Cowie - Complaint No C20986 [2018] NZREAA 43 (16 February 2018)

Last Updated: 18 December 2018

Before the Complaints Assessment Committee

Complaint No: C20986

In the matter of

Part 4 of the Real Estate Agents Act 2008

Licensee 1: Anna Cowie (20038689)

Decision on Orders

16 February 2018

Members of Complaints Assessment Committee: CAC409

Chairperson: Jane Ross

Deputy Chairperson: Peter Brock

Panel Member: Josephine O'Donnell

Complaints Assessment Committee

Decision on orders

1. Background

1.1. On 30 November 2017 the Complaints Assessment Committee (the Committee) found Anna Cowie (the Licensee) guilty of unsatisfactory conduct under section 89(2)(b) of the Real Estate Agents Act 2008 (the Act).

1.2. The Complainant and the Licensee were given the opportunity to make submissions to the

Committee on orders.

2. Submissions

2.1. The Complainant submitted

2.2. That he didn’t have any costs associated with the Property but that he would like to see the first home buyers who did incur costs in respect of misguided attempts to purchase the Property, reimbursed.

2.3. Agency Eligible Officer responded for the Licensee. The Agency EO submitted

a) That no orders are appropriate or necessary for the following reasons:

b) He challenged the Committee’s finding on liability;

c) The prejudice or harm to the potential purchasers is very limited;

d) The Licensee is no longer practicing;

5. The Agency has reviewed its policies and procedures (that were already in place to mitigate this kind of breach) and has reinforced its expectations of compliance with Rules 9.1 and 9.4 of the Real Estate Agents Act (Professional Conduct and Client Care) Rules 2012 (the Rules) with all its licensees;
   
6. The Committee has censured the Licensee in its decision which will be published, registered against her and available to the public once the Committee has issued its decision on penalties;
   
7. The conduct in question arises as a result of unique and unpredictable circumstances that do not form a pattern of behavior that requires rehabilitation and;
   
8. The conduct raised novel legal issues about the expectations of the industry with respect to competing duties under the Code. Those issues were discussed and resolved in the determination on liability, which will be published to the industry.
   
9. The Eligible Officer notes the requirement for a licensee to balance the tension between his or her duty to act in the client’s interest and the duty not to mislead customers or potential purchasers. He comments that tension arises as it is in the vendor’s interest for a licensee to “cast a wide net” or market a property in a manner that will attract the most potential purchasers prior to auction. He considers the distinction between communication that entices potential purchasers to an auction, and that which misleads them is therefore an

important issue and is often nuanced.

10. The duties owed by licensees under Rules 9.1 and 9.4 of the Rules should not be weighed evenly and balancing, while being mindful of the interests of all parties, should not undermine the integrity of any contractual and/or fiduciary relationship owed to a licensee’s client.
    
11. Given the interplay between Rules 9.1 and 9.4 of the Code, anything less than a serious disregard of the Licensee’s obligations towards potential purchasers should fail to attract culpability.
    

50. The Committee appears to have inferred that the Licensee’s undocumented conversations with two potential purchasers amounted to misleading conduct. In the absence of corroborating documents the testimony of potential purchasers is not sufficient to prove the Licensee has breached the Act when she denies wrongdoing, and it is not sufficient for the Committee to adopt the evidence of the potential purchasers simply because it cannot find a “motivation for the Complainant to have made the statements that form his complaint were they not factual”.
    

13. The Committee appears not to have considered the Licensee’s subjective understanding of a potential purchaser’s price expectations, nor to have analysed a reasonable purchaser’s price expectations, ie: would a reasonable person have likely been misled or deceived.
    
14. Given the paucity of pricing information available to the Licensee at the time, and the variability of the local market, it would have been reasonable for the Licensee to provide sales data and communicate a price range that was within $100,000 of the suggested price

range in the CMA. Equally it would have been reasonable for a potential purchaser to assume that the price range was subject to a high margin of error.

o) The standard of proof in professional disciplinary proceedings is the balance of probabilities.

This standard may be flexibly applied, so the Committee may take into account the seriousness of the alleged act or conduct and the potential consequences to the Licensee if proved, when determining whether or not the standard has been reached. The courts require stronger evidence to satisfy the civil standard in cases concerning professional misconduct and/or misrepresentations.

16. The Committee seems to focus on the fact the Licensee’s price range was significantly different to the final purchase price. The Licensee cannot be penalised for providing a price estimate when the variables that comprise that estimate are inherently unpredictable and the test of whether the estimate was misleading or not is by comparison to an event that occurred later in time (the Auction).
    

3. Orders

Having made a finding of unsatisfactory conduct against the Licensee, the Committee decided to make the following orders pursuant to s93 of the Act:

a) make an order censuring the Licensee;

2. order the Licensee to pay to the Authority a fine of $500.00 within 21 working days of the date of this decision.

4. Our reasons

Our decision

4.1. The Committee found that the Licensee advised the Complainant the expected price range for the Property was in the low $500,000 range and that advice was misleading.

4.2. The Committee found as proved facts:

a) that the Licensee did not disclose to the Complainant that a pre-auction offer of

$510,000 had been rejected by the vendor who considered the amount of the offer was ridiculous;

2. In the last week of the marketing campaign the vendor advised the Licensee he would not accept less than $650,000;
   

100. The Licensee knew the vendor’s price expectation was well above the price expectation she provided to the Complainant;
     

4.3. The Committee clarifies that its finding against the Licensee is one of unsatisfactory conduct.

The Committee does not make, nor has it the power to make, a finding of misconduct. Had the Committee considered the Licensee’s conduct was at, or over, the threshold required for misconduct, it would have referred the matter to the Real Estate Agents Disciplinary Tribunal (READT) for its consideration. The Committee did not consider the Licensee’s conduct was at that level and did not make any such referral to the READT.

4.4. Section 89(2)(b) of the Act specifically refers to the standard of proof for the Committee’s determinations of unsatisfactory conduct to be the balance of probabilities which is what the Committee applied in its decision. The Committee accepts that for serious allegations the standard is applied flexibly. The standard does not change – it is still the balance of probabilities, however the quality of the evidence to meet the standard may differ in cogency depending on the seriousness of the matters to be proved and the consequences of proving them1. The Eligible Officer referred to the case of Z (supra) in support of his argument that the standard of proof should be (and by inference, was not) applied flexibly by the

Committee in this case.

4.5. Z (supra) involved a disciplinary process looking at allegations of indecent assault. The conduct here is unsatisfactory conduct, not misconduct, so there is no need to apply the standard flexibly. The Committee was satisfied the allegation was proved on the balance of probabilities. The Committee accepted the evidence of the Complainant which was consistent with the evidence of (and experience) of two other prospective purchasers.

4.6. The Committee notes that the invitation to make penalty submissions is not an opportunity to re-litigate the Committee’s substantive decision but, for the purpose of clarification the Committee comments as follows:

4.7. The Committee found as proved that the Licensee represented the price range for the Property to be in the low $500,000 range. This information was misleading to prospective purchasers because none of the information the Licensee had justified that price indication. The Licensee may have had a “paucity of pricing information” but her CMA for the Property indicated a range from $620,000 to $680,000. The Committee considers it is not

“reasonable”, nor acceptable, that the Licensee should provide sales data and communicate a

1 See Z v Dental Complainants Assessment Committee [2008] NZSC 55

price range that was “within $100,000” of the suggested price in the CMA – such information would render a CMA useless – and that a reasonable person would have likely been misled or deceived by such information. The Committee also notes that when considering Rule 6.4 “there is no need to focus on whether a person has been misled...”2 and “... the question

must be whether what was done or said was capable of materially affecting a decision on the part of the representation in relation to the transaction; and with actual or presumed knowledge that the information was material.”3 The statement made to the Complainant misled him and was capable of materially affecting his decision in relation to the transaction - to carry out due diligence and to attempt to purchase the Property at auction.

4.8. The Committee’s finding recognised the “variables” and “unpredictable” nature of an auction situation and had no issue with the sale price of the Property. Indeed, a commission amount was calculated on a sale price of $720,000 in the agency agreement. The issue for the Committee was not that the “Licensee’s price range was significantly different to the final purchase price”, but that the price indication she represented to the Complainant was significantly different to what she knew to be the vendor’s price expectations. The vendor

had rejected a pre-auction offer of $510,000 describing it as ridiculous, and a week out from the auction advised the Licensee he would not accept less than $650,000. At that time the Licensee should have corrected the misleading advice she had given to the Complainant.

4.9. The Committee does not find rules 9.1 and 9.4 create conflicting interests or require “weighing” or “balancing”. Rule 9.1 requires a licensee to act in the best interests of a client and to act in accordance with the client’s instructions unless to do so would be contrary to law. Rule 9.4 requires that a licensee not mislead customers as to the price expectation of the client. An advertised price (either verbal or written) must be a price that has a prospect of being accepted by the vendor and will be given serious consideration. An advertised price

that is lower than the vendor’s bottom line is therefore misleading to potential customers. Misrepresenting a vendor’s price expectations to a prospective purchaser is not acting in that vendor’s best interest and does not create a conflict.

4.10. Further, an auction sale by nature has no “advertised price” and therefore no conflict should arise as the vendor’s expectations are not represented to potential purchasers. Although the vendor is informed by buyer feedback so that a realistic and achievable reserve may be set, potential purchasers can only be guided by facts such as relevant sales data, the property’s capital value (CV) and an indication as to percentage trends above CV for sales. Had the Licensee “stuck to the script” as advised by the Agency, the Complainant would have been required to make his own judgment on price for the Property, and the complaint likely avoided.

Relating our decision to our orders

4.11. The Committee finds no “unique and unpredictable circumstances” in the transactions for the Property, with no-price marketing and prospective purchaser price queries being part and parcel of a standard auction programme. It also finds no “novel legal issues” in the requirements of the Rules for the Licensee to honour her fiduciary obligations to the vendor client and to also be fair to all parties to the transaction. In an auction sale, with only one party able to purchase, there is an understood and accepted risk that those purchasers not in the ball park will spend time and money on due diligence which cannot be recouped. The issue here was that the Complainant proceeded based on misleading advice given to him by the Licensee.

2 _{Vosper v REAA and Biddle [2017] NZHC 453 paragraph 63}

3 Vosper (supra) paragraph 63

4.12. The Committee is aware the Licensee is no longer in the industry and accordingly does not make an order for education.

4.13. The Committee notes that its substantive decision made a finding of unsatisfactory conduct against the Licensee but the finding is not in itself a censure. The Committee does make an order of a censure as a reminder to the Licensee of the importance of maintaining professional standards, and to promote and protect the interests of consumers and the public, should she re-enter the industry at some time in the future.

4.14. The Complainant advises that he had no financial loss as a consequence of the Licensee’s conduct but asks that other first home buyers, who did incur costs in respect of “misguided” attempts to purchase the Property, be reimbursed. The Committee notes it can only address this complaint and this Complainant and he has suffered no loss as a consequence of the Licensee’s misleading advice. The Committee cannot look at others who are not party to the complaint.

4.15. The Licensee offers no information about her personal circumstances and no indication of any regret or remorse for her actions. The Licensee’s lack of an apology or any appearance of remorse does not increase any penalties against her but a genuine apology or a sense of remorse by the Licensee would have been considered in mitigation. The Committee does take into account the Licensee has no prior disciplinary findings against her and that she is no longer working in the industry.

4.16. The Committee has the power to impose a fine up to a maximum of $10,000 for an individual licensee. The Committee notes that the Complainant in this case did not suffer any financial loss but considers that the potential existed for loss to have been incurred as a consequence of the Licensee’s conduct. The Committee considers the Licensee’s actions to be low-end unsatisfactory conduct and that an order of a $500.00 fine is appropriate to reinforce the requirement to protect the interests of consumers and the public in general, and to act as a penalty for the conduct that occurred.

Principles considered

4.17. 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.

4.18. 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

4.19. 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."

4.20. 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

4.21. 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.

4.22. 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.
  

4.23. In the Committee's view, maintaining professional standards is also a function of the disciplinary processes under the Act.

Punishment

4.24. 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)).

4.25. 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

4.26. 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.

5. Your right to appeal

5.1. 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 the notice of this decision Friday, 16 March 2018 (section 111).

5.2. 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 ).

6. Publication

6.1. 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.

6.2. 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.

6.3. 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

Jane Ross

Date: 16 February 2018

Appendix: Relevant provisions

The Real Estate Agents Act 2008 provides:

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.

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.

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.