Cartwright - Complaint No C26065 [2019] NZREAA 119 (16 May 2019)

Last Updated: 13 December 2019

Before the Complaints Assessment Committee

Complaint No: C26065

In the matter of

Part 4 of the Real Estate Agents Act 2008

Licensee 1: Benjamin Cartwright (20000661)

Licensee 2: Caleb Martin (20040971)

Decision finding of unsatisfactory conduct - asking for submissions on orders

16 May 2019

Members of Complaints Assessment Committee: CAC520

Chairperson: Bernardine Hannan

Panel Member: Craig Edwards

Complaints Assessment Committee

Decision finding unsatisfactory conduct - asking for submissions on orders

1. The Complaint

1.1. On 15 October 2018 the Real Estate Agents Authority (the Authority) received a complaint against Benjamin Cartwright (Licensee 1) and Caleb Martin (Licensee 2) (the Licensees) from the Complainants.

1.2. The Licensees are both licensed Salespersons under the Real Estate Agents Act 2008 (the Act) and at the time of conduct were engaged by Leaders Real Estate (1987) Limited, trading as Leaders in Real Estate Johnsonville (the Agency).

1.3. The complaint relates to a property (the Property).

1.4. The details of the complaint are that the Licensees had mishandled the Sale and Purchase Agreement (Agreement), including a final version which was sent to the solicitors with a version of the further terms that the Complainants had not agreed to. Also, that the Licensees misled the Complainants by advising them that the home would be built by Company A, when Company A had not been engaged by the vendor and would not be building the home.

1.5. In particular, the Complainants advised that:

a) They contacted Licensee 2 in late 2016 about a two-bedroom townhouse development at the

Property.

b) They submitted a signed offer for the Property on 8-9 January 2017. The vendor counter-signed the offer and removed the clause stating a build start date of six months after payment of the deposit. The Complainants re-inserted the start date clause and returned the signed Agreement to Licensee 2.

c) Licensee 2 advised them the vendor had accepted their offer and they had a binding Agreement.

Licensee 2 forwarded the signed and dated Agreement to the Complainants’ lawyer and copied them in.

d) When the build had not started six months after the deposit had been paid, they contacted the vendor. The vendor began making excuses for the delay.

e) In late September 2018, they discovered the Agreement which had been submitted to their lawyer by Licensee 2 was not the version which contained the start date clause they had re- inserted, and which they thought had been accepted by the vendor.

f) They met with Rob Garlick and the manager of the Agency to discuss the issues with the Agreement shortly after the above discovery. The Agreement was cancelled and they received a refund of the deposit. The Licensees had not met their obligation to ensure the correct Agreement was forwarded to the Complainants’ lawyer and they want the Licensees held accountable for their conduct.

g) Advertising on the Agency website and signage on the site indicated Company A would be building the dwelling on the Property.

h) They were advised by Licensee 2 that Company A is a reputable building company and the

Complainant’s own research supported this.

1. They followed up with Company A, who advised that they had not been contracted to build the dwelling on the Property.
   

1.6. The Complainant requested a remedy, being:

1. Part reimbursement of legal fees ($2000) arising out of Licensee 2’s negligence in relation to the Agreement.
   

b) Licensees to be held accountable for misleading the Complainants about Company A

building the dwelling on the Property.

c) Licensee 2 to be held accountable for sending the incorrect Agreement to the

Complainants’ lawyer.

1.7. The Licensees responded to the complaint against them.

1.8. In particular, the Licensee 1 commented that:

a) His role in the sale of the Property was to deal with the developer vendor. He had no contact with the purchasers (Complainants).

b) He presented the original offer to the vendor and returned the counter-offer to Licensee 2, which the vendor had amended in respect to price, deposit and start date (clause 31).

c) He re-presented the counter-offer from the Complainants to the vendor. The Complainants had inserted a revised start date (clause 31) and counter-offered on price ($620,000).

d) He had a discussion with the vendor around the requirement for the start date clause, especially given the vendor was to be able to access the deposit prior to settlement. Previous townhouses he had sold for the vendor also had a start date clause, which the vendor had adhered to.

e) He received back by email a counter-offer which the vendor had changed the price to

$658,000. He passed this on to Licensee 2 to present to the Complainants. The

Complainants re-countered that offer at $640,000, which the vendor accepted.

f) He is certain that what he passed over to Licensee 2 for the Complainant’s consideration was the form of a final contract and believes that only the vendor could have substituted the page of special conditions from his initial counter-offer.

g) On listing the properties, the vendor prepared and gave information packs with plans produced by Company A. The vendor informed him at the time of listing that Company A were going to build the properties.

h) Company A were the builders of phase 1 of the development. During the sale marketing period, the vendor consistently referred to meeting with Company A to get clarity on any points raised, and the vendor had informed him that Company A were the builders for this second phase of the development.

i) Design updates as late as 7 June 2017 for the car deck were provided by Company A. The vendor never informed him of any possibility that he might not engage Company A.

1.9. In particular, the Licensee 2 commented that:

(a) He had either no contact or very little contact with vendors other than to arrange access or make enquiries on behalf of interested parties.

(b) He never met the vendor in person until 20th of January 2017, with the Complainants.

(c) Licensee 1 obtained a counter-signed offer from the vendor, who had removed clause

31 (start date clause) and clause 34 (deposit clause). He returned the offer to the

Complainants with the changes highlighted for them.

(d) On 9 January 2017, the Complainants counter-signed the offer reinstating clause 31 (start date clause) with a 6-month start time frame and amended clause 34 (deposit clause) to reduce the deposit from 10% to 5% of the purchase price and allow the vendor access to the deposit to assist with funding the build.

(e) This offer was passed directly on to Licensee 1, who informed him that the vendor would not accept the price of $620,000. On 10 January 2017, the Complainants re-offered

$640,000 with all the previous further terms.

(f) On 16 January 2017, Licensee 1 informed him that the vendor had accepted the offer instructing him to convey acceptance to the Complainants.

(g) The signed Agreement was first handled by Licensee 1, before administration and management checked over the agreement. He was then instructed to disperse the now signed and dated Agreement to the Complainants and their solicitor.

(h) There is also no credible reason for anyone other than the vendor to remove clause 31 (start date). To do so would create an agreement in which the sales team would potentially never be paid a commission.

(i) He was informed by the vendor and his colleagues that Company A were the builders of the proposed development at the Property as they had built Property 2 and Property 3 for the vendor.

(j) The Agency had sold these two properties prior to him joining the Agency.

(k) When the proposed development was listed for sale by Licensee 1, Licensee 2 was informed that he would be the selling agent for the development.

(l) All marketing material, boundary maps, outline specifications, chattels list, plans, diagrams and drawings were provided to him by colleagues, as supplied to them by the vendor, who had sourced this information from Company A.

2. What we decided

2.1. On 16 November 2018, 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 16 April 2019, 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 Licensee 1 and Licensee 2 have engaged in unsatisfactory conduct under section 89(2)(b) of the Act.

3. Our reasons for the decision

3.1. The Committee found, pursuant to section 72 of the Act, that the actions of Licensee 1 and Licensee 2 contravene a provision of this Act or of any regulations or rules made under this Act.

3.2. Rule 5.1 states; A licensee must exercise skill, care, competence and diligence at all times when carrying out real estate agency work.

Substituted further terms

3.3. The evidence would suggest that the further terms that contained the clause requiring the vendor to start construction within six months (Clause 31) were removed and replaced with further terms from an earlier counter-offer. The earlier version omitted the start date clause (clause 31) which had been re-inserted (amended) in the Agreement by the Complainants. There is insufficient evidence for the Committee to conclude, on the balance of probabilities, that either Licensee was responsible for doing this, complicit in this action or aware of it until sometime later.

3.4. What is relevant in this matter is the conduct of the Licensees in respect of the handling and checking of the Agreement document. Notwithstanding the cause of the substitution of the further terms, the Licensees are found to have engaged in unsatisfactory conduct because they did not identify that they had been substituted and did not take appropriate action to ensure all terms had been agreed to and signed by both parties.

3.5. In this regard, the Committee has determined that both Licensees failed in their duty to exercise skill, care, competence and diligence with respect to the handling of the Agreement.

3.6. It is clear from the evidence presented that Licensee 1, who received the signed Agreement from the vendor, assumed that no changes had been made to it from the version presented to the vendor earlier. A check of the document to ensure that it was complete and did not contain any changes would have revealed the substitution of the further terms and revealed the need to have this change presented back to the Complainants for their approval.

3.7. The Committee considers that the checking of the document and ensuring that both parties have agreed to and signed all of the provisions is fundamental to a licensee’s duty.

3.8. The Committee has also given consideration to whether the vendor ’s actions in this case might amount to a deception, which the Licensee’s cannot reasonably be expected to have discovered. The Committee is of the view based on the evidence presented that this is not the case. A simple reading of the Agreement would have revealed to either Licensee that the version was not the same as the one the Complainants had signed.

3.9. The Committee has also given consideration of each Licensee’s role in the transaction and has determined that both Licensees had a duty to check the Agreement and ensure that it had been agreed to and signed by both parties. While it is understandable in this situation that Licensee 2 did not question Licensee 1 when advised that the offer had been accepted by the vendor, this does not, in the Committee’s view, absolve Licensee 2 of the same responsibility to check the Agreement and ensure that it was complete and had been signed by both parties.

3.10. Accordingly, Licensee 1 and Licensee 2 are found to have engaged in unsatisfactory conduct in respect of this matter.

Did the Licensees mislead the Complainants about the builder?

3.11. The evidence in this case is compelling that building company, Company A was expected to be the builder of the home on the Property. Details of the intended development were prepared by Company A and their branding was visible on signage, marketing material and supplied information. It is also clear from the statements by both Licensees that they also expected Company A would be the builder.

3.12. However, the Committee is not convinced that it was unsatisfactory conduct on the part of the Licensees to convey their understanding of who the builder would be to potential purchasers, including the Complainants, for the following reasons.

3.13. The Committee is satisfied that it is more likely than not that it was the vendor’s genuine intention at the time to use Company A. Had it been the case that the vendor sought to use Company A’s reputation to assist in marketing the Property without a genuine intention to engage them, then the Committee would have considered whether such intention was readily apparent to the Licensees and may have formed a different view in this regard. However, there is no evidence presented to suggest that it was not the vendor’s intention at the time to use Company A.

3.14. The Committee considers that the Licensee’s representations about who was expected to build the home were consistent with the vendor’s intention and that such representations were therefore not inaccurate at the time. The Committee has to consider whether the subsequent change by the vendor after the fact could then make those representations, though accurate at the time, subsequently misleading. The view of the Committee is that it would not. In this situation the Licensees cannot be responsible for the subsequent actions by third parties.

3.15. The Agreement did not specify that the builder must be Company A. The contract was between the Complainants and the vendor. While it was expected, based on the information available at the time, that Company A would be engaged by the vendor this was not a requirement in the Agreement.

3.16. The Committee has also given careful consideration to whether the Licensee’s statements about Company A and their implied involvement through signage and information ought to have been qualified with a caveat by the Licensees explaining that the involvement of Company A is the vendor’s intention only, and that the Licensees cannot be certain they will be used. The Committee forms the view that such caveat was unnecessary. The Complainants were aware that they were not entering into an agreement with Company A and that there was no requirement in the Agreement that the vendor use Company A. It was self-evident that representations and the implied involvement by Company A was a future intention and not something that the Licensees were in a position to guarantee.

3.17. The Committee has also given careful consideration to whether the substitution of one builder for another was a risk the Licensees ought to have identified and warned the Complainants about. The Committee does not consider this to be the case, firstly because there is no evidence to indicate the Licensees should have been aware of a heightened risk of this occurring, and secondly, because there was no evidence presented to support a view that the building, if it had been acquired by the Complainants, would have been inferior in any way from that which might have been built by Company A.

3.18. Accordingly, the Committee determines to take no further action on this issue.

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 Licensees, 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 Licensees 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

Craig Edwards

Panel Member

For Complaints Assessment Committee 520

Real Estate Agents Authority

Date: 16 May 2019

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.

The relevant provisions from the Real Estate Agents Act (Professional Conduct and Client Care) Rules

2012 are:

Rule 5.1 A licensee must exercise skill, care, competence, and diligence at all times when carrying out real estate agency work.