Complaint No C27344 [2019] NZREAA 93 (5 August 2019)

Last Updated: 29 November 2019

Before the Complaints Assessment Committee

Complaint No: C27344

In the matter of

Part 4 of the Real Estate Agents Act 2008

and

The Agency: The Agency

Decision to take no further action

5 August 2019

Members of Complaints Assessment Committee: CAC519

Chairperson: Jane Ross

Panel Member: Maria McElwee

Complaints Assessment Committee

Decision to take no further action

1. The Complaint

1.1. On 15 October 2018 the Real Estate Authority (the Authority) made an own-motion complaint against the Agency.

1.2. The Agency, which was previously a licensed Agent Company under the Real Estate Agents Act

2008 (the Act) but is now in liquidation. The liquidators were appointed by the High Court in Auckland on 8 March 2019 and 10 May 2019 was fixed as the last day for creditors to lodge and establish any priority their claims may have.

1.3. The complaint relates to Audit Reports for Trust Accounts held by the Agency.

1.4. The details of the complaint are that

a) On 10 July 2018 the Authority received Audit Reports for the period ending 31 March 2018 for Trust Accounts held by the Agency. The Audit Reports identified breaches by the Agency of Regulation 15 of the Real Estate Agents Audit Regulations (the Regulations) and a subsequent review by the Authority of the Agency’s audit history identified multiple breaches of Regulations 15 (Duty to provide monthly list of balances and reconciliation statement) and 16 (Duty to report in respect of each audit period) of the Regulations for periods ending 31 March 2014, 2015, 2016, 2017 and 2018.

b) Several compliance letters were sent by the Authority to the Agency in June 2015, July

2015, October 2015 and September 2017 in respect of the breaches of Regulations 15 and

16.

c) The 10 July 2018 Audit Report shows that further Agency breaches of Regulation 15 occurred.

1.5. The Agency responded to the Authority as follows:

a) In October 2017 the Agency stated that the establishment of a new office, staff changes and a new IT system caused the Agency’s failure to comply with Regulations 15 and 16. The Agency claimed these were “extraordinary circumstances”, that a robust system had since been put in place and that it was confident the breaches would not occur again.

b) Following the further breaches identified in the 10 July 2018 Audit Report and the complaint by the Authority, the Agency stated that it accepts that, whilst it was compliant in doing the work to maintain a trust account, it was at fault in delivering that work to the external auditor in the timeframe prescribed by Regulation 15. The Agency states that the breaches occurred due to staffing changes and administrator errors of which the Agency was unaware, and that steps were subsequently taken to ensure future compliance. The Agency notes that of the Audit Reports for the period ending 31 March 2018, 57 of 60 reports were delivered to the auditor on time with 3 reports being delivered less than one week late.

2. What we decided

2.1. On 23 October 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 20 March 2019 and on 18 July 2019 the Committee held hearings on the papers and considered all the information gathered during the inquiry.

2.3. The Committee has decided to take no further action on the complaint.

2.4. This decision was made under section 80(2) of the Act. The decision was also made with reference to the Real Estate Agents Act 2008 (the Act) section 73(c)(iii).

3. Our reasons for the decision

3.1 Real Estate Agency work is defined as work done or services provided, in trade, on behalf of another person for the purpose of bringing about a transaction, with a transaction defined as the sale, purchase, grant or other disposal or acquisition of an interest in land, a business, an occupation right or a licence registerable under the Land Transfer Act 1952.

3.2 Section 72 of the Act applies to unsatisfactory conduct but can only be considered in relation to real estate agency work.

3.3 Section 73 of the Act applies to misconduct. Section 73(c)(iii) of the Act does not specifically require the conduct being considered to be real estate agency work and applies to a willful or reckless contravention of regulations or rules made under the Act.

3.4 The Committee determines that the Agency’s conduct in breaching the Regulations is not in respect of specific transactions and cannot be defined as real estate agency work. The Committee must therefore determine if the Agency’s conduct reaches the threshold for misconduct under s73(c)(iii) of the Act.

3.5 The Committee is aware that the Company, of which the Agency is an Agent Company, is in liquidation and that section 248(1)(c) of the Companies Act 1993 provides that once a company has been put into liquidation, legal proceedings against it may not be continued or commenced unless leave of the court or of the liquidator is obtained.

3.6 The courts, however, have observed that simply because a company is in liquidation this should not, as a matter of principle, be seen as a means of escaping or avoiding the regulatory consequences of breaches of conduct. The Committee must weigh up the court’s guidance against the importance of a prosecution and the potential effect of any penalties imposed.

3.7 It is not disputed that the Agency breached Regulations 15 and 16. It is noted, however, that there is no evidence of account irregularities and the breaches are in relation to late provision and filing of records. The breaches, whilst numerous on a cumulative basis, would not result in a grave outcome or penalty, the offence is not of a serious nature, no financial harm ensued and, as the Company is in liquidation it will not repeat the conduct.

3.8 As the Company is no longer in existence, imposition of a fine and/or suspension or cancellation of its licence would not be an end goal. While prosecuting to send a message to the industry that the Authority will prosecute breaches of the Regulations may be a valid consideration, on its own that reason would not be sufficient to pass the public interest test where the predominant consideration is the seriousness of the offence.

3.9 Whilst there are some factors in favour of laying charges under s73(c)(iii) of the Act, on balance the factors weigh against seeking agreement to commence proceedings. The lack of purpose combined with the lower-end seriousness of the breaches and the degree of harm caused by those breaches leads the Committee to the decision that it will not commence proceedings against the Agency.

3.10 The Committee takes no further action in this matter.

4. Your right to appeal

4.1. If you are affected by this decision of the Committee, the right to appeal is set out in section

111. You may appeal in writing to the Real Estate Agents Disciplinary Tribunal (the Tribunal) within 20 working days after the date notice is given of this decision. Your appeal must include a copy of this decision and any other information you wish the Tribunal to consider in relation to the appeal. The Tribunal has a discretion to accept a late appeal filed within 60 working days after the date notice is given of this decision, but only if it is satisfied that exceptional circumstances prevented the appeal from being made in time.

4.2. For further information on filing an appeal, read Gu id e to Filin g a n Ap p ea l on the Real Estate

Agents Disciplinary Tribunal website ( https:/ / www. justi ce. g ov t. nz/ tri bunal s/ real -estate -

ag ents/).

5. Publication

5.1. At the Committee’s discretion, the decision will be published without the names or identifying details of the Complainant (including the address of the Property), the Licensee and any third parties.

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 industry standards and that is in the public interest.

Signed

Jane Ross

Date: 5 August 2019

Appendix 1: 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.

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.