MacDiarmid - Complaint No C34577 [2021] NZREAA 14 (19 January 2021)

Last Updated: 6 July 2021

Before the Complaints Assessment Committee
In the matter of	Complaint No: C34577 Part 4 of the Real Estate Agents Act 2008
and
Licensee:	Karan MacDiarmid (20000657)

Decision finding of unsatisfactory conduct - asking for submissions on orders

19 January 2021

Members of Complaints Assessment Committee: CAC2001 Chairperson: Ian Hayes

Deputy Chairperson: Peter Brock Panel Member: Ian Keightley

Complaints Assessment Committee

Decision finding unsatisfactory conduct - asking for submissions on orders

1. The Complaint
   • 1.1. On 2 December 2019, the Real Estate Agents Authority (the Authority) received a complaint against Karan MacDiarmid (the Licensee) from Mr and Mrs A (X and/or Y) (together, the Complainants).
     
   • 1.2. The Licensee is a licensed Salesperson under the Real Estate Agents Act 2008 (the Act) and at the time of conduct was engaged by Mackenzie Country Real Estate Limited T/A LJ Hooker Twizel (the Agency).
     
   • 1.3. The complaint relates to a property situated at the property (the Property).
     
   • 1.4. The details of the complaint are that the Licensee:
     
     1. Misled the Complainants by leading them to believe they had entered into a binding agreement for sale and purchase [ASP 1] when they had not.
        
     2. Acted for the backup offeror on the property the vendor had their offer on [ASP 2].
        
   • 1.5. The Complainants say:
     
     1. They viewed the Property on 23 November 2019 and submitted an offer on 24 November 2019. There was some negotiation on price.
        
     2. At 11:26 a.m. on 26 November 2019 the Licensee conveyed to them that their offer had been accepted. They then initialed the new offer price on the agreement [ASP 2].
        
     100. On 27 November 2019 they texted the Licensee asking her to send a complete signed copy of the agreement [ASP 1] to them so they could forward it to their lawyer. The Licensee replied, “will do”.
          
     4. They organized their building inspection and finance.
        
     5. After their building inspection had taken place on 29 November 2019 they had phone and text contact with the Licensee about the building report and satisfying the conditions in the agreement [ASP 1]:
        
        1. They conveyed to the Licensee that the under floor insulation was insufficient.
           
        2. The Licensee asked if they would waive the finance condition.
           
        3. The vendor was happy to insulate under half the floor.
           
     6. At 3:20 p.m. on 29 November 2020 the Licensee told X they had until 4:00 p.m. that day to confirm unconditional which was much earlier than they had expected.
        
     7. Between 3:40 p.m. and 4:00 p.m. X advised the vendor and the Licensee they would go unconditional.
        
     8. At 4:27 p.m. on 29 November 2020 the Licensee advised them they had missed out on the Property and it was no longer on the market.

9. They were led to believe (by the Licensee) that they had entered into a legally binding agreement [ASP 1] on 26 November 2019.
   10. They ask how it was possible for the Licensee to also act for the backup offer on the Property the vendor had offered on “...She would know the timeline on the two contracts was not in line with each other and her vendor was not protected in the contract...” for the Property.
       
   11. There were no conditions in the agreement [ASP 1] to protect the vendor.
       
   50. The Licensee did not act fairly and acted deliberately.
       
   13. Attempting to purchase the Property cost them financially and emotionally.
       
   
   
   • 1.6. The Complainants requested a remedy, being:
     
     1. The Licensee be held accountable for her mistakes.
        
   • 1.7. Subsequent to the Committee deciding to inquire into the complaint, the Complainants advised they wished to withdraw their complaint. The Committee decided to continue with its inquiry pursuant to section 78(b) of the Act. The allegations inquired into are the same as the complaint.
     
   • 1.8. The Licensee responded to the issues through her lawyer, Wotton Kearney.
     
   • 1.9. The Licensee says:
     
     1. At the time the vendor listed the Property the vendor had a conditional agreement to purchase another property (Property Q). The Licensee had listed Property Q. The vendor agreement for the purchase of Property Q [ASP 2] had an escape clause allowing the vendor to accept an alternative offer and to give notice for the purchaser to make the agreement unconditional.
        
     2. On 28 November 2019, the vendor returned the fully signed agreement [ASP 1] for the Property with instructions to action it only on receipt of a confirmation email later that day or the following day.
        
     100. Prior to the vendor signing the agreement [ASP 1] for the Property, an escape clause in the vendor’s purchase for Property Q [ASP 2] had been activated and the vendor had until 4:00 p.m. on 29 November 2019 to make the vendor’s purchase unconditional.
          
     4. She does not recall any specific discussion with the purchasers about the fact the vendor would only sell the Property if it secured Property Q, but “...she is confident she would have done so”. She accepts it would have been clearer for the vendor to have counter offered with a clause making the agreement [ASP 1] for the Property conditional on purchasing a suitable replacement property.
        
     5. On 26 November 2019, she believed the parties had come to a verbal agreement on price but she “...understood any deal was conditional on the...” vendor “...purchasing Property Q”.
        
     6. She did not provide a fully signed and dated agreement [ASP 1] for the Property to the purchasers because the lawyer for the vendor had instructed her not to do so until the vendor confirmed they “...were prepared to enter into the written agreement”.

2. What we decided

2.1. On 21 October 2020, the Committee held a hearing on the papers and considered all the information that had been gathered during the inquiry.

2.5. The Committee found the Licensee has engaged in unsatisfactory conduct under section 89(2)(b) of the Act. The decision was also made with reference to the Real Estate Agents Act (Professional Conduct and Client Care) Rules 2012 (the Rules) being, Rule 5.1 (skill, care, competence, and diligence), rule 6.2 (act in good faith and deal fairly), rule 6.4 (not mislead nor withhold information that should by law or in fairness be provided to a customer) and rule

9.1 (act in the best interests of a client and in accordance with a clients instructions).

3. Our reasons for the decision

3.1. The Committee found, pursuant to sections 72(a) and (b) of the Act, that the Licensee’s actions fall short of the standard a reasonable member of the public is entitled to expect from a reasonably competent licensee and contravenes provisions of the Rules.

General

3.2. The Complainants withdrew their complaint. The Committee decided to continue with the inquiry. In these reasons the Complainants are referred to as the Purchasers or by their first names where the context require a reference to one of them.

3.3. The vendor of the Property was two persons (a male and a female) acting as trustees of a family trust, although ASP 1 did not record that status. The evidence establishes the Licensee dealt with one of the vendors, the male. The Committee assumes that this person had the authority of the other trustee for the dealings and in this decision will refer to the vendor.

3.4. The vendor of the Property was spoken to by the Committee’s investigator. The vendor says:

1. The Property was for sale on the condition he purchased another one.
   
2. He accepted the offer “...on condition he could purchase Property Q”.
   

100. He wanted the agreement (ASP 1) held until he was happy with it because the Purchasers “...were trying to bring through conditions on the thing that I wasn’t happy with”. One of the conditions was a building report.
     

4. The purchasers were mucking him around.
   
5. He thought ASP 1 included a condition about his purchase of the Property Q.
   

3.5. The following chronology of relevant events is accepted by the Committee:

23/11/19 (Saturday)	Purchasers view the Property
24/11/19 (Sunday)	Purchasers make an offer on the Property
26/11/19 (Tuesday)	Vendor verbally accepts offer
27/11/19 (Wednesday) 12:54 p.m.	Licensee emails purchaser signed agreement (ASP 1) to vendor for signature
27/11/19 (Wednesday)	Purchaser’s request the signed agreement (ASP 1) be sent to them so they can send it

to their lawyer – Licensee responds, “will do”

28/11/19 3:07 p.m. (Thursday)

Vendor returns signed agreement (ASP 1) to Licensee

29/11/19 (Friday) 10:34 a.m. to 4:00 p.m.

Purchasers interact with the Licensee about whether vendor will insulate under the floor (a building report issue) and satisfying the conditions

29/11/19 (Friday) 4:27 p.m.

Licensee advises Purchasers the Property is no longer on the market

Misleading

3.6. The following rules are relevant to this allegation. By rule 6.2 a licensee “...must act in good faith and deal fairly with all parties engaged in a transaction.” By rule 6.4, a licensee “...must not mislead a customer... nor withhold information that should by law or in fairness be provided to a customer...”. By rule 9.1, a licensee “...must act in the best interests of the client and act in accordance with the client’s instructions unless to do so would be contrary to law.” By Rule 5.1, a licensee “...must exercise skill, care, competence, and diligence...when carrying out real estate agency work.”

3.7. Although the vendor thought the agreement (ASP 1) for the sale of the Property was conditional on the vendor purchasing a replacement property, it did not contain that condition. The agreement was only conditional on the purchasers’ lawyer approving the title and on finance.

3.8. Some important facts are not disputed, being:

1. The vendor had a conditional agreement (ASP 2) to purchase Property Q, conditional on the vendor selling the Property.
   
2. An escape clause in the Property Q agreement had been activated and the vendor had until 4:00 p.m. on 29 November 2019 to make the vendor’s purchase unconditional.
   

100. The vendor signed the agreement (ASP 1) for the Property to the purchasers (X and Y). The vendor instructed the Licensee not to action the agreement until further confirmation from the vendor.
     

4. The ASP for the Property was not dated by the Licensee.
   
5. A copy of the signed ASP for the Property was not provided to the Purchasers or their lawyer prior to the vendor withdrawing the Property from the market.
   

3.9. The Licensee sent an email to the Purchasers on 26 November 2020 at 11:36 a.m. She advised “...they will accept your offer of $463,000...” and “...he is looking for a quick time frame to go unconditional...”. She did not say anything in the email about why the vendor was looking for a quick time frame to go unconditional. The Licensee has supplied further emails between her and the Purchasers. There is no mention of the vendor having a purchase agreement (ASP 2) with an escape clause activated.

3.10. When the Licensee emailed the Purchaser(s) signed agreement (ASP 1) for the Property to the

vendor for signature she advised she would be in touch once the builder’s report had been completed.

3.11. The Purchasers say that on Wednesday, 27 November 2019 they texted the Licensee asking her to send them a copy of the signed ASP 1 (signed by both parties) so they could forward it to their lawyer and she replied to the effect she would do this. There is text messaging between X and the Licensee where X says, “Can you send us the contract so we can get our lawyer to do the lim and stuff” and the response from the Licensee is “will do.” The date and time of this is not apparent on the face of the text message.

3.12. The Licensee has not disputed the Purchaser’s allegation that this text exchange took place on 27 November 2019. The Committee accepts it as proved that the text exchange took place on 27 November 2019 which is before the vendor had returned the signed agreement (ASP 1) to the Licensee.

3.13. There is further texting between X and the Licensee on Friday, 29 November 2019. The Licensee asks X if he will waive the finance condition. X responds advising “Have had verbal confirmation meeting the bank next week so will leave it just Incase (sic).” The Licensee also responds with the vendor’s instructions about insulation (an issue raised by the Purchasers consequent on their building report) saying the vendor will only agree to insulation in half the house.

3.14. There is a clear disconnect between what the Purchasers believed about the status of the agreement (ASP 1) for the purchase of the Property and what the vendor believed. The Purchasers believed they had a conditional agreement to purchase the Property, conditional only on finance and their solicitor’s approval of title with the time frames for satisfaction of the conditions specified in the agreement. The vendor believed he had an agreement to sell conditional on the vendor purchasing a Property at Property Q (ASP 2) and that he was not bound by ASP 1 until he authorized it to be released.

3.15. Several issues arise from the way the Licensee has dealt with the Purchasers and the vendor, being:

1. Was there a binding agreement (ASP 1) for the purchase of the Property?
   
2. If there was not a binding agreement (ASP 1) for the purchase of the Property then did the Licensee lead the Purchasers to believe there was.
   

100. Should the agreement (ASP 1) for the purchase of the Property have been conditional on the vendor purchasing Property Q (ASP 2)?
     

4. Did the Licensee inform the Purchasers the vendor had a conditional agreement to purchase (ASP 2) where an escape clause had been activated. If she did not inform them should she have done so?
   

3.16. Offer and acceptance and communication of those things are at the heart of any contractual relationship. In the circumstances of this case there has been an offer by the Purchasers and the offer has been accepted by the vendor - it is accepted by the vendor by his signing the agreement (ASP 1), notwithstanding his mistaken belief that the agreement was conditional upon purchasing Property Q (ASP 2). Acceptance must be communicated for there to be binding acceptance - although there are exceptions which are not relevant here. Acceptance

can be communicated by an agent1.

3.17. The Licensee is the agent of the vendor and has a fiduciary relationship with the vendor. When the vendor returned ASP 1 to the Licensee the vendor instructed the Licensee to hold it until further instruction. That can be construed as an instruction not to communicate acceptance. Despite this the Licensee dealt with the Purchasers and proceeded on the basis that the offer had been accepted. She has led the Purchasers to believe that they had a binding agreement to purchase the Property.

3.18. The Committee is satisfied the Licensee represented to the Purchasers that they had a binding agreement (ASP 1) for the purchase of the Property and it is satisfied she did not inform the Purchasers that the vendor had entered into an agreement (ASP 2) to purchase a property (Property Q) nor that an escape clause in ASP 2 had been activated. It makes this finding for the following reasons:

1. Prior to the vendor signing the agreement (ASP 1) for the sale of the Property she conveyed to the Purchasers their offer was accepted. She did not qualify or retract this after the vendor instructed her to hold the agreement.
   
2. The Licensee, by her conduct, has represented to the Purchasers that they have a binding agreement (ASP 1). She has allowed the Purchasers to order their building report and engaged with them and the vendor about that report. She has negotiated agreement for the vendor to install underfloor insulation in half the house. She engaged with the Purchasers about the finance condition. In response to request to send the agreement (ASP 1) to the Purchasers’ lawyer she said, “will do.”
   

100. The Committee takes from the evidence that the escape clause in the vendor’s purchase agreement (ASP 2) had been activated at the latest prior to the vendor returning the signed offer to the Licensee on 28 November 2019.
     

4. The Purchasers were surprised (and did not know the reason) when the Licensee told them at 3:20 p.m. on 29 November 2019 that they had until 4:00 p.m. that day to make the agreement (ASP 1) unconditional. This is not disputed by the Licensee. At this time, the vendor had not yet instructed the Licensee to communicate acceptance.
   
   5. The Licensee has not mentioned in her written correspondence with the Purchasers (text and email) anything about the vendor having a conditional purchase agreement (ASP 2) or that the escape clause in that agreement had been activated.
      
   6. The Licensee does not recall any specific discussions with the Purchasers about the vendor purchasing Property 2 (ASP 2) and only selling if the purchase were to proceed. The Committee does not accept her evidence that she is “confident” she would have told them. It is inconsistent with the other evidence referred to above for the Licensee to have told the Purchasers about the vendor’s purchase of Property Q (ASP 2).
      

3.19. The Committee finds that the Licensee has misled the Purchasers by representing to them that they had a binding agreement (ASP 1) to purchase the Property at a time when the vendor had instructed the Licensee to withhold acceptance.

3.20. The Committee also considers the Licensee’s response to the Purchasers’ request to send the agreement (ASP 1) to the Purchasers’ lawyer was misleading. The Committee takes from the evidence that the request made by the Purchasers for the agreement to be provided to them

1 Contract Law in New Zealand, Chris Nicoll and Colin Perkin, CCH 1991

so they could provide it to their lawyer was a request for the signed agreement to be provided. The Licensees response “will do” without qualification implies a degree of immediacy. At the time, the Licensee provided that response, the vendor had not returned the signed agreement to her and/or had instructed that acceptance not be conveyed. She was not in a position to provide the signed agreement to the Purchasers’ lawyer with the implied immediacy.

3.21. The Committee also finds that the Licensee has failed to exercise the requisite level of skill, care and competence when dealing with the vendor and ASP 1. The vendor believed ASP 1 for sale of the Property was conditional on the vendor purchasing Property Q (ASP 2) when it was not. The vendor also believed the Purchasers were mucking him around when all they were doing was proceeding on the basis of the conditions in ASP 1 that they believed the vendor had accepted. This indicates a significant failing in the communication by the Licensee with her vendor client.

3.22. Further, the Committee considers that ASP 1 should have been conditional on the vendor purchasing Property Q (ASP 2). The Licensee exposed her vendor client to significant risk. That risk being committing the vendor to selling without the purchase of Property Q when the vendor did not wish to sell unless the vendor could purchase Property Q. The Purchasers say they had legal advice to the effect that they did have a binding agreement (ASP 1) with the vendor and that they could have held the vendor to the agreement. It is possible that the Purchasers could have argued that by her conduct the Licensee had conveyed acceptance of the offer despite the vendor’s instructions to withhold it.

3.23. The unfortunate thing about the situation is that on the evidence of the Purchasers, they were in a position to/did satisfy the conditions before the vendor’s escape clause saw the vendor’s agreement (ASP 2) cancelled. If the Licensee had managed the situation properly it is likely the vendor would have succeeded in purchasing Property Q and the Purchasers would have succeeded in purchasing the Property.

3.24. The following findings of unsatisfactory conduct are made against the Licensee:

1. Misleading the Purchasers by representing (by her conduct) they had a binding agreement (ASP 1) when the vendor had instructed her to withhold acceptance.
   
2. Misleading the Purchasers about providing the signed agreement (ASP 1) to the Purchasers’ lawyer at a time when she was not in a position to do so.
   

100. Failing to provide information which should in fairness have been provided to the Purchasers - that the vendor had a conditional agreement (ASP 2) to purchase and that the escape clause in ASP 2 had been activated (she should have obtained the authority of her vendor client to disclose this information).
     

4. Failing to competently deal with the vendor’s expectations/properly inform the vendor as to the nature of the ASP and that it was not conditional on the vendor’s purchase.
   

5. Failing to include a condition in the ASP making it conditional on the vendor’s purchase.
   

Conflict

3.25. The Licensee and her agency were also acting for the vendor selling Property Q.

3.26. It is unclear what the Purchasers are alleging for this issue. The Committee interprets the allegation as an allegation of a conflict of interest.

3.27. A conflict of interest does not arise just because a Licensee acts in two related transactions.

• 3.28. The Purchasers ask, “How can this be possible when the agent was the same agent acting for the back up offer on the property the vendor had their offer on...”. The Committee does not know what this means.
  
  • 3.29. The Committee has insufficient information to properly understand and determine this allegation. Bearing in mind the complaint was withdrawn it does not consider it necessary to enquire further into it.
    
  • 3.30. The Committee takes no further action on this issue2.

4. Request for submissions on orders

4.1. The Licensee is to file submissions (if any) on what orders should be made within ten working days from the date of notice of this decision.

4.2. The Committee requires the Case Administrator to obtain a record of any previous disciplinary decision in respect of the Licensee 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.

6. Your right to appeal

6.1. The Licensee may appeal to the Real Estate Agents Disciplinary Tribunal within 20 working days after the day the Committee gives notice of its decision on orders, if any.

7. Publication

7.1. The Committee has deferred making any decision on publication until its hearing to decide what orders, if any, should be made.

8. Provisions of the Act and Rules referred to

8.1. The provisions of the Act and the Rules referred to in this decision are set out in the Appendix.

2 Pursuant to section 80(2) of the Act

Signed

Andrew Hayes Chairperson

Peter Brock

Deputy Chairperson

Ian Keightley Member

Date: 19 January 2021

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 Disciplinary Tribunal against the determination within 20 working days after the day on which notice of the relevant decision was given under section 81 or 94, except that no appeal may be made against a determination under section 89(2)(a) that a complaint or an allegation be considered by the Disciplinary Tribunal.

(1A) The Disciplinary Tribunal may accept a late appeal no later than 60 working days after the day on which notice was given to the appellant if it is satisfied that exceptional circumstances prevented the appeal from being made in time.

(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 (ab) the prescribed fee, if any; 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:

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

6.2 A licensee must act in good faith and deal fairly with all parties engaged in a transaction.

6.4 A licensee must not mislead a customer or client, nor provide false information, nor

withhold information that should by law or in fairness be provided to a customer or client.

9.1 A licensee must act in the best interests of a client and act in accordance with the client’s instructions unless to do so would be contrary to law.