Lupi - Complaint No C34522 [2021] NZREAA 30 (31 May 2021)

Last Updated: 8 March 2022

Before the Complaints Assessment Committee
In the matter of	Complaint No: C34522 Part 4 of the Real Estate Agents Act 2008
and
Licensee:	Joseph Lupi (10006812)
The Agency:	Century 21 Wellington Limited (20022709)

Decision on Orders

31 May 2021

Members of Complaints Assessment Committee: CAC1907 Chairperson: Rachel Palu

Panel Member: Julian Twiss

Complaints Assessment Committee

Decision on orders

Background

1.1. On 12 January 2021 the Complaints Assessment Committee (the Committee) found Joseph Lupi (the Licensee) and Century 21 Limited (the Agency) guilty of unsatisfactory conduct under section 89(2)(b) of the Real Estate Agents Act 2008 (the Act).

Orders

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

The Licensee

1. make an order censuring the Licensee;
   
2. order the Licensee to pay to the Real Estate Authority a fine of $4,500.00 by Wednesday, 30 June 2021;
   

The Agency

100. make an order censuring the Agency;
     

4. order the Licensee to pay to the Real Estate Authority a fine of $2,500.00 by Wednesday, 30 June 2021;
   

General principles

3.1. In determining whether to impose one or more of the orders available under section 93 of the Act, the Committee has had regard to the following general principles relevant to professional disciplinary cases.

Promoting and protecting the interests of consumers and the public

3.2. Section 3(1) of the Act sets out the purpose of the legislation. The 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."

3.3. One of the ways in which the Act achieves this purpose is by providing accountability through an independent, transparent and effective disciplinary process (section 3(2) of the Act).

3.4. In the leading case on the principles relevant to professional disciplinary cases, Z v Dental Complaints Assessment Committee [2008] NZSC 55, [2009] 1 NZLR 1, the Supreme Court affirmed that consumer protection was a central focus of professional disciplinary cases (see at [70], [113], [128] and [145]).

Maintaining professional standards

3.5. The other central focus of professional disciplinary cases is maintaining professional standards. As already noted, section 3(1) of the Act refers to the purpose of “[promoting] public confidence in the performance of real estate agency work", and section 3(2) refers to raising industry standards and providing accountability through the disciplinary process. In Z v Dental Complaints Assessment Committee the Supreme Court confirmed that maintenance of

professional standards is a fundamental purpose of professional disciplinary proceedings.

3.6. The need to maintain proper professional standards means that it is necessary to:

1. make sure that no person who is unfit because of his or her conduct is allowed to practice in the profession in question;
   
2. protect both the public and the profession itself against persons unfit to practice; and
   

100. enable the profession or calling, as a body, to ensure that the conduct of members conforms to the standards generally expected of them.
     

3.7. Specific and general deterrence has an important role to play in ensuring maintenance of professional standards. The penalty imposed should be sufficient to deter the licensee from engaging in the same or similar conduct in the future. It should also be sufficient to deter other members of the profession from engaging in similar conduct, even if the Committee is satisfied that the licensee is unlikely to repeat the conduct themselves.

Other relevant factors

3.8. Although the Supreme Court in Z v Dental Complaints Assessment Committee placed particular emphasis on the purposes of consumer protection and maintenance of professional standards, the High Court has recognised other relevant factors which are consistent with these purposes. In TSM v Professional Conduct Committee [2015] NZHC 3063, the High Court summarised these other factors as follows (at [16]):

1. Punishment of the professional;
   
2. Rehabilitating and reintegrating the professional into the profession, if the professional is capable of that;
   

100. The penalty must be comparable with the penalty imposed on others in similar circumstances;
     

4. The penalty must be based on assessment of the offending behavior against the spectrum of penalties available, with the maximum penalties being reserved for the worst offences;
   
5. The penalty must involve imposition of the least restrictive penalty that can be reasonably imposed in the circumstances; and
   
6. The penalty imposed must be fair, reasonable and proportionate in the circumstances.
   

3.9. The Committee accepts that a penalty in a professional disciplinary case is primarily about maintaining standards and protecting the public, not punishment, as may be the case in criminal proceedings. However, if the Committee decides to impose one or more of the penalties available under section 93 of the Act to meet the purposes summarised above, the penalty will likely be regarded as having a punitive effect from the licensee’s perspective. As the TSM decision makes clear, this is permissible and is consistent with the overall objectives of professional discipline.

Discussion

4.1. The Complainant, the Licensee and the Agency were given the opportunity to make submissions to the Committee on orders, however no submissions were received.

The Licensee

4.2. The Committee found that the Licensee: failed to ensure that requirements under the Anti- Money Laundering and Countering the Financing of Terrorism Act 2009 Act (AML) had been complied with before listing the Complainant’s property in 2019; failed to obtain a title search when listing the property, which would have also revealed a registered caveat; failed to obtain the consent of all registered owners of the property; and offered the property for sale without the required authority. Such conduct was found to amount to multiple breaches of Rules 5.1, a breach of 9.6 and also resulted in a failure to ensure that both the listing agreement and the initial agreement for sale and purchase presented for signature, failed to include all material particulars amounting to multiple breaches of Rule 9.9. Cumulatively, the various breaches were found to amount to conduct that would reasonably be regarded as unacceptable and fell short of the standard that a reasonable member of the public is entitled to expect of a reasonably competent licensee in breach of ss 72(a) and 72(d) of the Act.

4.3. The Licensees’ conduct could have resulted in costly consequences for the vendor and purchaser had the existence of the independent trustee’s interest in the property not been identified by the purchasers before an agreement for sale and purchase was duly executed. In this case the purchasers were assisted by a lawyer prior to entering into the agreement to purchase. However, that is not always the case and the important role licensees have in identifying all registered owners and securing their consent cannot be understated. In this case the Complainant also incurred legal costs responding to efforts by one of the vendor trustees to sell the property without reference to his fellow trustees.

4.4. There are no personal mitigating factors.

4.5. There are several personal aggravating factors:

• (a) The Licensee does not have an unblemished record. In 2017 the Real Estate Agents Disciplinary Tribunal1 (the Tribunal) found the Licensee guilty of misconduct in relation to overseeing the preparation of a 2014 sale and purchase agreement (the 2014 transaction) for vacant possession of a property with a fixed term tenancy, by a licensee with less than six months experience. The Licensee was found to be the most culpable in the circumstances which involved three licensees, and found to have an indifferent or reckless approach to his obligations under the Act.
  
• (b) The Licensee’s explanation in response to the complainant failed to understand the errors made or accept responsibility.
  

4.6. The Licensee is an experienced Licensee of many years. The matter concerns multiple breaches and errors that are relatively basic and fundamental to the role of a licensee. Overall, the Licensee was indifferent to his obligations and took a casual approach to the listing in this case.

4.7. Although, the Licensee has voluntarily suspended his licence and sold the Agency’s real estate business, it is unclear if the Licensee has actually left the industry.

4.8. After weighing the general principles above and the Act’s objectives of protecting the interests of consumers, promoting public confidence and maintaining professional standards as well as the need for specific and general deterrence and rehabilitation and consistency, against the circumstances of this case, we consider the conduct to be mid-level unsatisfactory conduct.

4.9. We consider that a fine should imposed to demonstrate the importance of consumer

1 Complaints Assessment Committee 408 v Schembri, Lupi and Kearins [2017] NZREADT 24

protection and professional standards. A fine also has a punitive element and serves as a deterrent to the Licensee and others in the industry.

4.10. Under section 93(1)(g) of the Act the Committee may order the Licensee to pay the Authority a fine not exceeding $10,000.00. This would indicate a fine of $2,000.00 to $7,000.00 for mid- range conduct. Given the Licensee’s casual approach we find that a fine of $3,500.00 is appropriate. To that an uplift of $1,000.00 is added for aggravating factors. The Licensee is therefore ordered to pay a total fine of $4,500.00.

4.11. In making the Complaint, the outcome sought by the Complainant was to ensure that the correct procedure is followed when listing property with multiple owners. In circumstances where a Licensee appears to be inactive in the industry, it is unlikely that an order for further training would meet the Act’s objectives.

4.12. However, the Committee considers that a censure is appropriate to reflect the importance of ensuring that correct procedures are followed when listing a property with multiple owners, and the maintenance of professional standards.

The Agency

4.13. We have found that the Agency failed to provide adequate management or systems in relation to obtaining authority to list a property, completion of AML requirements, and ensuring sale agreements contained all material particulars, in breach of s 50 and Rule 8.3. Although, the conduct of the Licensee as sole director and owner of the Agency is attributable to the Agency, it was still the Agency’s responsibility to ensure it had adequate systems and management to ensure the proper supervision of Licensees acting for it.

4.14. The Agency was also found guilty of unsatisfactory conduct in relation to the 2014 transaction by another Complainants Assessment Committee (CAC) in 20162. The decision of the CAC was also upheld on appeal by the Tribunal in 20173. The Agency was found to have lacked proper office systems and financial controls to safeguard client funds and failed to provide a suitable supervision structure and framework to ensure its licensees were properly supervised.

4.15. We are satisfied that despite the reminder through the finding of unsatisfactory conduct in relation to the provision of a suitable supervision structure just over two years before the listing in this case, the Agency’s systems still had areas that were inadequate. This in our view is an aggravating factor.

4.16. Overall, the Committee’s considers that the Agency’s conduct is in the low-range of unsatisfactory conduct. Under s 93(1)(g) a company may be fined up to $20,000.00. After taking into consideration the Licensee’s culpability and orders already made against the Licensee, and the fact that the Agency’s real estate business has been sold, we find that a fine of $2,000.00 is appropriate to reinforce the importance of maintaining professional standards and AML requirements at all times. After taking into account the aggravating factor, a total fine of $2,500.00 is considered appropriate.

4.17. Although, the Agency is no longer active as a licensed agency, it still appears to be a trading company and a censure is also considered appropriate to reaffirm the importance of suitable systems and management and as a general deterrence.

2 Century 21 Wellington Ltd [2016] NZREAA 155 (29 July 2016)

3 Century 21 Wellington Ltd v REAA and O [2017] NZREADT(31 July 2017)

Publication

5.1. The Committee directs publication of its decision. The decision will be published without the names or identifying details of third parties (including the address of the Property). 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. 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.

Your right to appeal

6.1. If you are affected by this decision of the Committee, the right to appeal is set out in section 111 of the Act. You may appeal in writing to 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.

6.2. The Notice of Appeal form, which includes information on filing an appeal, can be located on the Ministry of Justice’s website: https://www.justice.govt.nz/tribunals/real-estate- agents/apply/.

Provisions of the Act and Rules referred to

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

Signed

Rachel Palu Chairperson

Julian Twiss Member

Date: 31 May 2021

Appendix: Provisions of the Act and Rules referred to

The Real Estate Agents Act 2008 provides:

3 Purpose of Act

(1) The purpose of this 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.

(2) The Act achieves its purpose by—

• (a) regulating agents, branch managers, and salespersons:
• (b) raising industry standards:
• (c) providing accountability through a disciplinary process that is independent, transparent, and effective.
  

50 Salespersons must be supervised

(1) A salesperson must, in carrying out any agency work, be properly supervised and managed by an agent or a branch manager.
(2) In this section properly supervised and managed means that the agency work is carried out under such direction and control of either a branch manager or an agent as is sufficient to ensure—

• (a) that the work is performed competently; and
• (b) that the work complies with the requirements of this Act.
  

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;

(ha) if the Committee is satisfied that the unsatisfactory conduct involves more than a minor or technical breach of this Act or of any regulations or rules made under this Act, make an order referring the matter to the Disciplinary Tribunal for the Tribunal to consider whether to make a compensation order under section 110(5);

(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 Rules from the Real Estate Agents Act (Professional Conduct and Client Care) Rules 2012 referred to in this decision are:

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

Rule 8.3 An agent who is operating as a business must ensure that all salespersons employed or engaged by the agent are properly supervised and managed.

Rule 9.6 Unless authorised by a client, through an agency agreement, a licensee must not offer or market any land or business, including by putting details on any website or by placing a sign on the property.

Rule 9.9 A licensee must not take advantage of a prospective client’s, client’s, or

customer’s inability to understand relevant documents where such inability is reasonably apparent.