Freear - Complaint No C34717 [2021] NZREAA 50 (3 August 2021)

Last Updated: 19 April 2022

Before the Complaints Assessment Committee
In the matter of	Complaint No: C34717 Part 4 of the Real Estate Agents Act 2008
and
Licensee 1:	Catherine Ann Freear (20089510)
Licensee 2:	Craig Anthony Freear (10009873)

Decision on Orders

3 August 2021

Members of Complaints Assessment Committee: CAC1901 Chairperson: Rachael Schmidt-McCleave

Deputy Chairperson: Noel Cooper

Panel Member: Barbara Mackenzie

Complaints Assessment Committee

Decision on orders

Background

1.1. On 19 March 2021 the Complaints Assessment Committee (the Committee) found Catherine Ann Freear (Licensee 1) and Craig Anthony Freear (Licensee 2) (collectively the Licensees) guilty of unsatisfactory conduct under section 89(2)(b) of the Real Estate Agents Act 2008 (the Act).

1.2. The Complainants and the Licensee were given the opportunity to make submissions to the Committee on orders.

Orders

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

1. make an order censuring the Licensees.
   
2. order each Licensee to pay to the Real Estate Authority a fine of $3,000 by Wednesday, 1 September 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 McCaig 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 McCaig decision makes clear, this is permissible and is consistent with the overall

objectives of professional discipline.

Discussion

4.1. The unsatisfactory conduct in this case was about the Licensees’ failure to provide the REA Approved Guide, prior to the Complainants signing an agency agreement, and therefore not

fulfilling the obligations of sec 127(1) of the Act. By not providing the REA guide the Licensees breached Rules 5.1 and 5.2 of the Real Estate Agents Act (Professional Conduct and Client Care) Rules 2012 which requires licensees to exercise skill, care, competence and have a sound knowledge of the Act, regulations and rules when carrying out real estate agency

work. The Licensees also did not advise the Complainants in writing of the names of each prospective purchaser in respect of whom the Agency could claim a commission at some later stage as required by Rule 9.11.

4.2. In their submissions on orders the Complainants say they expected an experienced Licensee to comply with the Act and by not providing the REA guide, as required, they were denied the ability to be fully informed and possibly take independent advice before signing a contract. The Complainants further submitted that the Licensees’ failure to comply with Rule 9.11 and provide them with a written list of the names of purchasers showed a casual approach to not following correct due process. The Complainants considered the Licensees behaviour was on several occasions well below the standard one would expect from experienced real estate

licensees.

4.3. The Complainants requested penalties being:

1. The Licensees be censured and reprimanded.
   
2. That this order be published.
   

100. The Licensees apologise in writing to the Complainants.
     

4. The Licensees pay a minimum fine of $5000.
   

4.4. The Licensees in their submission on orders say that the Complainants had a copy of the draft agency agreement on Friday morning and were advised to peruse, discuss and seek legal

advice prior to signing. The Licensees received a text on Friday afternoon informing them that the Agency had been selected to sell their property. On Sunday morning when the Licensees met with the Complainants to complete the signing of the agency agreement the Licensees found that they did not have a copy of the REA Guide on hand. However, the Complainants gave their permission for the Licensees to email it to them later that day. The completed

agency agreement and REA guide were subsequently emailed to the Complainants later that Sunday evening. The Complainants also had the ability under section 130 of the Act to cancel the agency agreement if they felt unhappy about the process. The Licensees acknowledge

that it was human error in not providing the REA guide at the time of signing the agency

agreement and relied on the Complainants’ acknowledgement that they were experienced in the selling process and happy to receive the guide later by email.

4.5. With regard to the Committee’s finding of a breach of Rule 9.11, the Licensees submit that the first names and surname initials of all inspecting purchasers were entered into an

exclusive use portal for the benefit of the Complainants. The Complainants had 24/7 access to this database of buyers and the Complainants accessed it 96 times so were aware of all buyers who had inspected the property. The portal had an “offers tab” where the full names of the buyers who had made offers on the Property were shown. The Complainants were

therefore aware of the identity of all the interested buyers. This is further supported by the Complainants’ actions in advising the next listing agency of those buyers and entering a rider into the other agency’s listing agreement “We the vendors are not legally or financially liable for any issues over double commission.”

4.6. The Committee notes that the above submissions are focused on outcome, and the Licensees have the opportunity to appeal the substantive decision if they are unhappy with the outcome. The Licensees have not made any submission as to penalty.

4.7. The Committee has found that unsatisfactory conduct in this case is a result of the Licensees’ oversight and not a deliberate act or omission, nor done in the Licensees’ self-interest.

However, care with preparing for an agency agreement signing and fully informing the client when a possibility exists to claim a double commission are fundamental to real estate agency work, as is the requirement to comply with the Act and Rules. Parliament has imposed

requirements for a good reason.

4.8. Mitigating factors in this case are that the Complainants agreed to allow the Licensees to

email the REA guide later the same day. The Complainants did have approximately 2 days to take advice before signing the Licensees’ agency agreement. The Complainants had also acknowledged that they had experience in selling properties. The Licensees did provide an electronic portal that listed all the serious buyers who had made offers and visited the Property. The Complainants by their actions in inserting a rider on the next real estate company’s agency agreement, acknowledged that the Licensees may claim a commission if they subsequently sold to one of the Licensees’ listed buyers.

4.9. The basis for the Committee’s substantive decision was the mistake of the experienced Licensees to not follow good real estate practice and step back for a couple of hours to

provide the Complainants with a written copy of the REA guide before they signed the agency agreement, or alternatively, emailing a copy of the REA guide to the Complainants when they initially provided the appraisal and agency agreement. Although the Licensees did provide an electronic portal that contained the information of all prospective buyers for the

Complainants, the omission in not specifically providing a written list of buyers exposed the Complainants to a claim for double commission and is a breach of rule 9.11. This rule is specific in nature and is to provide a clear notification to the Complainants as to who a claim for double commission can be claimed for. In this case a double commission has been claimed by two Agencies.

4.10. The Committee has carefully considered the orders that can be made, and comments as follows.

4.11. The Committee considers that breaches of Rules 5.1, 5.2 and 9.11 warrants a censure of the Licensees. The Committee’s view is that this case is in the mid-level of unsatisfactory conduct due to the impact it had on the Complainants and their being subsequently subjected to a

claim for double commission.

4.12. The Committee itself cannot make an order of compensation and is not satisfied that the unsatisfactory conduct is such that an order referring the matter to the Tribunal should be made for the reasons set out in its substantive decision. The Committee has determined it is low to mid-level unsatisfactory conduct. The Committee therefore does not make an order referring the matter to the Real Estate Disciplinary Tribunal to consider whether to make a compensation order under section 110(5) of the Act.

4.13. The Committee has considered the Complainants’ request that an apology be ordered. The Committee, however, does not consider that an ordered apology is likely to be a genuine one, and would prefer that any apology come from the Licensees of their own volition. The Committee therefore declines to order an apology.

4.14. The Committee orders the Licensees to pay to the Real Estate authority a fine of $3,000 each for the reasons set out below.

4.15. Licensees have a duty of care to ensure that clients are fully informed of their rights when they enter into legally binding agency agreements and also be advised in writing when a

client may be exposed to a double commission situation. Such professional conduct is fundamental to good Real Estate agency work. The penalty in this case must reflect these factors while taking into account that the conduct was not deliberate.

4.16. The primary purpose of penalty under the Act is to maintain professional standards and protect the public. The Committee considers that it is necessary that penalty in this case is consistent with those objectives and supports maintenance of appropriate standards of care and diligence when carrying out Real Estate agency work.

4.17. In determining penalty and the level of fine applied in this case the Committee has also considered Z v Dental Complaints Assessment Committee and the need for penalty to be comparable with penalty imposed on others in similar circumstances. In this regard the Committee notes the following cases below.

The Complaints Assessment Committee in C31305 (2020) found the licensee in breach of Rule

5.1 of the Code of Conduct 2012 for failing to refer to an existing agency agreement in the new Agency agreement and failed to view the existing agency agreement before entering into the new Agency agreement. The Committee considered this breach to be minor in nature but resulted in significant consequences in exposing the vendor to the risk of double commission. The licensee was censured and ordered a fine of $2500. The Tribunal upheld the Committee’s decision (READT 043/19).

4.18. The Complaints Assessment Committee in C04822 (2014) reached a similar decision when the licensees were both censured and fined $2,500 each. In this case the licensees were found to have breached rules 9.11 and 10.2 of the Code of Conduct 2012 when they did not provide a written appraisal of the property nor provide the complainant with the name of each

customer in respect of whom they would claim a commission if the customer concluded a contract with the complainant.

4.19. The Complaints Assessment Committee in CA3876105 (2013) was also similar to the above case where the licensee was found to have breached rule 9.11 of the Code of Conduct 2009 and was fined $3000 and reprimanded for not explaining the risk of double commission to the complainants.

Publication

5.1. The Committee directs publication of its decision. The decision will state the name of the Licensees 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

Rachael Schmidt-McCleave Chairperson

Noel Cooper

Deputy Chairperson

Barbara Mackenzie Member

Date: 3 August 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.
  

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 5.2 A licensee must have a sound knowledge of the Act, regulations, rules issued by the Authority (including these rules), and other legislation relevant to real estate agency work

Rule 9.11 On notice of cancellation of an agency agreement being given or received by the agent under the agreement, the agent must advise the client, in writing, of the name of each customer (if any) in respect of whom the agent would claim a commission, were the customer to conclude a transaction with the client.