Watson - Complaint No C38197 [2021] NZREAA 68 (6 September 2021)

Last Updated: 18 November 2022

Before the Complaints Assessment Committee
In the matter of	Complaint No: C38197 Part 4 of the Real Estate Agents Act 2008
and
Licensee 1:	Stephen Watson (10010960)
Licensee 2:	Licensee 2 (XXXXXXXX)
The Agency:	The Agency (XXXXXXXX)

Decision finding unsatisfactory conduct in the matter of Stephen Watson

Decision to take no further action in the matter of Licensee 2 and The Agency

6 September 2021

Members of Complaints Assessment Committee: CAC2107 Chairperson: Gayatri Jaduram

Deputy Chairperson: Patrick Waite

Panel Member: Anthony Hutchinson

Complaints Assessment Committee

Decision to take no further action:

Decision finding unsatisfactory conduct – asking for submissions on orders:

1. The Complaint

1.1. On 17 August 2020 the Real Estate Agents Authority (the Authority) received a complaint against Stephen Watson (Licensee 1) from the Complainant. The Complainant is the owner of Harcourts, Ashburton.

1.2. Licensee 1 is a licensed Salesperson under the Real Estate Agents Act 2008 (the Act) and, at the time of the conduct, was engaged by the Agency.

1.3. The Complaints Assessment Committee (the Committee) also decided (under section 78(b) of the Act) to enquire into the conduct of:

1. Licensee 2 who is a licensed Agent under the Act and, at the time of the conduct, was (and still is) the sole director and shareholder of the Agency; and
   
2. The Agency.
   

1.4. The complaint relates to a property situated at the Property. The Property is owned by the Owners.

1.5. The details of the complaint against Licensee 1 are that:

1. The Property was listed for sale with no agency agreement in place.
   
2. Obligations under the Anti-Money Laundering/Countering the Financing of Terrorism Act 2009 (AML/CFT Act) were not completed prior to the Property being listed.
   

1.6. In particular, the Complainant said:

1. The Customers viewed the Property on 11 July 2020 with Licensee 1.
   
2. On 20 July 2020 the Customers met Licensee 1 at his office for the purpose of making an offer on the Property. While Licensee 1 was preparing the offer, he advised the Customers that the Agency had yet to complete the AML/CFT requirements and didn’t have a signed listing authority for the Property.
   

1.7. The Complainant asked the Authority to investigate her complaint to ensure that the following was done before the Property was offered for sale:

1. a listing agency agreement for the Property in place, signed by all the Owners; and
   
2. all AML/CFT requirements were completed.
   

1.8. Licensee 1 and Licensee 2 (personally and on behalf of the Agency) responded to the complaint against them.

Response: Licensee 1

1.9. Licensee 1 said:

1. His nephew and nephew’s wife (two of the four owners of the Property) urged him to

show any prospective purchasers through the Property before the paperwork was completed.

2. His nephew and nephew’s wife provided a signed letter asking him to proceed in the meantime.
   

100. He did not state to the Customers on 20th July 2020 that he had not yet completed paperwork. His nephew had provided all paperwork by 20th July.
     

4. He accepts that he showed the Customers the Property without having an agency agreement or the AML/CFT paperwork completed.
   
5. He said he recalls telling the Customers that he cannot take an offer from them until all the paperwork is received.
   
6. That’s when the Customers made an offer, they asked him if he had received the paperwork, he confirmed to them that he had received the documentation.
   
7. He said the agency agreement and the AML/CFT documentation were all received by him prior to the Customers completing the agreement for sale and purchase.
8. He said that he was completely honest with the Customers at all times regarding the paperwork and at no time was any marketing undertaken until all paperwork was

received from the Owners.

1. He has apologised to Licensee 2 over this as he did not expect a complaint given his honest transparency to the Customers at all times.

10. Since the complaint was made, he along with other sales colleagues have received training from Licensee 2.
    
11. He is also aware under Rule 9.6 that “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".
    

50. Under the AML/CFT requirements he categorised the Owners as extremely low risk as two of them were family related.
    

Response: Licensee 2

1.10. Licensee 2 said:

1. He is the owner, director and manager of the Agency.
   
2. At the time, he was not aware:
   
   1. that Licensee 1 was looking at the Property;
      
   2. when the agency agreement was completed;
      
   3. when the AML/CFT requirements were completed; and
      
   4. that Licensee 1 was showing Customers through the Property.
      

100. His licensees should complete their AML /CFT requirements before, or at the same time as they do the agency agreement. He has no reason to doubt that Licensee 1 would’ve completed the AML/CFT requirements before completing the agency agreement

documentation.

4. Both he and his AML/CFT trainer do random audits on his licensees’ files. It is during these audits (three files per licensee every three months) when he will check their

AML/CFT documents.

5. He spoke to Licensee 1 when he found out about the complaint. He wasn’t sure if Licensee 1 knew or not that you cannot contract out of law.
   
6. Licensee 1’s decision to show the Customers the Property was due to the pressure the Customers applied to look at it.
   
7. He said Licensee 1 had a letter from his nephew (being one of the Owners) saying the Owners were happy for them to come and have a look at it, even though all the

paperwork hadn’t been signed.

8. He said the Customers were told that any subsequent offers could only happen once he had an agency agreement.
   
9. He understands Licensee 1 received the offer from the Customers the same day the agency agreement was signed.
   
10. At no time was any marketing or advertising done until a signed agency agreement and the AML documentation completed as is stipulated in the Agency’s Procedure Manual.
    
11. The viewing by the Customers was a one off only given their urgency to view.
    

50. The AML/CFT documentation received back from the Australian based owners were not ‘certified documents’ as required under pages 38 and 39 of the Agency’s “Anti-Money Laundering/Countering the Financing of Terrorism (AML/CFT) Compliance Programme. The AML/CFT risk was considered “Very Low Risk” given the relationship Licensee 1 had with his nephew. An exception for the scanned documents from Australia not needing to be certified has been registered in the Agency’s AML Exception Log.
    

13. The Agency manages the Property and has for some time.
    
14. The Customer, who was working for Bayley’s Real Estate at this time, agreed to proceed under the circumstances and then even entered into negotiations which were unsuccessful.
    
15. It was only when the Customer went to work for Harcourts did the Agency receive the complaint, along with many others from the Complainant, which to date have all led to nothing.
    
16. To his and the Agency’s knowledge Licensee 1 was properly supervised and managed in relation to the obligation to conduct customer due diligence under the AML/CFT.
    
17. He said that Licensee 1 has learnt from this and it will not happen again.
    

2. What we decided

2.1. On 10 November 2020 the Committee considered the complaint and decided to inquire into it under section 79(2)(e) of the Act.

2.2 The Committee also decided, on its own initiative, under section 78(b) of the Act, to:

1. Inquire into the conduct of the Agency. The reason for including the Agency relates to the supervision, management and training of Licensee 1.
   
2. Inquire into the conduct of Licensee 2. The reason for including Licensee 2 relates to whether or not customer due diligence under the AML/CFT Act was done before the Property was listed.
   

2.3 Accordingly, the Committee decided to enquire into the following issues:

1. Whether Licensee 1 offered the Property for sale with no agency agreement in place (Issue 1).
   
2. Whether Licensee 1 and Licensee 2 listed the Property before completing customer due diligence under the AML/CFT Act (Issue 2).
   

100. Whether the Agency properly supervised and managed Licensee 1 in relation to the obligation to conduct customer due diligence under the AML/CFT Act (Issue 3).
     

4. Whether the Agency ensured that Licensee 1 had a sound knowledge of the obligation to conduct customer due diligence under the AML/CFT Act (Issue 4).
   

2.4 On 27 May 2021 the Committee held a hearing on the papers and considered all the information that had been gathered during the inquiry.

Licensee 1

2.5 The Committee has decided that Licensee 1 engaged in unsatisfactory conduct in relation to Issue 1 and Issue 2.

2.6 This decision was made 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), namely Rules 5.1 and 9.6.

Licensee 2

2.7 The Committee has decided to take no further action on the complaint against Licensee 2 in relation to Issue 2.

2.8 This decision was made under section 89(2)(c) of the Act. The decision was also made with reference to Rule 5.1 of the Rules.

The Agency

2.8 The Committee has decided to take no further action on the complaint against the Agency in relation to Issue 3 and Issue 4.

2.9 This decision was made under section 89(2)(c) of the Act. The decision was also made with reference to section 50 of the Act and Rules 8.3 and 8.4 of the Rules.

3. Our reasons for the decision

3.1. The Committee concluded:

Did Licensee 1 offer the Property for sale with no agency agreement in place

3.2 The evidence shows that the agency agreement was not signed by all four of the Owners of the Property:

1. before the Customers viewed the Property on 11 July 2020; nor
   

2. before the Customers made an offer on the Property on 20 July 2020
   

3.3 There are four registered owners for the Property. Two reside in Ashburton and two reside in Melbourne, Australia.

3.4 The agency agreement was signed by the two Ashburton owners (Licensee 1’s nephew and his nephews’ wife) and one Australian based owner. That agency agreement is dated 20 July 2020.

3.5 Rule 9.6 of the Rules says:

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.

3.6 Licensee 1, by showing the Customers the Property before an agency agreement was signed breached Rule 9.6. Showing the Customers the Property is “marketing” for the purposes of Rule 9.6. Licensee 1 accepts that he showed the Customers the Property without having an agency agreement. 1
3.7 The Customers made a written offer on the Property on 20 July 2020.

3.8 The second Australian based owner had signed the agency agreement electronically. The date and time recorded against the electronic signature was 21 July 2020 at 12:59:07am. The date and time were picked up by the Authority’s Investigator when they clicked on the properties of the signature, it appeared the date the signature was created or edited was 21 July (not 20 July when the Customers made an offer).
3.9 Licensee 1 didn’t want to respond to questions asked by the Authority’s Investigator and asked the Investigator to deal with Licensee 2. Licensee 2 was unable to provide the required detail, so the Investigator went back to Licensee 1 who didn’t comment further.

3.10 Licensee 1 did not provide evidence of an email to the two owners based in Australia. This suggests that it is more likely than not that both the Australian based owners signed the

agency agreement on 21 July. As at least one owner had not signed at the time the offer was made there was no agency agreement in place.

3.11 The Committee concludes that Licensee 1 breached Rule 9.6 of the Rules. Accordingly, the Committee finds, pursuant to section 89(2)(b) of the Act, that Licensee 1 has engaged in unsatisfactory conduct (for the purposes of section 72(b) of the Act).

Did Licensee 1 and Licensee 2 list the Property before completing customer due diligence under the AML/CFT Act

3.12 The evidence shows that Licensee 1 had not completed customer due diligence under the

1 In terms of rule 9.6, in CAC 414 v S Tafilipepe; and CAC 416 v S Tafilipepe [2019] NZREADT 13 the licensee had brought a prospective purchaser to a property she had not yet signed a listing for. The Tribunal considered that this constituted ‘marketing’ the property as far as rule 9.6 was concerned, holding that “market or offer” is broader than public marketing.

AML/CFT Act before listing the Property.

3.13 Rule 5.1 of the Rules says:

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

3.14 Licensee 1 was unable to meet face-to-face with the Australian based owners in order to complete AML/CFT obligations.

3.15 The Agency’s AML/CFT Compliance Programme says when there is no face-to-face there is a requirement for identifying documentation to be certified by an approved trusted referee (repeated in full below). This requirement was not followed by Licensee 1. He also accepts

that he showed the Customers the Property without having the AML/CFT paperwork completed.

Approved Trusted Referee

The relevant identification and verification documentation should be received at a face-to-face

meeting with the customer. Original documents should be photocopied and signed stating it has been sighted and is a good likeness of the individuals.

If unable to meet the customer face to face, identification and proof of address can be certified by an approved trusted referee.

The trusted referees must

• Be at least 16 years of age
  
• Have sighted the original documentary identification
  
• Specify their capacity to act as a trusted referee from the approved trusted referee list below
  
• Certified copies of the original documents can be returned by post or courier
  

An email with a scan of a certified copy of an identity document is not normally acceptable for [Customer Due Diligence] purposes because it could easily be falsified or tampered with prior to being emailed.

3.16 Licensee 2 confirmed that the AML/CFT documentation received back from the Australian based owners were not ‘certified documents’ as required under the Agency’s AML/CFT Compliance Programme.

3.17 The Committee concludes that Licensee 1 breached Rule 5.1 by not exercising care and diligence in ensuring the AML/CFT requirements were completed. Accordingly, the Committee finds, pursuant to section 89(2)(b) of the Act, that Licensee 1 has engaged in unsatisfactory conduct (for the purposes of section 72(b) of the Act).

3.18 Licensee 2 says:

1. He was not aware that Licensee 1 was looking at the Property.
   
2. At the time, he was not aware when the agency agreement or AML/CFT requirements were completed.
   

100. He was not aware Licensee 1 was showing the Customers through the Property.
     

3.19 There is no evidence to refute Licensee 2’s claims. The Committee concludes that Licensee 2

was not carrying out “real estate agency work” in relation to the Property. Accordingly, the Committee takes no further action against Licensee 2 in relation this issue pursuant to section 89(2)(c) of the Act.

Did the Agency properly supervise and manage Licensee 1 in relation to the obligation to conduct customer due diligence under the AML/CFT Act

3.20 Section 50(1) of the Act says:

A salesperson must, in carrying out any agency work, be properly supervised and managed by an agent or a branch manager

And Section 50(2) of the Act says:

...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.

3.21 Rule 8.3 of the Rules is similar to section 50(1).

3.22 It does not necessarily follow that if a licensee employed or contracted by an agency

breaches the Rules then that means the agency did not properly supervise or manage the licensee.2

3.23 Licensee 2 (on behalf of the Agency) said that:

1. The Agency and its salespeople’s record to date is exemplary which only happens with proper training and being aware of the requirements of the Authority and the AML/CFT requirements.
   
2. He and his AML/CFT trainer do random audits on licensees’ files. It is during these audits (three files per licensee every three months) when he will check their AML/CFT

documents.

3.24 The Agency has in place an Agency Licensee Procedure Manual with AML checklists.

• 3.25 The Committee concludes that there is no evidence to support a finding that the Agency did not properly supervise or manage Licensee 1 under section 50 of the Act and Rule 8.3 of the Rules. Accordingly, the Committee takes no further action against the Agency in relation to

this issue pursuant to section 89(2)(c) of the Act.

Did the Agency ensure that Licensee 1 had a sound knowledge of the obligation to conduct customer due diligence under the AML/CFT Act?

2 In Turoa & Osborne Realty Ltd v REAA and Mills [2020] NZREADT 31 the Tribunal said at [97] that “the fact that a licensee who is contracted to an agency infringes the rules does not necessarily lead to the conclusion that

there has been a lack of required supervision by the responsible real estate agency”. The Tribunal also said at

[98] “For an allegation of this kind to be proved, it is necessary for there to be evidence which enables a comparison to be made of what the agency should have done with what it actually did. The evidence must establish these elements with reasonable clarity.”

3.26 Rule 8.4 of the Rules says:

An agent who is operating as a business must ensure that all licensees employed or engaged by the agent 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.

3.27 Paragraphs 3.23 and 3.24 are equally relevant to this issue.

3.28 It is also noted that the Agency’s AML/CFT Compliance Programme sets out the requirements for customer due diligence. There is no evidence to suggest the Agency added the

requirements once a complaint was received by the Authority (as was implied in the complaint).

3.29 The Committee concludes that there is no evidence to support a finding that the Agency did not ensure the Licensee 1 had a sound knowledge of the obligation to conduct customer due diligence under the AML/CFT Act. Accordingly, the Committee takes no further action against the Agency in relation this issue pursuant to section 89(2)(c) of the Act.

4. Request for submissions on orders: Licensee 1

4.1 The Complainant is to file submissions (if any) on what orders should be made within ten

working days from the date of notice of this decision. These submissions, if any, will then be provided to Licensee 1, 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 Licensee 1 and, if any such decision exists, provide it to the Committee.

5. What happens next

5.1 The Committee will consider all submissions and issue a decision on orders for Licensee 1.

6 Publication

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

7 Your right to appeal

7.1 A person affected by the Committee’s decision in respect of Licensee 1 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.

7.2 If you are affected by the Committee’s decision in respect of Licensee 2 or the Agency, your right to appeal to the Real Estate Agents Disciplinary Tribunal (the Tribunal) 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.

7.3 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/.

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.

Signed

Gayatri Jaduram Chairperson

Patrick Waite

Deputy Chairperson

Anthony Hutchinson Member

Date: 6 September 2021

Appendix: Provisions of the Act and Rules referred to

The Real Estate Agents Act 2008 provides:

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.

78 Functions of Committees

The functions of each Committee are—

(a) to inquire into and investigate complaints made under section 74:
(b) on its own initiative, to inquire into and investigate allegations about any licensee:
(c) to promote, in appropriate cases, the resolution of complaints by negotiation, conciliation, or mediation:
(d) to make final determinations in relation to complaints, inquiries, or investigations:
(e) to lay, and prosecute, charges before the Disciplinary Tribunal:
(f) in appropriate cases, to refer the complaint to another agency:
(g) to inform the complainant and the person complained about of its decision, reasons for the decision, and appeal rights:
(h) to publish its decisions.

79 Procedure on receipt of complaint

(1) As soon as practicable after receiving a complaint concerning a licensee, a Committee must consider the complaint and determine whether to inquire into it.

(2) The Committee may—

• (a) determine that the complaint alleges neither unsatisfactory conduct nor misconduct and dismiss it accordingly:
• (b) determine that the complaint discloses only an inconsequential matter, and for this reason need not be pursued:
• (c) determine that the complaint is frivolous or vexatious or not made in good faith, and for this reason need not be pursued:
• (d) determine that the complaint should be referred to another agency, and refer it accordingly:
• (e) determine to inquire into the complaint.
  

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 apologies 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 8.4 An agent who is operating as a business must ensure that all licensees employed or

engaged by the agent 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 9.6 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