Stone & Stone - Complaint No C34232 [2021] NZREAA 93 (13 December 2021)

Last Updated: 21 November 2022

Before the Complaints Assessment Committee
In the matter of	Complaint No: C34232 Part 4 of the Real Estate Agents Act 2008
and
Licensee 1:	Lisa Stone (10050085)
Licensee 2:	Steven Stone (10049434)

Decision on Orders

13 December 2021

Members of Complaints Assessment Committee: CAC2001 Chairperson: Andrew Hayes

Deputy Chairperson: Peter Brock Panel Member: Ian Keightley

Complaints Assessment Committee

Decision on orders

Background

1.1. On 4 March 2021 the Complaints Assessment Committee (the Committee) found Lisa Stone and Steven Stone (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 Licensees were given the opportunity to make submissions to the Committee on orders.

Orders

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

1. An order censuring the Licensees.
   

Submissions

3.1 The Complainants made no submissions about orders.

3.2 The Complainants made a further submission about the issues and evidence. They say:

1. There are two unanswered questions.
   

2. The “...Super Gold card 10% Discount Commission was not applied to our Listing totalling

$5000. Lisa stone applied it to the Vendors of Property 2 totalling $5,117.50.” [sic]

100. The commission structure in the agency agreement was 2% on the balance of the purchase price and Lisa Stone charged them 2.5%.
     

3.3 The Licensees submitted:

1. At the time they did Property 11 appraisal there were no comparable recent sales. They took the most relevant at the time.
   
2. They met with the Complainants and went over the appraisal and told them there were no recent comparable sales.
   

100. They have changed the way they set out their appraisals to include a description of the comparable properties and to state whether they are superior or inferior.
     

3.4 The Committee invited the Complainants to respond to the statement by the Licensees that they met with the Complainants and went over the appraisal with them and told them there were no recent comparable sales. The Complainants’ response is they do not accept the submission of the Licensees and “...Minimal time was spent going over the appraisal in detail and there was no discussion relating to the property, land floor area etc...”.

General principles

4.1. In determining whether to impose one or more of the orders available under section 93 of

1 The property being sold by the Complainants at property 1

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

4.2. 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."

4.3. 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).

4.4. In the leading case on the principles relevant to professional disciplinary cases, Z v Dental Complaints Assessment Committee2 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

4.5. 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.

4.6. 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.
     

4.7. 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

4.8. 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 Committee3 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;
   

2 [2008] NZSC 55; [2009] 1 NZLR 1

3 [2015] NZHC 3063

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.
   

4.9. 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

Two unanswered questions

5.1. The Complainants say they did not get a Super Gold card 10% discount on commission for the sale of Property 1 whereas the vendors of Property 24 did.
5.2. The initial complaint5 made by the Complainants did not include a complaint about any Super Gold card discount on the commission/fees to be charged. In later correspondence with the REA the Complainants only complained they did not receive a settlement statement and they did not receive a marketing rebate refund of $500. They also complained that Licensee 1 did not explain a reduction in the commission charged for the sale of Property 1. These issues were addressed in the Committee’s substantive decision dated 4 March 2021 where it found no unsatisfactory conduct.

5.3. The documentary evidence in the investigation report considered by the Committee does not include any material about the Complainants being offered a Super Gold card 10% discount on commission. The listing cover sheet for the vendors selling Property 2 to the

Complainants records that the commission on that sale would be minus a 10% Super Gold card discount.

5.4. The Complainants have not, in this new allegation, stated they were offered (and not

afforded) a 10% Super Gold card discount. The new complaint is that the vendors of Property 2 received it and they did not. It is not an allegation about the conduct of the Licensees.

5.5. The allegation that the vendors of Property 2 were afforded a 10% Super Gold card discount and they were not is a fresh ground of complaint. This matter should have been raised by the Complainants before the Committee made its substantive decision on 4 March 2021. As it was not it will not be considered by the Committee.

5.6. The allegation that the commission structure in the agency agreement was 2% on the balance of the “purchase price” (sale price of Property 1) and the Complainants were charged 2.5% is

4. The property being purchased by the Complainants at Property 2
5. Complainants letter to the REA dated 26 October 2019

also a fresh ground of complaint made subsequent to the Committee’s substantive decision dated 4 March 2021. The allegation is inconsistent with the documentary evidence. The agency agreement signed by the Complainants dated 3 October 2018 states the commission to be 2.5% on the balance of the sale price.

5.7. As this allegation was not made before the Committee’s substantive decision on 4 March 2021 it will not be considered by the Committee.

Our decision

5.8. The Committee investigated 10 separate grounds of complaint. It took no further action on nine grounds of complaint and made an unsatisfactory conduct finding on one ground of complaint.

5.9. The Committee found the Licensees guilty of unsatisfactory conduct because their written appraisal of Property 1 did not comply with rule 10.2 and it was defective such that the

Licensees failed to exercise skill care and competence when carrying out real estate agency work.

5.10. The defect being that the Licensees only referred to three sales and they did not explain in their appraisal why those sales were comparable nor why only three sales were referred to.

Reasons for ordering the Licensees be censured

5.11. Appraisals must realistically reflect current market conditions because if an appraisal does not realistically reflect current market conditions it will either underrepresent or over represent (inflate) the potential market value of a property. The focus of the complaint was that the appraisal inflated the value of Property 1. The Committee had no evidence from which it could conclude the value was inflated.

5.12. The Licensees submit there were no recent comparable sales. They also submit (by way of mitigation) that at some point they met with the Complainants to discuss the appraisal at which time they told them there were no recent comparable sales and they also discussed how the sales related to Property 1.

5.13. The Complainants say they do not accept this submission by the Licensee but accept the appraisal was discussed and say only minimal time was spent going over it.

5.14. The Committee finds the response by the Complainants to be vague. They do not deny the Licensees’ assertion that they told the Complainants there were no comparable sales. The Committee prefers the evidence of the Licensees and accepts that the Complainants were provided with further verbal explanation as alleged by the Licensees. However, any further explanation required should have been in writing in the appraisal.

5.15. The Licensees also say they have adjusted their procedure and now include in their appraisals a description of the comparable properties and state whether the comparable properties are superior or inferior.

5.16. That the Licensees have adjusted the procedure is a good thing and is taken into account by

the Committee as mitigating their conduct. However, this might not be a complete answer to the problem which arose here. Just saying a property is superior or inferior is unlikely to be

enough. It would be prudent for the Licensees to explain why a property is superior or inferior.

5.17. The Licensees have one prior disciplinary finding against them. In C047866 the Licensees were found to have engaged in unsatisfactory conduct when they failed to follow the

instructions of a vendor client in relation to a settlement date inserted in an auction

agreement. Each Licensee was fined $2,000 and censured7. The Committee considers the conduct here to be less serious than the conduct in C04786.

5.18. The Committee places this conduct in the range of low level unsatisfactory conduct. It does so for the following reasons:

1. No harm has been caused to the Complainants;
   
2. There is no evidence that the value of Property 1 was inflated;
   

100. The conduct involves the breach of one rule only;
     

4. A written appraisal (although inadequate) was provided;
   
5. The Licensees provided further verbal explanation of their appraisal.
   

5.19. Low level unsatisfactory conduct can be met with a fine, (where a fine is appropriate), from several hundred dollars to $3,000.00.

5.20. The Licensees acknowledge an “oversight” in relation to the appraisal and say they have

changed the way they set out appraisals to state whether a comparable property is superior or inferior.

5.21. The unsatisfactory conduct of the Licensees is mitigated by the fact the Licensees have accepted their error although to characterise it an “oversight” is an understatement of the error. Their conduct is also mitigated by the fact the Licensees have changed their process

for written appraisals in an attempt to improve their process. That the Licensees have a prior disciplinary finding for a failure to exercise skill and care is a relevant matter also taken into account by the Committee.

5.22. Weighing the factors discussed above (relevant to the conduct and the personal factors

relating to the Licensees) the Committee has decided that a censure is a sufficient response its finding of unsatisfactory conduct. It does not consider a fine is necessary.

5.23. The Licensees are censured.

Publication

6.1. The Committee directs publication of its decision. The decision will be published without the names or identifying details of the Complainants (including the address of the Properties), and any third parties. 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.

6.2. 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.

6. CAC301 19 August 2014
7. CAC301 18 December 2014 (orders decision)

Your right to appeal

7.1. 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.

7.2. 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

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

Signed

Andrew Hayes Chairperson

Peter Brock

Deputy Chairperson

Ian Keightley Member

Date: 13 December 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.