Chen - Complaint No C40274 [2022] NZREAA 76 (14 December 2022)

Last Updated: 7 April 2024

Before the Complaints Assessment Committee
In the matter of	Complaint No: C40274 Part 4 of the Real Estate Agents Act 2008
and
Licensee 1:	Jing (Amy) Chen (20114130)
Licensee 2:	Dequn (Gloria) Zeng (10039354)
The Agency:	Barfoot & Thompson Limited t/a Barfoot & Thompson Greenlane (10018521)

Decision finding unsatisfactory conduct 14 December 2022

Members of Complaints Assessment Committee: CAC2108 Chairperson: Andrew Hayes

Deputy Chairperson: Denise Evans Panel Member: Ian Keightley

Complaints Assessment Committee

Decision finding unsatisfactory conduct

1. The Complaint

1.1. On 18 December 2020 the Real Estate Agents Authority (the Authority) received a complaint against Jing (Amy) Chen (Licensee 1) and Dequn (Gloria) Zeng (Licensee 2) from the Complainant.

1.2. Licensee 1 and Licensee 2 are licensed Salespersons under the Real Estate Agents Act 2008 (the Act) and, at the time of the conduct, were engaged by Barfoot & Thompson Limited t/a Barfoot & Thompson Greenlane (the Agency). The Agency is managed by its Sales Manager and Branch Manager.

1.3. The complaint relates to a property situated at the Property purchased by the Complainant.

1.4. In summary the Complaint is that the content of a building report obtained by the vendors was not disclosed to the Complainant purchaser.

1.5. On 22 April 2020 Complaints Assessment Committee 2105 (Committee 2105) considered the complaint and decided to inquire into it under section 79(2)(e) of the Act.
1.6. Committee 2105 considered the complaint also raised issues about whether the Licensees were adequately supervised by the Agency given Licensee 1 had less than 6 month’s experience at the time of the conduct. Therefore, Committee 2105 decided to inquire into this issue under section 78(b) of the Act.

1.7. On 20 August 2021, the complaint was transferred to Complaints Assessment Committee

2108 (the Committee) who considered and affirmed the decision made by Committee 2105 and adopted the decision to inquire.

1.8. The issues under inquiry are:

• (a) Whether, prior to the signing of the agreement for sale and purchase for the Property and prior to that becoming unconditional, the Licensees did not disclose that the vendors had obtained a building inspection report dated 22 September 2020 (the Report) of the Property which highlighted areas of damp that required further investigation.
• (b) Whether the Licensees had an obligation to disclose the existence and content of the Report.
  
• (c) Whether the Licensees were adequately supervised.

1.9. Accordingly, this decision addresses concerns related to disclosure of the builders report to the complainant (“the Report disclosure issue”) and also the supervision of both Licensee 1 and Licensee 2 by the Agency (“the supervision”).
1.10. The Complainant says that she felt that she should have been made aware of the content of the Report and given a copy of it. She says the Report would have alerted her to potential problems with the Property. In particular she said:

• (a) She dealt with the Licensees, both of whom were marketing the Property.

• (b) The vendors who reside in China had been renting out the Property.
  
  • (c) Prior to the Property going to market the vendors engaged the services of a building inspector to fully inspect the Property. As a result of that inspection the Report was prepared. The Report identified five areas of the house as having high readings of moisture, within the 40-80 digits range. Page 3 of that report stated: “where moisture readings exceed 20% the risk of timber decay is high.”.
    
  • (d) Licensee 1 never disclosed the existence or the content of the Report to the Complainant or her partner (The Complainant’s Partner) on 2 November 2020 or any other time until after the sale was unconditional. The only disclosure as to weathertightness was made by Licensee 1 being that there had been some historical leak in the kitchen and that had been repaired 1 to 2 years earlier.
    
  • (e) On 3 November 2020, she and The Complainant’s Partner went to the Agency to make an offer on the Property.
    
  • (f) She says that the Report was known to both the Licensees, but they never disclosed it to her, neither at the time of viewing the Property or when the Sale & Purchase Agreement was signed by her.
    
  • (g) The Report was disclosed to her by Licensee 1 after the agreement became unconditional for the Property and when she informed Licensee 1 that she was required to arrange a building inspection by her bank for finance purposes.
    
  • (h) It was only then that Licensee 1 told her that the vendors had commissioned the Report and Licensee 1 subsequently forwarded the Report to her.
    
  • (i) She was very concerned reading the Report and had she known the Property had weather-tightness issues she and her partner would never have followed through with the purchase.
  • (j) She commissioned a further report from another party later. This report highlighted significant water ingress mostly to the downstairs bedrooms and the upstairs dining area.
  • (k) The remedial costs have not yet been finalised but may well be upwards of $50,000.00.
  • (l) She says she is now in the situation of not knowing whether her bank will extend her finances or not because of the weather-tightness issues to the Property.

1.11. The Complainant requested a remedy, being:

• (a) That half the cost of the required repairs be paid by the Agency or the Licensees.

1.12. The Licensees and Agency responded to the complaint against them.

Response: Licensee 1

1.13. Licensee 1 responded to the complaint. In particular Licensee 1 said:

• (a) The vendor wanted to make sure that the Property was concrete rather than plaster, so he arranged a building report.
  
• (b) On the day of the Report inspection the tenant was working from home and so Licensee 1 stayed outside the house during the inspection.

• (c) At the completion of the inspection the inspector told her the house was a solid concrete property in a very good condition.
  
  • (d) She points out that at the beginning of the Report on page 6 of the summary it states in capital letters “Overall the property is in an ABOVE AVERAGE condition for its age”. She relied on the general comments in the front of the Report and that it was of concrete and not plaster construction, being the vendor’s concern.
    
  • (e) Given that statement she “didn’t spend much time studying the technical terms of the 41-page report, and “didn’t pay much attention to the other parts of the report”. The moisture reading result listed in Appendix A, page 32, was not highlighted.
    
  • (f) Due to the limitation of her construction knowledge and lack of technical experience she didn’t identify any defect from the Report.
    
  • (g) This listing is the first she had been fully involved in and as a newly licensed salesperson she was very reliant and confirmed each step of the way with her supervisor.
  • (h) Licensee 2 was her direct supervisor. She received direction from Licensee 2. If Licensee 2 was not sure of something, Licensee 1 would ask the Sales Manager.
    
  • (i) On 30 September 2020 she asked Licensee 2 if they should print out the Report to show at open homes. Licensee 2 told her they could provide it if it was requested otherwise not to as buyers should get independent advice from their own building inspector rather than the vendor’s. Further Licensee 2 told her that this good building report might mislead potential buyers.
  • (j) She sent a copy of the Report to Licensee 2 on 21 October 2021 via Online Messages.
  • (k) The Property was passed in at auction the following day, 22 October 2020.
  • (l) Around 1 November 2020, the Complainant’s partner, contacted Licensee 2 to make an appointment to view the Property. He had told her he was a cash buyer.
    
  • (m) On 2 November 2020 The Complainant’s Partner and two of his friends spent about an hour viewing the Property. She told them that although the building looked to have plaster cladding, she and her colleagues were sure it was not as the vendor had had a building report done which showed the building was of concrete construction.
    
  • (n) She did not disclose the content of the Report because:
    1. Licensee 2 instructed her they did not have to show the report to each buyer unless they asked to see it.
       
    2. She didn’t identify any defects from the Report.
       
  • (o) The Complainant’s Partner picked up some spots that needed to be repaired, upgraded or checked. She advised The Complainant’s Partner to consult professionals. The Complainant’s Partner and his group remarked that the Property looked solid and old houses always have some issues, but they were planning to do renovation work anyway.

• (p) The Complainant and The Complainant’s Partner submitted a conditional offer with their lawyer’s approval at the Agency’s Greenlane branch. They said they didn’t need a loan from the bank. Before they signed the purchase documents, both Licensees again suggested to them they should obtain their own building report.
  
  • (q) A burst pipe and some other issues such as a broken light and chattels were disclosed to the Complainant.
    
  • (r) The Complainant and The Complainant’s Partner advised that they didn’t need further technical advice from an independent third party.
    
  • (s) On 3 November 2020 when the Complainant and The Complainant’s Partner were signing the conditional Sale & Purchase Agreement both the Licensees advised them to obtain their own builder’s report, but they didn’t take that advice until after they had purchased the Property.
    
  • (t) Because of their change of circumstances, the Complainant then had to raise bank finance and that required her to obtain a building report.
    
  • (u) Licensee 1 immediately sent the Complainant the Report, when the bank requirement was raised, in case it was of any use to her. She says, “I never wanted to hide anything from the report otherwise I would not send it to her.”.
    

Response: Licensee 2

1.14. Licensee 2 responded to the complaint against her. In particular Licensee 2 said:

• (a) Licensee 1 is a well-trained Barfoot and Thompson salesperson who has been working

with her for “about” 7 months.

(b) After the building inspection was finished Licensee 1 sent her a text through Online Messages that the inspector said the house was made of concrete with a layer of plaster outside and said there were no issues with the materials.

(c) She did not read the Report at that time.

(d) Before the auction she emailed Licensee 1 requesting that she send her any important information about the Property that needed to be disclosed to potential buyers.

(e) Licensee 1 told her she had mentioned to the Complainant’s partner that the vendor had obtained a building report and that The Complainant’s Partner did not have any concerns about the Property as it was concrete.

(f) Prior to writing the offer (on around 3 November 2020) she went through the buyer’s acknowledgement and consentswith The Complainant’s Partner. He was advised to pay attention to all items listed in the form, especially to the one item which states that the Property is a cladding type that may be of risk of weathertightness problems, and that it was recommendedthat they seek the expert advice of a suitably qualified person. That was initialled on the form by the Complainant and The Complainant’s Partner.

(g) When the offer was written she suggested to The Complainant’s Partner that a due diligence or builders’ clause be added. The Complainant’s Partner did not wish to do so but did add in a lawyer’s approval clause.

(h) She “did not read the vendors building report, so she was unable to disclose any information about its contents.”

(i) She only read the Report on 15 December 2020, after the agreement had gone unconditional and in response to the Complainant’s enquiry as to whether she could elect not to settle.

(j) Licensee 1 was ‘’unable to disclose any information about the moisture because she was unaware of the moisture issues in the report”.

Response: The Agency

1.15. The Agency responded to the complaint. In particular it said:

The Report disclosure issues

(a) The Branch Manager of the Agency became aware of the conduct when the Support Centre contacted her by email on 4 March 2021.
(b) A meeting was held with her, the Agency’s Sales Manager, Lead Salesperson (Licensee

2), and salesperson Licensee 1.

(c) During that meeting the below was established to the Agency’s satisfaction:

1. The vendor had commissioned a building inspection and a report had been provided to both the vendor and Licensee 1.

2. The focus of that report appeared to have been concrete exterior versus monolithic cladding exterior – she understood that was the vendor’s key concern. The Report indicated the exterior was concrete and timber weatherboard.
   
3. Licensee 1 advised that she did not read the Report cover-to-cover as she had been told by the building inspector the home was in very good condition. She had relied solely on his verbal comments.
   
4. Licensee 2 was aware of the Report, but it had not been forwarded onto her at that stage.
   5. Licensee 1 had discussed having the Report available at Open Homes with Licensee 2, but Licensee 2 believed potential buyers should only be shown it if requested.
      
6. On 2 November 2020, while Licensee 1 was showing the Property to The Complainant’s Partner, she reportedly advised him that the vendor had a building report carried out on the Property.

7. Licensee 1 advised that when the Complainant and partner were completing their offer, she and Licensee 2 asked if they would like to include a building report (of their own). They apparently declined stating they were planning extensive renovations anyway, so one would not be necessary.
   
8. Because of the Complainant’s changed circumstances one month later, she had a building inspection carried out, as part of the lending criteria from her bank. Neither Licensee 1 nor Licensee 2 sighted this second report.
   
   9. A few days later the Complainant called Licensee 1 telling her that there were serious problems pertaining to the balcony’s construction stating it was a design issue.
      10. Until that call, neither Licensee 1 or Licensee 2 were aware of any issues with the balconies, in fact the first report notes both the back and front balconies as follows:
          

“It is in our opinion that it is satisfactory for the construction type and age of deck.”.

11. Given this there was nothing to disclose about the balconieswhich is the specific area that the Complainant is now claiming compensation for.

The Supervision

(a) The level of supervision at the Greenlane Branch of Barfoot and Thompson Ltd would likely be considered higher than a standard office as there is both a Branch Manager and a Sales Manager.

(b) One of the advantages of this is the Sales Manager is available solely for the salespeople, with his office situated in the sales area upstairs.

(c) The salespeople have direct access to the Sales Manager and a large amount of his time is dedicated to assisting and over-seeing salespeople in their day-to-day activities.
(d) The weekly sales meetings are run jointly by the Branch Manager and the Sales Manager.

(e) A regular part of these sales meetings is discussing “case studies” where issues have arisen (or could have arisen but were averted) in certain situations over the last week and they are used as a training opportunity. Issues around disclosure have been a common feature in these case studies.

(f) Throughout 2019 and 2020, regular fortnightly discussion groups were held on Wednesday mornings in the office. These were open forums without specific agendas, where salespeople could discuss any questions, doubts or queries they might have that were real estate related.
(g) While they don’t have a record of attendance for those meetings Licensee 2 was a fairly regular attendee. New agents such as Licensee 1 were required to attend all these meetings for their first 6 months with the Agency.

(h) Disclosure was often a topic that was raised in those meetings.

(i) 2019 was the year REA included disclosure as part of the verifiable training. On 10 September 2019, they (the Agency) put out a REA Disclosure refresher training in the Branch that Licensee 2 attended.

(j) Dates and topics that took place in the months prior to the listing were provided as wel as the Sales Manager’s reports.

(k) The Agency can only manage what they are provided with and given that both Licensee 1 and Licensee 2 failed to inform either the Sales Manager or Branch Manager about the Report, they were not given the opportunity to assist, advise or oversee the appropriate action.

2. What we decided

2.1. On 29 November 2021 the Committee held a hearing on the papers and considered all the information gathered during the inquiry

2.2. In relation to the Report disclosure issue the Committee found:

• (a) Licensee 1 has engaged in unsatisfactory conduct under section 89(2)(b) of the Act. The decision was also made with reference to the Real Estate Agents Act (Professional Conduct and Client Care) Rules 2012 (the Rules), namely r 5.1 (a licensee must exercise skill, care, competence, and diligence at all times when carrying out real estate agency work).
• (b) Licensee 2 has engaged in unsatisfactory conduct under section 89(2)(b) of the Act. The decision was also made with reference to the Rules, namely r 5.1 (a licensee must exercise skill, care, competence, and diligence at all times when carrying out real

estate agency work).

2.3. In relation to the supervision, the Committee found the Agency has engaged in unsatisfactory conduct under section 89(2)(b) of the Act in relation to its inadequate supervision and management of Licensee 2. This decision was made in reference the Act namely s 50 (1) and

(2) and the Rules, namely 8.3 (proper management and supervision of salespersons).

2.4. The Committee has decided the lack of supervision provided by the Agency to Licensee 1 should be referred to the Real Estate Agents Disciplinary Tribunal to consider whether it meets the threshold for misconduct and is therefore subject of a separate decision to lay charges.

3. Our reasons for the decision

The Report disclosure issue

The Report and its Moisture readings.

3.1. The Report included a table headed “Moisture Reading Result Summary”. That table recorded the readings in 10 rooms of the house with a reading and a summary. Of those 10 rooms 5 (half) recorded readings of between 46 to 54. The summary of each of these 5 entries stated:

“Slightly higher than normal moisture readings show above 40 digits indicating damp. It would need to be further investigated.”

3.2. Below that the reading was defined as follows: “40-80 digits = Damp”.
3.3. Below that was a note stating:

“Please refer to page 3 for an explanation of moisture reading.”

3.4. Page 3 includes the following statement:

“Accurate moisture readings can only be obtained by intrusive means, which is not carried out during this inspection. However, whereslightly high or greater moisture readings are indicated during inspection, further investigation would be required to determine the source of the reading.”

3.5. The moisture table does not directly address any moisture issues in relation to the balconies.
3.6. The Report identifies no specific issues with the balconies.

Whether Licensee 1 and Licensee 2 had an obligation to disclose the existence and content of the Report.

Licensee 1

3.7. On the complaint against Licensee 1 and Licensee 2, as to the existence and content of the Report, the Committee found that, under section 72 (a) (b) (c) and (d) of the Act, they both engaged in unsatisfactory conduct.

3.8. Licensed real estate professionals have disclosure obligations to ensure that consumers are fully informed before entering a transaction and are treated fairly. The obligations are reflected in a number of rules. For example, rules 6.2 provides that a licensee must act in good faith and deal fairly with the parties to a transaction and r 6.4 provides that a licensee must not mislead a customer or client, nor provide false information, nor withhold information that should by law or in fairness be provided to a customer or client. A licensee has obligations to discuss material facts that may have a bearing on a potential purchaser’s decision whether they ask about these matters or not.
3.9. In this case, both Licensees do not appear to have met disclosure obligations by failing to disclose material information to the complainants in relation to the content of the Report. In the Committee’s view this failure has emanated from a fundamental misunderstanding of their obligations and a failure in exercising care, skill, competency and diligence. The Committee concluded that the primary proved conduct issue and conduct failure here is once the Report came into existence both Licensees were obliged to read the whole of the Report and understand the whole of the Report. These failings are the subject of the decision and Committee’s findings.

3.10. The Committee is of the view that a simple reading of the Report indicated half of the rooms tested have above normally anticipated readings, show dampness and that further investigation was needed to determine the source of the reading (source of the dampness). This is a red flag of a potential problem with the Property that, had they read the report, a reasonably competent licensee would take further appropriate action upon.

3.11. If the Report disclosed issues of concern/red flag (as here), then they were further obliged to not withhold that information and in fairness to fully disclose the Report and its content to interested parties. Here the failure to disclose the contents of the report was the result of the Licensees failure to read it. The Licensees did not know the information they failed to disclose.

3.12. The Committee makes no finding on whether the existence of the Report was disclosed by Licensee 1 to The Complainant’s Partner as she alleges. There is insufficient evidence to establish whether it was mentioned as alleged by the Licensee 1. However, little turns on this point as what needed to be disclosed was the content of the Report. The Licensees had no knowledge of the content of the Report as they had failed to properly read it (Licensee 1) or read it at all (Licensee 2).
3.13. Licensee 1, even with her relatively limited 6 months of experience, is expected to have read and taken steps to understand the Report. She admits she did not spend much time studying the “technical terms” of the Report and did not pay much attention to the other parts of it, which would have included the moisture reading table. It is clear Licensee 1 did not know of its content firstly and most importantly, because she had not properly read it and secondly because she had not understood it and taken advice on it.
3.14. The Committee does not accept that the moisture reading table is a “technical term” in the Report. The moisture readings of a property are well-known important aspects of any building. The table is simple to read and clear in its recommendation.

3.15. The Committee notes Licensee 1 did not ask Licensee 2 to explain the content of the Report. Nor is there any evidence that she raised the report with the Agency’s managers.

3.16. The Committee finds if some of the Report was not understood, as Licensee 1 says, she was obliged to take appropriate advice on it so as to understand it. Merely relaying some of its content to Licensee 2 and then shortly before the auction, sending it to Licensee 2, was not enough to discharge that obligation.
3.17. The Committee therefore finds that in breach of r 5.1, Licensee 1 did not exercise the required appropriate skill, care, competence and diligence in relation to reading and understanding the whole Report and therefore engaged in unsatisfactory conduct under s72(a), (b), (c) and (d).

Licensee 2

3.18. Licensee 2 was obliged to obtain the Report from Licensee 1 and to read it, because:

• (a) she was the lead listing agent involved throughout the sales process;
• (b) she signed the agency agreement;
• (c) she was aware of the existence of the Report;
• (d) Licensee 1 was relatively inexperienced salesperson, and she considered Licence 1 was always under her guidance;
• (e) Licensee 1 directly asked her whether she should disclose the report to all that attended the open homes. Licensee 2, without being aware of its content, by reading it, advised her not to do so and to only disclose it if potential purchasers asked her for it;
  
• (f) she went through the buyers’ acknowledgement with The Complainant’s Partner;

• (g) having not read and understood the Report, Licensee 2 was unable to know whether further investigation or disclosure was necessary to meet her and Licensee 1’s obligations under rules 6.2, 6.4 and/or 10.7.
  

3.19. On the evidence provided Licensee 2 did not read the Report when it was obtained, or before: the auction; the Complainant signing the sale and purchase agreement; or that agreement going unconditional.

3.20. The Report could have contained any number of issues, in addition to the moisture reading concerns, that in fairness should have been disclosed to potential purchasers. She was unaware of that as she elected not to read it, despite having the opportunity to do so. Instead, she relied on a scant summary of it from a relatively inexperienced salesperson.

The Committee therefore finds that Licensee 2 did not take appropriate steps concerning the Report and its content. She should have read it, understood and considered its content. A reasonably competent licensee would have done so and taken notice of the red flags present and Licensee 2 has therefore engaged in unsatisfactory conduct under s72(a), (b), (c) and (d).

The Agency’s Supervision of Licensee 2

3.21. The Tribunal said in in its decision Maserow v Real Estate Agents Authority (CAC 404) [2016] NZREADT 19, at [25]:

“Supervision must be actual, it must be tailored to the circumstances of the agent and the property sold, it must involve actual involvement by the branch manager with the agent(s), including a knowledge and understanding of the issues with each of the properties sold by the agency, if any....The Branch manager should be alert to identifying potential problems rather than waiting for a possibly inexperienced agent to identify them. At regular meetings of staff managers should also questions to elicit matters which might be of concern such as issues as to boundary, lack of code of compliance, and disclosure of known defects and issues with the LIM. All of these matters should be considered by the branch manager and the agent when a property is listed for sale and in regular reviews relating to the sale process,”

3.22. The REA’s professional standard on supervision includes:

• (a) Supervisors are not expected to sight and direct every aspect of a salesperson’s real estate agency work. However, a supervisor should be actively and regularly involved with a salesperson’s activity. Ultimately, what is required is an exercise of judgement as to the nature and degree of supervision that is appropriate in each case to ensure effective supervision.
• (b) The supervisor must be actively involved with the salesperson, which means:
  1. understanding the level of experience and skill of the salesperson and placing conditions and/or restrictions on their real estate work as appropriate.
     

2. understanding the issues with each of the properties being listed and sold.

3. conducting regular meetings with the salesperson being supervised and asking questions to draw out matters that might be of concern (such as resource consents, boundary issues, lack of Code Compliance Certificates, planned developments in the area and disclosure of known defects and issues with the Land Information Memorandum).

4. It is recommended that supervisors keep supervision records in addition to any supervision plan/agreement that may be used.
   
   5. Where REA receives a complaint about a salesperson, the adequacy of supervision will be considered. If supervision is, or appears to be, an issue, the supervisor will be provided an opportunity to demonstrate how they have complied with this Standard. Up-to-date supervision records are important to demonstrate compliance. If the supervisor is not able to produce records or otherwise demonstrate they have complied with this Standard, this will be relevant to the REA’s compliance and enforcement decision making.
      

3.23. As Licensee 2 holds a salespersons licence, s50 of the Act requires them to be properly managed and supervised by an agent or a branch manager.

3.24. The Sales Manager is described by the Agency as Sales Manager. He has also held a branch manager’s licence since 28 February 2019. The Branch Manager is described by the Agency as branch manager. She has held an agent’s license since 5 July 2013.
3.25. The Sales Manager says that as the existence of the Report was not brought to his notice he was unable to supervise or advise the Licensee accordingly at the time.

3.26. The Branch Manager similarly states that she and The Sales Manager only manage what we are provided with and given that the Licensee failed to inform them about the Report, they were not given the opportunity to assist, advise or oversee the appropriate action.

3.27. The Sales Manager says as to the supervision of Licensee 2 - she “was always able to ring either myself or [The Branch Manager] at any time of night or day to ask questions about anything she needed to know about. Ongoing non-verifiable training was regularly conducted in-branch, including topics such as disclosure, cladding etc, and Licensee 2 was a regular participant in these trainings”.

3.28. A copy of the Agency’s “Template management and supervision of a salesperson” agreement was supplied by the Agency for Licensee 2. That recorded Licensee 2 being directly responsible to her branch manager recorded as The Branch Manager. Both Licensee 2 and The Branch Manager signed that agreement.
3.29. No written supervision or management plan was submitted by the Agency for Licensee 2.

3.30. That Licensee 2 was “able” to contact call or report to her mangers demonstrates a reactive style of supervision rather than the required proactive standard established in Maserow.

3.31. The Agency stated that it was not aware of the existence of the building report and its content. While supervision does not require the Agency to be across all aspects of a transaction, the Agency should have had sufficient involvement in the transaction in a way that would have made it possible for it to be aware of the issues and the existence of the Report. It is clear that the Agency was relying on Licensee 2 to identify and bring such issues to its attention. This does not meet the required proactive standard of supervision.
3.32. The Committee is satisfied that the supervision of Licensee 2 was insufficient and constitutes unsatisfactory conduct under s72 (a), (b), (c) and (d).

3.33. In coming to this conclusion, the Committee has also taken into account the following factors. Licensee 2 was supervised by an authorised person, The Branch Manager with the assistance of The Sales Manager. There were ongoing training programmes for its salespeople. As

Licensee 2 was an experienced salesperson the required degree of supervision and management is less than expected of a newly qualified salesperson. Such, however, are insufficient here to discharge its proactive supervision obligations

4. Request for submissions on orders

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, Licensee 2 and the Agency, 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, Licensee 2 and the Agency, 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.

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, Licensee 2 or the Agency 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 1, 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

Andrew Hayes Chairperson

Denise Evans

Deputy Chairperson

Ian Keightley Member

Date: 14 December 2022

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.

74 Complaints about licensees

(1) Any person may, in accordance with regulations made under this Act, complain in writing to the Authority about the conduct of a licensee.
(2) When the Authority receives a complaint under this section, the Authority must—

• (a) refer the complaint to the Registrar of the register of licensees, who must consider whether to deal with the complaint under subsection (3); and
• (b) if the Registrar decides not to deal with the complaint under that subsection, refer the complaint to a Committee for determination and notify the person complained about of the reference.

(3) The Registrar may determine that—

• (a) the complaint discloses only an inconsequential matter, and for that reason need not be pursued:
• (b) the complaint is frivolous or vexatious or not made in good faith, and for that reason need not be pursued:
• (c) the complaint should be referred to another agency, and refer it accordingly:
• (d) the complaint has been resolved to the complainant’s satisfaction and no further action is needed.
  

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.
  

80 Decision to take no action on complaint

(1) A Committee may, in its discretion, decide to take no action or, as the case may require, no further action on any complaint if, in the opinion of the Committee, —

• (a) the length of time that has elapsed betweenthe date when the subject matter of the complaint arose and the date when the complaint was made is such that an investigation of the complaint is no longer practicable or desirable; or
• (b) the subject matter of the complaint is inconsequential.

(2) Despite anything in subsection (1), the Committee may, in its discretion, decide not to take any further action on a complaint if, in the course of the investigation of the complaint, it appears to the Committee that, having regard to all the circumstances of the case, any further action is unnecessary or inappropriate.

81 Notice of decision

(1) In any case where a Committee decides to take no action on a complaint, the Committee must promptly give written notice of that decision to—

• (a) the complainant; and
• (b) the person complained about.

(2) The notice must—

• (a) state the decision and the reasons for it; and
• (b) describe the right of appeal conferred by section 111.
  

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.

94 Notice of determination

(1) When a Committee makes a determination under section 89, the Committee must promptly give written notice of that determination to the complainant and to the licensee.
(2) The notice must—

• (a) state the determination and the reasons for it; and
• (b) specify any orders made under section 93 and be accompanied by copies of those orders; and
• (c) describe the right of appeal conferred by section 111.
  

110 Determination of charges and orders that may be made if charge proved

(1) If the Disciplinary Tribunal, after hearing any charge against a licensee, is satisfied that it has been proved on the balance of probabilities that the licensee has been guilty of misconduct, it may, if it thinks fit, make 1 or more of the orders specified in subsection (2).
(2) The orders are as follows:

• (a) 1 or more of the orders that can be made by a Committee under section 93 (except under section 93(1)(ha)):
• (b) an order cancelling the licence of the licensee and, in the case of a licensee that is a company, also cancelling the licence of any officer of the company:
• (c) an order suspending the licence of the licensee for a period not exceeding 24 months and, in the case of a licensee that is a company, also suspending the licence of any officer of the company for a period not exceeding 24 months:
• (d) an order that a licensee not perform any supervisory functions until authorised by the Board to do so:
• (e) an order, in the case of a licensee who is an employee or independent contractor, or former employee or former independent contractor, that any current employment or engagement of that person by a licensee be terminated and that no agent employ or engage that person in connection with real estate agency work:
• (f) an order that a licensee who is an individual pay a fine not exceeding $15,000 and order a licensee that is a company pay a fine not exceeding $30,000:
• (g) where it appears to the Tribunal that any person has suffered loss by reason of the licensee’s misconduct and the order is one that a court of competent jurisdiction could make in relation to a similar claim in accordance with principles of law, an order that the licensee pay to that person a sum by way of compensation as is specified in the order, being a sum not exceeding

$100,000.

(3) The making of an order under this section for the payment of compensation to any person does not affect the right (if any) of that person to recover damages in respect of the same loss, but any sum ordered to be paid under this section, and the effect of any order made under this section for the reduction, cancellation, or refund of fees, must be taken into account in assessing any such damages.
(4) If the Disciplinary Tribunal, after hearing any charge against a licensee, is satisfied that, although not guilty of misconduct, he or she has engaged in unsatisfactory conduct, it may do either or both of the following:

• (a) make any of the orders that a Complaints Assessment Committee may make under section 93 (except under section 93(1)(ha)):
• (b) if it appears to the Tribunal that any person has suffered loss by reason of the licensee’s unsatisfactory conduct, make an order that the licensee pay to that person a sum not exceeding $100,000 by way of compensation, but only if—
  • (i) the unsatisfactory conduct is more than a minor or technical contravention of this Act or of any regulations or rules made under this Act; and
  • (ii) the order is one that a court of competent jurisdiction could make in relation to a similar claim in accordance with principles of law.

(5) If a Complaints Assessment Committee refers a matter to the Tribunal under section 93(1)(ha), the Tribunal may, if satisfied that the requirements of subsection (4)(b) (except paragraph (b)(i)) are met, make a compensation order under that subsection.
(6) For the purposes of subsection (5), the Disciplinary Tribunal—

• (a) must apply, and may not overturn, a Complaints Assessment Committee determination that there was unsatisfactory conduct involving more than a minor or technical contravention of this Act or of any regulations or rules made under this Act; and
• (b) must apply, and must not overturn, a Complaints Assessment Committee determination of any substantive matter in the case; and
• (c) has no jurisdiction to inquire into a determination described in paragraph (a) or (b).
  

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

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

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

6.4 A licensee must not mislead a customer or client, nor provide false information, nor withhold information that should by law or in fairness be provided to a customer or client.

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.

10.7 A licensee is not required to discover hidden or underlying defects in land but must disclose known defects to a customer. Where it would appear likely to a reasonably competent licensee that land may be subject to hidden or underlying defects4 , a licensee must either—

• (a) obtain confirmation from the client, supported by evidence or expert advice, that the land in question is not subject to defect; or
• (b) ensure that a customer is informed of any significant potential risk so that the customer can seek expert advice if the customer so chooses.