Cho - Complaint No C42202 [2023] NZREAA 3 (21 February 2023)

Last Updated: 25 April 2023

Before the Complaints Assessment Committee
In the matter of	Complaint No: C42202 Part 4 of the Real Estate Agents Act 2008
and
The Licensee:	Hao Cho (10009087)

Decision on Orders

21 February 2023

Members of Complaints Assessment Committee: CAC2108 Chairperson: Andrew Hayes

Deputy Chairperson: Denise Evans Panel Member: Ian Keightley

Complaints Assessment Committee

Decision on orders

Background

1.1. On 21 April 2022 the Complaints Assessment Committee (the Committee) found Hao Cho (the Licensee) guilty of unsatisfactory conduct under section 89(2)(b) of the Real Estate Agents Act 2008 (the Act). The Committee found the Agency did not engage in unsatisfactory conduct and therefore took no further action against the Agency.

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

Orders

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

• (a) make an order censuring the Licensee.
  
• (b) order the Licensee to pay to the Real Estate Authority a fine of $3,500.00 by Wednesday, 22 March 2023
  

General principles

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

Promoting and protecting the interests of consumers and the public

3.2. Section 3(1) of the Act sets out the purpose of the legislation. The purpose of the Act is "to promote and protect the interests of consumers in respect of transactions that relate to real estate and to promote public confidence in the performance of real estate agency work."

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

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

Maintaining professional standards

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

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

• (a) make sure that no person who is unfit because of his or her conduct is allowed to practice in the profession in question;
  
• (b) protect both the public and the profession itself against persons unfit to practice; and
  
• (c) enable the profession or calling, as a body, to ensure that the conduct of members conforms to the standards generally expected of them.
  

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

Other relevant factors

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

• (a) Punishment of the professional;
  
• (b) Rehabilitating and reintegrating the professional into the profession, if the professional is capable of that;
  
• (c) The penalty must be comparable with the penalty imposed on others in similar circumstances;
  
• (d) 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;
  
• (e) The penalty must involve imposition of the least restrictive penalty that can be reasonably imposed in the circumstances; and
  
• (f) The penalty imposed must be fair, reasonable and proportionate in the circumstances.
  

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

Discussion

Level of unsatisfactory conduct

4.1. The Licensee through his solicitors submitted that the Licensee’s unsatisfactory conduct is relatively minor. That it falls within the low to mid-level spectrum. That was because his omission to take the Complainant through the agreement and take informed instructions on

his GST status arose from an incorrect assumption proceeding from his apparent intention to develop the Property. The Licensee regrets that he did not live up to his usual high standards of practice in this instance. If a fine was considered it should be at the low end of the scale.

4.2. The Committee does not characterize the conduct as relatively minor. The failure here is twofold. Firstly, it was a failure to make an appropriately thorough enquiry of the buyer as to its/his GST status. The Licensee assumed from some initial discussions and the Complainant’s ownership of the adjacent property, that development was the Complainants intention and therefore did not sufficiently enquire as to the Complaint’s intended GST status of the agreement. The Committee considers the grounds for that assumption were weak and required a more direct confirmation of the actual intent and wishes of the Complainant. Secondly, it was compounded by a further failure to take the buyer through and discuss and confirm those GST declarations in the agreement when presenting it for signature. The Licensee also did not have the appropriate schedule of the agreement initialed by the buyer. The failure to discharge these important and basic obligations based only on an unverified assumption amounts to a more than minor level of unsatisfactory conduct. The later discovery of the error also added further stress to the sale process than would have otherwise existed.

4.3. Four previous decisions were referred to the Committee in support of the conduct falling into the low to mid-level range of unsatisfactory conduct and a penalty of censure and a small fine. The most relevant being A Prior Case. It involved (as here) more than 1 failure in relation to a GST issue. That conduct was found to fall within the moderate /mid-level range. In that complaint the licensee was effectively fined $3,064.25 (including taking into account a voluntary payment of $2,064.25 made to the complainant). The Committee is of the view the conduct here, as described in the above paragraph (4.2), is if anything, more serious than that of The Licensee Of A Prior Case due to the lack of taking proper informed instructions from the buyer.

4.4. The other decisions were for less serious unsatisfactory conduct and imposed fines ranging from $1,000.00 to $2,000.00 and also took into account other voluntary payments made to the complainant by the licensee when setting the fine (as is accepted practice).

4.5. The Committee considers the conduct of the Licensee falls within the mid-range of unsatisfactory conduct with a starting point for the determination of an appropriate fine being of $4,000.00 to $5,000.00.

Complainants’ submission

4.6. In his initial complaint the Complainant requested compensation of $100,000.00.

4.7. In his short penalty submissions, he has submitted the conduct has had substantial consequences in terms of monetary loss to him. The Committee notes that there has not been sufficient evidence submitted quantifying or setting out and supporting that claimed substantial monetary loss. He has requested the issue of penalty be referred to the Disciplinary Tribunal under s93(1)(ha) of the Act for it to consider making a compensation order under s110(5) of the Act.

4.8. The Committee considers that such a referral is unwarranted. Such referrals are rare and made in limited circumstances. Something more than mid-level unsatisfactory conduct is required [A Second Prior Case Reference], conduct that approaches a high level of unsatisfactory conduct, which is not present here.

4.9. The Committee has also considered whether an order of rectification under s 93(1)(f) is appropriate. It concludes no such order is justified because it is not satisfied that any proven

loss has been caused by the Licensee’s conduct. The GST error was discovered a week before the complainant declared the agreement unconditional and a month before settlement was due. The Complainant was free to withdraw from the agreement or make arrangements to address the GST implications. He elected to proceed with the transaction. The Committee accepts the Licensee’s submissions that this decision to proceed with the knowledge of the GST implications broke the chain of causation between the conduct and its alleged consequences/loss.

Mitigating factors

4.10. The Committee recognizes and has taken the following mitigating factors into account when fixing the fine it has:

• (a) The Licensee was quick to acknowledge the unsatisfactory nature of his conduct in his initial response to the complaint.
  
• (b) His assumption, while based on weak grounds and being in error, was not made for his own benefit or dishonestly made.
  
• (c) He has reviewed his practice and made a concerted effort to improve how he handles sale and purchase documentation.
  
• (d) He has no previous disciplinary history over his years of practice.
  

4.11. Taking into account the starting point, the mitigating factors and the absence of aggravating factors present here and the effect of the finding of unsatisfactory conduct and its publication, the Committee considers it appropriate to:

• (a) Censure the Licensee.
  
• (b) Impose a fine of $3,500.00, payable by the Licensee to the Authority.
  

Publication

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

5.2. Publishing the Committee’s decision supports the purpose of the Act by ensuring that the disciplinary process remains transparent, independent and effective. The Committee also considers that publishing this decision helps to set standards and that is in the public interest.

Your right to appeal

6.1. If you are affected by this decision of the Committee, the right to appeal is set out in section 111 of the Act. You may appeal in writing to the Tribunal within 20 working days after the date notice is given of this decision. Your appeal must include a copy of this decision and any other information you wish the Tribunal to consider in relation to the appeal. The Tribunal has a discretion to accept a late appeal filed within 60 working days after the date notice is given of

this decision, but only if it is satisfied that exceptional circumstances prevented the appeal from being made in time.

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

Provisions of the Act and Rules referred to

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

Signed

Andrew Hayes Chairperson

Denise Evans

Deputy Chairperson

Ian Keightley Member

Date: 20 February 2023

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.