Complaint No C44627 [2023] NZREAA 74 (16 October 2023)

Last Updated: 10 April 2024

Before the Complaints Assessment Committee
In the matter of	Complaint No: C44627 Part 4 of the Real Estate Agents Act 2008
and
Licensee 1:	Licensee 1 (XXXXXXXX)
Licensee 2:	Licensee 2 (XXXXXXXX)

Decision to take no further action

16 October 2023

Members of Complaints Assessment Committee: CAC2301 Chairperson: William Acton

Deputy Chairperson: Amanda Elliott Panel Member: Susanne Guhl

V202211

Complaints Assessment Committee

Decision to take no further action

Background

1. On 7 October 2021 the Real Estate Agents Authority (the Authority) received a complaint against Licensee 1 and Licensee 2 (the Licensees) from Complainant 1 and Complainant 2 (the Complainants).
   
2. Both Licensees are licensed Salespersons under the Real Estate Agents Act 2008 (the Act).
   
3. The complaint relates to a Houseboat which is located on a mooring in the middle of River A with a landing jetty on the edge of the River.
   
4. The Complainants wished to sell the Houseboat and contact was made with the Licensees in May 2021 (or thereabouts) in order to discuss options in relation to the selling of the Houseboat.
   
5. As a result, some emails were exchanged and Licensee 1 visited the Complainants twice at their home, once with Licensee 2, and then both Licensees made a site visit to the boat in late May. At that visit they made some general recommendations regarding the necessary remedial work that would need to be undertaken if the boat was to be taken to market.
   
6. The Complainants engaged a builder who had been recommended by Licensee 1 as they did not have one, after Licensee 1 gave them three builders’ names.
   
7. On the 19th of July 2021 before those repairs were completed, the Licensees emailed the Complainants and advised that they did not wish to proceed with selling their Houseboat.
   

Complaint

8. Against this background the Complainants complain that the Licensees led them to believe that they were prepared to sell the Houseboat on their behalf. That as a result of the

discussions they had with the Licensees, the Complainants undertook maintenance and other work on the Houseboat.

9. The Complainants complain that they would not have incurred these costs if they had known that the Licensees would not be selling the Houseboat. They therefore seek compensation being the reimbursement of those costs from the Licensees.
   

Issues

10. The Committee notes that this complaint was initially dealt with by Complaints Assessment Committee (CAC) CAC2108 who on 24 May 2022 considered the complaint and decided to inquire into it under section 79(2)(e) of the Act.
    
11. On 30 March 2023, the complaint was transferred to this Committee, CAC2301, who confirmed the decision to inquire made by CAC2108. On the same day, the Committee held a hearing on the papers and considered all the information that had been gathered during the inquiry.
    
12. The Issues for Inquiry are:
    
    • (a) Did the Licensees pressure the Complainants to complete repairs on the Houseboat

before the Licensees would list their Business for sale.

(b) Did Licensee 1 provide the contact details of a builder to complete the recommended work, who did not complete the work in a professional manner.

(c) Did the Licensees pressure the Complainants to pay for the services of a numerologist during the sale of their Business?

(d) Were the Licensees under any obligation to produce the agreed marketing plan?

(e) When the Licensees refused to proceed with listing the Business for sale once the repairs were completed were they entitled to do so?

(f) Did the Licensees adequately respond to the Complainants’ correspondence regarding the sale of the Business.

13. In order to determine these issues, the Committee must first deal with the preliminary issue about whether the proposed transaction amounts to real estate agency work. If the

transaction does not amount to real estate agency work, then the Committee’s assessment of the Licensees’ conduct is limited to whether or not it amounts to misconduct under s 73 of

the Real Estate Agents Act 2008. (The Act). The Committee has also considered whether

there is any contractual relationship between the parties that might give rise to the Licensees having some legal obligation to act for the Complainants.

14. The relevant sections are:
    

Section 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- ... (emphasis ours)

Section 73 Misconduct

For the purposes of this Act, a licensee is guilty of misconduct if the licensee’s conduct—

(a) Would reasonably be regarded by agents of good standing, or reasonable members of the public, as disgraceful; or

(b) Constitutes seriously incompetent or seriously negligent real estate agency work; or

(c) Consists of a wilful or reckless contravention of—

• (i) This Act; or
  
• (ii) Other Acts that apply to the conduct of licensees; or
  
• (iii) Regulations or rules made under this Act; or
  

(d) Constitutes an offence for which the licensee has been convicted, being an offence that reflects adversely on the licensee’s fitness to be a licensee.

Consideration:

Unsatisfactory conduct

15. As noted above for a finding of Unsatisfactory Conduct, the first consideration is to determine whether licensees were engaged in real estate agency work as defined under the Act.
    
16. Under s 4 of the Act “real estate agency work or agency work” is defined as:
    

real estate agency work or agency work—

(a) Means any work done or services provided, in trade, on behalf of another person for the purpose of bringing about a transaction; and
(b) Includes any work done by a branch manager or salesperson under the direction of, or on behalf of an agent to enable the agent to do the work or provide the services described in paragraph (a); but
(c) Does not include— ...

transaction is defined as any 1 or more of the following:

(a) The sale, purchase, or other disposal or acquisition of a freehold estate or interest in land:

(b) The grant, sale, purchase, or other disposal or acquisition of a leasehold estate or interest in land (other than a tenancy to which the Residential Tenancies Act 1986 applies):

(c) The grant, sale, purchase, or other disposal or acquisition of a licence that is registrable under the Land Transfer Act 2017:

(d) The grant, sale, purchase, or other disposal or acquisition of an occupation right agreement within the meaning of the Retirement Villages Act 2003:

(e) The sale, purchase, or other disposal or acquisition of any business (either with or without any interest in land).

Was there a potential transaction involving a freehold or leasehold estate or interest in land, a licence or an occupation right?

17. For a transaction to be considered real estate agency work it must meet the above criteria.
    
18. The Committee’s view is that the sale of a Houseboat does not meet the criteria of a

transaction under paragraphs (a) to (d), however it could possibly fall within the definition under paragraph (e) regarding the sale of a business.

Was the sale of the houseboat the sale of a business?

19. The Act does not define “business” the Committee has therefore undertaken its own assessment of whether the houseboat was a business based on the information provided to it.
    
20. The definition of "business" has been defined in the taxation context by the Court of Appeal,

and summarised in a regulatory context in the High Court:1

...the Court of Appeal considered the ordinary sense of “business” was “the exercise of an activity in an organised and coherent way and one which is directed to an end

result”. Further, the 'existence of a profit-making motive ... or of an intention that the activity serve commercial purposes' are material considerations.

21. With the same High Court decision referring to Calkin which said:
    

“A business cannot exist simply in the mind of the taxpayer. It involves real transactions carried on for pecuniary profit" (Calkin at [447]).

22. In the initial complaint dated 7 October 2021 the Complainants referred to “the sale of the business” and appear to have taken the view that they were selling a business. Providing

information which refers to the business having been in operation since 2008.

23. However, to sell a business there needs to be an operating business to sell. Licensee 1 said one reason why they did not proceed with selling the Houseboat as a business, was that they were never provided the financial books, meaning they were unable to give any written appraisal of the value of the business. When interviewed Licensee 1 concluded, “we had

nothing to sell”, “there was nothing to market”, “there was no business there either”.

24. Licensee 2 also gave evidence that there was no business. His response included the following in its summary, “I believe that the [Complainants] own a white elephant, never fit for purpose and never having fulfilled their dream, either as a lifestyle or a business and which after their own serious efforts to sell, had become in fact an ongoing drama for them, and is plainly

worth less than their investment in it.”

25. The Complainants did provide the Committee with marketing information including a

document they had prepared when attempting to sell themselves, with a partial heading that said, “Exciting Investment Opportunity” and some financial information including a document headed, “Points to consider regarding the sale of our business”, which said the following, “ it essentially was not a fully-fledged business”, and “Although not set up as a business, our experience with charters enabled us to become aware of what would be required to operate it as a profitable business...”.

26. The Complainants have also provided the Committee with the net profit/loss calculations for the 2018 and 2019 years which it appears were prepared by Chartered Accountants, with a disclaimer that the relevant information, “has been prepared without performance of audit

or review engagement and must be read subject to the compilation report”. Both calculations show a large loss. With the following years financial statements incomplete and the overall financial position for these years unknown. While a loss does not mean that there is no business in the Committee’s view the provided accounts do not reflect an operating business.

The Committee also notes that Licensee 1 has said that the Licensees were never provided with any financial books and therefore if the accounts do evidence a business the Licensees would not have been able to ascertain that there was a business, as they had not had access to the referred to financial calculations.

27. The Committee has determined after careful examination of all the information provided,
    

1 Kenny v Ministry of Business, Innovation and Employment [2018] NZHC 1984 at [56], citing Grieve v Commissioner of Inland Revenue [1984] 1 NZLR 101 at [106], and Calkin v Commissioner of Inland Revenue [1984] NZCA 18; [1984] 1 NZLR 440 at [446-447].

that it cannot identify any operating business capable of sale. Despite the Complainants’ intention for the Houseboat to become a business, unfortunately this never eventuated.

28. As a result, the sale of the Houseboat is not a transaction as defined by the Act and any work undertaken by the Licensees is not “real estate agency work or agency work” and therefore a finding of Unsatisfactory Conduct cannot be found.
    

Is there any contractual relationship?

29. The Committee has considered whether there was any contractual relationship between the parties in order to determine whether there was any legal obligation by the Licensees to act for the Complainants. The Committee is satisfied that there was no express contractual

relationship between the Licensees and the Complainants. Whilst the Licensees did provide the Complainants with a blank listing authority, it was not completed, executed or returned to the Licensees.

30. Licensee 1 explained that he gave them this document as he usually provides a blank listing agreement to a potential client to consider.
    
31. The Committee accepts this explanation and concurs that a blank agreement without

signatures is not a contract, and it should not have raised any reasonable expectation that the Licensees would definitely act for them.

32. The Licensees also accept that they did make suggestions about the Houseboat needing maintenance work to ensure it was of a sellable standard and the topic of numerology was also discussed. However, they said these were only part of preliminary discussions and they only gave general advice they thought necessary if the boat was ever to be sold in the future due to its then current condition.
    
33. The Committee has considered whether in the absence of an express agreement, whether in the alternative the Licensees could be deemed to have created an implied contract to sell the business which included the boat, as the complainant has suggested. The Committee’s view is that there is no evidence of an implied contract.
    

Misconduct

34. A licensee can be guilty of misconduct for conduct that falls outside the scope of real estate agency work. This was affirmed by the High Court in House v Real Estate Agents Authority which stated:
    

“Section 73 can relate both to real estate agency work and other conduct, with only paragraph (b) confined to real estate agency work”.

35. In considering section 73 of the Act, the Committee must consider whether misconduct

charges should be brought under section 73(a) of the Act, which is the only section that the Committee considers may be applicable.

36. Section 73(a) of the Act provides that a licensee is guilty of misconduct if the licensee’s conduct would “reasonably be regarded by agents of good standing or reasonable members of the public as disgraceful.
    
37. In the leading decision of Morton-Jones v Real Estate Authority, Woodhouse J affirmed that:2
    

2 Morton-Jones v Real Estate Agents Authority [2016] NZHC 1804 at [29].

“If the charge is under s 73(a) the critical enquiry is whether the conduct is “disgraceful”. Conduct which involves a marked and serious departure from the requisite standards must be assessed as “disgraceful”, rather than some other form of misconduct which may also involve a marked and serious departure from the standards.”

38. In light of this, we have considered whether the actions of the Licensees were in fact a serious departure from any expected requisite standard.
    
39. The Complainants raised a number of issues, all of which were fully considered. The Committee must consider the various allegations and determine if they could amount to disgraceful conduct.
    
40. The Complainants’ key complaint is that they felt that there was a binding obligation by the Licensees to market the Houseboat and were obviously disappointed that did not occur.
    
41. However, the Committee does not share their view regarding the Licensees’ obligations to them and accepts as noted above that the Licensees were only discussing the possibility of

selling the Houseboat by providing some informal and preliminary advice. The Committee has decided that there is no legal obligation by the Licensees to act for the Complainants.

42. The Committee does not consider the Licensees conduct as disgraceful nor a serious

departure from usual standards and if anything considers this as the type of conversations and communications that it expects Licensees to have with potential clients to assist those clients to sell their property.

43. The Committee considers that the communications overall by the Licensees were acceptable and are not a departure from accepted standards and cannot be considered Misconduct.
    

Determination

44. The Committee has decided to take no further action against the Licensees with regard to this complaint.
    

Publication

45. The Committee directs publication of its decision. This decision will be published without the names or identifying details of the Complainant, the Licensees and any third parties.
    
46. The Authority will publish the Committee’s decision after the period for filing an appeal has ended, unless the Real Estate Agents Disciplinary Tribunal (the Tribunal) receives an

application for an order preventing publication. The Authority will not publish the Committee’s decision until the Tribunal has made a decision on the application.

47. 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 industry standards and that is in the public interest.

Your right to appeal

48. 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 the 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.

49. 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

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

Signed

William Acton Chairperson

Amanda Elliott

Deputy Chairperson

Susanne Guhl Member

Date: 16 October 2023

Appendix: Provisions of the Act and Rules referred to

The Real Estate Agents Act 2008 provides:

4 Interpretation

real estate agency work or agency work—

(a) means any work done or services provided, in trade, on behalf of another person for the purpose of bringing about a transaction; and
(b) includes any work done by a branch manager or salesperson under the direction of, or on behalf of an agent to enable the agent to do the work or provide the services described in paragraph (a); but
(c) does not include— ...

transaction means any 1 or more of the following:

(a) the sale, purchase, or other disposal or acquisition of a freehold estate or interest in land:
(b) the grant, sale, purchase, or other disposal or acquisition of a leasehold estate or interest in land (other than a tenancy to which the Residential Tenancies Act 1986 applies):
(c) the grant, sale, purchase, or other disposal or acquisition of a licence that is registrable under the Land Transfer Act 2017:
(d) the grant, sale, purchase, or other disposal or acquisition of an occupation right agreement within the meaning of the Retirement Villages Act 2003:
(e) the sale, purchase, or other disposal or acquisition of any business (either with or without any interest in land).

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.

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.

73 Misconduct

(a) For the purposes of this Act, a licensee is guilty of misconduct if the licensee’s conduct—

(b) would reasonably be regarded by agents of good standing, or reasonable members of the public, as disgraceful; or

(c) constitutes seriously incompetent or seriously negligent real estate agency work; or consists of a wilful or reckless contravention of—

• (i) this Act; or
• (ii) other Acts that apply to the conduct of licensees; or
• (iii) regulations or rules made under this Act; or

(d) constitutes an offence for which the licensee has been convicted, being an offence that reflects adversely on the licensee’s fitness to be a licensee.