Home Buyers Limited v Real Estate Agents Authority HC Wellington CRI 2011-485-82

[2011] NZHC 1814

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CRI 2011-485-82/83

HOME BUYERS LIMITED AND FRANCISCA DORIENTJE FORSTER

Appellants

v

REAL ESTATE AGENTS AUTHORITY

Respondent

Hearing:         18 October 2011

(supplementary submissions filed on 25 October 2011, 3 November
2011 and 5 November 2011)

Counsel:         Appellants appearing in person

M Hodge for the Respondent

Judgment:      22 December 2011

JUDGMENT OF MALLON J

Introduction

[1]      Home Buyers Ltd and Mrs Francisca Forster (the appellants) appeal against their conviction and sentence in the District Court on charges of carrying out real estate agency work without a licence.  The charges were brought under s 141 of the Real Estate Agents Act 2008.  The convictions in this case are the first of their kind under the Act and the present appeal is the first time such a charge has been considered by the High Court.  In the only other prosecution for unlicensed trading under s 141, the District Court found the charge not proven.  I understand that the

finding in that case is being appealed by way of case stated.

HOME BUYERS LTD & FORSTER v REAL ESTATE AGENTS AUTHORITY HC WN CRI 2011-485-82/83

22 December 2011

Background facts

[2]      Home Buyers Ltd is a family business which has been operating for 12 years. Its directors are Mrs Forster and her daughter, Rineke Forster.  The directors view the company as being in the property trading business.   They do not regard the company or themselves as real estate agents and do not advertise themselves as such. They have therefore not applied for and do not hold a real estate agents licence.

[3]      Home Buyers Ltd trades property in different ways, but in the usual course a key feature of its business is that it purchases property in its name and on-sells the property for profit.  Often Home Buyers Ltd will buy the property and renovate it before selling it.  Sometimes it buys the property and on-sells it through a “rent-to- buy” arrangement.  Sometimes there will be a period of time between its purchase of the property and the sale to a new purchaser.  On other occasions the purchase by Home Buyers Ltd from the vendor, and the sale by Home Buyers Ltd to the new purchaser are effected simultaneously.

[4]      In the situation which led to the charges it was intended that Home Buyers Ltd would locate a purchaser for the vendor and that Home Buyers Ltd’s purchase of the property from the vendor would be effected at the same time as the sale from Home Buyers Ltd to the purchaser.  The transaction did not in fact proceed in this way.

[5]      The transaction involved the sale of a residential property in Lower Hutt. Mrs  Forster  was  contacted  by  the  owners  of  that  property,  Mr  Addy  and Ms Robinson.   As was apparently Home Buyers’ standard practice, Home Buyers and Mr Addy and Ms Robinson signed a “Notice of Interest to Purchase Property”. This was dated 27 April 2010 and described Home Buyers Ltd as the Buyer of the property and Mr Addy and Ms Robinson as the Seller.  It provided that:

(a)       The Buyer had 90 days to “exercise due diligence”.

(b)      The Seller was to provide the Buyer with reasonable access to the

property “to show to prospective occupants”.

(c)       When “a purchase price is agreed upon then the Buyer will offer

Seller an Option to Buy”.

(d)The agreement did not interfere with any other bona fide written offer to purchase received by the Seller.

(e)       The agreement ended if the parties had not reached an acceptable

“Contract for Option to Buy” at the end of the 90 day period.

[6]      After this, Mrs Forster went about marketing the property.  The property was advertised on the Trademe website.  The advertisement referred to “the vendors” as motivated, and as wanting to move into the city.  It said that “the current owners” had completed a lot of work on the property.   It said that it was a “private sale”. Open home times were advertised.

[7]      Mr Bulmer and Ms Nelson saw the advertisement on Trademe and attended an open home at the property on 30 May 2010.  Mrs Forster was present at the open home.   She took Mr Bulmer and Ms Nelson’s contact details and showed them around the house.   She discussed with them their housing requirements and financial situation.  She informed them of a valuation of the property and had other material available about the house.  She told them that Ms Robinson was the vendor.  She gave them her business card and told them she was not a real estate agent.  After the open home she telephoned them to follow up on their potential interest in the property.

[8]      About two weeks later, Mr Bulmer contacted Mrs Forster to arrange a second viewing.   Mrs Forster advised Mr Bulmer that the vendors had received an offer from someone else but were unlikely to accept it.  Mr Bulmer understood from the conversation  that  the  existing  offer  was  for  $330,000  and  that  Mr  Addy  and Ms Robinson would not accept anything less than $335,000.

[9]      The second viewing took place on the first Saturday after this telephone conversation.   Mrs Forster again showed Mr Bulmer and Ms Nelson around the property.  Mr Bulmer’s evidence was that at this viewing he sought clarification on

Mrs Forster’s role, given that she was not a real estate agent.  Mrs Forster described herself as a “trader”.  She explained that she had the right to buy from the owners and that she would be the vendor in a sale to him.   She explained that her profit would  be  the  difference  between  her  purchase  price  from  the  vendor  and Mr Bulmer’s buy price.  Mr Bulmer’s evidence was that Mrs Forster also mentioned that sometimes she had a side agreement with the buyer and would allow the buyer to buy directly from the vendor but that this was not being promoted as an option for Mr Bulmer and Ms Nelson.  His evidence was that Mrs Forster said that she could do everything  a  real  estate  agent  could  do  except  take  money  from  the  vendors. Mrs Forster did not contradict any of this in her evidence about this discussion.

[10]     After the second viewing, on 21 June 2010 Mr Bulmer contacted Mrs Forster and offered $342,000 to purchase the property.  Following further discussion about price and an email about chattels, Mrs Forster emailed to Mr Bulmer a draft agreement for sale and purchase.  This showed the purchase price as being $342,000, the vendor as Home Buyers Ltd, and the purchasers as Mr Bulmer and Ms Nelson. The draft agreement was not signed by either party at this stage.

[11]     Mr Bulmer sought legal advice on the agreement.  He was advised that under the draft agreement he would not get the benefit of the vendor warranties in the agreement.    The lawyer  advised  Mr Bulmer that  one option  was  to  amend the agreement so that he would have the benefit of those warranties.  Mr Bulmer raised the concern about vendor warranties with Mrs Forster but did not refer to the option suggested by his lawyer.

[12]     As a result of further discussions between Mrs Forster and Mr Bulmer the agreement was amended so that the vendors were Mr Addy and Ms Robinson (rather than Home Buyers Ltd) and the purchase price was $336,000 (down from $342,000). The agreement was dated 22 June 2010.  Alongside that agreement, Home Buyers Ltd and Mr Bulmer and Ms Nelson entered into an agreement also dated 22 June

2010.  Under that agreement Mr Bulmer and Ms Nelson agreed that they would pay a fee of $6000 to Home Buyers Ltd for finding them a property to purchase.

[13]     Mrs  Forster  attended  the  pre-settlement  inspection  provided  for  in  the agreement for sale and purchase.  Problems arose with the settlement date.  These problems were worked through with the involvement of Mrs Forster.  The agreement settled and Mr Bulmer and Ms Nelson took ownership of the property.

[14]     Home Buyers Ltd sent an invoice to Mr Bulmer and Ms Nelson on 15 July

2010 for the agreed fee of $6000.   Mr Bulmer was unhappy with Mrs Forster’s service and refused to pay the $6000.   On 23 July 2010 Mr Bulmer paid Home Buyers $5000 “under protest”.  A receipt was issued to him and Ms Nelson which recorded the receipt of the $5000 and that the whole $6000 was in dispute which dispute was to be settled at a later date.

[15]     Sometime later an investigator from the Real Estate Agents Authority (“the Authority”) telephoned Mrs Forster.  She was invited to discuss with the investigator a complaint the Authority had received from Mr Bulmer.  An interview subsequently took  place  on  30  November  2010.     The  interview  was  conducted  by  two investigators.  Mrs Forster attended with her daughter, Rineke, and a lawyer.  The interview was recorded.  During the interview the investigators read out the detail of the complaint that had been received from Mr Bulmer and asked them questions about  the  transaction  and  their  business  more  generally.    Mrs  Forster  and  her daughter were not given any warning about potential consequences at any time before or during the interview.

[16]     On 21 December 2010 the Authority laid informations in the District Court against Home Buyers Ltd and Mrs Forster.   The informations alleged an offence under  s  141  of  the  Real  Estate  Agents  Act  in  relation  to  the  property sold  to Mr Bulmer.

[17]     On 25 May 2011 there was a status hearing in the District Court.   At the status hearing the District Court Judge noted that the matter should be capable of being resolved and, according to the appellants, indicated that a discharge without conviction might be appropriate.   Counsel for the prosecution apparently did not have instructions for resolving the matter.  The matter was set down for a defended hearing.  The defended hearing took place on 18 July 2011 and the Judge delivered

his decision on 20 July 2011.  He found the charges proven.  He entered convictions against both Home Buyers Ltd and Mrs Forster.  In addition to the $5000 fee paid by Mr Buller which was to be forfeited, he imposed a fine of $13,000 on Home Buyers Ltd and a fine of $7000 on Mrs Forster.

The Legislation

[18]     The Real Estate Agents Act came into force on 16 November 2009.  As set out in s 3, its purpose is as follows:

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.

[19]     The Act requires any person who carries out “real estate agency work” to be licensed;1  and makes it an offence to carry out such work without a licence or an exemption from the requirement to have a licence,2 or to hold out that any person is licensed under the Act or exempt from being licensed under the Act, when they are not.3   The Act established the Authority to regulate the conduct of licensees.4   There are complaints and discipline provisions which apply only to licensees.5   The duties relating to real estate agency work apply only to licensees.6   The cornerstone of the Act is therefore the definition of “real estate agency work”.   That is because it

determines whether the consumer protection provisions set up by the Act apply and

whether an offence has been committed.

1      Section 6 of the Real Estate Agents Act 2008 (“the Act”).

2      Section 141 of the Act.

3      Section 142 of the Act.

4      Part 2 of the Act.

5      Part 4 of the Act.

6      Part 5 of the Act.

[20]     The appellants in this case were charged with an offence under s 141 of the

Act which is as follows:

Offence to carry on business of agent, branch manager, or salesperson unless licensed or exempt

A person commits an offence if the person carries out any real estate agency work without—

(a)       being licensed to do so under this Act; or

(b)      being exempt from the requirement to be licensed.

[21]     Section 4 defines “real estate agency work” as follows:

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—

(i)        the provision of general advice or materials to assist owners to locate and negotiate with potential buyers; or

(ii)      the  publication  of  newspapers,  journals,  magazines,  or websites that include advertisements for the sale or other disposal of any land or business; or

(iii)      the  broadcasting  of  television  or  radio  programmes  that include advertisements for the sale or other disposal of any land or business; or

(iv)     the lending of money on mortgage or otherwise; or

(v)      the provision of investment advice; or

(vi) the provision of conveyancing services within the meaning of the Lawyers and Conveyancers Act 2006

[22]     Section 4 also defines “transaction”.  For present purposes the relevant part of the definition is that it includes “the sale, purchase, or other disposal or acquisition of a freehold estate or interest in land”.

[23]     The combination of ss 4 and 141 mean that an offence is committed if:

(a)       Any work or services provided are carried out by a person; (b)          In trade;

(c)       On behalf of another person;

(d)      For the purpose of bringing about the sale or purchase of land; (e)     Without a licence (or an exemption).

Strict liability

[24]     An issue arose in the District Court as to whether the offence in s 141 was a strict liability offence.   The issue seems to have arisen because the appellants contended that they had no intention to contravene the Act and believed that they were acting within the law.   The District Court Judge’s view was that the offence was one of strict liability because the offence was of a public regulatory nature and the definition of real estate work in s 4 of the Real Estate work was clear.  This issue was again raised on the appeal.

[25]     I consider that the issue of whether the offence is a strict liability one does not assist the appellants.   That issue has more relevance where the offence is committed by a person who does not have a licence but thought that they did.  In that case, if the offence is a strict liability one, the offence is proven unless the person proves on the balance of probabilities an absence of fault.  That is not the present situation.  Here Mrs Forster knew she did not have a licence.  She says that she did not know that she needed one.   Not knowing the law is not a defence although, depending on circumstances, it may be mitigating in the assessment of penalty.

[26]     Here the mens rea requirement is satisfied if Mrs Forster knowingly took the actions which constitute the offence.  It does not matter that she did not know that those actions constituted an offence.

Did the appellants carry out real estate agency work?

[27]     In the District Court the Judge’s conclusion on whether the appellants had undertaken real estate agency work was as follows:

I find this ingredient proved by the informant beyond reasonable doubt.  The defendants marketed the property, conducted an open home, undertook an open home follow-up, arranged a second viewing, negotiated price, prepared contracts, amended contracts to meet Mr Bulmer's concerns and were involved in further negotiations to ensure settlement.

Although some of that work might not amount to real estate agency work by virtue of paragraphs (c)(i) and (ii) of the definition, the other work is undoubtedly work in trade, that is the business of making a profit, on behalf of Addy and Robinson to bring about a sale of the property.

On the totality of the evidence no other conclusion is available.  Home Buyers secured a sale at $336,000 on behalf of Addy and Robinson.  In essence, Addy and Robinson have foregone the full amount $342,000 to meet Home Buyers' fee for securing the sale.  More than that, the finder's fee agreement reflected work undertaken by the defendants for Mr Bulmer. However the transaction is viewed it amounted to real estate agency work on behalf of someone else, here both vendor and purchaser.  The fact it was designed to achieve a benefit for Home Buyers is immaterial; after all real estate work is for that purpose.

[28]     The appellants contend that they were not carrying out real estate agency work (at least as they had envisaged the transaction would proceed) because they were buying the property and on-selling it.  In the words of the definition of “real estate agency work” I understand this submission to be that the appellants were not “acting on behalf of another person” because they were acting for themselves.   In relation to the transaction as it in fact proceeded they say that they were not acting on behalf of Mr Bulmer and Ms Nelson and that the transaction only proceeded in that way because of Mr Bulmer’s concerns.

[29]     The Authority submits that the work carried out to bring about a sale for Mr Addy and Ms Robinson was indistinguishable from the work of a real estate agent.  It submits that this was the case both as Mrs Forster envisaged the transaction would be carried out (with the simultaneous exchange of contracts) or as it in fact took place (with the side agreement).   It submits that in either case Mrs Forster intended that she would not take money from Mr Addy and Ms Robinson, thinking that this would take her outside the scope of the Act.  It submits that in substance the

transaction  involved  a  payment  by  Mr  Bulmer  and  Ms  Nelson  of  $342,000  to Mr Addy and Ms Robinson to purchase the property, from which Home Buyers Ltd took a $6000 commission (later reduced to $5000).

[30]     I agree with the Authority and the conclusion reached in the District Court that the transaction as it proceeded was an offence under s 141.   Although Home Buyers Ltd does enter into other kinds of arrangements, in this case the whole purpose of the arrangement with Mr Addy and Ms Robinson was to find a buyer for their property.  It was only if a buyer was found, at a price acceptable to Mr Addy and Ms Robinson once Home Buyers Ltd had taken its profit, that Home Buyers Ltd would exercise its “Option to Buy”.   That is apparent from the way the sale was negotiated in this case.  In the telephone conversation to arrange the second viewing, Mrs Forster indicated to Mr Bulmer the vendors’ bottom line.  When Mr Bulmer and Ms Nelson made an offer, it took the form of an agreement with Home Buyers Ltd, but even at that stage Home Buyers Ltd did not sign the agreement and did not enter into an agreement with Mr Addy and Ms Robinson.

[31]     In the words of s 4 it was work done or services provided, in trade, on behalf of another person, to bring about a sale of the land.  In this case the work was done on behalf of Mr Addy and Ms Robinson.  It went beyond “the provision of general advice or materials to assist owners to locate and negotiate with potential buyers” (as referred to in s 4(c)(i)).   That provision is concerned with assistance provided to owners who will be locating and negotiating with potential buyers.  In this case, it was Home Buyers Ltd (not Mr Addy and Ms Robinson) that located the potential buyers (through the advertising, conducting the open home, and following up those who attended the open home) and negotiated with potential buyers (through the discussions and email communications between Mrs Forster and Mr Bulmer about price and terms).

[32]     The Authority made submissions to the effect that the only other prosecution that has been brought under s 141 of the Act was wrongly decided.7    However the facts in that case were different.  In that case the person assisting the owner referred those  who  enquired  about  the  vendor’s  expectations  to  the  vendor,  he  was  not

involved in negotiating a contract or in dealing with the money, and he was paid a flat fee for his assistance.   It is therefore not necessary for me to comment on whether I agree with the decision in that case and it is better for that to be considered on the appeal in that case.

[33]     The appellants’ seem to have thought that providing they made it clear that they were not real estate agents then they were not caught by the Act.  However the offence in s 141 is dependent on the nature of the work or services carried out, not how the person carrying out the work or services represents themselves to be.  There is a separate offence if a person holds themselves out as a salesperson.8

[34]     The appellants were also of the view that it was only the way in which the transaction in fact proceeded that caused the difficulty for them under the Act.  The charges brought against them related to the period between 22 June 2010 and 23 July

2010.   They are therefore concerned with the transaction as it in fact proceeded. However the lead up to this period is relevant to whether the work and services provided during that period were on behalf of another person for the purpose of bringing about a sale and purchase of the property.  Although this case relates only to the work or services as the transaction in fact proceeded,  I do not want the appellants to assume that the way they envisaged the transaction proceeding would not have been caught by the Act.  They are on notice that the Authority considers that this would breach s 141 of the Act.  If the appellants are unclear about this they should discuss this further with the Authority so that they have a clear view of where the Authority views the boundaries to be.

Interview by investigators from the Authority

[35]     The  appellants  are  also  unhappy  that  they  were  interviewed  by  the investigators without being warned that the interview might end up being played in court.  This issue does not appear to have been raised in the District Court where the appellants were represented by counsel.   Had an objection been pursued in the District Court the Authority says it would have wished to call evidence about it.  I do not consider this issue further because it has been raised late and it does not seem

that Mrs Forster said anything in that interview that was relied on in proving the charges against her.

Sentence

[36]     The maximum fine for unlicensed trading is $100,000 for a company and

$40,000 for an individual.9     These fines are significantly greater than under the predecessor legislation.10

[37]     The District Court Judge assessed the level of culpability as in the “lowish to medium range” for which he considered a fine of about one quarter of the maximum was appropriate.  He said this would mean a fine of about $20,000 to $25,000 for the company and about $8000 to $10,000 for Mrs Forster.  He then said that he needed to assess the overall culpability because the two defendants “are one and the same”. He therefore decided on an overall starting point of $30,000 for the two defendants. He reduced this to $25,000 for mitigating factors.  He apportioned this by imposing a fine of $13,000 to Home Buyers Ltd, a forfeiture order against Home Buyers of

$5000 (indicating that this should be refunded to Mr Bulmer) and a fine of $7000 on

Mrs Forster.

[38]     The appellants submit that this sentence was too harsh.  They say that they are a small family business which has operated for many years.  They say that they have many happy testimonials and there have been no previous complaints against the  business.     They  say  that  they  always  make  it  clear  that  Home  Buyers Ltd/Mrs Foster is not a real estate agent.  They say that parties are protected by their requirement that they take independent legal advice and the banks’ requirement in a private sale that there be a registered valuation.   They say that the payment they receive is less than the usual real estate agent’s commission, so that in this case Mr Bulmer suffered no loss and in fact made a gain.

[39]     In relation to Mrs Forster in particular, she says that she is 62 years old, with a good business reputation and who has never previously offended.  She says that the

9      Section 138 of the Act.

10     Under the 1976 Act the maximum fine was $2000.

fine is a significant financial penalty.  She says that she has already suffered adverse media attention which has led to embarrassing “whispers and finger pointing” at business meetings.  She is concerned that she will lose business as the Authority will continue to publicise this case.  She says that her work requires her to travel.  She says that on a recent business trip to Sydney she was questioned at customs and interviewed by immigration, and had to line up with other criminals which was embarrassing and time consuming.   She also says that the legislation is relatively new, so far as she is aware the Authority has not publicised guidelines or otherwise provided education so that property traders know where the boundaries are, and that she never intended to breach the law.

[40]     In the course of the appeal hearing it became apparent that Mrs Forster was seeking a discharge without conviction.   This had not been sought on her behalf before the District Court.  Mrs Forster was under the mistaken impression that this was something that required the Authority’s agreement and, when it was not forthcoming at the status hearing,  was not something that  could be revisited at sentencing.  As a result of the way matters developed at the appeal hearing I gave both  parties  an  opportunity  to  file  further  submissions  on  whether  a  discharge without conviction was appropriate.    Mrs Forster provided submissions seeking a discharge without conviction both for herself and for Home Buyers Ltd.   The Authority filed submissions opposing a discharge without conviction and submitting that, if the Court were to make such an order in relation to Mrs Forster, then the fine on Home Buyers Ltd should be increased to $15,000 (plus the forfeiture order).

[41]    The first step in determining whether a discharge without conviction is appropriate is to assess the gravity of the offending.   This kind of offending is concerned with ensuring there are appropriate standards of conduct for those who act on behalf of others in the selling and buying of houses, so as to protect consumers involved in these transactions.  In this case the Authority accepts that there was no evidence of actual harm “otherwise than perhaps some increased stress and legal costs brought about by the unusual nature of the negotiations and, in Mr Bulmer’s case, the absence of an industry disciplinary process to hear his complaints which otherwise would have been available to him.”

[42]     However, if there was any such increased stress and legal costs that was somewhat balanced out by other factors.  Mr Bulmer was well aware from the outset that Mrs Forster was not a real estate agent.  He elected to proceed with the purchase with that knowledge.   He was agreeable to paying the overall purchase price (the price paid to the vendors and the fee paid to Mrs Forster) which at least potentially was a lower overall price than would have been the case had a real estate agent’s commission been payable by the vendor.  He ended up paying less than the fee he had agreed to pay Mrs Forster, and has since been (or it is intended that he will be) refunded that fee.   Mr Bulmer did not need access to the Authority’s complaints’ procedures because the settlement of the house proceeded, at the price and on terms acceptable to him.   There is no evidence that the vendors were dissatisfied with Mrs Forster’s services or suffered harm in any way.

[43]     Also relevant to the gravity of the offending is that this was first prosecution under s 141 of the Act.  I note that the Authority does not accept that there was no education provided by the Authority about the Act.  It says that there was significant information about the new Act and that others working in the property industry took steps to become licensed under the new Act.  The Authority nevertheless accepts that Mrs Forster’s mistaken belief that she was not carrying out real estate agency work as lessening her culpability.

[44]     I am unable on the material before me to make a proper assessment of the adequacy or otherwise of the educational material provided by the Authority about the meaning of “real estate agency work” and this appeal is not the proper place for that sort of assessment in any event .   Nor do I know whether the Authority has procedures for warning those who may be operating in breach of the Act so that in appropriate circumstances first offenders may be given the opportunity of applying for a licence or altering their business activities.  It is not always appropriate that a case of possible breach under new legislation should proceed through the courts. I consider that the relative newness of the legislation is relevant to the culpability here.

[45]     In Commerce Commission v L D Nathan & Co Ltd11 the Court said this about prosecutions under the Fair Trading Act:

Not only are these apparently the first prosecutions against the respondents but they are the first prosecutions under the Act.  While it is appropriate that there should be a clear acknowledgement that the penalties to be imposed should have a deterrent effect and should realistically reflect the seriousness of the offence, it is not, I think necessary to begin with very substantial fines.

The Court also said that the “fact of the conviction and the publicity about it must be considered to be part of the punishment.”12    I consider that the comments in L D Nathan & Co Ltd have some application here.

[46]     The Authority  also  acknowledges  that  in  this  case  the  principles  of  the Sentencing Act may be upheld by the effect of the conviction and fine imposed on Home Buyers Ltd.  It acknowledges that this will have an impact on Mrs Forster as a director and shareholder of the family business.  In acknowledging these matters the Authority says that it does not accept that a discharge will generally be appropriate for an individual simply because both an individual and a closely held company have been found guilty of linked offending.  I agree with these submissions.

[47]     The principles of the Sentencing Act will be met in this case through the conviction of Home Buyers Ltd, the fine and forfeiture order imposed on it and the publicity about this case.   Mrs Forster will effectively bear those consequences as director and shareholder of the company.  I am satisfied that the consequences of her conviction, as she has outlined them, are out of all proportion to the gravity of the offending (particularly as this is the first successful prosecution of its kind and no harm was suffered by either the vendor or the purchaser).  That is not to say that this outcome will be appropriate in other cases (just as it is often appropriate in prosecutions under the Fair Trading Act for example that both the company and

individuals are convicted13).

11     Commerce Commission v L D Nathan & Co Ltd [1990] 2 NZLR 160 at 166.

12     At 166.

13     See for example Commerce Commission v Brian Soper Appliances Ltd DC Christchurch

CRI-2005-009-9656, 2 May 2006; Commerce Commission v The Home Finance Company Ltd DC Auckland CRI-2008-004-6310, 25 March 2011; Commerce Commission v Ross DC Auckland CRN-5004504283, 6 April 2006; Commerce Commission v O’Neill [2007] NZCA

466; Commerce Commission v Kim DC Auckland CRN-4004502648-2651, 18 March 2005;
Rural Management Ltd v Commerce Commission HC Christchurch AP-243/95, 4 October 1996;

[48]     In my view the conviction and sentence imposed on Home Buyers Ltd was appropriate and it has not been shown that any error was made about this.  In setting the overall financial penalty the Judge expressly took into account that it was “significant and will impose a substantial financial penalty on what must be a relatively small business”.  To achieve deterrence, fines must be significant so as “to

bite” rather to amount to a licence fee.14

[49]     There is no basis to increase the sentence against Home Buyers Ltd in light of the discharge without conviction for Mrs Forster.  The Judge initially set the starting point against Home Buyers Ltd at between $20,000 to $25,000.  That starting point was relatively stern.  There were was then a deduction for mitigating factors. The end point was $13,000 plus a forfeiture order of $5,000, giving rise to an overall financial penalty of $18,000.   In view of the lack of intent to breach the law, the relative newness of the legislation and the absence of harm to vendor or purchaser, this overall financial penalty was not inadequate to meet the principles and purposes of the Sentencing Act.

Result

[50]     The  appeal  by  Home  Buyers  Ltd  against  conviction  and  sentence  is dismissed.   The appeal by Mrs Forster is allowed.   She is discharged without conviction.

Mallon J

Commerce Commission v Merric Apparel (NZ) Ltd DC Manukau CRN-5092504544, 4

November 2005; Commerce Commission v Sports Resources Ltd DC Auckland CRN-
600045004417-20, 23 April 2007; Commerce Commission v Shukla HC Auckland CRI-2007-

404-229, 21 November 2007.

14     Department of Labour v Hanham & Philp Contractors Ltd (2008) 6 NZELR 79 (HC).