Prasad v Real Estate Agents Authority (Complaints Assessment Committee 416)
[2020] NZHC 335
•28 February 2020
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2019-404-301
[2020] NZHC 335
UNDER Section 116 of the Real estate Agents Act 2008 IN THE MATTER
of an appeal against a decision of the Real Estate Agents Disciplinary Tribunal dated 23 January 2019
BETWEEN
INDRA PRASAD
Appellant
AND
REAL ESTATE AGENTS AUTHORITY (COMPLAINTS ASSESSMENT
COMMITTEE 416)
Respondent
CIV-2019-404-982 UNDER
Section 116 of the Real Estate Agents Act 2008
IN THE MATTER
of an appeal against a decision of the Real Estate Agents Disciplinary Tribunal
BETWEEN
REAL ESTATE AGENTS AUTHORITY (COMPLAINTS ASSESSMENT
COMMITTEE 416)
AppellantAND
INDRA PRASAD
Respondent
Hearing: 11 December 2019 Appearances:
No appearance by or on behalf of Indra Prasad M J Mortimer for Real Estate Agents Authority
Judgment:
28 February 2020
PRASAD v REAL ESTATE AGENTS AUTHORITY (COMPLAINTS ASSESSMENT COMMITTEE 416) [2020] NZHC 335 [28 February 2020]
JUDGMENT OF BREWER J
This judgment was delivered by me on 28 February 2020 at 4:30 pm pursuant to Rule 11.5 High Court Rules.
Registrar/Deputy Registrar
Introduction
[1] On 23 January 2019 the Real Estate Agents Disciplinary Tribunal found against Ms Prasad on two charges:1
[a](First charge): A charge of misconduct under s 73(b) (seriously incompetent or seriously negligent real estate agency work) of the Real Estate Agents Act 2008 (“the Act”). The Committee alleges that in the course of marketing a property at Redoubt Road, Goodwood Heights, Auckland, and having become aware of an Auckland Council project which involved widening Redoubt Road, she failed to inform all potential purchasers of the road-widening by:
[i]Failing to mention it during all open homes; and/or
[ii]Failing to mention it during sales meetings or discussions with other licensees who were acting as selling agents; and/or
[iii]Failing to bring it to the attention of potential purchasers or their representatives at the auction of the property; and/or
[iv]Failing to mention it in any written information about the property provided to potential purchasers.
[b](Second charge): A charge of misconduct under s 73(a) (disgraceful conduct) of the Act. The Committee alleges that she retrospectively added or expanded entries to her diary relating to the marketing of the property, and to a transaction report relating to the property, so as to record that she had disclosed the road-widening project to potential purchasers and colleagues, and had facilitated disclosure of the road- widening at the auction of the property.
[2] The Tribunal ordered Ms Prasad’s licence to be suspended for 18 months. The Tribunal also censured Ms Prasad and ordered her to undertake further training and education.
1 Complaints Assessment Committee 416 v Prasad [2019] NZREADT 001.
[3]Ms Prasad appeals the Tribunal’s findings that the charges were proved.
[4] The Real Estate Agents Authority (Complaints Assessment Committee 416) (“the Committee”) appeals the Tribunal’s decision to suspend Ms Prasad’s licence. It contends the Tribunal should have cancelled the licence.
[5]This judgment decides both appeals.
Procedural history
[6] Ms Prasad’s notice of appeal was filed by her solicitors on 21 February 2019. On 17 June 2019 Ms Prasad advised the Court she would now act in person. The appeals were called on 18 June 2019 and, because of the change of representation, were adjourned until 16 July 2019.
[7] On 16 July 2019 there was a further adjournment to 23 July 2019. Justice Powell provisionally set the appeals down for hearing on 11 December 2019.
[8] On 23 July 2019 Powell J made timetabling directions. The 11 December 2019 fixture was confirmed.
[9] On 7 November 2019, Ms Prasad not having taken any further steps, Powell J made a timetable order as to the filing of submissions.
[10] Ms Prasad did not file any submissions. Instead, by email to the Registrar dated 3 December 2019, Ms Prasad applied for an adjournment on medical grounds. By Minute dated 5 December 2019, Wylie J declined to grant an adjournment.
[11] Ms Prasad did not appear at the hearing before me on 11 December 2019. In the circumstances, I directed I would determine her appeal on the papers.
[12] I heard submissions by Mr Mortimer on behalf of the Committee in relation to the Committee’s appeal against penalty.
Background
[13] Ms Prasad was a licensed salesperson. She was, in 2016, engaged to sell a residential property. Among other duties, Ms Prasad conducted open homes from early January to 6 February 2016. During this period Ms Prasad learned that the property would be affected by the Redoubt Road-Mill Road Corridor Project. Road widening for the project would mean an area from the front of the property would be compulsorily acquired. Obviously, this would be of interest to prospective purchasers.
[14] The property was sold at auction on 6 February 2016. Mr Verma, another salesperson engaged at the same agency as Ms Prasad, bid at the auction on behalf of the purchaser. The purchaser carried out renovations on the property and it was listed for sale by Mr Verma. The property went to auction again on 2 July 2016. Subsequently the successful bidders withdrew their offer after discovering that the road-widening project affected the property.
[15] Eventually the purchaser lodged a complaint with the Real Estate Agents Authority. The essence of his complaint was that Ms Prasad was aware that part of the property would be acquired for road-widening, significantly diminishing its value, but Ms Prasad failed to tell him about this and failed to tell any other person either before or after the sale of the property at auction.
[16] The purchaser alleged a financial loss of $160,000, made up of renovation costs of $40,000 and with the balance comprising a mixture of related costs and diminished property value.
[17] On the first charge she faced, Ms Prasad’s position was that after she learned of the road-widening she told open home attendees about it. The purchaser did not attend any open home but bought the property in reliance upon the marketing material.
[18] Ms Prasad also said she told her fellow salespersons at staff sales meetings. She said she had a further conversation with Mr Verma about it at one of the open homes. Ms Prasad attended the auction and said she told the auctioneer, Mr Thorstensen.
[19] Ms Prasad’s evidence also was that before the auction she telephoned the vendor’s solicitors and discussed the road-widening project, asking whether the matter should be included in the auction sale and purchase agreement. Ms Prasad said she was told not to put it in writing in the contract, but the auctioneer should be told to mention it at the auction. She said she reminded Mr Thorstensen to mention the road- widening, and he showed her an envelope with the road-widening highlighted. At the hearing she said this was an A4 size envelope, which Mr Thorstensen gave to her at the auction, and which she kept for some time in her car, then threw out.
[20] The second charge came about because during the investigation Ms Prasad produced her diary which contained entries which she pointed to as corroborating her account of telling attendees at the open homes and her fellow salespersons about the road-widening. Ms Prasad also referred to a “Lister Transaction Report” as corroborating her account. This was a report which Ms Prasad was required to complete immediately after the auction. It contained the entry:
Total Do up – Told everyone of Rd widening check with MCC. Also Chetty came to the open home. I told him the opposite people said there is Rd widening to check with the council.
[21] The charge alleged the diary entries and the entry in the report were inserted after Ms Prasad knew about the investigation, they were false, and intended by Ms Prasad to help avoid culpability for her conduct around not disclosing the road- widening.
Ms Prasad’s appeal
[22]Ms Prasad’s notice of appeal set out her grounds of appeal as follows:
1.1The Tribunal made an error of fact in finding that the appellant failed to disclose the road-widening issue to prospective purchasers and to other licensees, including the selling salesperson, Mr Verma.
(a)The Tribunal did not give sufficient weight to the evidence given by the appellant regarding such disclosure, or to the evidence of witnesses on the appellant's behalf, particularly open home attendees who confirmed that the appellant had made such disclosure to them.
(b)It did not consider, or give sufficient weight, to factors affecting the credibility of witnesses called on behalf of the
Complaints Assessment Committee, particularly Mr Verma, who had a vested financial interest in selling the property as a result of commission that he would derive from the sale, and potential disciplinary exposure for his own failure to disclose the issue to the purchaser.
(c)Despite having the ability to regulate its own procedure, which would include the ability to adjourn the hearing and call for further evidence, the Tribunal did not seek to hear evidence from the vendors' solicitors, despite the evidence of the appellant that she specifically queried with them whether the road-widening issue should be included in the auction sale and purchase agreement but was advised that the auctioneer should be informed.
1.2The Tribunal made an error fact in finding that the appellant backdated diary entries and other notations to record disclosures that were made.
1.3Notwithstanding the appellants’ denial that she failed to inform all open home attendees of the road-widening issues, the Tribunal made an error of law in finding that the appellant had a duty to disclose the issue to all open home attendees, as opposed to prospective buyers who showed a reasonable level of interest in purchasing the property.
1.4Notwithstanding the appellants’ denial of either unsatisfactory conduct or misconduct, the Tribunal made a further error of law in finding that the appellants’ conduct met the threshold for misconduct.
Discussion
[23] This appeal proceeds by way of rehearing. I have to decide whether the Tribunal was in error and, if so, whether its decision should stand. If I disagree with the Tribunal on a material point then I must give effect to my own finding.
[24] It is important to note that the onus of proof was on the Committee, but the standard of proof was on the balance of probabilities.
[25] When an appeal is brought on grounds that a tribunal did not give sufficient weight to evidence given by the appellant and other witnesses, the appellate court bears in mind the advantage the tribunal had in observing the witnesses give their evidence. If the findings of the tribunal were open to it on the evidence it heard there is little room for an appellate court to interfere.
[26] As to ground 1.1(a), the Tribunal found that Ms Prasad did make disclosure to some people who attended the open homes. The Committee did not suggest otherwise.
The Tribunal found that Ms Prasad did not disclose the road-widening to all potential purchasers. The Tribunal did not reject the evidence of witnesses who said Ms Prasad had made disclosure to them.
[27] As to ground 1.1(b), the credibility of Mr Verma was in issue at the hearing. He was cross-examined on the point he stood to gain a commission if his client, the purchaser, bought the property. Part of Mr Verma’s evidence was that he dealt with the purchaser a lot and that he would definitely have told the purchaser about the road- widening if Ms Prasad had told him about it. Mr Verma’s evidence that Ms Prasad did not disclose the road-widening was consistent with the evidence of other witnesses. The Tribunal was entitled to assess Mr Verma’s credibility and the credibility of other witnesses and to prefer their evidence to Ms Prasad’s evidence.
[28] As to ground 1.1(c), the hearing before the Tribunal was an adversarial one. The fact that in evidence Ms Prasad alleged she had had a conversation about the road- widening with the vendor’s solicitors did not mean the Tribunal should have brought the hearing to a halt and made inquiries with the solicitors. It was for Ms Prasad, who had elected to give evidence, to put any exculpatory evidence before the Tribunal.
[29] On 23 July 2019, Powell J gave Ms Prasad the opportunity to obtain further evidence to be considered for use in Ms Prasad’s appeal. He made timetabling directions accordingly. Ms Prasad did not take advantage of that opportunity. Accordingly, it would be speculative to consider what the solicitors might say.
[30] As to ground 1.2, the Tribunal analysed carefully the issue of whether Ms Prasad had added the entries to her diary and the Lister Transaction Report. Its findings were open to it on the evidence given the standard of proof. I do not find error.
[31]As to ground 1.3, the Tribunal said:
[73] It is evident from the marketing material that no written advice of the road-widening was given. Ms Prasad’s evidence that she told anyone who expressed an interest in buying the property does not establish that she told everyone. We accept Mr Waalkens’ submission that it was not for her to select who should be informed. As he submitted, the significance of the effect of the road-widening project on the property made it vital that anyone who came to
an open home, and anyone who might develop an interest in the property, was fully informed about it.
[32] Rule 6.4 of the Real Estate Agents Act (Professional Conduct and Client Care) Rules 2012 provides that an agent (including a salesperson) should not “withhold information that should by law or in fairness be provided to a customer.” The road- widening was clearly information that in fairness should have been provided. I note that “customer” includes a “potential party to a transaction”.2
[33] People attending an open home are potential parties to the sale of the property, or should be treated as such. As the Tribunal said, it was not for Ms Prasad to select which attendees at the open homes should be told about the road-widening. Any of them could have attended the auction and bid for the property. I see no error of law in the Tribunal’s decision on this point.
[34] Further, the first charge of misconduct had other particulars. They were failures to disclose the road-widening to her fellow salespersons, at the auction, and in the written information provided to potential purchasers. The Tribunal found those failures proved also. The evidence supports the findings. Collectively, they established the first charge of misconduct.
[35] As to ground 1.4, I take it the criticism that Ms Prasad’s conduct did not meet the threshold for misconduct is directed at both charges. “Misconduct” means “seriously incompetent or seriously negligent”.3
[36] On the first charge, I have no doubt that Ms Prasad’s failure to fully disclose the road-widening was seriously incompetent or seriously negligent. This was information of real significance to prospective purchasers. This is illustrated by the position of the actual purchaser. He bought in ignorance of the road-widening, lost an on-sale as a result, and has suffered a significant financial effect. The failure to tell all open home attendees about the road-widening, or to put it in the written material provided to prospective purchasers, was compounded by Ms Prasad’s failure to tell her fellow salespersons or the auctioneer. Those failures cannot be said to be the result
2 Real Estate Agents Act (Professional Conduct and Client Care) Rules 2012, r 4.1.
3 Real Estate Agents Act 2008, s 73(b).
of mere incompetence or mere negligence. They go directly to Ms Prasad’s duty as a salesperson.
[37] For the second charge the issue is whether Ms Prasad’s conduct in falsifying diary entries and the entry in the Lister Transaction Report “would reasonably be regarded by agents of good standing, or reasonable members of the public as disgraceful”.4
[38] In my view, Ms Prasad’s actions were deliberately dishonest and designed to subvert the disciplinary process to which she was subject as a salesperson. Ms Prasad sought to escape culpability for her failures to disclose very significant information. That is conduct which is a “marked and serious departure from the requisite standards”.5 It is disgraceful conduct.
Decision
[39] I see no error in the Tribunal’s findings that the charges were proved. Ms Prasad’s appeal is dismissed.
The Committee’s appeal
[40]Mr Mortimer submits:
This penalty appeal turns on two key issues:
(a)First, what the Committee submits is an error in approach by the Tribunal. By this, the Committee means that the Tribunal’s approach did not follow senior court authority that dishonesty by a licensee will typically be met by cancellation of licence. The Tribunal was instead influenced by a series of cases where the Tribunal stepped back from cancellation in the face of dishonesty. The Committee submits that, while the Tribunal was correct to have regard to comparable cases, there was nothing in this case that meant the Tribunal should derogate from what should be the usual outcome of cancellation as a response to dishonesty.
(b)Second, and regardless of the outcome on the first issue, that the Tribunal erred on the facts of this case in declining to cancel Ms Prasad’s licence.
4 Real Estate Agents Act 2008, s 73(a).
5 Morton-Jones v Real Estate Agents Authority [2016] NZHC 1804 at [29].
[41] The Tribunal approached its task of setting penalty by referring to the principal purpose of the Act, which 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”.6 It noted the penalty should be the least punitive penalty appropriate in the circumstances and that rehabilitation is an important consideration.
[42] The Tribunal found that Ms Prasad’s misconduct in failing to make disclosure of the road-widening was at the lower end of the range of seriousness. Mr Mortimer accepts that. The Tribunal is a specialist tribunal and on the material before me I have no reason to disagree.
[43] On the second charge, the Tribunal was influenced by the decision of Woodhouse J in Morton-Jones. That was a case involving disgraceful conduct by short paying a client approximately $45,000 of rental receipts. There was also a charge of misconduct by failing to produce information or documents to a Complaints Assessment Committee when given notice to do so.
[44] Justice Woodhouse overturned the Tribunal’s decision to suspend Mr Morton- Jones’s licence for nine months.
[45]The Tribunal in this case said:7
[38] The circumstances of the present case are quite different from those considered in Morton-Jones. While proven dishonesty will certainly be regarded as serious misconduct, and cancellation must be the starting point, we are not persuaded that Morton-Jones is authority for an order for cancellation being the “invariable” outcome in the present case.
[46]The Tribunal concluded:
[46] We must determine the appropriate penalty orders on our assessment of the circumstances of the particular case before us, and by applying the relevant penalty principles set out earlier. On the particular facts of this case, and taking the two findings of misconduct into account, we assess Ms Prasad’s conduct as serious, but not sufficiently so as to require cancellation of her licence. Albeit different in various aspects, it is within the same range as that considered in Ganesh and Taylor.
6 Real Estate Agents Act 2008, s 3(1).
7 Complaints Assessment Committee 416 v Prasad [2019] NZREADT 17.
[47] We have taken into account the matters raised by Mr Rea in mitigation. We have concluded that the purposes of promoting and protecting the interests of consumers, promoting public confidence in the performance of real estate agency work, maintaining a high standard of conduct in the industry, the need for both personal and general deterrence, determining a penalty that is appropriate for the particular nature of the misbehaviour, maintaining consistency, and imposing the least punitive penalty that is appropriate in the circumstances, are best met by suspending Ms Prasad’s licence. The appropriate period of suspension is 18 months.
[47] Mr Mortimer submits that the approach taken by the Tribunal in having regard to other cases of dishonesty where licences were suspended rather than cancelled led it into error. He submits the Tribunal should have proceeded on the basis that cancellation is almost invariably the end point of cases of proven dishonesty. Mr Mortimer recognised that cases where the Courts have cancelled licences where proven dishonesty is present are all cases where the proven dishonesty related to money. However, Mr Mortimer submits that dicta in the English case of Bolton v Law Society are of general application.8 He quotes the Judge:9
Any solicitor who is shown to have discharged his professional duties with anything less than complete integrity, probity and trustworthiness must expect severe sanctions to be imposed upon him by the Solicitors Disciplinary Tribunal. Lapses from the required high standard may, of course, take different forms and be of varying degrees. The most serious involves proven dishonesty, whether or not leading to criminal proceedings and criminal penalties. In such cases the tribunal has almost invariably, no matter how strong the mitigation advanced for the solicitor, ordered that he be struck off the Roll of Solicitors.
[48]A difficulty for Mr Mortimer is that Bolton concerned a solicitor who dispersed
£45,000 from his trust account contrary to client instructions. Nevertheless, Mr Mortimer submits:
There is no distinction in principle why the dishonesty regarding client funds is more or less serious than any other form of dishonesty. It may be the case that dishonesty relating to client funds in a particular case involves loss that increases the overall seriousness of the conduct. But it is not immediately clear that a licensee that dishonestly appropriates $1 of client money is more or less serious (sic) than a licensee who intentionally lies when asked about defects in a property, with the result that a customer overpays for a property by thousands of dollars. All dishonesty is serious in a profession such as real
8 Bolton v Law Society [1994] 1 WLR 512 (CA).
9 At 518.
estate where trust is critical. In Mairs v Complaints Assessment Committee 413 the High Court quoted with approval the observations of the Tribunal:10
dishonesty of any type is met with the highest degree of disapprobation by registration bodies and by members of the public who must retain confidence in the honesty and integrity of agents.
Discussion
[49] Two serious charges were proved against Ms Prasad. The first charge of misconduct, even characterised as being at the lower end of the range, established that Ms Prasad was seriously incompetent or seriously negligent in her real estate agency work. The second charge established that Ms Prasad acted disgracefully by dishonestly altering documents to help her avoid culpability for her serious incompetence or negligence.
[50] The Tribunal recognised11 that proven dishonesty by a real estate agent will be regarded as serious misconduct and that cancellation of their licence must be the starting point. It did not accept that cancellation must be the invariable outcome. What is required is a proper assessment of all the relevant circumstances.
[51] Mr Mortimer accepts this approach, and so do I. The orders available to the Tribunal following a finding of misconduct are set out in s 110 of the Act. They include cancelling a licence or suspending it for a period not exceeding 24 months. So, even though proven dishonesty merits a starting point of cancellation of licence, the end point must be reached by a full and principled consideration of the relevant circumstances.
[52] It follows I do not accept Mr Mortimer’s argument that the Tribunal erred in not finding it was bound by higher court authority to consider the circumstances against a presumptive end point of cancellation. The end point of a case where there is proven dishonesty might well be cancellation, but to presume that risks skewing the analysis.
10 Mairs v Complaints Assessment Committee 413 [2019] NZHC 1839 at [38] quoting Complaints Assessment Committee v Gollins [2015] NZREADT 2 at [42]. Emphasis added by High Court.
11 See [45] above.
[53] I turn now to the Committee’s second ground of appeal which is that the Tribunal’s analysis was wrong and resulted in a penalty (suspension) which was unavailable to it on the facts.
[54] In my view, cancellation of Ms Prasad’s licence was the correct starting point taking into account the circumstances of the offending. Ms Prasad’s misconduct around failing to disclose as fully as she should the road-widening was not only seriously incompetent or negligent, it resulted in the purchaser suffering significant financial loss.
[55] The misconduct by dishonestly altering records was serious dishonesty. That is because it was intended to help Ms Prasad escape culpability for her other misconduct. Ms Prasad decided to lie about disclosing the road-widening and altered the records to bolster her lies. Her conduct goes directly to her fitness to be a licensed salesperson.
[56] The issue then becomes whether Ms Prasad’s personal circumstances should be taken to reduce the starting point of cancellation to a lesser penalty. The Tribunal (rightly) considered it should impose the least punitive penalty available in the circumstances and bearing in mind the need to assist Ms Prasad with rehabilitation.
[57]I find the Tribunal erred in its application of those principles.
[58] Ms Prasad had 15 years’ experience in the real estate industry. That experience included two previous findings of unsatisfactory conduct which, although Mr Mortimer does not claim them as aggravating factors, mean Ms Prasad could not claim an exemplary record.
[59] Ms Prasad’s actions in falsifying records were not reckless or naïve. They were deliberate and done to support her lies to the investigator.
[60] Of greatest significance is that Ms Prasad maintained her lies. At the hearing before the Tribunal she continued her claim that the falsified records were genuine.
That is still her position. Ms Prasad refuses to accept responsibility for her actions and accordingly demonstrates neither insight nor remorse.
[61] In these circumstances, suspending Ms Prasad’s licence and ordering her to undertake training in (broadly) professional ethics is not appropriate. Ms Prasad did not come before the Tribunal as a penitent but as a recalcitrant.
[62]In my view, the penalty of suspension of licence was imposed in error.
Decision
[63] The appeal is allowed. The penalties imposed by the Tribunal are quashed. I order cancellation of Ms Prasad’s licence.
Brewer J
Solicitors:
Meredith Connell (Auckland) for REAA
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