Quin v Real Estate Agents Authority

[2012] NZHC 3557

IN THE HIGH COURT OF NEW ZEALAND TAURANGA REGISTRY

CIV-2012-470-256 [2012] NZHC 3557

IN THE MATTER OF     an appeal under s 116 of the Real Estate

Agents Act 2008

BETWEEN  ANDREA QUIN Appellant

ANDTHE REAL ESTATE AGENTS AUTHORITY

First Respondent

ANDPHILIP ANDREW BARRAS AND SANDRA KNAPTON

Second Respondents

Hearing:         8 August 2012

Counsel:         PJ Napier for Appellant

MJ Hodge and H McKenzie for First Respondent
Second Respondents in person

Judgment:      19 December 2012

JUDGMENT OF BREWER J

This judgment was delivered by me on 19 December 2012 at 3:30 pm pursuant to Rule 11.5 High Court Rules.

Registrar/Deputy Registrar

SOLICITORS

Keegan Alexander (Auckland) for Appellant Meredith Connell (Auckland) for First Respondent (Copies to Second Appellants in person)

QUIN V THE REAL ESTATE AGENTS AUTHORITY HC TAU CIV-2012-470-256 [19 December 2012]

Introduction

[1]      On  2 April  2012,  the  Real  Estate  Agents  Disciplinary  Tribunal  (“the Tribunal”) upheld a decision of the Complaints Assessment Committee (“the Committee”) that the appellant had committed unsatisfactory conduct under the Real Estate Agents 2008 (“the 2008 Act”).1    The Tribunal also upheld the Committee’s decision  to  grant  relief  in  favour  of  the  second  respondents,  but  increased  the quantum awarded by the Committee.

[2]      The appellant now appeals against the decision of the Tribunal.  The second respondents cross-appeal on the issue of quantum.

Facts

[3]      On 9 November 2009, the second respondents visited a Tauranga property that was for sale by auction.  The appellant was the listing agent who showed them the property.   At the time she was a salesperson licensed under the Real Estate Agents Act 1976 (“the 1976 Act”).  Upon the coming into force of the 2008 Act, the appellant became licensed as a salesperson thereunder.

[4]      During the visit to the property, the second respondents asked the appellant to point  out  the  boundaries.    The  appellant’s  response  indicated  that  the  eastern boundary of the property was marked by a nine-wire fence.   This meant that the entire driveway to the house on the property, including a gateway, was part of the property.

[5]      It was indicated to the appellant at that time by the second respondents that they wanted a property where they could build a workshop from which they could operate a business and which had heavy vehicle access.   The second respondents identified a suitable area on the property for the construction of the workshop with

good access for heavy vehicles using the existing entranceway.

1      Quin v Real Estate Agents Authority [2012] NZREADT 13.

[6]      The second respondents purchased the property at auction on 25 November

2009 for $290,000 and took possession of it on 9 December 2009.

[7]      Following settlement, and while undertaking preliminary earthworks for the accessway to the proposed workshop, the second respondents discovered that the actual eastern boundary to the property was some eight metres inside the nine-wire fence.  This meant that the workshop could not be constructed at the chosen location because  it  was  too  close  to  the  actual  boundary.    A different  location  for  the workshop was chosen.  However, that required the construction of a new accessway which in turn required a resource consent from the local council.

The Committee’s decision2

[8]      The Committee found that the appellant was guilty of unsatisfactory conduct. Its decision focused on the appellant’s knowledge that there were uncertainties regarding the location of the eastern boundary.   The Tribunal summarised the Committee’s finding on unsatisfactory conduct at [5] and [6] of its decision:

[5]       Broadly, the Committee found that the licensee [the appellant] failed to determine the real issue with the accessway and compounded the error by failing to alert the complainants [the second respondents] in the clearest possible terms to the fact that there was a real problem with the only access to the property.  She should not have indicated the boundaries to the property and should have told the complainants in the “clearest terms” that she had been told by the owners that the gate was not where it was meant to be.  She should have said that she was not able to state the boundaries to the property and advised the complainants to make their own professional enquiries.

[6]       The Committee found that representations and omissions relating to the eastern boundary and accessway “continued, uncorrected” up to the time of the 25 November 2009 auction.  The fact that the auctioneer signalled that agents were not bound to point out boundaries or that the property was sold on an “as is where is” basis neither relieved the licensee from the representations she made to the complainant, nor meant that the complaint must be considered under the 1976 Act.

[9]      The Committee ordered that the appellant:

(a)      Pay a fine of $7,000 to the Authority;

2      CAC10036, 11 May 2011.

(b)      Undergo additional training; and

(c)       Pay relief of $25,000 plus GST to [the second respondents] on proof of completion of the quoted work.

[10]     The relief awarded was substantially less than the total relief sought by the second respondents of $101,871.30.   The relief sought by them extended beyond claiming for the costs of relocating the accessway and included additional categories of loss such as compensation for annual leave taken and medical fees.  Most of these claims were rejected by the Committee.

Appeal to the Tribunal

[11]     The appellant appealed the Committee’s decision on the grounds that the conduct took place before the 2008 Act was in force, that the conduct should not have been classified at the higher end of unsatisfactory conduct, and that the Committee did not have the power to award $25,000 plus GST for the provision of the new accessway because that would not be a payment arising from the consequences of the appellant’s error or omission.

[12]     The second respondents cross-appealed on the quantum of relief awarded, seeking  “relief  in  whole  for  the  expenses  incurred  by  the  conduct  of  [the appellant]”.3    The further money sought related mostly to costs they claimed arose out of the appellant’s conduct but which did not relate directly to the cost of the new accessway.

[13]    The Tribunal found that although the misrepresentation by the appellant occurred prior to the 2008 Act coming into force, the conduct of the appellant was ongoing and continued after the 2008 Act came into force.   This was because the appellant ought to have corrected her earlier misrepresentation prior to the auction.

[14]     The Tribunal found that the Committee was entitled to conclude that the

appellant’s conduct fell at the upper end of unsatisfactory conduct.

3      Quin v Real Estate Agents Authority, above n 1, at [13].

[15]    The Tribunal then addressed the appellant’s argument that there was no claimable loss shown to have arisen from the unsatisfactory conduct.  The appellant argued that the correct assessment of loss was to adopt the Fair Trading Act 1986 measure under s 43(2)(d) of that Act.4   Under that measure, because the property was bought at $25,000 below the market value (in the opinion of a valuer employed by the appellant and retrospectively assessed on the actual boundaries), there was no

loss to the second respondents.   In the appellant’s submission to the Tribunal, no damages could be awarded to the second respondents.  That is because any damages awarded in such a circumstance would amount to an award of expectation damages and, on the case law referred to, expectation damages were not available.

[16]     The Tribunal rejected this line of argument.  It held that the objects of the Fair

Trading Act are distinguishable from those of the 2008 Act:5

We consider that the fact that a person has purchased a property which, he or she thought, had a particular feature, based on a representation by an agent, when in fact it does not have that feature, is a consequence for which relief can be provided in appropriate cases.  This is so despite the fact the market value of the property may not be diminished because of the absence of the feature concerned.

[17]   Further, the Tribunal held that it had not been proven that the second respondents bought the property at an undervalue as it was purchased by them in an open market auction.

[18]     The Tribunal, with more information available to it than had been provided to the Committee,  allowed  the  cross-appeal  of the second  respondents  in  part.    It calculated the second respondents’ loss at $46,585.34 including GST.  The Tribunal noted that it presumed that the second respondents would obtain GST inputs for those items.  The loss was calculated in respect of restoration works for which a total of $65,946.60 had been claimed.  The Tribunal found that some of the claims had insufficient nexus to the unsatisfactory conduct, while there were also elements of

betterment.   In exercising its discretion under s 93 of the 2008 Act, the Tribunal

4      Cox & Coxon Ltd v Leipst [1999] 2 NZLR 15, Harvey Corporation Ltd v Barker [2002] 2 NZLR

213.

5      Quin v Real Estate Agents Authority, above n 1, at [39].

decided to  increase the Committee’s  award from  $25,000  plus GST to  $40,000

including GST.

The appeal to this Court

[19]     The appellant’s appeal to this Court is succinct and clear.   She does not challenge the findings of the Committee and the Tribunal that her conduct amounted to unsatisfactory conduct in terms of the 2008 Act.  Instead, the appellant challenges jurisdiction in relation to her unsatisfactory conduct and, alternatively, the Committee’s and Tribunal’s right to make any order in favour of the second respondents for relief or compensation.

The first ground of appeal

(i)        The first ground of appeal is that the Real Estate Agents Disciplinary Tribunal erred by finding that the penalty provisions of the Real Estate Agents Act 2008 applied to the appellant’s conduct, when the conduct complained of took place before that Act came into force.

[20]     The  2008  Act  came  into  force  on  17 November  2009.     The  second respondents’ visit  to  the  property  at  which  the  misdescription  of  the  boundary occurred took place on 9 November 2009.  Accordingly, the appellant’s position is that the penalty provisions of the 2008 Act simply cannot apply because they were not in force when that visit occurred.

[21]     Section 172 of the 2008 Act provides:

172      Allegations about conduct before commencement of this section

(1)       A Complaints Assessment Committee may consider a complaint, and the Tribunal may hear a charge, against a licensee or a former licensee in respect of conduct alleged to have occurred before the commencement of this section but only if the Committee or the Tribunal is satisfied that,—

(a)       at the time of the occurrence of the conduct, the licensee or former licensee was licensed or approved under the Real Estate Agents Act 1976 and could have been complained about or charged under that Act in respect of that conduct; and

(b)       the licensee or former licensee has not been dealt with under the Real Estate Agents Act 1976 in respect of that conduct.

(2)       If, after investigating a complaint or hearing a charge of the kind referred to in subsection (1), the Committee or Tribunal finds the licensee or former licensee guilty of unsatisfactory conduct or of misconduct in respect of conduct that occurred before the commencement of this section, the Committee or the Tribunal may not make, in respect of that person and in respect of that conduct, any order in the nature of a penalty that could not have been made against that person at the time when the conduct occurred.

[22]     The  section  found  by  the  Committee  and  by the Tribunal  to  have  been breached by the appellant is s 72 of the 2008 Act, which provides:

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.

[23]     The appellant submits that it is conduct which breaches s 72 and it is that conduct which must be looked at for the purposes of s 172.   Here, the conduct complained of was the misdescription at the 9 November 2009 visit.  The issue is not the point at which the second respondents suffered loss (being the date at which they bought the property at auction), but when the conduct took place.   The appellant submits that there was no specific opportunity between the visit to the property and the auction to correct the misrepresentation.  Therefore, the appellant’s liability must relate solely to her conduct on 9 November 2009.   Since the 1976 Act would not have permitted any order in the nature of compensation to be made against the appellant for the unsatisfactory conduct, s 172(2) operates to prevent any such order being made under the 2008 Act.

[24]     The first respondent’s main submission on this point is that the conduct of the appellant was a continuing conduct.  The submission is that there was opportunity between the visit to the property and the auction for the appellant to have corrected the misrepresentation.   The appellant was on notice of the issues, failed to make

adequate enquiries as to the boundary position and accessway, and thus failed to provide the second respondents with accurate information.  The appellant knew that there were problems with the positioning of the boundary and should have made that clear to the second respondents before the auction.  Accordingly, the first respondent submits there was no error on the part of the Tribunal.

Discussion

[25]     The starting point is that there is no dispute that there was a misrepresentation on 9 November 2009 that by itself amounted to unsatisfactory conduct in terms of the 2008 Act.   Neither is there any dispute that if the unsatisfactory conduct is confined to the events of 9 November 2009, then the 2008 Act does not apply to it. The issue is whether the appellant had an ongoing obligation to correct the misrepresentation prior to the auction such that her failure to do so amounted to a continuation or renewal of the unsatisfactory conduct during a period when the 2008

Act was in force.

[26]     I accept the submission of the appellant that the relevant provisions of the

2008 Act focus on conduct.   Conduct can amount to an act or acts occurring at a particular time or can consist of an act or acts which occur over a period of time. Conversely, a failure or omission to act can also amount to conduct.

[27]     In this case, the unsatisfactory conduct found by the Tribunal related to more than the misrepresentation made on the day of the visit to the property.  The Tribunal found that the appellant’s unsatisfactory conduct was ongoing because, knowing that there were potential problems with the accessway and gate to the property, she failed to  make  adequate  enquiries  to  determine  what  the  situation  was.    Further,  the appellant had an obligation to make such enquiries and then to inform the second respondents of their outcome.  Whether that was done at the time of the visit to the property or subsequently is wholly irrelevant.  The Tribunal found that there was an onus  on  the  appellant  following  the  initial  misrepresentation  to  correct  the impression created by it.

[28]     I agree with the submissions of the first respondent on this ground of appeal. The definition in s 72 of “unsatisfactory conduct” is wide.  It was, and in the context of the legislation must have been, open to the Tribunal to find that after an initial misrepresentation where the appellant knew that the position was unclear over the positioning of the boundary, it was unsatisfactory conduct on her part not to make further  enquiries  and  to  inform  the  second  respondents  of  the  result  of  those enquiries (and if it was indeterminate, to pass on the instructions she had received from the vendor and warn the second respondents that they should engage specialist help to establish the boundaries) prior to the auction.

[29]     I  disagree  with  the  appellant’s  argument  that  there  was  no  particular opportunity prior to the auction for the appellant to correct the misrepresentation.  To my mind, whether or not such an opportunity existed is irrelevant.   The Tribunal found,  and  it  must  be  the  case  to  give  proper  effect  to  the  definition  of “unsatisfactory conduct”, that having misrepresented the boundary situation, and with knowledge of that situation, there was a positive onus on the appellant to correct the misrepresentation.

Decision

[30]     I find against the appellant on the first ground of appeal.

The second ground of appeal

(ii)       The  second  ground  of  appeal  is  that  the  Real  Estate  Agents Disciplinary Tribunal erred by finding that the second respondents were entitled to compensation and/or relief based upon their expectation of loss.  It is the appellant’s position that a purchaser of a property is not entitled to compensation and/or relief based on his or her expectation under the Real Estate Agents Act 2008 or otherwise. Accordingly, it is the appellant’s position that a purchaser must show that he or she is worse off as a result of relying on a representation, not merely that he or she did not realise an expected benefit or benefits.

[31]     The power of the Committee (and, on appeal, the Tribunal) to make orders on a finding of unsatisfactory conduct is found in s 93 of the 2008 Act:

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:

(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.

[Emphasis added]

The appellant’s submissions

[32]     The appellant’s submission is that s 93(1)(f)(ii) of the 2008 Act allows the Committee  or  Tribunal  to  order  relief  from  the  consequences  of  the  error  or omission.    In  this  case,  the  error  or  omission  was  the  failure  to  point  out  the

boundary and the accessway issues.  The appellant did not cause those issues herself. Had the appellant complied with her obligations, the second respondents would have been able to make an informed decision as to whether to purchase the property or not.  In this case, their position was that had they known the true position they would not have purchased the property. Accordingly, the appellant submits the only remedy that is legally available under s 93(1)(f) is the extent to which, if any, the second respondents paid too much for the property as a result of there being boundary and accessway issues.

[33]     The appellant submits that this case is on all fours with the Court of Appeal’s decision in Harvey Corporation v Barker.6   That was a decision addressing a claim for relief under s 43(2)(d) of the Fair Trading Act for misleading and deceptive conduct by a real estate agent.   The Court of Appeal rejected the availability of expectation damages under the Fair Trading Act and held that the loss should be assessed as the amount of over-expenditure in purchasing the property relative to its

actual market value.

[34]     The appellant points to the evidence of a valuer to the effect that even taking into account the issues of boundary and accessway, the price paid by the purchasers was below market value.  The appellant concludes her submission on this point as follows:

3.13It is submitted that the Tribunal was wrong to interpret s 93(1)(f) in such a way as to “turn on its head the whole rationale of the measure of damages for a civil wrong”.7    There is nothing in the Act which would   lead   to   the   conclusion   that   it   was   designed   so   that complainants could successfully claim what in some situations may be significant sums which would not be claimable in the Courts under the civil jurisdiction.

Submissions of the first respondent

[35]     The first respondent bases its submissions on the nature and purpose of the

2008 Act, the “plain” interpretation of s 93, and the differences between the 2008 Act and the Fair Trading Act.

6      Harvey Corporation v Barker, above n 4.

7      The quoted phrase is from the judgment of Henry J in Cox & Coxon v Leipst, above n 3, at p 26.

[36]     The  first  respondent  submits  that  the  appellant’s  unsatisfactory  conduct resulted in the second respondents purchasing a property in the mistaken belief that a workshop could be built at a particular location with heavy vehicle access to it. When they discovered the true position, they had to incur additional expense to create vehicle access to a different location.  It is submitted that s 93(1)(f) is wide enough to permit a Committee or the Tribunal to make an order that such expense be covered by the appellant. An analogy is drawn with the law of promissory estoppel.

[37]     The first respondent distinguishes Harvey Corporation v Barker on the basis that the 2008 Act and the Fair Trading Act are directed towards different purposes. The former deals with the consequences of unsatisfactory conduct whereas the latter is directed towards compensating for loss or damage.

[38]     In response to the appellant’s submission that if expectation damages are achievable there could be no end to liability, the first respondent submits that relief under s 93 is discretionary and would be open to challenge if it was unreasonable in all the circumstances.

Analysis

[39]     I have to uncover the correct interpretation of s 93(1)(f).  The provision is not expressed in the language of the common law.  It does not refer to “damages” nor to the common law classifications of relationships under which varying obligations to compensate or indemnify might arise.   If the appellant is right, s 93(1)(f) provides for relief on a limited basis.   If the first respondent is right, the provision gives a Committee a wide discretionary power to order a licensee to pay compensation.

[40]     I will begin my analysis by attempting to discover what powers Parliament intended to confer on a Committee by enacting s 93(1)(f).

[41]     In a Government report on the effectiveness of the 1976 Act, it was stated:8

8      Ministry of Justice The Government’s Preferred Options for Reform of the Real Estate Agents

Act 1976, May 2007 at 18.

The Act needs to be updated to provide remedies to provide a means of compensation for loss and harm suffered.  This would encourage people to use the disciplinary system if they know compensation can be awarded.

[42]     The explanatory note to the Bill remarked:

[The Bill] sets more modern offence provisions with a wider range of penalties and remedies, including the ability for consumers to seek compensation in cases of  demonstrated financial loss.

[43]     The purpose of the 2008 Act is set out in s 3:

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.

[44]     The primary focus of the 2008 Act is not, therefore, the provision of a forum in which complainants can seek monetary compensation.  Its focus is the regulation of the real estate industry so as to promote and protect the interests of consumers. This includes conferring on regulators powers to grant consumers relief from harm, resulting from licensees acting contrary to the standards required of them.

[45]     The  2008 Act  prescribes  two  levels  of  sub-standard  conduct.    They  are “unsatisfactory conduct”9  and “misconduct”.10     The former (which is the level at which the appellant’s conduct was classified) is less serious than the latter.

[46]     The definitions of unsatisfactory conduct in s 72 are directed towards conduct which a competent agent would not engage in.  They overlap to a great extent, and

generally relate to departures from what would be regarded as satisfactory conduct:

9      Real Estate Agents Act 2008, s 72.

10     Ibid, s 73.

(a)       falls short of the standard ... (b)    contravenes [the 2008 Act] ... (c)       is incompetent or negligent; or

(d)      would reasonably be regarded ... as being unacceptable

[47]     These are concepts that fit within liability for tort at the level of negligence.

[48]     Section 73 provides for a greater level of culpability, namely misconduct. This is characterised by conduct at the disgraceful or seriously negligent level.  Only the Tribunal can determine whether misconduct has occurred and, if it has, make orders in response to it.

[49]     The Tribunal may, where misconduct is proved, make one or more of the orders that can be made by a Committee under s 93.11

[50]     Additionally:12

(g)       where it appears to the Tribunal that any person has suffered loss by reason of the licensee’s misconduct, an order that the licensee pay to that person a sum by way of compensation as is specified in the order, being a sum not exceeding $100,000.

[51]     This is the only provision in the 2008 Act which provides specifically for the payment of monetary compensation.   None of the parties referred to it in their original  written  submissions  or  in  their  oral  submissions.     By  Minute  dated

13 September 2012, I invited memoranda on its significance to this case.  I noted:

[4]       On first principles, the granting of this power to the Tribunal would indicate that it is a power beyond that which can be said to be within the ambit of s 93.

[52]     The appellant in her memorandum13 tends to support a construction that s 110 confers a power not available to a Committee within s 93(1)(f).

11     Ibid, s 110(2)(a).

12     Ibid, s 110(2)(g).

13     Appellant’s memorandum on the significance of section 110 of the Real Estate Agents Act 2008,

dated 24 September 2012.

[53]     The first respondent in its memorandum submits:14

(a)       On  a  plain  reading,  s 93(1)(f)(ii)  includes  the  power  to  grant monetary relief as ordered in this case.

(b)       This interpretation is consistent with the purpose of the Act and indeed, it is submitted, is necessary to give effect to that purpose.

(c)       While  there  is  overlap,  the  power  to  award  compensation  under s 110(2)(g)  is  a  different  power  which  will  apply  in  different circumstances to that under s 93(1)(f)(ii).

(d)       To this extent the power under s 110(2)(g) is beyond that which is within the ambit of s 93, as noted at [4] of the Court’s minute. However, this is not to the exclusion of monetary orders under s 93 and it is submitted that it was open to the Tribunal to make the order it did.

[54]     The  second  respondents  in  their  memorandum  reiterate  their  claim  for

$73,875.45 and contend that it could be ordered under either s 93 or s 110.

[55] As I have indicated,15 s 93(1)(f) does not align with the familiar concepts of “loss” or “damage” that are commonplace in remedy provisions. Section 110(2)(g) does. It uses “loss”, related to misconduct, and “compensation”, but limits the amount which can be ordered to $100,000. There is no assistance in the 2008 Act as to how the two provisions relate in purpose or scope. The provisions seem to be modelled on almost identical provisions in the Lawyers and Conveyancers Act

2006.16    But under that Act both remedies are available to a Standards Committee

which has found unsatisfactory conduct to be proved. My research has not found any useful interpretation of the Lawyers and Conveyancers Act provisions and so the

2008 Act must be construed “from its text and in the light of its purpose”.17

[56]     There is nothing in the 2008 Act which demonstrates that Parliament intended to confer on a Committee or the Tribunal a general power to order a licensee to compensate a complainant for any and all loss or harm to the complainant resulting from  a  real  estate  transaction  in  which  the  licensee  acted  below  the  standard

expected. That would be a sweeping change to the obligations of a licensee.  It could

14     Submissions on behalf of the first respondent on the significance of s 110 of the Real Estate

Agents Act 2008 to this appeal, dated 11 October 2012, at para 1.2.

15     At [39] above.

16 Lawyers and Conveyancers Act 2006, s 156(1)(d) and (h).

17     Interpretation Act 1999, s 5(1).

result in liability being imposed beyond that which would be available under the general law.  If that were intended by Parliament then I would expect it to be stated explicitly in the purpose section of the 2008 Act, explicitly set out in the remedies provisions of the Act, and for the concept to have been at least raised in the readings of the Bill.

[57]     I  note  that  the  1976  Act  provided  only  for  monetary  penalties  to  be imposed,18 payable to the Real Estate Institute.  In introducing the Bill which became the 2008 Act, the Hon Clayton Cosgrove said:19

The bill also creates a fully independent disciplinary tribunal to deal with serious cases.  The tribunal will have the ability to order the cancellation of licences, award compensation, and impose fines.

There is no similar reference to Committees.

[58]     In my view, the wording of ss 93 and 110 makes it clear that a limited jurisdiction is conferred.  Section 93(1)(f) does not empower a Committee to order a licensee to make payments in the nature of compensatory damages.  That is a power which is given to the Tribunal under s 110, but to a limit of $100,000.

[59]     Section 93(1)(f)(i) empowers a Committee to make orders directed at the taking of actions.  So, a Committee may order a licensee “to rectify, at his or her or its own expense, any error or omission”.20   Rectify means to put right or to correct. That is the focus of the provision.  It is, in my view, a power to order a licensee to do something  to  put  right  or  correct  an  error  or  omission  by  the  licensee,  at  the licensee’s expense.

[60]     Similarly, s 93(1)(f)(ii) is focused on the taking of action to provide relief from the consequences of an error or omission where rectification is not practicable. This is clear from the framing of the power to order a licensee “to take steps to

provide” relief “in whole or in part”.  The inclusion in the power of the ability to

18     Real Estate Agents Act 1976, s 96.

19     (11 December 2007) 644 NZPD 13816.

20     Real Estate Agents Act 2008, s 93(1)(f)(i).

order that this be done at the licensee’s expense is a necessary incident of the power to direct the taking of steps.

[61]     To take an example, suppose a licensee assured prospective purchasers that the vendor would permit them to take early possession of a residential property.  In reliance, the purchasers contracted to sell their own home with a settlement date a month before that of the purchase.  The licensee then explained that early possession was not available and that he had just assumed that the vendor would be receptive to such  a  course.     If  this  was  classified  as  unsatisfactory  conduct  then  under s 93(1)(f)(i) a Committee could order the licensee to see if he could reach agreement with the vendor to allow early possession in return for a reasonable payment, which would be at the licensee’s expense.   If that rectification was not practicable, the licensee  might  be  ordered  under  s 93(1)(f)(ii)  to  arrange  suitable  alternative accommodation,  and  storage,  for  the  relevant  period,  again  at  the  licensee’s

expense.21

[62]     Another example would be if the licensee, through unsatisfactory conduct, represented that a chattel was included in the price when it was not.  A s 93(1)(f)(i) order might be that the licensee negotiate its purchase, at his own expense.   A s 93(1)(f)(ii) order might be that the licensee, at his own expense, supply a similar chattel.

[63]     There  will  be  occasions  when  the  passage  of  time  will  mean  that  a complainant has had to rectify the error or omission, or to take steps in respect of consequences, before the case comes before a Committee or the Tribunal.  In those situations rectification, or the taking of steps, might require the licensee to reimburse the complainant and orders to that effect would be within the ambit of s 93.

[64]     If a licensee’s conduct is found to be misconduct, the Tribunal, in addition to

the s 93(1)(f) power, can award, under s 110(2)(g), a sum by way of compensation for loss not exceeding $100,000.

21     See Storie v Real Estate Agents Authority [2012] NZREADT 7.

[65]     I conclude that the 2008 Act gives a Committee the power to order a licensee to  rectify  an  error  or  omission,  or  to  take  steps  to  provide  relief  from  its consequences, where the error or omission resulted from the licensee’s unsatisfactory conduct.   Whatever is ordered would be at the licensee’s expense.   In situations where a complainant has already done what was necessary to rectify the error or omission, or to provide relief from its consequences, the power would extend to requiring the licensee to reimburse the complainant.

[66]     However, the 2008 Act does not give a Committee the power to order a licensee to pay compensatory damages, either by way of indemnity or for loss of expectation.  The 2008 Act does give the Tribunal the power to award compensation for loss where there is a finding of misconduct against a licensee.  I do not here have to decide whether the term “compensation” under the 2008 Act would extend to monetary relief for loss of expectation and I will not do so.  The argument was not before me and the point would be better left for a case where issues arising from a finding of misconduct are in play.

[67]     In  interpreting  s 93(1)(f)  in  this  manner,  I  have  deliberately  avoided importing terms such as “cost of cure losses”, “expectation damages”, and the “tortious measure of damages”.   My focus has been on the text of s 93(1)(f), and what the purpose of the enactment says about Parliament’s intentions.

[68]     My interpretation of s 93(1)(f) does not reveal principles which would place a monetary limit on a Committee’s jurisdiction.  If rectification, or the taking of steps to provide relief, would be costly then that would be something bearing on the Committee’s discretion to order payment.  Other factors might be the culpability of the licensee compared to other parties, the complexity of issues of causation and the remedies available to the complainant under the general law.

Decision

[69]     In this case the error or omission was the failure to properly put the second respondents on their guard about the location of the boundary.  The consequence was

that they purchased a property which, on their evidence, they would not have purchased had they known the true location of the boundary.

[70]     It was then too late for the licensee to rectify (put right or correct) the error or omission.  But there were steps she could have taken to provide relief, in part, from its consequence.  Those steps would have related to putting the property back on the market and re-selling it.  The costs of marketing the property and conveying it to the new purchasers would have fallen on the licensee.  If there were other consequential costs to the second respondents then, depending on reasonableness, they could also fall on the licensee.

[71]     However, if the property sold for a price less than that paid for it by the second respondents, that loss would not fall to the account of the licensee, at least not under s 93(1)(f) of the 2008 Act.  The second respondents would still have their rights under the general law, of course.

[72]     In this case, the second respondents elected to keep the property.  They paid the extra cost of developing it to achieve the result they had expected when they bought it.  In my view, that extra cost does not come within the ambit of s 93(1)(f). The steps they took cannot be said to be to provide relief from the consequence of the error or omission – which was that they were denied the opportunity not to purchase in the first place.  The relief the second respondents seek comes under a different  doctrine of the law.    It  is  the right  of a party to  a contract,  in  some circumstances, to compensation for the loss of what the party reasonably anticipated to gain from the contract.

[73]     Accordingly, the appeal will be allowed.   The second respondents’ cross- appeal must accordingly be dismissed.

[74]     I emphasise that my decision does not leave the second respondents without a remedy.  It is clear that they suffered loss of expectation because of the appellant’s unsatisfactory conduct.   My decision means that the Tribunal acted outside its jurisdiction in ordering payment by the appellant.  It does not mean that it would be outside the jurisdiction of the District Court or of this Court, although other parties

might need to be involved.  Given the history of this matter, I express the hope that the appellant and the second respondents will now negotiate a settlement.

Expectation Damages

[75]     If I am wrong in my view that s 93(1)(f) does not empower a Committee to order compensatory damages, I would nevertheless accept the appellant’s submission that the power does not extend to expectation damages. I reach that conclusion on three bases.

Harvey Corporation v Barker

[76]     I find the Court of Appeal’s decision in Harvey Corporation v Barker useful on this point.   The decision focuses on the remedy provisions of the Fair Trading Act.  Section 43 of that Act empowers the making of orders that could broadly be termed remedial.  The orders are aimed at the “loss or damage” suffered by a person as a result of the misrepresentation.  However, I think the principles underlying the decision are applicable to this case.

[77]     The Court in Harvey Corporation v Barker took an orthodox approach to the obligations of a real estate agent.  The normal contractual measure of relief would be the difference between the value of what was contracted for and the value received as a result of the misrepresentation.   The Court of Appeal held that loss is not measured by the extent of the benefit not received because of the misrepresentation. That would amount to damages on expectation.

[78]     I do not consider there to be anything in the purposes of the 2008 Act which necessarily  means  that  the  Fair  Trading  Act  and  the  2008  Act  should  be distinguished.   At their core, they are both directed towards consumer protection. Although the 2008 Act is more directed to a specific industry, I do not view that as a reason, on its own, to distinguish it as being different when it comes to calculating relief.

Principles underpinning contract and tort law

[79]     The common law concerning the measure of damages when a contract is induced  by  misrepresentation,  including  misrepresentation  by  a  non-contracting party, has been discussed recently at some length by the Supreme Court.22    It is a complex area.  However, the basic divide for the calculation of damages for breach of contract (by measuring the difference in value between the bargain contracted for and the value received) and tort (by measuring the value of the detriment caused by the tort) remains.

[80]     Where there has been a negligent misrepresentation by or on behalf of one party which induces another party to enter into a contract, s 6(1) of the Contractual Remedies Act 1979 can apply.   This creates an entitlement to damages as if the misrepresentation were a term of the contract.  In other words, the aggrieved party to the contract can claim the cost of putting itself into the position which the other party had represented it would be in when the contract was completed.

[81]     If  s 93(1)(f)  of  the  2008  Act  empowers  a  Committee  to  order  that  the appellant pay or contribute to the cost of the second respondents’ accessway, then effectively it empowers a Committee to treat the appellant as a party to a contract induced by a negligent misrepresentation.

[82]     To allow a non-contracting party to be liable in such a manner, without Parliament clearly expressing such an intention, would amount to a significant and unheralded erosion of the common law.  It must be remembered that the 2008 Act is not the sole remedy for an aggrieved purchaser.  It must also be remembered that the

2008 Act does not confer on a Committee or the Tribunal a jurisdiction to make orders against someone who is not subject to the Act.  For example, a vendor might

well have liability, but that could not be resolved under the 2008 Act.

22     Marlborough District Council v Altimarloch Joint Venture Ltd [2012] 2 NZLR 726 (SC).

The nature of unsatisfactory conduct

[83]     It is also relevant that the claim here is to compensate for unsatisfactory

conduct.  The definition of “unsatisfactory conduct” is framed in negligence terms.23

For instance, s 72(a) refers to falling “short of the standard that a reasonable member of the public is entitled to expect from a reasonably competent licensee”.   That would  tend  to  suggest  that  an  approach  to  damages  that  excludes  expectation damages and is closer to a tortious measure is contemplated.

Decision

[84]     The first ground of appeal fails.

[85]     The appeal on the second ground is allowed.  The decision of the Tribunal awarding damages against the appellant is quashed.

[86]     It follows that the second respondents’ cross-appeal also fails.

Costs

[87]     The appellant is entitled to costs.  If they are to be claimed, the appellant is to file a memorandum within four weeks of the date of this judgment.  The first and second respondents are to file replies to any such memorandum within a further four

weeks.

Brewer J

23 Also discussed above at [46].