Vosper v Real Estate Agents Authority
[2017] NZHC 453
•15 March 2017
IN THE HIGH COURT OF NEW ZEALAND TAURANGA REGISTRY
CIV-2016-470-000150 [2017] NZHC 453
BETWEEN FRANK VOSPER AND VOSPER
REALTY LIMITED Appellants
AND
THE REAL ESTATE AGENTS AUTHORITY
First Respondent
MATTHEW BIDDLE Second Respondent
Hearing: 2 February 2017 Appearances:
P J Crombie for Appellants
M Hodge for First Respondent
No appearance by or on behalf of Second RespondentJudgment:
15 March 2017
JUDGMENT OF HEATH J
This judgment was delivered by me on 15 March 2017 at 4.00pm pursuant to
Rule 11.5 of the High Court Rules
Registrar/Deputy Registrar
Solicitors:
Cooney Lees Morgan, Tauranga
Meredith Connell, Auckland
VOSPER AND VOSPER REALTY LIMITED v THE REAL ESTATE AGENTS AUTHORITY [2017] NZHC
453 [15 March 2017]
The appeal CONTENTS [1]
The High Court appeal [7] Background facts [12] The Committee’s decisions [25] The Tribunal’s decision [30] The issues [37] Analysis
(a) The complaints’ process
[40]
(b) The Rules [54] (c) The r 6.4 appeal [57] (d) The r 12.1 appeal [66] Result [78]
The appeal
[1] Mr Frank Vosper and Vosper Realty Ltd each appeal against a decision of the
Real Estate Agents Disciplinary Tribunal (the Tribunal) delivered on 26 August
2016.1 Mr Frank Vosper is the sole director and shareholder of Vosper Realty Ltd. Unless the context otherwise requires, I refer to those parties collectively as “the licensees”.
[2] The appeal arises out of a transaction for the sale and purchase of land, in respect of which Mr Frank Vosper acted as agent for a company called Vosper Property Ltd. That company is associated with Mr Frank Vosper’s son, Kirk, and his son’s partner. The purchaser was Mr Biddle. After the agreement had been cancelled, Mr Biddle made a complaint about the licensees’ conduct.
[3] After investigating the complaint,2 Complaints Assessment Committee 402 (the Committee), in a decision given on 8 September 2015, found that the licensees had breached rr 5.1, 6.4 and 12.1 of the Real Estate Agents Act (Professional
Conduct and Client Care) Rules 2012 (the Rules).3 The Committee found that:
1 Vosper v Real Estate Agents Authority (CAC 402) [2016] NZREADT 60 (Hon P J Andrews
(Chairperson), Ms N Dangen and Ms Sandelin).
2 A summary of the complaints’ process is set out at paras [40]–[53] below.
3 Those Rules deal respectively with failure to exercise skill, care, competence and diligence, misleading conduct and refusal to engage in a dispute resolution process. Rules 6.4 and 12.1 are set out at para [56] below.
(a) Both Mr Frank Vosper and Vosper Realty Ltd failed to exercise the skill, care, competence and diligence required by r 5.1;
(b) Contrary to r 6.4 of the Rules, Mr Frank Vosper misled Mr Biddle;
and
(c) Contrary to r 12.1, Mr Frank Vosper and Vosper Realty Ltd did not make a copy of their procedures for dealing with complaints available to Mr Biddle.
[4] The Committee took the view that, having found that the licensees were in breach of their professional obligations under the Rules, each had engaged in “unsatisfactory conduct”.4
[5] On 9 November 2015, after receiving submissions on the topic, the
Committee issued a decision on penalty, in which it:
(a) Reprimanded both Mr Frank Vosper and Vosper Realty Ltd;5
(b) Required Mr Frank Vosper and Vosper Realty Ltd to apologise to Mr
Biddle in writing, in a form to be approved by the Committee;6 and
(c) Required Mr Frank Vosper to pay a fine of $2000, and Vosper Realty
Ltd to pay a fine of $1500.7
[6] The Tribunal allowed the licensees’ appeal against the finding that they were
in breach of r 5.1 (failure to exercise skill, care and competence) but dismissed their challenge to the other two findings.8 As a result of its decision to allow the r 5.1
4 Real Estate Agents Act 2008, s 89(2)(b), read in conjunction with the definition of “unsatisfactory conduct” in s 72 of the Act. Section 89 is set out at para [52] below. Section 72 is reproduced at para [50] below.
5 Ibid, s 93(1)(a).
6 Ibid, s 93(1)(c).
7 Ibid, s 93(1)(g). The maximum fine that could have been imposed was $20,000 for a company, and $10,000 for an individual.
8 Vosper v Real Estate Agents Authority (CAC 402) [2016] NZREADT 60 at para [66].
appeal, the Tribunal reconsidered what penalties should be imposed. The
Committee’s penalty decision was quashed. In substitution, the Tribunal:9
(a) Censured each of the licensees;10
(b)Required each of the licensees to apologise in writing to Mr Biddle in a form to be approved by the Committee;11 and
(c) Required each of the licensees to pay a fine of $500.12
The High Court appeal
[7] The licensees’ appeal to this Court13 involves a challenge to the Tribunal’s decision to uphold the Committee’s finding that the licensees were in breach of r 6.4. A separate appeal against the revised penalty decision is also brought. The Real Estate Agents Authority (the Authority) has not cross-appealed against the Tribunal’s decision to quash the Committee’s finding that r 5.1 had been breached.
[8] During the course of the hearing, a more nuanced issue arose on the penalty appeal. It involved a consideration of whether the Committee, if it had determined that only the r 12.1 charge had been established, would have exercised its discretion under s 80 of the Act.14 That question will only require determination if I were to reverse the Tribunal’s finding that the licensees were in breach of r 6.4.
[9] The Tribunal did not give detailed reasons for the substituted penalty which it imposed. But, it did record an acceptance from Mr Hodge, for the Authority, that if the Tribunal were to reverse the Committee’s findings, an “acknowledged breach of
r 12.1 would require no more than a reprimand and an order for an apology”.15
9 Ibid, at para [67].
10 Real Estate Agents Act 2008, s 93(1)(a).
11 Ibid, s 93(1)(c).
12 Ibid, s 93(1)(g).
13 Brought under s 116 of the Real Estate Agents Act 2008.
14 Section 80 of the Real Estate Agents Act 2008 is set out at para [45] above.
15 Vosper v Real Estate Agents Authority (CAC 402) [2016] NZREADT 60 at para [62].
[10] An appeal against the Tribunal’s decision is a challenge to an evaluative decision. As a result, the principles discussed by the Supreme Court in Austin, Nichols & Co Inc v Stichting Lodestar16 apply. The distinction to be drawn between an appeal against an evaluative decision and one against a discretionary decision was discussed recently by the Court of Appeal in Nottingham v Real Estate Agents Authority,17 in the context of an appeal brought under the Real Estate Agents Act
2008 (the Act). Dobson J, delivering the judgment of the Court of Appeal, said:18
[38] The appellants were entitled to a general right of appeal to the High Court under s 116 of the Act. The appellate court ought to have applied the standard in Austin, Nichols & Co Inc v Stichting Lodestar,19 rather than that in Kacem v Bashir.20 That standard required Thomas J to come to her own view on the issues. If that analysis resulted in an outcome that was different to the one reached by the Tribunal, then that would mean that the Tribunal’s decision was wrong.
(Footnotes retained)
[11] That is the test that I apply.
Background facts
[12] In March 2003, Mr Biddle responded to an advertisement placed by Vosper Realty Ltd that indicated that the rear section of a property owned by Vosper Property Ltd was for sale. Mr Frank Vosper made proper disclosure to Mr Biddle that he was acting as an agent for his son’s company, and his son’s involvement in the transaction. Mr Kirk Vosper and his partner lived in a house on the front section.
[13] The two sections were registered on the land transfer title by way of cross- lease. The vendors intended to subdivide the two sections, to produce two freehold parcels of land. In the course of discussions in the pre-contractual phase, Mr Biddle
explained to Mr Frank Vosper that he wanted the boundary of the section to be
16 Austin, Nichols & Co Inc v Stichting Lodestar [2007] NZSC 103, [2008] 2 NZLR 141.
17 Nottingham v Real Estate Agents Authority [2017] NZCA 1. The distinction between an appeal against an evaluative or discretionary decision was previously discussed by the Supreme Court in Kacem v Bashir [2010] NZSC 112, [2011] 2 NZLR 1 at para [32].
18 Ibid, at para [38]. Earlier, the Court of Appeal had drawn the distinction between an appeal from
a Complaints Assessment Committee to the Tribunal (which is regarded as an appeal against a discretionary decision) and the High Court’s consideration of the Tribunal’s evaluative judgment on that first appeal: see para [36].
19 Austin, Nichols & Co Inc v Stichting Lodestar [2007] NZSC 103, [2008] 2 NZLR 141.
20 Kacem v Bashir [2010] NZSC 112, [2011] 2 NZLR 1 at [32].
changed so that he could erect planned buildings on them. Mr Biddle alleged that Mr Frank Vosper told him that the boundaries could be altered for that to be done. Mr Frank Vosper denied that he had said that. His recollection was that there was no mention of a boundary change when Mr Biddle first viewed the section. The Committee found that it was unlikely that Mr Frank Vosper had made that
representation.21
[14] In August 2013, Mr Biddle made an offer to buy the rear section. The agreement for sale and purchase was, at Mr Frank Vosper’s suggestion, drawn up by Mr Biddle’s own solicitor. Mr Frank Vosper was present when the agreement was drafted.
[15] A “Flat Plan” was annexed to the agreement for sale and purchase. It showed the boundary between the front and rear sections abutting the rear of the carport, then splaying slightly to allow access to the driveway. The boundaries of the area to be subdivided were identified on the first page of the agreement. They corresponded to the Flat Plan. However, a second plan (called a “Site/Drainage Plan”), prepared by Mr Biddle, was also annexed to the agreement. That showed the boundary in a different place; one that suited Mr Biddle’s building needs.
[16] Mr Biddle had offered to buy the rear section, driveway and splayed area as shown on the Flat Plan, but subject to a right-of-way and services easement over the driveway and flayed area. Under that proposal, Mr Biddle was to be responsible for both obtaining resource consent for the subdivision, and the costs of the subdivision. The agreement was conditional on Mr Biddle obtaining subdivision consent by 31
October 2013.
[17] The vendors accepted Mr Biddle’s offer on 14 August 2013. A conditional contract was formed at that date. As Mr Biddle was unable to obtain resource consent by 31 October 2013, a meeting was arranged for Mr Biddle to talk to Mr Frank Vosper and his son at the former’s office. Mr Frank Vosper advised Mr Biddle
and his solicitor that no commission would be charged. As a result, the agreement
21 As recorded by the Tribunal: see Vosper v Real Estate Agents Authority (CAC 402) [2016] NZREADT 60 at para [28].
recorded that the sale was one by “private treaty”. Unfortunately, things did not go
according to plan.22
[18] After the agreement was signed, Mr Biddle indicated that he was making good progress in obtaining consent. In November, he provided copies of his house plans and other documents for the vendors to sign. Mr Kirk Vosper’s understanding was that these related to Mr Biddle’s application for building consent, and that he was being asked to consent to aspects which did not comply with local planning rules. The vendors signed the documents. Mr Kirk Vosper said that he did not notice that the plans showed that the boundary between the front and rear sections had been moved.
[19] When nothing further was heard from Mr Biddle, Mr Kirk Vosper asked Mr Frank Vosper to obtain a progress report. Mr Frank Vosper reported back that Mr Biddle said he was experiencing delays with obtaining consent to the subdivision but that progress was being made.
[20] Mr Biddle met with Messrs Frank and Kirk Vosper at the section in December 2013. Mr Biddle wanted to build a block party-wall along the boundary between the front and rear sections. Messrs Frank and Kirk Vosper had removed spouting and guttering from both the eastern side of the carport and a small workshop behind it.
[21] Mr Biddle indicated that Messrs Frank and Kirk Vosper that he wanted them to demolish the carport and workshop so that he could fit his garage on the section. There was a discussion between Mr Frank Vosper and Mr Biddle, in which (according to Messrs Frank and Kirk Vosper) Mr Biddle said that he wanted to move the boundary to accommodate his garage. In order to preserve the sale, the vendors agreed to the boundary being moved.
[22] In January 2014, Mr Biddle put in concrete footings for the block wall
alongside the garage. The vendors did not object to this, because Mr Biddle’s
22 With minor modifications, I record what happened from that point by reproducing the Tribunal ’s summary. See Vosper v Real Estate Agents Authority (CAC 402) [2016] NZREADT 60 at paras [13]–[18].
request to move the boundary had been accepted. However, Mr Kirk Vosper was concerned at Mr Biddle’s ongoing delay in obtaining resource consent. He contacted the Tauranga City Council and learned that, while he had applied for a building consent for the house to be built on the section, Mr Biddle had not sought a resource consent for the subdivision.
[23] Correspondence followed between the solicitors for the vendors and Mr Biddle. On 7 April 2014, the vendors’ solicitor terminated the agreement on the grounds of Mr Biddle’s delay in complying with the condition requiring him to obtain resource consent for the subdivision.
[24] Mr Biddle contended that the termination had occurred because of delays in sorting out boundary issues, which had caused him to lose $30,000 spent on preparing the site to construct the block wall. He asked for a copy of the licensees’ dispute resolution process. He said that he was told that there was no such process, and the licensees would not accept any responsibility for any loss Mr Biddle had suffered. Ultimately, compensation issues were resolved on a claim made by Mr Biddle to the Disputes Tribunal.
The Committee’s decisions
[25] On 5 March 2015, Mr Biddle made a complaint to the Authority. There were two aspects to the complaint. First, Mr Biddle alleged that he was given misleading information by Mr Frank Vosper about the boundary of the property. The second was that Mr Frank Vosper had informed him that Vosper Realty Ltd had no disputes process and would not accept any responsibility in respect of Mr Biddle’s claims.
[26] The Committee considered the complaint and made a decision to inquire into it. Its primary decision of 8 September 2015 was given after a hearing “on the papers”.23 The Committee found that, although it was unlikely that Mr Frank Vosper had made a representation that the boundary could be changed to suit Mr Biddle’s needs,24 the licensees had a duty to ensure that all parties were in agreement as to
important aspects of the transactions, such as boundaries, before the agreement was
23 Real Estate Agents Act, s 89(1) and 90.
24 See para [7] above.
signed. It considered that the licensees had failed to exercise the degree of skill, care and competence required of them and, as a result, there was confusion that led to the transaction being cancelled. In support of its view, the Committee referred to the decision of the Disputes Tribunal on the claim for compensation that Mr Biddle had brought separately. The Disputes Tribunal had found that the boundary problem had
arisen out of a mutual mistake between the vendor and Mr Biddle.25
[27] The Committee found that Mr Frank Vosper had misled Mr Biddle as to his role in the transaction, in breach of r 6.4 of the Rules. This arose out of a dispute between Mr Biddle and Mr Frank Vosper as to whether the latter and his company continued to engage in “real estate agency work”26 after the agreement for sale and purchase had been signed. Contrary to the stance that Mr Frank Vosper had taken, the Committee took the view that the licensees continued to act in that capacity up to
the point at which the transaction was cancelled. They concluded that Mr Frank Vosper had misled Mr Biddle as to the licensees’ role in the transaction, in breach of r 6.4 of the Rules.27
[28] Rule 12.1 of the Rules deals with the need for a licensee to have a dispute resolution process available for a client or customer, if any dispute were to arise between the licensee and that person. Mr Frank Vosper acknowledged that with the benefit of hindsight, an in-house document called a “Complaints and Dispute Resolution Process Procedure” ought to have been made available to Mr Biddle. The Committee found that Mr Frank Vosper and Vosper Realty Ltd were in breach of
r 12.1 as a result of that conduct.28
[29] Having made those findings, the Committee imposed penalties consisting of a reprimand, the provision of an apology in writing to Mr Biddle and imposition of a
fine.29
25 Discussed in Vosper v Real Estate Agents Authority (CAC 402) [2016] NZREADT 60 at para
[28].
26 That term is defined by s 4 of the Real Estate Agents Act 2008.
27 Vosper v Real Estate Agents Authority (CAC 402) [2016] NZREADT 60 at para [27]. Rule 6.4 is set out at para [57] below.
28 Ibid, at para [29].
29 See para [5] above.
The Tribunal’s decision
[30] On appeal to the Tribunal, Mr Frank Vosper and Vosper Realty Ltd challenged the Committee’s finding that they had engaged in unsatisfactory conduct by misleading Mr Biddle as to their role in the purchase transaction, failing to exercise due care and skill in ensuring that the parties knew and agreed to the boundaries, and by failing to make a disputes resolution process available to Mr
Biddle.30
[31] The Tribunal disagreed with the Committee’s finding that the licensees had acted in breach of r 5.1. In doing so, it took, as the starting point for its analysis, that “upon the listing for the property the licensees had a responsibility both to their vendor client and to all potential purchasers to ensure that both knew exactly what the property being offered for sale was”.31
[32] The Tribunal accepted that the licensees had an obligation to ensure that the vendors and Mr Biddle were in agreement as to the boundaries of the section on offer.32 But, based on evidence that Mr Biddle’s solicitor prepared the agreement for sale and purchase, rather than the licensees, the Tribunal took a different view about whether the licensees had breached r 5.1. Relevantly, the Tribunal said:33
[55] The following matters are relevant to our consideration of whether the Committee was correct to find the licensees in breach of their obligations under r 5.1:
[a] The agreement was prepared by Mr Biddle’s solicitor, after a meeting with Mr Biddle, and it identified the boundaries of the section as they were shown in the Flat Plan;
[b] Mr Biddle did not raise any issue as to the boundary at time the agreement was prepared by his solicitor. If Mr Biddle considered at the time that the boundaries were wrong (in that he had drawn up designs which could not be accommodated within the boundaries shown in the Flat Plan) it would be expected that any dispute as to what was being bought and sold would have been sorted out between the parties and their solicitors at the time of the agreement.
[c] At the time of the December 2013 meeting, the agreement was still conditional, yet Mr Biddle did not raise any boundary issue with his
30 Ibid, at para [3].
31 Ibid, at para [51].
32 Ibid, at para [52].
33 Ibid, at paras [55]–[58].
solicitor. The signed agreement was by then in the hands of the solicitors for the parties, and any “resolution” of a boundary issue would have to have been by way of a variation of the agreement. There is no evidence of communication between solicitors regarding the boundary before February
2014.
[56] This is not a case where, as frequently occurs, the agreement for sale and purchase was drawn up by the licensees prior to the involvement of Mr Biddle’s solicitor. It is significant that Mr Biddle’s solicitor drew up the agreement. After the hearing, at our request, counsel filed submissions as to the effect on a licensee’s liability (in a professional disciplinary sense) of involvement by a solicitor in the preparation of an agreement for sale and purchase. Counsel were not able to refer us to a decision specifically addressing this issue. Mr Hodge accepted, as a general proposition, that such involvement may affect the liability of the licensee for any defects in the agreement. He submitted, however, that the issue must be determined on the particular facts of a case.
[57] There has been no suggestion that the agreement was negligently or incompetently prepared. There has been no suggestion that the agreement was prepared in terms that were contrary to Mr Biddle’s instructions. Mr Biddle did not raise any issue as to the boundary at that time. We have concluded that this is a case where, on the specific facts of this case, the fact that Mr Biddle’s solicitor drew up the agreement affects the extent of the licensees’ obligations.
[58] We have concluded that in this case the Committee erred in finding that the licensees were required to meet the obligation to ensure that the parties knew and agreed as to what was being bought and sold, to the same extent as would be the case in transactions where agreements for sale and purchase are signed before solicitors are involved.
[33] On the r 6.434 charge, the Tribunal upheld the Committee’s view that, at all material times, the licensees were acting as real estate agents. The next question was whether they had misled Mr Biddle as to their role, contrary to r 6.4. The licensees argued that because Mr Biddle believed that they acted as real estate agents throughout, and Mr Frank Vosper did nothing to change that belief, Mr Biddle could not be heard to say that he was “misled” about Mr Frank Vosper’s role.
[34] The Tribunal rejected that argument. It said:35
[42] … As submitted by [counsel for the Authority], it is not necessary to establish that a complainant has relied on a representation (or lack of one). So it is irrelevant that Mr Biddle believed Frank Vosper to be acting as a real estate agent, and Frank Vosper did nothing to change that belief.
34 Rule 6.4 is set out at para [57] below.
35 Vosper v Real Estate Agents Authority (CAC 402) [2016] NZREADT 60 at paras [42]–[45].
[43] We endorse the Committee’s observation that, in the light of the Act’s purpose of consumer protection, it makes no sense that licensees should be able to engage in real estate agency work up to a certain point in time, then withdraw while not altering their role in any practical sense. In this case, after the agreement was signed, Frank Vosper arranged meetings involving himself, Kirk Vosper and Mr Biddle, he obtained progress reports from Mr Biddle and reported back to Kirk Vosper, and he spoke directly to Mr Biddle about his purchase of the property. We are satisfied that Frank Vosper did not alter his role in any practical sense, and continued to engage in real estate agency work.
[44] We are satisfied that Mr Vosper continued to act as a real estate agent, and he could not purport to withdraw from that role. In continuing to act as a real estate agent, while maintaining that he was not acting in that capacity, he misled Mr Biddle as to his role.
[45] We are not persuaded that the Committee was wrong to find that the
licensees misled Mr Biddle as to Frank Vosper’s role, and were in breach of r
6.4. The licensees’ appeal on this aspect of the appeal is dismissed.
(Emphasis added)
[35] The third issue concerned the alleged breach of r 12.1. In the Tribunal, the licensees did not contest that their conduct breached that provision. By reference to an earlier decision of the Tribunal,36 Mr Hodge, for the Authority, had submitted that even if this breach alone remained “a finding of unsatisfactory conduct must follow”. The Tribunal agreed.37
[36] I have already recorded the penalties imposed by the Tribunal in substitution for those ordered by the Committee.38 I do not consider it is necessary, at this stage, to analyse the penalty decisions.
The issues
[37] In terms of the amended notice of appeal,39 three issues arise:
(a) On the r 6.4 appeal:
36 Pollett v Real Estate Agents Authority [2013] NZREADT 4 at para [32].
37 Vosper v Real Estate Agents Authority (CAC 402) [2016] NZREADT 60 at paras [60] and [61].
38 See para [6] above.
39 I gave leave for the licensees to file an amended notice of appeal at the commencement of the hearing. No prejudice was caused to the Authority because it had prepared submissions based on a draft of that document.
(i)Were the licensees both engaging in real estate agency work (as defined) at the time Mr Frank Vosper was aware of a potential dispute with Mr Biddle?
(ii) Was any misleading statement made by Mr Frank Vosper?
(b) Was the penalty imposed by the Tribunal excessive or inappropriate? [38] As counsel’s arguments developed, it became clear that the issues raised by
Mr Crombie, for the licensees, required a more detailed review of the statutory scheme than had been necessary on the arguments put to the Tribunal. During the hearing, I raised concerns about whether there was a statutory mechanism to enable a Complaints Assessment Committee to determine that, although conduct had occurred which breached one or more of the Rules, a licensee should be relieved from the stigma of a finding of “unsatisfactory conduct”, and the imposition of a penalty, where it was clear that the circumstances were such that no disciplinary sanction was required.
[39] I gave leave for Mr Crombie and Mr Hodge to file supplementary written submissions and a further bundle of authorities to respond to those additional points. I have considered that additional material. I acknowledge that these were not issues that the Tribunal had the opportunity to consider. To the extent that I rely on them, no criticism can be made of the Tribunal’s decision.
Analysis
(a) The complaints’ process
[40] The Act is a consumer protection measure. It is designed to maintain and improve industry standards for those engaged in business as real estate agents, including branch managers and salespersons. Section 3 provides:
3 Purpose of Act
(1) The purpose of this Act is to promote and protect the interests of consumers in respect of transactions that relate to real estate and to promote public confidence in the performance of real estate agency work.
(2) The Act achieves its purpose by—
(a) regulating agents, branch managers, and salespersons: (b) raising industry standards:
(c) providing accountability through a disciplinary process that is independent, transparent, and effective.
[41] Part 4 of the Act deals with complaints and discipline. It:
(a) Defines “unsatisfactory conduct” and “misconduct”;40
(b) Sets out the functions and powers of a Complaints Assessment
Committee;41
(c) Defines the powers of the Tribunal;42 and
(d)Provides for appeals from a Complaints Assessment Committee to the Tribunal, and for subsequent appeals to the High Court and Court of Appeal.43
[42] The Authority is required to appoint “as many Complaints Assessment Committees as, in its opinion, are required to deal effectively with complaints and allegations about licensees.44 A particular Complaints Assessment Committee is appointed to consider each complaint.
[43] A Complaints Assessment Committee exercises dual functions as both an investigator and decision-maker. Section 78 of the Act provides:
78 Functions of Committees
The functions of each Committee are—
(a) to inquire into and investigate complaints made under section 74:
(b) on its own initiative, to inquire into and investigate allegations about any licensee:
40 Real Estate Agents Act 2008, ss 72 and 73 respectively. Both are set out at para [50] below.
41 Ibid, at ss 75–99.
42 Ibid, at ss 100–115.
43 Ibid, ss 111 and 116–120.
44 Ibid, s 75(1).
(c) to promote, in appropriate cases, the resolution of complaints by negotiation, conciliation, or mediation:
(d) to make final determinations in relation to complaints, inquiries, or investigations:
(e) to lay, and prosecute, charges before the Disciplinary Tribunal: (f) in appropriate cases, to refer the complaint to another agency:
(g) to inform the complainant and the person complained about of its decision, reasons for the decision, and appeal rights:
(h) to publish its decisions.
[44] The Committee’s first decision is to determine whether the complaint should be considered.45 If it were to decide to inquire into a complaint, it must do so in a timely manner.46 Provided that it exercises its powers and performs its duties and functions in a manner consistent with the “rules of natural justice”, a Committee may regulate its own procedure, as it thinks fit.47 A Committee has full power to call for information or other documents relating to the complaint.48 A negotiation, conciliation and mediation process may be used.49 The Committee makes a decision whether to determine the complaint or allegation.50
[45] Section 80 of the Act confers a discretion on a Complaints Assessment Committee to take no action (or no further action) on any complaint in specific circumstances. Section 80 provides:
80 Decision to take no action on complaint
(1) A Committee may, in its discretion, decide to take no action or, as the case may require, no further action on any complaint if, in the opinion of the Committee,—
(a) the length of time that has elapsed between the date when the subject matter of the complaint arose and the date when the complaint was made is such that an investigation of the complaint is no longer practicable or desirable; or
(b) the subject matter of the complaint is inconsequential.
45 Ibid, s 79.
46 Ibid, s 82.
47 Ibid, s 84.
48 Ibid, ss 85 and 86.
49 Ibid, s 87.
50 Ibid, s 89. See also, s 80.
(2) Despite anything in subsection (1), the Committee may, in its discretion, decide not to take any further action on a complaint if, in the course of the investigation of the complaint, it appears to the Committee that, having regard to all the circumstances of the case, any further action is unnecessary or inappropriate.
…
[46] The s 80 power may be exercised by a Complaints Assessment Committee for the whole of the time during which the Committee is seized of the complaint. In my view, up until the time that the Complaints Assessment Committee makes one of the determinations that it is empowered to make by s 89(2) of the Act, it retains the ability to apply s 80 in appropriate circumstances. In other words, a Complaints Assessment Committee’s ability to determine a complaint by reference to s 80 is
only lost once it is functus officio.51 While I understand that s 80 is rarely used in
practice, it has assumed some significance as a result of the way in which argument developed in this Court.
[47] The Act extends a licensee’s obligations beyond those owed contractually to a client. Primarily, this result has been achieved through the use of s 14(1) of the Act, which empowers the Authority to make “Practice rules”. Section 14(2) requires any such rules to “include or provide for a code of professional conduct and client care, which will be a reference point for discipline and which will focus on, but need not be limited to, the duties of agents to their clients”. In Barfoot and Thompson Ltd v
Real Estate Agents Authority52 the Court of Appeal referred to the Rules as “a
minimum standard”, which were “to be read in conjunction with the Act”.53
[48] A number of obligations set out in the Rules (of which r 6.4 is an example) refer to conduct involving both a client and a “customer”. The term “customer” is defined to capture persons such as purchasers, many of whom may (wrongly, as a matter of law) regard the licensee as acting on his or her behalf in the course of a transaction. Rule 4.1 of the Rules defines the term “customer” as “a person who is a party or potential party to a transaction and excludes a prospective client and a
client”.
51 Ibid, s 89(3). Section 89 is set out at para [52] below.
52 Barfoot and Thompson Ltd v Real Estate Agents Authority [2016] NZCA 105, [2016] NZAR
648, (2016) 17 NZCPR 485 (CA).
53 Ibid, at para [17].
[49] The Act creates two levels of disciplinary offences. The first is “unsatisfactory conduct”. The second is “misconduct”. The former may be the subject of a ruling by the Complaints Assessment Committee. The second must be referred by the Complaints Assessment Committee to the Tribunal, for decision.54
On a reference of that type, the Complaints Assessment Committee assumes a role akin to that of a prosecutor, in respect of the charges that it brings.55
[50] If a Complaints Assessment Committee were to determine (among other things) that the conduct of a licensee contravened a provision in the Rules, in the absence of an exercise of its discretion under s 80 of the Act, that finding (by operation of law) equates to one of “unsatisfactory conduct”. That term is defined by s 72 of the Act:
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.
(Emphasis added)
[51] By contrast, more serious transgressions fall under the rubric of
“misconduct”. Section 73 of the Act provides:
73 Misconduct
For the purposes of this Act, a licensee is guilty of misconduct if the
licensee’s conduct—
(a) would reasonably be regarded by agents of good standing, or reasonable members of the public, as disgraceful; or
54 Real Estate Agents Act 2008, s 89(1)(a).
55 Ibid, s 91.
(b) constitutes seriously incompetent or seriously negligent real estate agency work; or
(c) consists of a wilful or reckless contravention of—
(i) this Act; or
(ii) other Acts that apply to the conduct of licensees; or
(iii) regulations or rules made under this Act; or
(d) constitutes an offence for which the licensee has been convicted, being an offence that reflects adversely on the licensee’s fitness to be a licensee.
[52] The process by which a Complaints Assessment Committee undertakes its decision-making role, and the nature of the orders it may make after considering complaint are set out in ss 84 and 89 of the Act:
84 Procedure of Committee
(1) A Committee must exercise its powers and perform its duties and functions in a way that is consistent with the rules of natural justice.
(2) The Committee may, subject to subsection (1), direct such publication of its decisions under sections 80, 89, and 93 as it considers necessary or desirable in the public interest.
(3) The Committee may regulate its procedure in any manner that it thinks fit as long as it is consistent with this Act and any regulations made under it.
…
89 Power of Committee to determine complaint or allegation
(1) a Committee may make 1 or more of the determinations described in subsection (2) after both inquiring into a complaint or allegation and conducting a hearing with regard to that complaint or allegation.
(2) The determinations that the Committee may make are as follows:
(a) a determination that the complaint or allegation be considered by the Disciplinary Tribunal:
(b) a determination that it has been proved, on the balance of probabilities, that the licensee has engaged in unsatisfactory conduct:
(c) a determination that the Committee take no further action with regard to the complaint or allegation or any issue involved in the complaint or allegation.
(3) Nothing in this section limits the power of the Committee to make, at any time, a decision under section 80 with regard to a complaint.
[53] If a Complaints Assessment Committee were to make a determination under s 89(2)(b) it may impose one or more of the penalties to which s 93 of the Act refers. The nature and range of the available penalties reflects the wide spectrum of conduct that falls within the definition of “unsatisfactory conduct”. Section 93 states:
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.
(b) The Rules
[54] In this case, the Committee found that “unsatisfactory conduct” had been established by reason of proved breaches of the Rules.56 The Rules represent a “Code of Professional Conduct and Client Care”, prepared by the Authority as required by s 14 of the Act.57 They set out “the standard of conduct and client care that agents, branch managers, and salespersons (collectively referred to as licensees) are required to meet when carrying out real estate agency work in dealing with clients”.58 The Rules extend to obligations owed to persons other than specific clients; that category of persons is defined as “customers”.59
[55] The Rules represent minimum standards, and a reference point for discipline. The Rules are to be read in conjunction with the Act. They “do not repeat duties and obligations that are included in the Act”, or any regulations made under the Act.60 A charge of “misconduct or unsatisfactory conduct may be brought and dealt with even though the charge is not based on a breach of any specific rule”.61
[56] The nature and purposes of the Rules are set out in r 3. It provides:
3 Scope and objectives
(3.1) These practice rules setting out a code of professional conduct and client care have been prepared by the Real Estate Agents Authority (the Authority). They constitute the Professional Conduct and Client Care Rules required by section 14 of the Real Estate Agents Act 2008.
(3.2) These practice rules set out the standard of conduct and client care that agents, branch managers, and salespersons (collectively referred to as licensees) are required to meet when carrying out real estate agency work and dealing with clients.
(3.3) These practice rules are not an exhaustive statement of the conduct expected of licensees. They set minimum standards that licensees must observe and are a reference point for discipline. A charge of misconduct or unsatisfactory conduct may be brought and dealt with despite the charge not being based on a breach of any specific rule.
56 Ibid, s 72(b), set out at para [50] above.
57 Real Estate Agents Act (Professional Conduct and Care) Rules 2012.
58 Ibid, r 3.2.
59 See para [48] above.
60 Real Estate Agents Act (Professional Conduct and Care) Rules 2012, r 3.3. See also Barfoot and
Thompson Ltd v Real Estate Agents Authority [2016] NZCA 105, [2016] NZAR 648, (2016) 17
NZCPR 485 (CA) at para [17].
61 Real Estate Agents Act (Professional Conduct and Care) Rules 2012, r 3.2.
(3.4) These practice rules must be read in conjunction with the Act and regulations, and do not repeat duties and obligations that are included in the Act or regulations.
(c) The r 6.4 appeal
[57] Rule 6 deals with standards of professional conduct. So that r 6.4 may be seen in context, I set out the whole of r 6:
6 Standards of professional conduct
(6.1) A licensee must comply with fiduciary obligations to the licensee's client.
(6.2) A licensee must act in good faith and deal fairly with all parties engaged in a transaction.
(6.3) A licensee must not engage in any conduct likely to bring the industry into disrepute.
(6.4) A licensee must not mislead a customer or client, nor provide false information, nor withhold information that should by law or in fairness be provided to a customer or client.
(6.5) A licensee is not required to discover hidden or underlying defects in land but must disclose known defects to a customer. Further, where it appears likely, on the basis of the licensee’s knowledge and experience of the real estate market, that land may be subject to hidden or underlying defects, the licensee must either—
(a) obtain confirmation from the client that the land in question is not subject to defect; or
(b) ensure that a customer is informed of any significant potential risk so that the customer can seek expert advice if the customer so chooses.
(6.6) A licensee must not continue to act for a client who directs that information of the type referred to in rule 6.5 be withheld.
[58] Mr Hodge contended that the question whether a “misleading” statement had
been made ought to be approached in the same way as s 9 of the Fair Trading Act
1986. Mr Crombie responded by submitting that there is a difference between r 6.4, which refers to “misleading” statements by a licensee and s 9, which refers to conduct in trade that is “likely to mislead or deceive”.
[59] Mr Hodge called in aid the Tribunal’s decision in Tesar v Real Estate Agents Authority (CAC 2004).62 In that case, the Tribunal was asked to consider whether, in the absence of any intention to mislead, a statement that was (in fact) misleading could amount to “unsatisfactory conduct”. The Tribunal took the view that r 6.4 captured any form of misrepresentation, whether wilful, reckless or innocent. It considered that a “wilful or reckless breach” may amount to “misconduct”, but something less may amount to “unsatisfactory conduct”.63
[60] I was also referred to Wright v Complaints Assessment Committee 10056.64
The Tribunal in that case took a similar, but not identical view. Mr Crombie pointed out that, in relation to the concept of reliance, the Tribunal had said:
[48] … While reliance is not required, proof that the complainants were misled is.
[61] Given the potential for confusion arising out of the observations made in those two decisions of the Tribunal, I consider a first principles analysis is required.
[62] My starting point is that any rules dealing with industry standards, breach of which can lead to disciplinary sanctions, are necessarily aimed at the conduct of (in this case) a licensee. It seems self-evident that for a misrepresentation of the type to which r 6.4 refers to attract disciplinary sanctions, something more than an erroneous statement based on a genuine belief that a state of affairs exists should be required. While the analogy is not perfect, the same approach is taken to certain aspects of disorderly and offensive behaviour; only conduct that truly warrants the attention of
the criminal law will constitute such an offence.65
[63] Unlike in civil proceedings, there is no need to focus on whether a person has been misled. There is no requirement for the representee to have relied upon any misleading words or conduct. The focus of the inquiry is on the standard to which
the licensee has performed statutory and other duties. In that context, the question
62 Tesar v Real Estate Agents Authority (CAC 2004) [2014] NZREADT 18 (Judge P F Barber, Mr
G Denley and Ms N Dangen).
63 Ibid, at para [39] citing s 73(c)(iii) (“for misconduct”) and s 72(b) (“for unsatisfactory conduct”).
64 Wright v Complaints Assessment Committee 10056 [2011] NZREADT 21 (MS K G Davenport, Mr G Denley and Mr J Gaukrodger).
65 Summary Offences Act 1981, s 4(1)(a). For example, see Morse v Police [2011] NZSC 45, [2012] 2 NZLR 1.
must be whether what was done or said was capable of materially affecting a decision on the part of the representee in relation to the transaction; and with actual or presumed knowledge that the information was material. In my view, that approach has the benefit of synthesising the two elements in issue; representations made by a person carrying on the business of a real estate agent which are misleading in nature.
[64] The relevance of s 9 of the Fair Trading Act is that it tends to focus both on the likelihood of a false representation misleading the person to whom it is directed (“conduct that is misleading or deceptive or is likely to mislead or deceive”) and is capable of having a material impact on that person’s decision-making. That is the rationale behind the Supreme Court’s decision in Red Eagle Corporation Ltd v
Ellis66 in which the Court found it necessary to focus on the likelihood of the
representation being “objectively regarded as capable of misleading or deceiving”
the person to whom it was directed.
[65] The question is whether any misleading statement of that type was made by Mr Frank Vosper. In my judgment, no statement reaching that threshold was made. There is no dispute that Mr Frank Vosper acted honestly throughout, holding the genuine but mistaken view that he did not act as a real estate agent from the time at which the agreement was completed. There is nothing to suggest that his mis- statement of the true legal position was capable of having had any material adverse effect on the way in which Mr Biddle conducted himself in the transaction. In those circumstances, with respect to the Tribunal, I do not accept that the charge based on r 6.4 was established.
(d) The r 12.1 appeal
[66] Mr Frank Vosper acknowledges that neither licensee made available the dispute resolution procedures to Mr Biddle. Rule 12.1 governs this situation. Its underpinning is the need for information to be disclosed to clients or customers so that they are aware of dispute resolution processes to which the licensee is
committed.
66 Red Eagle Corporation Ltd v Ellis [2010] NZSC 20, [2010] 2 NZLR 492 at para [28].
[67] Rule 12 provides:
12 Information about complaints
(12.1) An agent must develop and maintain written in-house procedures for dealing with complaints and dispute resolution. A copy of these procedures must be available to clients and consumers.
(12.2) A licensee must ensure that prospective clients and customers are aware of these procedures before they enter into any contractual agreements.
(12.3) A licensee must also ensure that prospective clients, clients, and customers are aware that they may access the Authority’s complaints process without first using the in-house procedures; and that any use of the in-house procedures does not preclude their making a complaint to the Authority.
(12.4) A licensee employed or engaged by an agent must advise the agent within 10 working days of becoming aware of—
(a) any complaint made to the Authority against them, the decision of the Complaints Assessment Committee made in respect of that complaint, and any order made by the Committee in respect of that complaint; and
(b) if the matter proceeds to the Tribunal, the decision of the Tribunal in respect of the matter, and any order made by the Tribunal in respect of the matter.
(12.5) If a licensee was employed or engaged by a different agent at the time of the conduct relevant to the complaint referred to in rule 12.4, the licensee must also provide the information referred to in rule 12.4(a) and (b) to that agent within 10 working days of becoming aware of the complaint.
[68] Mr Frank Vosper has acknowledged liability on the part of the licensees in respect of the r 12.1 charge. The appeal point goes to penalty. But, having regard to my decision to reverse the finding of breach of r 6.4, it is necessary to consider whether, had the r 12.1 charge been the only one proved, the Committee would have considered the possible application of s 80 of the Act.
[69] The concern that I raised with counsel was whether, if I were left only with a breach of r 12.1, the mere finding of “unsatisfactory conduct” may be a disproportionate response to the nature of the conduct. On the present jurisprudence, it appears that the only means by which a finding of “unsatisfactory conduct” could be avoided is if an “absence of fault” defence were successfully raised,67 even
though the conduct in question represents a relatively minor indiscretion.
67 For example, see Ryan v Real Estate Agents Authority [2013] NZREADT 45 at para [52].
[70] I must consider what the Tribunal might have done had it found that the r 6.4 charge had not been established. On appeal, the Tribunal “may confirm, reverse, or modify the determination of the” Complaints Assessment Committee.68 In doing so, it may reverse or modify any determination, or exercise any of the powers that the Complaints Assessment Committee could have exercised.69 The nature of the Tribunal’s powers are discussed in Nottingham v Real Estate Agents Authority.70
[71] In the absence of any specific provision in the Act to the contrary, this Court, on appeal, is empowered (among other things) to make any order that the Tribunal could have made.71 I consider it is open to me to determine whether the Tribunal could (and ought to have) invoked s 80, if the breach of r 12.1 were the only charge that had been established.
[72] I assume, for present purposes, that following investigation into the complaint, the Committee had determined only that r 12.1 had been breached. Given the relatively minor nature of the breach, the Committee, before deciding whether to make a determination under its s 89(2)(b) power to determine that the licensee had engaged in unsatisfactory conduct, ought to have considered whether to exercise its discretion under s 80.72 Relevantly, for present purposes, the Committee would have turned its mind to whether “the subject matter of the complaint [was] inconsequential”73 or that “having regard to all the circumstances of the case, any
further action is unnecessary or inappropriate”.74
[73] As with any discretionary decision, all relevant factors must be taken into account. The Authority’s acknowledgement, on appeal, that the breach was at the lowest end of the spectrum, deserving only of a reprimand and a letter of apology, indicates that the charge was relatively minor. Nevertheless, not every relatively minor breach of the Rules can be characterised as “inconsequential”. Other factors
must be present before a discretion under s 80 could be exercised to avoid a finding
68 Real Estate Agents Act 2008, s 111(4).
69 Ibid, s 111(5).
70 Nottingham v Real Estate Agents Authority [2017] NZCA 1 at para [77].
71 High Court Rules, r 20.19(1)(a).
72 Real Estate Agents Act 2008, s 89(3).
73 Ibid, s 80(1).
74 Ibid, s 80(2).
of “unsatisfactory conduct”, particularly as there is no jurisdiction for a Complaints Assessment Committee to direct anything to be done (perhaps by way of apology) if a finding of “unsatisfactory conduct” were not made.75
[74] A balance needs to be struck between the competing goals of promoting a consistent and effective disciplinary process and avoidance of the stigma of a finding of unsatisfactory conduct, where the conduct in issue is relatively minor and all other circumstances point to the absence of a need to mark the conduct in that way.
[75] Mr Frank Vosper has been engaged in the real estate industry for many years, both as an agent and licensee. He worked as an agent for 18 years, and has been a licensee for 8 years. No previous disciplinary charges have been brought against him. His record is unblemished. He also undertakes charitable work, particularly in the Bay of Plenty. As a recognition of his public services to the community Mr Frank Vosper was awarded the Queen’s Service Medal in 2011. Those are strong factors of a personal nature telling in favour of the exercise of the s 80 discretion.
[76] I am satisfied that, if the Committee had been faced with proof only of a breach of r 12.1 on the basis I have outlined and the personal history of Mr Frank Vosper to which I have referred, it would inevitably have reached a decision that “any further action” on the complaint was “unnecessary” for the purposes of s 80(2). The nature of the transgression was not sufficient, in those circumstances, to attract disciplinary sanctions. I understand, from what was said at the hearing of the appeal, that whatever the outcome, Mr Frank Vosper intended to apologise in writing to Mr Biddle for the breach of r 12.1. That is another relevant factor to go into the discretionary mix.
[77] For those reasons, I propose to quash the Committee’s decision to make a
finding of unsatisfactory conduct and to substitute a decision not to take action on the complaint.
75 Compare ss 106 and 107 of the Sentencing Act 2002, with regard to discharges without conviction.
Result
[78] For those reasons, I allow the appeal to the following extent:
(a) The Tribunal’s finding that the licensees breached r 6.4 of the Rules, is set aside.
(b) The substituted penalty orders imposed by the Tribunal are set aside. (c) In substitution,
(i)I exercise the Committee’s discretion, under s 80(2) of the Act, not to take action on the complaint, on the grounds that further action was unnecessary; and
(ii)As a result, I make an order setting aside the Committee’s decision, under s 89(2)(b) of the Act, that the licensees have engaged in unsatisfactory conduct.
[79] In the circumstances, I consider that the most just outcome would be for the licensees to pay costs to the Authority in relation to the appeal. The Authority has acted responsibly throughout, and its counsel was realistic and helpful in the manner in which the s 80 issue was debated. An order for costs provides some response to the conduct in issue, which no longer carries the stigma of being characterised as unsatisfactory conduct for disciplinary purposes.
[80] I order that the licensees pay costs to the Authority on the appeal on a 2B
basis together with reasonable disbursements. Both are to be fixed by the Registrar.
[81] I thank counsel for their assistance.
P R Heath J
Delivered at 4.00pm on 15 April 2017
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