Whitehead v Commerce Commission HC Napier CRI 2010-441-2
[2010] NZHC 299
•9 March 2010
IN THE HIGH COURT OF NEW ZEALAND
NAPIER REGISTRY
CRI-2010-441-000002
IN THE MATTER OF ss 115 and 123 Summary Proceedings Act
1957
AND
IN THE MATTER OF an appeal from the determination of the
District Court at Wellington
BETWEEN TIMOTHY RANDALL WHITEHEAD Intending Appellant
ANDCOMMERCE COMMISSION Intended Respondent
Hearing: 9 March 2010
Appearances: Andrea Challis and Kiri Harkess for Intending Appellant
Brett Carter for Intended Respondent
Judgment: 9 March 2010
JUDGMENT OF HARRISON J
SOLICITORS
McElroys (Auckland) for Intending Appellant
Ben Vanderkolk & Associates (Palmerston North) for Intended Respondent
COUNSEL
Brett Carter, Commerce Commission, Wellington
WHITEHEAD V COMMERCE COMMISSION HC NAP CRI-2010-441-000002 9 March 2010
Introduction
[1] Mr Timothy Whitehead has filed an application for leave to appeal a notice of abandonment of appeal against his conviction for three offences under the Fair Trading Act 1986 (FTA) and to extend the time within which to appeal against his conviction and sentence of fines of $7,500. This application, which was filed on 4 November 2009, is the latest step in a regrettably convoluted process which was commenced when the Commerce Commission filed informations in the District Court at Wellington in 2005.
[2] In brief summary, Mr Whitehead is by occupation a real estate agent. He was ultimately convicted and sentenced in late 2007. The trigger for the application filed over two years later was the enactment of s 37 Real Estate Agents Act 2008 (REAA). It introduced a prohibition against eligibility to hold a licence for a person who had been convicted of an offence under the FTA within the five years preceding the application for a licence. Mr Whitehead presently holds a licence but has to apply for renewal before 31 March 2010.
Background
[3] The Commission initially filed nine informations against Mr Whitehead. It alleged that he made nine separate misleading representations concerning the price payable for land in connection with the promotion for its sale: ss 14(1)(b) and 40(1)(a) FTA. The misrepresentation common to all charges was Mr Whitehead's advertisement of a property for sale in Northland, Wellington, in April and May 2004 calling for buyer inquiry over $380,000 (known colloquially by its acronym "BEO"). He placed these advertisements at a time when the vendor had instructed him of her expectation of receipt of a sale price of $400,000 net of agent's commission.
[4] Judge Bridget Mackintosh originally dismissed the charges in a reserved decision delivered in the District Court at Wellington on 5 July 2006. The Commission then appealed by way of case stated to this Court. The appeal was
allowed by Mallon J and remitted to the District Court for redetermination:
Commerce Commission v Whitehead HC Wellington, CIV-2006-485-88, 4 July
2007. Of particular relevance was Mallon J's formulation of the appropriate test to
be applied when determining the charges as follows:
[51] In my view the representation is that any offer that is over $380,000 has a prospect of being accepted. The seller may seek to negotiate a higher price, but her success on that will likely depend on whether there is more than one offer. An offer over $380,000 could not be rejected merely because
it does not meet the seller’s desired selling price. The offer must be given serious consideration. That raises the question of how it is to be determined that an offer over the BEO price will be given serious consideration.
[5] Judge Mackintosh convened a further hearing in the District Court in October
2007 and delivered her reserved decision on 22 November 2007. She found as follows:
[24] It is my view that at the time all the advertisements were placed there was not a prospect of any offer over $380,000.00 being accepted and given serious consideration. The Defendant chose to market the property at
a price. He had not discussed the issue of the price advertising with the vendor and he had no instructions from the vendor in relation to that. He did
know that the vendor expected to get $400,000 net or she would rent the
house or meet the market. The vendor expected to receive a net price of
$400,000 and in my view there was no prospect of her agreeing to a sale price that effectively netted her with the sum of $371,000 (or even less prior
to the deal on the commission being done) which would have been the most
she could have expected to achieve with a flat commission and a sale price
of $381,000, just over $380,000 the buyer enquiry price.
[25] The vendor was presented with offers over $380,000, offers of
$382,000, $385,000, $390,000 and possibly $395,000. These were below her expected price and they were all rejected by her after giving them some consideration. The vendor consistently responded to offers that were forthcoming that she would countersign at $410,000.00 when finally with a change of heart on the 7th of May she received an offer for $405,000 she instructed the Defendant to ask the purchaser whether it would be prepared
to pay $410,000 and when indicated it was not she sold it for that with the reduced commission payable giving her $395,000 net of commission which
was only $5,000 less than her expected sale price.
[26] All the advertisements at the BEO price $380,000 were misleading
in these circumstances as there was not a prospect of any offer over $380,000 being accepted and given serious consideration.
[6] However, the Judge found that Mr Whitehead had proven on the balance of probabilities that six of his contraventions were due to a reasonable mistake:
s 44(1)(a). Those charges relating to advertisements placed between 7 and 24 April
2004 were dismissed. She dismissed his defence of reasonable reliance on the other three charges and entered convictions accordingly for advertisements placed on
28 April, 1 May and 5 May. She fined Mr Whitehead $2,500 on each of the three charges on 11 December 2007. Her informed and articulate remarks are directly relevant to this application and I will return to them later.
[7] Mr Whitehead filed and served a notice of appeal against conviction only on
7 January 2008. However, he filed a notice of abandonment of that appeal on
11 June 2008. It was deemed by operation of law to be dismissed the following day. Subsequently, he filed the subject application in November 2009.
[8] Mr Whitehead's originating application was, as noted, directed towards reopening argument on his conviction and advancing fresh argument on sentence. Ms Andrea Challis filed a very careful written argument designed to establish that leave should be given to withdraw Mr Whitehead's notice of abandonment. She also
set out in detail the grounds of Mr Whitehead's challenge to the substance of the convictions. However, during argument and after taking instructions, Ms Challis withdrew the application relating to Mr Whitehead's conviction.
[9] In my judgment that decision was proper. Ms Challis faced difficult if not insurmountable hurdles in crossing the discretionary threshold necessary to allow revival of the appeal and, more importantly, in challenging the substance of the convictions. Judge Mackintosh's decision was fully and carefully reasoned and her conclusion was, with respect, unimpeachable.
Sentence
[10] Thus the only issue for determination this morning is Mr Whitehead's application for leave to appeal against sentence. Ms Challis does not challenge the quantum of the fines but more fundamentally submits that leave should be given because Mr Whitehead is entitled to be discharged without conviction: ss 106 and 107 Sentencing Act 2002. I note immediately that the appeal against sentence does not raise a challenge to Judge Mackintosh's sentencing methodology. To the contrary, Ms Challis relies on the Judge's findings made when imposing the fines.
[11] Ms Challis relies on one exceptional circumstance in support of this appeal. She says that the retrospective effect of s 37 REAA warrants revision of the sentence. That is particularly because Mr Whitehead's offending occurred in 2004, more than three years before the new Act was even introduced or its first reading in the House of Representatives and five years before s 37 came into force. Mr Brett Carter for the Commission, in commendably balanced and fair submissions, accepts the unique factor of the retrospective effect of the REAA on Mr Whitehead's financial circumstances.
[12] Ms Challis is correct that if s 37 had been in force at the time of sentencing, it would have been a relevant consideration for Judge Mackintosh when deciding whether or not to grant a discharge without conviction. Mr Whitehead did not make that application on sentencing because he was not then in a position to submit that the consequences of a conviction under the FTA would be out of all proportion to the gravity of his offending. Significantly the Court of Appeal has accepted that a legislative change following offending is a relevant factor on sentence: see R v O'Brien [1976] 1 NZLR 513 at 517.
[13] I interpolate to note my agreement with Simon France J that an appeal against
a refusal or failure to discharge without conviction is strictly one against sentence. That is because the basis of the verdict or plea is not in issue: see Lee v Police HC Auckland, CRI-2005-404-028, 27 July 2005 at [14]-[15].
[14] The first step is to examine the consequences of a conviction for Mr Whitehead. He has been a real estate salesman for eight years. I am satisfied that he will lose his livelihood and a significant financial income if the convictions remain. Furthermore, his assets will be in jeopardy. He and his wife have established an apparently successful real estate business (I accept that he is the driving force), earning gross commissions of between $500,000 and $800,000 per annum. The two have acquired a number of investment rental properties securing indebtedness of about $1.25m as part of a retirement plan. Among other things, if he was unable to continue as a real estate salesman, Mr Whitehead and his wife would have to sell three of their properties in order to retire their debt. I also accept that he
would have real difficulty finding employment which yielded anything like the comparable financial returns in any other field.
[15] Mr Carter accepts that, if the convictions remain, Mr Whitehead's application
for renewal of his licence will be rejected on 31 March. The statutory prohibition allows for no exceptions. He will not be able to apply again until December 2012.
By then I am satisfied that Mr Whitehead would not only have been without substantial income but his business would have lost the goodwill generated through his efforts in recent years. His prospects of re-establishing himself would not be promising.
[16] The second and consequential step is to determine whether that result is out
of all proportion to the gravity of Mr Whitehead's offending. I return to Judge Mackintosh's sentencing findings. She reviewed a number of relevant factors. I adopt her conclusions that Mr Whitehead's statement to the effect that the vendor would seriously consider any price over $380,000 did not depart significantly from the truth (the vendor later accepted an offer of $395,000 net of commission); the advertisements were not disseminated widely; and, most significantly, Mr Whitehead did not conduct himself dishonestly but carelessly. The Judge also gave weight to his co-operation with the Commission when it instituted its investigation and noted expressly that no credit would be available for a guilty plea, observing that the structure of the prosecution case changed significantly from its inception to disposal as reflected in Mallon J's judgment.
[17] Accordingly I accept Ms Challis' submission that Mr Whitehead's offending was relatively minor. His culpability was very low on the criminal scale. There is
no evidence that the vendor suffered loss as a consequence of his statutory contraventions. Furthermore, as Mr Carter acknowledges, the prosecutions were in the nature of a test case, designed to challenge the legality of a practice which was then apparently widespread in the real estate profession.
[18] I am satisfied that the statutory balance weighs heavily in Mr Whitehead's favour in that the consequences of convictions on the three charges will be out of all proportion to the gravity of the offending. I add that I am in no doubt that, if faced
with the same argument that is advanced today, Judge Mackintosh would have exercised her statutory discretion in Mr Whitehead's favour.
[19] However, I record my express endorsement of a submission made by Mr Carter. The purpose and policy of the REAA is unequivocal. It is a legislative response to public concern about the unacceptable practices of a small but damaging minority in the real estate profession. It is designed to have a remedial effect by proscribing certain conduct and, in particular, to exclude from the profession's ranks those who are convicted of contravening the FTA. The message is now unmistakeable.
[20] This decision is not meant to serve as a precedent for any other case, except
to the extent that it construes relevant statutory provisions. Like all statutory discretions, the result is dictated by these particular and, I repeat, unique facts. Ms Challis doubtless is correct that Mr Whitehead and others will not be under any misunderstandings about the propriety of this type of conduct or the consequences of any future contraventions of the FTA.
Result
[21] In the result Mr Whitehead's application for leave to appeal against sentence out of time is granted. His appeal is allowed and he is discharged without conviction
on all three offences subject to payment of costs of $2,500 on each.
[22] I wish to express my appreciation for the quality of argument, both written and oral, from Ms Challis and Mr Carter.
Rhys Harrison J
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