Wyatt v Real Estate Agents Authority
[2012] NZHC 2550
•3 October 2012
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2012-404-1060 [2012] NZHC 2550
BETWEEN GREGORY JOHN WYATT Appellant
ANDTHE REAL ESTATE AGENTS AUTHORITY
First Respondent
ANDBARFOOT & THOMPSON LIMITED Second Respondent
Hearing: 26 June 2012
Appearances: Appellant in person
L J Clancy for the First Respondent
R B Hern and J E Tomlinson for the Second Respondent
Judgment: 3 October 2012
JUDGMENT OF WOODHOUSE J
This judgment was delivered by me on 3 October 2012 at 10:00 a.m. pursuant to r 11.5 of the High Court Rules 1985.
Registrar/Deputy Registrar
……………………………………
Counsel / Solicitors / Parties: Mr G W Wyatt, Waiwera
Mr L J Clancy, Meredith Connell, Office of the Crown Solicitor, Auckland
Mr R B Hern and Mr J E Tomlinson, McElroys, Solicitors, Auckland
WYATT V THE REAL ESTATE AGENTS AUTHORITY HC AK CIV-2012-404-1060 [3 October 2012]
[1] This is an appeal from a decision of the Real Estate Agents Disciplinary Tribunal (the Tribunal) concerning standards of professional conduct for licensed real estate agents under the Real Estate Agents Act 2008 (the Act).
[2] The proceeding arose from the sale of a rural property by the trustee of a family trust. The appellant, Mr Wyatt, had primary responsibility for the sale on behalf of the vendor. The legal distinction between the vendor and Mr Wyatt is not relevant in the circumstances of this case. There is no issue that Mr Wyatt was entitled to bring the complaint and for all practical purposes relevant to the present appeal Mr Wyatt may reasonably be treated as the vendor. The second respondent, Barfoot & Thompson Ltd (Barfoot & Thompson), was engaged as agent for the vendor on the sale.
[3] An agreement was entered into. Barfoot & Thompson (through its licensed sales person at the local branch) used the seventh edition of the standard form agreement for sale and purchase of real estate approved by the Real Estate Institute of New Zealand Inc and Auckland District Law Society. I will refer to the various editions as “the standard form”. Approximately two months before the agreement was entered into the eighth edition of the standard form agreement had been released for use by real estate agents and lawyers (and any others who chose to use the form by buying it). Mr Wyatt complained to the first respondent, the Real Estate Agents Authority (the Authority), about the use of the seventh edition of the standard form, contending that the eighth edition should have been used. The complaint was dismissed by a Complaints Assessment Committee of the Authority. Mr Wyatt appealed to the Tribunal which dismissed the appeal relating to the standard form and dealt with and dismissed some other matters.
The issues
[4] Some of the matters arising on this appeal were disposed of in discussions at the commencement of the hearing. I will note those below.
[5] The central issue arising on the appeal is whether the use of the seventh edition of the standard form constituted unsatisfactory conduct by Barfoot & Thompson under s 72 of the Act or misconduct under s 73 of the Act.
[6] Sections 72 and 73 are as follows:
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.
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
(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.
[7] There are two further issues. The first is whether the Tribunal had jurisdiction to determine whether Barfoot & Thompson should have disclosed what Mr Wyatt contended was a conflict of interest arising from the apparent association of a Barfoot & Thompson sales person with the purchaser. The primary enquiry here
is whether the Tribunal could determine this issue when it had not first been dealt with by a Complaints Assessment Committee. The remaining issue is whether Mr Wyatt is entitled to expenses incurred in obtaining evidence for the hearing before the Tribunal.
Issues not requiring determination
[8] There was an issue whether the Tribunal had jurisdiction to award costs against Mr Wyatt. After this appeal was filed the Tribunal held that there should be no order for costs against Mr Wyatt. I have not seen the decision, but I understand that it was on the basis that the Tribunal concluded that there is no jurisdiction to award costs against a complainant. In any event, Mr Wyatt’s appeal in this regard does not require further consideration.
[9] Mr Wyatt contended that the Authority should not be a party to this appeal. At the commencement of the hearing, Mr Wyatt advised that the practical reason he wished to advance this argument was that it exposed him to a risk of liability for costs to two parties on the appeal. Mr Clancy, for the Authority, said that he anticipated that the Authority would not seek costs from Mr Wyatt irrespective of the outcome of the appeal. Mr Clancy during the hearing advised that he had obtained instructions and confirmed that the Authority would not seek costs on this appeal. In consequence, it was agreed that the question as to whether the Authority should be a party on this appeal need not be determined.
[10] I record Mr Clancy’s advice that the Authority’s undertaking not to seek costs against Mr Wyatt is an undertaking limited to this appeal. It does not apply to any other proceeding in which the Authority and Mr Wyatt may be involved. And it does not apply in respect of any other proceedings, including appeals, in which the Authority may be involved. By the same token, I record, for the avoidance of any doubt, that there has been no determination in this judgment that, in terms of the Act, the Authority was properly a party to this appeal. However, whatever the correct legal position may be, it has been helpful to have Mr Clancy’s separate submissions on some of the points of principle of a general nature.
[11] Mr Wyatt applied for leave to adduce some further evidence relating to his application for costs before the Tribunal. This was not opposed by the respondents.
The sale
[12] Mr Wyatt’s family trust, through a company, was the owner of rural land at Wainui, north of Auckland. On 13 March 2007 Mr Wyatt met two Barfoot & Thompson agents at the property, Mr Tony Reid and Mr Roger Molloy. Barfoot & Thompson had not been engaged as the agent at that date. The purpose was to enable the agents to see the land and to have a preliminary discussion. Mr Molloy’s evidence on the meeting was, so far as is now relevant, as follows:
3.1I have only met Gregory Wyatt once. This was in March 2007. I was asked by Anthony Reid (Tony Reid) to accompany him to assist in appraising the Wyatt farm on Weranui Road (the Property). It was not to list it. …
3.2We were told bluntly by Mr Wyatt how everything was going to work as he was a lawyer. He told Tony and I [sic] that the property was being sold inclusive of GST. He had already had the place valued so our appraisal was not really required. The meeting lasted around 10 to 15 minutes and this is the only time I have met Gregory Wyatt personally.
[13] Mr Molloy had no further dealings with Mr Wyatt. The sales person who acted directly in the sale was Mr Reid. However, the contention by Mr Wyatt that there was a conflict of interest arose from Mr Molloy’s association with the purchaser. The background to this is dealt with below.
[14] In respect of the meeting on 13 March 2007, Mr Reid said:
2.4At the time, I understand Mr Wyatt was a lawyer who had recently returned from working in London. Although I had not dealt with Mr Wyatt before, I had dealt with his father several times over the years. I recall that Mr Wyatt’s father would send Greg Wyatt copies of real estate contracts to look over.
2.5The instructions that I would receive from Greg Wyatt were always very comprehensive. Mr Wyatt micromanaged the terms of the sale. Mr Wyatt was clearly very confident about real estate. Mr Wyatt was exceptional in his control of the agreement and its terms. I have never experienced such control by a vendor before.
[15] Mr Reid’s understanding that Mr Wyatt had recently returned from working in London appears to be incorrect, but nothing turns on this. Mr Wyatt was admitted as a barrister and solicitor in 1987 although in 2007 he was not practising as a lawyer. Mr Reid’s evidence relating to comprehensive instructions from Mr Wyatt is confirmed by a letter with formal instructions dated 29 March 2007. It is a letter of four pages with a schedule of three pages. Mr Wyatt said that he wanted Barfoot & Thompson to act as one of the agents. The letter contains instructions on the terms of engagement, asking price, signage, boundaries and viewing for prospective purchasers. There is just over a page setting out instructions relating to terms of the agreement. The schedule of three pages contains particular clauses for insertion in the agreement plainly drafted with considerable care.
[16] Mr Reid said that in “early April 2007” he received an offer from Mr Jack Wright to buy the land for $1,350,000. This was at the valuation that Mr Wyatt had earlier obtained. Mr Wyatt had given Mr Reid authority to disclose the valuation to potential purchasers. Mr Wyatt’s asking price had been $1,385,000. His 29 March letter recorded: “The $35,000 difference represents the room for any negotiation”. Mr Wright had also agreed to the special terms stipulated by Mr Wyatt.
[17] Mr Reid said that, following receipt of the offer from Mr Wright:
4.2I provided the necessary details, such as the names of parties, the price and Mr Wyatt’s special conditions, to the administration staff at B&T’s Albany branch. The administration staff then incorporated the information and terms into a standard form of the agreement for sale and purchase (ASP) of real estate issued by the Auckland District Law Society (ADLS) and the Real Estate Institute of NZ (REINZ). At no time, did Mr Wyatt give instructions on what form to use. As far as I am aware the administration staff would have used the edition that was commonly used at the time.
4.3Mr Wyatt did not ask for my advice with respect to the terms of the agreement. Mr Wyatt had a very clear idea concerning the terms of the agreement as evidenced by his letter 29 March 2007. Mr Wyatt’s letter of 13 April 2007 was similarly of a highly technical nature and confirmed my understanding that he was acting as the Wyatt Trust’s lawyer. For these reasons Mr Wyatt’s name was entered into the “Vendor’s solicitor” box of the ASP.
4.4 In any case, I could not give Mr Wyatt advice as I am not a lawyer.
My expertise is in real estate. If Mr Wyatt had asked, I would have told Mr Wyatt to seek legal advice.
[18] Mr Wyatt’s trustee company accepted the offer subject, it appears, to one change. This was to bring the possession date forward from 31 July 2007 to 24 May
2007. This change was the subject of a letter dated 13 April 2007 from Mr Wyatt to Mr Reid explaining in reasonable detail why the change to the possession date was sought. This alteration was accepted and an agreement was made. The agreement is dated 13 April 2007.
[19] The agreement was made using the seventh edition of the standard form. The only changes to the standard form are the addition of the further terms stipulated by Mr Wyatt and the insertion of the variable provisions relating to, amongst other things, the price, whether it was inclusive or exclusive of GST and the possession date.
[20] On the first page there were standard terms to record whether the agreement was “plus GST (if any)” or “inclusive of GST (if any)”. In accordance with Mr Wyatt’s express instructions the words “plus GST” were deleted. It was Mr Wyatt’s understanding that the trust would have no liability for GST on the sale. In the event, the trustee company was assessed for GST on the sale in a sum of $110,000 and, because of the terms of the agreement, that sum was not recoverable from the purchaser. This clearly was an important reason for Mr Wyatt’s complaint about Barfoot & Thompson’s use of the seventh edition rather than the eighth edition of the standard form. The basis for this complaint in that regard is noted below.
[21] On the penultimate page of the agreement, signed by Mr Wyatt and his co- director, immediately before the signatures, there is the following:
WARNINGS (These warnings do not form part of this agreement)
1.This is a binding contract. Read the information set out on the back page before signing.
2. …
[22] The back page of the agreement includes the following:
BEFORE SIGNING THE AGREEMENT
It is recommended both parties seek professional advice before signing.
This is especially so if:
ØThere are any doubts. This is a binding contract with only restricted rights of termination.
Ø The property is sold as a going concern.
Ø Property such as a hotel or a farm is being sold. …
…
The vendor should ensure the warranties and undertakings in clauses 6 and 7:
Ø are able to be complied with; and if not
Øthe applicable warranty is deleted from the agreement and any appropriate disclosure is made to the purchaser.
…
If the property is sold as a “going concern”, the vendor should ensure the purchase price is stated on the front page as “PLUS GST (if any)”.
THE ABOVE NOTES ARE NOT PART OF THIS AGREEMENT AND ARE NOT A COMPLETE LIST OF MATTERS WHICH ARE IMPORTANT IN CONSIDERING THE LEGAL CONSEQUENCES OF THIS AGREEMENT.
PROFESSIONAL ADVICE SHOULD BE SOUGHT REGARDING THE EFFECT AND CONSEQUENCES OF ANY AGREEMENT ENTERED INTO BETWEEN THE PARTIES.
The introduction of the eighth edition of the standard form
[23] The standard form used for the agreement records that the seventh edition was produced in 1999. The eighth edition was released in February 2007. It was the product of months of work by members of the Auckland District Law Society and the Real Estate Institute of New Zealand. There was expert evidence on this from, amongst others, Mr Howard Morley. Mr Morley is a real estate consultant with extensive experience in the real estate industry generally, including wide experience in, and senior positions in, matters relating to the operation of real estate agencies. Mr Morley gave evidence on, amongst other things, the introduction of the eighth edition. His evidence included the following:
5.1… Work had been going on with the preparation for the 8th Edition for many months, in fact it could have been measured in years. The exact date as to when it was supposed to come out was always moving forward because of changes in legislation that needed to be provided for, and the lack of the available time and effort by the ADLS and REINZ to getting the new forms out to members.
[24] Mr Morley then explained that, once the new edition had been released, time was required for real estate agencies to “take their own legal advice, run training seminars, prepare changes to marketing material and instruct all staff, both administration and sales teams”. He continued:
5.2… Clearly the larger firms such as B&T have a greater issue in making sure the instructions get carried down to all levels. The forms need to be properly installed in their IT programs and if need be, are integrated into other promotional material that will go out to clients. Often material in real estate offices all needs to be changed. This particularly applies to the agreement for Sale and Purchase of Real Estate form and particularly with the large number of changes between the 7th and 8th edition.
5.3There had been several proposed drafts of the 8th Edition but it was constantly being amended, upgraded and updated by both REINZ and ADLS and it is quite unrealistic to expect the form to be introduced on day one particularly into a firm the size of B&T, the largest privately owned real estate company in New Zealand. They have a significant number of offices and people that need to be trained and advised of any new form including administration, training staff, marketing departments as well as sales teams. They cannot start the training until the form has been finalised by the ADLS and REINZ.
5.4So, inevitably there is a crossover period when real estate agents/firms are educating their staff on changes to the new edition. This process can take several months.
[25] Mr Morley’s evidence in respect of a transitional period following introduction of the new form was similar to the expert opinion on the position for lawyers. This came from Mr Robert Eades, a lawyer with extensive experience and expertise in relation to property transactions, including agreements for sale and purchase.
[26] The eighth edition was first released on 19 February 2007. This was through an electronic distribution by the Auckland District Law Society to law firms with a subscription for that purpose. Barfoot & Thompson’s customer relations manager, Mr Maxwell House, said:
3.1Although the 8th edition began publication in February 2007, B&T did not make immediate use of the form. Due to B&T’s size and the significance of the change it took time for B&T to present the new form and educate its staff.
3.2 B&T is New Zealand’s largest privately owned real estate company.
It has 60 branches in Auckland/Northland and over 1300 salespersons. Hence, a large number of staff had to be trained before
the form could be formally introduced.
[27] Mr House said that Barfoot & Thompson “held a series of regional workshops between February and the middle of 2007”. He said that these seminars were run in conjunction with the Real Estate Institute seminars which were held from 26 February to 22 March 2007, with an Auckland presentation on 14 March
2007.
[28] Mr House also said:
3.6B&T arranged a guide to the eighth edition to be prepared for its staff with the assistance of solicitors Glaister Ennor. Although B&T cannot find the records to show when the final version of the guide was made available to its branch members, it is likely to have been in mid to late April 2007 because B&T’s Head Office began considering a draft version of the guide on 5 April 2007. A copy of an email from Glaister Ennor 5 April 2007 providing the draft guide is at page 74 Appellant’s Bundle. …
3.7So in summary the agreement here was entered during a transitional period introducing the 8th edition, when B&T and its staff were in the process of becoming familiar with the 8th edition.
[29] Following an application by Mr Wyatt, Barfoot & Thompson provided particulars of sales in March and April 2007 made by Barfoot & Thompson’s Albany branch, the branch which handled Mr Wyatt’s sale. This shows that in March 2007 there were 29 sales and all of these used the seventh edition. In April there were 10 sales using the seventh edition and 23 sales (including Mr Wyatt’s sale) using the eighth edition.
[30] Mr Wyatt also obtained evidence from two other sources in respect of the use of the eighth edition compared with the seventh edition in the period from 19
February to 30 April 2007. A solicitor employed by an Auckland law firm advised that the firm had acted in eight transactions where the eighth edition had been used.
These were in March and April 2007.1 The other evidence came from the manager of the branch of another real estate agency. Her evidence was that in February and March 2007 both the seventh and eighth editions were used. The first use of the eighth edition was on 21 February 2007. The last use of the seventh edition, at least from the list provided, was on 23 March 2007. In other words, in the period covered, all agreements after 23 March 2007 were made using the eighth edition.
Mr Wyatt’s complaint
[31] Mr Wyatt first complained to Barfoot & Thompson by letter dated 11 May
2009. The contention was that Barfoot & Thompson should have used the eighth edition and that Barfoot & Thompson was liable to Mr Wyatt “for loss suffered as a result of the use of the seventh edition instead of the eighth edition”. The loss was the liability for GST. It was said to arise because of different wording in the standard form clause 13.0 relating to supply of a going concern and zero rating for GST.
[32] Mr Wyatt’s formal complaint to the Authority is dated 22 March 2010. In describing the nature of the complaint Mr Wyatt said that the seventh edition had been used. He then said:
… but the current edition at that time was the 8th edition. In my opinion, the licensee should have provided the 8th edition. The consequence of the licensee’s failure is a potential liability to the Inland Revenue Department for Goods and Services Tax.
[33] A Complaints Assessment Committee of the Authority determined, in a decision dated 20 December 2010, to take no further action in respect of the complaint. The Committee concluded that there was no relevant error by Barfoot & Thompson in respect of the specific GST issue. The Committee also concluded that Barfoot & Thompson had “acted reasonably” in the use of the seventh edition. It said:
We make this finding given firstly that the contract occurred on the cusp of the introduction of the new 8th edition, and secondly that the terms of the contract had been dictated by Mr Wyatt a lawyer of some experience.
1 This evidence was also obtained to challenge a particular date on a letter discovered by Barfoot & Thompson. There is no longer a live issue in respect of that date and it is unnecessary to record the further detail in the solicitor’s evidence in this regard.
[34] The Committee did not consider any question as to whether there was a conflict of interest for Barfoot & Thompson arising out of Mr Molloy’s association with Mr Wright. No complaint had been made by Mr Wyatt in that regard to the Authority. The circumstances in which this question arose before the Tribunal are noted below.
The Tribunal’s decision
[35] The hearing before the Tribunal was in November 2011. Mr Wyatt was cross-examined on his written evidence-in-chief and all of the witnesses for Barfoot
& Thompson were cross-examined (other than Mr Garth Barfoot, a director of Barfoot & Thompson, who had provided an affidavit on a discovery issue). The Barfoot & Thompson witnesses of fact were Mr Reid, Mr Molloy, Mr Teh (the branch manager) and Mr House. The two experts called by Barfoot & Thompson, Mr Morley and Mr Eades, were also cross-examined at some reasonable length by Mr Wyatt.
[36] The Tribunal delivered its decision after consideration on 23 February 2012.
Does s 72 require proof of loss?
[37] It is clear from Mr Wyatt’s original complaint to Barfoot & Thompson and, more particularly, his complaint to the Authority, that a material part of the complaint was loss arising from the GST liability. Before the Tribunal, and on this appeal, Mr Wyatt argued that proof of loss is not necessary to establish unsatisfactory conduct under s 72 of the Act.
[38] The Tribunal noted that Mr Wyatt had given emphasis to negligence as the form of unsatisfactory conduct he was alleging: see s 72(c). The Tribunal concluded:
[35] We do not think that there needs to be proof of loss before negligence can be established. Negligence is just one of the statutory grounds on which we could find that Barfoot’s conduct was unsatisfactory, depending on the view we take of the underlying facts.
The Tribunal referred to the one of the alternatives, in s 72(a), for a finding of unsatisfactory conduct and then said:
[36] It was submitted for the Authority that, given the alternative grounds on which a finding might be made, the issue of loss is not determinative as to a finding of unsatisfactory conduct; but showing that a loss was caused would, of course, generally be an important consideration on the question of penalty. We agree with those views.
[39] The Tribunal then recorded the essence of Mr Wyatt’s position. This was as follows:
[37] The appellant accepts that he had not turned his mind to whether or not a taxable activity was being undertaken at the subject property, or whether or not the sale was the transfer of a going concern, at the time the agreement was drawn up. He simply assumed GST would not be payable because the land had not been subdivided. It has not been suggested that Barfoot was on notice that the seller was carrying on a taxable activity and that what was intended was the transfer of a going concern.
[38] Accordingly, it does not seem to be any specific failure on the part of Barfoot to protect the appellant’s position as to GST which is the basis of the complaint. Rather, the complaint is based on an alleged general failure by Barfoot to ensure that its staff were using the most up to date version of the Standard Form.
[39] In other words, the appellant’s case does not appear to be that Barfoot, in using the seventh edition of the Standard Form, should have foreseen possible loss and, therefore, was guilty of unsatisfactory conduct in the particular circumstances of this case. Rather, the appellant contends that it is unsatisfactory, per se, for a licensee to use an old edition of the Standard Form once a new edition is released.
[40] Notwithstanding this, the Tribunal did consider the merit of the GST issue. This may be seen in the Tribunal’s summary of its conclusion on the central issue as to whether there was unsatisfactory conduct by using the seventh edition rather than the eighth edition. The Tribunal said:
[59] With respect to the negligence allegation that the wrong edition of the Agreement was used, we consider that:
[a] The use of the 7th edition was reasonable. The sale occurred on the cusp of the changeover between the 7th and 8th editions;
[b] Even if the 8th edition had been used, the trust/company vendor would still have incurred a GST liability;
[c] Mr Wyatt (who was previously a lawyer) controlled the marketing and sale to an exceptional degree;
[d] It was unreasonable for Mr Wyatt to expect Barfoot to advise whether the GST arrangement for the sale was appropriate.
[60] It is understandable that the change-over of forms did not happen instantaneously. It took time for the ADLS, REINZ and other organisations, such as Barfoot, to come to grips with the new form. It would not have been prudent to launch immediately into using the new form.
[61] Mr Wyatt was responsible for the terms of the agreement, including the terms in respect of GST. He was acting as his company’s (the vendor) lawyer. If he had any concerns in respect of GST, it was his responsibility to seek legal advice. He chose not to obtain independent legal advice. Mr Wyatt provided detailed instructions regarding the terms of the agreement. He stipulated that the purchase price should be “Inclusive of GST (if any)”.
[41] The Tribunal, after recording the essence of its conclusions on the conflict issue, came back to the issue relating to the use of the seventh edition rather than the eighth edition. The Tribunal again referred to the emphasis Mr Wyatt had placed on the claimed loss in respect of GST. But the Tribunal also noted authorities bearing on the assessment of professional conduct2 and to the reasonableness of Barfoot & Thompson’s transition from the seventh edition to the eighth edition in general, and the particular facts of this case as to the respective roles of Mr Wyatt and Mr Reid in relation to the terms of the agreement for sale and purchase.
The conflict of interest issue
[42] The question as to whether there may have been a conflict of interest did not arise from any determination by the Committee, as has already been noted. It was first referred to in a memorandum from Mr Wyatt dated 13 July 2011, the day before the originally scheduled start of the hearing before the Tribunal. Mr Wyatt’s memorandum was directed primarily to a dispute with Barfoot & Thompson concerning discovery of documents by Barfoot & Thompson, which dispute had been somewhat protracted. In the final paragraph Mr Wyatt said that he had recently discovered a connection between Mr Molloy and Mr Wright.
[43] There was a hearing before the Tribunal on 14 July 2011. The only written record that appears to have been produced for this appeal in respect of that hearing is a report by email to Barfoot & Thompson from its solicitors. The copies produced3 record that the only matters dealt with were issues of discovery and the directions that were made in that regard. There is no reference to the conflict of interest issue. Nevertheless, Barfoot & Thompson provided briefs of evidence on the conflict issue for the hearing which had been rescheduled for 25 November 2011. This included the brief of evidence from Mr Molloy, being the agent directly affected and who
appears to have taken no objection to this matter being considered by the Tribunal. Mr Wyatt had also addressed the issue in a supplementary brief of evidence provided before the hearing in November. At the hearing the conflict of interest issue was addressed in evidence, including cross-examination of Mr Molloy by Mr Wyatt.
[44] Following the hearing, and presumably in accordance with directions made by the Tribunal, Mr Wyatt filed written submissions. There was a reasonably short reference to the conflict of interest issue. Mr Wyatt noted that it had not been the subject of a determination by the Committee because he had been unaware of the potential conflict until much later. He then referred to s 111 of the Act and concluded:
Given the lack of any determination by the Committee, the Tribunal may lack jurisdiction. In any event, Wyatt has filed a claim in the District Court concerning the conflict issue, so there is no need for the Tribunal to deal with it.
[45] The Tribunal did consider and rule on the conflict issue without any reference to the question as to whether it had jurisdiction. The Tribunal in fact recorded that Mr Wyatt’s appeal “from the CAC decision [of] 20 December 2010 is two-fold”. The first issue was the use of the seventh edition. The second issue said to have been on appeal from the Committee’s decision concerned the conflict issue. The Committee concluded that there was no evidence to support an adverse finding on the conflict issue.
Discussion : use of the seventh edition
[46] The Act came into force on 17 November 2009. Although the events in question in this case occurred earlier, it is not in issue that the complaint, or complaints if the conflict issue is included, can be considered under the Act because s 172 of the Act applies. The only qualification in that regard would apply to penalty if there is a question of penalty.
[47] Mr Wyatt put the primary question on the appeal as being whether use of “an old form is a breach of an agent’s duty of care”. Defining the primary issue in these terms is likely to be confusing because it expresses the issue in the same terms as the issue that arises on an action for negligence in tort. Mr Wyatt in fact went so far as to submit:
The Act imports the common law duty of care, in that ‘unsatisfactory conduct’ includes real estate agency work that is ‘negligent’. The word is not defined in the interpretation section, so it should be given its ordinary meaning, which is breach of a duty of care, being the first two elements of the tort.
[48] Cases of tortious negligence may provide some assistance. But the question must be determined in accordance with the statutory provisions. The question is whether there is unsatisfactory conduct as defined in s 72 or misconduct as defined in s 73.
[49] I am satisfied, and notwithstanding Mr Wyatt’s submissions, that the evidence falls well short of what would be required to embark on an enquiry into misconduct under s 73. The enquiry in this case is limited to s 72, although the provisions of s 73 assist to an extent in defining the scope of s 72. Substantially less will be required to establish unsatisfactory conduct than will be required to establish misconduct. Beyond that, the words in s 72 should not, in my judgment, be over- refined by treating the words in s 72 on the basis that they have some technical meaning or by seeking synonyms for words which have natural meanings.
[50] In my judgment the Tribunal was correct when it observed, in effect, that the enquiry on a complaint is not limited to individual paragraphs in s 72. In this case
the enquiry can include the question raised by paragraph (a) as to whether the work in this case fell short of the standard that a reasonable member of the public is entitled to expect. Negligent work will be different from what is defined in paragraph (a) and negligent work will be different from incompetent work, being the other category of unsatisfactory conduct stated in paragraph (c).
[51] The underpinning for an assessment as to whether the work in question is unsatisfactory, in one or more of the ways defined in s 72, is s 3(1) which defines the purpose of the Act as follows:
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.
[52] Applying s 3(1) to the relevant provisions of s 72, and in turn to the facts of this case, satisfies me that there was no material error by the Tribunal in its conclusion that use of the seventh edition did not constitute unsatisfactory conduct. I have come to this conclusion having had regard to the careful and extensive submissions of Mr Wyatt in support of his primary contention that use of the seventh edition was negligent and fell short of what a reasonable member of the public is entitled to expect. The thrust of Mr Wyatt’s submissions on negligence, supported by reference to a substantial body of evidence, was to the essential effect that Barfoot & Thompson had ample opportunity to ensure that the eighth edition was used and had no good reason to continue to use the seventh edition. The essence of the submission as to reasonable public expectation was founded on a submission that members of the public will naturally assume that, if the agent provides a standard form of agreement for sale and purchase, it will be the current edition. That submission was supported by reference to a statement in a Real Estate Institute document entitled “Residential Property Sale and Purchase Agreement Guide” which contains the following statement: “Your agent will probably use the Auckland District Law Society and Real Estate Institute of New Zealand form”. Mr Wyatt emphasised the word ‘the’.
[53] I will explain my reasons for concluding that Barfoot & Thompson’s conduct was not unsatisfactory conduct on the basis, but without deciding, that it was not necessary for Mr Wyatt to establish that Barfoot & Thompson’s conduct resulted in
loss to Mr Wyatt or, more specifically, to the trustee company as vendor. Depending on the circumstances of a particular case, proof that the licensee’s conduct has resulted in a loss may be necessary to establish unsatisfactory conduct. But the case was not, in the end, argued by Mr Wyatt on this basis and it is appropriate to determine the issue on the basis that proof of loss is unnecessary.
[54] The question in this case can be considered at two levels. The first may be described as a general level, without regard to any particular facts relating to the dealings between the parties. The second level is the specific; the particular circumstances of this case relating to the relevant dealings between the parties.
[55] At the general level there is the clear and essentially uncontradicted expert evidence of Mr Morley to the essential effect that there was need for a transitional period before the seventh edition stopped being used. This evidence was supported, in relation to Barfoot & Thompson’s own approach to the eighth edition, by the evidence of Mr House in particular. Mr Eades’ expert opinion from the perspective of lawyers is also relevant, notwithstanding the obvious, and marked differences between the roles of real estate agents and lawyers.
[56] Considering the issue in terms of the purpose of the Act defined in s 3, and reasonable standards of conduct, the expert opinion is not determinative, but it is of importance. Mr Wyatt sought to counter the expert opinion by reference to a range of evidence. However, I am not persuaded by that evidence, and Mr Wyatt’s submissions on it, that having a transitional period when both the seventh and eighth editions were used constituted unsatisfactory conduct in cases where the seventh edition was used.
[57] There are further important considerations of general application. Whether particular provisions in a standard form are appropriate for a party to the agreement is a matter to be determined by the party or that party’s lawyer. This is not a matter for a real estate agent unless the particular circumstances give rise to a particular responsibility for the agent (the licensee). The standard form agreement, whether it is the seventh edition or the eighth edition, in fact gives the parties to the agreement
express notice of the desirability of obtaining professional advice before the agreement is signed. The relevant wording is recorded above.
[58] This clear advice points to a further general consideration. The subject matter of this complaint is a standard form. It is simply a template. No doubt it will be suitable without amendment in many cases. But in particular cases it may not be suitable, or particular provisions in it may need modification. That will be the case whether it is the old edition or the new edition. And, when considering the present issue in that context, continued use over a reasonable period of time of the template
– the seventh edition – which had been in use since 1999, could reasonably be regarded as prudent. In my judgment, for the reasons outlined, it certainly cannot be regarded as unsatisfactory conduct.
[59] Assessing the issue in relation to the particular circumstances of this case, I remain of the view that there was no unsatisfactory conduct by Barfoot & Thompson. The circumstance of this case of particular relevance is that Mr Wyatt made quite clear that he was assuming full responsibility for the terms of the agreement. Mr Wyatt’s express instructions as to terms to be included did not include instructions for modification or deletion of standard form clauses. But that absence of instructions in this regard has no bearing on the inference to be drawn from the express instructions given. Looking at it from a different perspective, there was nothing that could have indicated to Mr Reid that Mr Reid specifically, or Barfoot & Thompson in general, were being asked to assume any responsibility as to the suitability of any of the terms of the agreement.
[60] Mr Wyatt submitted that the provision of the seventh edition amounted to a representation that that edition was the current edition. Viewing that fact in isolation I do not accept that the mere use of the form amounted to a representation of any relevance. In any event, this must be put into the circumstances of this case, and the relevant circumstances are that Mr Wyatt by his own clear instructions effectively made clear that he was not relying upon any advice or representation, express or implied, that might be proffered by Mr Reid.
[61] For these reasons I am satisfied that Mr Wyatt’s appeal on this question
should be dismissed.
Conflict of interest
[62] I am satisfied that the Tribunal should not have proceeded to make a determination on the conflict of interest question. There are two main reasons for this.
[63] The first is that, in my judgment, the Tribunal did not have jurisdiction. The
Tribunal’s jurisdiction is prescribed by s 111 which, so far as material, is as follows:
111 Appeal to Tribunal against determination by Committee
(1) A person affected by a determination of a Committee may appeal to the Tribunal against a determination of the Committee within 20 working days after the date of the notice given under section 81 or
94.
…
(4) After considering the appeal, the Tribunal may confirm, reverse, or modify the determination of the Committee.
[64] There was no determination of a Committee, which means a Complaints Assessment Committee, in respect of which the Tribunal could entertain an appeal. For Barfoot & Thompson, Mr Hern referred to s 105(1) of the Act which provides that the Tribunal may regulate its procedure as it thinks fit. However, this is not a provision enabling the Tribunal to give itself a jurisdiction it does not have.
[65] There is no doubt that the parties engaged with the issue in the hearing before the Tribunal. However, having regard to the carefully prescribed statutory procedures for the bringing of a complaint, with investigation and determination by a Complaints Assessment Committee, and the wording of s 111 in respect of appeals, I am not persuaded that jurisdiction could effectively be granted by agreement. But if I am wrong in that regard there is a second consideration which satisfies me that the Tribunal’s determination should be set aside. This is the clear statement by Mr Wyatt, in his written submissions following the hearing, that he did not seek a determination of this issue. Even if his raising of the matter with the Tribunal could
be regarded as a complaint, which I doubt, as the complainant he was entitled to withdraw it. This may have a bearing on costs. But it does not have a bearing on the substance.
Expenses incurred in obtaining evidence for the appeal
[66] Because of my conclusion on the primary issue relating to use of the seventh edition I am satisfied that there are no reasonable grounds for an order in Mr Wyatt’s favour that Barfoot & Thompson meet expenses he incurred in obtaining evidence to put before the Tribunal.
Result
[67] The appeal against the Tribunal’s decision on use of the seventh edition is
dismissed.
[68] The appeal against the Tribunal’s determination on the conflict issue is allowed to the extent that that decision is set aside. This is coupled with a declaration that there is no extant determination on this issue, one way or the other.
[69] Mr Wyatt’s application for an order for reimbursement of expenses is dismissed.
[70] Barfoot & Thompson is entitled to costs. If costs are sought and cannot be agreed between the parties, a memorandum for Barfoot & Thompson should be filed
with a response from Mr Wyatt one month later.
Woodhouse J
5
0
1