IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2014-404-2690 [2015] NZHC 1011

BETWEEN	JANE HONGBO WANG
Appellant	

AND	
REAL ESTATE AGENTS AUTHORITY Respondent	

Hearing:	3 March 2015	

Appearances:	
T Rea for the appellant
M Hodge and Ms McGibbon for the respondent	

Judgment:	
13 May 2015	

JUDGMENT OF TOOGOOD J

This judgment was delivered by me on 13 May 2015 at 4:00 pm
Pursuant to Rule 11.5 High Court Rules

Registrar/Deputy Registrar

WANG v REAL ESTATE AGENTS AUTHORITY [2015] NZHC 1011 [13 May 2015]

[1]       The appellant, Ms Jane Hongbo Wang, appeals under s 116 of the Real Estate Agents Act 2008 (“the REA Act”) against a decision of the Real Estate Agents Disciplinary  Tribunal  (“the  Tribunal”)  finding  her  guilty  of  misconduct  in  her capacity as a senior salesperson at the Panmure branch of Barfoot & Thompson, real estate agents.1

Introduction

[2]       During 2013, the designated branch manager of the Panmure branch was Mr Christopher  Swann.    Ms Wang  led  a  team  of  salespeople  which  included Mr Zhong (Sam) Li.

[3]       In a Notice of Charge dated 8 January 2014, Ms Wang was charged by CAC

20004, a complaints assessment committee of the Real Estate Agents Authority (“the Authority”), with misconduct under s 73(c)(ii) of the REA Act in that  she had “wilfully or recklessly contravened s 36(2A) of the Lawyers and Conveyancers Act
2006” (“the LCA”).  Ms Wang also faced alternative charges of misconduct under s

73(b) of the REA Act and of unsatisfactory conduct under s 72 of the REA Act.  The charges were based on complaints by Mr Saiyad Shiron and Ms Shazia Ali in respect of a sale and purchase agreement for a property described as Unit 64, 51 Ireland Road, Panmure (“the property”).

[4]       Mr Li and Mr Swann faced separate but related charges set out in the same Notice of Charge.   The charges against Mr Li included an allegation that he had breached s 36(2A) of the LCA in that

… having not held a licence as a salesperson under the Act for more than 6 months, [he] prepared the sale and purchase agreement for the property and gave the complainants advice about legal rights and obligations, particularly in  relation  to  the  meaning of  conditional  and  unconditional,  which  was advice that was incidental to the preparation of the sale and purchase agreement.

1	The Real Estate Agents Authority (Per CAC 20004) v Li [2014] NZREADT 67 (“the Tribunal’s substantive decision”).

The charges against Ms Wang

[5]       On 10 and 11 April 2014, the Tribunal conducted a hearing of the charges. By consent, the original Notice of Charges was amended after the hearing; the original charge against Ms Wang alleging a wilful or reckless contravention of the law was withdrawn.  By the time the Tribunal came to deliver its decision, therefore, Ms Wang faced the following charges:

Charge 4 – Jane Wang

CAC 20004 charges Jane Wang with misconduct under s 73(b) of the [REA]  Act  in  that  her  conduct  constitutes  seriously  incompetent  or seriously negligent real estate agency work.

Particulars

Ms Wang instructed Mr Li to obtain the complainant’s signature on the sale and purchase agreement for the property in circumstances where the sale and purchase agreement had not been finalised and Mr Li could not legally finish preparing the sale and purchase agreement for the property, or give advice about legal rights and obligations arising from the agreement for sale and purchase.

Charge 5 (alternative to Charge 4) – Jane Wang

Unsatisfactory conduct under s. 72 of the [REA] Act, repeating the particulars set out under Charge 4 above.

[6]       Mr Swann was charged with wilful and reckless contravention of s 50 of the REA Act, in that he did not properly supervise Mr Li, and alternative charges based on the same facts.

The Tribunal’s findings against Ms Wang

[7]       The Tribunal said at [170] of its decision:

We consider that misconduct has been proven against Ms Wang but, quite possibly, at a relatively modest level of offending overall.  We feel she was seriously negligent in her instructions to Mr Li as to the real estate work he was  to  undertake  …  and  she  has  wilfully  contravened  the Act  and  its Regulations.

[8]       This is an appeal against that decision.

Approach to appeal

[9]       On a general appeal, the appellate court has the responsibility of considering the merits of the case afresh.2    In Austin, Nichols & Co Inc v Stichting Lodestar, Elias CJ stated that the appellate court must reach its own opinion “even where that opinion is an assessment of fact and degree and entails a value judgment”.3    The Chief Justice continued:4

If  the  appellate  Court’s  opinion  is  different  from  the  conclusion  of  the tribunal appealed from, then the decision under appeal is wrong in the only sense that matters, even if it was a conclusion on which minds might reasonably differ. In such circumstances it is an error for the High Court to defer to the lower Court’s assessment of the acceptability and weight to be accorded to the evidence, rather than forming its own opinion.

[10]     This does not mean that the appellate Judge should be “uninfluenced” by the lower court.5   What influence the lower court’s reasoning should have is for the High Court’s assessment.6

Facts

[11]     The Tribunal delivered a decision which discusses at some length the nature of the charges and allegations against Ms Wang, Mr Swann and Mr Li; the relevant legislative provisions; the evidence given by the witnesses; and the arguments of counsel for the Authority and for the three defendants respectively.  Regrettably, the Tribunal did not include a clear statement of its findings of fact in relation to each allegation against each of the defendants – whether by resolution of disputed matters, or by reference to undisputed evidence – and the Tribunal’s expressed views are not always consistent.   Consequently, the parties and the Court are left  to infer the Tribunal’s conclusions on the facts from the statement of its views on the case
against Ms Wang, summarised in five paragraphs near the end of the decision.7

2	Kacem v Bashir [2010] NZSC 112, [2011] 2 NZLR 1 at [31].
3	Austin, Nichols & Co Inc v Stichting Lodestar [2007] NZSC 103, [2008] 2 NZLR 141 at [16].
4	At [16].
5	Kacem v Bashir, above n 2, at [31].
6	Austin, Nichols & Co Inc v Stichting Lodestar, above n 3, at [17].
7	Set out at [31]-[32] below.

[12]     This being a general appeal, although not expressly by way of rehearing, I am required in the circumstances to set out, as far as I can determine them from the material before the Court, the essential facts leading to the Tribunal’s findings.

[13]     On 13 April 2013, the complainants, Ms Ali and Mr Shiron, attended an open home at Unit 64, 51 Ireland Road, Panmure.   Unit 64 was located in the same complex as the unit which the complainants were renting.  It was there that they met Mr Li, a junior salesperson for Barfoot & Thompson who had, at the time, less than six months’ experience as a salesperson.  The property was to be auctioned off just over a week later.

[14]     The  complex  had  been  a  leaky  building,  which  had  since  been  re-clad. A code compliance certificate was issued in respect of the property on 11 November
2010.

[15]     During the open home, Mr Li showed the complainants around for about half an hour.  At the Tribunal hearing, Mr Li stated that the complainants had told him that they were living in an apartment in the complex and knew all about the building. He claimed that they also told him that they owned a barbershop in a nearby suburb, that they had bank approval for finance to purchase a property, and they knew that the building had been re-clad and certified so they did not need a building report. Following the open home, Mr Li sent the complainants a number of text messages to see if they were interested in making an offer on the property.

[16]     The bank approval for finance to which the complainants referred during the open  home  was  given  in  2010  for  a  mortgage  loan  on  a  different  property  in Mangere. The purchase did not go ahead.

[17]     The complainants decided to attend the auction for the property, but only as observers to see how an auction worked.  The auction took place on 24 April 2013. It was there that the complainants also met Mr Swann, the manager of the Panmure Barfoot  &  Thompson  office.    This  was  the  only  time  the  complainants  met somebody other than Mr Li during the process that led to making an offer on the property.  Both Mr Swann and Mr Li encouraged the complainants to make an offer

on the property in order to get the auction started.  The complainants bid $300,000 on the property but it was passed in.  Had the complainants been successful, their bid would have amounted to an unconditional offer.   Before the Tribunal, the complainants stated that they did not understand what the term  “unconditional” meant, but said they made the bid because they trusted Mr Li.

[18]     Mr Li told Ms Wang that the complainants had been the highest bidders at the auction but did not meet the reserve.  Ms Wang encouraged Mr Li to see whether the complainants were interested in putting in a written offer.   Mr Li spoke with the complainants who said that they were prepared to make an offer of $340,000 for the property.

[19]     Some time prior to 29 April 2013, Mr Li approached the complainants with an offer document.  Ms Wang had sent Mr Li to meet with them in her place because she was too busy; she instructed Mr Li to contact her if the complainants had any questions.  Ms Wang  was  aware  that  that  the  building  had  been  subject  to weathertightness issues, but she had sold another unit in the complex since remedial work had been completed and she knew that a code compliance certificate had been issued.

[20]     Although it was claimed on behalf of Ms Wang that Mr Li had informed her that the complainants had finance in place at the time the offer document was being prepared, Ms Wang accepted in cross-examination before the Tribunal that she had never asked the purchasers what the bank had required for a deposit, or any other questions about finance.

[21]     The offer document had been prepared by a Ms Guo, a licensed salesperson working at Barfoot & Thompson, but it did not contain the price, settlement date, or conditions of sale.   Ms Wang claimed that she checked the draft document and prepared other necessary documentation such as the Real Estate Agents Authority’s “Approved Guide” and pre-contract disclosure information, but the complainants said  they  never  received  these  other  papers.    The  Tribunal  recorded  that  an

acknowledgement signed by the complainants that they had received the documents on an earlier occasion had been produced in evidence.8

[22]     The   complainants   signed   the   offer   document   which   contained   an unconditional offer of $340,000 with a settlement date of 17 May 2013.  Mr Li filled in the price, settlement date and the conditions of the sale and purchase agreement himself.   It was not disputed that in leaving Mr Li to complete the form initially drafted by Ms Guo, Ms Wang’s actions breached Barfoot & Thompson’s policy that no person with under six months’ experience was to prepare agreements for sale and purchase; that all agreements were to be prepared by a designated and suitably experienced salesperson; and that no licensee with under six months’ experience was to be involved in any unaccompanied negotiation of sale and purchase agreements.

[23]     The complainants also said that Mr Li told them that the offer would be “unconditional” but that they did not understand the meaning of the term.   From Mr Li’s explanation, the complainants understood that if conditions were put on the offer, the vendor might think they were not genuine buyers, but if they made the offer unconditional, the vendor would be interested in their offer. The complainants alleged that, at this point, Mr Li did not give them a copy of the agreement to read or check, nor did he tell them that they should see a lawyer.

[24]     On 2 May 2013, Ms Wang informed Mr Li that someone else was making an offer  on  the  property.    Mr Li  passed  this  information  to  the  complainants. The complainants signed a “multiple offer acknowledgement form” that included advice that other offers were being presented; that they may not have an opportunity to increase their offer; and that the vendor may accept another offer without further reference to them.

[25]     Apparently keen to purchase the property, the complainants told Mr Li that they wanted to meet with him to make another offer.  Ms Wang told Mr Li that he could use the previous offer document and have the complainants insert and initial their best price. On 2 May 2013 Mr Li advised the complainants to offer $375,000.
The  complainants  made  the  offer,  which  was  accepted  by  the  vendor.    The

8	The Tribunal’s substantive decision, above n 1, at [134], [135] and [138].

complainants said they did not understand that this offer was binding on them even if they failed to obtain bank finance.   It is significant, however, that the Tribunal recorded at [160] of its substantive decision that Mr Shiron gave evidence that he had informed Mr Li that his wife and he had finance approved at $390,000 and that he “probably” did not add that the approval had been arranged in 2010.

[26]     The complainants said Mr Li did not caution the complainants that in the absence of a finance condition they should obtain prior finance approval for the specific  property,  especially  given  that  it  was  a  large  block  of  units  and  had previously had weathertightness issues.  Furthermore, they told the Tribunal Mr Li gave no advice about the risk of entering into an unconditional contract.

[27]     The complainants said that when they contacted their accountant to arrange a loan to purchase the property, they realised that they would be contractually obliged to buy it even if they were unable to secure a bank loan.  One bank agreed to give them a loan but required them to pay 35 per cent of the purchase price from their own pocket.  The complainants could only meet five per cent of the purchase price and could not obtain finance.

[28]     The complainants were unable to complete the purchase and have been sued by the vendor for $37,500, which is the 10% deposit required under the contract. They complained to the Authority about the conduct of Mr Li, Ms Wang and Mr Swann.

Relevant statutory provisions

[29]     The Tribunal referred to and relied upon to the following provisions of the

REA Act:

50	Salespersons must be supervised

(1)        A salesperson must, in carrying out any agency work, be properly supervised and managed by an agent or a branch manager.

(2)        In  this section  properly supervised  and  managed means  that the agency work is carried out under such direction and control of either a branch manager or an agent as is sufficient to ensure—

(a)	that the work is performed competently; and

(b)	that the work complies with the requirements of this 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.

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.

[30]     The Tribunal also considered s 36(2) – (2A) of the LCA.  These subsections provide that, while a person who holds a current licence as a salesperson under the REA Act is permitted to prepare any agreement for sale and purchase of land and give advice about legal rights and obligations that is incidental to the preparing of such an agreement, the provision does not apply unless the salesperson has had at least six months experience as such a licensee.

The Tribunal’s substantive decision

[31]	The Tribunal’s reasoning in support of its finding against Ms Wang is as follows:

[168]    With regard to Ms Wang, we are of the firm view that her conduct was deficient in that she over-delegated to Mr Li in order to keep putting through a high volume of real estate work and achieve many sales in a high- powered manner.   She knew of the requirements of the Act and its Regulations that she supervise Mr Li.  She was well aware that, in failing to do so, she was breaching the very strict guidelines imposed by Mr Swann on behalf of her agency.

[169]    We regard her failure to supervise Mr Li at all material times as concerning. It may well be that the heavy financial consequences which complainants seem to have incurred have resulted from that; although in many ways, they seemed to know the risks they were undertaking.

[170]    We consider that misconduct has been proven against Ms Wang but, quite possibly, at a relatively modest level of offending overall. We feel that she was seriously negligent in her instructions to Mr Li as to the real estate work he was to undertake as covered above and she has wilfully contravened the Act and its Regulations.

…

[172]    It is surprising that between Ms Wang, Ms Guo and Mr Li, neither a finance condition nor conditions relating to a LIM and builder’s report were inserted in the contract. At least there should have been full discussion by an experienced agent with the complainants about those aspects.

[173]    Generally  speaking,  we  cannot  disagree  with  the  case  against Ms Wang put to us by Mr Hodge [counsel for the Authority] and as we have summarised it above….

[32]	The case put by the Authority’s counsel appears at [66] – [72] of the decision:

[66]      It  is  submitted  by  Mr Hodge  that  Ms Wang  instructed  Mr Li  to obtain Mr and Mrs Shiron’s signatures on the sale and purchase agreement when important aspects of the agreement had not been finalised; and that Mr Li, with less than six months’ experience, could not legally finalise the agreement or provide advice about legal rights and obligations arising from it; and that there were important matters about the agreement which needed to be covered with Mr and Mrs Shiron as a matter of fairness.

[67]      This occurred in the context where Mr Li had all the dealings with Mr and Mrs Shiron, apart from Mr Swann’s interaction with them at the auction.  Mr Li had almost all of the important contact with them including at the open home; pre-auction contact (by telephone); post-auction follow up (by telephone); and two meetings in person (29 April 2013 and 2 May 2013), at both of which Mr Li obtained the signatures of Mr and Mrs Shiron to unconditional offers.

[68]      Ms Wang has admitted that, by not attending with Mr Li, her actions breached company policy.  Mr Swann described it as an error of judgment. However,  Mr  Hodge  submits  that  Ms Wang’s  conduct  was  much  more serious than that.   He noted that the property had undergone significant repairs due to weathertightness issues.   It was part of a large complex of units. Anne Duncan’s evidence about lending requirements in either of these circumstances, referred to above, was not challenged.  In cross-examination Ms Wang agreed with Anne Duncan’s evidence on this point.  Despite this, Ms Wang allowed Mr Li to have almost exclusive dealings with Mr and Mrs Shiron, and to sign them up to an unconditional contract.

[69]      Ms Wang gave no advice to Mr and Mrs Shiron about the possibility of the banks imposing strict lending requirements.  She did nothing to ensure that Mr Li explain this, or explain the need for finance pre-approval for the property, or discuss the need for their offer to be conditional on finance.

[70]      Ms Wang’s evidence was that she promotes a careful approach in dealing with purchasers as a matter of fairness.  Ms Wang says that even if there is a “1% risk” the purchaser is unsure, the purchasers should put a condition in the contract.

[71]      Mr Hodge submits that the dealings with Mr and Mrs Shiron fell short of that standard by a very wide margin. It is submitted that, by her own standards and the standards of reasonable agents, Ms Wang’s conduct in letting Mr Li deal with Mr and Mrs Shiron by himself, and failing to take the care to ensure they were dealt with fairly in relation to whether a finance condition should have been inserted, was seriously incompetent or negligent, and  her  conduct  in  letting  this  happen  was  a  serious  departure  from acceptable standards.

[72]      Mr Hodge noted that Ms Wang and Mr Li have attempted to justify Mr Li’s solo attendances by explaining that Ms Wang was available to call should Mr Li encounter any problems.   Ms Wang has also explained her actions by stating she was just too busy.  However, it is also submitted by Mr Hodge that being too busy, and stating that she was available on the telephone, does not excuse Ms Wang’s misconduct under s 73(b) of the Act.

Issues on appeal

[33]     For Ms Wang, Mr Rea submits that the Tribunal made a number of errors of law, which meant that the Tribunal erred in reaching its decision that Ms Wang was guilty or serious misconduct or negligent misconduct.  In essence, he argues:

(a)       The Tribunal misstated the law regarding supervisory duties under the REA  Act  and  regulations  by  holding  that  Ms Wang,  a  licensed salesperson, had  a duty under the Act  or  regulations  to  supervise Mr Li, who was also a licensed sales person.

(b)       The Tribunal purported to find Ms Wang liable in respect of a matter on which she faced no charge, the charge of wilful or reckless contravention of s 36(2A) of the LCA having been withdrawn.

(c)       The Tribunal failed to consider, or give sufficient weight to, various relevant factors concerning the specific circumstances of the case.  In particular, the Tribunal failed to consider Ms Wang’s actions in the light of her knowledge at the time, and to take into account, in respect of Ms Wang, its findings about Mr Li’s competence and honesty, and about the complainants’ understanding of matters concerning the sale.

(d)       The  Tribunal  reached  a  finding  of  misconduct  that  cannot  be reconciled the decision in Complaints Assessment Committee 20003 v Jhagroo9

The significance of the law regarding supervisory duties under the REA Act and regulations

[34]     Ms Wang was a licensed salesperson, the lowest of three tiers of licensee under the Real Estate Agents Act 2008.    The other two tiers are licensed branch managers and licensed real estate agents.

[35]     Ms Wang submits that it is only real estate agents and branch managers who are responsible for the supervision of salespeople under s 50 of the REA Act and that,  because  she  is  a  salesperson  only,  she  does  not  have  that  responsibility. Similarly, under r 8 of the Real Estate Agents Act (Professional Conduct and Client Care) Rules 2012 it is only agents who have a duty of supervision.  The Rules came into  effect  on  8  April  2013  and  were  applicable  to  the  conduct  of  the  three defendants in the transaction subject to the complaint.

[36]     The Authority argues that there is nothing in s 50 of the REA Act which precludes experienced salespersons from being involved in supervision of junior salespersons.  That may be so, but it is clear that a salesperson who may be given
actual responsibility for supervising the real estate work of another salesperson by an

9	Complaints Assessment Committee 20003 v Jhagroo [2014] NZHC 2077.

agent or branch manager, or who may assume such responsibility, is not under a statutory duty in carrying out that role. And it was not open to Mr Swann to delegate to Ms Wang his statutory duty under s 50 to ensure that Mr Li’s work was performed competently and that it complied with the requirements of the Act, including the relevant provisions of the LCA.

[37]     It follows that the Tribunal erred when it said at [168] that Ms Wang “knew of  the  requirements  of  the Act  and  its  Regulations  that  she  supervise  Mr Li.” Although it did not address that statement directly, the Tribunal appears to have acknowledged its error with regard to it in its decision of 30 September 2014 dealing with an application by Ms Wang for a recall of the decision insofar as it concerned her.10   Ms Wang had applied for a recall of [170] of the substantive decision to delete a reference to Ms Wang wilfully contravening the Act and its regulations because the charge alleging a wilful contravention of the legislation was withdrawn and amended to one of serious incompetence or negligence.11    In respect of that application, the Tribunal said:

… we take the view that there is no need to correct our paragraph [170] as referred to above; even though the words “and she has wilfully contravened the Act and its Regulations” are beside the point in terms of the final form of the charge against her, and would better have been omitted.  Our reasoning for our finding against Ms Wang is clearly based on the issue of serious negligence as charged.12

[38]     Reading  the  Tribunal’s  substantive  decision  as  a  whole,  however,  it  is difficult not to conclude that the Tribunal misdirected itself and that it placed some weight on what it held to have been a deliberate breach by Ms Wang of a statutory duty to supervise Mr Li.13

[39]     Nevertheless,  the  Tribunal  recorded  that  Ms Wang  acknowledged  in  the course of her evidence that she had over-delegated the responsibility for dealing with
the complainants to Mr Li and, in doing so, had breached Barfoot & Thompson’s

10	Recall of the Tribunal Decision in Real Estate Agents Authority (per CAC 20004) v Li [2014] NZREADT 77.
11	As discussed at [5] above.
12	Recall of the Tribunal Decision in Real Estate Agents Authority (per CAC 20004) v Li above, n
10 at [10].
13	The Tribunal’s substantive decision, above n 1 at [168], quoted at [32] above.

policies.14   The Tribunal also recorded that Ms Wang “seemed to accept” that in fact

Mr Li had handled the purchase transaction.

[40]     Mr Rea  sought  to  minimise  the  nature  of  the  work  done  by  Mr Li, characterising it as merely obtaining the signatures of the complainants on the agreement.  It was open to the Tribunal, however, to conclude that in fact Mr Li had done all of the relevant  real estate agency work in his direct dealings with the complainants, including discussing with them matters of finance and the weathertightness issues.   That was Mr Li’s evidence, and Ms Wang conceded that Mr Li had controlled the open home, assisted at the auction, and done all the follow
up work after the auction leading to the binding contract to purchase.15

[41]     I am also satisfied that the Tribunal was correct to characterise some aspects of what Mr Li did in relation to the complainants as conveyancing work; such work, because  it  been  carried  out  by  a  salesperson  who  had  less  than  six  months experience, was in breach of the LCA and not protected by the exemption in s
36(2A) of the LCA.

[42]     The Tribunal was entitled to reject the proposition that the sale and purchase agreement had been  finalised, and required  the insertion of only routine details concerning the names of the purchasers, the settlement date and the price, by the time it was given to Mr Li for signing by the complainants.  The agreement was far from complete at the time Mr Li received it.   The important issues of a finance condition and the requirements to obtain a LIM and a building report had not been addressed in the document handed to him.

[43]     The Tribunal was entitled to conclude that, as alleged in the particulars to charge 4,16 “Ms Wang instructed Mr Li to obtain the complainant’s signature [sic] on the sale and purchase agreement for the property in circumstances where the sale and purchase agreement had not been finalised”.  Further, Ms Wang gave that instruction in circumstances and at a time when “Mr Li could not legally finish preparing the
sale and purchase agreement for the property, or give advice about legal rights and

14	At [120].
15	At [122].
16	Quoted at [5] above.

obligations arising from the agreement for sale and purchase” in that he did not have the requisite six months experience required to take advantage of the exception in s 36(2A) of the LCA.

Did the Tribunal purport to find Ms Wang liable in respect of a matter on which she faced no charge?

[44]     It is not disputed that the Tribunal erred to the extent that it found, at [170], Ms Wang guilty of misconduct because she had “wilfully contravened the Act and its Regulations.”    I have noted above that the Tribunal acknowledged its error in the recall decision.  But as the Tribunal observed, its reasons for the misconduct finding included also what it described as Ms Wang’s serious negligence in giving Mr Li instructions regarding the real estate work he was to undertake.   The Tribunal’s admitted error is not one that can afford the appellant any assistance in her appeal unless it can be shown that the misconduct finding was not supported by the ground for its decision regarding the instructions to Mr Li.  I turn to that matter shortly.

[45]     Moreover, there is some force in Mr Hodge’s submission on behalf of the Authority that the Tribunal was not prevented from finding that a wilful breach of Barfoot & Thompson’s rules and the legislative restrictions on Mr Li could properly be taken into account as underscoring the seriousness of the appellant’s conduct generally.

What relevant factors concerned the particular circumstances of the case?

[46]     Mr Rea submitted that the Tribunal failed to consider and/or give sufficient weight  to  the  standard  of  real  estate  agency  work  performed  by  Mr  Li  and Ms Wang’s knowledge at the time of the transaction in finding Ms Wang guilty of misconduct.

The standard of real estate agency work performed by Mr Li

[47]     I accept that findings about the duties and conduct of Mr Li were relevant to

the Tribunal’s consideration of the case against Ms Wang.  The Tribunal described

the work undertaken by Mr Li as being undertaken “competently”;17  and no factual finding was made against Mr Li’s testimony that the complainants did not tell him that the pre-approved finance related to a previous prospective transaction.  In fact, as I have noted at [25], the Tribunal appears to have accepted Mr Shiron’s evidence that he had informed Mr Li finance had been approved at $390,000 and that he probably did not add that the approval had been arranged in 2010.

[48]     The Tribunal found Mr Li to be “a sensible and honest person”;18  that the complainants seemed “to have a reasonable understanding of commerce…despite their protestations to the contrary”;19   and that the complainants “seemed to know the risks they were undertaking”.20

[49]     Those findings were consistent with Mr Li’s evidence.21    Mr Li also said in evidence that he had advised the complainants to obtain legal advice, and arrange finance and reports, so they would be in a position to make an unconditional offer,22 and that the complainants spent about 10 minutes reading the purchase contract before they signed it.23    It is implicit in the Tribunal’s finding that the real estate work Mr Li did on behalf of the complainants was done competently that it accepted Mr Li’s evidence on those matters.   I note also that the finding impliedly rejected both evidence of the complainants to the contrary and the description of Mr Li’s conduct by the expert witness called on behalf of the Authority, Ms Anne Duncan, as seriously  incompetent.    Ms Wang  is  entitled  to  rely  on  the  Tribunal’s  findings concerning Mr Li, so far as they are relevant to the case against her.

[50]     The Tribunal dismissed the misconduct charges against Mr Li, but held that he was guilty of unsatisfactory conduct because he was too involved in the purchase
transaction given his lack of experience and the requirements of the LCA.24

17	The Tribunal’s substantive decision, above n 1 at [167].
18	At [106].
19	At [99].
20	At [169].
21	At [107].
22	At [107].
23	At [112].
24	At [165]-[167].

Circumstances  relating  specifically  to  Ms Wang,  including  her  relevant  state  of knowledge and instructions

[51]     I accept Mr Rea’s submission that whether Ms Wang was seriously negligent or seriously incompetent needed to be considered in the light of the circumstances at the time as they were reasonably understood by Ms Wang and the precautions she took.  The agreement for sale and purchase was prepared by a qualified salesperson (Ms Guo); it was a standard ADLSI form in which the general terms of sale were pre-printed.  So far as it was necessary to turn the document into an offer capable of acceptance to form a binding contract, Mr Li was required only to ensure that the names of the purchasers, the price and the settlement date were inserted.

[52]     The  form,  however,  had  a  section  in  which  finance  conditions  could  be entered.   It also required choices to be made about whether a Land Information Memorandum  (LIM),  a  building  report,  and  an  Overseas  Investment  Act  2005 consent were required.  Considering whether to make an unconditional offer or an offer subject to finance, and/or to obtaining a satisfactory LIM and building report, required an appreciation by the purchasers of the significance of those choices and was more than mere box-ticking.  Ms Duncan considered it necessary for a finance condition, and conditions as to a LIM and a building report, to be included in a contract for first home buyers and for a property with a weathertightness history.  It followed, in her view, that it was inappropriate for an inexperienced salesman such as Mr Li to be given the responsibility for advising the intended purchasers on the completion of those parts of the agreement.

[53]     The Tribunal appeared to accept that an information guide had been supplied to the complainants by Mr Li.  Ms Wang was aware that the property had been fully remediated and that a code of compliance certificate had been issued for remedial work  but  it  does  not  appear  that  she  considered  the  possibility that  the  bank’s requirements for finance might be more stringent in light of the property’s weathertightness history.  Ms Wang was also aware, however, that the complainants
had made an unconditional offer of $300,000 at the auction a few days earlier,25 and

the Tribunal recorded that Ms Wang was not challenged on her evidence that the

25	At [148].

complainants had told her they already had finance arranged and  that they just needed to provide a few more documents to the bank.26

Conclusion as to relevant factors

[54]     Before turning to consider whether the Tribunal gave sufficient weight to its findings about Mr Li and Ms Wang’s state of knowledge, it is helpful to consider the decision of this Court in Complaints Assessment Committee 20003 v Jahgroo. Whether the Tribunal reached a finding of misconduct that cannot be reconciled with that case turns partly on the weight it gave to those factors.

Did the Tribunal reach a finding of misconduct that cannot be reconciled with the decision in Complaints Assessment Committee 20003 v Jhagroo?

Complaints Assessment Committee 20003 v Jhagroo

[55]     This Court’s decision in Complaints Assessment Committee 20003 v Jhagroo concerned an appeal against the dismissal by the Tribunal of a charge of misconduct against Mr Jhagroo under s 73(b) of the REA Act.27   The Authority argued that the threshold the Tribunal set for serious misconduct or serious negligence was too high. Mr Jhagroo’s company was agent in respect of a property for sale by the vendors. Under a sale and purchase agreement, the vendors agreed to sell the property to the purchasers for $505,000, with a deposit of $25,000 to be paid to Mr Jhagroo’s company’s account on the agreement becoming unconditional.  The offer was made
after Mr Jhagroo had represented to the purchasers that the amount of the purchase only  needed  to  be  sufficient  to  satisfy  the  vendors’ indebtedness  to  their  first mortgagee.  Mr Jhagroo knew, however, that the certificate of title showed that there were three interests registered against the property, including a caveat by Southland Finance Ltd. The solicitor for the vendors had advised them that they should include a clause in any sale and purchase agreement making any sale conditional on the vendors reaching agreement with their mortgagees as to the sale. This was because there were concerns that the amount owed to the three lenders was likely to exceed
the amount that could be expected from a sale.   This clause, however, was not

26	At [149].
27	Complaints Assessment Committee 20003 v Jhagroo above, n 9.

included in the agreement.  The agreement was declared unconditional.  Mr Jhagroo contacted the purchasers and instructed them to pay the deposit of $25,000 into his company’s trust account, which they did. The sale did not proceed.  Mr Jhagroo then deducted from  the  deposit  $20,925  in commission  and  $3,514.30  for marketing costs.  The purchasers complained to the Tribunal which found Mr Jhagroo guilty of unsatisfactory conduct.

[56]     Thomas J accepted the Tribunal’s analysis that it would be arbitrary to draw a specific  line  between  seriously negligent  or  incompetent  work  and  negligent  or incompetent work without reference to other decisions of the Tribunal and a comparison to the circumstances in those cases.  The Judge compared the situation in Jhagroo to other Tribunal decisions and felt that it was less serious than decisions in which the Tribunal had found there to be serious negligence or misconduct.  Since a similar comparison exercise is appropriate here, I respectfully adopt Thomas J’s analysis of the two cases she used as comparators:

[66]      CAC v Miller the Tribunal found the licensee guilty of misconduct by disgraceful conduct and being seriously negligent. The agent failed to disclose  a  development  plan  relating  to  land  neighbouring  the  property which would impact the view from the property.   There was a further allegation that he had positively advised the purchasers that nothing would be built on the neighbouring land.  The Tribunal commented that the agent had placed himself in a delicate position of trust by being both vendor and listing agent.   The Tribunal was not sure whether the defendant had any dishonest intentions but failure to disclose was such a bad error of judgment as to be very negligent and a disturbing breach of trust.

[67]      In  CAC  v  Wallace  the Tribunal  found  that  the  licensee  had  not necessarily intended to mislead the purchaser but in terms of his knowledge, experience, and duty, he was not justified in assuring the purchaser that the property had no potential weathertightness issues.   In the circumstances of that case, the licensee’s conduct was both seriously negligent and seriously incompetent real estate agency work and, at least, was a reckless contravention of the Act.

[68]       The cases of Miller and Wallace both involve serious negligence by an agent.  The representations made by the agents had significant long term consequences for the purchasers.  That is not to minimise the consequences on the purchasers in this case.   In the case of Miller the agent failed to disclose something he knew was a fact.   In the case of Wallace the agent made a positive representation on an issue in respect of which he had a well known duty and where, given his knowledge and experience, he was not justified in making the representation.  In my assessment this case falls into a different category.  As acknowledged by Mr Hodge, there is no suggestion that in every transaction an agent has a duty to be satisfied that a vendor can

discharge the financial liabilities secured by the property.   This was a relatively unusual situation.  Furthermore, Mr Jhargroo was entitled to place some reliance on the fact that the vendors should not have accepted the offer if they would not be able to settle the transaction.   The situation is more analogous to a case where an agent has encouraged the making of an offer even though he is aware that the vendor will not accept an offer at that level. In both situations the foreseeable loss to a purchaser is wasted time and money associated with making the offer.  Mr Jhagroo’s behaviour was of a qualitatively different nature from that in the cases of Miller and Wallace.

Submissions for Ms Wang

[57]     Mr Rae submits on behalf of Ms Wang that the “foreseeable” loss for the complainants is the same as in Jhagroo in that it involved wasted time and wasted money, but that Mr Jhagroo’s conduct was worse than that of Ms Wang.  He submits that it is difficult to understand what Ms Wang actually did wrong, other than to choose  not  to  follow  the  instruction  of  her  branch  manager,  which  set  a  more cautious standard than that in the LCA.   Mr Jhagroo had made a positive representation to the complainants to the effect that the amount of their offer only needed to satisfy the vendors’ indebtedness to first mortgage, when he knew that the vendors were not able to settle the transaction at the agreed price.

[58]     By contrast, Mr Rae submits, Ms Wang was held merely to have “over- delegated” to a person whom the Tribunal found to have acted “competently” in respect  of  complainants  whom  the Tribunal  held  seemed “to  have a reasonable understanding of commerce…despite their protestations to the contrary”28  and who “seemed  to  know  the  risks  they were  undertaking”.29      Furthermore,  Ms Wang’s
knowledge of the circumstances at the time made it reasonable for her to expect that the complainants would not require advice on the conditions of sale.

Submissions for the Authority

[59]     Mr Hodge submits that Jhagroo makes it clear that a question of serious negligent or incompetence needs to be assessed on the circumstances of each case. The  facts  of  Jhagroo  are  different  to  this  situation;  Jhagroo  did  not  involve  a
situation of a licensee instructing a junior salesperson to conduct negotiations in

28	The Tribunal’s substantive decision, above n 1, at [99].
29	At [169].

breach of well known industry standards.  Mr Hodge argues that the Tribunal is well placed to decide where to draw the line in the circumstances of each case and submits that it has done so correctly here.

Discussion

[60]     I  respectfully  adopt  Thomas  J’s  analysis  in  Jhagroo  that  in  determining whether the threshold of misconduct has been reached, the words “seriously incompetent or seriously negligent real estate work” in 73(b) must be given their plain meaning:
[49]      …   Whether   serious   negligence   or   serious   incompetence   has occurred is a question to be assessed in the circumstances of each case … the Tribunal is well placed to draw a line between what constitutes serious negligence or incompetence, or mere negligence or incompetence, the Tribunal having considerable expertise and being able to draw on significant experience in dealing with complaints under the Act.

[61]     In evaluating the extent to which it is reasonable to rely on the Tribunal’s findings of fact and its analysis of the nature of Ms Wang’s conduct in the present case, this Court is placed in some difficulty by the absence of clear findings of fact and some ambiguity and inconsistency in the way the Tribunal expressed itself.  At [99] of the substantive decision, for example, the Tribunal observed that the complainant, Mr Shiron, seemed to the Tribunal members “to have a reasonable understanding of commerce as did Ms Ali despite their protestations to the contrary.” Further, the Tribunal said at [169] that “in many ways, [the complainants] seemed to know the risks they were undertaking.”   That view may be contrasted with the suggestion   at   [167]   that   the   complainants   were   “possibly,   unsophisticated prospective purchasers” and with the absence from the decision of a clear rejection of the complainants’ evidence.

[62]     It is also difficult to reconcile the Tribunal’s statement at [170] that Ms Wang “was seriously negligent in her instructions to Mr Li as to the real estate work he was to undertake” with the statement immediately preceding it that, although misconduct had been proved, it was “quite possibly, at a relatively modest level of offending overall.”

[63]     As I have said, the Tribunal was required to take into account its findings about Mr Li and Ms Wang’s state of knowledge when determining the misconduct charge.  It is not clear that it did so.  It is difficult to understand how a finding of serious  negligence  or  serious  incompetence  can  sustained  in  the  light  of  the Tribunal’s apparent rejection of Ms Duncan’s expert view, its finding that Mr Li acted competently, and Ms Wang’s unchallenged evidence that the complainants had said they already had finance arranged and that they just needed to provide a few more documents to the bank.

[64]     But  I  am  unable  to  accept  Mr Rea’s  submission  that  it  is  difficult  to understand what Ms Wang actually did wrong other than to choose not to follow the instruction of her branch manager.  The Authority’s case against Ms Wang, described in the particulars to charge 4, focused appropriately on the deficiencies in Ms Wang’s handling of the transaction rather than on some imprecise notion of over-delegation. Knowing that Mr Li did not have six months experience as a licensed sales person, Ms Wang instructed him nevertheless to have all of the direct dealings with the sale of the property and Barfoot & Thompson’s contact with the complainants who were prospective purchasers.   An experienced sales person ought to have known that increasing their offer from $300,000 to $375,000 exposed the complainants to additional risk in circumstances where the subject property had a weathertightness history.   Notwithstanding the remediation and the issuing of a code compliance certificate, a lending institution was likely to be cautious about its exposure and to require a borrower to contribute a higher level of equity to the purchase than might otherwise have been the case.

[65]     In such circumstances, an experienced salesperson could have been expected to inquire more closely into the apparent assertion by the prospective purchasers that they had obtained bank approval, particularly given the warning sign inherent in Ms Ali’s statement that they had bank approval subject to giving the bank “some more documents”.  Moreover, the agreed contract price represented a 25 per cent increase over the $300,000 bid at auction. Although the complainants had been willing to bid at  auction  at  a  lower  price,  thereby  exposing  themselves  to  an  unconditional purchase, a prudent salesperson would have recommended to the complainants that they obtain a guarantee of bank funding at the higher purchase price before signing

the offer, or insist on approval of finance and a satisfactory LIM and building report as conditions of the contract.

[66]     It  is  instructive  that  Ms Wang  acted  in  knowing  breach  of  Barfoot  & Thompson’s instructions and it is no excuse for her to say that she had directed Mr Li to get the complainants to telephone her if they had any questions.  It is more to the point that the salesperson dealing with the purchasers needed to be sufficiently experienced to ask the complainants the right questions.

[67]     It follows, in my view, that Ms Wang’s conduct was at least negligent or incompetent and that, accordingly, she was guilty of unsatisfactory conduct at least.30
The more difficult question on appeal is whether the Tribunal was justified in characterising Ms Wang’s conduct as seriously incompetent or seriously negligent real estate agency work31  and as being in wilful contravention of the REA Act and the LCA.

[68]     Looked at in the abstract, for the reasons discussed above, the Tribunal’s findings   in   that   regard   were  open   to   it   on   the   evidence.      However,   the characterisation of serious rather than mere negligence or incompetence is difficult to reconcile with the Tribunal’s findings that, in the circumstances, Mr Li carried out his responsibilities competently.  That statement must relate not only to his following the  instructions  given  by  Ms Wang  but  also  to  his  handling  of  the  particular complainants in the particular case.  It reflects the Tribunal’s apparent view that the purchasers were not unsophisticated and that they understood the risks they were taking in signing the offer in the form in which it was executed.  This had been the view taken by Ms Wang and it formed part of her decision to direct Mr Li to act alone in getting the offer signed and submitted to the vendor.

[69]     The members of the Tribunal had the advantage of seeing and hearing the witnesses and I am satisfied that it is reasonable to accept their characterisation both of Mr Li’s conduct and the state of knowledge and understanding of the purchasers.
Although I consider Ms Wang should have involved herself more directly with the

30	Real Estate Agents Act 2008, s 72.
31	Section 73(b).

purchasers prior to the signing of the offer and encouraged them to act cautiously, she was in possession of information which indicated that the complainants, as the Tribunal found, understood the risks.

Conclusions

[70]     In these circumstances, I consider the members of the Tribunal erred in their assessment of Ms Wang’s conduct as serious negligence or serious incompetence, because it was inconsistent with their findings in respect of Mr Li.

[71]     They were entitled to conclude, however, that it was negligent or incompetent of Ms Wang to instruct Mr Li to act alone in the transaction, when she knew doing so breached clear instructions from Barfoot & Thompson and amounted to a breach of the LCA.  Given Ms Wang’s concessions at the hearing, a finding of unsatisfactory conduct was both inevitable and appropriate.

Result

[72]     For the reasons given, I set aside the Tribunal’s finding of misconduct and replace  it  with  a  finding  that  Ms Wang  was  guilty of  the  alternative  charge  of unsatisfactory conduct under s 72 of the REA Act.

[73]     The relief sought in the notice of appeal was that “the misconduct finding be reversed and that no further action be taken against the Appellant”.  The appellant has succeeded only in part in that I have not accepted the submission that she should be found not guilty of any breach.

[74]     On  the  basis  of  the  Tribunal’s  findings  that  they  had  been  guilty  of unsatisfactory conduct, Mr Li and Mr Swann were fined $750 and $1,500 respectively.32   Ms Wang was fined $4,000 and censured for misconduct.33

[75]     On the face of it, the reduction of Ms Wang’s offence to one of unsatisfactory

conduct should have consequences as to penalty, but it does not appear from the

32	The Real Estate Agents Authority (Per CAC 20004) v Li [2015] NZREADT 6 at [37].
33	At [38].

notice of appeal that the penalty is challenged.  Counsel did not address me on the issue of whether, if the charge was reduced on appeal, the Court has jurisdiction to impose a lesser penalty or remit the matter to the Tribunal for reconsideration of the penalty.  I reserve the issue for further submissions if Ms Wang wishes to pursue the point.

[76]     The appellant shall have until Friday, 29 May 2015 to file a memorandum indicating whether she considers the Court has jurisdiction to address the question of penalty and, if so, what course the Court should adopt.   The Authority shall have until Friday, 12 June 2015 to file a memorandum in response.

[77]     In the event that memoranda are filed, the Registrar shall refer them to me and arrange a telephone conference with counsel at the earliest available date.

Costs

[78]     Costs are reserved.  The appeal has succeeded in part only and there would appear  to  be  good  reasons  why costs  on  the  appeal  might  lie  where  they fall. However, any party wishing to apply for costs may file a memorandum accordingly. The opposing party shall have 15 working days to file and serve a memorandum in reply.

………………………………..

Toogood J