Harvey v Real Estate Agents Authority

• Jurisdiction: New Zealand
• Judge: Brown J
• Judgment Date: 20 October 2022
• Neutral Citation: [2022] NZCA 498
• Docket Number: CA687/2021
• Court: Court of Appeal

Between

Michael Henry Harvey

Appellant

and

Real Estate Agents Authority

First Respondent

Richard Lowe And Petronella Lowe

Second Respondents

[2022] NZCA 498

Court:

Brown, Lang and Downs JJ

CA687/2021

IN THE COURT OF APPEAL OF NEW ZEALAND

I TE KŌTI PĪRA O AOTEAROA

Professional Practice — appeal by licensed real estate agent against adverse findings — Standards of professional competence — agency agreements and contractual documents — burden of proof — Real Estate Agents Act 2008 — Real Estate Agents Act (Professional Conduct and Client Care) Rules 2012

Counsel:

P B McMenamin for Appellant

P K Feltham and T W Wheeler for First Respondent

No appearance for Second Respondents

The appeal was dismissed.

• A The appeal is dismissed.

• B The appellant must pay the first respondent costs for a standard appeal on a band A basis and usual disbursements.

JUDGMENT OF THE COURT

Table of Contents

	Para No
Introduction	[1]
Relevant background	[2]
The Tribunal's decision	[3]
The High Court judgment	[7]
The scope of the appeal	[10]
Breach of r 9.7	[13]
Issue 1: Did the Judge err in law by misdirecting on the burden of proof?	[13]
Issue 2: Did the Judge err in law by failing to consider the contents of the agency agreement?	[22]
Breach of r 5.1	[24]
The context to the finding of a breach of r 5.1	[25]
(a) The Lowes' complaint	[25]
(b) The Committee's approach	[28]
(c) The Tribunal's approach	[31]
(d) Comment	[33]
Issue 3A: Did the Judge err in law by failing to give consideration to cl 19.0 of the agreement for sale and purchase?	[36]
Issue 3B: Did the Judge err in law by failing to give consideration to the purchasers' instructions for the preparation of the agreement for sale and purchase?	[48]
Issue 4: Did the Judge err in law by giving consideration to an irrelevant matter, namely a hypothetical proposition which was unsupported by any evidence?	[55]
Issue 5: Did the Judge err in law by making a factual finding (that the appellant did not recommend that the Lowes obtain legal advice) which was unsupported by any evidence?	[60]
Issue 6: Did the Judge err in law by failing to consider r 6.4 of the PCCC Rules?	[65]
Result	[71]

REASONS OF THE COURT

(Given by Brown J)

Introduction

1 The Real Estate Agents Disciplinary Tribunal (the Tribunal) upheld findings of the Complaints Assessment Committee (the Committee) of two breaches by Mr Harvey, a licensed real estate agent, of rr 5.1 and 9.7 of the Real Estate Agents Act (Professional Conduct and Client Care) Rules 2012 (the PCCC Rules). 1 Mr Harvey's appeal was dismissed in the High Court. 2 Mr Harvey now appeals to this Court on the ground that in several respects the High Court decision is erroneous in law.

Relevant background

2 The salient facts are recorded in the High Court judgment:

[3] Mr and Mrs Lowe (the Lowes), together with their solicitor, were the Trustees of two trusts. They were the registered owners of two properties in Nelson, referred to as “No 28” and “No 26.” Each Trust owned a half share of each of the properties. The Lowes lived in No 28, which had a house on it and had extensive views of the sea and mountains. No 26 was a bare section in front of No 28, situated between No 28 and the view.

[4] The Lowes met Mr Harvey in December 2017 after a visit to an open home he was conducting. The Lowes told Mr Harvey that at the time they had no intention or plans to build on No 26 but asked him for a market appraisal for No 28, as they were considering whether they had sufficient funds to submit an offer on another property. They did not pursue that option however and advised Mr Harvey of this.

[5] On 29 December 2017 Mr Harvey visited the Lowes and asked them if they wanted to sell their home as he had a prospective purchaser (Mr S) who wished to see the property that day. Mr Harvey drafted an agency agreement which the Lowes both signed. Two hours later Mr S was shown through the property. Mr Harvey also drew up a draft agreement for sale and purchase. This included a clause which dealt with the covenants and restrictions on the bare section at No 26. Mr S never made an offer for No 28.

[6] Mr Harvey contacted the Lowes again in early January 2018. He wished to show another prospective purchaser (the Crowes) through No 28. A discussion took place between Mr Harvey and the Lowes about their plans for No 26. The Tribunal summarised the discussion as follows:

… The Lowes said that Mr Harvey was aware they would consider building on No 26 if they sold No 28, but had not made any decisions or plans of any sort, and they told him if they were to build on No 26, they would be mindful and considerate when planning any build, and that it would have to comply with Council and subdivision requirements.

[7] On 7 January 2018, the Crowes were shown No 28. The next day, the Lowes accepted an offer to purchase, which was to become unconditional on 10 January 2018. Although the Crowes had concerns about the potential impact on the view from No 28 being blocked by any build on No 26, the agreement for sale and purchase did not contain any provisions relating to any proposed development or easements on No 26. The reason for that omission was that Mrs Crowe wanted to present a “clean” purchase offer.

[8] On 10 January 2018, prior to the agreement for sale and purchase being made unconditional, Mr Harvey arranged for the Lowes and the Crowes to meet to discuss the prospect of any development on the bare section at No 26. Mr Harvey was not present at this meeting. The sale was settled in April 2018.

[9] In 2019 the Lowes began building on the empty section. The Crowes became concerned about the height of the building and issued proceedings in the High Court against the Lowes, alleging that Mr Harvey and the Lowes had made misrepresentations about the effect a building on the empty section would have on their view. Mr Harvey provided an affidavit in support of the Crowes' proceedings, stating the Lowes told him they would not build a structure that would negatively impede the view from their old home.

This proceeding has since been settled.

(Footnote omitted.)

The Tribunal's decision

3 On a complaint by the Lowes, the Committee found Mr Harvey had engaged in unsatisfactory conduct by: 3

The Committee assessed the conduct as unsatisfactory conduct at a moderate level and made orders censuring Mr Harvey, that he pay a fine of $2,500, and that he refund to the Lowes $5,000 of his commission. 4

• (a) not recommending that the Lowes obtain legal advice and not giving them a reasonable opportunity to obtain that advice before they signed the agency agreement; and

• (b) failing to confirm in writing what was to be disclosed to prospective purchasers about the Lowes' intentions as to the empty section, and/or failing to capture this in an appropriate clause in the sale and purchase agreement.

4 On Mr Harvey's appeal the Tribunal upheld the Lowes' complaint that Mr Harvey did not recommend that the Lowes obtain legal advice or provide them with a reasonable opportunity to do so, in breach of his obligation under r 9.7 of the PCCC Rules. 5 Rule 9.7 states:

Before a prospective client, client, or customer signs an agency agreement, a sale and purchase agreement, or other contractual document, a licensee must—

(a) recommend that the person seek legal advice; and

(b) ensure that the person is aware that he or she can, and may need to, seek technical or other advice and information; and

(c) allow that person a reasonable opportunity to obtain the advice referred to in paragraphs (a) and (b).

5 The Tribunal also found that the Committee was correct to determine that, by failing to confirm the Lowes' instructions as to their intentions regarding the new build or to recommend the insertion of an appropriate clause in the agreement for sale and purchase, Mr Harvey breached his obligation under r 5.1 of the PCCC Rules. 6 Rule 5.1 states:

A licensee must exercise skill, care, competence, and diligence at all times when carrying out real estate agency work.

6 The Tribunal reversed the Committee on a third ground relating to Mr Harvey's failure to obtain a third trustee's signature and quashed the refund order as being plainly wrong, but upheld the $2,500 fine and directed Mr Harvey to complete an appropriate course in consumer protection law related to real estate transactions. 7

The High Court judgment

7 On Mr Harvey's appeal from the Tribunal decision, Cull J identified two issues for determination: 8

• 1. Did the Tribunal err in finding Mr Harvey failed to recommend the Lowes obtain independent legal advice or provide a reasonable time for them to do so?

• 2. Did the Tribunal err in finding Mr Harvey breached r 5.1, in failing to record his clients' instructions in writing and recommending a clause be inserted into the agreement for sale and purchase?

8 The Judge did not find any error in the Tribunal's finding that there had been a breach of the r 9.7 obligation concerning the agency agreement. In so doing the Judge rejected criticisms of the Tribunal's approach to the burden of proof and its consideration of the evidence relating to the content of the agency agreement. 9

9 The Judge also rejected the challenge to the finding of a breach of r 5.1. 10 In so doing the Judge made a number of observations which are said to give rise to several of the alleged errors of law that are the subject of the present appeal.

The scope of the appeal

10 Section 120 of the Real Estate Agents Act 2008 allows a party who is dissatisfied with a decision of the High Court on appeal from the Tribunal, on the ground that the decision is erroneous in law, to appeal to this Court on a question of law only.

11 In advance of the hearing Mr McMenamin, counsel for Mr Harvey,...