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4002RE01Q05: Explain what the agent should have done to ensure they acted within ethical standards and codes of conduct requirements

COMMISSIONER FOR CONSUMER AFFAIRS v STEPHENS [2018] SADC 52 (25 May 2018)

Last Updated: 31 May 2018

DISTRICT COURT OF SOUTH AUSTRALIA (District Court Administrative and Disciplinary Division)

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COMMISSIONER FOR CONSUMER AFFAIRS v STEPHENS

[2018] SADC 52

Judgment of Her Honour Judge Tracey

25 May 2018

ADMINISTRATIVE LAW

Disciplinary proceedings brought under the Land Agents Act 1994. Land agent said to be liable to disciplinary proceedings by acting improperly in relation to the sale of two properties in failing to address conflicts of interest and acting when not authorized pursuant to a sales agency agreement.

Held: Proper cause for taking disciplinary actions exists.

Land Agents Act 1994 (SA) s43, s47; Land and Business (Sales and Conveyancing) Act 1994 (SA) s6, s20, referred to.

Craig v The Medical Board of South Australia [2001] SASC 169, considered.

COMMISSIONER FOR CONSUMER AFFAIRS v STEPHENS [2018] SADC 52

Introduction

1. The Commissioner for Consumer Affairs (the Commissioner) lodged a complaint against Robert Stephens (the defendant) pursuant to section 43 of the Land Agents Act 1994 (SA) (the Act) detailing two grounds, which were alleged to constitute proper cause for disciplinary action against the defendant. The defendant was at all times registered as an agent pursuant to the Act, employed by Elders Rural Services Pty Ltd, trading as Elders Real Estate-Clare (Elders).

The Complaint

Ground One

1. The Commissioner alleged that pursuant to s 43(1)(c) of the Act, the defendant, being a registered land agent, had acted improperly in his capacity as a sales representative.
2. The particulars of the complaint upon which the Commissioner relies are as follows:

Particulars 1.1 At all material times, the Defendant was registered as an agent pursuant to Part 2 of the Act (RLA 2026) which required him to act in accordance with the Act and accepted industry conduct standards. 1.2 At all material times, the Defendant was employed by Elders Rural Services Australia Ltd, trading as Elders Real Estate - Clare (Elders) as a real estate sales representative. 1.3 ... 1.4 At all material times, Mrs Cherie Stirling (Mrs Stirling) was employed by Elders as a sales support officer in the Elders Clare office. 1.5 At all material times, Mrs Stirling was the sole director of CC Stirling Pty Ltd (the Company). 1.6 On or about 7 August 2012, the Defendant, as the company representative on behalf of Elders, entered into a Rural Sales Agency Agreement with Messrs William and James Freebairn and Mesdames Merrilyn and Denise Freebairn (collectively the Freebairns) to sell their property at Lot 7 of 'Karalee' '3 Corner', Snowtown (the Snowtown property). 1.7 The Defendant was the Elders' sales representative who handled the transaction described in paragraph 1.6 herein. 1.8 On 22 October 2012, the Freebairns entered into a contract with the Company pursuant to which the Company purchased the Snowtown property for $210,000. 1.9 The Defendant failed to advise the Freebairns at any time that Mrs Stirling was the sole director of the Company and that Mrs Stirling was an employee of Elders. 1.10 The Defendant acted improperly as a sales representative on behalf of Elders in that he failed to advise the Freebairns of the matter described in particular 1.9 herein. 1.11 In the circumstances described in paragraph 1.10, the Defendant failed to address the conflict of interest thereby arising. 1.12 The Defendant acted improperly in that he acted as a sales representative on behalf of Elders in circumstances where the purchaser was a body corporate of whom the sole director was an employee of Elders.

Ground Two

1. The Commissioner alleged that pursuant to s 43(1)(c) of the Act, the defendant, being a registered land agent, acted contrary to the Act and the Land and Business (Sales and Conveyancing) Act 1994 (SA) (the LABSAC Act) and improperly in his capacity as an agent.
2. The particulars of the complaint upon which the Commissioner relies are as follows:

Particulars 3.1 At all material times, the Defendant was registered as an agent pursuant to Part 2 of the Act (RLA 2026) which required him to act in accordance with the Act and accepted industry conduct standards. 3.2 At all material times, Mrs Mellissa Ann Helbig (Mrs Helbig) held a sales representative licence under the Act (RSR 214727). 3.3 At all material times, Mrs Helbig was employed by Elders as a property and sales manager in the Elders Clare office. 3.4 At all material times, Mr Michael Edward Helbig (Mr Helbig) was the husband of Mrs Helbig. 3.5 On 6 February 2013, the Defendant, as the company representative on behalf of Elders, entered into a 90 day Residential Sales Agency Agreement with Mr Noel Clifton and Mrs Anne Marie Sommerville (the Sommervilles) to sell their property at 2/1 Sabine Street, Clare, South Australia 5453 (the Clare property). 3.6 The Defendant was the sales representative of Elders who handled the transaction described in paragraph 3.5 herein. 3.7 The Sommervilles did not enter into a further sales agency agreement with Elders following the expiration of the Residential Sales Agency Agreement described in paragraph 3.5 herein. 3.8 After the expiry, the Defendant commenced acting as vendors agent for the Sommervilles in his personal capacity as a registered agent in relation to the matters set out in paragraphs 3.10 to 3.17 here. No written agreement or authority was entered into between the Sommervilles and the Defendant. 3.9 The Defendant advised the Sommervilles that he was entitled to a commission for acting in his personal capacity as a registered agent in the circumstances described in paragraph 3.8 herein. 3.10 On 13 June 2013, Mrs Helbig communicated an offer to the Defendant of $255,000 to purchase the Clare property (the Helbig offer). 3.11 The Helbig offer was later revised to $258,000 (the revised Helbig offer). 3.12 It was a condition of the Helbig offer and the revised Helbig offer that Mrs Helbig receive 20% of the Defendant's commission from the sale of the Clare property (Ms Helbig's commission). 3.13 The Defendant did not disclose to the Sommervilles that Ms Helbig's commission was a condition of the revised Helbig offer. 3.14 On 21 June 2013, Michael Edward Helbig and/or Mr Helbig's Nominee entered into a contract with the Sommervilles pursuant to which Mr and Mrs Helbig intended to purchase the Clare property for $258,000. The defendant facilitated the execution of this contract which was later superseded by the contract described in paragraph 3.15 herein. 3.15 On 4 July 2013, Michael Edward Helbig & Or Nominee entered into a contract with Noel Sommerville Nominees Pty Ltd pursuant to which Mr and Mrs Helbig purchased the Clare property for $258,000. The defendant facilitated the execution of this contract and settlement of the Clare property pursuant to the terms of this contract. 3.16 On 11 September 2013, Mr and Mrs Sommerville paid $5,863 by cheque to the Defendant as a commission payment. The Defendant banked this cheque into his personal bank account. 3.17 Following settlement of the Clare property, the Defendant paid approximately $1,000 to Mrs Helbig in cash in satisfaction of the condition described in paragraph 3.12 herein. 3.18 The Defendant acted improperly in that he failed to advise the Sommervilles of the matters described in paragraph 3.12 and 3.17 herein, namely that the purchaser was to receive a commission from the transaction. 3.19 The Defendant acted improperly in that he accepted a commission payment from the Sommervilles where he was not entitled to do so in the circumstances described in paragraph 3.8 herein, namely where there was no valid sales agency agreement. 3.20 The Defendant acted contrary to section 6(2) of the Act in that he accepted commission from the vendor when he was not authorised, in writing, to act as an agent by the vendor. 3.21 The Defendant acted contrary to section 20(7) of the LABSAC Act in that he demanded, received or retained commission or expenses in respect of the sale or purchase of land when he was not authorised to act on behalf of the vendor by a sales agency agreement. 3.22 The Defendant acted improperly in that he acted as an agent for the Sommervilles in the circumstances described in paragraph 3.8 herein, namely where there was no valid sales agent agreement. 3.23 The Defendant acted contrary to section 20(1) of the LABSAC Act in that he acted on behalf of the vendor in the sale of residential land in the circumstances described in paragraph 3.8 herein, namely that he was not so authorised to act by a sales agency agreement.

1. The disciplinary proceedings had been listed initially for trial to commence on 27 April 2018. At trial the defendant admitted the grounds of both complaints and the Commissioner asked the Court to find that the defendant is liable to disciplinary action.
2. Section 43(1) of the Act identifies when there is proper cause for disciplinary action against an agent or a sales representative.

43Cause for disciplinary action against agents or sales representatives (1) There is a proper cause for disciplinary action against an agent or sales representative if ... (c) the person has acted contrary to this Act or the Land and Business (Sale and Conveyancing) Act 1994 or otherwise unlawfully, improperly, negligently or unfairly; or ...

1. Accordingly, provided the Court is satisfied on the balance of probabilities that there is proper cause, as defined in section 43(1), the Court may order one or more of the sanctions listed ss 47(a)-(g) of the Act.

47Disciplinary action (1) Subject to subsection (1a), on the hearing of a complaint, the Court may, if it is satisfied on the balance of probabilities that there is a proper cause for taking disciplinary action against the person to whom the complaint relates, by an order or orders do one or more the following: (a) reprimand the person; (b) impose a fine not exceeding $20,000 on the person; (c) either (ai) impose conditions or further conditions on any registration of the person; or (i) suspend any registration of the person for a specified period or until the fulfilment of stipulated conditions or until further order; or (ii) cancel any registration of the person; (d) in the case of a person whose registration is suspendedimpose conditions as to the conduct of the person or the person's business as an agent after the end of the period of suspension; (e) disqualify the person from being registered under this Act; (f) prohibit the person from being employed or otherwise engaged in the business of an agent; (g) prohibit the person from being a director of a body corporate that is an agent. ...

1. Ground one of the complaint concerns a transaction which occurred in 2012. The defendant was acting for the Freebairns, the vendors, in the sale of their property at Snowtown to CC Stirling Pty Limited. At that time, Mrs Stirling was the sole director of that company and employed by the Elders' Clare office. The defendant acted improperly in failing to advise the Freebairns of Mrs Stirling's involvement in the sale, and thereby failing to address a conflict of interest.
2. Ground three relates to a contract of sale in early 2013. The defendant, pursuant to a sales agency agreement, was acting for the Sommervilles, the vendors, in relation to the sale of their property. The Elders sale agency agreement had lapsed and the defendant continued to act in his personal capacity as an agent with no written agreement with or authority from the Sommervilles. The defendant sold the property to Mr and Mrs Helbig. Mrs Helbig was an employee of Elders. Furthermore, it was a condition of the sales agreement that Mrs Helbig would receive 20% of the defendant's commission, a condition that was not disclosed to the Sommervilles. The defendant then received $5,363 in commission from the Sommervilles and paid Mrs Helbig $1,000 in cash.
3. Pursuant to s6(2) of the Act, the defendant was not entitled to the commission.

6Agents to be registered (2) A person required by this Act to be registered as an agent is not entitled to commission or other consideration for services as an agent unless the person (a) is, at the time of rendering the services, registered as an agent; and (b) is authorised, in writing, to act as an agent by the person for whom the services are rendered or a person authorised to act on behalf of that person.

1. As there was no written sales agency agreement, the defendant was not entitled to commission. Further, pursuant to s20(7) of the LABSAC Act, it is an offence for an agent to demand, receive or retain commission or expenses in respect of a sale if the agent has contravened or failed to comply with a requirement of s20.
2. Section 20(7) provides:

... (7) An agent must not demand, receive or retain commission or expenses in respect of the sale or purchase of land or a business if the agent has contravened or failed to comply with a requirement of this section in acting on behalf of the vendor or purchaser. Maximum penalty: $5 000. ...

1. Relevantly, s20(1) of the LABSAC Act requires an agent to be authorised by a sales agency agreement, before acting in a sale.

20Authority to act as agent (1) An agent must not act on behalf of a vendor in the sale of residential land unless the agent has been authorised to so act by an agreement (a sales agency agreement) that (a) specifies the agent's genuine estimate of the selling price expressed without any qualifying words or symbols as a single figure; and (b) specifies the selling price sought by, or acceptable to, the vendor expressed without any qualifying words or symbols as a single figure; and (c) specifies (i) the manner of sale (for example, by auction, private treaty or tender); and (ii) the duration of the agreement (not exceeding the prescribed number of days); and (iii) the rights of the vendor to terminate the agreement; and (iv) the services, including advertising and marketing, to be provided for the vendor by the agent or a third person that will be separately charged for by the agent, the amounts to be charged for the services and the time for payment of the amounts; and (v) the nature and source and, if known, the amount or value of any rebate, discount, refund or other benefit expected to be received by the agent from a third person in relation to services referred to in subparagraph (iv); and (vi) whether the agreement is a sole agency agreement; and (vii) whether the agent has authority to accept an offer for the land on behalf of the vendor; and (d) is dated and signed by the vendor and the agent; and (e) complies with the regulations. Maximum penalty: $5 000

1. Statements of Mrs Stirling, Mrs Helbig, Mrs Sommerville and Mr Freebairn have been tendered. I am satisfied on the balance of probabilities that the defendant is liable for disciplinary action.

Defendant's submissions

1. In submissions on behalf of the defendant, I was told that the defendant does not remember a great deal about the sale the subject of ground one of the complaint. He says he was extremely busy around the relevant time. As he regards Mrs Stirling as a truthful person, he does not challenge the statement she has given. He says that the Freebairns would have been aware of the appropriate price for such a property, notwithstanding the property was sold in the way that it was. It was, the defendant says, not sold to their detriment and there was no particular benefit to the defendant. He concedes that with the benefit of hindsight, he must have behaved in the way as is alleged, simply to cut corners but without appreciating there would be any detriment to anyone. He accepts the wrongfulness of his behaviour.
2. In relation to the Helbig/Sommerville sale, the defendant says that the property was to be sold to Mr Michael Helbig but, as the Sommervilles wanted the sale to go through more quickly, the Minister's consent was not sought. It was the defendant's apparently mistaken understanding that the appropriate assessment may take up to two or three months to process. The contract that had already been prepared was completed as a private sale. The defendant says the arrangement was made to simply expedite the matter for the benefit of the Sommervilles and that the price was a fair price with no detriment to them. He says that were it not for the Sommervilles wanting a quick sale, the necessary consent would have been sought. He says having done all of the work, had the relevant consent been obtained, a commission would have been payable. The defendant has however acknowledged he had no legal right to a commission, and in fact knew he had no such entitlement.

The defendant's circumstances

1. The defendant is aged 56. He had worked for Elders in real estate for over 20 years.
2. It is said that he has an excellent reputation, receiving numerous awards from the Real Estate Institute including the Rural Sales Person of the Year and South Australian Sales Person of the Year.
3. I understand such awards are based on sales results and accordingly some care must be taken with respect to their relevance in this matter. I note the defendant has donated his time to various charitable causes. The defendant is no longer working with Elders and currently manages a Moonta and Wallaroo franchise for Statewide Real Estate. He resides in Wallaroo. I accept that the defendant has enjoyed a good reputation within his industry and the community more generally. He has had a rewarding and satisfying career, which has been damaged through his own wrongdoing. I accept that these proceedings have resulted in a reduction in his income, resulting in financial strain. He has paid into his solicitor's trust account a sum equivalent to the commission that the Sommervilles had paid, that is, $5,863.
4. The defendant is said to be genuinely remorseful.

The appropriate sanction

1. I now turn my mind to what sanction would be appropriate.
2. The evidence does not support the defendant acting by mistake or because of a simple lack of care.
3. In her statement, Mrs Stirling says that at the time she prepared the contract, the defendant asked her which of the three business entity names available for use in the contract was most different to her name, to avoid the necessary consent. In Mrs Helbig's statement, she describes having attended a Real Estate Institute (REI) refresher training course where the course trainer emphasised conflicts of interest and the use of auctions to avoid any such issues. Mrs Helbig says that when she returned to work she spoke with the defendant and advised him that the contract needed to be cancelled and the property go to auction, with both she and her husband bidding for the property. Mrs Helbig says that the defendant reassured her, informing her that he had been told by the conveyancer that "this would be the way to do it". Not surprisingly, Mrs Helbig says she remained concerned. At the relevant time, she was a property manager and office administration manager of Elders Real Estate Clare office. Clearly the defendant had been alerted as to the way in which the conflict could be rectified but chose not to take any action.
4. This would suggest that on occasion the defendant knew or had at least been alerted to his obligations to avoid a conflict of interest and turned his mind to it, choosing not to take the necessary steps to address those conflicts. The REI code concerning conduct, ethics and behaviour in real estate, provides that a practitioner should avoid any conflict of interest and be transparent in their business dealings.
5. The purpose of disciplinary proceedings is the protection of the public and not punishment of the defendant in the sense in which punishment is imposed in the criminal law. I take into account matters of general and personal deterrence but also the protection of the public. In Craig v The Medical Board of South Australia^[1] Doyle CJ noted that:

The purpose of disciplinary proceedings is to protect the public, not to punish a practitioner in the sense in which punishment is administered pursuant to the criminal law. A disciplinary tribunal protects the public by making orders which will prevent persons who are unfit to practice from practicing, or by making orders which will secure the maintenance of proper professional standards. A disciplinary tribunal will also consider the protection of the public, and of the relevant profession, by making orders which will assure the public that appropriate standards are being maintained within the relevant profession.^[2]

And later, at paragraph 47

... the protection of the public or the public interest may justify an order intended to bring home to the practitioner the seriousness of the practitioner's departure from professional standards, and intended to deter the practitioner from any further departure. A fine might well be imposed with this object. An order imposing a fine might look like a punishment imposed by a court exercising criminal jurisdiction, but in professional disciplinary proceedings it is imposed on a different basis. An order might also be made in professional disciplinary proceedings to emphasize to other members of the profession, or to reassure the public, that a certain type of conduct is not acceptable professional conduct. In the latter case the order is made in part to protect the profession, by demonstrating that the profession does not allow certain conduct. This, in the end, is also in the public interest.

1. The Commissioner describes the defendant's conduct as relatively serious misconduct in that there are two transactions involving employees of an agency, creating a perception of a conflict of interest with the potential to undermine public confidence in both the particular real estate office but also the real estate industry more generally.
2. In considering the appropriate disciplinary action, it is my view that the defendant's conduct, involving a failure to act in the interest of the vendors and purchasers, is in each case, a serious neglect of his duties.
3. I accept that the nature of the defendant's conduct means that he is not suitably qualified at the present to be a practitioner who exercises effective control over a corporate real estate business. The fine and the reprimand will be messages to both the defendant and also the community at large that this serious non-compliance with the legislation is not acceptable.
4. I have taken into account the defendant's reputation as an agent and his acceptance of responsibility. I take into account he has worked as a real estate agent for over 20 years, apparently without blemish and his current financial difficulties.
5. In my opinion, the public can properly be protected by the following outcome and I make these orders:

1. The defendant is reprimanded; 2. The defendant is fined the sum of $5000. 3. Conditions are imposed on the defendant's registration as an agent in that:

3.1 he is to training course approved by the Commissioner, involving the interpretation of the Act, ethics and identifying and dealing with conflicts of interest;

3.2 he is to nominate such a training course for the Commissioner's approval within two months of the date of the orders of the Court; 3.3 he is to bear the cost of the training course himself;

3.4 he is to attend the training course in person, either on a fulltime or part-time basis; and

3.5 he is to complete the training course within a reasonable time, such time to be determined by the Commissioner but based on the suggested time to complete the course and any other relevant factor.

1. The defendant is prohibited from being the nominated manager and supervisor of a corporate agent for six months from the date of this order, or until he has completed the training course required by order 3 above, whichever is the longer.

1. The defendant is prohibited from being the director of a corporate agent for six months or until he has completed the training course required by order 3 above, whichever is longer.

1. The defendant is to authorise payment of the sum of $5,863 to the Sommervilles.

4002RE01Q05: Explain what the agent should have done to ensure they acted within ethical standards and codes of conduct requirements

What should the agent have done specifically in this scneario ?