Real estate agent's negligence charge overturned

The dispute arose over the sale of a Zest Apartment in Auckland. Photo / NZ Herald

A real estate agent has had a charge of serious negligence overturned in the High Court at Auckland, after she challenged a Real Estate Agents Disciplinary Tribunal decision.

The tribunal decision found Daphne Brown guilty of serious negligence by creating the impression her company was acting in the complainants' best interests. But Justice John Priestley in the High Court overturned that, saying Mrs Brown was the principal officer of City Investments Services Ltd (CISL) linked to an a franchisee of LJ Hooker.

CISL developed a marketing scheme focusing on the sale of Auckland CBD apartments.

In 2006, a Hamilton couple aged in their late 50s, the Wealleans, got a telemarketing call at home, then went to an investment seminar run by LJ Hooker in Hamilton.

LJ Hooker offered them free overnight accommodation in an Auckland hotel, although they did not take that up.

They bought a Zest apartment on Nelson St in Auckland's CBD for $248,000, putting down a $1000 deposit and borrowing $253,500 for the purchase and all costs associated with it.

But they found out in 2010 that the place was worth only $143,000 following the global financial crisis. Bank teller Mary Wealleans was aggrieved and laid a complaint with real estate authorities over the transaction.

The tribunal found Mrs Brown guilty of negligence and she was fined $450.

Mrs Brown went to the High Court which decided the tribunal's finding was flawed and could not stand.

"The tribunal failed to grapple with the essential evidence of industry standards and practice," the judge ruled.

"It failed to explain in a convincing way why the perceptions of an unsophisticated investor (and Mrs Wealleans never resiled from the fact that she knew vendors paid real estate agents commissions) should constitute unacceptable conduct. No adequate explanation is given as to why the marketing scheme of CISL might constitute serious negligence, particularly against the backdrop of the expert evidence the tribunal heard. No consideration was given as to whether, in the context of both the marketing scheme and Mrs Brown's personal involvement, sanction was merited," the judge decided.

But he declined to award costs, saying many aspects of CISL's marketing scheme were of dubious merit and although consistent with industry practice at the time, ran the risk of placing many consumers - particularly the unsophisticated - in a position which might not necessarily have been in their best interests.