Before the Complaints Assessment Committee
Complaint No: C27720

In the matter of

Part 4 of the Real Estate Agents Act 2008

Licensee 1:

Geraldine Hermens (10015203)

Decision finding of unsatisfactory conduct including orders

10 May 2019

Members of Complaints Assessment Committee: CAC520
Chairperson:
Bernardine Hannan
Deputy Chairperson:
Peter Brock
Panel Member:
Craig Edwards

 Complaints Assessment Committee
Decision finding unsatisfactory conduct including orders
1.

The Complaint

1.1.

On 10 September 2018, the Real Estate Agents Authority (the Authority) received a complaint
against Geraldine Hermens (the Licensee) from the Complainants.

1.2.

The Licensee is a licensed Salesperson under the Real Estate Agents Act 2008 (the Act) and at
the time of conduct was engaged by Wayne Graham Realty DN Ltd t/a LJ Hooker Dunedin (the
Agency).

1.3.

The complaint relates to a property situated at the Property.

1.4.

The details of the complaint are that the Licensee misled the Complainants, advising them that
the house did not contain scrim, that the third bedroom was a bedroom when it was smaller
than stipulated in the Housing Improvement Regulations 1947, and that the cooktop was an
induction unit when it was a ceramic.

1.5.

In particular, the Complainant advised that:
a)

They wanted to ensure the house they purchased did not have scrim.

b)

They had building and electrical inspections completed as a condition of sale.

c)

The builder’s report noted there was no visible scrim and the wall linings were in good
condition. The electrical report found scrim behind the switchboard. The electrician
advised the Complainants should check further.

d)

On 5 March 2018, the day before their offer went unconditional, they emailed the licensee
asking, “Are the owners aware of any scrim in the house?”. They received an email
response from the Licensee saying, “There is no scrim in the house.”

e)

On 6 March 2018, the agreement became unconditional. The agreement included a
discount price of $3000 to remove the scrim behind the switchboard and address other
issues identified in the building report.

f)

After moving in, they thought they could see signs of scrim in the walls. A builder engaged
to inspect the walls found scrim behind approximately 50% of the wall linings in the house.

g)

They raised their concerns with the Agency. The Agency sales manager said the Licensee
did not know if there was scrim in the walls or not, and the Licensee had made her
statement purely by looking at the walls.

h)

The Property was advertised as a three-bedroom property. When they moved in they
realised one of the rooms is 5.2 m² , and therefore, smaller than the minimum required
for a bedroom under the Housing Improvement Regulations 1947. They say the
advertising was misleading.

i)

The cooktop was described on the chattels list as an induction cooktop. The Complainants
say when they moved in, the cooktop was a ceramic cooktop. The Licensee told the
Complainants that the seller had thought the cooktop was an induction cooktop.

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 j)

1.6.

The Complainants say the matter involving the cooktop was successfully resolved,
however, they are concerned the Licensee initially tried to settle the issue by appearing to
be untruthful.

The Complainant requested a remedy, being:
a)

The Licensee to pay $21,761.57 for the removal of the scrim and relining the walls.

1.7.

The Licensee responded to the complaint against her.

1.8.

In particular, the Licensee commented that:
a)

She received an email on 5 March 2018 from the Complainants asking, ‘Are the owners
aware of any scrim in the house?’

b)

She interpreted this to mean ‘Are the purchasers aware of scrim on the walls’. There was
no scrim on the walls and she was absolutely certain of this, as it was the second time in
two years she had sold the Property. All the wall linings were a hard surface, and there
was no scrim on the walls. It did not occur to her the Complainants were referring to scrim
behind the walls.

c)

During the marketing of this property in 2015 and 2017, at least 3 builders inspected the
property (in addition to the Complainants’ building inspector) and never mentioned that
scrim was identified.

d)

She could not have known if there was scrim behind the walls without conducting invasive
testing.

e)

The first she knew there was scrim behind the switchboard was at the time of
confirmation, when the Complainants requested a reduction in the purchase price
because scrim together with other issues was identified in pre-purchase building and
electrical inspection reports undertaken by the Complainants.

f)

She asked the vendor if he knew there was scrim behind the switchboard. The vendor
confirmed that he didn’t know until communication about this between the lawyers.

g)

The vendor agreed to a price reduction requested by the Complainant due to the presence
of exposed scrim and timber behind the switchboard. The issue with scrim was resolved
through this means.

h)

She was surprised to hear from the Complainants later regarding scrim, seeking
compensation from her for replacement of their walls. Attempts to resolve the scrim issue
have not progressed.

i)

The size of the third bedroom was never raised with her until the complaint was laid with
the Authority. It was not raised as an issue in the Complainants builder’s report.

j)

In the marketing material, the bedroom was described as it is described in the Dunedin
City Council LIM Report, which clearly states that the room is a bedroom.

2.

What we decided

2.1.

On 23 October 2018, the Complaints Assessment Committee (the Committee) considered the
complaint and decided to inquire into it under Section 79(2)(e) of the Act.

2.2.

On 13 March 2019, the Committee held a hearing on the papers and considered all the

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 information that had been gathered during the inquiry.
2.3.

The Committee found the Licensee has engaged in unsatisfactory conduct under section
89(2)(b) of the Act. The decision was also made with reference to the Real Estate Agents Act
(Professional Conduct and Client Care) Rules 2012. 5.1 (skill, care etc), 5.2 (sound knowledge
etc), 6.2 (act in good faith etc), 6.3 (must not mislead etc).

3.

Our reasons for the decision
The Committee found, pursuant to Section 72 of the Act, that the Licensee’s actions breached
Rule 6.3 (must not mislead).

Licensee’s Statement Regarding Scrim
3.1.

By way of background, scrim is a woven fabric, made from a natural fibre such as flax, used in
home wall construction, and was common in some areas in the late 19th and early 20th
century. Scrim can also refer to the type of construction generally where walls, lined internally
with sarking (rough sawn timber) are covered with scrim which is usually later lined with wall
paper. Scrim is less desirable than alternative wall lining systems due mainly to the higher fire
risk and poor/instable surface, particularly when coated with multiple layers of wall paper.

3.2.

The evidence shows that the Complainant asked the Licensee in an email on the evening of 5
March 2018 ‘Are the owners aware of any scrim in the house?’. The Licensee replied 10
minutes later with ‘There is no scrim in the house.’

3.3.

The Committee notes that the Complainants were aware of the electrician’s report which
identified the presence of scrim behind the switchboard when they asked the Licensee the
question about scrim.

3.4.

The Complainants says that they took the Licensee’s response to be an assurance that any
scrim must have been removed from the house prior to it being relined (except, of course, the
area behind the switchboard). They assumed the Licensee must have had some knowledge of
this to have been able to provide such an assurance.

3.5.

The Licensee says she had no way of knowing whether any scrim on previous wall linings had
been removed prior to relining, only that the house had been relined, and therefore, did not
have scrim on the walls. She says she would not have been able to know whether scrim existed
under the new linings without invasive testing.

3.6.

The Committee notes that the Complainant’s question was an enquiry as to the vendor’s
knowledge about scrim in the house. The Licensee’s response didn’t address the question as
to the vendor’s knowledge directly, but instead, provided an assertion which clearly sought to
set the Complainants’ minds at rest. The Committee accepts that this statement was based on
the knowledge the Licensee had about the Property at the time, and that it is unlikely the
question was put directly to the vendor.

3.7.

The Licensee contends that her statement was not intended to report on any scrim beneath
the relined walls, only what would have been visible. The Committee notes that the
Complainants did not seek to inform or correct the Licensee with the knowledge they had of
the scrim found by the electrician behind the switchboard. Had they done so at the time, it is
very likely that clarification by the Licensee of what she meant by her statement and what she
knew (and was not in a position to know), might well have resolved the matter satisfactorily at
that time. That is not what happened though, and the statement made by the Licensee in the

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 absence of any clarification or qualification was incorrect and misleading.
3.8.

Accordingly, on the issue of the Licensee’s statement regarding scrim, the Committee finds the
Licensee breached Rule 5.1 (skill, care and competence) and Rule 6.4 (not mislead) and has
engaged in unsatisfactory conduct.

Induction Cooktop
3.9.

The Committee is satisfied that the Licensee prepared the Agreement for Sale and Purchase
form (Agreement) and included “induction cooktop” in the chattels list. This Agreement was
signed by both parties, and the vendor claims not to have noted or questioned the description
of the cooktop in the Agreement before signing.

3.10.

The Licensee claims her understanding of the type or cooktop installed was based on the
previous agreement when the vendor bought the property, and the existing appliance was to
have been replaced with an induction unit. The vendor claims not to recall this and expressed
disappointment that the chattel description turned out to be inaccurate.

3.11.

The Committee is of the view that a licensee engaging in best practice would have checked to
ensure the description in the chattel list was accurate, and would have sought clarification, if
necessary, from the vendor. That this did not occur does not automatically mean the threshold
of unsatisfactory conduct has been met.

3.12.

The Committee has also considered in this case that the remedy provided by the Licensee and
the vendor fully mitigated the Licensee’s error. The provision of a new induction unit at the
cost of the Licensee and vendor has placed the Complainants in no worse position than they
would have been had the cooktop been accurately described as what it was, a ceramic cooktop,
or been of a type that met the description in the Agreement, which it now does.

3.13.

The Committee has, therefore, concluded that the Licensee’s conduct in respect of the
description of the cooktop in the chattels list does not meet the threshold or unsatisfactory
conduct, and the Committee has determined to take no further action on this issue.

Bedroom Size
3.14.

The Complainants’ claim that the 3rd bedroom should not have been represented to them as a
bedroom because its size is less than the minimum required for a bedroom in the Housing
Improvement Regulations 1947 (Regulations). The Committee does not agree that the
Licensee’s description of the space was misleading.

3.15.

The issue raised by the Complainants is that the 3rd bedroom was only 5.2 square meters. The
Licensee has not disputed this assertion, so the Committee proceeds of the basis the bedroom
is 5.2 square meters. The Committee interprets the Complaint to be because the bedroom is
less than 6 square meters, it is in breach of the Regulations, and because it is in breach of the
Regulations, it is a misrepresentation and misleading to refer to it as a bedroom.

3.16.

The Regulations specify that “Every bedroom shall have an area of not less than 6 sq m…” and
“…provided that in an existing house a room with an area of less than 6 sq m but not less than
4.5 sq m may be occupied as a bedroom by a person under 10 years of age.” The Regulations
are not unequivocal and a bedroom less than 6 square meters in size does not necessarily
contravene the Regulations.

3.17.

The Licensee’s description of the room as a bedroom is consistent with the LIM report and the

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 building plans which record it as a three-bedroom house and show the space as a bedroom.
3.18.

The Complainants do not say the space was not being used as a bedroom, or that it was not
capable of being used as a bedroom and had the opportunity to inspect the Property and make
their own determination as to the size and suitability of the third bedroom for use as a
bedroom. There is no suggestion the Licensee misled the Complainants as to the actual size of
the room.

3.19.

In the circumstances, the Committee does not consider referring to the third bedroom as such
is incorrect or misleading.

3.20.

Accordingly, the Committee has determined to take no further action on this matter.

4.

Orders

4.1.

Having made a finding of unsatisfactory conduct against the Licensee, the Committee decided
to make the following orders pursuant to Section 93 of the Act:
a)

No order.

5.

Our reasons

5.1.

The Committee has determined to make no order in this case for the following reasons.

5.2.

The Licensee has been found to have engaged in unsatisfactory conduct by making an incorrect
and misleading statement that there was no scrim in the house.

5.3.

The Committee, however, considers this breech to be minor in the context of the circumstances
of the conduct including the following matters.

5.4.

The Complainants were aware that scrim had been found behind the switchboard. They did
not inform the Licensee of this when they asked her if the vendor was aware of any scrim in
the house. If they had, her answer to the question asked may well have been different or
qualified by her.

5.5.

Also, the fact the electrician found scrim behind the switchboard must have put the
Complainants on notice of the risk of unseen scrim being elsewhere in the house.

5.6.

The Complainants seek a remedy being the cost of removing the scrim from their walls. They
initially feared the scrim was a fire risk and a safety issue, but after further inquiry their primary
concern is that failing to remove scrim when the Property was relined is an indication of poor
workmanship. The Committee infers from this a concern by the Complainants that the
presence of scrim will impact on value or salability when the Complainants sell the Property.

5.7.

The Committee’s power to make orders is set out at Section 93 of the Act. The Committee has
no general power to award compensation. It has a specific and limited power to order a
licensee to rectify an error or omission or, if it is not possible to do so, then to provide “… relief,
in whole or in part, from the consequences of the error or omission …”.

5.8.

Loss of value due to negligence by a licensee, including loss on resale, is outside the limited
and specific power a Committee has to compensate a complainant. This is made very clear in
the High Court decision of Quin v REAA.

5.9.

The Licensee’s error was to say there was no scrim in the house. Her error cannot be rectified
because the Complainants purchased the Property with scrim in the house. The consequence

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 of the omission was that the Complainants purchased the Property when they might not
otherwise have done so. The Licensee offered to purchase the Property back from the
Complainants at what they paid for it plus their legal costs. This is very similar to the situation
in Quin (supra) where the purchasers (respondents in the High Court litigation) where there
was a misrepresentation about the location of a boundary elected to keep the property, and
they incurred extra costs to build what they wanted to build on the property. The High Court
said the consequence of the error was being deprived of the opportunity not to purchase the
property – not the costs of the extra building works.
5.10.

Using the Quin (supra) methodology, the cost of removing the scrim is not a consequence of
the incorrect representation that there was no scrim in the house.

5.11.

Even if the cost of removing the scrim was a consequence of the Licensee’s error, the
Committee would not exercise its discretion to order rectification in favour of the Complainants
in the circumstances of this case, primarily because they were on notice as to the existence of
hidden scrim in the house, and they did not inform the Licensee of scrim being found behind
the switchboard when they asked her if the vendor was aware of any scrim in the house.

5.12.

Therefore, in consideration of these factors the Committee has determined that the Licensee’s
error is a minor breach, and the finding of unsatisfactory conduct is sufficient in this case to
meet the objectives of the Act in determining penalty.

Principles considered
5.13.

When determining whether or not to make an order under Section 93(1), the Committee has
also had regard to the functions which the imposition of a penalty usually must serve in
professional disciplinary proceedings.
(a) promoting and protecting the interests of consumers and the public generally (section
3(1))
(b) maintaining professional standards
(c) punishing offences
(d) rehabilitating the professional.

5.14.

The Committee acknowledges that, when making an order under Section 93, the order/s made
must be proportionate to the offending and to the range of available orders.

Promoting and protecting the interests of consumers and the public
5.15.

Section 3(1) of the Act sets out the purpose of the legislation. The principal purpose of the 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."

5.16.

One of the ways in which the Act states it achieves this purpose is by providing accountability
through an independent, transparent and effective disciplinary process (Section 3(2)).

Maintaining professional standards
5.17.

This function has been recognised in professional disciplinary proceedings involving other
professions (for example, in medical disciplinary proceedings: Taylor v The General Medical
Council (1990) 2 A11 ER 263; and in disciplinary proceedings involving valuers: Dentice v The

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 Valuers Registration Board (1992) 1 NZLR 720.
5.18.

Although different professions use different descriptions of the nature of the unprofessional or
incompetent conduct that will attract disciplinary charges, there is a common thread of scope
and purpose. The aim is to enforce a high standard of propriety and professional conduct.
Professions seek to:
• make sure that no person unfitted because of his or her conduct is allowed to practise the
profession in question
• protect both the public and the profession itself against persons unfit to practice
• enable the profession or calling, as a body, to ensure that the conduct of members
conforms to the standards generally expected of them.

5.19.

In the Committee's view, maintaining professional standards is also a function of the
disciplinary processes under the Act.

Punishment
5.20.

The Committee accepts that a penalty in a professional discipline case is primarily about
maintaining standards and protecting the public. However, in the Committee's view there is
also an element of punishment – indicated by the power the Committee has to impose a fine
(Section 93(1)(g)); or make an order of censure (Section 93(1)(a)). The element of punishment
has been discussed in the context of other professional disciplinary proceedings (see Patel v
Dentists Disciplinary Tribunal (High Court, Auckland, CIV 2007-404-1818 Lang J 13 August
2007)).

5.21.

At paragraph [27]-[28], the judge said:
“Such penalties may be appropriate because disciplinary proceedings inevitably involve issues
of deterrence. They are designed in part to deter both the offender and others in the
profession from offending in a like manner in the future. I therefore propose to proceed on
the basis that, although the protection of the public is a very important consideration,
nevertheless the issues of punishment and deterrence must also be taken into account in
selecting the appropriate penalty to be imposed…”

Where appropriate, rehabilitation of the professional must be considered
5.22.

The Committee regards its power to make an order requiring a Licensee to undergo training or
education (Section 93(1)(d)) as indicating that rehabilitation is a function of professional
disciplinary processes under the Act.

6.

Your right to appeal

6.1.

If you are affected by this decision of the Committee, the right to appeal is set out in section
111. You may appeal in writing to the Real Estate Agents Disciplinary Tribunal (the Tribunal)
within 20 working days after the date notice is given of this decision. Your appeal must include
a copy of this decision and any other information you wish the Tribunal to consider in relation
to the appeal. The Tribunal has a discretion to accept a late appeal filed within 60 working days

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 after the date notice is given of this decision, but only if it is satisfied that exceptional
circumstances prevented the appeal from being made in time.
6.2.

For further information on filing an appeal, read Guide to Filing an Appeal on the Real Estate
Agents Disciplinary Tribunal website (https://www.justice.govt.nz/tribunals/real-estateagents/).

7.

Publication

7.1.

The Committee directs publication of its decision. The decision will be published without the
names or identifying details of the Complainant (including the address of the Property), and
any third parties. The decision will state the name of the Licensee and the Agency for which
they work or worked for at the time of the conduct.

7.2.

The Authority will publish the Committee’s decision after the period for filing an appeal has
ended, unless the Tribunal receives an application for an order preventing publication. The
Authority will not publish the Committee’s decision until the Tribunal has made a decision on
the application.

7.3.

Publishing the Committee’s decision supports the purpose of the Act by ensuring that the
disciplinary process remains transparent, independent and effective. The Committee also
considers that publishing this decision helps to set standards and that is in the public interest.

Signed

Craig Edwards
Panel Member
For Complaints Assessment Committee 520
Date: 10 May 2019

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 Appendix: Relevant provisions
The Real Estate Agents Act 2008 provides:
89

Power of Committee to determine complaint or allegation
(1) A Committee may make 1 or more of the determinations described in subsection (2) after
both inquiring into a complaint or allegation and conducting a hearing with regard to that
complaint or allegation.
(2) The determinations that the Committee may make are as follows:
(a) a determination that the complaint or allegation be considered by the Disciplinary
Tribunal:
(b) a determination that it has been proved, on the balance of probabilities, that the
licensee has engaged in unsatisfactory conduct:
(c) a determination that the Committee take no further action with regard to the
complaint or allegation or any issue involved in the complaint or allegation.
(3) Nothing in this section limits the power of the Committee to make, at any time, a decision
under section 80 with regard to a complaint.

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.

93

Power of Committee to make orders
(1) If a Committee makes a determination under section 89(2)(b), the Committee may do 1
or more of the following:
(a) make an order censuring or reprimanding the licensee;
(b) order that all or some of the terms of an agreed settlement between the licensee and
the complainant are to have effect, by consent, as all or part of a final determination
of the complaint;
(c) order that the licensee apologise to the complainant;
(d) order that the licensee undergo training or education;
(e) order the licensee to reduce, cancel, or refund fees charged for work where that work
is the subject of the complaint;
(f) order the licensee:
(i) to rectify, at his or her or its own expense, any error or omission; or
(ii) where it is not practicable to rectify the error or omission, to take steps to provide,
at his or her or its own expense, relief, in whole or in part, from the consequences
of the error or omission;
(g) order the licensee to pay to the Authority a fine not exceeding $10,000 in the case of
an individual or $20,000 in the case of a company;

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 (h) order the licensee, or the agent for whom the person complained about works, to
make his or her business available for inspection or take advice in relation to
management from persons specified in the order;
(i)

order the licensee to pay the complainant any costs or expenses incurred in respect
of the inquiry, investigation, or hearing by the Committee.
(2) An order under this section may be made on and subject to any terms and conditions that
the Committee thinks fit.
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.
(2) The appeal is by way of written notice to the Tribunal of the appellant's intention to
appeal, accompanied by—
(a) a copy of the notice given to the person under section 81 or 94; and
(b) any other information that the appellant wishes the Tribunal to consider in relation
to the appeal.
(3) The appeal is by way of rehearing.
(4) After considering the appeal, the Tribunal may confirm, reverse, or modify the
determination of the Committee.
(5) If the Tribunal reverses or modifies a determination of the Committee, it may exercise any
of the powers that the Committee could have exercised.

The relevant provisions from the Real Estate Agents Act (Professional Conduct and Client Care) Rules
2012 are:
Rule 5.1 A licensee must exercise skill, care, competence, and diligence at all times when
carrying out real estate agency work.
Rule 5.2 A licensee must have a sound knowledge of the Act, regulations, rules issued by the
Authority (including these rules), and other legislation relevant to real estate agency
work.
Rule 6.2
Rule 6.3

A licensee must act in good faith and deal fairly with all parties engaged in a
transaction.
A licensee must not engage in any conduct likely to bring the industry into disrepute.

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