Auckland's biggest realty firm has been found guilty of unsatisfactory conduct and ordered to repay a vendor's commission for breaching conflict of interest rules and failing to comply with the law.
A landmark Real Estate Authority (REA) decision has criticised Barfoot & Thompson for "contradicting its duty to act in the best interests" of paying clients after one of its agents negotiated the sale of a client's house to her own son and daughter-in-law.
The couple then on-sold the South Auckland property - described as their "forever dream home" - on settlement day for a further $52,000.
"The Agency was expected to adhere to legal principles and act in a manner that reflects the required standards of professional competence," the decision says.
Barfoot & Thompson's failure was described as "incompatible with their obligations to 'act in good faith and deal fairly"' with paying customers.
The company has accepted the findings, reviewed its procedures and apologised.
But the agent, Wendy Vroegop, who was also found to have committed unsatisfactory conduct, says she did nothing wrong. Vroegop told the Weekend Herald she followed the company's internal policies "to the letter" when she sold Richard and Fiona Horwood's Lauren Grove, Papakura home to her son for $1.048 million in January 2015.
She believed she had been made a scapegoat by the REA and her former employers.
"I've followed every single procedure that the company wanted ... in terms of my son buying that property. There was nothing that I didn't do that was not signed off by my manager. How the hell I ended up being the scapegoat is absolutely beyond me."
The case centred around a now defunct Barfoot & Thompson policy which stipulated any agent or "related person" who wanted to buy a client's property should assume direct negotiations with the vendors.
In 2013, the REA ruled the policy was in breach of consumer protection rules in the Real Estate Agents Act.
The company repeatedly challenged the decision all the way to the Court of Appeal, which ruled against Barfoot & Thompson in 2016.
The policy was under appeal but still in force when Vroegop's son bought the Horwoods' home. She says she had no knowledge of the protracted legal proceedings and believed she was acting in accordance with her professional obligations.
The Horwoods paid $33,000 in commission. Though Vroegop was not the listing agent, she earned nearly $20,000 on the sale for bringing in the buyers, and even conducted price negotiations for the Horwoods with her relatives by phone.
The Horwoods only learned their property had been on-sold for $1.1m, without the buyers ever taking possession, by chance months later.
"This is not about the money," Richard Horwood told the Weekend Herald. "This is ... about the ethics.
"We ... live by a code of rules in our professions. We feel that by listing with an agent we bought into a code of ethics and professional code, and we don't feel that has been upheld."
After learning of the on-sale, the Horwoods complained to the REA in 2016, claiming Vroegop breached her fiduciary duty.
The REA found Vroegop made the appropriate written disclosures about her son and provided the required registered valuation.
But it ruled she had failed to act in the Horwoods' best interests by overseeing her son's purchase of a client's house, and questioned whether she ought to have informed the Horwoods their home was effectively being sold twice in one day.
Vroegop told investigators she met her legal and ethical obligations. She was entitled to commission on the initial sale and permitted to conduct negotiations with the Horwoods by virtue of the Barfoot & Thompson policy.
She had played no role in the subsequent on-sale, which was done privately and occurred due to an "extreme" change in personal circumstances involving her son.
Vroegop was ordered to repay her share of the commission by the REA.
The decision says Barfoot & Thompson, which also repaid more than $13,000, had since rectified the policy and instructed staff of a "zero tolerance" to any non-compliance.
It had also tendered an apology to the Horwoods and expressed regret for any distress and inconvenience, though the Horwoods say no apology was ever received.
The REA criticised Barfoot for allowing Vroegop and other agents to follow its discredited internal policy, even after an earlier court ruling found it in breach.
"While the Agency was entitled to appeal the decision of the High Court, it remained the responsibility of the Agency in the interim to ensure it complied with the law."
Barfoot & Thompson managing director Peter Thompson said the company had admitted its error and offered to refund its share of the commission voluntarily.
It immediately rectified the policy after the Court of Appeal ruling and was lauded for doing so by the REA.
Thompson agreed that Vroegop had followed the company's policy during the transaction.