A New Zealand court ruling has cost an Auckland estate agency nearly $1 million for failing to declare a conflict of interest.
Consumer advocate Neil Jenman said this decision should shake up all bird-dog agents not only in New Zealand but also in Australia.
Just as bird-dogs are dogs trained to locate or retrieve birds, bird-dog agents locate good deals for property investors: “It’s time treacherous bird-dog agents got busted – big time.”
The Kiwi court found the agency breached its fiduciary duty to its seller clients when it sold their Milford cliff-top home for $2.5 million when it was really worth $3.2 million.
This bird-dog agency did not disclose its relationship with the buyer, a property speculator for which the agency was acting on other property deals.
The agency had a close relationship with the buyer prior to the sale date because it either had acted or was currently acting as agent for this speculator or associated entities in respect of eight properties.
Failure to disclose these matters was fatally misleading and deceptive.
When the buyer resold the property less than six months later for $3.55 million, the pinged-off sellers promptly sued.
The agency was ordered to pay the sellers $675,000 in “equitable damages” to restore them to their previous position, and refund $67,000 commission.
The judge described this as “unauthorised profit” which had to be “disgorged”.
The sellers told the NZ Herald: “We felt we had been wronged, but following this decision of the High Court we feel justice has now been served.”
On the other hand, the agency’s boss told the paper he was floored by the decision: “We believe we sold the property at the prevailing market price and do not believe we can be held responsible for what someone subsequently was prepared to pay for it.”
He expected to appeal because of the ramifications for the real estate industry and, if his firm had to pay, would claim on its professional indemnity policy.
By Tim O’Dwyer Queensland Solicitor & Consumer Advocate watchdog@argonautlegal.com.au.*
