An
estate agent’s failure to tell his client that a second potential buyer was
interested in a Maketu kiwifruit orchard cost PGG Wrightson $1.1 million; the
extra amount the property could have sold for but for the misleading advice
given the vendor by the agent.
Maketu Estates Ltd
sold its Bay of Plenty 66 hectare kiwifruit orchard in November 2012 for $3.8
million. It had been a tough two years
for the industry and for local real estate agents: PSA bacterial disease had
badly affected production, farm incomes and land values. Kiwifruit packhouses were scrambling to get
fruit for their production lines and were buying up orchards to ensure a
guaranteed supply of fruit.
Maketu Estates sold to
a local packhouse: DMS. Maketu learnt
days after the sale that a rival packhouse MPAC had also been interested. The High Court was told that hours before DMS
shook hands on the deal MPAC was still showing interest as a serious buyer, phoning
the Wrightson agent for clarification of what was included in the sale. MPAC was left with the impression there was no
rush, while in fact the agent was at that time meeting with directors of Maketu
prior to a final meeting with DMS. The
agent did not tell Maketu’s directors that another buyer was still keen.
Directors of Maketu
Estates said at no time were they advised that MPAC was in the market and
proposing to make a bid. Having
competing bidders would inevitably push up the price.
Justice Woolford said evidence
indicated that Wrightson’s agent told Maketu’s directors DMS was the only
buyer. And not telling MPAC that
negotiations were underway between Maketu and DMS was deceptive and misleading,
he said. His Honour surmised that the
Wrightson agent held a subconscious bias in favour of DMS. The agent had a very good relationship with
the packhouse, having done a lot of work for the company over the years. By contrast he had no previous working
relationship with the MPAC staffer he spoke to on the phone, had not taken him
on an earlier view of the property and did not recognise the significance of
his interest in the orchard.
Wrightson and its
agent were held liable for a breach of the Fair Trading Act and for a breach of
the duties owed a client. Damages of
$1.1 million were the difference between the price paid by DMS and the amount
that could have been obtained in a competitive market. Wrightson’s claim for $88,000 commission on
the sale to DMS was dismissed. Its agent
had failed to act in the best interests of Maketu Estates.
Maketu
Estates v. Robb – High Court (29.10.14)
14.050