Allegations
of sharp practices by a Manawatu real estate firm for its role in the
forced sale of a Palmerston North commercial building where a buyer was
gazumped through a “better offer” clause saw Westpac and a Bayleys Real Estate
franchise facing claims under the Fair Trading Act.
Property company Batchelar
Centre Ltd complains it was robbed of the chance to re-negotiate its deal for
the purchase of a building in Broadway Avenue, Palmerston North because of
misleading behaviour by staff at a Bayleys franchise, Coast to Coast Ltd. In the High Court, Associate Judge Smith
ruled there was prima facie evidence
of a breach of the Fair Trading Act and the dispute should go to a full hearing.
The court was told Coast to
Coast marketed the Broadway property in late 2013 on behalf of Westpac in a
mortgagee sale. It was passed in at
auction with Batchelar Centre the only bidder at $400,000. Batchelar had made a pre-auction offer of
$750,000, but this offer was withdrawn.
After the auction, Batchelar signed a contract to buy at $400,000. The contract contained a “better offer”
clause: Westpac could cancel the contract if it received a better offer before settlement
by Batchelar – due in some fourteen weeks.
Evidence was given that Batchelar was astounded to learn seven weeks
prior to settlement that its contract was cancelled. It had no inkling that other buyers had been
interested. The new buyer was buying at
$405,000. This buyer had also been
present at the unsuccessful auction.
When Batchelar protested and asked for evidence of the better offer, the
new buyer accelerated its date for settlement and finalised the deal quickly.
Batchelor sued, alleging
breach of the Fair Trading Act. Judge
Smith said there were two aspects of the sale which might be considered a
breach of the Act. First, when Batchelar
asked Coast to Coast why there was no “sold” sign posted on the property it was
told one would be put up immediately.
This gave to Batchelar an impression that the property was off the
market. But at this time Coast to Coast
staff were in fact actively looking for alternative offers. Secondly, Batchelar was given brief access to
the building around this same time “to have a look around”. As it transpires, contractors hired by
Batchelar removed some partitions from the building during this period in
readiness for refurbishment of the building after settlement. Again, granting early access gave Batchelar
the impression it was the only buyer in the market.
If Coast to Coast is found to
have breached the Fair Trading Act, Westpac is liable also. Coast to Coast was acting as agent for
Westpac in carrying out the sale. Proof
that there was a breach of the Act will require a later full court hearing.
Batchelar
Centre v. Westpac – High Court (25.2.15)
15.012