Real
estate agents sharing commission on a sale do not share liability for any
negligence by the selling agent.
Auckland real estate agent Stanaway Real Estate paid twenty per cent of
its $148,250 commission on sale of a North Shore beach-front mansion to Realty
(NZ) Ltd as referring agent then was later held solely liable to pay $2.2
million damages for its negligence on the sale.
Litigation over the sale of a Muritai
Road property at Milford in Auckland has dragged on for over ten years. The High Court was told vendors Mr & Mrs
Messenger, living in Guernsey, gave their son Gary Messenger power of attorney
to sell their Milford property. He was
working as a salesperson for a LJ Hooker franchise: Realty (NZ) Ltd. Gary owned Realty but could not act as agent
on his parents sale since he didn’t then have a real estate agent’s licence. He struck a deal with Stanaway Real Estate;
he would give them sole listing and in return it would pay twenty per cent of
the commission on any sale.
In late 2006, Stanaway negotiated a sale
at $5.9 million to a Mr Goodman and Ms Rattray. They failed to make their initial
promised part-payment and were bankrupted after the High Court ordered $2.8
million damages payable for breach of contract.
The Messengers then turned their
attention to Stanaway Real Estate alleging it failed to do a competent job as
selling agent. The Goodman/Rattray contract
was to be later described in court as “a complete mess” and “poorly drafted”. The original offer followed by multiple
counter-offers resulted in a heavily amended contract which one law firm said was capable of nine
possible interpretations. The purchasers
had committed to paying only $2.75 million of the $5.9 million purchase price
when getting title in December 2006, with the balance due in two years. The High Court decided that the Messengers
would have been left unsecured for the balance.
A “caveat” clause in the contract which the agent thought would protect
the Messengers for the unpaid balance did no such thing.
Justice Woolford ruled that a reasonably
competent agent would have inserted a standard vendor finance clause in the
contract as protection. The Messengers
were held twenty per cent to blame for not getting legal advice before having
their son sign off on the agreement.
Stanaway Real Estate was ordered to pay the Messengers $2.2 million in
damages. It in turn sued son Gary
Messenger and his company Realty (NZ) claiming they were partly to blame.
Justice Woolford ruled that referring
agents do not share any liability after introducing a property owner to the
listing agent. They have no further
role, do not assume any responsibility for the listing agent’s actions and
there is no foreseeable reliance by the property owner on the referring agent. Gary Messenger was also held not liable. He was not at that time a licensed real
estate agent. His link to the vendor was
that of parent/son, not that of client/adviser.
Messenger
v. Stanaway Real Estate – High Court (31.07.15)
15.086