Two Manawatu real estate agents ordered to pay $813,000 damages kept client David Olsen’s Pangani Properties in the dark while promoting a business opportunity for ‘an acquaintance’ described as someone met casually from time to time for coffee. Grant Robert Lloyd and Philip James Leslie Nevill went on to make commissions of $331,150 brokering a string of deals for a Malden Street industrial site in Palmerston North.
In 2010, CEO David Olsen was mulling over future plans for Pagani Property Ltd’s Malden site. He could sell, or expand by purchasing a neighbouring site. Negotiations with the neighbour came to nothing. A sale listing was removed after four months. No offers were received.
The High Court was told Mr Lloyd, trading as Tremain Commercial Palmerston North Ltd, approached Mr Olsen in 2013 offering to market his property. An agency agreement was signed. Unbeknown to Mr Olsen, Tremain also signed up the neighbour. Mr Olsen was to later learn Tremain Commercial brokered negotiations behind his back. In September 2013, Mr Nevill was in discussions with NZ Post about potential industrial sites available for lease. Six weeks later, he negotiated a conditional sale of Pagani Properties Malden Street site. The buyer, Zambora Projects Ltd was owned by Garry Doyle, a local Subway franchise holder who had previously run a second-hand car parts business. Mr Lloyd was to describe him as a casual acquaintance. Evidence was given of feverish negotiations brokered by Tremain Commercial between Mr Doyle, NZ Post and the owner of the neighbouring Malden Street site to put together a long-term leasing deal satisfactory to NZ Post using both sites. Potentially having all his ducks in a row, Mr Doyle went unconditional on the Pagani Properties purchase. This earned Tremain Commercial commission of $63,150. Tremain earned further commissions totalling $268,000 on the sale of the neighbouring site to Mr Doyle’s company, the lease to NZ Post and Mr Doyle’s subsequent sale of the project to a new buyer after he struggled to complete the NZ Post redevelopment within the tight timeframe demanded.
Justice Ellis ruled Mr Nevill and Mr Lloyd as agents failed in their fiduciary duties to their principal Pangani Properties in five respects: they prevaricated over Mr Doyle’s background, not disclosing his true motivation for buying Malden Street; they did not tell Pangani Properties about NZ Post’s interest in Malden Street, with detailed interest having arisen weeks before Malden Street went unconditional and at a time when Pangani Properties could have withdrawn Malden Street from sale as Mr Doyle was seeking a time extension for his unconditional contract; they preferred their own interests over Pangani Properties getting an extra commission by having Mr Doyle buy and then lease to NZ Post rather than missing a sale and having Pangani Properties itself conclude a lease with NZ Post; they advanced the interests of Mr Doyle’s Zambora Projects over their duty to Pangani Properties by not disclosing NZ Post’s interest, and; they prejudiced Pangani Properties position by signing up the neighbour at a time when they knew Pangani’s Mr Olsen was still looking to acquire the neighbouring site with his own intention to expand.
In general, the two real estate agents failed to disclose material information to their principal, Pangani Properties, and they allowed their interests and the interests of third parties to conflict with Pangani without Pangani’s consent. Failing to act in the best interests of client Pangani Properties meant a lost opportunity to achieve a different outcome. Justice Ellis said.
Pangani Properties was awarded $813,150 damages: recovery of its commission paid on sale to Zambora Projects ($63,150); compensation for the loss of a chance to secure NZ Post as its own tenant on the expanded site ($650,000), and; compensation for investigation costs ($100,000) including the hire of private detectives to unravel what had happened.
In addition, Mr Nevill and Mr Lloyd were both censured by the Real Estate Agents Complaints Committee and each fined $8000.
Pangani Properties Ltd v. Lloyd and Nevill – High Court (6.08.18)
18.159