Price-fixing: Commerce Commission v. Property Brokers

Manawatu real estate agent Timothy Mordaunt has been fined $50,000 for initiating a price-fixing ring amongst local agents and his business Property Brokers Ltd was fined $1.45 million.

Mr Mourdant admitted he breached the Commerce Act by colluding with at least ten other Manawatu real estate agents in late 2013 to pass on Trade Me’s $159 listing fee for each property when Trade Me dropped its initial subscription pricing model.  The Commerce Commission said this collusion amounted to price-fixing; agents were agreeing not to compete on price.

The court was told Mr Mourdant organised, hosted and chaired a meeting at which the Manawatu price-fixing agreement was decided.  He co-ordinated its implementation and later attempted to expand its operation.

Property Brokers Ltd is owned by Mr Mourdaunt’s family trust.  Other real estate agents in the Manawatu region have been prosecuted and fined for their involvement in the price-fixing agreement.  Price fixing arrangements are often hard to detect.  The Commerce Act imposes heavy penalties for any breach.

Commerce Commission v. Property Brokers Ltd – High Court (10.04.17)

17.033

Property: Whitford Properties v. Bruce

Adjusting the sale price in a mortgagee sale to accommodate their own side deal cost developer Robert Bruce and financier Gregory Hayhow $2.5 million following a High Court ruling that they compensate Whitford Properties Ltd, now in liquidation.

Whitford Properties went into receivership and liquidation in 2014 after failed attempts to subdivide 8.6 hectares of rural land near Whitford Golf Club in south Auckland.  Finance together with disposal of sewage and waste water proved insurmountable hurdles.

The High Court was told ANZ Bank owed $8.5 million began the process for a mortgagee sale.  Whitford Properties’ shareholders had guaranteed the loan.  They looked to refinance, with financier Mr Hayhow expressing interest.  An initial unconditional deal fell through with Mr Hayhow forfeiting to ANZ his $1.25 million deposit.  Evidence was given of a series of agreements in July 2014 with Mr Bruce and interests associated with Mr Hayhow offering to buy Whitford’s land at prices varying from ten million dollars to $7.4 million.  The deal was eventually done at ten million. A cash payment of $7.4 million cleared what remained of the ANZ debt and $2.56 million was written off against money due by Mr Bruce to Mr Hayhow: the $1.25 million deposit previously lost and $1.3 million Mr Bruce personally owed Mr Hayhow.  The court was told Mr Bruce had borrowed $330,000 from Mr Hayhow nine months earlier to alleviate a cash flow crisis with interest charged at four hundred per cent.

The sale process was structured as a mortgagee sale with ANZ’s rights transferred to Mr Bruce as guarantor.  Whitford Properties’ liquidator sued, claiming a failure to properly account for proceeds of the mortgagee sale.

Justice Duffy ruled the best evidence of a market price for Whitford’s land was the agreed sale price at ten million dollars.  There was a surplus of $2.56 million after paying ANZ.  This surplus belonged to Whitford Properties, not to Mr Bruce or Mr Hayhow.  They were ordered to hand over to Whitford’s liquidator the $2.56 million surplus for the benefit of Whitford Properties’ creditors and shareholders.  Companies office records show founding shareholder Mr Wayne Allen’s family as a fifty per cent shareholder with a Mr Owen Harnish holding the balance.  Mr Harnish purchased his stake at a 2014 mortgagee sale of Mr Bruce’s fifty per cent shareholding.  Mr Hayhow held a mortgage over these shares.

Whitford Properties v. Bruce – High Court (4.04.17)

17.032

Property: Mahon v. Station at Waitiri

Claims by experienced property developer Neville Mahon that colleague Tim Edney was holding Queenstown properties for him in a warehousing deal were described by the High Court as being no more than an unwritten indefinite option to purchase which lacked commercial reality.

Mr Mahon alleged fellow Auckland property developer Mr Edney welshed on a buyback deal over properties in Park Street, Queenstown earmarked for development as a small retirement complex.  Pinched for cash when it came to paying up for his June 2015 five million dollar purchase, Mr Mahon arranged for Mr Edney to pay and take title through an Edney company: Station at Waitiri Ltd.  Associate judge Bell ruled the prolonged negotiations which led to Waitiri taking title did not include any finalised agreement that Mr Mahon could buy back at a later date.

Mr Mahon alleged there was an oral buyback agreement and it was enforceable because he partly-performed the agreement by paying architects and engineers who prepared reports for the proposed Queenstown build.  Judge Bell ruled discussions with Mr Edney amounted to no more than a suggestion that some time in the future there might be an agreement for a buyback.  Expenses incurred by Mr Mahon were no more than an optimistic expectation that a buyback deal might follow.

By way of background, the High Court was told of other financial dealings between Mr Edney and Mr Mahon in dispute: Station Hotel in Beach Road central Auckland and a 43 hectare development on Coronation Road at Mangere in south Auckland.  Edney-controlled companies allege that one of Mr Mahon’s companies owes over $2.1 million in relation to the Station Hotel and that Mr Mahon’s partner Saren Lu is director of a company which has allegedly defaulted on a $11.6 million loan in respect of Coronation Road.         

Mahon v. Station at Waitiri – High Court (4.04.17)

17.031