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              BETWEEN                          MARK MONCRIEFF STEVENS &

              AND                              PREMIUM REAL ESTATE LIMITED

Hearing:      12-21 June 2006

Appearances: W Akel and N Alley for Plaintiffs
             P Napier and N Pye for Defendants

Judgment:     6 December 2006


                             This judgment was delivered by me on
                                  6 December 2006 at 2:00 pm
                           pursuant to r 540(4) of the High Court Rules

Solicitors:    Simpson Grierson, Private Bag 92518, Auckland
               Fax: (09) 307-0331
               Keegan Alexander, P O Box 999, Auckland
               Fax: (09) 307-2610

STEVENS & ANOR V PREMIUM REAL ESTATE LTD HC AK CIV-2005-404-2667 [6 December 2006]
                              Table of Contents

                                                                   Para No

Introduction                                                          [1]
Value of 23D Beach Road in April 2004                                 [4]
       Valuations by Mr Mahoney and Mr Churton                        [6]
       The Sheldons valuation                                        [18]
       Mr Gamby’s valuation                                          [21]
Fair Trading Act 1986                                                [23]
       Premium’s appraisal of 23D Beach Road                         [32]
       Marketing 23D Beach Road                                      [48]
       Tender process                                                [62]
       Negotiations with Mahoenui                                    [65]
Negligence / Breach of Contract                                      [78]
       Appraisal of 23D Beach Road                                   [80]
       Tender process                                                [88]
       Failing to obtain best possible price                         [91]
Premium’s failure to disclose what it knew of Mr Larsen - breach
of Fair Trading Act / Breach of fiduciary duty                       [96]
       What Ms Riley knew about Mr Larsen                            [98]
       Fair Trading Act 1986                                        [102]
       Breach of fiduciary duty                                     [110]
       Relief under FTA                                             [121]
       Relief for breach of fiduciary duty                          [127]
Result                                                              [138]

[1]    In April 2004 Mr and Mrs Stevens sold their home at 23D Beach Road,
Castor Bay. The buyer was the Mahoenui Valley Trust (Mahoenui) and the price
was $2.575m. The Stevens were disappointed with the price. When Mahoenui re-
sold the property only five months later for $3.555m they were very upset and
believed that they had sold their house at an under-value.

[2]    Premium Real Estate Ltd (Premium) was the Stevens’ agent on the sale and
Mahoenui’s agent on the re-sale. Mahoenui’s trustee, Mr Larsen, was responsible
for the transactions on behalf of Mahoenui. When they sold their house the Stevens
did not know that Mr Larsen was a property speculator for whom Premium’s agent,
Ms Riley, was already acting in relation to other properties and that her daughter
worked as his personal assistant.

[3]    The Stevens seek from Premium a refund of the $67,050 commission paid on
the sale and damages of $995,000. They allege that Premium’s conduct in relation to
the sale of 23D Beach Road constituted breaches of ss 9 and 14 Fair Trading Act
1986 (FTA), negligence, breach of contract and breach of fiduciary duty. The
numerous alleged breaches overlap considerably but can be conveniently treated as
raising the following issues:

       a)      What was 23D Beach Road worth in April 2004?

       b)      Was Premium in breach of the FTA in the way it appraised and
               marketed the property, advised and conducted the tender process and
               handled the negotiations with Mahoenui?

       c)      Was Premium negligent/in breach of its contractual duty in the way it
               appraised and marketed the property, advised and conducted the
               tender process and handled the negotiations with Mahoenui?

       d)      Was Premium’s failure to disclose what Ms Riley knew about
               Mr Larsen misleading and deceptive conduct under the FTA ?
       e)      Did Mr Larsen’s interests and those of the Stevens conflict so as to
               require Ms Riley to disclose what she knew about Mr Larsen, making
               her failure to do so a breach of fiduciary duty?

       f)      If the Stevens succeed on any of the causes of action, what is the
               appropriate relief?

Value of 23D Beach Road in April 2004

[4]    23D Beach Road occupies a cliff-top position in Castor Bay, a popular
suburb on Auckland’s North Shore. It has a substantial 1970s house and a pool. Its
main feature is the spectacular 180-degree sea view. Against that, it is on a unit title
and shares its access with three other properties.

[5]    Four valuers gave evidence about the value of 23D Beach Road in April
2004. In addition, a valuation by Darrochs, obtained by a prospective purchaser in
August 2004, was included in the common bundle. The valuations ranged from
$2.7m to $3.6m. I have serious reservations about two of them, Mr Gamby’s (the
lowest) and that of Sheldon and Partners Ltd (Sheldons) (the highest), for reasons
that I discuss later. Also, I am unable to attribute much significance to the Darrochs
valuation because the valuer was not called and I do not know the process that was
used to reach the conclusion. The contest on the valuation issue was therefore
between Mr Mahoney and Mr Churton. Mr Mahoney assessed the value of 23D
Beach Road in April 2004 at $3.25m. Mr Churton assessed it at $2.74m.

Valuations by Mr Mahoney and Mr Churton

[6]    Mr Mahoney and Mr Churton are both very experienced and knowledgeable
valuers, who approached the valuation exercise in roughly the same way. They
assessed the land value of comparable properties in the area that had recently sold.
They adjusted the sale prices to reflect growth in the market since the sale;
Mr Mahoney used 16% per annum and Mr Churton 1.25% per month, i.e. 15% per
annum. Both made further adjustments to the sale price to aid the comparison with
23D Beach Road in the form of deductions for the compromised access and unit title
and an increase for its superior views. They then took a global view to determine the
value of 23D Beach Road using the comparative value of the hypothetically adjusted

[7]    Both valuers considered properties in Castor Bay and neighbouring suburbs
for the purposes of comparison with 23D Beach Road. Some of the properties
Mr Churton referred to seemed too remote or dissimilar but most of those, he
explained, had been used for the purposes of assessing building costs. It was evident
that the sales of 27 and 41 Beach Road were viewed by both as the most relevant.
However, 41 Beach Road was slightly problematic as a comparison because the
buyer had been the owner of an adjoining site and it was widely thought that a
premium had been paid.

[8]    Although both valuers made quite detailed comparisons of both 27 and 41
Beach Road as well as other similar properties and I have considered all of that
evidence, there was no doubt that both regarded 27 Beach Road as the best
comparison. I have therefore focused on the approaches that the valuers took to this
particular property.

[9]    The main differences between 27 and 23D Beach Road were:

       •       23D Beach Road was on a unit title;

       •       23D Beach Road had shared access with three other units;

       •       27 Beach Road enjoyed a larger site with a tennis court;

       •       27 Beach Road had a larger, newer house;

       •       23D Beach Road had superior views.

[10]   The aspect on which Mr Mahoney and Mr Churton differed most was the
land value of the two properties. The site at 27 Beach Road was significantly larger.
It was the way they treated that factor that mainly accounted for the difference in
their overall assessment of the value of 23D Beach Road.                27 Beach Road is
undoubtedly the more valuable property. This is mainly because of its bigger section
with a tennis court. However, if the tennis court were removed the size of the two
sites would be comparable.

[11]   When Mr Mahoney considered the land value of 27 Beach Road he took out
the value of the tennis court so that he could compare two similar sized properties.
With the tennis court taken out of the equation, giving comparable site areas, the
contest is much closer, coming down mainly to the difference between the access
and the unit title on one hand and the sea views on the other. Mr Mahoney was very
much influenced by the views and less concerned by the title and access issues. He
assessed the land value of 27 Beach Road as at April 2004 at $2.765m and the land
at 23D Beach Road at $2.6m. He described his assessment as follows:

       What I’ve done is analyse the sale at 27 Beach Road to get a land component
       of that sale of $2,750,000. And then to compare it with the subject property
       I’ve deducted the value of the land attributable to the tennis court at
       $300,000 which is the front area of approximately 470 sq metres which gives
       me a land component for the house site and cliff face at 27 Beach Road of
       $2,415,000. That value I have adjusted by minus 5% for title, minus 2½%
       for the shared access way plus 7½% for the superior views relating to 23
       Beach Road. That gave me an equivalent land value for the house site
       transferred to 23 Beach Road of $2.6 million.

       Where is the adjustment for the difference in the size of the land?….There’s
       not. Well the adjustment for the differences in the size of the land are not
       done on a square metre basis. When you look at 27 Beach Road I’ve taken
       out the tennis court area which I have ascribed a separate value because its at
       a much lower level of value than the cliff top position. I’ve also taken out
       the right of way because that’s a shared right of way as its in the area of the
       title. And I finished up with a land area applied to the house site and cliff
       face of approximately 1900 square metres. I look at that site of 1900 sq
       metres of which a very substantial proportion constitutes the bush cliff face
       and then compare that value with the subject site.

[12]   Mr Churton assessed the land value of 23D Beach Road at $1.89m. He
reached this figure based on a rate of $1400 per m². Mr Churton did not express a
land value for 27 Beach Road but said that he had used a rate of $1,686 per m² in
assessing its overall value. Mr Churton was clear that he considered 27 Beach Road
superior, in part, because of the size of the site; a larger site was inherently more
valuable and Mr Churton reflected that in the lower m² rate that he put on 23D Beach
Road. In considering the overall value of 23D Beach Road Mr Churton placed more
emphasis on the unsatisfactory aspects of the title and access to 23D Beach Road and
less on the views.

[13]   Mr Churton explained his approach in this way:

       What percentage increase do you give to the better outlook of 23 as opposed
       to 27?….I made a deduction to 27 to compare with 23 of 7.5%. I believe
       that the subject property has a superior outlook to all of the key sales I relied

       Did you make a deduction with regard to the shared access way and if so
       what percentage was that compared with 23?….I made adjustment of 7.5%
       for the access to the property compared to the 10% for 41 so I regard the
       access to number 27 as not as good as 41 but superior to 23 particularly as
       the shared access goes to another high priced property.

       And what adjustment did you make for the strata title for 23 as opposed to
       27?….All my key sales I made an adjustment of 10% then the difference
       between freehold and strata title (transcript 183-184)…

       So if there is any suggestion in your evidence that the determinative factor in
       the valuation is the size of the land it is not a suggestion you wish to convey
       to the court?….The size of the land does have an impact on value.
       Comparing a 1000 metre site with a 500 site that 1000 metre site would not
       have twice the value but may have 15-20% more value than the 500 metre
       site and I have reflected that in my analysis of sales.

[14]   The adjustments made for title, access and views are a matter of judgment for
the particular valuer and the variations between Mr Mahoney and Mr Churton fell
within the acceptable range. It was the difference in their respective approaches to
the size of 27 Beach Road that mainly accounted for the very substantial difference
in their assessments as to land value of 23D Beach Road and, consequently, to the
difference in their assessment of the overall value of 23D Beach Road.

[15]   There is no question that 27 Beach Road is a far superior property to
23D Beach Road, largely because of its greater size. But its actual superiority is not
in issue. The valuers were aiming to establish a hypothetical benchmark against
which to compare 23D Beach Road. Such hypothetical similarity could only be
achieved by adjustments such as were made in relation to the title, access and views.
Such adjustments to the value of 27 Beach Road would eliminate, as far as possible,
the differences between the two properties in order to compare them.
[16]   I accept Mr Churton’s view that the larger land area enjoyed by 27 Beach
Road conferred on it an inherently higher land value on a per m² basis. However,
unless an adjustment is made for that larger land area there is no basis on which to
compare it with 23D Beach Road. Mr Mahoney adjusted for the larger area by
eliminating the value of the tennis court. Mr Churton did not make any adjustment.
Mr Napier submitted that Mr Mahoney’s failure to take land area into account as a
relevant factor was unsupportable but there was no evidence to that effect and no
basis for the submission.

[17]   I prefer Mr Mahoney’s approach, which essentially compares two similarly
sized properties, one with better views and the other with better access and title.
Whilst Mr Churton’s emphasis on the title and access issues over views is just as
acceptable as Mr Mahoney’s preference for views, it is Mr Mahoney’s treatment of
the land area that is decisive for me. I therefore accept Mr Mahoney’s evidence and
find that the market value of 23D Beach Road in April 2004 was $3.25m.

The Sheldons valuation

[18]   Ms Freeborn of Sheldons prepared a valuation for Mahoenui in May 2004.
She valued 23D Beach Road at $3.6m including chattels and $3.57m excluding
chattels. The Stevens have used this valuation as a benchmark for the calculation of
their loss, using the figure of $3.57m, although the figure of $3.6m was sometimes
referred to in evidence. When referring to the Sheldons valuation I mean the figure
of $3.57m.

[19]   The Sheldons valuation was the highest of all the valuations. It came under
attack from the defendant on the basis that Ms Freeborn was not a registered valuer
at the time and there had been a subsequent incident in which her employer had
expressed dissatisfaction with another valuation. I do not ascribe much significance
to these points because the valuation was signed by a registered valuer, Mr Brian
Stafford-Bush, who supervised Ms Freeborn’s work. Nevertheless, I have
reservations about the accuracy of this valuation.
[20]    Ms Freeborn placed considerable emphasis on the superiority of the views
and was not very concerned about the shared access or the fact that 23D Beach Road
was on a unit title. My impression was that she attributed less significance to those
factors compared to the other valuers. The access issue, particularly, seemed to be a
point of concern for prospective buyers. Of greater concern is that, if correct,
Ms Freeborn’s valuation would have meant that 23D Beach Road was worth more in
April 2004 than 27 Beach Road. But it was obvious from all the evidence that
27 Beach Road would always command the higher price because it sat on a larger
site with a tennis court and newer home on it. For that reason alone I cannot accept
the Sheldons valuation.

Mr Gamby’s valuation

[21]    Mr Gamby’s valuation was the lowest valuation, at $2.7m. Mr Gamby was
strongly influenced by the risk of slip along the cliff face in front of 23D Beach
Road. He viewed this risk as being one inherent in all cliff top properties but
considered 23D Beach Road was in a worse position than either 27 or 41 Beach
Road because the house was relatively close to the cliff face and, in the event of a
slip, remediation work would be more difficult and would require the consent of the
other unit title holders.

[22]    None of the other valuers referred to the risk of slip.         There was no
engineering evidence to support a suggestion that the site was unstable. There was
no evidence that any prospective buyer perceived a risk of slip. Mr Gamby may be
right that such a risk exists, and if there was a slip, 23D Beach Road would be in a
worse position than its neighbour.        However, unless prospective buyers also
perceived that risk it is difficult to see how it could have influenced the market value
of the property in 2004.

Fair Trading Act 1986

[23]    There are two aspects to the FTA cause of action. The first relates to the
appraisal, marketing and sale of the property. The second relates to the alleged
conflict of interest between Premium and Mahoenui. At this stage I deal only with
the first aspect.

[24]    The Stevens allege that Premium’s assessment of the value of 23D Beach
Road and conduct during the marketing and sale process amounted to breaches of
ss 9 and 14(1)(b) FTA, which provide:

        9       Misleading and deceptive conduct generally

                No person shall, in trade, engage in conduct that is misleading or
                deceptive or is likely to mislead or deceive.

        14      False representations and other misleading conduct in relation
                to land

                (1) No person shall, in trade, in connection with the sale or grant or
                possible sale or grant of an interest in land or with the promotion by
                any means of the sale or grant of an interest in land -….

                        (b) make a false or misleading representation concerning the
                        nature of the interest in the land, the price payable for the
                        land, the location of the land, the characteristics of the land,
                        the use to which the land is capable of being put or may
                        lawfully be put, or the existence or availability of facilities
                        associated with the land.

[25]    The same allegations are relied on in relation to both ss 9 and 14(1)(b).
However I do not consider that these allegations are capable of amounting to a
breach of s 14(1)(b).      The Stevens’ case under that section is that Premium’s
representations about the value of 23D Beach Road related to the price payable for
the land and misled the Stevens. However it is stretching the usual meaning of the
words “price payable” to suggest that a real estate agent’s opinion as to the value of a
property is a representation about the price payable for the property.

[26]    Self-evidently, and most especially in relation to land transactions, the price
that is paid does not necessarily reflect the value of the property. The everyday
meaning of “price” is the amount of money for which something is bought or sold.
“Value” is a broader concept, which may encompass a specific amount of money to
be paid but also encompasses the worth of something, which may be unrelated to a
particular price. This view accords with the observations of the Court of Appeal in
Commerce Commission v Bennett & Associates Ltd (1995) 6 TCLR 691 at 695. I do
not accept that the allegations are capable of constituting an actionable breach under
s 14(1)(b) and therefore propose to consider the Stevens’ claim only in relation to
s 9.

[27]   The approach to be taken in determining whether there has been an
actionable breach of s 9 was described by Tipping J in AMP Finance NZ Limited v
Heaven (1998) 6 NZBLC 102,414 (CA) at 102,420:

       The first step, which focuses on the conduct in question, is to ask whether
       the conduct is capable of being misleading. The second step is to ask
       whether [the plaintiffs] were in fact misled by the relevant conduct. This
       step focuses on the effect of the relevant conduct on the [plaintiffs’] minds.
       The third step requires consideration of whether it was in all the
       circumstances reasonable for [the plaintiffs] to have been misled. This is
       rare, as with the first step, the objective dimension comes in. It is not
       enough for [the plaintiffs] to show they were misled if reasonable people in
       their shoes would not have been misled.

[28]   In considering whether Premium’s conduct was capable of being misleading I
adopt the general principles stated by Wilcox J in Chase Manhattan Overseas
Corporation v Chase Corporation (1985) 8 ATPR 40-661 at 47,336 in respect of s
52 Trade Practices Act, as McGechan J did in Taylor Bros Limited v Taylors Group
Limited [1988] 2 NZLR 1 at 28:

       a)      Conduct categorised as misleading, or deceptive, or
               likely to be misleading or deceptive, unless it contains or conveys a
               misrepresentation: Taco Co of Australia Inc v Taco Bell Pty (1982)
               ATPR paragraph 40-303 at 43,751; (1982) 42 ALR 177 at 202.

       b)      A statement which is literally true may nevertheless be misleading or
               deceptive: see Hornsby Building Information Centre Pty Limited v
               Sydney Building Information Centre Ply Limited (1978) ATPR
               paragraph 40-067 at p 17,690; (1978) 140 CLR 216 at 227…

       c)      Conduct is likely to mislead or deceive if this is a “real or not remote
               chance or possibility regardless of whether it is less or more than 50
               per cent: Global Sportsman Pty Limited v Mirror Newspapers
               Limited (1984) ATPR paragraph 40-463 at 45,343; (1984) 55 ALR
               25 at p 30.

       d)      The question whether conduct is or is likely to be misleading or
               deceptive is an objective one, to be determined by the Court for
               itself, in relation to one or more identified sections of the public, the
               Court considering all who fall within an identified section of the
               public “including the astute and the gullible, the intelligent and the
               not so intelligent, the well educated as well as the poorly educated,
              men and women of various ages pursuing a variety of vocations”:
              Taco Company at ATPR 43,752; ALR 202…

       e)     Ordinarily mere proof of confusion or uncertainty will not suffice to
              prove misleading and deceptive conduct: Parkdale Custombuilt
              Furniture Pty Limited v Puxu Pty Limited (1982) ATPR 40-307;
              (1982) 149 CLR 191. However, where confusion is proved the court
              should investigate the cause so that it may determine whether this is
              because of misleading or deceptive conduct: Taco Company at
              ATPR 43,752; ALR 203.

[29]   Relevantly in this case, relief under s 43 requires a causal link between the
infringing conduct and the loss or damage: Goldsbro v Walker [1993] 1 NZLR 394,
398-399; (1992) 5 TCLR 46, 50 (CA); Commerce Commission v Bennett and
Associates Ltd (1996) 6 TCLR 691, 694.

[30]   The general allegation on which this aspect of the FTA cause of action is
based is that Mr and Mrs Stevens were misled into believing that their property was
only worth $2.575m as a result of Premium:

       a)     Incorrectly assessing the value of the property;

       b)     Pitching the marketing to the wrong market;

       c)     Misleading the Stevens with regard to the operation of the tender

       d)     Advising or encouraging the Stevens to accept the Mahoenui offer;

       e)     Failing to make enquiries as to the true value of the property once it
              was put on notice of it by Mahoenui’s marketing campaign.

[31]   I can dispose of (e) immediately. The evidence showed that when the Stevens
signed the agreement Mahoenui had probably not even engaged its valuer and if it
had, Premium was unaware of that fact. The agreement was conditional only on
Mahoenui arranging finance. By the time Mahoenui began its marketing campaign
its agreement with the Stevens was unconditional. There was no evidence to suggest
that the Stevens might have been able to cancel the agreement. So this allegation
could not give rise to the requisite causal link that would enable the Stevens to
succeed under s 9 and I do not consider it further.

Premium’s appraisal of 23D Beach Road

[32]   The Stevens had lived at 23D Beach Road since 1994. But the travel time for
Mr Stevens, who worked in Ellerslie, and one of their sons, who was training at
Ardmore, was onerous. In early 2004 the Stevens decided to sell, though they were
not in a rush to do so. Mrs Stevens was aware that the neighbouring property at
27 Beach Road had sold in September 2003 for $3.2m. Despite its larger section and
tennis court she thought that the views were not as good as 23D Beach Road. On
that basis the Stevens decided that they wanted to achieve at least $3m for their

[33]   Mrs Stevens engaged Premium to market the property. Director Brian Guy
and listing agent, Lewis Guy, visited Mrs Stevens on 4 and 9 February 2004. There
is a dispute about what was said at these meetings. Mr Brian Guy did not give
evidence, so the contest is solely between Mrs Stevens and Mr Lewis Guy.

[34]   Mrs Stevens claims to have said at the first meeting that she and her husband
wanted to achieve $3m. She said that Brian Guy told her that they would put a
package together, including recent house sales in the area and come back again.
When they returned, Brian Guy told her about the sale of 27 Beach Road and pointed
out the features that would make it more valuable than 23D Beach Road, namely the
larger section with a tennis court and the fact that it was not on a unit title.

[35]   It was also at this meeting, according to Mrs Stevens, that they discussed how
the property would be marketed, with Lewis Guy suggesting advertising the price as
being “by negotiation” and Mrs Stevens suggesting internet advertising.
Mrs Stevens then signed an agency agreement appointing Premium sole agent until
30 April 2004.

[36]   Mr Lewis Guy denied being told that Mrs Stevens wanted to achieve $3m.
He said that she simply asked him what he thought the property was worth and
whether $3m was achievable. He recalled Brian Guy referring to the recent sale of
27 Beach Road on 4 February 2004 but says that there was no mention of them
returning with details of other sales in the area.

[37]   Mr Lewis Guy thought the house was worth somewhere in the mid-high $2m
range. Although optimistic that $3m was achievable, he simply said that it was not
out of the question and they would need to see how the market responded to the
property. He said that they also discussed the best method of marketing, with Mrs
Stevens saying that she wanted a low-key approach, with no open homes. They
agreed to market the property “by negotiation”.           Mr Guy said that internet
advertising was his idea.

[38]   Mr Guy said that he visited Mrs Stevens alone on 9 February 2004. Before
that meeting he and Brian Guy had discussed the probable value of 23D Beach Road,
comparing it with 27 Beach Road and noting particularly that 27 Beach Road had a
tennis court and was not on a unit title. However, Mr Guy said that the purpose of
the visit on 9 February 2004 was simply to obtain a written authority.

[39]   I am satisfied that Mrs Stevens did indicate to Mr Guy that she wanted to
achieve $3m for the property. I do not accept that she was as tentative as Mr Guy
recalls. But I am not satisfied that there was an agreement that Brian and/or Lewis
Guy would return with details of recent sales in the area. They were all aware of the
sale of 27 Beach Road. They discussed it at that first meeting and recognised its
significance. I do not believe that Brian Guy returned on the second occasion. As
regards the form of marketing, I am sure that Mrs Stevens and Mr Lewis Guy were
both aware of the possibility of internet marketing and that it was an option
discussed but not particularly the idea of one or the other.

[40]   Mr Guy quickly formed a view that the property was worth in the range of
mid-high $2m and proceeded on that basis without much further consideration. The
advice he gave that the property should be advertised on the basis of “offers over
$2.7 million” conveyed his view that it was worth less than $3m. It was perfectly
reasonable for Mr and Mrs Stevens to rely on this view. However, it is clear that Mr
Guy did no more than express his opinion as to the value of the property and that
Mrs Stevens realised that this was an opinion. The possibility of the Stevens getting
their own valuation was never discussed, either at the outset of the marketing
campaign or later.

[41]   Relying on Prudential Assurance Co New Zealand Limited v Prudential
Building Investment Society of Canterbury [1988] 2 NZLR 653 at 658 (CA),
Mr Akel submitted that an expression of expert opinion can fall within s 9 because
s 9 is not limited by the concept of misrepresentation. However, that case involved
entirely different circumstances and cannot be relied on to suggest that an expert
opinion that is incorrect should, without more, attract liability under s 9.

[42]   It is well established that an opinion that is honestly held and which has some
reasonable basis will not amount to misleading and deceptive conduct. An opinion
is not actionable merely because it is incorrect: Global Sportsman Pty Limited v
Mirror Newspapers Limited ATPR at 45,344; ALR at 31.:

       The non-fulfilment of a promise when the time for performance arrives does
       not of itself establish that the promisor did not intend to perform it when it
       was made or that the promisor’s intention lacked any, or any adequate,
       foundation. Similarly, that a prediction proves inaccurate does not of itself
       establish that the maker of the prediction did not believe that it would
       eventuate or that the belief lacked any, or any adequate, foundation.
       Likewise, the incorrectness of an opinion (assuming that can be established)
       does not of itself establish that the opinion was not held by the person who
       expressed it or that it lacked any, or any adequate, foundation.

       The applicants argued that, nevertheless, the statement of an incorrect
       opinion is misleading or deceptive or likely to mislead or deceive merely
       because it misinforms or is likely to misinform. An expression of opinion
       which is identifiable as such conveys no more than that the opinion
       expressed is held and perhaps that there is a basis for the opinion. At least if
       those conditions are met an expression of opinion, however erroneous,
       misrepresents nothing.

       (emphasis added)

[43]   There was no suggestion that Mr Guy’s view as to the value of 23D Beach
Road was not an honest one. Mr Akel submitted that it was not a reasonably held
one because of the inadequacies in Mr Guy’s approach to determining the probable
value of the property. However, I find that Mr Guy did have a reasonable basis for
his view. He was aware of the previous sale of 27 Beach Road, which all the valuers
who gave evidence agreed was highly relevant in determining the value of
23D Beach Road. He took into account the differences in the properties and was
clearly influenced by the larger land area and better amenities enjoyed by 27 Beach
Road. He was reluctant to accept that the views at 23D Beach Road were better than
27 Beach Road, conceding only that they were different but both wonderful.

[44]   Whether or not Mr Guy’s opinion was correct or was reached after the kind
of careful consideration to be expected of a competent agent are not relevant in
considering the FTA cause of action. He was offering an opinion for which he had a
reasonable basis. This aspect of the FTA cause of action therefore fails.

[45]   Related to the Stevens’ criticism of the appraisal is the allegation that
Premium’s failure to advise the Stevens to obtain their own valuation of 23D Beach
Road amounted to misleading and deceptive conduct. Silence may constitute a
breach of s 9 but whether it does depends on the circumstances of the case: Smythe v
Bayleys Real Estate (1993) 5 TCLR 454 at 464; Guthrie v Taylor Parris Group
Cossey Limited (2002) 10 TCLR 367 at 373.

[46]   Unlike other cases involving silence as misleading and deceptive conduct, the
effect of the Premium’s failure to advise that a valuation should be obtained did not
convert a true statement into a false one or conceal information. Premium had no
reason to think that a valuation would produce a different result to Mr Guy’s

[47]   Nor did this change when Mr Larsen engaged Sheldon. It is common for
purchasers subject to a finance condition to obtain a valuation. Premium could not
have expected to receive a copy of the valuation and clearly would not have been
given one. At that stage it had no reason to think that the valuation would cast doubt
on Mr Guy’s assessment. I find that, in the circumstances of this case, the failure to
advise on a valuation was not capable of amounting to misleading and deceptive
Marketing of 23D Beach Road

[48]   Premium marketed 23D Beach Rd for the Stevens on the basis that it was
worth less than $3m. It advertised the property from 24 February 2004 on the
Open2View website and on its own website. Mr Guy advised prospective buyers
that the asking price was “around $3 million”, “over $2.8 million” and “$2.8 million
plus”. There was interest but no offers.

[49]   In early March 2004 Mr Guy discussed progress with Mrs Stevens.
Mrs Stevens recalled a telephone discussion and Mr Guy a meeting. It is more likely
to have been a meeting. According to Mr Guy, Mrs Stevens was becoming anxious
and wanted a more proactive approach. He suggested a change to the marketing
campaign, with print advertising for “offers over $2.7 million”. Mrs Stevens says
she was not happy about this but accepted the suggestion because she was happy to
rely on him. Mr Guy says that she did not express any disappointment to him. I find
that Mrs Stevens did express some disappointment, but that Mr Guy explained his
reasons and Mrs Stevens was persuaded.

[50]   The property was advertised in the North Shore Property Press during March
and April on the basis of “$2.7 million and over”. In mid-April 2004 the Stevens
received an offer of $2.2m. Their counter-offer of $2.8m was rejected. After that,
Mrs Stevens and Mr Guy discussed how to bring some finality to the sale process.
They settled on a tender process with a closing date of 12 May 2004. However, in
late April Premium presented a pre-tender offer on behalf of Mahoenui and shortly
afterwards the agreement with Mahoenui was entered into.

[51]   Mrs Stevens says that Mr Guy did not fully explain the tender process to her.
I find that there was a discussion about it, although it did not adequately convey how
the tender process worked.

[52]   I suspect that these (and other) differences in their recollections can be
attributed to the lack of experience of all those involved. Both Mr and Mrs Stevens
were inexperienced in property transactions. Mr Guy himself had only four years
experience selling property. Ms Riley, who actually presented the Mahoenui offer,
had only six years experience. My impression was that Mr Guy viewed Mrs Stevens
as more experienced than she actually was. Ms Riley certainly did, acknowledging
in evidence that she had made assumptions about the Stevens business experience
based on her perception of their connection with a family business in which
Mr Stevens worked.

[53]   The Stevens compare the type of marketing campaign that Premium
undertook for them with that undertaken for Mahoenui and allege that Premium
pitched their campaign at the wrong market, with the result that buyers over $3m
were not attracted to the property. In comparison Mahoenui’s campaign was
aggressive and based on a price guide of $3.8-$4.8m. The Stevens point to the facts
that Premium gave Mr Larsen written advice against a tender process, acted more
promptly, provided better quality advertising for not much more than they had spent
and offered the property by international tender, which was never suggested to them.

[54]   There is no doubt that, on the evidence, that there was a significant difference
between the two marketing campaigns and the response to them from prospective
buyers. Mr Denley was a knowledgeable and experienced real estate agent who gave
evidence for the Stevens. He thought that marketing the property in the $2.7m-plus
range effectively conditioned buyers to offer the lesser sum and that buyers over
$3m would not respond to properties marketed in this range.

[55]   Mr Pinkney, an experienced real estate agent, who gave evidence for
Premium, disagreed with this. However, I found Mr Denley’s view on this topic
persuasive. I think that the marketing campaigns were aimed at different markets. It
was likely that the buyers who responded to Mahoenui’s advertising campaign
would not have responded to the Stevens’ advertising campaign.

[56]   The Stevens also criticised Premium for using the Sheldons valuation to
assist in the marketing of the property for Mahoenui. However, Mahoenui obtained
the valuation for the purposes of the finance condition. The fact that it was later able
to use its valuation for marketing purposes cannot be used as the basis for criticising
[57]   Premium’s response to criticism about the difference in the marketing
campaigns was that Mahoenui’s marketing campaign was directed by Mr Larsen.
Mr Akel submitted that Premium cannot distance itself from this marketing
campaign because it willingly undertook the campaign on behalf of Mahoenui and
was paid for it. However, I am looking at the question of misleading and deceptive
conduct in relation to the period during which the marketing campaign for the
Stevens was being undertaken. I am completely satisfied that, at that stage, it would
never have occurred to either Mr Guy or Ms Riley that the property was worth well
over $3m and should be marketed accordingly.

[58]   Ms Riley said that she had thought the price guide Mr Larsen insisted on was
ridiculous and that the valuation that he was using must have been suspect. I accept
that she did, in fact, hold this view. I have no doubt that, left to her own devices,
Ms Riley would never have suggested marketing the property with a price guide of

[59]   I also observe that the styles of the respective campaigns reflected the
different wishes of the Stevens and Mr Larsen. It was clear that Mrs Stevens did not
want an aggressive and highly publicised campaign, but that it was exactly what
Mr Larsen did want. In fairness to Premium I doubt that Mrs Stevens would have
agreed to the kind of marketing that Mr Larsen insisted on, even if it had been

[60]   The style of the marketing campaign was substantially a consequence of
Mr Guy’s assessment of the value of 23D Beach Road. Any inadequacies in it only
assume significance because it was directed at prospective purchasers who were
interested in properties worth less than $3m, whereas the property was worth more
than $3m. Had the property, in fact, been worth around $2.7m then there could be
no criticism of the marketing campaign.

[61]   While the way the property was marketed contributed to the Stevens’ belief
that their property was worth less than $3m it cannot be viewed in isolation from Mr
Guy’s assessment of value. Having found that his assessment did not amount to an
actionable breach, I do not consider that the marketing campaign that gave
expression to it should do so either.

Tender process

[62]   I have already found that Mrs Stevens was told about the way the tender
process worked, though I doubt that the explanation was sufficiently detailed for a
person with her lack of experience. Further, Mr Guy failed to note the significant
point that the Mahoenui agreement would not become unconditional until the finance
date of 17 May 2004, which was several days after the close of the tender date.

[63]   Had the tender produced a higher offer the Stevens would not have been in a
position to accept it but would have had to wait until the unconditional date of 17
May. If the agreement went unconditional (as it did) the Stevens would have been
unable to accept a higher offer received through the tender process. So although the
tender date was changed to 19 May, the tender process became redundant when the
sale to Mahoenui went unconditional on 17 May 2004.

[64]   The way that Premium managed the tender process and the interface between
that and the agreement with Mahoenui was unsatisfactory. The Stevens’ criticism of
it is quite justified. However, because the tender process did not produce any offers,
Premium’s various failings in relation to it are not relevant in a causative sense. As a
result, these failings cannot contribute to any finding that there was an actionable
breach of the FTA.

Negotiations with Mahoenui

[65]   The next allegation relates to the negotiations between the Stevens and
Mahoenui. The Stevens say that Premium advised them:

       a)      It was not worth making a counter-offer of $2.8m in response to
               Mahoenui’s offer of $2.525m; and
       b)      The subsequent offer of $2.575m was the best price they would get
               for the property.

[66]   Shortly after the property went on the market Ms Riley showed Mr Larsen
through the property. On 23 April 2004 she met with Mrs Stevens to present
Mahoenui’s offer of $2.525m. She told Mrs Stevens, either on this or a previous
occasion, that she had dealt with Mr Larsen a few times, but she did not elaborate
except to say that, while he looked scruffy, he had the money to buy the property.
Mrs Stevens, who kept diary notes about prospective buyers, was struck by the fact
that Mr Larsen had only seen the house twice, for about ten minutes each time and
that his wife had never been to see it.

[67]   Ms Riley recalled that when she presented the offer Mrs Stevens asked
whether there was more money to be had from Mr Larsen and that she replied that
Mr Larsen was determined and not very flexible, that there might be a bit more
money, but not much.

[68]   Mr Stevens was not at this meeting. He said that he arrived as Ms Riley was
leaving, asked her a general question about Mr Larsen and was told simply that she
had dealt with him before. However, Ms Riley was adamant in her recollection of
that evening and said that she spoke only to Mrs Stevens and did not see or speak to
Mr Stevens. I accept her recollection. I believe that Mr Stevens is mistaken about
having met Ms Riley that day.

[69]   The Stevens were disappointed with this offer. They asked Lewis Guy to
come and discuss it, which he did. They say that Mr Guy expressed the view that
they were unlikely to get a better offer through the tender process and seemed
unenthusiastic about making a counter offer. Mr Guy says that he simply talked
through the options with them, pointing out that, while they could counter-offer and
wait for the tender process to finish, they risked losing this offer and also the
possibility that the tender process would not produce a better offer. I do not ascribe
much significance to the difference in these versions of events. I accept that Mr Guy
discussed the various options with Mr and Mrs Stevens. I suspect that, because of
their relative inexperience and their disappointment with the offer, they perceived
Mr Guy to be advocating the offer more than he was.

[70]      At this point however, the recollections of the Stevens on one hand and
Mr Guy and Ms Riley on the other diverge significantly. I pause here to record my
general impression that although these witnesses gave their evidence honestly, I
thought that there was an element of reconstruction on the part of both the Stevens
and, to a lesser extent, Mr Guy about some of the discussions and the sequence of

[71]      The Stevens say that:

          •      Mr Guy returned the next evening (24 April 2004), appeared tired and
                 irritable, was negative about the idea of a counter-offer and said that
                 he would get Ms Riley to come and see them;

          •      Ms Riley came on 26 April 2004 and had with her the sale and
                 purchase agreement, which still bore the offer of $2.525m. She told
                 Mrs Stevens not to write a counter-offer of $2.8m on the agreement
                 because Mr Larsen would never pay that. Instead, Ms Riley herself
                 wrote the figure of $2.575m, saying that this figure was the most that
                 Mr Larsen was prepared to pay;

          •      Mrs Stevens signed the agreement at that figure because she was
                 relying on Lewis Guy’s advice that she would not get a better offer.

[72]      However:

          •      Ms Riley says that Mr Guy told her on 26 April 2004 that the Stevens
                 wanted $2.8m, though it was not put on the basis of a formal counter-
                 offer. Ms Riley rang Mr Larsen and conveyed to him that the Stevens
                 wanted $2.8m but he said that he would not pay that much;
       •      Ms Riley says that she then spoke to Mrs Stevens on the phone and
              said that she thought Mr Larsen would go up a bit, but not to $2.8m.
              Mrs Stevens told her that if she could get even $50,000 more they
              would seriously consider signing the contract. Ms Riley adamantly
              denied that the discussion about a price of $2.8m was on the basis that
              the Stevens wished to actually counter-offer at that figure;

       •      Ms Riley arranged for Mr Guy to collect the sale and purchase
              agreement from the Stevens and for Mr Larsen to come to Premium’s
              office and sign the agreement at $2.575m;

       •      Mr Guy says that he received a telephone call from Ms Riley to say
              that the Stevens wanted to make a counter-offer. He did not recall
              going to the Stevens’ house again but if he did it was solely to collect
              the agreement in order to give it to Ms Riley to put in the counter-

       •      Ms Riley then took the signed sale and purchase agreement around to
              Mrs Stevens and told her that it was Mr Larsen’s final offer and that
              he would not consider a counter-offer.

[73]   Mr and Mrs Stevens produced notes they had made during that period. It is
clear from these notes that, at some point, they did intend to counter-offer at $2.8
million. However, I accept Ms Riley’s evidence that Mrs Stevens telephoned her to
say that they would accept $2.575m if Mr Larsen offered it. I also accept Ms Riley’s
evidence as to how the agreement came to be signed at $2.575m. I have no doubt
that she did say to Mrs Stevens that $2.575m was the most Mr Larsen would pay and
I am satisfied that the sale and purchase agreement had already been signed at
$2.575m by Mr Larsen when she visited the Stevens.

[74]   As I have noted, the agreement was conditional on finance until 17 May
2004. Mr Larsen engaged Sheldons to provide a valuation in late April. The date of
the instruction is unknown but the valuation was provided on 6 May 2005. Premium
was not aware of its contents at that stage. The agreement became unconditional on
17 May 2004 with settlement in July 2004.         The tender date, which had been
changed to 19 May 2004, closed with no offers being made.

[75]   In June 2004 Mr Larsen advised Ms Riley that he wanted to re-sell the house
and appointed her as Mahoenui’s agent for this purpose. He instructed her as to the
kind of marketing campaign he wanted and sold the property in November 2004 for

[76]   Mr Akel submitted, in essence, that if Mr and Mrs Stevens had not been
misled by Premium’s conduct as to what the property was worth they would not
have sold it at the price they did. But Premium’s conduct in this phase of the sale
process was, again, a consequence of Mr Guy’s assessment of the value of
23D Beach Road.      These allegations do not really add anything to the general
allegation that the Stevens were misled as to how much their property was worth. I
have already found that what the property was worth was a matter of opinion by Mr
Guy and that conveying that opinion did not amount to misleading and deceptive
conduct. It does not make any difference whether it was conveyed directly, as it was
at the outset when the assessment was made, or indirectly in the context of

[77]   Mr Akel also made various criticisms of the way Mr Guy and Ms Riley
conducted the final phase of the negotiations, essentially suggesting that Ms Riley
was acting only for Mr Larsen and that Mr Guy had left the Stevens in her hands at
that critical stage. However, these criticisms are more appropriately raised in the
context of the negligence and breach of contract causes of action.

Negligence / Breach of contract

[78]   Although the Stevens have alleged both breaches of contract and negligence,
for practical purposes there is no difference between these causes of action; the duty
of care alleged is one to exercise all reasonable care and skill in advising the
plaintiffs on the sale of their property and the implied term of the agency agreement
alleged is to identical effect. It was not in dispute that real estate agents owe
contractual and tortious duties to their clients to exercise the care expected of a
competent and careful agent in the performance of their duties. The question is
whether a competent estate agent in Mr Guy’s position could have given the advice
and taken the steps that were taken in this case. This benchmark is usually set by
reference to the evidence of experienced practitioners as to the accepted practice
among competent agents.

[79]   Mr Denley, a real estate agent who gave evidence for the Stevens, was very
experienced and knowledgeable. However, his evidence was of limited assistance
because it tended to be based on his personal experience and his opinion as to
whether Premium had fallen below the required standard. Evidence of this nature
does not assist in identifying the standard to be met and is irrelevant: Sulco Limited v
E S Redit & Company & Anor [1959] NZLR 45 at 88 (CA); Bindon v Bishop [2003]
2 NZLR 136 at 141 (HC).

Appraisal of 23D Beach Road

[80]   I turn to consider whether there was negligence in the assessment of the value
of 23D Beach Road. Mr Denley said that Premium had, in his opinion, failed to
properly assess the market value of the property. However, his criticism related to
the failure by Premium to provide written sales information of comparable
properties. He did not actually express the view that, as a result of this failure, the
assessment of value that Mr Guy made was one that no competent estate agent could
have made.

[81]   Although I have found that the value of the property in April 2004 was
approximately $3.25m that fact does not necessarily mean that Mr Guy was
negligent in reaching his view as to the value of the property. Provided he exercised
the reasonable skill and care expected of a competent agent in reaching his view, he
will not have acted negligently, even if that view was wrong.

[82]   Mr Guy’s evidence as to the way he reached his view was quite limited. In
describing the first meeting he had with Mrs Stevens at which he inspected the
property and discussed the sale generally Mr Guy said:
       She asked what we considered the value of the property was for the purpose
       of the listing price. I told her the market was strong at the top end, with a
       high level of sales being achieved and a good level of buyers in the market.
       On that basis I thought the property was worth somewhere in the mid-high
       $2 million range. Debbie asked whether I thought $3 million was
       achievable. I told her it was not out of the question and I was quietly
       optimistic about achieving that…

       (emphasis added)

[83]   I take this evidence to mean that Mr Guy’s view of value was that the
property was worth less than $3m, though he might nevertheless achieve a sale at the
$3m mark. He clearly did not consider that the property was worth over $3m. Mr
Guy made no further reference in his evidence-in-chief to any process by which he
specifically considered what the property was worth.

[84]   In cross-examination he referred to a discussion with his father in which they
talked about 27 Beach Road and said that they allowed for the fact that there would
have been capital gain over that period though without putting an actual value on it.
He did not make any reference to obtaining written information of recent sales in the
area or of accessing a computer database for that purpose, but did refer generally to
his knowledge of values in the area and other sales.

[85]   It is obvious that Mr Guy was aware of the recent sales including 27 Beach
Road, as well as other (unspecified) sales in the area. I cannot see that his failure to
provide written information about such sales, even if negligent, could have had any
causative effect.   I am doubtful that Mr Guy adequately took into account the
movement in the market between September 2003 and April 2004. Although he
recognised that there had been growth in the market I do not believe he thought
through the implications of this in advising Mrs Stevens. However, in the absence of
evidence that a competent agent could not have reached the view that Mr Guy did
about the value, there is no basis on which to conclude that he was negligent in
relation to the appraisal of 23D Beach Road.

[86]   Nor do I consider that there was any negligence in Premium’s failure to
advise the Stevens to obtain a registered valuer’s report. Mrs Stevens had obtained a
valuer’s report on one previous occasion when she was a prospective purchaser but,
as a vendor, considered that the estate agent acting for her would fulfil that role.
Mr Denley did not suggest that a competent agent would, as a matter of course,
advise a client to obtain a registered valuer’s report. He said:

       Where there is disagreement between a real estate agent and his or her
       vendor as to the value of a property, or where a vendor wants to sell a
       property for a price which is materially higher than that appraised by the
       agent, then the agent should advise the vendor to seek an independent
       valuation of the property from a registered valuer. Alternatively, the agent
       may advise the vendor to sell the property by way of an auction or tender in
       order to let the market decide on the value of the property.

[87]   Mr Denley’s evidence was based on the existence of a disagreement between
vendor and agent. Mrs Stevens made it clear that she wanted $3m and Mr Guy was
quietly optimistic that $3m was achievable. There was no obvious disagreement nor
an expectation materially higher than the appraised value that would have justified
advising the Stevens to obtain an independent valuation. The Stevens’ position is
that they were misled into thinking that it was Mr Guy, not themselves who had
correctly assessed the value of the property. But that is a different issue; the result is
still that there was no disagreement that would have warranted Premium advising the
Stevens to obtain a valuation.

Tender Process

[88]   The allegations relating to the tender process are substantially the same as
those made in relation to the FTA cause of action namely:

       •       Failing to treat the offer from Mahoenui as part of the tender process;

       •       Changing the tender date to 19 May 2004, being after the
               unconditional date of the Mahoenui agreement, thus rendering the
               tender process redundant if that agreement went unconditional;

       •       Not including a “better offer” clause in the sale and purchase
       •       Not adequately advising on the tender process and, in particular, the
               interface between the tender process and Mahoenui’s pre-tender offer;

       •       Changing the marketing plan from marketing with a price indication
               to a tender process midway through the campaign, with the result that
               the tender process was compromised by the earlier price

[89]   Mr Denley gave evidence about the aspects of the tender that were
inadequate. First, he pointed out that tender protocol required that offers received
during the tender period remained sealed until after the tender was closed. In this
case Mahoenui’s offer was not treated as part of the tender process. Further, there
was no explanation to the Stevens as to why the tender date was moved from 12 May
to 19 May 2004. The clear inference is that Mr Guy belatedly realised that the
finance date on the Mahoenui offer fell after the original tender date. However, Mr
Denley was critical of moving the date, because the tender process would become
redundant if (as happened) the Mahoenui offer went unconditional on 17 May 2004.

[90]   It is clear from the undisputed facts that the tender process was poorly
handled. Mr Guy did not adequately explain the interface between the Mahoenui
offer and the tender process and if a better offer had been submitted through that
process, the Stevens would have been seriously disadvantaged. However, because
there were no tenders received, these criticisms have no causative effect.

Failing to obtain best possible price

[91]   The Stevens assert that Premium advised or encouraged them to sell for
$2.575m and failed to advise them against doing so. I have found that this was not
the case and that while Mr Guy portrayed the offer as one worth considering neither
he nor Ms Riley actively advised them to sign. That decision was theirs and there
was nothing that could possibly be regarded as actual advice or encouragement. As
a result there is no factual basis on which to consider this allegation.
[92]   This leaves the question whether Premium was negligent in failing to advise
them against signing the agreement. Mr Denley’s evidence did not touch on this
allegation.   Without evidence to the effect that a competent agent would have
advised against signing the offer I cannot find that Premium was negligent in this
regard. I would not have thought it was the function of an agent to advise a vendor
to sign or not sign an offer; that is a decision for the vendor. The most the agent can
do is point out the advantages and disadvantages of accepting or declining the offer.

[93]   Mr Denley did say that Premium should have advised the trustees of the
Stevens’ family trust to take the offer to their solicitor for approval. There was,
however, no allegation to this effect and no evidence as to what such advice might
have been.

[94]   The Stevens also say that Premium was negligent in advising it to enter into
the agreement when the tender process was ongoing and not advising them to wait
until the process had been completed. Mr Denley’s evidence-in-chief did not touch
on this issue either. His criticism was that entering into the agreement virtually
rendered the tender process redundant because the sale and purchase agreement did
not contain a “better offer” clause. This meant that any better offer received in tender
could not have been accepted unless Mahoenui’s finance condition was not fulfilled
by the unconditional date. While this must be right, it could not have had any
causative effect because no other offers were received.

[95]   Finally, the Stevens say that Premium failed to advise them against selling
the property at anything other than the best possible price it could achieve. At that
stage the best possible price was unknown to both Premium and the Stevens. Since
there were no other offers, Mahoenui did represent the best possible price at that
stage, following the marketing strategy that had been adopted. The root of the
problem was that Mr Guy had wrongly assessed the value of the property so that the
Stevens were not in a position to make an informed decision as to whether the offer
was worth accepting.
Premium’s failure to disclose what it knew of Mr Larsen - Breach of Fair
Trading Act / Breach of fiduciary duty

[96]   Mr Larsen was a property speculator for whom Ms Riley regularly acted on
both the purchase and sale of properties. In addition, one of Ms Riley’s daughters
worked for Mr Larsen as his personal assistant and the other, an architect, had
undertaken design work for Mr Larsen on his beach house.

[97]   Premium accepted that Ms Riley had not told the Stevens about these aspects
of her connection with Mr Larsen or about Mr Larsen’s method of operating. The
Stevens allege that Ms Riley’s failure to share the information she had about
Mr Larsen was both misleading and deceptive for the purposes of s 9 FTA and a
breach of Premium’s fiduciary duty.

What Ms Riley knew about Mr Larsen

[98]   In the period from July 2001 up to and including April 2004 Ms Riley either
had acted or was currently acting as agent for Mr Larsen or his associated entities in
respect of eight properties. A good number of these transactions fell into the pattern
of Mr Larsen (or an associated entity) purchasing and re-selling within a short time.
Ms Riley portrayed Mr Larsen as an aggressive negotiator and speculator prepared to
take risks in the market. He made substantial profits doing so; an analysis of the
transactions on which Ms Riley had acted generally showed a significant increase
from Mr Larsen’s purchase to the on-sale of the property, sometimes within just a
few months.

[99]   In cross-examination Ms Riley agreed that, at the time, she had a very close
professional association with Mr Larsen. From her description, Mr Larsen did not
appear to be the kind of person inclined to take advice from real estate agents and
Ms Riley suggested that she complied with his directions rather than offered advice.
Nevertheless, it was obvious that she knew Mr Larsen well on a personal level and
was in a good position to judge his probable approach to a purchase and the
likelihood of him treating a property as an investment. She had a realistic, even
cynical, view about Mr Larsen:
       [11]    Over time I became familiar with his approach to the property
       market. Typically, he would buy properties on the basis that they would be
       his family home for his partner, Lisa, and himself. Mr Larson was an astute
       buyer and was quite demanding. I would show him many properties before
       he would put an offer in on a property. Usually if his offer on a property
       was accepted, he would get a valuation report for the property, he sometimes
       asked me to organise a valuation, but he always directed which valuer to use,
       which included Trish Freeborne [sic] or Angus McDonald at Sheldons and
       Liam Lyons at Lyons and Co. Often Mr Larson would get me to meet the
       valuer at the property to provide him or her with access. He used valuations
       as a basis for finance or to trade the property. Usually, after a short period of
       time and perhaps after he had made some alterations to the property, he
       would re-list it for sale.

[100] Ms Riley accepted that she had not disclosed the real nature and extent of her
association with Mr Larsen. Her explanation was that she never had the opportunity.
I do not accept this explanation. There was no indication in any of the evidence
from either Mrs Stevens or Ms Riley that the meetings between them were
conducted under pressure of time. The circumstances simply do not support a
suggestion that Ms Riley had no opportunity to inform Mrs Stevens of these matters.
This is particularly so when, even on Ms Riley’s own evidence, she did make a
general statement about Mr Larsen. That would have been a convenient opportunity
to complete the picture but she chose not to do so.

[101] I find that Ms Riley had a high degree of insight into how Mr Larsen
operated. In particular, her experience had showed her that he was likely to offer a
figure below the asking price but obtain a valuation that indicated a higher value. He
was likely to suggest that he was purchasing a property for use as a personal
residence but instead re-list it soon after purchase at a higher price. He was likely to
use a valuation obtained for finance purposes in future negotiations to support a
higher asking price. I now consider whether Ms Riley should have shared this
knowledge with the Stevens.

Fair Trading Act 1986

[102] The Stevens allege that Premium’s failure to disclose these facts caused or
contributed to their belief that their property was only worth $2.5 to $2.7m. I have
already noted that silence may form part of the circumstances that constitute
misleading and deceptive conduct. Ms Riley’s silence about Mr Larsen must be
viewed against the general circumstances leading up to the offer from Mahoenui.

[103] Those circumstances included first, that Mr and Mrs Stevens had believed
their property to be worth at least $3m whereas Mr Guy thought it was worth less
than $3m. Secondly, although the Stevens were disappointed with the offer of
$2.575m, Mr Guy and Ms Riley had conveyed that it was worth considering.
Thirdly, the offer coincided with Mr Guy’s opinion that 23D Beach Road was worth
less than $3m. That coincidence gave credence both to the offer and to Mr Guy’s
opinion about the value of the property.

[104] Whether these circumstances meant that Premium’s silence was misleading
and deceptive really depends on whether knowledge of Mr Larsen, his modus
operandi in property speculation and his business relationship with Ms Riley would
have altered the Stevens’ perception of the offer. In re-examination Mrs Stevens was
asked what, if anything, she would have done had she been told of the various
transactions on which Ms Riley had acted for Mr Larsen. She said that if she had
been told that Mr Larsen was a trader and property investor she would not have
signed the agreement. She said she thought she would probably have been scared off
because she would have known that she did not have the same level of experience as
he did.

[105] I allowed Mr Napier to cross-examine on that response, giving rise to the
following exchange:

          It was clear at the time that Mr Larsen made his offer that potential buyers
          were not beating down the door to pay more than $2.5 million dollars wasn’t
          it ?…..

          I think that question relates back to information if I knew and I didn’t know
          Mr Larsen was an investor. I didn’t know Mr Larsen got a valuation for
          trade purposes. I didn’t know he did it for a life job. There was just so
          much information that I didn’t know that I feel I would have done better
          extending my sale period if I’d known that as he did in every transaction. I
          would have done what he did on every transaction, like I would have
          extended my sale period as he built on the promotions of others. I mean if I
          had any information then I would have been smarter, and would have been
          different choices.
       …I put it to you that you would not have done anything different. Mr
       Larsen’s offer was the best on the property and that even if you had had the
       information about Mr Larsen that you now say is material you would have
       made exactly the same decision at that time as you did?….

       My answer is no. My answer is that if I had known that Mr Larsen was an
       investor/trader, if I’d known that there was a $3.6 million valuation on my
       property, if I had known that Mr Larsen sold properties on in a short time to
       make money I would have done something different.

[106] Since Premium did not know what the valuation was at that stage, this aspect
cannot be taken into account when considering what it should have told Mrs Stevens.
However, I am satisfied that, had Ms Riley disclosed what she knew about Mr
Larsen, Mrs Stevens (and indeed any vendor in her position) would have thought
that any offer he made was likely to be below the market value of the property. All
of the information that Ms Riley had about Mr Larsen pointed to a buyer whose
typical modus operandi was to buy at a price that would allow re-sale at a
substantially higher price within a short time. I accept that this was not always the
case, but it did appear to have happened many times. I think that the likely impact of
such knowledge would have been to reinforce Mrs Stevens’ unhappiness about
Premium’s appraisal and marketing of the property. I think that this would have led
to a nervous reconsideration by the Stevens of their position.

[107] Mr Napier submitted that Mr or Mrs Stevens should have made enquiries
about Mr Larsen after being told that Premium had dealt with him before. He
pointed to the fact that Mr Stevens is an experienced businessman and that
Mrs Stevens’ demeanour was not that of a naïve or unworldly person. However,
Mrs Stevens gave unchallenged evidence that she had asked Ms Riley if she knew
anything about Mr Larsen and why his wife had not been to look at the property,
though she could not recall exactly when that conversation took place. She was
puzzled that Mr Larsen had stayed for such a short time on the occasions he visited
and that his wife had not been through the property with him.

[108] She recalled Ms Riley telling her that Mr Larsen’s wife was not interested in
the property because she liked horses but he preferred the sea. Ms Riley also
recalled a conversation with Mrs Stevens in which she said that Mr Larsen and his
partner lived in Karaka and he was finding the travelling too much. Given this
evidence, there is no basis on which to criticise Mrs Stevens for not making further
enquiries. Realistically, she could only have enquired of Ms Riley and Ms Riley had
clearly elected not to share what she knew.

[109] Looking at the relevant circumstances, I conclude that Premium’s failure to
disclose what it knew about Mr Larsen concealed information that the Stevens would
have regarded as important and which would have affected their view of the offer. I
therefore find that, in the circumstances of this case, Ms Riley’s failure to tell what
she knew about Mr Larsen did amount to misleading and deceptive conduct.

Breach of fiduciary duty

[110] It was common ground between the parties that Premium, as the Stevens’
agent, owed them fiduciary duties. The fiduciary duty that Premium is alleged to
have breached is the duty not to allow its interests or those of a third party to conflict
with the Stevens’ interests without their informed consent. This duty is stated by
Bowstead & Reynolds on Agency (18 ed, 2001) at 6-055:

        An agent may not put himself in a position or enter into a transaction in
        which his personal interest, or his duty to another principal, may conflict
        with his duty to his principal, unless his principal, with full knowledge of all
        the material circumstances and of the nature and extent of the agent’s
        interest, consents.

[111]   The duty was considered in the context of the solicitor/client relationship in
Farrington v Rowe McBride & Partners [1985] 1 NZLR 83 at 90 per Richardson J:

        A solicitor’s loyalty to his client must be undivided. He cannot properly
        discharge his duties to one whose interests are in opposition to those of
        another client. If there is a conflict in his responsibilities to one or both he
        must ensure that he fully discloses the material facts to both clients and
        obtain their informed consent to his so acting:

                “No agent who has accepted employment from one principal can in
                law accept an engagement inconsistent with his duty to the first
                principal from a second principal, unless he makes the fullest
                disclosure to each principal of his interest, and obtains the consent of
                each principal to the double employment (Fullwood v Hurley [1928]
                1 KB 498, 502 per Scrutton LJ)
[112] The decision in Farrington v Rowe McBride & Partners was applied in the
real estate agent context in McDonnell v Barton Realty Limited [1992] 3 NZLR 418
in which the Court of Appeal restated the position that the law does not prohibit an
agent from acting for apparently opposing interests but does require the agent to
make full disclosure of material facts and obtain informed consent.

[113] The Stevens allege that a conflict existed between their interests and those of
Mahoenui. They say that this conflict arose from the relationship between Ms Riley
and Mr Larsen.      As a result, the Stevens maintain that Ms Riley should have
disclosed all that she knew about Mr Larsen to them before they made their decision
to accept the offer from Mahoenui.

[114] Mr Napier submitted that, in a sense, there is always a conflict between
vendors, who wanted to obtain the highest possible price, and purchasers, who
wanted to pay as little as possible. However, he said that there would only be a
conflict in this case if Ms Riley intended to prefer Mr Larsen over Mr and Mrs
Stevens, which, clearly, she did not.

[115] The duty of disclosure exists in respect of both actual and potential conflicts:
Phipps v Boardman [1967] 2 AC 46 at 124 per Lord Upjohn. In my view, the
relationship between Ms Riley and Mr Larsen created an actual conflict between the
Stevens’ interests and those of both Premium and Mr Larsen.            There was no
evidence to suggest that Ms Riley did prefer Mr Larsen over the Stevens or that she
provided Mr Larsen with information which might have assisted him at the Stevens’
expense. However, the extent to which Ms Riley benefited from her relationship
with Mr Larsen inevitably raises doubts over Premium’s ability to give its undivided
loyalty to the Stevens in relation to this particular transaction.

[116] Ms Riley enjoyed an ongoing relationship with Mr Larsen, which was
significant for her in a financial sense. She was in a very good position to assess the
likely purpose for which Mr Larsen might be purchasing the property. If it was for
the purposes of investment then Ms Riley would almost certainly benefit from that
fact through the re-listing of the property.           I have already found that the
circumstances were such that this must have been a real possibility and one that was
apparent to Ms Riley, regardless of what Mr Larsen said.

[117] I am therefore satisfied that a conflict existed that required Ms Riley to
disclose the extent of her relationship with Mr Larsen. She was not required to
speculate as to his purpose in purchasing but she should have provided sufficient
information for the Stevens to decide whether Mr Larsen was someone they wanted
to deal with.

[118] In order to succeed on this cause of action the plaintiffs must demonstrate a
loss arising from the sale: Gilbert v Shanahan [1998] 3 NZLR 528 at 535-536. Mr
Napier submitted that the Stevens had not suffered any loss as a result of the sale to
Mahoenui because Mahoenui’s offer was the only one received. However this
submission overlooked the fact that the Stevens may have chosen not to sell, thereby
retaining their asset worth $3.25m. It is clear from my factual findings to this point
that the Stevens did suffer a loss as a result of this transaction, namely the under-
value at which they sold their property and I deal with this aspect in more detail

[119] It is, of course, open to a defendant to resist liability for a loss arising from its
breach of fiduciary duty by showing that the transaction would have proceeded in
any event: Gilbert v Shanahan, citing Everist v McEvedy [1996] 3 NZLR 348 in
which Tipping J said at 355:

         …To succeed in a claim for breach of fiduciary duty the plaintiff must show
         three things: first that the defendant owed the plaintiff a fiduciary duty;
         second that the defendant was in breach of that duty; and third that the
         plaintiff has suffered a loss arising out of a transaction or circumstance to
         which the breach was material.

         If the position rests there, the plaintiff is entitled to recover the amount of the
         loss from the defendant. However, the defendant may resist the plaintiff’s
         claim by showing that the plaintiff’s loss would have occurred in any event
         without any breach on the defendant’s part. To establish this in a case
         involving a solicitor, it is necessary for the solicitor to show that even with
         the appropriate independent advice or full information the plaintiff client
         would nevertheless have entered into the impugned transaction upon
         materially the same terms. If that can be shown equity should not attribute
         the loss to the errant fiduciary; for it cannot fairly be said that without the
         breach the loss would not have occurred. The breach cannot be regarded as
         causing the loss.
         To establish the point the errant fiduciary cannot invite speculation. There
         must be a proper evidential foundation for the conclusion which the court is
         asked to draw. Usually the point would be one of inference rather than
         direct evidence. If so the conclusion sought by the fiduciary must be a fair
         and reasonable inference from the evidence. The necessary conclusion
         should be cogent and should not be lightly reached.

[120] But it was for Premium to show that the transaction would have proceeded
even if Ms Riley had disclosed her knowledge about Mr Larsen. Even allowing for
an obvious element of reconstruction on Mrs Stevens’ part, the evidence fell well
short of demonstrating that Mr and Mrs Stevens would have proceeded with the
transaction if Ms Riley had told them all she knew about Mr Larsen. I therefore find
that the Stevens succeed on this cause of action.


Relief under FTA

[121] Mr and Mrs Stevens seek relief under s 43(2)(c) and (d) FTA for:

         a)     A refund of the commission paid of $67,050;

         b)     $995,000 being the difference between the Sheldons valuation of
                $3.57m and the sale price of $2.575m.

[122] The power to grant monetary relief under s 43 is a broad discretionary one:
Goldsbro v Walker [1993] 1 NZLR 394; Cox & Coxon Limited v Leispt [1999] 2
NZLR 15. The discretion means that the Court will at look at all the circumstances
of the case, including the question of the extent to which the defendant has actually
caused the loss suffered: Cumberworld Contracting Limited v Foseco (NZ) Limited
(1993) 5 TCLR 534 (affirmed on appeal in Foseco (New Zealand) Ltd v
Cumberworld Contracting Limited (1997) 6 NZBLC 102,033 (CA)).

[123] I have found that Mr and Mrs Stevens were misled by Premium’s failure to
disclose what it knew about Mr Larsen into thinking that their property was worth
substantially less than $3m when, in fact, it was worth more than $3m. However,
Ms Riley’s reticence about Mr Larsen was not the only factor in Mr and Mrs Stevens
reaching that conclusion. Mr Guy’s assessment and advice regarding value and
marketing had a significant part to play.

[124] This can be seen by considering what the position would have been had
Mr Guy concluded that the property was worth over $3m; in that situation it is less
likely that Mr and Mrs Stevens would have been misled because they would have
had a benchmark, which accorded with their own view, against which to test the
offer. I consider that Mr Guy’s assessment and advice (which I have found did not
amount to a breach of the FTA) contributed equally to the view that Mr and Mrs
Stevens held about the value of their property. Any monetary compensation should
reflect that fact.

[125] I do not accept that the correct measure of the Stevens’ loss is the difference
between the Sheldons valuation and the sale price to Mahoenui. The property, on
my finding, was worth $3.25m. Had they not proceeded with the sale to Mahoenui
the Stevens would have retained that asset. Their loss is the under-value at which the
property sold i.e. the difference between its true value of $3.25m and the sale price
of $2.575m, which is $675,000. Reduced by 50% to reflect the actual causative
effect of the conduct, the loss is $337,500.

[126] I do not allow the claim for refund of the commission. If the Stevens are
fairly compensated for their loss on the sale there is no justification for treating their
position as if the property had not sold.

Relief for breach of fiduciary duty

[127] The Stevens seek the same relief for breach of fiduciary duty. Although the
statement of claim put this relief on the basis of compensation for their loss, closing
submissions focussed on an accounting of profit. Since then the Supreme Court has
delivered its decision in Chirnside and Rattray Properties Ltd v Fay [2006]
NZSC 68.

[128] It is well established that a fiduciary who receives a profit as a result of a
breach of his or her fiduciary duty is liable to account for that profit. Chirnside
represents the most recent review of authorities and statement on this point. For an
application in the real estate context see Gathergood v Blundel [1991] 1 NZLR 405
(CA). However, a plaintiff may elect to seek equitable compensation, which can be
more favourable where, for example, the loss to the plaintiff exceeds the profit
obtained by the errant fiduciary: Day v Mead [1987] 2 NZLR 443 at 450;
Aquaculture Corporation v New Zealand Green Mussel Co Limited [1990] 3 NZLR
299 at 301; Chirnside at [120] (Elias CJ).

[129] Given my finding on liability, the commission that the Stevens paid to
Premium clearly falls into the category of unauthorised profit and should be
disgorged. However, the position is less clear in relation to the profit on the re-sale,
which was enjoyed only by Mahoenui. No authority was cited to me in which a
fiduciary had been required to account for profit not received by him or her.

[130] The starting point must be the purpose for which this form of relief is
granted. In Chirnside Elias CJ said at [17]:

       The liability of defaulting fiduciaries to account for all benefits arises from
       the requirements of equity that fiduciaries must not place themselves in
       positions where their duties conflict with their own interests and must not
       obtain unauthorised profits from their position. Parker LJ said in Murad v
       Al-Saraj [2005] EWCA C10 959 at [108] of the “no conflict” rule that it is
       “neither compensatory nor restitutionary”:

               “…rather, it is designed to strip the fiduciary of the unauthorised
               profits he has made whilst he is in a position of conflict. As Lord
               Keith observed in Attorney-General v Guardian Newspapers Ltd
               (No 2) (1990) 1 AC 109 at 262E-F, the remedy of an account of
               profits “…is, in my opinion, more satisfactorily to be attributed to
               the principle that no-one should be permitted to gain from his own

[131] Elias CJ went on to note at [19] that an account is also the appropriate
remedy where a fiduciary receives an unauthorised benefit. She summarised the rule
as follows:

       The rule which prevents a fiduciary from profiting from his office without
       the consent of the principal is part of the wider no-conflict rule which arises
       from the duty of loyalty. It “reinforces” the wider duty of fidelity, as Lord
       Nicholls explained in Attorney-General v Blake at 280:

               “Equity reinforces the duty of fidelity owed by a trustee or fiduciary
               by requiring him to account for any profits he derives from his office
                or position. This ensures that trustees and fiduciaries are financially
                disinterested in carrying out their duties. They may not put
                themselves in a position where their duty and interest conflict. To
                this end they must not make any unauthorised profit.”

[132] This point arose in Warman International Limited v Dwyer (1995) 182 CLR
544 at 557-558 where the High Court of Australia considered whether a fiduciary
could be required to account for profit received by a company in which he and his
wife held a half-interest. The profit was held to have been the result partly of his
breach of fiduciary obligations and partly of factors connected with the other
shareholder. The plaintiff had originally obtained an order for an account of profits
against both the errant fiduciary and the company, which was reversed on appeal,
partly on the ground that the profits were made by the company rather than the
director personally.

[133] The High Court of Australia considered that the plaintiff should have been
entitled to elect an account of profits. However, the question of whether the orders
should have been made against both the company and the fiduciary was not argued
and the Court proceeded on the basis that the orders made should be against all the
defendants including the director. The Court concluded that since the company had
knowingly benefited from the fiduciary’s breach of duty to some extent, the
appropriate approach was to view the company’s business as built upon the breach of
fiduciary duty to that extent.

[134] In Warman, therefore, an order for an account was made against a fiduciary
where the fiduciary did not personally receive the profit. However, the profit was
nevertheless enjoyed indirectly by the fiduciary whose breach had contributed to it. I
do not view Warman as authority for the proposition that an errant fiduciary whose
actions have resulted in profit coming to an unrelated party should be personally
liable to account for that profit.

[135] The object of the rule is to prevent unauthorised gains by a fiduciary, whether
by profit or other benefit. Where the profit on a transaction has gone to a party
unrelated to the fiduciary I do not see how it can serve the purpose of the rule to
require the fiduciary to account for that profit.
[136] In this case, save to the extent of the commission received on the re-sale,
Premium did not benefit from the sale to Mahoenui. It had no connection with
Mahoenui in a way that could have conferred any further benefit on it. In those
circumstances, the purpose of an order for an account could not be served by
requiring Premium to account for Mahoenui’s profit.

[137] However, although Premium did not make a profit (except for the
commission), the Stevens have certainly suffered a loss as a result of the transaction
and are entitled to seek compensatory damages in equity. The proper relief is
equitable damages in an amount that would restore the Stevens to the position they
occupied before Premium’s breach. This figure is $675,000 being the difference
between the value of 23D Beach Road of $3.25m and the sale price to Mahoenui of


[138] I have found that:

         a)   There was no breach of the FTA arising from Premium’s assessment
              of the value of 23D Beach Road, the marketing campaign or its
              conduct during the negotiations with Mahoenui;

         b)   The evidence does not support a finding of negligence by Premium in
              relation to the assessment of value, marketing or negotiations with

         c)   Premium’s failure to disclose its relationship with Mahoenui did
              amount to misleading and deceptive conduct and it is liable for the
              loss consequent on that breach which is $337,500;

         d)   Premium’s failure to disclose its relationship with Mr Larsen also
              amounted to a breach of its fiduciary duty to the Stevens. Premium
              failed to show that the Stevens would have proceeded with the
              transaction in any event and is therefore liable for the loss on the
              transaction which was $67,050 (the commission) and $675,000 (the
              extent of the under-value at which the property was sold).

[139] The plaintiffs are entitled to interest at 7% on the judgment sums from the
date of settlement of the sale by the Stevens to Mahoenui.

[140] The plaintiffs are entitled to costs.     Counsel may file memorandum as

       a)     On behalf of the plaintiffs by 20 December 2006

       b)     On behalf of the defendants by 5 February 2007

       c)     On behalf of the plaintiffs in reply by 19 February 2007


                                                             P Courtney J