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Queenstown real estate agents win scrap over $125k commission; court warns professionals about the meaning of ‘informed consent’

26 May 2023

| Author: Heidi Bendikson

Appeal from District Court decision on real estate commission – District Court Act 2016 – applicable principles – repudiation of contract – breach of fiduciary duty – informed consent – standards of professional conduct – Appeal dismissed

James v Luxury Real Estate Limited [2023] NZHC 1104 Osborne J

Ross and Nona James entered a sole agency agreement with Luxury Real Estate Limited (LRE) for the sale of their Queenstown property. The agency agreement included a clause saying the client consented to the agent providing information to any potential purchasers as required by law or fairness.

Over the course of marketing their property, the Jameses were introduced to Bharadwaja, a friend of their neighbour, who was interested in the property. Ross and Nona James and Bharadwaja entered into direct negotiations.

Terry Spice, a director of LRE and a licensed real estate agent, became involved in discussions with Bharadwaja’s solicitor after the Jameses received an offer, which was lower than expected. Spice sent multi-offer forms to other parties and advised Bharadwaja’s solicitor to submit his best offer as all offers would be discussed that night.

However, the only offer was later withdrawn. Spice advised the Jameses he was ethically bound to advise Bharadwaja that they were no longer in a multi-offer situation. The Jameses told Spice not to do that but were informed he had already done so.

At a subsequent meeting, the Jameses told Spice they were unhappy with his performance and angry words were exchanged. The Jameses alleged Spice had said he was “walking away”. The next day, after some back-and-forth between Bharadwaja and Jameses’ solicitor, a final agreement for sale and purchase was signed.

The Jameses’ solicitors requested an invoice from Spice for marketing already completed, saying they considered the agency agreement ended on the date of their acrimonious meeting. Spice disagreed, sending an invoice for his commission.

LRE brought proceedings at the District Court for the unpaid invoice. The Jameses raised the affirmative defence that the contract had been cancelled by repudiation and counterclaimed for breach of fiduciary duty. The District Court found in LRE’s favour and the Jameses appeal that decision.

Applicable principles – whether contract repudiated by conduct, High Court found District Court was entitled to find LRE had not –  whether LRE breached fiduciary duty – discussion of precedent regarding “good faith” –  discussion about meaning of “informed consent” – High Court found District Court erred in finding Jameses gave their informed consent to Spice’s disclosure to Bharadwaja that they were no longer in a multi-offer situation – noted that there was no evidence of a discussion with the Jameses, which gave examples of when that information might be disclosed – whether alleged breaches caused loss – High Court agreed with District Court determination that as there was no loss with reference to what Bharadwaja would have paid, James could not claim damages based on unestablished market value –  whether breach disentitles LRE to commission – discussion of precedent relating to damages remuneration where fiduciary duty breached – applying Premium Real Estate Ltd v Stevens, the High Court found LRE’s claim to commission fell squarely within the exception to the rule that remuneration is forfeited where there is a breach of fiduciary duty.

Held: Appeal dismissed. Appellants to pay costs on 2B basis.

James v Luxury Real Estate

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