Pangini Properties Limited v Lloyd - [2018] NZHC 1982

IN THE HIGH COURT OF NEW ZEALAND PALMERSTON NORTH REGISTRY

I TE KŌTI MATUA O AOTEAROA TE PAPAIOEA ROHE

CIV 2016-454-126

[2018] NZHC 1982

BETWEEN
PANGANI PROPERTIES LIMITED

Plaintiff

AND

GRANT ROBERT LLOYD

First Defendant

AND

PHILIP JAMES LESLIE NEVILL

Second Defendant

Hearing: 19 – 27 March 2018

Counsel:

J V Ormsby and S Meares for Plaintiff A B Darroch for Defendants

Judgment:

6 August 2018

JUDGMENT OF ELLIS J

[1] The defendants, Messrs Lloyd and Nevill, are commercial real estate agents. They accept that in 2013 they breached their fiduciary duty to one of their clients, Pangani Properties Ltd (PPL) in relation to the sale of a commercial property owned by PPL in Palmerston North. Indeed, there has been a finding against them to that effect by a Complaints Assessment Committee (CAC) established under the Real Estate Agents Act 2008 (the REAA).

[2] The agents accept that, as a consequence of their breach, the commission they received from PPL on the sale should be forfeit. But PPL says that compensation is also payable for lost profits and for costs incurred by the company investigating the matter and successfully pursuing the agents through the professional disciplinary process. And during the trial PPL sought leave to amend its claim in order to seek

PANGANI PROPERTIES LTD v LLOYD [2018] NZHC 1982 [6 August 2018]

further redress in the form of disgorgement of commissions paid to the agents on three subsequent transactions relating to the land in question.

[3] The issues now requiring determination principally relate to the nature and extent of the breach of duty by the agents, and the appropriate remedial consequences.

Facts and evidence

[4] PPL was first incorporated in 1997 for the purpose of acquiring and holding an industrial property in Malden Street, Palmerston North which was tenanted by Steel and Tube Ltd (STL). At the time material to these proceedings, the annual rental paid by STL was $350,000, plus GST.

[5] Mr David Olsen is PPL’s managing director and the company’s driving force. He is an experienced businessman who has, through PPL and other companies controlled by him, owned and developed other properties in the North Island over the years. PPL’s other directors are Mr Olsen’s daughter, Amy Hain, his son, Jeremy Olsen and an accountant, Mr Alan (Butch) Reichelmann. It is relevant that Ms Hain is, herself, married to a real estate agent in Auckland, Mr Paul Hain.

Attempted sale of Malden Street in 2010/11

[6] In 2010 Mr Olsen began to think about the future of the Malden Street property. By that time, STL had enlarged the building on the site leaving no further room for expansion. Mr Olsen had discussions with a real estate agent and a valuer about the possibility of buying 1,700 m2 of the adjoining land owned by Mr Alan Jones. They agreed that if PPL were able to purchase the land for around $150,000 (approximately
$88 per square metre) it could be a worthwhile commercial proposition.

[7] In August 2010…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2018] NZHC 1982
Decision Date: 6 August 2018

CaseChat Overview and Summary

Pangani Properties Limited (PPL) brought proceedings against Messrs Lloyd and Nevill, commercial real estate agents, seeking compensation for breaches of fiduciary duty, breach of contract, negligence and breaches of the Fair Trading Act 1986. The agents admitted that they breached their fiduciary duty to PPL by not disclosing to PPL that New Zealand Post (NZ Post) was interested in leasing the property. The agents also admitted that they breached their fiduciary duty by telling Mr Doyle of NZ Post’s interest in the property while still acting as agents for PPL and using PPL’s information to attract NZ Post. The agents also breached their fiduciary duty by acting as Mr Jones’ agent in relation to the sale of his land. PPL’s case for equitable compensation for lost profits was based on a probabilistic assessment (based on the evidence) of the chance that PPL would have achieved the lost profits. The Court awarded PPL compensation of $650,000 for the lost profits. The Court awarded PPL $100,000 in relation to the costs incurred by PPL investigating and pursuing the matter before the Complaints Assessment Committee (CAC). The Court ordered the agents to pay equitable compensation of $650,000 for the lost profits and $100,000 for the costs incurred by PPL investigating and pursuing the matter before the CAC. The Court also ordered that the agents restore to PPL the net commission on PPL’s sale of the Malden Street property to Zambora in the sum of $63,150. Interest at the rate of five per cent per annum is payable on the above amounts from dates which should be agreed and advised by counsel.

Orders