Lessons for real estate sector after Colliers' agents ordered to repay $800,000 to ex-client

The High Court ruled on the case involving the two Colliers agents.

A case where two Colliers International agents were ordered to pay a former client more than $800,000 is a warning signal to all working in the real estate sector, an expert says.

John Waymouth, an Auckland-based barrister specialising in real estate law who represents agents, said the High Court ruling dealing with the sale of a Palmerston North property showed the importance of full disclosure.

"Agents have a strong and important fiduciary duty to their vendors to always act in their best interests and put the vendors' interests ahead of their own. This means disclosing everything that they know or should be deemed to know so the vendor can make a fully informed decision," Waymouth said.

The case found that Colliers commercial agents Grant Robert Lloyd and Philip James Leslie Nevill were in breach of fiduciary duties and ordered them to pay former client Pangani Properties in $650,000 as compensation for a lost sale, $100,000 for costs incurred in investigating and pursuing the matter before a Complaints Assessment Committee and $63,150 net commission to be repaid.

Pangani said the agents had failed to keep it fully informed about interest from New Zealand Post in a building they were selling and might have lost out on $799,000. So it sued them and Judge Rebecca Ellis ruled in Pangani's favour.

Waymouth said the case showed the financial consequences of non-disclosure.
"Not only were they ordered to forfeit the commission but also pay very substantial damages to remedy the vendors' losses," Waymouth said.

The judge had clarified the extent of "the duty of loyalty " but Waymouth said agents also had a duty to buyers to act in good faith and fairly.

"Often agents lose the focus of who their principal is and what the consequential fiduciary duty involves," he said.

"Agents must learn to put their own interests for a commission a distant second behind those of the vendor and sometimes third behind those of the buyer as well as the vendor," he said.

A statement from Colliers' Auckland office said this week said it was aware of the court finding involving the sale of a property handled by its franchisee in Palmerston North.

"While the agents involved did not intend to disadvantage their client, they did fully accept the finding of unsatisfactory conduct made by the Real Estate Authority's Complaints Assessment Committee in 2014.

The client subsequently took a civil matter before the High Court.

The franchisee is reviewing its options regarding this decision.

"Colliers International takes its obligations and responsibilities under the Real Estate Agents Act seriously. Since the matter was raised in 2014, we have reviewed our compliance guidelines, and are confident robust procedures are in place to ensure similar matters do not occur in the future," the statement said.

Neither agents would comment on the case.