Damien Grant: Website turned against owner

Guest's website was used as evidence that he merely wanted to lock up the property while he went shopping. Photo / Thinkstock

Much has been written about the risks social media presents to youthful careers but it is not just young people posting awkward selfies who can get tripped up by what they post online.

I've had my ill-considered columns gleefully displayed before disapproving judges so I feel sympathy for lawyer and property entrepreneur Andrew Guest, whose website was used in evidence against him. Guest had been scouting around Wanaka looking for property deals and he found one, making a $2 million offer just before Christmas 2007.

Wanting to keep his options open, Guest signed on behalf of his company, Arcadia Homes, but made the contract subject to board approval. Guest was the only director, so he may have considered he had an option to buy the property, not an enforceable contract.

The following month Guest found another Wanaka property he liked better and cancelled the first deal. The $2 million property was later sold for only $1.4 million and the unhappy vendors decided to sue Arcadia for the balance. They won. Sort of.

It is common practice to sign a conditional contract when buying a property. The purchaser inserts a clause that allows them to cancel the deal at their discretion.

If done openly this can be useful, but the option must be explicit. You cannot rely on make-believe conditions.

Evidence was presented that Guest did no real checking on the property, he just found a better deal. Guest's website, in which he advocated using "director approval" clauses as a device to escape from contracts, was used as evidence that he merely wanted to lock up the property while he went shopping. Had the contract been written to allow the purchaser to cancel at its discretion, Arcadia would have walked away without consequence, although the vendor may not have been willing to sign on those terms.

Such loosely worded clauses are common in real-estate deals and purchasers need to be careful when signing them; if you want time to consider if the property deal is a good one, the clause needs to clearly state that you have the right to walk away with no consequences. If you sign a contract with a "due diligence" clause and do nothing, or "subject to finance" and then do not seek a loan, then congratulations, you may have just bought the property.

Guest had the last chuckle, however. After he lost in the High Court he liquidated Arcadia, leaving the successful party with only a claim in the liquidation.

The purchaser has not received a cent and is not likely to unless the liquidator takes action again Guest. Perhaps mindful of this, Guest funded litigation to take the matter to the Court of Appeal where Arcadia, in liquidation, lost.

The matter may still proceed to the Supreme Court.