Agents ordered to pay back $1m

This Castor Bay home was bought for $2.5 million and sold six months later for $3.5 million. Photo / Supplied

The Supreme Court has ordered a real estate firm to pay an Auckland couple almost $1 million after their Castor Bay home was sold for $2.5 million to a property developer who resold it shortly afterwards for $3.5 million.

The court ordered Premium Real Estate to pay $659,813 in damages and repay the $67,050 commission for the sale.

It awarded the couple Supreme Court costs of $21,000 and Court of Appeal costs of $6000 and ordered Premium to pay 7 per cent interest over some years.

The case is one of the most significant in real estate, having wound its way through the courts for three years.

Pam Riley, the agent at the centre of the bitter litigation, still works at Premium's Takapuna office and her boss was yesterday standing firmly behind her.

Brian Guy, Premium Real Estate Group's managing director, said Ms Riley was good at her job and he was "gutted" at the latest decision.

He vowed to take the case back to the Court of Appeal, saying he would mount a new challenge this time against the original decision of the High Court at Auckland and the conclusions it reached over valuations of the house.

In 2004, Mark Moncrieff Stevens and Deborah Ruth Stevens sold their North Shore clifftop house at 23D Beach Rd through Ms Riley, who the courts have found was not acting in the interests of the Stevens.

Premium had not disclosed Ms Riley's relationship with the buyer, a move previous court decisions found to be misleading and deceptive.

The buyer was a property developer, Mahoenui Valley Trust, for which Ms Riley was acting on other property deals, and her daughter had worked for the trust. Ms Riley had acted for the trust's Mr Larsen (named as such in the official documents) on eight property transactions and could reasonably hope for further work from him, the Supreme Court found. That had set up a conflict of interest whenever she introduced the trust to a vendor.

The Stevens' lawyer, Willie Akel, told the Weekend Herald his clients were "absolutely delighted" by the decision.

"It was a case that was important to them. There was a point of principle that was important to them."

The case was also important for the real estate industry, Mr Akel said.

"This judgment is an important one. Real estate agents must act in the best interests of the people they are selling homes on behalf of. They must make full disclosure of any conflict of interest, otherwise they will have to pay a very high price."

The Supreme Court's decision noted that the couple thought the trust wanted their house so Mr Larsen could live there and although he appeared scruffy, Ms Riley reassured them he had money.

Two appeals went to the Supreme Court: Premium challenged earlier findings of a breach of fiduciary duty and a breach of the Fair Trading Act and the Stevens appealed against the amount of compensation awarded.

The Stevens expected to get about $3 million for their house, the Supreme Court said, although Premium had told them to advertise it on the basis of offers over $2.7 million.

Mahoenui paid $2,575,000 and sold it just six months later in a rising property market and after some changes and an aggressive international sales campaign which brought in an overseas buyer. A Bayleys agent sold it for $3,555,000.



"Mr and Mrs Stevens lost the opportunity to sell their property for a higher price," the Supreme Court concluded.

Previous court cases noted Ms Riley told the Stevens she had previously dealt with Mr Larsen of the trust but she did not tell them his modus operandi was that he might resell the property within a short space of time.

The first round of litigation was in 2006 when the Stevens and fellow trustee Melva Beatrice Walker went to the High Court at Auckland, claiming against Premium for breach of contract, negligence, misleading and deceptive conduct in breach of the Fair Trading Act and breach of fiduciary duty.

Although Justice Patricia Courtney of the High Court rejected the main thrust of the Stevens' case, she found Premium guilty of misleading and deceptive conduct and breach of fiduciary duty.

Last April, her decision went to the Court of Appeal where Justice Terence Arnold upheld her ruling that Premium's actions had breached its legal obligations to the Stevens.

But he dismissed the Stevens' cross-appeal and cut the huge damages award against Premium to just $225,000.

He ordered the Stevens to pay $3000 to Premium.