Agents, conduits and strike out

• The High Court¹ recently considered whether, in providing documentation to the potential purchasers of a property, a real estate agent had misled them as to weathertightness issues. The Court was required to decide whether the agent/agency was a mere conduit of the information provided to the purchasers or something more. The decision provides useful commentary on the scope of agents’ duties in such circumstances and demonstrates the efficacy of a strike out application in the right case.

In mid-2015, Tony and Robyn Weber (as trustees of the Fairview Trust) purchased a property at 192 Te Mata Peak Rd in Havelock North (Property).

The vendors had engaged Tremain Real Estate (2012) Ltd (Tremains) to market the Property for sale. They confirmed in the listing agreement that they were not aware of any past or present weathertightness issues affecting the Property.

In August 2015, after the Webers viewed the Property at an open home, Tremains sent Mr Weber information relating to the Property. This included property records, and correspondence between the vendors and the Hastings District Council concerning work that had been undertaken on the Property prior to code compliance being issued. The information referred to issues arising from water ingress. Tremains’ email forwarding the documents to Mr Weber read:

Good evening

It was lovely chatting again with you both this afternoon.

I finally made it back to the office to enable me to scan the docs for you to look at.

Happy reading.

The Webers purchased the Property in October 2015. In mid-2018, they decided to sell. In August 2018, following inquiries from a potential purchaser, extensive issues with weathertightness were identified. The Webers removed the Property from the market.

The Webers issued proceedings against the Council, the vendors, and Tremains. As against Tremains, the Webers alleged that they misrepresented the Property, engaged in misleading and deceptive conduct, and were negligent in providing information to the Webers which was either false or misleading or in a manner that concealed that the Property had weathertightness issues.

Tremains applied to strike out the Webers’ claims on the basis that they were mere conduits of the information. Even if it was misleading, any misrepresentation was that of the vendors, not Tremains. Tremains had done nothing more than forward documents received from the vendors to the Webers.

The High Court accepted Tremains’ submission that the Webers could not succeed on any of the causes of action against it. The Judge struck out the claims against the agency/agent as the case fell “squarely within the category of case in which a principal’s agent has acted as a mere conduit between the principal and a third party”.

The Court’s key considerations in coming to this conclusion were that Tremains:

• Only had the information that was ultimately sent to the Webers and nothing more.
• Was entitled to send that material directly to the Webers prior to their lawyers being instructed. There was no obligation to send it to the lawyers later. The Court found that the Webers and their lawyers were “one entity” in this regard with material provided to one being accepted as being provided to both.
• Did not adopt the information as their own. Any representations arising from the documents were those of the vendors.
• Did not misrepresent the state of the Property by failing to specifically draw the Webers’ attention to the information.

In addition, the Court held:

In my view, all the circumstances point to Tremain Real Estate and Ms Baddeley being a mere conduit of this documentation. Ms Baddeley’s email of 19 August 2015 contains no indication that she was doing anything other than passing on documentation that Tremain Real Estate and she had received from the vendors. There is no sense in which the email can be interpreted as Tremain Real Estate and Ms Baddeley adopting the documentation or any information contained in it as their own, saying anything about the accuracy of the same, or adding to it in any way. Nor is there evidence that in any other way Tremain Real Estate and Ms Baddeley did or said anything prior the execution of the agreement for sale and purchase that could be interpreted as adopting the documentation or any information in the same as their own.

The Court’s decision is a timely reminder to real estate agents of the importance of taking care to ensure that all information they receive concerning a property for sale, particularly concerning weathertightness, is provided to potential purchasers and to avoid adopting or making representations about the content of the information which they pass on.

It is also a welcome reminder of the potency of a strike out application if there is no factual or legal basis for a claim.

This publication is intended as a general overview and discussion of the content dealt with. It should not be used in any specific situation, in which case you should seek specific legal advice.