by: Richard Hargreaves, Partner
Weber v Hastings District Council and Others  NZHC 1405
A real estate agent had a good win in the High Court last month, which will hopefully help other agents in the future. They succeeded in running a ‘mere conduit’ defence to have the claims against them struck out of court.
The agent had been named in High Court proceedings in Napier, having sold a house which (unbeknownst to them) leaked. As part of the marketing, the agent emailed the purchasers with property information from the vendors including details from the council property file. Those documents showed that the house had previously been re-clad due to leaking, but there was nothing in the documents provided by the vendors which showed the house was still leaky.
The purchasers of the house discovered leaks, and sued the Council, the vendors, their lawyers and the real estate agent (and their agency). They said the agent had misrepresented the property, had misled and deceived them under the Fair Trading Act, and had been negligent. All the causes of action related to the agent providing the documents to them which did not disclose leaking.
In their defence, the agent said that they were a ‘mere conduit’ of the information, passing it from the vendors to the purchasers without adopting it as their own. Fortunately for the agent, they had (sensibly) simply forwarded the property information with a brief polite email, rather than elaborating and repeating assurances that the house was in excellent condition etc.
The judge struck out the claims against the agents concluding there were no reasonably arguable causes of action. The court found that the agent had passed on all the information they had to the purchasers. There was no suggestion that the agent had ‘adopted the documentation or any information contained in it as their own’ (e).
The agent (and their lawyer) did very well here. The ‘mere conduit’ defence is notoriously difficult to rely on effectively, because courts are often willing to find that a person passing on information adopts it as their own based on the slightest comments.
The key to the agents’ success was letting the documents speak for themselves, and not seeking to explain, interpret or comment on them (and in doing so make representations themselves about the property).
Real estate agents often seek to add value, help purchasers, or try to maximise the good features of a property, but they need to be very careful when making absolute assurances to purchasers even when there are reports which support their position. Allowing purchasers to make conclusions based on the documents themselves, recommending expert advice if there are questions, and keeping communications brief, are all good practices. If these things are done, this recent case shows that the mere conduit defence continues to be very useful when a claim is made.Disclaimer