Barbalich v Leaders Real Estate (1987) Limited [2014] NZHC 3383 (19 December 2014)

Last Updated: 2 February 2015

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV 2013-485-974 [2014] NZHC 3383

BETWEEN	ELIZABETH JANET BARBALICH Plaintiff
AND	LEADERS REAL ESTATE (1987) LIMITED First Defendant NICHOLAS LIAM DENIS REEVE Second Defendant

Hearing:	4, 5 August 2014 and 1 September 2014
Counsel:	F Geiringer for the Plaintiff J R Parker and L D Tidey for the First and Second Defendants
Judgment:	19 December 2014

_{JUDGMENT OF MALLON J}

Table of Contents

Introduction ....................................................................................................................................... [1] The evidence ...................................................................................................................................... [4] Background to sale ......................................................................................................................... [4]

Marketing of property...................................................................................................................... [8] Meeting one .................................................................................................................................. [27] Meeting between Mr Reeve and the Vogels on 28 February 2013 ............................................... [33] Meeting two .................................................................................................................................. [42] Discussion between Mr and Mrs Barbalich on the evening of 28 February 2013 ....................... [50] Meeting three ................................................................................................................................ [56] Meeting between Nicholas Reeve and the Vogels on 1 March 2013 ............................................. [62] Events following acceptance of the offer ...................................................................................... [64] Real Estate Institute complaint..................................................................................................... [86] High Court proceeding ................................................................................................................... [89] Factual findings ............................................................................................................................... [93] Whose version of events I accept .................................................................................................. [93] Misrepresentations? .......................................................................................................................[118] Loss? ............................................................................................................................................... [126] Result .............................................................................................................................................. [135]

BARBALICH v LEADERS REAL ESTATE (1987) LIMITED [2014] NZHC 3383 [19 December 2014]

Introduction

[1] Mrs Barbalich (the plaintiff) purchased a house in the Wellington suburb of Karori. She paid $2.78 million dollars for it. She says she offered to buy the house at that price because of representations made by Mr Reeve (the second defendant), who was the real estate agent appointed by the vendors (Mr and Mrs Vogel), that there were two other tenders received for the property. She says that Mr Reeve’s conduct, in making those representations, was misleading and deceptive because

there were in fact no other tenders received for the property.¹ She seeks

compensation under the Fair Trading Act 1986 of $250,000, being the difference between the price at which she bought the house and the price she would have offered if the representations had not been made.²

[2] Mr Reeve denies making the representations. He also says that if Mrs Barbalich had offered the price of $2.53 million it would not have been accepted. He therefore says that Mrs Barbalich has not suffered the loss for which she claims compensation.

[3] The first defendant is Mr Reeve’s employer. The claim is brought against it

on the basis that Mr Reeve was acting on its behalf in making the representations.

The evidence

Background to sale

[4] The house is situated at 15 Mallam Street, Karori. It was owned by Mr and Mrs Vogel. They purchased the property in 1999 and carried out substantial work on it. The property was described in the marketing material later prepared as a “sublime family estate” complete with a high quality tennis court, heated in-ground swimming pool and year round sun. In the latter part of 2012 Mr and Mrs Vogel decided to sell the property because their financial position had deteriorated and they wished to

_downsize.

¹ _{Fair Trading Act 1986, s 9.}

² The compensation is sought pursuant to s 43.

[5] At this time the property had a rateable value of $1.85 million. In preparation for the sale they arranged for Quotable Value to reassess this. In early December

2013 the Quotable Value valuer told the Vogels that the new rating value would be

$2.35 million. The valuer explained that this would not be recorded in Wellington City Council’s rating value until 1 September 2013. However the Vogels understood that they could proceed on the basis that this was the rating value.

[6] The Vogels approached three real estate agents for proposals on marketing the property on their behalf. One of those real estate agents was Mr Reeve. Mr Reeve provided his proposal on 7 January 2013 for selling the property by closed tender, with a closing date of 2 pm on 28 February 2013. Amongst the material he provided to Mr and Mrs Vogel that day was a letter which gave his “up-to-date market appraisal”. This stated that the “appraised base market price” was $2.35 million. He described this as reflecting “the current market conditions but is a deliberately conservative estimate of sale.” He set out the figures if the sale price was 7.5 percent or five per cent less ($2,173,750 and $2,232,500 respectively) or achieved a five per cent or 20 per cent premium ($2,467,500 and $2,585,000 respectively).

[7] Mr Vogel did not recall the exact details of the market appraisals from the other agents. He believed that they were around the same level as that provided by Mr Reeve. Mr Vogel’s evidence was that he did not pay too much attention to these figures because his view was that real estate agents’ appraisals are not necessarily reliable opinions of market values and he thought the property was worth a lot more than $2.35 million. The Vogels selected Mr Reeve because Mr Vogel knew him and knew that he had been in the market for a long time.

Marketing of property

[8] The property was first advertised for sale on 9 February 2013 in the Dominion Post. Mr and Mrs Barbalich had been looking to buy a new property for about five years. They wanted a place with more sun, better access and more room for their three children than their Rawhiti Terrace property. In the course of that period they had made three unsuccessful attempts to buy other properties. When

Mrs Barbalich saw the advertisement for 15 Mallam Street she made arrangements with Mr Reeve to view it on 10 February 2013. Mr Barbalich was not present with her on this viewing. However Mrs Barbalich told Mr Barbalich about it and he drove past the property later that day.

[9] Mr and Mrs Barbalich inspected the property again on 16 February 2013. Mr Reeve was present. On this viewing they received a copy of the sales brochure which, amongst other things, stated the rating valuation as being $2.35 million. Mr and Mrs Barbalich said that at this viewing Mr Barbalich asked Mr Reeve about the vendors’ expectations. They were given a figure of $2.5 million as the Vogels’ “bottom line”, which they thought was “a bit of money”, especially given the rating valuation. They decided to get an independent valuation.

[10] Mr Reeve said that from his discussions with the Vogels he understood that they wanted in excess of $2.5 million, but they had not had discussions about their “bottom line”. He expected that the Vogels would prefer to see what tenders were received. Mr Reeve said it would certainly not be his practice to disclose a vendor’s bottom line. He considered that if he mentioned price parameters with the Barbaliches he would have said that the vendors wanted “in excess of $2.5 million” but the nature of the tender would make it impossible to gauge what the property would sell for. Mr Vogel also contended that at no stage during the sale process did he tell Mr Reeve the exact amount that they wanted for the house or a “bottom line.” He said that this was an issue they reserved to themselves, as they were entitled to do.

[11] After the second viewing Mrs Barbalich sent a text to Mr Reeve asking him to provide her with the details of the registered valuer he had mentioned and to confirm that he was independent. She also asked to be emailed the tender documents. On 17 February 2013 Mr Reeve replied by text, providing the details of Hamish Bills from Lockwood Valuations, confirming that he was independent and that he was on most banks’ recommended list of valuers. He also said that he was doing the tender documents in the coming week and would drop a set off to her.

[12] Mrs Barbalich said that she then rang Hamish Bills. Within two days she was called by Nigel Lockwood. She was told that Mr Bills had a conflict of interest because of his personal relationship with Mr Reeve. He asked if she knew that. She said she did not. She arranged for Mr Lockwood to do the valuation instead. Mr Reeve’s evidence on this point is that while he had recommended him a number of times, he has never met Mr Bills socially so does not know why this would have been said. Mr Vogel’s evidence is that neither he nor his wife knew Mr Bills or Mr Lockwood in a personal capacity either.

[13] At 8.44 am on 21 February 2013 Nigel Lockwood emailed his valuation report to Mrs Barbalich. The report set out a range of information including sales information about a number of substantial city-end Karori properties in a price range of $1.62 million to $3.88 million. The report concluded:

Following consideration of all factors involved however we believe a fair current market value for the property to lie within a range of $2,450,000 to

$2,600,000. We have adopted $2,525,000 herein.

[14] Shortly after receiving this report Mrs Barbalich arranged to have a final viewing of the property at 5.30 pm the next day. Mr Reeve informed the Vogels of this appointment by email on 21 February 2013 at 10.04 am. He told the Vogels that he would be giving the tender documents to her at this time. As per that arrangement, Mr and Mrs Barbalich inspected the property together on 22 February

2013.

[15] In this period there were two other potential buyers who appeared to Mr Reeve to be seriously interested in purchasing the property. One of these was Mr Leach and his wife. Mr Leach and his wife owned a property in central London. Mr Leach gave evidence that prior to looking at this property, he and his wife had looked at about twelve properties. He and his wife visited the property on two occasions and were “very interested” in purchasing it. They were aware that the rateable valuation was $2.35 million. They discussed this with Mr Reeve who told them that the vendors were likely to want more than that. When they discussed specifically what offer they might make, Mr Reeve told them to place their “best offer” and that he “simply could not know whether an offer at a specific price point would be accepted.” The upper end offer that Mr Leach was considering was $2.5 million.

But they “absolutely” did not discuss with Mr Reeve the price they were thinking of offering, nor that their upper end offer was $2.5 million.

[16] Mr Leach said that he and his wife decided they would look at putting in a tender in respect of the property subject to resolving issues as to financing. At this time, their London property was under contract but awaiting the process of exchanging contracts that property transactions in the United Kingdom involve. That process meant they could not be sure that the sale would be completed. The process had been delayed on several occasions and was looking to be delayed again. Mr Leach understood he would be committed if he submitted a tender offer with a deposit in the vicinity of $250,000 and that tender was accepted. He therefore had discussions with his bank to see if finance could be arranged to enable an offer to be made. These discussions continued up to the morning of the tender.

[17] The other interested party was a couple who were clients of another Leaders agent, Mr Graham, who worked in Leaders’ Khandallah office.³ Mr Graham gave evidence that his clients were looking for a substantial family home in either central Khandallah or city-end Karori and had a budget of up to $3 million. He showed them the property at 15 Mallam Street. He understood they were interested because they revisited the property and requested a copy of the LIM and tender documents.

He provided them with the tender documents. Mr Graham informed Mr Reeve, as the listing agent, of their interest, that they had requested a LIM and that he had provided the tender documents to them.

[18] At some point prior to the tender closing date Mrs Barbalich asked Mr Reeve how much interest there was in the property. Mrs Barbalich said that, at the time of the second viewing on 16 February 2013, Mr Reeve told her that there were other parties who would be making offers. She said that Mr Reeve specifically mentioned a purchaser from Khandallah and a purchaser from London. With respect to the latter, she said that Mr Reeve said that the offer would most likely be conditional on

_{the sale of a property in Westminster.}

³ Mr Graham’s brief of evidence stated that he worked in the Johnsonville office. I am unsure whether he used to work in the Khandallah office or whether Mr Reeve was mistaken in thinking that he worked at the Khandallah office.

[19] Mr Reeve did not say precisely when Mrs Barbalich discussed with him the level of interest in the property. He acknowledged that she did so prior to the tender closing date. He said that he did not know where his Khandallah colleague’s clients were from.⁴ He also said that that he was aware that the London client would prefer his Westminster property to sell before he made an offer, but he did not know whether this was absolutely crucial to him. He did not say that these parties would

be making offers because he did not know that.

[20] Mr Reeve said that prior to the tender closing he told Mrs Barbalich that he had sent out two sets of tender documents to prospective purchasers. He may have said that he was hopeful to receive tenders from them but he would not have said that he expected to do so. He explained that when people ask for tender documents that implies that they are seriously considering putting in tenders. He said it could happen that a person then does nothing about it.

[21] On 24 February 2013 Mr Reeve emailed the Vogels with a summary of the interest to date. A number of parties who had viewed the property were set out in this email with their comments about what they thought of the property. Included in this list were the Khandallah clients of Mr Reeve’s colleague, Mr Leach and the Barbaliches. He noted that the Khandallah party was having a second look at the property on 25 February 2013 and had called for tender documents. He said that “[i]f we get 3 Tenders back I will be delighted as that is a healthy result for a home of this value on the market.”

[22] On 26 February 2013 Mr Reeve knew that the Khandallah offer would not be proceeding. Mr Graham had informed him of this. Mr Reeve emailed the Vogels at

9.12 pm that evening saying that his colleague’s clients had decided not to proceed

with the tender. He said:

So it’s probable its [sic] either the Barbaliches or nothing (not that they will know that of course!). As you know I have felt all along that they were the strongest buyers and they have taken it the most seriously with 3 viewings and paying for a valuer. I will be very disappointed if I can’t get a serious tender from them. I know you don’t have your up [sic] hopes up re them but time will tell.

⁴ See footnote 3.

Its [sic] all speculation at this point anyway, of course. Roll on Thursday. As Peter’s client has pulled out there is no necessity for our city manager to present Tenders as both clients are mine at this point. If the [other party] do something then that will have to change but if you don’t hear anything to the contrary from me I will come up to your place at 2.30 on Thursday and I am there tomorrow at 930, as you know.

[23] Shortly before the closing time of 2 pm on 28 February 2013 Mr Reeve knew that Mr Leach would not be putting in an offer. Mr Reeve received a call from him “right at the last minute”, before the tender closed. Mr Leach’s evidence is that he called Mr Reeve at around 10.30 am to advise him that he had been unable to secure finance. He informed Mr Reeve that they remained interested in the property. Mr Reeve told him it was a matter of seeing whether agreement could be reached with the other party at the right price for the vendors, and if not Mr Leach would have the opportunity of negotiating with the vendors. Mr Leach said that at all times he found Mr Reeve to act towards him and his wife in an “up-front and fair manner ... while of course, seeking to obtain the best price for his vendor clients.”

[24] Mrs Barbalich was keen to purchase the house. A text message exchange on

27 February 2013 was as follows:

Mrs Barbalich: Hi Nicholas look forward to meeting you at 1230 Very excited, planning to get this house! Elizabeth

Mr Reeve: And I am planning to get it for YOU too!!!!!

[25] Prior to this meeting, Mr and Mrs Barbalich discussed what offer they would make. Mr Barbalich’s evidence was that they came to the conclusion that they were prepared to offer $2.53 million for the property because that figure was a little higher than Mr Lockwood’s valuation. At that stage, they did not know that the rateable value had been upgraded, but they took the valuer’s advice because he was reputable and knew the market. They resolved together to offer $2.53 million. That was a figure with which they both felt comfortable.

[26] Similarly Mrs Barbalich’s evidence was that after the third viewing, and after Mr Lockwood’s report had been received, she and Mr Barbalich discussed what they should offer for the property. They both liked the property. They decided on a figure of $2.53 million because they had looked at Mr Lockwood’s valuation and decided

to offer a figure slightly higher than that. They made arrangements to see their accountant and bank. Mrs Barbalich did not discuss with Mr Barbalich or the bank and their accountant the possibility of making a higher offer.

Meeting one

[27] Mrs Barbalich met with Mr Reeve at Mr Reeve’s offices on 28 February 2013 at about 1 pm (meeting one). According to Mr Reeve this meeting was set close to the close of the tender because it was a mutually convenient time and because he personally thinks this is the time to meet with a prospective purchaser to ensure they are putting their best foot forward.

[28] There is a conflict between Mrs Barbalich and Mr Reeve about what was said at this meeting. Mrs Barbalich says that she gave the tender documents to Mr Reeve when she came into the office. At this point she had not written in her proposed offer. She discussed that she and Mr Barbalich were aiming to offer $2.53 million for the property. Mr Reeve told her that two other tenders had been received, and that she had to put her best offer forward if she wanted to purchase the house. She felt under “a huge amount of pressure” and made a “unilateral decision based on the information I’d been given in that office to put in a higher offer than I was intending to make”. She decided to make an offer at $2.7 million. She wrote out a cheque for the deposit. Although she had not previously discussed this figure with the bank or the accountant or her husband she had confidence that such an amount was available to her. She saw Mr Reeve write this figure on the tender document.

[29] Mr Reeve’s version of the meeting is as follows. Mrs Barbalich handed over the tender document when she entered Mr Reeve’s office. She had completed her name, the possession date information and marked the offer as unconditional. She had not written in the price. Mrs Barbalich asked him about the level of interest in the property. He said that he could not discuss this and that she cannot control what anyone else does. He did not say that tender documents had been received. Nor did he comment on whether any further tenders were expected. He said that it was “no one’s business” and that he “wouldn’t have known for sure ... I mean I was pretty sure that we weren’t getting any other tenders ...”.

[30] Mr Reeve told her that she should “put [her] best foot forward.” He told her this because an “agent’s job is to get the best possible price.” While he knew that there were not going to be any other bids when the tender closed, he said that every prospective tenderer is told that the highest tender is not necessarily accepted, and that he informed Mrs Barbalich of this during this conversation.

[31] Mr Reeve said that Mrs Barbalich did not explain to him why her offer was

$2.7 million. He asked her what she had decided about the price. She said to him “I’ve decided to offer $2.7 million. What do you think of that?” He said to her “Well whatever you’re putting in you must make sure it’s your absolute best offer because it’s probable that you won’t get another opportunity”. He considered it was “quite likely” that he filled in the $2.7 million figure on the agreement for sale and purchase for her.

[32] Mr Reeve recalls that when he subsequently accompanied Mrs Barbalich out of his office he put the tender in the clear tender box at reception and saw that it was empty.

Meeting between Mr Reeve and the Vogels on 28 February 2013

[33] Mr Reeve’s evidence did not discuss in any detail his meeting with the Vogels once he had received the offer from Mrs Barbalich. He did say that he took the tender to the Vogels. They counter-offered at $3 million. This surprised him because, prior to this point, they had not indicated in any way that this was the sort of money they expected. He said that the Vogels said that he was not to tell Mrs Barbalich that there were no other tenders.

[34] Mr Vogel said that Mr Reeve brought them the document with Mrs Barbalich’s $2.7 million offer. Mr Reeve said that Mrs Barbalich was the only tenderer. Mr Vogel said that Mr Reeve “looked a bit shocked” when they said they wanted $3 million. He said they talked to him about it and said that was the price they wanted. They discussed that Mr Reeve was to go back to Mrs Barbalich and tell her that they would negotiate with her, and that they wanted $3 million for the property, or something to that effect.

[35] At the trial Mr Vogel was questioned as to what he would have done if the offer had been $2.53 million rather than $2.7 million. He said that he would have rejected it. The rejection would have been accompanied by a counter-offer. He was cross-examined about this. He accepted that they were selling the house because there had been a significant down turn in their finances. However he was “pretty certain” they would have rejected an offer at $2.53 million. He said:

... It needs to be remembered that when the initial tender came in at 2.7 we counter offered three. The effect of the counter offer was the tender of 2.7 was now off the table. You know, we ran the risk that the plaintiff could just turn around and say, “No, I’m not going to pay one cent more and, in fact, I’m going to withdraw my offer.”

[36] Mr Vogel was asked if he hoped that by counter offering at $3 million it would increase the price. He said that “[w]e did but we also knew that there was a real risk here that it wouldn’t, that all bets could be off”. He was asked what he expected would happen. He replied:

Well it’s hard to know. What do you expect? What you hope for is that the person will come back and increase the original offer. Do you expect them to do that? Not necessarily. I mean it depends on the words you use but the hope was that they would, um, based on the fact that we knew that they – well, the plaintiff was very interested in the property, that all things being equal it was more likely, we thought, that she would come back with a higher offer but I don’t think we can take it to the extent of saying that’s what we expected.

[37] Mr Vogel was cross-examined about why he said he would have rejected an offer of $2.5 million when all the experts had said it was worth less than that. He said that, with all due respect, Mr Reeve was not an expert valuer. He said that the Quotable Valuation was not really a valuation and he did not think the valuer had even come into the house. He was not aware of the value that Mr Lockwood had arrived at for Mrs Barbalich. He said that “there were two parties that thought it was worth a lot more than that”, namely Mrs Barbalich and he and his wife.

[38] Mr Vogel was asked whether there was any discussion with Mr Reeve about what would be said about other tenders. Mr Vogel said that he understood that nothing was going to be discussed about the other tenders. He could not recall the exact reasons, but he “thought that in essence, that this was a closed tender, and ...

the rules pertaining to it are that you don’t discuss how many tenders or at what

price”.

[39] Mr Vogel was then asked whether there was any discussion about a “plan B”. He said that he was not sure, because there was not much time between receiving Mrs Barbalich’s original tender, the counter-offer, her second offer, and their acceptance. He said the interest from the English couple (Mr and Mrs Leach) may have been part of the discussion, but “it needs to be put into the context that they never submitted a tender”. They did not know where the English couple stood. Mr Vogel said that he could not definitively say that if the counter-offer was not accepted, they would chase the English couple. For all they knew, the English couple could have walked away at that point, but they remained a possibility. He did not think they would have talked to Mr Reeve about holding on to the property because that would be a personal decision.

[40] Mr Reeve was sitting with the vendors when he received a text from Mrs Barbalich saying “Hi Nicholas getting texts from the kids any news yet?” Mr Reeve replied that Mrs Barbalich was not to call him at the moment and asked where she would be over the next hour or so. Mrs Barbalich said they could meet in the city at Nikau café.

[41] Mr Vogel wrote the $3 million counter-offer (in figures and words) on the document. He accepted that the counter-offer was in his handwriting. He and his wife initialled their counter offer. Mr Reeve took the document as amended to his meeting at Nikau Café with Mrs Barbalich.

Meeting two

[42] Mr Reeve met with Mrs Barbalich at the Nikau café mid-afternoon on 28

February 2013 (meeting two). Again there is a conflict in the evidence about what was said at this meeting.

[43] Mrs Barbalich’s version of the discussion is as follows. Mr Reeve told her that the vendors had not accepted her offer of $2.7 million and that they had countersigned the offer at $3 million. She was “blown away” and she said to him “I

feel this whole process has been completely misleading” because that figure had never been discussed during any point. He indicated that the vendors wanted $3 million, that he was also very surprised by the figure and that he had not discussed it with them at any time. He told her that the basis for the $3 million figure was that the vendors’ friends had told them the house was worth that amount. She said “[w]ell then the friends can purchase the house”.

[44] Mrs Barbalich said that she did not believe that there was an offer for $3 million and she asked to have a look at the agreement. He refused to give her the document. She said that if the vendors had countersigned at $3 million that meant her offer had been crossed out which meant that no live offer was in place. Mr Reeve had told her two other offers had been received but that the vendors had chosen to negotiate with her prior to negotiating with other tenderers. She told him that she needed to think about things, that she was not happy, and that she felt “the whole thing has been misleading”.

[45] Mr Reeve’s evidence is that his exact words to Mrs Barbalich were:

In the first instance they have decided to negotiate with you. If they can’t reach agreement with you then they are going to go to plan B. And if they don’t reach agreement with you it will free them up to negotiate with any other interested parties.

[46] By plan B, Mr Reeve said that he understood that another prospective purchaser (Mr Leach) to be “very keen” for Mrs Barbalich not to buy the house. He said that if Mrs Barbalich had chosen to walk away their next step would have been to either negotiate with Mr Leach or take the property off the market.

[47] Mr Reeve rejected the allegation that he had said that “the other two tenders were red-hot buyers waiting right behind [Mrs Barbalich’s] decision”.⁵ He explained that his words were picked “extremely carefully” because “we don’t want to convey any impression of ambiguity or any impression of other offers that don’t exist”. He

_{had just come from a meeting with the Vogels knowing that he could not say there}

⁵ These were the words used in Mrs Barbalich’s subsequent complaint to the Real Estate Agents

Authority (refer below at [87]).

were other tenders coming (when there were none) and nor could he say that no

other tenders had been received.

[48] Mr Reeve told Mrs Barbalich that the vendors had counter-offered her tender at $3 million. He said that Mrs Barbalich must be confused about this. He recalled that she wanted to take the contract away. He told her this was not real estate practice. However he had no reason not to show her the counter offer of $3 million and he was sure that he did so. He could not remember her exact words but did recall that she was very surprised at the level of the counter-offer. He could not remember the exact words she used to express her surprise. He told her that he was “a little surprised too at the figure” but “it’s their prerogative” because they were the vendors.

[49] He told her that she had three choices. They were to “counter-offer their offer”, “walk away”, or “come back at another price”. She chose to think about the matter overnight. She did not say that this brought an end to her $2.7 million offer.

Discussion between Mr and Mrs Barbalich on the evening of 28 February 2013

[50] Mrs Barbalich told Mr Barbalich on the night of 28 February that she had made an offer of $2.7 million. She told him that she was the highest bidder which is what she thought based on the information that she had.

[51] Mr Barbalich said that Mrs Barbalich returned from her meetings with Mr Reeve “quite distressed”. She had put in an offer of $2.7 million, which was “a lot more than we wanted to pay”. She had been told by Mr Reeve that their tender was the highest, but then Mr Reeve came back and told her that the vendors wanted $3 million. Mrs Barbalich told him that she couldn’t believe the counter-offer, that she had asked to see the offer and Mr Reeve refused to show it to her or give it to her, and that Mrs Barbalich told him that she had said “well, it’s a dead deal. If they’ve countersigned it the deal’s dead. There’s no contract now.”

[52] Mr Barbalich said he was not unhappy that Mrs Barbalich had offered more than the $2.53 million they had discussed. He said he felt like he had gone into an

auction saying “I’m going to pay $2.53 million” but that they had gotten caught up in the heat of the auction. Other people had bid, and they beat them. He was happy.

[53] Mr Barbalich said that they agreed they would not pay more than $2.7 million. He told her “[t]hey’re dreaming. There’s – no one’s gonna pay that sort of money. Let’s just sit this out over the weekend. The vendors will come down”. They discussed that no one would pay more than $2.5 million unconditionally for the property. They had been told that two other tenders had been received, and although they did not know the amount, they knew the offers had gone in the box. He thought “sit this out. Okay, there might be some other tenderers in there but they’re not gonna be over 2.5 million unconditional. We were unconditional. Not conditional. Unconditional. So let’s sit this out.”

[54] Mrs Barbalich said that later on 28 February 2013 Mr Reeve called her to say that a property at 3 Mallam Street had sold for $1.5 million when the rating valuation was only $900,000. Her evidence was that Mr Reeve told her that he did not want to tell the Vogels because they might then ask for even more than $3 million. He also said that if he had known that they were wanting $3 million he would never have acted for them, that they were behaving unreasonably and had been misleading, and that he was not expecting a counter offer.

[55] Mr Reeve said that he did not recall discussing 3 Mallam Street on the evening of 28 February 2013. He did recall Mrs Barbalich asking during the marketing period about 3 Mallam Street and the price range. He told her that it was to sell in a tender and he thought that the price parameters were likely to be over $1 million and under $1.5 million. He considered that he would not have got the figures wrong had there been a discussion on 28 February 2013 as claimed by Mrs Barbalich. When responding to the complaint later made to the Real Estate Institute (discussed further below), Mr Reeve made the point that he would not say what Mrs Barbalich alleges. He said that the owners of number 3 were friends of the Vogels and they would have been well aware of the price achieved for number 3 soon after the tender closed. He also made the point that he did not understand the correlation between the two properties because they were in a different price range.

In any event the price Mrs Barbalich paid was 20 per cent above the rating valuation whereas number 3 sold for 25 per cent above its rating valuation.

Meeting three

[56] Mr Reeve met Mrs Barbalich again on 1 March 2013 at Nikau Café at roughly 1 pm (meeting three). The purpose of the meeting was to discuss what Mrs Barbalich would do. He suggested a meeting because she had said she wanted to think about things overnight, so he was following up and “wanted to move things along”. Mrs Barbalich said that she went to the meeting just to “talk about it” and thinking that perhaps the vendors had changed their minds.

[57] Mrs Barbalich’s evidence is that the she did not go to this meeting having made a decision to make a counter offer at $2.78 million. Rather she made that offer at this meeting in the context of Mr Reeve saying to her:

If you don’t sign it now, right now, they’re going to start negotiating with someone who’s right behind you. It’s just as good as you. It’s now or never. If you don’t sign it – if you walk out now and you don’t sign it, you lose the house.

[58] She felt incredibly pressured that she had to make a decision on the spot. She offered another $80,000 on the property, hoping that it would be enough. She did this only because Mr Reeve had told there were two other tender offers that had come in and one was “definitely as good” as hers. Mr Reeve wrote the figure of

$2.78 million on the agreement and she initialled the figure. The agreement remained in his hand and his control the whole time. She asked to see it and he refused to hand it over. He only allowed her to see it to initial the figure. She believed that the figure of $3 million was on the document at that point.

[59] Mr Reeve’s evidence is that Mrs Barbalich said that she was not going to pay

$3 million, so he said to her:

[w]hy don’t you increase your offer? Come back with your – I know that I asked you last time at the tender to put your absolute maximum in but they’re not going to accept that. As you can see they’ve counter-offered at three and why don’t [you] put your final offer in and I’ll take it to them on a take it or leave it basis –

[60] He did not tell her anything about other interest in the property because it was irrelevant, since the vendors had made the counter-offer to her. He told her that if they could not reach an agreement, it would allow them to negotiate with other interested parties. Mr Reeve’s evidence was that he used those words “very carefully” because he could not say “other tenderers” because there were none. Counsel put to him Mrs Barbalich’s evidence that he told her his instructions were to talk to one of the other tenderers if she didn’t increase her offer. He “absolutely” denied that. He also denied saying that one of the other offers was “just as good as hers” and said that this was “ridiculous” and that no real estate agent would say that.

[61] Mr Barbalich said that Mrs Barbalich called him to tell him about the meeting. He did not believe Mr Reeve’s comment that he had received an offer “just as good as [hers]” because he did not believe that anyone could offer more than $2.5 million conditionally given the state of the market. He became suspicious. He was therefore unhappy that the $2.78 million had been offered.

Meeting between Nicholas Reeve and the Vogels on 1 March 2013

[62] Mr Reeve’s evidence is that he took the increased offer to the Vogels and there was a difference of view as to what should be done. Mrs Vogel was not keen on selling the property at that price whatsoever. Mr Reeve was unsure of Mr Vogel’s position. Mr Reeve was asked to go outside, which he did for 10 or 15 minutes, and they then told him that they would accept the offer.

[63] Mr Vogel’s evidence is consistent with this. He said that the decision to accept the increased offer of $2.78 million was not made instantaneously because “we had counter offered three million and that’s generally what we wanted”. The counter offer was obviously less than that so he and his wife had a discussion about it. The end result is that they decided to accept the offer and they informed Mr Reeve of their decision.

Events following acceptance of the offer

[64] Mr Reeve rang up Mrs Barbalich at 2.10 pm to tell her that her offer had been accepted. Mrs Barbalich’s evidence was that she was a little surprised by this given the $3 million counter offer.

[65] Mr Barbalich rang Mr Reeve at about 3 pm. Mr Reeve’s evidence was that Mr Barbalich asked him who had purchased the property. Mr Reeve was surprised that Mr Barbalich did not know that it was his wife. When he told Mr Barbalich that Mrs Barbalich had purchased it, Mr Barbalich became very angry and threatened to sue him. Mr Reeve was unsure what Mr Barbalich was angry about. Ten minutes later he attempted to call Mr Barbalich back. He left a voice mail message explaining that he was unsure why Mr Barbalich was angry and asked Mr Barbalich to telephone back. After the telephone conversation with Mr Barbalich, Mr Reeve said that he informed the Vogels to let them know about it. He also made a note of the conversation with Mr Barbalich.

[66] Mr Barbalich’s evidence about this telephone call is different. His evidence is that he knew what Mrs Barbalich had offered but did not know it had been accepted. Mr Reeve told him that the offer had been accepted. He asked Mr Reeve why Mrs Barbalich had to pay so much for the property when Mr Reeve had said that the vendors wanted $2.5 million. Mr Reeve told him that two tenders other than Mrs Barbalich’s had been received and they were better than $2.5 million. When Mr Barbalich pressed for more information, Mr Reeve said that he could not tell him because it was confidential. Mr Barbalich made a careful note of the conversation because he thought that his wife had been deceived. His file note recorded the following:

Notes on conversation with Nik Reeve taken at 3.25 on 1 March 2013

By: Zoran Barbalich

N. “Have you heard the good news they have accepted 2.78 mil”

26. “Why did she have to pay so much as you said the vendors only wanted 2.5M”

N. “There was a lot of interest in the property and two other tenders

were received”

Z. “Were they better than $2.5?”

N. “They were both a lot better than 2.5 mil so the vendors decided that

they could get more for the property”

Z. “What were the other tendered amounts?”

N. “I cannot tell you”

26. As my wife has now unconditionally purchased the property you have no reason not to tell me

N. I cannot tell you as it is confidential

Z. I do not believe that there were any other offers for more than

$2.5mil

You are a lying bastard and a crook and I am going to expose you for what you are.

End of conversation

[67] At 3.13 pm Mr Barbalich sent a text to Mrs Barbalich saying “[i]n case you do not already know you you [sic] offer of 2780 was accepted. At 3.50 pm Mr Barbalich sent a further text to Mrs Barbalich saying “I told nik reeve that I shall be laying a complaint about his behaviour”. Mrs Barbalich telephoned Mr Reeve at about 4.41pm and told him that her husband had issues and that Mr Reeve should not answer the telephone if he called.

[68] At 5.43 pm that evening Mr Reeve received a text message from

Mr Barbalich. That message was as follows:

You lied to and manipulated my wife into paying at least 250,000 more for the property than what it was worth. I shall lay a complaint with the real estate institute about your actions and shall sue you for this

[69] Mr Reeve responded by text at 9.51 pm saying “Im very sorry you feel that way Zoran. I did not and would never to do something like that.” Mr Barbalich responded with “The courts will decide on that”. At 10.10 pm Mrs Barbalich sent Mr Reeve a text as follows:

Hi Nicholas Many thanks for your help today I am very happy to have the house Very sorry for the inconvenience of zorans phone call he has been unwell for some time and unable to cope with stress of any kind Please keep this confidential Thanks again Elizabeth

[70] Mr Barbalich was asked about this. Mr Barbalich said that he had a difference in opinion with his wife. He believed she had been lied to and she did not believe that. She did not understand why Mr Barbalich had been so forceful towards Mr Reeve and “yes, and she was probably a bit embarrassed about what I’d said.” Mrs Barbalich agreed that she was not pleased with the conversation because she felt she had done a good job in the transaction.

[71] Mrs Barbalich said that in the days that followed she discussed what had occurred with her husband. Mr Barbalich was firm in his belief that she had been lied to and he pressured her to obtain proof from Mr Reeve that the competing offers existed and that they were as good as hers. At first she did not share her husband’s scepticism. She believed what Mr Reeve had told her and was happy that she had beaten two other bidders for the property. Mr Barbalich also did not believe what she had been told about 3 Mallam Street. Mr Barbalich told her that if he obtained evidence about what she had been told, he would cease raising it. For that reason, on

4 March 2013 she texted Mr Reeve about 3 Mallam Street.

[72] The text exchange on that day was as follows:

Mr Reeve: Good morning Elizabeth. I would like to send you some flowers but dont want to aggravate Z. Do you have a physical work address I could send them to?

Mrs Barbalich: Morning Nicholas than you that would be very nice, toward end of week best! As I am away couple if [sic] days. [work address provided].

Mrs Barbalich: Ps what was the exact price on 3 mallam?

Mr Reeve: Will do on Thursday re flowers! $1225000 for 3 Mallam.

Will post a copy of your contract (for yr records) to yr

Newtown address today as well. FYI I will keep yr name, price etc re #15 strictly confidential until its a matter of

public record end of May.

Mr Reeve: Interestingly number 3 sold for 25% above its Rateable Value of $980000 and number 15 was just under 20% above.

Mrs Barbalich: Great thanks

[73] Mrs Barbalich said that these figures were not the same as the ones she had been told earlier. This made her a little angry but she was still not convinced that she had been lied to about other matters.

[74] On 8 March 2013 Mr Barbalich sent Mrs Barbalich a text suggesting that she obtain from Mr Reeve a copy of the conditional offer he had claimed to have received from the London party. On that day Mrs Barbalich emailed Mr Reeve to thank him for the flowers and to ask for a copy of the final contract. Mr Reeve responded that the contract had already been sent. Mrs Barbalich replied to check which address Mr Reeve had sent it to and went on to say:

Nicholas – please can you confirm there was another offer on the house, (amount and condition) for some reason zoran seems to think no other offers existed.

It would make my life a lot easier if i can put his mind at rest on this, Kindest Elizabeth

[75] Mr Reeve replied to that email saying “As much as I would like to make your life easier with Zoran we have a strict company policy that all details of our Tenders remain confidential.”

[76] Mrs Barbalich received further promptings from her husband. She received a text from Mr Barbalich saying “Has the agent emailed you a copy of the other offer yet?”.⁶ On 10 March 2013 Mr Barbalich sent her a text saying:

The property was valued at 2.525 and I do not believe that there was any other offer for more that [sic] this amount. This then means that you were lied to and manipulated into paying 250,000 more than the property was worth

[77] Following this prompting, Mrs Barbalich emailed Mr Reeve on 19 March

2013 stating:

I am sorry to have to ask you this question again, however for some reason Zoran believes that there were no other offers on the Mallam st property and wishes to proceed with a complaint around this. He says that under the tender process that an agent cannot fabricate buyers. (note these are his words not mine)

⁶ The date of this text is not clear.

I absolutely do not wish to take this pathway, and I have told him that you advised there were two other offers on the property, and at least one was conditional. And I had faith in what I had been advised.

Please can you confirm this is the case, as it would put this matter to rest.

[78] Mr Barbalich made arrangements to meet a lawyer at 11 am on 20 March

2013. At 9.40 am Mr Barbalich sent a text to Mrs Barbalich asking whether Mr Reeve had provided “proof that two offers went in”. Mrs Barbalich replied that she had not. Mr Barbalich suggested that she send Mr Reeve a text asking for a reply and telling him that they were both seeing a lawyer at 11. Mrs Barbalich replied saying that she would “check my emails before 11am”. Mr Barbalich replied “have you sent him a text advising that we are seeing a lawyer at 11 today??”.

[79] It seems that before Mrs Barbalich took any follow up action as suggested by

Mr Barbalich, Mr Reeve replied to Mrs Barbalich by email. His email was sent at

9.45 am on 20 March 2013. In this email he said:

Thanks for your email. I’m really sorry Zoran still feels this way. To reiterate what I did say to you.

We went out 3 sets of Tender documents, one to a colleague at another of our offices, and I obviously had no idea what his clients position was, one to you, and one to some people who told me they could only Tender subject to the sale of their London house. The owners chose to negotiate with you and they countersigned your offer. At that point if you were not happy, you had the choice of walking away completely, or counter-offering their counter- offer, or accepting their price. You chose to counter-offer and after much deliberation, they accepted that offer. The vendors, who are both lawyers, had by that stage requested all details re their negotiations remain confidential. Leaders company policy also expressly prohibits discussing processes during or after the event.

If Zoran feels the need to persue (sic) things further then that is his choice. If you have any further correspondence I have been told in the first instance you need to contact my boss Mr Rob Garlick. His email is [e-mail]

[80] Mr Reeve sent a further email at 10.49 am that day saying that he “forgot to mention in my email that the London people were very disappointed that Mallam St sold and would still have been interested in buying it when their place sells.” Mrs Barbalich replied later that afternoon stating:

I am confused about this now as your reply is ambiguous.

You definitely told me that there were other tenders and that the vendors were choosing to negotiate with me first, before going back to the other tenderers. This was discussed at least twice between us. It was my clear understanding from you that there were other offers outside of my one, particularly after I had made the first offer, and in between the counter offer.

Your email below implies there were in fact no other tenders.

The outcome does not affect settlement however it does affect how Zoran wishes to proceed. Please can you advise which it is Thanks Elizabeth

[81] After this Mrs Barbalich texted her husband to say that, having read Mr Reeve’s email “[i]t does appear he could be lying regarding the London people.” She said:

... He categorically told me they had put in a conditional offer and that if I didn’t buy it the vendors would go to the ‘other offers’ to negotiate and tgAt [sic] they had chosen to negotiate with me first

I will support you on this however I am still categorically settling on the house

[82] Mr Barbalich replied that he was glad that Mrs Barbalich had “come to the realisation that he has probably lied to you and deceived.” There were further text messages between them along these lines.

[83] On 21 March 2013 at 1.25 pm Mr Reeve emailed Mrs Barbalich saying “I specifically told you we distributed 3 sets of Tender documents”. He said that if she had any further issues she was to direct them to Mr Garlick (Leaders’ company principal) or the Real Estate Agents Authority. He said that he “very much” regretted that her “successful experience and obvious delight in securing Mallam St is now being overshadowed by this.”

[84] At 3.20 pm Mr Barbalich sent a text message to his wife asking if the agent had replied. Mrs Barbalich said “he has relied [sic]”. At 4.21 pm Mrs Barbalich emailed Mr Garlick. In this email she confirmed that Mr Reeve did advise that three tender documents went out. She said that he “also told me on at least two occasions in between the first offer I made and the counter offer that ‘the vendors had chosen to negotiate with me first before going back to the other tenders’.” She said that if there were no other tenders then this was a “fabrication” and that she was “now

concerned that the ‘English buyers’ never existed.” She said that she had politely

asked for proof of these buyers

[85] Mr Garlick’s response was as follows:

...

Further to your comment I confirm Nick’s advice to me that he did state factually that 3 sets of tender documents, (including yours), were distributed to interested parties but did not claim Leaders were in receipt of 3 Tenders.

Nick further advises that his only representation to you after your Tender was submitted was that, “the vendors have chosen to negotiate with you first and if they cannot reach a satisfactory outcome they will go to plan B”. This is clearly a different position to your interpretation.

I also confirm that Leaders, as a matter of policy does not enter into discussion of process and outcome with any party accept [sic] our vendor. For your information I attach a copy of our most recent tender 9^th Edition Particulars, Terms and Conditions of sale by Tender wherein, (clause 2L), this matter is specifically stated.

...

Real Estate Institute complaint

[86] On 29 April 2013 Mrs Barbalich made a complaint to the Real Estate

Institute. In her complaint she contended the following matters:

(a) When she contacted the valuer she discovered that he was “a close friend of the vendor, and knew the agent well”.

(b) Over “the course of the next two weeks ... we were told that there would definitely be other tenders received ... and that there would be

‘stiff competition for the property’.”

(c) During the meeting at 1 pm on 28 February 2013 Mr Reeve said “three sets of tender documents had gone out, and he expected three to come in” and “given what [she] had been led to believe by the agent as a highly competitive situation or potentially rogue buyer” she put in her offer at $2.7 million.

(d) Three hours after the tender closed Mr Reeve told her that the vendors had “chosen to negotiate with me first” before going back to the “other tenders”.

(e) The following day Mr Reeve told her that another property on the street had just sold for $1.5 million, with a rating valuation of

$900,000 and that he did not want to tell the vendors or they would want more for their property.

[87] Mr Reeve’s response was consistent with his evidence at the trial (as summarised above). Mrs Barbalich provided a response by letter dated 23

September 2013. In this letter she referred to the same matters as set out in her complaint. She said:

Mr Reeves absolutely told me and my husband that there were two other tenders. He categorically said that the vendors had chosen to negotiate with me first and that the other two tenders were red hot buyers, waiting right behind my decision. Had I not been 100% convinced of the existence of two other tenders, and one was “just as good as yours” then I would not have offered the first figure or subsequently higher one.

[88] The Complaints Assessment Committee made its determination on the papers. It determined to take no further action. In making that determination it said:

After carefully reviewing all of the remaining evidence and submissions by the Complainant and the Licensee the committee has come to the conclusion that it has insufficient evidence to support the allegations made by the Complainant. This is sometimes known as a “he said/she said” scenario. Unfortunately [we] have no independent supporting evidence to conclusively determine what actually happened on this occasion. We make the comment that we find the Licensee’s evidence to be coherent and plausible. Notwithstanding this as we have explained the onus on establishing this complaint rests with the Complainant. We are unable to form a view that what the Complainant alleges is more likely than not to have happened and therefore we have determined to take no further action in relation to this complaint.

High Court proceeding

[89] Mrs Barbalich filed her proceeding in the High Court on 28 May 2013. The claim was subsequently amended. The claim is against both Mr Reeve and Leaders (on the basis that Mr Reeve is said to have acted on behalf of Leaders). The claim

alleges that Mr Reeve engaged in misleading and deceptive conduct in breach of s 9 of the Fair Trading Act. An order is sought for payment of $250,000 being the alleged loss suffered by Mrs Barbalich as a result of the conduct.

[90] The misleading and deceptive conduct is alleged to arise out of four alleged statements as follows:

(a) In the course Mrs Barbalich’s second and third visits to the property or in subsequent telephone conversations, Mr Reeve said that offers by way of tender would be made by other interested purchasers, including a purchaser from London and a purchaser from Khandallah.

(b) At meeting one Mr Reeve told Mrs Barbalich that three sets of tender documents had been provided to interested purchasers and two sets had been received back with offers to purchase the property.

(c) At meeting two Mr Reeve told Mrs Barbalich that the vendors had decided to negotiate the tender by her in preference to the other tenders received.

(d) At meeting three Mr Reeve told Mrs Barbalich that the vendors had instructed him to begin negotiations immediately with the makers of the other tenders received unless Mrs Barbalich made a higher offer to purchase the property than the offer in her tender.

[91] As a result of these statements it is alleged that:

(a) Mr Reeve represented to Mrs Barbalich that she was competing with two other purchasers genuinely interested in purchasing the property (relying on the statements at (a) to (d) above) and this was a misrepresentation because there were not at least two other purchasers genuinely interested in purchasing the property (misrepresentation 1).

(b) Mr Reeve represented to Mrs Barbalich that valid tenders offering to purchase the property had been received from two other interested

purchasers (relying on the statements at (b) to (d) above) and this was a misrepresentation because two other valid tenders had not been received (misrepresentation 2).

(c) Mr Reeve represented to Mrs Barbalich that there were three tenders offering to purchase the property, including Mrs Barbalich’s tender, eligible to be negotiated by the vendors as they saw fit (relying on the statements at (b) to (d)) and this was a misrepresentation because the only valid tender received was from Mrs Barbalich (misrepresentation

3).

[92] In the closing submissions counsel for Mrs Barbalich advanced a variant on misrepresentation one. This was that, having represented to Mrs Barbalich prior to meeting one that there were two other interested parties and that tender documents had gone out to them, it was misleading not to tell Mrs Barbalich that the other two interested parties would not be submitting offers.

Factual findings

Whose version of events I accept

[93] Mrs Barbalich’s and Mr Reeve’s accounts of what Mr Reeve said are in conflict. One of their accounts is not correct. It is necessary for me to determine whose evidence I find to be more reliable.

[94] The first point is that there is no contemporaneous record of the relevant discussions to assist. Further, while demeanour can be a poor indicator of credibility,⁷ there was nothing in the way that either Mrs Barbalich or Mr Reeve gave their evidence that indicated that either of them was not being truthful. I formed the view that this was likely to be one of those situations where each genuinely believed that their recollection was accurate but that one of them was mistaken.⁸ It is therefore necessary to consider other factors in drawing my conclusions as to whose

_{account was more reliable.}

⁷ _{E (CA799/2012) v R [2013] NZCA 678 at [32].}

⁸ Law Commission Total Recall? The Reliability of Witness Testimony (NZLC MP13, 1999) at

[15] and [38].

[95] There are a number of factors which indicate to me that Mrs Barbalich’s recollection is likely to be less reliable than Mr Reeve’s. The first of these factors is that it is apparent that Mrs Barbalich was very keen to get the property. It has to be said that 15 Mallam Street is a lovely property, the kind that some people would very much like and desire. The marketing brochure and other advertising material presented the property very well. Despite its high price bracket, a number of parties had taken the trouble to make an appointment and look through the property as listed in Mr Reeve’s email to the Vogels on 24 February 2013. Three of them had viewed the property more than once.

[96] Apart from its general attractiveness, Mrs Barbalich wanted more room for their growing family, better sun and better access. The property met these needs. She had been looking for a property for about five years and had missed out on three. She obviously liked this property immediately. On seeing the first advertisement, she made an appointment to view the property the next day. After the second viewing she instructed a valuer and asked for the tender documents. She arranged the third viewing as soon as she had received the valuation. The day before the tender closed Mrs Barbalich sent a text to Mr Reeve that she was “very excited, planning to get this house!” Although she had discussed a price with her husband, she had left for herself the possibility that she might offer more by not completing the tender documents with her proposed price until she had met with Mr Reeve. She sent a text to Mr Reeve while he was meeting with the Vogels.

[97] Buying the family house is often regarded as a stressful event, particularly where the purchaser has very much decided that they want it. That can be so even for an experienced and successful businessperson, as Mrs Barbalich was. Having put in a very good offer, unconditional and well above the valuation she had obtained, her reaction to Mr and Mrs Vogel’s counter offer is not surprising. It was the sort of counter offer that would frustrate a reasonable would-be purchaser who has pitched their offer at the price that Mrs Barbalich did. Nevertheless, having reflected on it overnight, in order to obtain the house that she wanted she was prepared to increase her offer, albeit not to an insensible level. She was happy to have secured the house. To then have her husband undermine her judgment with his angry call to Mr Reeve, and to later find out that she was in fact the only party to put

in a tender, is not a scenario where it is easy to be accurate about recalling exactly what was said at the meetings where the crucial decisions were being made.

[98] The second factor is that Mrs Barbalich was inaccurate in her recollection about some things. In particular, she believed that Mr Lockwood had said that Mr Bills could not undertake the valuation because he had a personal relationship with Mr Reeve. That was not the case. Mr Reeve had no such relationship. Nor could it have been Mr and Mrs Vogel to whom Mr Lockwood referred. They had no such relationship with Mr Bills either. Whatever the reason that Mr Bills could not carry out the valuation, it was not because of a conflict of interest due to a relationship with Mr Reeve or the Vogels.

[99] The third factor is that Mrs Barbalich found some things strange, which in fact were not. In particular, she found it strange that Mr Reeve would not let her have the vendors’ counter offer. Mr Reeve said that he did show her the offer at meeting two and he would have had no reason not to do so. As Mr Reeve explained, it is usual practice for the real estate agent to hold on to the offer during the negotiations. Mr and Mrs Barbalich seem to have wondered whether the $3 million counter offer had even been made. It is clear that it was. Mr Vogel confirmed that. Mrs Barbalich acknowledges she saw it when she made her own counter offer at meeting three.

[100] The fourth factor is that Mrs Barbalich’s account is inherently less plausible than Mr Reeve’s. An example is provided by their respective evidence about the sale price of 3 Mallam Street. Mrs Barbalich’s account was that Mr Reeve was lying about the price at which that property sold. That would have been a lie in respect of which Mr Reeve could be caught out easily. Similarly her account was that Mr Reeve said that he was not going to tell the Vogels about the price of that property. Mr Reeve pointed out that the Vogels would know of the price as they were friends with the owners of that property.

[101] In relation to the alleged misrepresentations in particular, it would be odd if Mr Reeve would have said that other offers would “definitely” be made (as per her complaint to the Real Estate Institute) or even, less categorically, that other offers

would be coming in. Mr Reeve is an experienced real estate agent. He has been in the business for a long time. That was part of the reason why the Vogels chose him. An experienced real estate agent would well know that nothing was definite until tenders closed. It is unlikely that he would say something he did not need to say, and which he could not know to be true. It is more likely that he conveyed the genuine interest of the Khandallah and London parties and that they had requested tender documents. Whether he said he hoped they would be putting in tenders or even that he expected them to is plausible. To say that they would definitely be putting in tenders is not.

[102] Less plausible again is that Mr Reeve would lie at meeting one by saying that two tenders had been received. Had he done so he ran the risk that Mrs Barbalich would see that her tender was the only one in the clear box at reception. He did not need to lie to obtain an offer from Mrs Barbalich. He knew that she wanted the property and that she was serious about making an offer. It is more plausible that he told Mrs Barbalich what he says he always said in a tender situation, that is, that a purchaser can only control what they do, that the purchaser should put their best foot forward and, if they do not, it is probable that they will not get a second chance. That is reinforced by the evidence of Mr Leach, to whom Mr Reeve made similar statements. It is also supported by the acknowledgment in the tender documents that Mrs Barbalich signed which included the following:

(ii) I/we have been advised to submit my/our highest and best offer in writing for presentation to the Vendor.

(iii) The terms and conditions of my/our Tender will remain secure and confidential until the Closing Time on the Closing Date.

(iv) I/we may have no further opportunity to review the amount of my/our Tender.

[103] Similarly, Mrs Barbalich’s account was that Mr Reeve told a further lie at meeting two following his meeting with the Vogels. Mrs Barbalich recalled that Mr Reeve said that the vendors had chosen to negotiate with her prior to negotiating with the other “tenderers”. It is more plausible that, with his experience, and knowing of the need to keep the tender process confidential, Mr Reeve very carefully chose his words by referring to “plan B”. That met the confidentiality requirement

whilst also allowing Mrs Barbalich the opportunity to stay in the negotiation, rather than having it fall through and going back to Mr Leach who remained interested.

[104] Lastly on this point, on Mrs Barbalich’s account Mr Reeve told a further lie at meeting three by saying that there was another offer that was “definitely as good as hers”. For the reasons discussed in respect of the other alleged lies this too is less plausible than Mr Reeve’s account of this meeting. It is not suggested that Mrs Barbalich was given any explanation for why the vendors had chosen to negotiate with her rather than the other tenderer whose offer was just as good.

[105] The fifth factor is that Mr Reeve has been in the real estate business for a long time. He has not been the subject of a complaint for his conduct in that time. While there can always be a first time, no particular reason has been advanced why Mr Reeve would conduct himself so dishonourably on this occasion as is alleged.

[106] The sixth factor is that Mr Reeve’s evidence of how he approached matters with Mrs Barbalich is consistent with Mr Leach’s evidence. Mr Leach regarded Mr Reeve as acting in an “up-front and fair manner ... while of course seeking to get the best price for his vendor clients.” Mr Reeve is not alleged to have told the same sort of lies to Mr Leach as is he is alleged to have told to Mrs Barbalich. Given Mr Leach’s genuine interest in the property, there is no reason for Mr Reeve not to have “talked up” the interest in the property to Mr Leach in the same way as he is alleged to have done with Mrs Barbalich.

[107] Turning then to the factors on which counsel for Mrs Barbalich relies to support the case that Mr Reeve did make the alleged misrepresentations. First is the email from Mr Reeve to the Vogels that “it’s probable its either the Barbaliches or nothing (not that they will know that of course!).” It is said that this makes it clear that Mr Reeve hoped that Mrs Barbalich would wrongly believe that she was in competition with others. In my view the email does no more than reflect the reality of the tender process. As Mr Murrell, a real estate agent called by the defendants to give expert evidence explained:

The tender process is designed to work on the basis of the confidentiality of offers. This is what [the] whole process is structured around.

...

In my experience, the tender process is used for unusual properties, which are special and need exposure to the market. Where a property is out of the ordinary, there is difficulty in setting a sale price due to a lack of comparable sales. The tender process is useful for such properties as it has the prospective purchasers set the price. But this only works if the prospective parties do not know the other offers which have been made/will be made.

[108] The second matter advanced is that Mr and Mrs Barbalich had settled on an offer of $2.53 million and no alternative explanation is advanced for the increased offers that she made. However Mrs Barbalich had not filled in the offer price when meeting one began. That does suggest the possibility that she had not quite made up her mind on what offer she would make. She had missed out on three properties before this one. She was planning to buy this one. She knew there had been other interest in the property because two other parties had asked for tender documents. The pressure she felt in that meeting is consistent with having to make a decision as to where she should pitch her offer in respect of a property she wanted. Those circumstances explain why she offered more than she had discussed with her husband before.

[109] Thirdly, it is said that Mr Reeve’s responses to Mrs Barbalich’s enquiries after the sale were disingenuous and inconsistent. I do not agree. Mr Reeve was in a difficult position in that he had received an angry and threatening call from Mr Barbalich almost as soon as he had advised Mrs Barbalich of her success in securing the property. He was not in a position to know the dynamics that might be at play as between Mr and Mrs Barbalich. He did not know what Mr Barbalich’s problem was. He did know that Mrs Barbalich wanted the property, was delighted to have secured it, had not immediately told her husband that she had secured it, and that Mrs Barbalich told him not to answer the telephone if Mr Barbalich called and that Mr Barbalich had issues. When Mrs Barbalich began pressing for information, making it clear she was doing so at Mr Barbalich’s request, he told her that the company policy was that all details of tenders were kept confidential. That was confirmed by Mr Garlick when he became involved and responded to Mrs Barbalich. Moreover, as Mr Murrell’s evidence explained:

The Release of Information After the Tender Process Has Closed

REINZ best practice guide states that all tenders including the identity of the tenderers will be kept secure and confidential and that the details of any tender (whether successful or unsuccessful) will not be divulged to any other tenderer or third party other than the REINZ for statistical data.

[110] He was therefore acting entirely properly in keeping to the policy of confidentiality. He was also consistent in explaining what he had said. Early in the course of this exchange of correspondence, where it became apparent that Mrs Barbalich (or Mr Barbalich) was not satisfied with his responses, he referred them to his boss, Mr Garlick.

[111] Fourthly, it is said that Mr Reeve is asking the Court to believe that Mrs Barbalich has concocted her allegations. Contrary to the submissions for Mrs Barbalich, this does not require me to find that she has done so rather than admit to her husband that she wanted to pay more for the property. I also note that it is her case that Mr Reeve has concocted his account of the events. In fact it is not necessarily the case that one or the other of them is lying. As explained earlier, in my view neither of them were lying. Rather Mr Reeve’s recollection of events is more likely to be reliable than Mrs Barbalich’s recollection, even though Mrs Barbalich now genuinely believes her account.

[112] Fifthly, it is said that the text exchange between Mr and Mrs Barbalich supports Mrs Barbalich’s account and evidences her slow realisation that her husband was correct. These text messages do show that Mrs Barbalich came to believe that she had been lied to. But that in turn relies on her recollection being correct as to what she was told during the negotiations. As discussed above, the factors at play were not necessarily the perfect situation for that.

[113] Sixthly, it is said that Mr Reeve claimed not to know what Mr Barbalich was angry about yet he did not think to ask. In fact he did leave a message for Mr Barbalich to call him back so that he could find out. He was then told by Mrs Barbalich not to answer Mr Barbalich’s call and that her husband had issues.

[114] Next it is said that Mr Reeve admits to making a number of statements which were intended to make Mrs Barbalich think that she was in competition with others for the property. It is said that this makes it more likely that Mr Reeve also said that

other offers had been received. I do not agree. Mr Reeve was truthful in saying that there were two other interested parties both of whom had asked for tender documents. He carefully chose his words during the negotiations. It does not follow that he said the statements alleged.

[115] Next it is said that Mr Reeve’s behaviour during the discovery process is relevant. It is the case that it took several attempts for all the relevant documents to be discovered. However, as is accepted on Mrs Barbalich’s behalf, mistakes in discovery are not uncommon and it does not prove that Mr Reeve is dishonest. In the present case the mistakes were consistent with someone who was new to discovery and less than au fait with the discovery process as Mr Reeve said. The mistakes in the discovery process were not good, but I regard them as peripheral and as not outweighing the other factors I have relied on to reach my conclusions.

[116] Similarly, I place no weight on the remaining factors referred to on Mrs Barbalich’s behalf. The email exchange between colleagues about whether there was a consent for the fireplace was unremarkable, and did not mean that it was not going to be followed up. His colleague understood that the LIM issues were going to be addressed by the vendor. The timing of the first meeting was not unusual in a tender situation and Mrs Barbalich had no issue with it at the time. Evidence could have been called about why it was appropriate to use the updated rating valuation in the marketing material had it been clear to the defendants that this remained in issue.

[117] Lastly I note that Mrs Barbalich’s evidence was supported by Mr Barbalich but I do not place any weight on that. However Mr Barbalich was not present at meetings one, two and three. He had a clear view about the price that should be offered. He also had a clear view that no one else would have offered more than

$2.5 million on an unconditional basis. That view is consistent with his understanding of the interest from the London couple, namely that an offer from them was likely to be conditional on the sale of their London property. An unconditional offer of $2.53 million can be viewed as well pitched in light of all the information the Barbaliches had, including that Mr Reeve thought that the vendors were likely to want in excess of $2.5 million. In light of these matters Mr Barbalich thought they should “sit it out”. Instead he learned that his wife had met with Mr

Reeve and increased the offer. It is not in doubt that he was angry (an available inference being that he thought his wife had paid too much) and that he clearly blamed Mr Reeve (it would seem for persuading his wife on two occasions to pay more than he thought was needed). Despite not having been at the relevant meetings he strongly believed that Mrs Barbalich had been lied to. His file note conveys those sentiments although, in so far as he has recorded Mr Reeve as saying that he had received two tenders that were both a lot better than $2.5 million, I consider that it is not an accurate record of the discussion that took place at that time.

Misrepresentations?

[118] In light of all these factors I find that Mr Reeve did not make the four statements (set out at [90] above) which are relied on as the basis for the misrepresentations alleged (set out at [91] above). It follows that misrepresentations

1, 2 and 3 are not proven on the balance of probabilities. [119] I consider that:

(a) Prior to meeting one Mr Reeve told Mrs Barbalich that there were two other parties who were interested in buying the property. He described them generally as a Khandallah party and a London party. He informed Mrs Barbalich that the London party had a property they needed to sell in London. He told Mr and Mrs Barbalich that the vendors were wanting in excess of $2.5 million but because of the tender process it was impossible to gauge the price at which the property would sell.

(b) At meeting one he told Mrs Barbalich that she could only control what she did, and that she should put in her absolute best offer because it was probable she would not get another chance.

(c) At meeting two he told Mrs Barbalich that in the first instance the vendors have decided to negotiate with Mrs Barbalich, that if they could not reach agreement with Mrs Barbalich then they would go to plan B, and if they did not reach agreement with Mrs Barbalich it

would free them up to negotiate with the other interested party. He also said that he was a little surprised by the counter offer but it was the vendors’ prerogative, and that they could choose to walk away or to make a counter offer.

(d) At meeting three he suggested to Mrs Barbalich that she increase her offer and he would take it to the Vogels on a take it or leave it basis.

[120] In closing submissions the case for Mrs Barbalich was advanced on an alternative basis, if I were to accept Mr Reeve’s evidence (as I have). It was said that Mr Barbalich’s statements would have led someone in her position to believe that competing offers had been made for the property. It was also said that, having led Mrs Barbalich to believe prior to the tender closing date that two other parties would be putting in tenders, it was misleading not to tell her at the meetings that they were not going to be putting in tenders.

[121] This alternative basis was not pleaded in the claim that was brought. It is said that there is no prejudice to the defendants because the submission conforms to the evidence that Mr Reeve gave. Counsel for the defendants said that they would not claim to have been prejudiced. Given that, I am prepared to consider it.

[122] However I consider that, in making the above statements, Mr Reeve did not engage in misleading and deceptive conduct.⁹ It is important to remember the context in which the statements were made. Mr Reeve was engaged by the vendors to sell the property on their behalf. He had obligations to them but also needed to be fair and honest in his dealings with prospective purchasers. A person in the position of Mrs Barbalich would have known this context. Mr Leach was an example of a person who did. Importantly, the property was to be sold by closed tender. That process required confidentiality. A person in Mrs Barbalich’s position would know

that and would have been informed of that if they were unsure. The tender process had been agreed to by the vendors. While Mr Reeve was not breaching that process

_{by informing Mrs Barbalich of the number of tender documents that had gone out, he}

9. For a good summary of the relevant considerations where it is alleged that silence can be misleading see Commercial Law in New Zealand (looseleaf ed, Thomson Reuters) at [9.3.5(f)].

would be breaching it by informing her of the number of tenders received, particularly when the vendors had instructed him not to inform Mrs Barbalich of this. A person in the position of Mrs Barbalich would know that, even though someone had requested a tender, it did not mean a tender would necessarily be received. It was an indicator of interest and competition but no more.

[123] In these circumstances, it was not misleading to stay silent during meetings one, two and three. Mr Reeve had not created a situation where he had a duty to speak. What he did say was accurate. Mrs Barbalich needed to put her best foot forward if she wanted to obtain the house. If she put in an offer that was too low she would risk the vendors taking the view that she was unrealistic and no sale would be achieved with her. She would therefore risk the tender falling through and the Vogels moving to whatever their plan B might be. If she put in a good offer she could secure the property that she wanted.

[124] The Vogels were looking to sell the house because their financial position had recently deteriorated. But that did not mean they would sell the house for less than they believed it was worth. When advising Mrs Barbalich to put her best foot forward as it was probable she would not get another chance, Mr Reeve did not know that the Vogels would counter offer as highly as they did. He did know that Mr Leach was still very keen on the property but at the last minute had not been able to put in place the necessary arrangements to make the offer. If Mrs Barbalich did not secure the property through tender, then so far as the Vogels and Mr Reeve knew, Mr Leach remained a genuine possibility. They did not know what his maximum price was because Mr Leach had kept that to himself.

[125] For these reasons I conclude that Mrs Barbalich has not established, on the balance of probabilities, that Mr Reeve engaged in misleading and deceptive conduct. Therefore her claim cannot succeed.

Loss?

[126] My conclusion on whether there were misrepresentations means that it is not necessary to determine whether compensation should be ordered. For completeness I will consider it.

[127] For Mrs Barbalich it is said that she must show three things in order to obtain damages: that she was actually misled, that she suffered damage, and that the representation was an operating cause of that damage. This is the starting point but, because there is a discretion under s 43 of the Fair Trading Act to do justice to the parties in the particular circumstances, it is not necessarily determinative.¹⁰ All relevant factors can be taken into account.

[128] For this discussion I am proceeding on the basis that Mrs Barbalich was misled about the existence of other tenders. It is said that Mrs Barbalich made offers above the $2.53 million figure on which she and her husband had earlier agreed because of the misrepresentations. I would accept that, if Mrs Barbalich was told two other tenders had been received, that would be a factor influencing her to make the offers she did. It would have been an operative cause of the levels of those offers.

[129] For Mr Reeve it is said that when the counter offer of $3 million was made, it changed the situation. Mrs Barbalich was no longer competing with other parties. The only material matter impacting on her at this point was the Vogels’ attitude in selling the property. I agree that that this was an important factor in Mrs Barbalich’s decision making. However in my view her understanding of other interest in the property had not become entirely irrelevant. If other potential purchasers were waiting in the wings, she needed to factor that into her offer to have the best chance of securing the property at a price with which she was comfortable. Had there been misrepresentations as alleged, I consider that they remained an operative cause of the levels of both her first and second offers.

[130] Mrs Barbalich contends that her loss is $250,000 because she paid that much above the figure she originally intended. In my view that is not the appropriate measure of her loss. In this kind of case, where it is alleged that a person is worse off as a result of misrepresentation relied upon, the tort approach will ordinarily be

appropriate.¹¹ Where a purchaser claims that a misrepresentation caused them to act

_{in a particular way ordinarily the question will therefore be what would have}

¹⁰ _{Red Eagle Corporation Ltd v Ellis [2010] NZSC 20, [2010] 2 NZLR 492 at [29] to [31].}

11. Harvey Corporation Ltd v Barker [2002] NZCA 34; [2002] 2 NZLR 213 (CA); McKeown Group Ltd v Russell HC Timaru CIV-2008-476-530, 19 August 2010.

happened if the misrepresentation had not been made. Loss could come about in various ways:¹²

(a) the property acquired is worth less than what was paid;

(b) there was some other over expenditure (depending on the representation that was made);

(c) the purchasers would not have proceeded at all;

(d) the purchasers missed the opportunity of purchasing an alternative property; and

(e) the vendors would have sold to them at a lower figure had the purchasers not been misled to act in the way they did.

[131] The first of these was not pleaded. The valuation from Mr Lockwood was in evidence, but Mrs Barbalich did not call him or any other expert to give evidence of value. It was therefore one valuer’s opinion of value that was not tested at the trial. The market price in this case was to be determined by a tender process where a prospective purchaser would make their assessment of what they were prepared to pay. In this tender Mrs Barbalich made an offer that she was comfortable with in order to secure the property. In the end she was comfortable with paying $2.78 million for the property and was happy to have secured the property at that price. The Vogels had higher price expectations but in the end were comfortable in accepting $2.78 million. A misrepresentation as to the number of parties who would be making an offer is not a misrepresentation of the property’s worth. There is insufficient evidence to establish that Mrs Barbalich paid more for the property than it was worth.

[132] The second, third and fourth kinds of loss are not possibilities on the evidence. The parties did, however, make submissions on the last of the type of loss

_{that might arise. That is, whether it was likely that Mrs Barbalich and the Vogels}

¹² Harvey Corporation v Barker, above n 11, at [14] to [18].

would have rejected an offer of $2.53 million. Mrs Barbalich contends that the Court cannot be sure that such an offer would have been rejected. The Vogels’ counter offer of $3 million was made in “the world where [they] received an offer of

$2,780,000.” In the counterfactual it has to be remembered that three real estate agents had formed the view that the property was worth less than $2.5 million, the re-evaluated rateable valuation was only $2.35 million, only one offer had been received through the tender process which was intended to test the market, the Vogels had recently lost money and this was motivating them to sell, if they had explored the alternative presented by Mr Leach they would have found that he would have offered less, and to take the property off the market was not an ideal option for the Vogels and (amongst other things) would probably have required them to sell shares they did not want to sell.

[133] Against that is the evidence of what the Vogels actually did. They had received a very good offer (above the rateable valuation and the market appraisal from Mr Reeve) but chose to counter offer well above the offer they had received. They knew that in so doing there was a “real risk” that “all bets were off”. They chose to take that risk. It was just as likely that they would take the same risk if the offer from the Barbaliches had been lower than it was. Mrs Barbalich would then have had a choice as to whether to increase her offer. In a world where she did not know whether any tenders had been received, but where she did want to secure the property, she is just as likely to have settled on her final figure of $2.78 million and it

is just as likely to have been acceptable to the Vogels.¹³ As Mr Vogel put it, there

were two parties (Mrs Barbalich and themselves) who thought the property was worth a lot more than $2.5 million as their conduct showed.

[134] For these reasons I find that Mrs Barbalich has not established damages or loss. No discretionary matters are advanced as to why compensation should

_{nevertheless be ordered.}

¹³ The situation is different from the tale of the sale of the Sibylline Books to King Tarquin of

Rome where the books of the future of Rome are finite and shrinking.

Result

[135] I have found that Mr Reeve made no misrepresentations to Mrs Barbalich. He did not engage in misleading and deceptive conduct. I have also found that, even if such conduct had been established, Mrs Barbalich has not made out her claim for compensation. That is because, if Mrs Barbalich had made her first offer at $2.53 million, it is likely that the Vogels would not have accepted the offer. It is likely that they would have counter offered and there is no reason to conclude that the final agreed price would have been any different than it was.

[136] It follows that Mrs Barbalich’s claim fails and is dismissed. My preliminary view is that the defendants are entitled to costs on a 2B basis. If the parties are unable to agree costs in light of this indication they may file brief memoranda (limited to no more than five pages) on the particular costs issues in dispute by

28 February 2015.

Mallon J