IN THE HIGH COURT OF NEW ZEALAND
PALMERSTON NORTH REGISTRY
CIV 2016-454-126
[2018] NZHC 1982
BETWEEN

PANGANI PROPERTIES LIMITED
Plaintiff

AND

GRANT ROBERT LLOYD
First Defendant

AND

PHILIP JAMES LESLIE NEVILL
Second Defendant

Hearing:

19 – 27 March 2018

Counsel:

J V Ormsby and S Meares for Plaintiff
A B Darroch for Defendants

Judgment:

6 August 2018

JUDGMENT OF ELLIS J

[1]

The defendants, Messrs Lloyd and Nevill, are commercial real estate agents.

They accept that in 2013 they breached their fiduciary duty to one of their clients,
Pangani Properties Ltd (PPL) in relation to the sale of a commercial property owned
by PPL in Palmerston North. Indeed, there has been a finding against them to that
effect by a Complaints Assessment Committee (CAC) established under the Real
Estate Agents Act 2008 (the REAA).
[2]

The agents accept that, as a consequence of their breach, the commission they

received from PPL on the sale should be forfeit. But PPL says that compensation is
also payable for lost profits and for costs incurred by the company investigating the
matter and successfully pursuing the agents through the professional disciplinary
process. And during the trial PPL sought leave to amend its claim in order to seek
further redress in the form of disgorgement of commissions paid to the agents on three
subsequent transactions relating to the land in question.

PANGANI PROPERTIES LTD v LLOYD [2018] NZHC 1982 [6 August 2018]

 [3]

The issues now requiring determination principally relate to the nature and

extent of the breach of duty by the agents, and the appropriate remedial consequences.
Facts and evidence
[4]

PPL was first incorporated in 1997 for the purpose of acquiring and holding an

industrial property in Malden Street, Palmerston North which was tenanted by Steel
and Tube Ltd (STL). At the time material to these proceedings, the annual rental paid
by STL was $350,000, plus GST.
[5]

Mr David Olsen is PPL’s managing director and the company’s driving force.

He is an experienced businessman who has, through PPL and other companies
controlled by him, owned and developed other properties in the North Island over the
years.

PPL’s other directors are Mr Olsen’s daughter, Amy Hain, his son,

Jeremy Olsen and an accountant, Mr Alan (Butch) Reichelmann. It is relevant that
Ms Hain is, herself, married to a real estate agent in Auckland, Mr Paul Hain.
Attempted sale of Malden Street in 2010/11
[6]

In 2010 Mr Olsen began to think about the future of the Malden Street property.

By that time, STL had enlarged the building on the site leaving no further room for
expansion. Mr Olsen had discussions with a real estate agent and a valuer about the
possibility of buying 1,700 m2 of the adjoining land owned by Mr Alan Jones. They
agreed that if PPL were able to purchase the land for around $150,000 (approximately
$88 per square metre) it could be a worthwhile commercial proposition.
[7]

In August 2010 Mr Olsen presented a signed offer to purchase the 1,700 m2 to

Mr Jones for $110,000 ($65 per m2). The offer was rejected by Mr Jones.
[8]

Mr Olsen decided to sell the Malden Street property instead. It was listed for

sale by The Professionals on 2 November 2010. The asking price was $4,000,000. At
that point, STL’s tenancy had just been renewed for three years, with further rights or
renewal through to November 2022. STL’s desirability as a tenant was emphasised in
the advertising.

 [9]

The property did not sell. No offers were received. It was taken off the market

on 28 February 2011, although apparently the “For Sale” sign remained in place for
some time afterwards.
The 2013 sale process
[10]

As at 1 September 2012, the property had a rating valuation of $3,875,000.

[11]

In late 2012 and early 2013 it became clear to Mr Olsen through his

conversations with STL’s property manager, Mr Michael Morais, that STL needed
more space and were thinking of moving to new premises when the current lease term
ended, in November 2013. The possibility of PPL buying some of Mr Jones’ adjoining
land to provide room for expansion was raised, but (according to a subsequent email
from Mr Morais to PPL’s lawyer) Mr Olsen had told him that Mr Jones was difficult
to deal with. Mr Olsen reportedly advised that Mr Jones might consider selling the
land for $175 per m2 but that (in Mr Olsen’s view) that price was totally unrealistic.
The email recorded that Mr Morais had told Mr Olsen not to pursue the matter.1
[12]

In June 2013 Mr Olsen commissioned a report from the property consultants

Prendos with a view to assessing any damage to the buildings on the Maldon Street
property which might be the subject of the “make good” requirements under the lease
in the event that STL did not renew. That report was completed on 2 July 2013.
[13]

Mr Olsen nonetheless continued to entertain the possibility of buying land from

Mr Jones as a way of keeping STL as a tenant. He commissioned an architect to design
a new building for STL on the adjoining property. He discussed this plan with his
fellow PPL director, Mr Riechelmann, at a meeting in July 2013. But STL continued
to look at alternatives sites for relocation at the expiry of the lease period. Mr Olsen
continued to think about selling the property.

1

In his evidence at trial Mr Jones confirmed that he had been willing to consider selling the land at
this time but that he would only do so at what he considered was an appropriate premium. He said
he had also considered leasing part of the land to accommodate STL as an alternative.

 [14]

Then, on 8 July 2013 Mr Lloyd approached Mr Olsen. He said he had an

overseas company interested in the Malden Street property and that the company
would consider leasing or buying it. Mr Olsen indicated to Mr Lloyd that he “was
rather keen to sell”. To that end, PPL obtained a valuation from Blackmore Group on
26 July 2013 which valued the property at $3,200,000.
[15]

Mr Lloyd and Mr Nevill were at that time operating under the trading name

Tremain Commercial Palmerston North Ltd (Tremain). Together they presented a
marketing proposal to PPL. Their appraisal suggested a sale price of between $3 and
$4 million. The marketing proposal referred both to selling and leasing the property.
That PPL was open to either option was confirmed by Paul Hain in an email to
Mr Lloyd on 2 August. On 7 August 2013, PPL entered into an agency agreement
with Tremain/Messrs Lloyd and Nevill.

The closing date for tenders was

4 October 2013.
[16]

On 16 August 2013 Messrs Lloyd and Nevill also entered into an agency

agreement with Mr Jones. This was not made known to PPL or Mr Olsen.
[17]

On 26 August 2013, the agents sent their first marketing report to PPL. It

recorded that the owner of the neighbouring property, Mr Jones, had “confirmed his
intention to enter into dialogue with any prospective tenant/purchaser”, noting that this
might help with marketing the property to larger companies. The report also advised
that the transportation company, Dommett Fruehauf Ltd (DFL) had shown some
interest in the property. It was DFL’s interest that had sparked Mr Lloyd’s initial
approach to PPL.
[18]

On 5 September 2013, the agents sent PPL a second marketing report. This

report advised that DFL required the neighbouring land for its operations and that a
meeting had been scheduled with Mr Jones. The agents noted that DFL was still the
best prospect.

 [19]

Mr Olsen travelled to Palmerston North (from Auckland) and met with

Messrs Lloyd and Nevill on Friday 27 September 2013. He sent an email to Mr Lloyd
the following Monday, saying he was willing to drop the price “significantly further”.
He also said:
To progress further with Dommet[t] trucks I feel it is essential to immediately
try and do a deal with neighbour Alan Jones.
I think it is necessary to get a four weeks ‘option to purchase’, from him per
sq metres up to approximately 4000 sq metres, subject to survey. Then we
have something to show Dommet[t] trucks.
Silvester Clark who did the truck upgrade works some seven years ago, to give
us a more firm estimate on the front access rout.
It would be interesting to know if Dommet[t]need one or two entrance doors.
Grant, you did give a ball park figure of $400,000, I would respectfully
suggest $200,000 - $250,000 maximum.
I think one of the key things to keep Dommet[t] interested is that he can collect
$350,000 in one year.

[20]

The meaning of the penultimate sentence is disputed. Mr Olsen’s evidence

was that he was referring to the cost of the alterations to the property which DFL was
considering. But Mr Lloyd and Mr Nevill say that he was referring to the price PPL
was willing to pay for Mr Jones’ land. If the latter, then it indicates that:
(a)

Mr Lloyd had suggested that a ballpark price for 4000 m2 of the
neighbouring land was $400,000 ($100 per m2); but

(b)

Mr Olsen was only willing to pay $200,000 to $250,000 ($50 to $62.50
per m2).

[21]

Later the same day, Mr Lloyd sent an email to Mr Jones, saying:
See attached aerial map.2
I would suggest we approach it in this way.
Lets assume we will work on 4000 m2.

2

The map showed Mr Jones’ property divided in two with the rear section shaded in, and showing
a total area of 3981.73 m2. The existing building is on the front site.

 A valuation for the rear site would probably come out at somewhere around
$80psm $320,000 assuming we could find a buyer for a separate site. …
Your site in its current form is un-serviced and un-compacted, so a valuer
would discount because of this.
The site has the highest value to a neighbour who needs it.
What is a premium?
I’d suggest $120psm gives you a premium of say $100,000-$160,000 and
allowing for the no-services, no hard-fill, it could be argued you are winning
by over $200,000.
As discussed, I’d want you to take independent advice, however we could
begin the process by writing up an option to purchase at say, market value plus
a percentage. In this case, 20%?
These things are fluid and pretty open to conjecture.

[22]

I confess I find this email difficult to understand. But Mr Lloyd explained in

his evidence that what he was proposing was a price of $264,000 for the
(approximately) 4,000 m2 rear area. This price was based on $80 per m2 less $25 per
m2 due to absence of services and compacting. This would yield a total price of
$220,000 ($55 per m2) but then with a 20 per cent premium taking it back up to
$264,000 ($66 per m2). The inference sought to be drawn is that this proposal reflected
Mr Lloyd’s understanding of the price that Mr Olsen might be prepared to pay for the
Jones land.
[23]

Mr Jones responded by email on 7 October 2013 saying that he would consider

leasing part of the rear portion of the land for 10 years. He also expressed a concern
about how to control the number of trucks using the property.
[24]

Mr Lloyd provided a further Marketing Report to PPL on 18 October 2013.

This followed on from discussions with Mr Olsen and was a summary of events over
the previous few weeks. He said DFL remained interested but reiterated that the
trucking operations needed more space. The report suggests that the agents were, by
then, discounting the possibility of obtaining an option from Mr Jones. Mr Lloyd
wrote:
Our efforts in the last ten days have been focussing on trying to solve, this
issue for [DFL] as until now we have been reliant on the neighbour, Alan
Jones, who has been difficult to nail down on his exact requirements. We now

 have credible alternatives for expansion (two other properties in Malden
Street) which have been presented to Fruehauf’s and we are now waiting for
Fruehauf to give us a desired direction with which to move forward.
Unfortunately although we have all our eggs in one basket, it is positive to
note that the one party we have at the table is highly qualified and able.
It is just going to be a process that will need patience to get the best solution
for all.

The conditional sale to Mr Doyle
[25]

On 22 October 2013, Zambora Projects Ltd (Zambora), a company owned by

Mr Garry Doyle, made an offer of $2.4 million for the property. Mr Doyle was an
“acquaintance” of Mr Lloyd’s whom he met from time to time for coffee. He owned
the local Subway franchise and had previously run a second-hand car parts business.
[26]

In an email accompanying a copy of the offer sent to Mr Olsen’s son-in-law

Mr Hain, and PPL’s lawyer (Nicky Thomas) Mr Lloyd said:
Paul, we are still working with Fruehauf, however, they are proving to be slow
and will not be in a position to offer for 4 to 6 weeks (if at all) so you can have
peace of mind in knowing that we still have 2 bites at the cherry.
This party has a good use for the building and does not require expansion land
next door which is proving problematic and part of the issues with Fruehauf's.
He has been in the auto dismantling business of 20 plus years and wishes to
expand into the scrap metal area. He has the site 2 doors up under contract
(envirowaste) however they have a covenant on the title which restricts
recycling on the site, hence his shift to our site.

[27]

I interpolate at this point that Mr Ormsby for PPL contended that Mr Lloyd’s

statement about the EnviroWaste site was untrue and known by the agents to be so.
He relied principally on an email from Mr Doyle to Mr Lloyd dated 8 October 2013 a
reasonable interpretation of which is that Mr Doyle’s principal thinking when making
an offer on that property was to:
(a)

“wrap it up” so that a trucking company (Menefy Trucking Ltd) would
“miss out again” and be forced to buy Mr Doyle’s property at
1 Keith Street, which was being marketed for sale by Mr Nevill;3 and

3

Mr Doyle’s Keith Street property was, indeed, sold to Menefy.

 (b)

share the site with, or on-sell it to, a neighbouring trucking company,
Macauley’s.

[28]

Mr Ormsby said that this was information that was relevant to PPL’s decision

to accept Mr Doyle’s offer and should have been passed on to PPL.
[29]

As far as PPL’s property was concerned, Mr Doyle’s evidence was that, at that

point, he saw opportunity to use the property for his business and also to extract money
from STL if that company was not ready to move out on the expiry of its lease.
Mr Doyle said that he also saw some opportunity for profit arising from the Prendos
report and the advice he had received that STL might be required to pay between
$150,000 and $200,000 for the “make good” work required at the end of the lease.
[30]

In any event, Mr Hain asked several questions about Zambora’s offer and

advised that Mr Olsen would get back to Mr Lloyd in due course. Ms Thomas spoke
to Mr Olsen about it on 22 October 2013. She made a file note recording that the offer
was subject to a due diligence clause of 20 working days and:
Grant Lloyd 4 to 6 weeks if at all
Second offer on table.
$2. 7 million.
David probably countersign for another.

[31]

Mr Olsen travelled to Palmerston North on 23 October 2013. He met with

Mr Nevill and discussed the offer. He then made a counter-offer of $2,650,000 which
was accepted by Mr Doyle the next day. The agreement was conditional on Mr Doyle
completing due diligence within 20 working days. The due diligence period therefore
expired at 5 pm on Friday 22 November 2013.
Enter NZ Post
[32]

About six weeks earlier, on 12 September 2013, Mr Nevill had met with

Mr Grant Morris, the National Property Manager for Operations at New Zealand Post
(NZ Post), regarding the possibility of NZ Post locating a contact centre in Palmerston
North. Mr Morris’ confidential advice at that point was that NZ Post might be looking

 to lease a commercial space for that purpose. Contact between Mr Nevill and
Mr Morris continued over the following weeks.
[33]

By early November 2013 NZ Post had identified two specific options in

Palmerston North for a mail processing facility:

[34]

(a)

“Plan A” being a site at the airport; and

(b)

“Plan B” being premises where Mitre 10 had been located.

On 14 November, however, Mr Morris emailed Mr Nevill, saying that he was

keen to explore a third option (Plan C) involving an area of between 8,000 and 9,000
m2. This was discussed at a meeting the following day. Because of this space
requirements the Malden Street Property was not an immediately obvious option.
[35]

It is at about this point that timing becomes critical. The chronology which I

consider is revealed by the evidence is as follows:
(a)

On Tuesday 19 November 2013 Mr Lloyd contacted Mr Olsen and told
him that Mr Doyle wanted an extension of time to complete due
diligence. Mr Olsen expressed reluctance but that an extension might
be granted if a proper reason was provided, and a further $50,000 was
added to the purchase price.

(b)

At around this time there was a change of approach by NZ Post.
Mr Morris had decided to look at sites for a smaller, stand alone, mail
processing centre as an alternative to his original plan. He had, himself,
identified PPL’s Malden Street site via an internet search as a
possibility. He rang Mr Nevill and asked to see it.

(c)

Mr Morris sent an Outlook email invitation to Mr Nevill on
21 November 2013. This invitation was for Monday 25 November
2013 from 12 noon to 2.30 pm with the heading “Steel & Tube and IRD
inspections”. It was accepted by Mr Nevill at 12.57 pm on
21 November.

 (d)

That same day, Mr Doyle’s lawyer made a formal request for an
extension of time to complete due diligence. He did not offer to
increase the price.

(e)

Mr Olsen spoke to his lawyer, Ms Thomas, and said that he would
contact the agents for an explanation.

(f)

The following day (22 November 2013, the date the due diligence
period was to expire) phone records show that:
(i)

Mr Lloyd rang Mr Olsen at 8.50 am;

(ii)

Mr Olsen then rang his lawyer Ms Thomas at 9.16 am and 9.27
am; and

(iii)
(g)

Mr Olsen spoke again to Mr Lloyd again at 9.44 am.

Ms Thomas made a file note of her conversation(s) with Mr Olsen and
then sent a letter to Mr Doyle's lawyer stating that no extension would
be granted and that the condition needed to be satisfied by 5 pm that
day. This correspondence was intended to be copied to Mr Nevill but
he did not receive it due to a mistake in his email address.

(h)

Messrs Lloyd and Mr Nevill say they met with Mr Doyle in the late
afternoon of Friday 22 November 2013 and that Mr Doyle agreed to
pay the additional $50,000 earlier mentioned by Mr Olsen to get the
extension. They say Mr Doyle agreed to contact his lawyer to have this
documented. But there is no evidence that this happened or of any form
of communication between Mr Doyle/the agents and Mr Olsen prior to
the 5 pm deadline.

(i)

Mr Olsen called Ms Thomas several times immediately after 5 pm and
spoke to her at 6.16 pm. He then rang Mr Nevill’s number but may not
have spoken with him. Subsequent events make it tolerably clear that
Mr Doyle’s agreement to pay the extra money was not communicated

 to Mr Olsen that night and the due diligence period technically expired
with no extension being granted;
(j)

At 8.58 am on Monday 25 November 2013 Mr Olsen spoke to Mr Lloyd
for nearly 5 minutes. Mr Lloyd did not mention the interest from
NZ Post.4

(k)

Mr Morris met Mr Lloyd and Mr Nevill at the PPL property at about
1.30 pm. Mr Nevill provided a copy of the Land Information
Memorandum relating to the property. They discussed the property.

(l)

Mr Lloyd rang Mr Olsen at 3.27 pm. The call lasted a little over ten
minutes. Mr Lloyd did not mention NZ Post.

(m)

At 4.04 pm Mr Doyle’s lawyer sent an email to Mr Olsen’s lawyer,
Ms Thomas. It said:
I have been informed your client has agreed to an extension
to the ‘due diligence’ satisfaction date to 11th December 2013
in consideration of an increase in the Purchase Price by
$50,000 to $2.7m plus GST if any. Please confirm.

(n)

Mr Olsen rang Ms Thomas at 4.43 pm and then again at 4.51 pm.
Ms Thomas made a file note of their conversation which recorded:
Extend due dili to 11 Dec.
Increase in p price $50K.
Sett date?
$10,000 non-refundable immediately in lieu of $50,000.
Additional $10K in purchase price. Deposit of $10K
non-refundable, payable immed.
Wed 11th December 2013.

4

Ms Hain spoke to her father at 9.36 am and 10.31 am that morning. In her evidence, she speculated
that he might have told her that he had granted Zambora an extension during one of those
conversations but that is contradicted by the documentary narrative. In my view, he must have
conveyed that to her later on.

 (o)

Ms Thomas then sent two emails to Mr Doyle at 5.18 pm and 5.21 pm.
The emails stated that her instructions were that there would be no
extension on the basis of a $50,000 increase but that one would be
granted if the purchase price was increased by $10,000 and this amount
was paid immediately as a non-refundable deposit.

She asked

Mr Doyle's lawyer to confirm the agreement could be varied in this
way.
[36]

The following day, Tuesday 26 November 2013, Ms Thomas put the terms of

the extension in a letter to Mr Doyle’s lawyer and sent it to him at 3.27 pm. The letter
required a response by 4.30 pm that day and stated that otherwise her instructions were
to give notice cancelling the agreement. Mr Doyle’s lawyer replied by email sent at
4.25 pm confirming the extension was agreed on the terms proposed.
[37]

At 5.33 pm the same day, Mr Morris sent an email to Mr Nevill saying that he

had just met with architects and BECA to brief them about PPL’s property and they
were to work up a concept showing how NZ Post’s proposed operation might fit onto
the site. He asked for more information. Mr Nevill forwarded this email to Mr Lloyd
at 6.42 pm with the note that they would discuss it in the morning.
[38]

Mr Nevill replied to Mr Morris on Thursday 28 November 2013 at 10.10 am.

He provided some further information and a plan which did not require the purchase
of the adjoining land.
[39]

Mr Morris confirmed that by this time the Mitre 10 option (Plan B) had

dropped away due to the planning and building constraints arising from the site’s
proximity to residential properties. But another property owned by Mainfreight and
located in Railway Road had also been identified as a possibility. Mr Morris was
dealing with a Mr Barry Clevely in relation to that option.
Mr Doyle’s deal with NZ Post
[40]

On Friday 29 November 2013, prior to the expiry of the extended due diligence

period, Messrs Lloyd and Nevill said they met with Mr Doyle and told him that
NZ Post was potentially interested in PPL’s property. Mr Doyle’s evidence generally

 confirmed this timing and, indeed, it is confirmed by the fact that the next day
Mr Doyle requested a meeting with Mr Morris. The agents arranged a meeting
between the two men for the following week.
[41]

On 3 December 2013 Mr Clevely emailed Mr Morris in relation to the

Mainfreight site. He said:5
You may already have discounted the Mainfreight property and it is with some
reluctance and a fair bit of trepidation I thought I should at least make you
aware of it, in case it was not the one you are currently working on. I recall
you had mentioned the vendor was in his seventies and did not want to do the
development. Mainfreight would not fit that description.

[42]

5

Mr Morris’s evidence about this passage was follows:
Q.

Who would the vendor be that’s being described there?

A.

I believe that would be Mr Olsen from Pangani.

Q.

So that information must’ve come from somewhere to you for
Barry Clevely to relate it back to you. Do you recall how you obtained
that information?

A.

From either Phil or Grant.

Q.

And I’ve had a look at the phone records for you which we’ll – for
Mr Neville and Mr Lloyd. From the 26th to the 3rd of December there
are a total of four, one minute calls which could be calls or could not
be calls because of the length. When is it likely that you were given
that information about Mr Olsen?

A.

It would either been on the 25th of sometime thereafter, shortly
thereafter.

Q.

The most substantive discussions would’ve taken place on the 25th,
given the phone records I’ve got?

A.

Yes, yeah.

Q.

Did that strike you as strange given the agents were acting for
Mr Olsen?

A.

My recollection at the time is that the property was under contract to
Garry. So a little bit odd but I guess at that point in time if my
recollection is correct Garry was the person in control of the property.

Q.

So you’d been told Garry was the purchaser?

A.

Mmm.

Emphasis added.

 [43]

Q.

At that time?

A.

Had I been told, no I’d been told it was under contract. Whether I’d
been told it was Garry I can’t recollect.

Q.

Well what I’m getting at is there must’ve been some indication as to
who would do the development for you at that meeting?

A.

Yeah the person who had the property under contract.

On 5 December, there was an email exchange between Mr Doyle and

Mr Morris in which Mr Doyle said “The next door site is an option, for car parking”.
[44]

Mr Morris carried out a further detailed inspection of the Malden Street

property with other representatives from NZ Post on 11 December 2013. He said that
it was after that visit that NZ Post’s interest in the site became really serious. Mr Doyle
and the agents were present during the visit. Later that same day, after trying
unsuccessfully to get a reduction in the purchase price, Mr Doyle confirmed the due
diligence condition was satisfied and went unconditional.6
[45]

On 16 December Zambora changed its name to Malden Street Holdings Ltd

(MSHL) and a draft lease proposal was prepared and forwarded to Mr Morris on
MSHL’s behalf by the agents. A formal proposal was forwarded the next day and
Mr Morris obtained approval to continue discussions with Mr Doyle alongside Plan A
(the option at the Airport).
[46]

By 17 December NZ Post was actively pursuing only two possibilities: the

Malden Street property and the larger, fully contained, facility at the Airport. At
around this time Mr Clevely was told that the Mainfreight site was no longer an option.
This prompted Mr Clevely to re-submit an amended proposal which involved (inter
alia) a reduction in the rent from $875,000 annually to $675,000 annually. But
Mr Morris’ response was that the rent would need to be reduced to $600,000 to make
it viable.

6

Messrs Lloyd and Nevill received commission on the sale of $72,622.50 (including GST) on
19 December 2013.

 [47]

On 19 December Mr Morris advised those involved in the airport proposal that

notwithstanding cost-saving changes that had been made to it:
a co-located facility at the airport is now going to have to stack up against a
standalone mail processing facility in a retro-fitted existing building off the
airport

[48]

The airport was told its plan was a non-starter unless they reduced the rental

significantly for the integrated facility to $960,000 per annum. The airport responded
by offering a 15 year lease with rental reduced to $1.1 million. Mr Morris explained
that a shorter lease term was regarded as preferable, notwithstanding the high fitout
costs, simply because it gave NZ Post greater flexibility in terms of future operations.
[49]

Mr Doyle entered into an option arrangement with Mr Jones for which he paid

$500, on 21 January 2014.
[50]

On 29 January 2014 the two options were considered by NZ Post. They were

now regarded as neutral in financial terms. It was agreed that the airport option should
be pursued with the Malden Street property as a fall-back position. But Mr Morris
suggested Mr Doyle might move ahead by offering a (shorter) initial lease term of
eight years. Mr Doyle’s agreement to this proved to be decisive.
[51]

Mr Lloyd sent a sale and purchase agreement to Mr Jones on 14 February. The

price was $662,000 for approx. 3400 m2 (subject to survey) or $195 per m2. The
agreement also contained the following conditions:
18.1

This agreement is subject to and conditional upon the Purchaser
successfully obtaining an unconditional lease agreement for its
property, 39 Malden St Palmerston North, by 4 pm Monday 31st
March 2014 (“Tenant Negotiation Period”)

18.2

If an unconditional lease agreement is not obtained by this date, then
this Agreement will be at an end and no party will have any claim over
the other. This condition is inserted for the sole benefit of the
Purchaser.

[52]

On 21 February 2014, the sale of the Malden Street property settled.

[53]

On 27 February 2014, NZ Post agreed to go ahead at the Malden St Property

subject to Board approval. Approval was given on 20 March 2014.

 [54]

On 28 March 2014, Mr Jones wrote to Mr Doyle confirming the terms of the

sale of the neighbouring land. On 1 April Mr Doyle paid a deposit of $66,200, for
which the agents received a commission of $25,000 GST exclusive. On the same day,
MSHL engaged Messrs Lloyd and Nevill as its agents in relation to the lease to
NZ Post.
[55]

The lease between NZ Post and MSHL was executed on 14 June 2014.

Messrs Lloyd and Nevill received a commission on the lease of $100,000 GST
exclusive.
Mr Doyle’s development and on-sale of the Malden Street property
[56]

The NZ Post lease agreement contained significant liquidated damages

provisions and a sunset clause all aimed at ensuring that NZ Post would be able to
occupy the new facility by early May 2015.
[57]

Mr Doyle supervised and project managed the construction work for a period

of seven months from 1 November 2014 until completion in May 2015.

The

renovation work was carried out by Colspec Construction Ltd (Colspec) on the basis
of its tender dated 21 August 2014. The tender price was $2,812,543 plus GST but
there were significant cost overruns as Mr Doyle struggled to meet the tight time frame
for completion of the work. Mr Doyle also managed the NZ Post fitout pursuant to a
separate, $3,000,000, contract with Colspec.
[58]

Mr Doyle gave evidence about some of the difficulties he encountered with the

project. He had a significant dispute with STL over the “make good” requirements
which ended up in mediation. He received only $25,000 for these, which was
considerably less than he had been given to expect. He said there were also cost
overruns of such a magnitude that his bank became concerned. The bank told
Mr Doyle to sell the development unfinished but he was unable to find a purchaser
due to the low margins and high risks.
[59]

In the end, Mr Doyle engaged Messrs Lloyd and Nevill to market the property

for sale on the basis that the development would be completed and NZ Post in place
as the tenant. A sale to Mainland Capital Ltd (MCL) was agreed for $7,650,000 on

 12 December 2014. Messrs Nevill and Lloyd received a commission on that sale of
$143,478, plus GST.
PPL’s complaint to the Real Estate Agents Complaints Assessment Committee
[60]

In March 2014, an article appeared in the Manawatu Standard reporting that

NZ Post had acquired the lease to the Malden Street property and crediting Mr Nevill
with brokering the deal. The article also referred to Mr Doyle as a property developer.
[61]

As I understand it, this article was the means by which PPL first came to know

about NZ Post’s involvement in the matter. It prompted Mr Olsen to engage a private
investigator and to seek legal and (later) forensic accounting advice.
[62]

In October 2014, PPL made a complaint to the CAC about Messrs Lloyd and

Nevill. The complaint was that the agents:
(a)

had misled PPL about Mr Doyle’s background; and

(b)

did not inform PPL of NZ Post’s interest in the property prior to the sale
to Zambora going unconditional; and

(c)

did not act in the best interests of PPL.

[63]

Both PPL and the agents had legal representation during the CAC process.

[64]

In accordance with its statutory powers CAC undertook its own investigation

and interviewed all the main protagonists. It now seems clear that some of the
information provided to the CAC investigator during this process by the agents was
not true. In particular, the investigator was (at least initially) wrongly told by or on
behalf the agents that:
(a)

NZ Post’s interest in the property did not arise until after PPL had
agreed to an extension of the due diligence period;

 (b)

the visit by NZ Post to the Malden Street property on 25 November
2013 had not involved an inspection of the property. The agents said
that they had simply sat outside in a car with Mr Morris and discussed
what NZ Post was looking for.

[65]

On 1 April 2016, the CAC held a hearing on the papers about the complaint

and following that hearing, found Messrs Lloyd and Mr Neville guilty of
unsatisfactory conduct under s 89(2)(b) of the Real Estates Agents Act 2008 (the first
CAC decision). More specifically, the CAC found that:
(a)

NZ Post’s appointment to view the property had been pre-arranged
likely between 18 to 22 November 2013;

(b)

NZ Post’s interest and the appointment to view the property should
have been conveyed to PPL at that point;

(c)

Mr Lloyd and Mr Nevill’s actions fell short of the standard that a
reasonable member of the public is entitled to expect from reasonably
competent licensees; and

(d)

Mr Lloyd and Mr Nevill had breached rr 6.1 and 6.4 of the Real Estate
Agents Act (Professional Conduct and Client Care) Rules 2012 by
failing to disclose information that should have, in fairness, been
provided to PPL and by breaching their fiduciary duties to PPL.

[66]

The CAC did not accept that the allegation that there had been a failure to

disclose that Mr Doyle was a “developer” because it did not accept that Mr Doyle had
been shown, in fact, to be a developer. In reaching that conclusion the CAC rejected
the evidence of the investigator that had been engaged by PPL.
[67]

The CAC sought further submissions about the orders that should be made. In

its response PPL’s lawyers said (inter alia) that:
… a Court would find that the licensees were obliged to account for all
benefits arising from placing themselves in the position where their duties to
Pangani conflicted with their own interests. Here, the consequence of the

 licensees’ breaches of their obligations was they effectively earned three
commissions. Pangani's position for the purposes of the REA complaint is that
the licensees’ breach of their fiduciary duties to Pangani means that they
should disgorge the $72,622.50 commission paid on the sale to Zambora …7
Should the CAC be minded to order the disgorgement of this commission
though, please note Pangani reserves the ability to exercise rights available to
it in future civil proceedings, as far as requiring the licensees to account for
subsequent profit paid to them, that was linked causatively to their fiduciary
breaches … .
…
Pangani has been put to significant cost - totalling $136,163.19 … . But this
was by no means an ordinary or straightforward complaint. Pangani has
incurred expenses investigating its initial suspicions, securing legal advice and
representation, for the purposes of making the complaint, and forensic
accounting assistance in quantifying the extent of its loss. Pangani accepts
that costs orders are discretionary, and that given the extent of the costs
incurred here, that the CAC may consider that these exceed its jurisdiction.
However, Pangani submits given the exceptional circumstances, along with
the complexity of the complaint and amount involved, that substantive
recognition of the costs that Pangani has incurred should be made.

[68]

In the submission filed on behalf of Messrs Lloyd and Nevill in response,

Mr Darroch said:
The correspondence from Mr Olsen and Pangani confirm their determination
to pursue a considerable civil claim against the agents.
The potential to maximise this claim appears to have influenced Pangani’s
approach from the outset. It was unusual to engage a private investigator to
interview participants and other agents before asking Mr Lloyd and Mr Nevill
for an explanation. This approach did result in a number of errors and
misinformation including the suggestion that the purchaser was a property
developer.
There is considerable disagreement between the parties as to the merits of the
claim and the entitlements Pangani considers it is due. It is not possible or
appropriate for the Committee to attempt to reach conclusions on these issues
with the limitations of its process and procedure.
Our submission is that it is appropriate to acknowledge the breach by the
agents in the disciplinary process. The Committee is not able to deal with
claims for compensation and damages. As a result we suggest these issues are
left to be resolved by the parties through the other mechanisms available to
them.
...
The Committee is able to make orders for the refund of commission and for a
contribution to costs in the appropriate circumstances.
7

This was the GST inclusive amount.

 In this case Pangani’s claim is substantial. It is apparent that Pangani will seek
to obtain not only a refund of the commission paid to the agents but also other
commissions which fall outside this property sale. The extended claim needs
to be dealt with its entirety rather than within the complaint process.
There remains a considerable dispute about the events which took place and
the legal remedies available to Pangani as a result. The determination of these
issues will affect whether the commission is recoverable by Pangani.
It is not appropriate to determine these complex issues in the context of this
disciplinary decision.
A similar approach is suggested with the costs incurred by Pangani. The vast
majority of these costs relate to Pangani’s potential claim for compensation.
The scale of the costs incurred and claimed are also well beyond the usual
context of a disciplinary complaint. These costs can and will be addressed as
Pangani’s civil claim is resolved.

[69]

On 12 August 2016, the CAC issued its decision about the orders it would

make. The orders were that:
(a)

Mr Lloyd and Mr Nevill were censured under s 93(1)(a) of the Real
Estate Agents Act 2008; and

(b)

each was fined $8,000 under s 93(1)(g), payable to the Real Estate
Agents Authority.

[70]

The CAC noted that because of the considerable dispute about the events that

had taken place and other difficulties “the complex issues surrounding the
complainant’s claim for compensation and damages are better dealt with through civil
litigation and other mechanisms”. No order for costs was made.
[71]

These proceedings were then filed.

The statement of claim
[72]

The statement of claim pleads four, alternative, causes of action, namely:
(a)

breach of fiduciary duty;

(b)

breach of contract;

 (c)

negligence; and

(d)

breach of the Fair Trading Act 1986 (the FTA).

Breach of fiduciary duty
As far as the breach of fiduciary duty claim is concerned, the originally pleaded

[73]

breaches are the failure by Messrs Lloyd and Nevill to inform PPL of Mr Doyle’s
background, or of NZ Post’s interest in leasing the property.8 The primary pleading of
loss is:
(a)

the profit PPL would have obtained from pursuing NZ Post as a lease
for the property of $799,000; and

(b)

$72,622.50 including GST, being the commission paid to Messrs Lloyd
and Nevill that they would not have had to pay if the agreement with
Zambora had been cancelled.

[74]

There is an alternative pleading of a loss of chance (to cancel the agreement

and pursue NZ Post as a lessee) in which the relief sought is:
(a)

compensation in the amount of $871,622.50 (the commission and the
lost profit combined) or

(b)

equitable compensation for the loss of chance, being the Court’s
assessment of loss taking into account the probability that PPL would
have cancelled the agreement with Zambora; and

(c)

equitable compensation by way of account of profits of:
(i)

$115,000 including GST, being the commission received by the
defendants for acting as agents in obtaining the NZ Post Lease;
and

8

The agents plead in response that they did inform Pangani of Mr Doyle’s background as they
understood it at the relevant time and that the interest from NZ Post came at a time after PPL had
already granted the due diligence extension.

 (ii)

an amount to be quantified closer to trial, being the commission
received by Messrs Lloyd and Nevill for acting as agents in the
Mainland Sale.

[75]

Interest and costs are also claimed.

Breach of Contract
[76]

PPL alleges there was an implied duty of good faith under the agency

agreement of which Messrs Lloyd and Nevill were in breach, as above. The alternative
pleading of loss is the same as before. The agents accept such a duty was owed but
deny the breaches and the losses.
Negligence
[77]

The allegation is that Messrs Lloyd and Nevill breached a duty of care owed

by them to PPL “to use all reasonable care and skill in carrying out their obligations
as agents for Pangani”. The pleaded breaches and losses are as before. The agents
accept such a duty was owed but deny the breaches and the losses.
Breach of the FTA
[78]

PPL pleads (and the agents accept) that they were “in trade” at all material

times. It pleads that by failing to inform PPL of Mr Doyle’s background and/or of NZ
Post’s interest in leasing the property the agents engaged in conduct that was
misleading or deceptive, or likely to mislead or deceive. The primary pleading of loss
is as before, but in the form of orders under subs 43(3)(e) and (f) of the FTA. The
alternative relief sought is in the form of an order under s 43(3)(f) of the FTA for
equitable compensation for the loss of chance, being the Court’s assessment of loss
taking into account the probability that PPL would have cancelled the agreement with
Zambora.

 Amendment during trial
[79]

At the beginning of the trial, PPL sought and was granted to amend the claim

to include a damages claim (or claim for equitable compensation) in relation to the
costs incurred by PPL in pursuing the CAC complaint.
[80]

As a result of evidence that came out during the trial further leave was sought

and granted to include:
(a)

an alleged breach of fiduciary duty by Messrs Lloyd and Nevill in
telling Mr Doyle of NZ Post’s interest in the property while still acting
as agents for PPL (ie before the sale and purchase agreement went
unconditional) and using PPL’s information to attract NZ Post, and for
the benefit of Zambora; and

(b)

an alleged breach of fiduciary duty by Messrs Lloyd and Nevill acting
as Mr Jones’ agent in relation to the sale of the adjoining land.

[81]

A claim for the further commission paid by Mr Jones to the agents in relation

to the sale of the adjoining land to Mr Doyle is also now made.
Scope of the remainder of this judgment
[82]

There can be no doubt that it was the first cause of action that was the focus of

the trial. The simple point is that if PPL cannot succeed on that cause of action they
cannot succeed on the others. The allegations of breach are essentially the same in
each, as are the damages claimed. But the less stringent approach to issues of
causation and remoteness in relation to claims for breach of fiduciary duty advantages
PPL. It is therefore only the breach of fiduciary duty claim that is discussed in the
remainder of this judgment.
[83]

As noted earlier, it is now accepted by the agents that they breached the

fiduciary duty owed to PPL by not disclosing NZ Post’s interest at the time the due
diligence extension was being sought. Other breaches are not accepted and need,
accordingly, to be explored further.

 [84]

It is also accepted by the agents that the commission on the sale to Zambora

should be forfeit because of their breach. But PPL’s entitlement to any other remedy
is contests and remains at large. Those aspects of the claims raise genuinely difficult
issues which I have not found easy to resolve.
Fiduciary duty: breach
[85]

It is common ground that, as PPL’s agents, Messrs Lloyd and Nevill owed PPL

fiduciary duties. For present purposes, their overarching duty of loyalty has two
relevant aspects:
(a)

the duty to disclose information which is or could be material to the
decisions required to be made by PPL in the course/context of the
fiduciary relationship; and

(b)

the duty not to allow their own interests or those of a third party to
conflict with PPL’s interests without PPL’s fully informed consent.

[86]

The pleaded breaches of fiduciary duty have been noted above. To reiterate,

however, they are:
(a)

Messrs Lloyd and Nevill’s failure to tell PPL of Mr Doyle’s background
and intentions prior to PPL agreeing to sell (the Zambora
Non-Disclosure); and

(b)

Messrs Lloyd and Nevill’s failure to tell PPL of NZ Post’s interest in
leasing the property at a time when PPL could have cancelled the
agreement (the NZ Post Non-Disclosure).

(c)

Messrs Lloyd and Nevill telling Mr Doyle of NZ Post’s interest in the
property while still acting as agents for PPL (before the sale and
purchase agreement went unconditional) and using PPL’s information
to attract NZ Post, and for the benefit of Zambora (the Zambora
Conflict); and

 (d)

Messrs Lloyd and Nevill acting as Mr Jones’ agent in relation to the
sale of the adjoining land (the Jones Conflict).

[87]

Implicit in those alleged breaches (and that aspect of the relief which relates to

disgorgement of subsequent commissions) is the further allegation that, in preferring
Zambora and Mr Jones over PPL, the agents were also advancing their own interests
at PPL’s expense.
[88]

Each alleged breach will be discussed in turn.

Zambora non-disclosure
[89]

Whether Messrs Lloyd and Nevill breached their duty by failing to disclose to

PPL relevant information about Mr Doyle’s background and intentions is fairly finely
poised. I note, however, that it is not the same issue that was determined by the CAC
in favour of the agents, namely whether Mr Doyle was a “developer”.
[90]

The evidence suggests that the agents did know more about Mr Doyle than

they let on.

In particular, they knew about Mr Doyle’s strategy around the

EnviroWaste property and were not forthcoming about that. The statement that
Mr Doyle’s offer on that property might be thwarted by consent issues was not the
whole truth; the agents knew that Mr Doyle had made a conditional offer on that
property largely to extract collateral gains. That necessarily might have had an impact
on his motivation for making an offer on PPL’s property. I suspect the agents also had
more general knowledge about what kind of business operator Mr Doyle was (by
which I simply mean that he was one with an eye to the main chance) and they did not
tell PPL about that, either. These failures to impart relevant information do not seem
to me to be particularly grave or significant, in the wider context of this case. On
balance, however, I would nonetheless be inclined to regard them as constituting a
breach of fiduciary duty.

 NZ Post Non-Disclosure
This breach is admitted by the agents and was found proven by the CAC.

[91]

Messrs Lloyd and Nevill should have told PPL about the interest from NZ Post when
interest was first expressed by Mr Morris and, certainly, at the time Mr Morris made
an appointment to see the property, on 21 November 2014. The obligation to disclose
continued right until the time Mr Doyle/Zambora went unconditional on 11 December
2013.9
Zambora Conflict
[92]

In my view, this breach is also clear cut. Mr Doyle was effectively introduced

to NZ Post by Messrs Lloyd and Nevill during the currency of second due diligence
period. The agents’ duty remained unquestionably owed to PPL at this time. There is
a reasonable inference to be drawn that informing Mr Doyle about the interest and
facilitating contact with Mr Morris played a significant part in Mr Doyle’s decision to
go unconditional on 11 December 2013. It would appear to be too much of a
coincidence that he had met with NZ Post on site earlier that day. The breach is also
arguably exacerbated by the fact that the agents personally had something to gain by
it. If they had informed Mr Olsen instead of Mr Doyle they would likely have received
only one commission (on the lease with NZ Post). By not telling Mr Olsen but telling
Mr Doyle, they obtained two.
[93]

In my view, the Zambora conflict involved a dual breach of the agents’ duty of

loyalty. The duty was breached by the agents:

9

(a)

preferring Zambora’s interests over PPL’s; and

(b)

preferring their own interests over PPL’s.

This is made clear by Keppel v Wheeler [1927] 1 KB 577.

 Jones conflict
[94]

Mr Ormsby submitted that the agents committed a further breach of their duty

to PPL by entering into an agency agreement with Mr Jones in relation to the sale of
his land in August 2013. He said that:
… the Pangani agency and the instructions they accepted from Pangani
required them to secure an arrangement with Mr Jones for Pangani; the Jones
agency required them to maximise the best price for Jones.

[95]

I agree that the two parallel agencies gave rise to a conflict of interest and

therefore a breach. The agents knew from an early stage that PPL’s ability to obtain
the Jones land was potentially critical to its ability to sell to DFL. They could not both
further PPL’s interests in that regard while also furthering Mr Jones’. They should
have obtained PPL’s fully informed consent before signing up Mr Jones.10
The approach to remedies for breach of fiduciary duty
[96]

Having found, essentially, four discrete (but related) breaches of fiduciary duty

the question then becomes what are the appropriate remedies for those breaches.
[97]

The relief sought by PPL focuses both on the removal of the agents’ gain (in

the form of their commissions) and on making good PPL’s loss (which is said to
comprise profits it would have made had it entered into a lease with NZ Post and
money expended in relation to the CAC hearing).
[98]

In the context of considering each head of loss claimed, it is necessary also to

consider whether the pursuit of one precludes the other.

For that reason, it is

convenient to begin by referring at some length to Tipping J’s (concurring) judgment
in Premium Real Estate Ltd v Stevens, which is undoubtedly the most authoritative
New Zealand discussion of the law in this area.11 Premium was a case whose facts
bear some similarity to the present. The outcome was that the errant fiduciary (also a
real estate agent) was found liable to disgorge the commission she had received on the

10

11

For completeness, however, I record that by the time the Jones land was in fact sold, Messrs Lloyd
and Nevill were no longer acting as PPL’s agents.
Premium Real Estate Ltd v Stevens [2009] NZSC 384, [2009] 2 NZLR 384.

 sale of the property in question and to pay equitable compensation for the loss her
breach had caused.12
[99]

In explaining why it was possible both to compensate for loss and to order the

disgorgement of the initial commission, Tipping J said:
[98] There are two dimensions to the question which require consideration.
The first is that this approach could be seen as penal on account of the doublecounting aspect. The second is that it might be thought necessary to reconcile
the approach with the rule that a plaintiff must elect between inconsistent
remedies for the same wrong.

[100] After explaining that he proposed to treat monetary relief as a species of
damages in all cases other than claims for debt and under statute, the Judge went on:
[99]
It is well established that for certain types of civil wrong the Courts
may award monetary relief based either on the loss caused to the plaintiff, or
on the gain made by the defendant as a result of the wrong. … Gain-based
remedies such as account of profits, whatever their historical origin, can
conveniently be regarded as a species of damages. So too can financial
remedies designed to restore to the plaintiff the monetary value of what the
plaintiff has transferred to the defendant when, in the circumstances, the law
requires restoration of that value. My immediate purpose in proposing this
approach is to enable the Courts to identify more readily whether and when
monetary remedies are necessarily inconsistent, so as to bring into play the
need for election between them.

[101] Then, the Judge raised the issue of election; whether Premium could be ordered
both to compensate for loss and to refund the commission or whether it had to choose
which of the two suited it best. Referring to Personal Representatives of Tang Man
Sit v Capacious Investments Ltd (a case in which the plaintiff had sought both an
account of profits and compensatory damages) he noted that the Privy Council had
considered when election was necessary and, in doing so, had drawn a distinction
between remedies which are truly alternative and remedies which can properly be
regarded as cumulative.13 In the former case, a plaintiff must choose. In the latter, the
plaintiff can generally have both. The Privy Council affirmed the general rule that the
plaintiff cannot have both these remedies together for the same wrong, save in the

12

13

Although the possibility of a claim for a subsequent commission relating to the on-sale was
(arguably) flagged by Blanchard J (writing for himself, McGrath and Gault JJ) no such claim was
advanced in that case.
At [100], citing Personal Representatives of Tang Man Sit v Capacious Investments Ltd [1996]
AC 514, [1996] WLR 192 (PC).

 unlikely event that in the particular case the remedies are to some extent not
inconsistent. Tipping J said there were two reasons behind that general rule:14
(a)

Historically, courts of law awarded damages and courts of equity
generally did not, instead developing the remedy of account whereby
gain was disgorged.

(b)

the early cases proceeded on the premise that if, as was then usual, the
plaintiff and the defendant operated in the same market, the defendant’s
profit was the obverse of the plaintiff’s loss. Hence, to award both
remedies would be to award substantially the same remedy twice.

Election was therefore required, originally as between courts, and later as between
remedies.
[102] Next, Tipping J observed that, putting to one side nominal damages and
exemplary damages, the three types of monetary relief which respond to civil wrongs
could be described as compensatory damages, disgorgement damages and restorative
damages. He said:15
… Compensatory damages are loss based. Disgorgement damages are based
on giving up a gain. Restorative damages are based on restoring to the plaintiff
value transferred. As the Privy Council affirmed in Tang Man Sit,
compensatory and disgorgement damages are generally, indeed almost
always, inconsistent. An election is required between them. Compensatory
and restorative damages are not necessarily inconsistent. Conceptually they
are capable of being cumulative, even if they arise from the same wrong.

[103] The Judge then referred to the approach that had been endorsed by the Supreme
Court in Chirnside v Fay, noting that there was some analogy with the circumstances
arising in the case before him.16 He went on:17
There is, of course, a difference between a case in which the errant fiduciary’s
skill and effort has generated the profit which is the subject of the
disgorgement damages, and a case like the present (refund of commission) in
which the damages in question are of a restorative kind. Nevertheless the
14
15
16
17

At [101].
At [102].
Chirnside v Fay [2006] NZSC 68, [2007] 1 NZLR 433.
At [104].

 concept of reward is present in both cases. When the damages represent
disgorgement of profit, the errant fiduciary may be allowed some reward for
generating the profit. When the damages represent the forfeiture or refund of
remuneration not fully earned because of the commission of the wrong, the
fiduciary may have expended time, effort and money for which some reward
is nevertheless appropriate. In the same way as an allowance for skill, effort
and expenditure is available on a discretionary basis in the disgorgement
context, so too should it be permissible to make an allowance, sometimes for
what would have been the full contractual entitlement had there been no
default, when the context is restorative damages. Much will turn in each case
on the seriousness of the wrong which has been committed, the degree of
moral turpitude attending the commission of the wrong and whether the
plaintiff has received any ultimate value from the defendant’s efforts.

[104] Next, the Judge turned to the Privy Council’s decision in Mahesan s/o
Thambiah v Malaysia Government Officers’ Co-operative Housing Society Ltd.18
There, the housing society had employed an agent to buy land on its behalf. The agent
entered into a dishonest arrangement with M whereby M would buy certain land which
was available at a good price and sell it on to the housing society at a profit. M paid
the agent a bribe of $122,000 for his assistance and made $443,000 on the resale. The
housing society was therefore deprived of the opportunity of buying the land at the
original price. The agent did not tell the society that the land had been for sale earlier,
nor what M had paid for it. When the society sued the agent for damages, the trial
Judge awarded the amount of the bribe. On a first appeal, the Federal Court awarded
the society both the amount of the profit made by M and the amount of the bribe
received by the agent. But the Privy Council held that the society could not have both
and that the society was bound to elect between the two amounts. Tipping J said:
[106] This was a case in which the agent was as dishonest as one could get.
He cheated his principal in return for a bribe. Nevertheless the Privy Council
required election between damages for fraud and recovery of the bribe and
would not permit the society to have both. The society was taken to have
elected the higher sum representing the loss it had suffered by reason of its
agent’s fraud. The two amounts bore different characters. The sum of
$443,000 was the loss suffered by the society. In other words, it represented
conventional compensatory damages. The bribe was in the nature of a gain or
a profit made by the agent from the wrong he had committed. While not
adopting this reasoning, the Privy Council, in effect, treated the case as
representing compensatory and disgorgement damages between which an
election was required. The case does not therefore involve the dichotomy
between compensatory and restorative damages. The bribe did not represent
value transferred by the society to its agent, restoration of which was
appropriate.
18

At [105], citing Mahesan s/o Thambiah v Malaysia Government Officers’ Co-operative Housing
Society Ltd [1979] AC 374; [1978] 2 All ER 405 (PC).

 [105] Turning then to the case before him:
[107] That, however, is the character of the commission which the Stevens
paid to Premium. They paid the commission on the premise that Premium had
faithfully performed its contractual and fiduciary duties. Premium had not
done so. Whether the commission should be refunded as restorative damages
in addition to compensatory damages does not, on the analysis I have
proposed, involve any question of election. To the extent the Court allows
both forms of damages the remedies are cumulative, not alternative. Whether
the Court should allow both remedies depends to a significant extent on the
policy which lies behind the granting of each. The policy which lies behind
compensatory damages is simple. It is to compensate for loss caused by civil
wrongs. The policy behind restorative damages is more complex. In present
circumstances it includes the importance, in appropriate cases, of reinforcing
fiduciary obligations by removing from the defaulting fiduciary a sum paid
pursuant to a contract which has not been faithfully performed. The primary
purpose, in the present context, of restorative damages, when awarded in
addition to compensatory damages, is to deter fiduciary breaches and to
express the Court’s disapproval, by requiring the defaulting fiduciary to
restore the value transferred but not earned, as well as compensating for the
loss caused.

[106] Tipping J said that although the approach taken in Keppel v Wheeler was not
along the lines discussed, his approach was consistent with its reasoning.19 There, the
Court had declined to order both compensatory damages and restorative damages
because the agent had acted in good faith and so his breach did not go “to the whole
contract”. Tipping J observed that, by that, Atkin LJ had meant that the breach did not
undermine the whole fiduciary underpinning of the contractual relationship, and was
not such that the agent had disentitled himself to commission. Then he turned again
to the facts of Premium, saying:
[109] The position in the present case is quite different. Premium, through
Ms Riley, deliberately misled the Stevens into thinking that Mr Larsen was
buying their property for occupation by himself and his family. This was a
deliberate breach of fiduciary duty. Indeed Ms Riley, knowing that
Mr Larsen’s general approach, when buying properties, was to induce vendors
to think he was buying for personal occupation, dishonestly assisted him in
that deception. The fiduciary breach for which Premium is responsible is
therefore far from innocent. Premium’s conduct represented the antithesis of
loyalty and good faith.
[110] It is just such a case as this that demonstrates the desirability of the
courts being able to award both compensatory and restorative damages.
Premium should be required to compensate for the Stevens’ loss and pay back
the commission which it did not earn. There is no basis upon which Premium
should, as a matter of discretion, be allowed to keep all or part of the
commission. There is a need to deter those in Premium’s shoes from breaching
19

Keppel v Wheeler, above n 9.

 their fiduciary duties in this deliberate way. To the extent that requiring the
refund of the commission as well as paying compensation for the loss caused
may be seen as having a punitive effect, it is appropriate that this be so. While
it is not a case in which exemplary damages are being awarded, it is a case in
which, by its conduct, Premium has disqualified itself from receiving or
retaining its commission by committing a serious breach of fiduciary duty
involving substantial moral turpitude.

[107] With this analysis in mind, I turn to the present case.
Forfeiture of the agents’ gains: the commissions
[108] The agents received four separate commissions which can be said to be
connected to one or other of the breaches of fiduciary duty I have found. The evidence
at trial established that the combined quantum of the four commissions paid was
$331,628.26 (GST exclusive20), made up of:
(a)

the net commission of $63,150 on the sale by PPL To Zambora;

(b)

the net commission of $100,000 on the lease between MSHL and
NZ Post;

(c)

the net commission of $25,000 on the sale of the Jones land to MSHL;
and

(d)

the net commission on the sale by MSHL to MCL of $143,478.26.

[109] The first commission is easily dealt with. There is, as I have said, no dispute
that this commission should be forfeit. As explained by Tipping J in Premium, it is
forfeit because it was remuneration that was paid for the faithful performance of the
agents’ contractual and fiduciary duties. But in light of their breaches it has not been
earned. No real no real attempt was made by the agents to bring themselves within
the limited “good faith” exception established by Keppel v Wheeler, which is also
discussed in the passages from Premium, above. Messrs Lloyd and Nevill were
experienced real estate agents. They knew all the relevant circumstances. They had a
number of opportunities to tell Mr Olsen of NZ Post’s approach but chose not to do
20

It is accepted that the GST component of the commissions, which was paid to the Commissioner
of Inland Revenue, cannot be disgorged.

 so. They had a pre-existing relationship with Mr Doyle and they put his interests
above PPL’s. And there was a benefit to them personally (in the form of at least two
commissions, rather than one) in keeping the sale to Zambora on track while providing
Mr Doyle with the opportunity to obtain a new and valuable lease.
[110] As far as the remaining three commissions are concerned, I have noted above
that the possibility of a claim for the disgorgement of such a later, connected,
commission was mentioned in the plurality’s judgment in Premium, although it had
not been sought in that case. And a claim for disgorgement of both the original
commission and a subsequent one did in fact succeed in the Canadian case of Baillie
v Charman.21 Baillie, too, was a claim involving errant real estate agents. Notably,
however, that was an account for profits case; no claim for equitable compensation
was made.
[111] Here, however, an application of Tipping J’s analysis in Premium shows why
the later commissions are not like the first. They do not represent value that was
transferred by PPL to the agents and they cannot therefore constitute monies that
should be “restored” to PPL as a consequence of the agents’ breach. They are true
profits which can only be transmogrified into “damages” if to do so would not be
inconsistent with PPL’s claim for compensation for its losses. Otherwise an election
must then be made.
[112] In my view the two claims are, indeed, inconsistent. Put simply, by accepting
an account of profits, a principal/beneficiary is choosing to affirm or adopt the
wrongful acts of his agent/fiduciary as his own. It follows that the principal cannot at
the same time seek recovery of losses resulting from what he has, effectively, adopted
as his own acts.
[113] So although Mr Ormsby maintained that no election was necessary I disagree.
And given no election has been made, I proceed as the Privy Council did in Mahesan,
namely on the basis that PPL should be taken to have elected to pursue whichever of

21

Baillie v Charman (1993) 107 DLR (4th) 577 (BCCA).

 the two inconsistent claims would yield it the higher amount.22 Here, that is its loss
based claims for compensation. There is also the added advantage that it is not then
necessary to consider the question of what allowance (if any) should be made for the
agents’ own skill and effort in obtaining those later commissions. I record that the
evidence addressing that issue was slight.
[114] PPL’s claim for the commissions therefore succeeds only in relation to the
$63,150 commission on the sale to Zambora.
[115] It is necessary now to turn to the two separate claims for equitable
compensation (or, adopting Tipping J’s preferred terminology, damages). The first is
the claim for PPL’s lost profits and the second relates to costs incurred in pursuit of its
claim in the CAC. Each raises different, but equally difficult, issues.
Equitable compensation: lost profits
[116] As noted earlier, PPL says that, had the agents not breached their fiduciary
duty, it would have been aware of NZ Post’s interest prior to the date on which the
extension of the due diligence was granted (26 November 2013), cancelled the
agreement with Zambora and then obtained NZ Post as a lessee for the property. PPL
says its losses can properly be quantified as being the profit it would have obtained
from successfully pursuing the NZ Post lease, which it says was $799,000.23
[117] In the alternative, PPL says that, had the agents not breached their fiduciary
duty, it would have had the opportunity to cancel the agreement with Zambora on or
about 22 November 2013 and therefore the loss it has suffered is the loss of the chance
to do that and then to pursue NZ Post as a lessee. The alternative relief sought is
equitable compensation for this loss of chance, being the Court’s assessment of loss
“taking into account the probability that Pangani would have cancelled the
agreement”.

22

23

Mahesan s/o Thambiah v Malaysia Government Officers’ Co-operative Housing Society Ltd,
above n 17.
Broadly speaking, this sum is based on the figures made available by Mr Doyle relating to his own
costs and profits from the development of the property (and the Jones land) for NZ Post, with
certain adjustments. I address the evidence about that in more detail, later.

 [118] Before turning to consider which (if either) of these measures of loss is the
appropriate focus of the inquiry here, it is necessary to say something about the
question of causation. The starting point is the following statement from the plurality’s
judgment in Premium:
[85] It was once the strict rule that when a fiduciary committed a breach of
duty by non-disclosure of material facts which the party to whom the duty was
owed was entitled to know in connection with the transaction, the fiduciary
could not be heard to maintain that the disclosure would not have altered the
decision to proceed with the transaction; once the court had determined that
the undisclosed facts were material, speculation as to what course the
beneficiary, on disclosure, would have taken was not regarded as relevant.
The strict rule could sometimes lead to unfair results and has been modified
in this country by an approach which affords the fiduciary a limited
opportunity of showing that all or some of the loss would have occurred even
if disclosure had been made. The matter was put in the following way
[O]nce the plaintiff has shown a loss arising out of a transaction to
which the breach was material, the plaintiff is entitled to recover
unless the defendant fiduciary, upon whom is the onus, shows that the
loss or damage would have occurred in any event, ie without any
breach on the fiduciary’s part . . . Policy dictates that fiduciaries be
allowed only a narrow escape route from liability based on proof that
the loss or damage would have occurred even if there had been no
breach.
The same general approach should be taken when the matter in issue is
restricted to the quantum of the loss. The same policy applies to both. That
policy is designed to deter fiduciary breaches by limiting the circumstances in
which fiduciaries in breach can escape or reduce their liability for the
consequences of the breach. It would be artificial, and inconsistent with that
policy, to distinguish between causation and quantum issues. Where there is a
normal or prima facie measure of loss, the fiduciary must positively show that
it is not an appropriate measure. The normal and natural measure of loss, when
a fiduciary breach has affected the price at which property is sold, is the
difference between the sale price and market value. Policy dictates that the
onus should be on the fiduciary to demonstrate that the plaintiff’s loss was
actually less (or non-existent). If there is any doubt about that, the doubt
should be resolved against the fiduciary.

[119] Accordingly, in Premium, once it was accepted that the information that was
not disclosed by the real estate agent was material to the beneficiary’s decision to sell
at a particular price, the only questions were whether:
(a)

the agent could displace the presumption that a different (more
beneficial) decision would have been made by the beneficiary had
proper disclosure been made; and

 (b)

if not, the agent could displace the presumption as to the normal or
prima facie measure of loss, namely the difference between the sale
price and the market value of the property.

[120] In the present case, there can be no doubt that the information that was not
disclosed (the existence of interest from NZ Post) was material to the decision required
to be made by PPL about whether to extend the due diligence period. I have little
hesitation in finding that the requisite nexus is present.

The provision of the

opportunity to make that choice on an informed basis was the very object of the agents’
fiduciary duty.
[121] By analogy with Premium it must, accordingly, then be asked:
(a)

whether the agents can displace the presumption that PPL would have
made a different (more beneficial) decision had proper disclosure
occurred; and

(b)

if not, can they displace the presumption as to the normal and natural
measure of loss (whatever that may be).

[122] So what the agents must first show is that even if PPL had known about the
interest from NZ Post, it would still have granted Zambora an extension of the due
diligence period, rather than refusing the extension and pursuing NZ Post.

In

submitting that this “narrow escape route” had, indeed, been found by the agents,
Mr Darroch made three broad points, each of which was substantiated by aspects of
the evidence. He submitted that:
(a)

PPL was only interested in a sale, not a lease:
(i)

Mr Olsen had wanted to sell the Malden Street property in
2010/11 despite having a blue-chip tenant (STL) in place who,
at that point, had no signalled intention of moving.

(ii)

Mr Olsen had said that the property “owed him nothing” and
that he was ready to sell.

 (iii)

If Mr Olsen had seriously been prepared to entertain continuing
with a lease, he would have done more to retain STL as a tenant
in 2013, in particular, purchasing the Jones land.

(b)

Mr Olsen would not have entertained the possibility of purchasing the
Jones land, which was necessary in order to pursue the NZ Post option:
(i)

He knew the price that Mr Jones wanted for the land next door
but took only desultory steps to secure an option in order either
to keep STL as a tenant or to assist him in securing a sale to DFL
were desultory;

(c)

There were real risks around letting Zambora go and pursuing the NZ
Post option which would, necessarily, have made that option
unattractive to Mr Olsen because:
(i)

at that time the extension was granted, NZ Post’s preferred
option was for a site at the airport and the likelihood of PPL
obtaining them as a tenant was low;

(ii)

PPL’s earlier attempt to sell the property had yielded no offers
and there had been only limited interest the second time round.
Mr Olsen had dropped the price considerably.

[123] There is, I think, some validity in each of these points. But there are also
important countervailing factors. In particular:
(a)

As regards PPL’s willingness to enter a long term lease, rather than sell:
(i)

PPL had previously been willing to enter a long term lease of
the premises with STL;

(ii)

the marketing proposal expressly referred to the possibility of
leasing; and

 (iii)

Mr Hain’s communications with the agents also confirmed that
that was a possibility.

(b)

As regards Mr Jones’ land:
(i)

Mr Olsen is an experienced and successful businessman who
would have striven to obtain the best deal for his company and
would have been prepared to do what was necessary to achieve
that;

(ii)

there was no bad feeling between Mr Olsen and Mr Jones such
that PPL might have been precluded PPL from buying the Jones
land, if that is what it took to secure NZ Post.

(iii)

Mr Olsen well understood (as a result of his earlier engagements
with Mr Jones) that it was just a matter of offering Mr Jones the
right price;

(iv)

Mr Olsen’s historical reluctance to pay the kind of “premium”
sought by Mr Jones does not mean that he would not have paid
such a premium if he knew that securing the land at that price
would still lead to a profitable venture;

(v)

Mr Olsen had been deterred in his most recent attempt to secure
the Jones land, by Mr Morais of STL as much as his own
reluctance; and

(vi)

similarly, it is arguable that DFL’s interest was insufficiently
strong or certain to warrant pursuing the matter more
vigorously.

(c)

As regards the risk of letting Zambora go and pursuing NZ Post:
(i)

the offer from Zambora was hardly a good one; the price was
undoubtedly low and the due diligence condition meant that it

 would effectively be up to Mr Doyle to decide whether or not
the sale would ultimately proceed;
(ii)

Mr Olsen was clearly not happy at the request for an extension
of the due diligence period and granting it would not have given
him any sense of security in terms of ultimately securing a sale;

(iii)

Mr Olsen knew that STL might well want an extension of their
lease (which in fact they did) so was not immediately facing the
risk of an empty, untenanted building; and

(iv)

PPL would therefore have been risking very little in declining
the extension.

[124] And lastly, I mention that the evidence of the defendants’ valuer, Mr Wall, was
that any prudent investor or vendor would have been interested in the opportunity to
secure NZ Post as a tenant if it could be done on acceptable terms and conditions. And
with the full benefit of hindsight it is clear that it could be; that is precisely what
Mr Doyle succeeded in doing.
[125] Accordingly, I am unable to conclude that the agents have displaced the
presumption against them. They have not established, on the balance of probabilities,
that PPL would have agreed to extend the due diligence period even if proper
disclosure had been made. On the contrary, on balance I consider that PPL would have
declined the extension and pursued NZ Post.
[126] The question of the appropriate measure of loss must therefore be addressed.
The appropriate measure of loss
[127] For Messrs Lloyd and Nevill, Mr Darroch sought to argue that, in accordance
with the passage from Premium quoted at [118] above, the appropriate measure of any
loss suffered by PPL was the difference between the sale price and the market value
of the Malden Street property. He called expert valuation evidence from Mr Wall,

 whose retrospective valuation for the Property yielded a market value of $2,565,000
as at 24 October 2013. Accordingly, he said, there had been no loss.
[128] But as that dictum from Premium itself makes clear, the Court’s focus in that
case was on a breach of fiduciary duty (non-disclosure) that affected the sale price
accepted by the principal. Here, the actuating and serious breach occurred after the
price had been agreed but at a time when PPL had (but did not know it had) an
opportunity to cancel the contract and effectively start again with a materially different
deal with a different potential counterparty. The opportunity PPL lost was not the
opportunity to achieve a different sale price. It was the opportunity successfully to
pursue a lease with NZ Post and the profits that would have yielded. The issue is how
that opportunity should be valued.
[129] A degree of complexity, I think, arises because the successful realisation of that
opportunity would have been contingent on a series of decisions that needed to be
made or actions that needed to be taken, not only by PPL itself but by third parties. In
order to have secured the lease and made the profits claimed as losses by PPL the
company would have had to:
(a)

successfully negotiate with NZ Post, resulting in a lease agreement on
materially the same terms as the lease that was agreed between NZ Post
and Zambora;

(b)

successfully negotiate with Mr Jones, resulting in an agreement for sale
and purchase of the adjoining land on materially the same terms as the
agreement between Zambora and Mr Jones; and

(c)

project manage and develop the property in accordance with NZ Post’s
requirements, on time and at the cost estimated by PPL’s expert in his
evidence.

[130] It is because of these cascading contingencies that I disagree with Mr Ormsby’s
primary pleading of loss here. I do not accept that it should simply be presumed that
PPL would have achieved all those things. I do not think that the full benefit of

 hindsight means that the Court should proceed on the basis that the beneficiary’s lost
opportunity can be equated with foregone certain success in relation to very real
exigencies which were (in part) out of its control. The choice PPL was deprived of
making (the choice to pursue NZ Post) would not have inexorably led to such success.
All that can be said is that it has been deprived of the chance of that result. And so it
is that chance that needs to be quantified.
[131] I interpolate at this point that in Chirnside Tipping J acknowledged that loss of
chance compensation might be available for breach of equitable obligations as, indeed,
the Court of Appeal had found),24 although the Supreme Court was held that the
remedy was not appropriate on the facts of that case.25 I note that there are cases in
both Australia and Canada where equitable compensation has been assessed on a loss
of chance basis.26
[132] In my view it is PPL’s alternative pleading that is the appropriate one here.
Any loss suffered by PPL can only be naturally measured by a probabilistic assessment
(based on the evidence) of the chance that the pleaded outcome (the lost profits) would
have been achieved. It is necessary to consider the evidence that bears on the relevant
contingencies.
[133] First, Mr Olsen’s evidence was that he would and could have done everything
required to achieve the best outcome for PPL. I accept that evidence. It is not disputed
that PPL did have the necessary capacity to pursue a lease with NZ Post, both
financially and in terms of development experience. And once a decision had been
made to refuse to extend the due diligence period and pursue NZ Post (which is the
starting assumption here) there can be little doubt that it would have been in PPL’s
interests to work hard to secure the lease; the last thing PPL wanted was to be left with
the property neither tenanted nor sold.

24
25
26

Chirnside, above n 15 at [100].
At [98].
Dempster v Mallina Holdings Ltd (1994) 15 ACSR (although it might be argued that, like
Chirnside, this should really have been an account of profits case); Hydrocool Pty Ltd v Hepburn
[2011] FCA 495; Ramsay v BigTinCan [2014] NSWCA 324 and Guerin v R [1984] 2 SCR 335;
59 BCLR 301; 13 DLR (4th) 321; [1984] 6 WWR 481; [1985] 1 CNLR 120.

 [134] Secondly, there was nothing to suggest that the third parties involved (Mr Jones
and NZ Post) would have declined to deal with PPL on the same basis as they did in
fact deal with Mr Doyle. On the contrary, both Messrs Morris and Jones confirmed in
their evidence that they each would have been open to that.
[135] But there were also some potential stumbling blocks. There can be little doubt
that both Mr Morris and Mr Jones would have played hard ball. The evidence was
clear that Mr Doyle managed to secure the lease only by the skin of his teeth. There
is some evidence to support the submission that Mr Olsen’s character was such that he
might have balked at paying a price that was well over the odds for the neighbouring
land and at some of the onerous terms and conditions demanded by NZ Post. I have
noted earlier that the conditions imposed in terms of timeframes and penalties were
such that no developer was willing to take on the project on Mr Doyle’s behalf.
[136] Relatedly, Mr Olsen’s evidence was that he would have undertaken the project
management himself. I have no doubt that he had the experience and wherewithal to
do that. That said, however, there is a modicum of force in Mr Darroch’s submission
that Mr Olsen’s age and his residence in Auckland might have presented difficulties
on that front, particularly in light of the tight deadlines. Nor can it be said with
certainty that all the deadlines would have been met; Mr Doyle himself clearly
struggled with these.
[137] In the end it is possible only to make a rough and ready assessment of the
probability that PPL would have successfully taken the course that Mr Doyle and
Zambora took. Although I am unable to accept Mr Ormsby’s submission that the
chance can be put at so close to 100 per cent that the chance should be regarded as a
certainty. Equally, however, I proceed on the basis that there was a good chance PPL
could have successfully taken the course that Mr Doyle and Zambora took. In my
view 80 per cent is the appropriate probability here.
[138] The next question is, 80 per cent of what?

 The evidence about lost profits
[139] Expert evidence was called by PPL about the profit it would have made (had
all the above contingencies been realised) from an accountant, Mr Ian Hempleman.
Mr Hempleman’s evidence built on a report that had earlier been prepared by
Mr Broom of the same firm, Crawford Accounting.27
[140] Mr Hempleman explained that he assessed the profit that MSHL had made on
the project, by reference to material that had been provided by Mr Doyle about the
development costs his company had actually incurred. While noting the quite serious
limitations of that material,28 those costs were used, subject to certain adjustments, as
a proxy for PPL’s hypothetical costs.
[141] After reviewing file notes of communications between Mr Broom and PPL’s
directors Mr Hempleman identified and explained a number of factors that would have
made a material difference between the costs that were incurred by Mr Doyle and those
likely to have been incurred by PPL. These were:
(a)

the fact that PPL already owned the property, whereas Mr Doyle has
had to fund the purchase of the property as well as its subsequent
development;

(b)

the site management cost of $80,000 which Mr Doyle paid to himself
and was treated by Mr Hempleman as a notional charge;

(c)

PPL’s likely interest costs, which were assessed as being approximately
$190,000 less than MSHL’s due to the relative strength of PPL’s balance
sheet and its ability to acquire related party funding;29

27

28

29

Mr Hempleman confirmed in his evidence that, overall, he agreed with methodology that
Mr Broom had adopted in that report.
Mr Hempleman noted that he had not been provided with Profit and Loss accounts, or
comprehensive Financial Statements or Management Accounts relating to the development or
relating to any of Mr Doyle’s entities. He was unable to comment on the completeness or accuracy
of the financial information supplied. He relied instead on the financial projections, estimates,
and statements provided by Mr Doyle.
Mr Doyle had reported a BNZ loan fee and interest associated with the funding of the development
amounting to $225,620.

 (d)

contingency and extra costs (totalling $101,000) which had been
identified by Mr Doyle but were properly regarded as being absorbed
into the final figures advised by him; and

(e)

the net sales commission of $63,150 paid by PPL to the agents on the
sale of the property, which would not have been incurred had PPL
retained the property.

[142] For the purposes of the comparative exercise, Mr Hempleman assumed that,
like Mr Doyle, PPL would have sold the property to MCL on 12 December 2014. But
he noted that had PPL completed the development and decided to retain the property
in its portfolio of property investments, it would have saved $165,000 selling costs,
thereby increasing its notional profit on the development.
[143] The upshot of Mr Hempleman’s calculations was that if PPL had had the
opportunity to carry out the development it could have earned a profit of around
$885,000, compared with the profit shown by Mr Doyle of approximately $450,000.
But given the many variables associated with such a development he said it was more
appropriate way to describe the hypothetical profit that PPL would have made as a
range. So he concluded that:
Based on the information presented, I consider that Pangani, if afforded the
opportunity, would have made a profit of between $789,000 and $1,045,000.

[144] The amount of compensation claimed by PPL for lost profits was therefore a
straightforward reflection of the lower end of Mr Hempleman’s range.
[145] Because the agents’ primary position was that the appropriate measure of loss
was the difference between the sale and the market price, they did not call any evidence
contradicting Mr Hempleman’s. The principal inroad made into his calculations
during cross-examination related to the site management cost. Although Mr Olsen had
given evidence that he would have performed that task himself (which was one of the
reasons for removing this item from the calculations) his doing so would plainly come
at some cost, account of which should properly be taken.

 [146] As was said in Jostens Canada Ltd v Gibsons Studios Ltd, it is important in
cases such as the present to avoid “… an illusion of mathematical certainty arising
from a precise calculation from imprecise foundations”.30

Rather, equitable

compensation has a flexible character; all that can be strived for is a broadly equitable
result. In the present case, I consider that the amount of equitable compensation
payable for the breaches here should be set in a broad brush way, taking into account:
(a)

my earlier assessment that the probability of PPL achieving broadly the
same result as did MSHL lies at around 80 per cent; and

(b)

Mr Hempleman’s conclusions, bearing in mind the limitations of the
underlying material and the small adjustment that I consider is required.

[147] As well, I bear in mind the fact that, in addition to the (now forfeit) commission
on the initial sale, Messrs Lloyd and Nevill made (and are able to keep) further profits
from the subsequent transactions of some $268,000. Although some of that profit
necessarily reflects their own efforts, the transactions to which it relates all flowed
from their breaches of fiduciary duty.
[148] I consider that the appropriate amount of compensation for lost profits here is
$650,000.
Equitable compensation: PPL’s costs in relation to the CAC proceedings
[149] As noted earlier, at the outset of the trial PPL sought and was granted leave to
amend its pleading to include a claim for special damages reflecting the costs it had
incurred between 2014 and 2016 in pursuing its complaint in the CAC. Those costs
totalled $136,163 and had the following components:

30

(a)

Legal costs

$97,902.01

(b)

Private Investigator costs

$12,210.79

Jostens Canada Ltd v Gibsons Studios Ltd (1999) 174 DLR (4th) 351 at 362.

 (c)

Accounting costs

$26,050.39

[150] The underlying invoices were provided but no other narrative or explanation
given. I nonetheless record my understanding that:
(a)

the private investigator costs were incurred in an attempt by PPL to get
to the bottom of what had occurred between the agents, Mr Doyle and
NZ Post and, in that sense, have an independent, direct, link to the
non-disclosure which constitutes one of the primary breaches of
fiduciary duty; and

(b)

the accounting costs relate to Mr Broom’s preliminary forensic work
which formed the starting point for Mr Hempleman’s evidence in this
Court.

[151] I have attempted to summarise the way in which the costs issue was dealt with
by the CAC earlier in this judgment. For present purposes, it suffices to reiterate that:
(a)

the CAC had the power to make costs awards in favour of a
complainant, although on that I accept Mr Darroch’s advice from the
bar that such awards tend to be around the $2500 mark;

(b)

an application for the full amount of its costs ($136,000) was made by
PPL to the CAC; and

(c)

no costs order was made by the CAC, implicitly on the basis that (as
the agents had contended) all such matters should be dealt with in the
High Court proceedings which had, at that point, been foreshadowed
but not filed.

[152] I begin by saying that I know of no case in which a claim for equitable
compensation relating to expenditure of this kind has been made. A useful stepping
off point therefore seems to be to consider the position in relation claims for costs as
damages in the context of claims based in contract and tort.

 [153] The general rule in cases of that kind is that litigation costs cannot be claimed
as damages. The term “litigation costs” in that context means costs incurred for the
dominant purpose of litigation. For example, there are cases where damages claims
relating to the costs of an expert report prepared before proceedings have been
commenced but at a time when proceedings might reasonably be said to be in
contemplation have been denied on the basis of the rule.31
[154] The rule has exceptions, but these are limited. As well, ordinary issues of
causation, remoteness and mitigation might well be in play in relation to a contractual
or tortious claim of this kind.
[155] To the extent that the proceedings in the CAC can be regarded as “litigation”
then costs claimed in that “litigation” (as the $136,000 was here) would be prima facie
covered by the rule. But the prior question is whether, properly, they can be so
regarded.
[156] In Z v Dental Complaints Assessment Committee the Supreme Court was
required to consider the nature of disciplinary proceedings of a kind similar to those
to which the agents were subject.32 In that context, the Chief Justice said:33
They are not civil proceedings, in the sense of claims between litigants
similarly situated and in respect of whom the risk of error in outcome can be
regarded with relative equanimity, in the manner described by Justice Harlan
in the passage I have cited at para [31]. Nor are they criminal proceedings.
The outcome is not criminal conviction and the procedures prescribed by the
statute are not criminal processes. On the other hand the Dental Act sets up a
statutory regime for professional regulation. The Complaints Assessment
Committee and the Dentists Disciplinary Tribunal are administrative bodies
which conduct inquiries and are empowered by statute to impose heavy
sanctions. This may not be exactly “government-initiated process”, but it is
statutory regulation in which analogy with civil proceedings (which attempt
relative justice between litigants) is less convincing than analogy with
criminal process, as indeed the Full Court suggested in Gurusinghe.

31
32
33

Berry v British Transport Commission [1962] 1 QB 306 CA at 323.
Z v Dental Complaints Assessment Committee [2008] NZSC 55, [2009] 1 NZLR 1.
At X.

 [157] The suggestion that proceedings in the CAC may well not constitute
“litigation” for present purposes can be tested further by reference to the policy
underlying the rule against awarding costs as damages. In her article Costs as
Damages Louise Merrett articulates the two limbs of that policy in this way:34
First, the rules on the assessment of costs reflect the fact that there are good
policy reasons for encouraging parties to exercise restraint which is to the
benefit of all those who need to resort to litigation; and secondly, it would
undermine the costs rules and, therefore, the policy behind those rules, if the
party claiming costs in an assessment could seek to recover any unrecovered
costs as damages.

[158] The first limb of the policy would appear to have some potential application
here. In particular, the legal costs incurred (and claimed) seem high. While I accept
that the nature of the agents’ (non-disclosure) breach necessarily caused PPL some
difficulty in terms of determining whether or not a wrong had, in fact, occurred the
reality is that the CAC process is, itself, inquisitorial and CAC proceedings are not
adversarial. And more broadly, it seems to me that the complaints process created by
the REAA does not contemplate expenditure of the sort or on the scale incurred here.
Permitting a complainant to recover such expenditure in the guise of damages in
separate and subsequent proceedings might be said to risk encouraging claimants in
future to engage in a far more complicated and costly REAA exercise than is necessary
or desirable.
[159] The aptness of the second limb of the policy is less clear cut. Although the
CAC does have the power to order costs, there is no structured regime or articulated
basis governing the making of such orders. That is consistent with the point made in
the previous paragraph that the REAA envisions for the parties a relatively
straightforward and low-cost process. Most relevantly, however, it means that there is
no discernible policy about appropriate recovery rates that would be undermined by
permitting a subsequent damages claim here.
[160] And relatedly, there is the point that the CAC did not in fact exercise its costs
jurisdiction at all in PPL’s case. But it did not decline to give PPL costs because it
considered that PPL did not deserve them. Rather than making a de minimis award in
34

“Costs as Damages” (2009) 125 LQR at 476–478. The author discusses the various rationales
given for the rule over time and concludes that it can only be justified as a matter of policy.

 line with what appears to be its customary practice, it chose to leave the issue for this
Court, as the defendants had sought.
[161] For both the above reasons I do no not think there is a danger of undermining
the CAC costs regime, such that it is, by (potentially) awarding some or all of PPL’s
costs as damages here. And overall, I consider that the better view is that the costs
sought to be recovered are not litigation costs. This aspect of PPL’s claim is not
precluded by the rule against costs as damages.
[162] Even if I am wrong in that, there also remain the accepted exceptions to the
general prohibition. As Heath J said in Peters v Peters:35
[95] Generally, there are two exceptions to the rule that costs cannot be
recovered as damages. The first is where costs were incurred in proceedings
involving a third party. … Second, even where the claim is between the same
parties, where the claimant is relying on an independent cause of action, costs
as damages may also be recovered. …

[163] Here, the two claims are (effectively) between the same parties. 36 Putting to

one side my view that PPL had no “cause of action” at all in the CAC, the present
proceedings are not confined to a claim for breach of fiduciary duty. PPL also makes
plainly tenable claims for breach of contract, negligence and breach of the FTA. And
even though a breach of fiduciary duty was alleged before (and found proven by) the
CAC, there seems to me to a be a fundamental difference between such a claim made
in an occupational regulation context and a claim seeking a remedial exercise of this
Court’s equitable jurisdiction. In a sense that is merely to restate one of the reasons
for my earlier, and primary, conclusion.
[164] On any analysis, however, the short point is that the aspect of PPL’s claim that

relates to its expenditure in relation to the CAC process is not, in my view, caught by
the general “no costs as damages” rule.

35
36

Peters v Peters [2013] NZHC 1061.
To the extent the term “parties” is apt at all in the context of a disciplinary process.

 [165] There remain the issues of remoteness, mitigation and intervening causes.
Were the claim for the costs advanced in the context of a claim for damages in contract
or tort, I consider these matters would certainly constitute potential hurdles for PPL.
But as touched on earlier, in the context of a claim for equitable remedies it is trite that
the usual rules about causation, foreseeability and remoteness may not apply.

As

McLachlin J in Canson Enterprises Ltd v Boughton & Co explained:37
The requirement that the loss must result from the breach of the relevant
equitable duty does not negate the fact that ‘causality’ in the legal sense as
limited by foreseeability at the time of breach does not apply in equity. ... Thus
while the loss must flow from the breach of fiduciary duty, it need not be
reasonably foreseeable at the time of the breach .... The considerations
applicable in this respect to breach of fiduciary duty are more analogous to
deceit than negligence in breach of contract. Just as ‘it does not lie in the
mouth of the fraudulent person to say that [the losses] could not reasonably
have been foreseen’ …, so it does not lie in the mouth of a fiduciary who has
assumed the special responsibility of trust to say the loss could not reasonably
have been foreseen. This is sound policy. ... In the case of a breach of fiduciary
duty, as in deceit, we do not have to look to the consequences to judge the
reasonableness of the actions. A breach of fiduciary duty is a wrong in itself,
regardless of whether a loss can be foreseen. Moreover, the high duty assumed
and the difficulty of detecting such breaches make it fair and practical to adopt
a measure of compensation calculated to ensure that fiduciaries are kept ‘up
to their duty.’

[166] Similarly, the Judge confirmed that in principle, there is only a limited duty to
mitigate in cases of the present kind:
… In negligence and contract the law limits the actions of the parties who are
expected to pursue their own best interest. Each is expected to continue to look
after their own interests after a breach or tort, and so a duty of mitigation is
imposed. In contrast, the hallmark of fiduciary relationship is that the
fiduciary, at least within a certain scope, is expected to pursue the best interest
of the client. It may not be fair to allow the fiduciary to complain when the
client fails forthwith to shoulder the fiduciary’s burden. This approach to
mitigation accords with the basic rule of equitable compensation that the
injured party will be reimbursed for all losses flowing directly from the
breach. When the plaintiff, after due notice and opportunity, fails to take the
most obvious steps to alleviate his or her losses, then we may rightly say that
the plaintiff has been ‘the author of his own misfortune.’ At this point the
plaintiff's failure to mitigate may become so egregious that it is no longer
sensible to say that the losses which followed were caused by the fiduciary's
breach. But until that point mitigation will not be required.”

37

Canson Enterprises Ltd v Boughton & Co [1991] 3 SCR 534 at 556.

 A related question which must be addressed is the time of assessment of the
loss. In this area tort and contract law are of little help. There the general rule
is that damages are assessed based on the value of the shares as at the time of
the wrongful act, in view of what was then foreseeable, either by a reasonable
person, or in the particular expectation of the parties. Various exceptions or
apparent exceptions are made for items difficult to value, such as shares traded
in a limited market. The basis of compensation at equity, by contrast, is the
restoration of the actual value of the thing lost through the breach. The
foreseeable value of the items is not in issue. As a result, the losses are to be
assessed as at the time of trial, using the full benefit of hindsight: …
It may sometimes be necessary to qualify this general principle to recognize
the plaintiff’s responsibility not to act unreasonably. It may not be fair, for
example, to allow a plaintiff who has discovered the breach to speculate at the
expense of the fiduciary. If a fiduciary holds out an investment as secure when
in reality it is highly speculative, the injured party should not be able to retain
the investment in unreasonable hope of a fortuitous rise in value, secure in the
knowledge that any loss will be borne by the fiduciary. In such a case, the
court might conclude that the loss should be assessed as at the time at which
the behaviour of the plaintiff becomes clearly unreasonable. Mitigation,
where losses are assessed as at the time of trial but adjusted to account for
what might have been saved, will be appropriate where the losses which might
have been prevented are separable from the underlying value of the thing lost;
for instance, consequential losses. Adjusting the time of assessment will be
more appropriate where the actions or omissions of the plaintiff directly affect
the value of the thing lost. No doubt the final award will sometimes be the
same under either approach.

[167]

Importantly, Her Honour went on to note that notwithstanding the limited role

of foreseeability, remoteness and the duty to mitigate when assessing compensation
for breach of fiduciary duty, liability is not endless. Equitable compensation must be
limited to loss flowing directly from the trustee’s or agent’s acts in relation to the
interest he or she undertook to protect. McLachlin J concluded:
In summary, compensation is an equitable monetary remedy which is
available when the equitable remedies of restitution and account are not
appropriate. By analogy with restitution, it attempts to restore to the plaintiff
what has been lost as a result of the breach, ie, the plaintiff's lost opportunity.
The plaintiff's actual loss as a consequence of the breach is to be assessed with
the full benefit of hindsight. Foreseeability is not a concern in assessing
compensation, but it is essential that the losses made good are only those
which, on a common sense view of causation, were caused by the breach. The
plaintiff will not be required to mitigate, as the term is used in law, but losses
resulting from clearly unreasonable behaviour on the part of the plaintiff will
be adjudged to flow from that behaviour, and not from the breach. Where the
trustee’s breach permits the wrongful or negligent acts of third parties, thus
establishing a direct link between the breach and the loss, the resulting loss
will be recoverable. Where there is no such link, the loss must be recovered
from the third parties.

 [168] As it happens, Canson itself was a case in which the loss claimed was found to
be too remote, even for a claim for equitable compensation.
[169] So. To this case.
[170] As I have said, no narrative was provided in relation to the costs for which this
part of the claim is directed. I do not, of course, dispute that they would not have been
incurred “but for” the breaches of fiduciary duty. The very nature of the breaches
(non-disclosure) gave rise to an information gap. It could not be said that PPL was
unreasonable in seeking expert assistance in an attempt to fill that gap. Similarly, I
accept that the forensic accounting services engaged were necessary in order to assess
the existence and extent of any loss. My own view is that the fee for that earlier
assessment (upon which Mr Hempleman’s evidence was built) could properly be
claimed as costs in these proceedings in any event.
[171] But notwithstanding the limited scope for arguments about remoteness and
failure to mitigate, on a common sense and fair view I have some reservations about
the extent of the legal costs claimed. While it could not possibly be said that pursuit
of disciplinary proceedings was unreasonable (or unforeseeable) as I have said, no
detail has been provided about the services to which the costs relate. The work done
may, as well, have had a beneficial effect on the legal costs incurred in relation to these
proceedings. The fees are undoubtedly high given the nature of CAC proceedings and
processes.
[172] In the end, I can, again, do little more adopt a relatively broad brush and robust
approach. In my view, an award of $100,000 under this head is warranted. For the
avoidance of doubt, I record that this award will preclude any claim for Mr Broom’s
accounting costs as costs in these proceedings.
Conclusions
[173] PPL has established two serious and actuating breaches of fiduciary duty here
and is entitled to remedies in accordance with my conclusions above. Accordingly, I
make orders as follows:

 (a)

the net commission on PPL’s sale of the Malden Street property to
Zambora in the sum of $63,150 is to be restored to PPL by the agents;

(b)

the agents are to pay equitable compensation in the sum of $650,000
for the chance that PPL lost of securing NZ Post as a tenant on broadly
the same basis and on broadly the same terms as were achieved by
MSHL; and

(c)

the agents are to pay equitable compensation in the sum of $100,000 in
relation to the costs incurred by PPL investigating and pursuing the
matter before the CAC.

[174] Interest at the rate of five per cent per annum will be payable on the above
amounts from dates which should be agreed and advised by counsel. Although
Mr Ormsby set out his view about those dates in his submissions, he did not include
any date in relation to (c) above and nor did I hear from Mr Darroch on the matter.
[175] Mr Ormsby asked that costs be reserved and I so order. Memoranda may be
submitted in that regard.

____________________________
Rebecca Ellis J