Case study
The agent advised the vendors that a water bore on the property had a capacity of 21 mega-litres a day and they could expect many years of trouble-free pumping.
However, before the sale was completed, the water bore had broken and a repairer estimated that at best it would only last another five years, and the capacity would be reduced to 13 mega-litres a day after the repair.
The agent also helped the purchasers work out calculations which showed they could buy the property. However, these calculations relied on the bore capacity and life expectancy as represented by the agent.
Any reduction would result in reduced farm yields and income, and therefore a reduced ability to repay the loan back.
A few years later after the purchase the water bore broke down completely, and so the purchasers brought a negligent misstatement claim against the selling agent.
Peter explains: “As far as risk management or claim avoidance is concerned, a court doesn’t focus on whether the agent was successful or unsuccessful, but concentrates on what the agent might have done differently to avoid a claim in the first place.”