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Agents can sometimes find themselves on the wrong end of a negligence claim by a seller, buyer, landlord or tenant.

Peter Moran, Partner in Colin Biggers & Paisley law firm, has over 30 years' extensive experience in insurance litigation.

He gave an example of one rural and stock agent who had been subject to a negligence claim for misleading information in relation to the sale of a farm.

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.”

“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.”

Tips to avoid claims

Here are some of Peter’s tips on how to avoid claims:

• Verify information, or make it clear to prospective purchasers that the information was unverified and suggest they make their own enquiries
• Avoid expressions of personal opinion and offering advice outside of your expertise
• Indicate to vendors that information they supply that is passed onto purchasers may be relied upon and subject to claims
• Include appropriate exclusions or qualifying statements 
• Indicate your role is to act as a conduit of information provided by the vendor
• Advise vendors to seek legal advice on property descriptions in the contract for sale, or when obtaining survey reports. If as the agent you rely on a survey report, make sure it is up-to-date
• Information provided verbally during pre-purchase inspections should also be given in writing together with necessary qualifications approved by the vendor
• Ensure efficient record keeping to assist in pursuing indemnity if inaccurate information is given.

Find out about other case studies where agents have been sued and also hear Peter’s advice on what to do in each case by watching REINSW’s video here.