Assignment 2 – Portfolio                      

Based on your Report in Assignment 1, Mr. Rich decided to invest in Realty Limited, a real estate agency and appointed Pro Consultancy Limited to conduct due diligence on Realty Limited. The due diligence report confirmed that Realty Limited’s business had:

1. a net profit that had grown steadily;

2. last year made a net profit exceeding $5 million.

In its report, Pro Consultancy Limited predicted that Realty Limited business would continue to grow and expand for the next 4 years.

Relying on Pro Consultancy Limited’s report, Mr. Rich went ahead with the purchase of shares in Realty Limited for $8 million and now owns 70% shares in the company.

Part 1Negligence–Application Question (ILAC)  

Soon after settling the purchase of shares in Realty Limited, 5 of the 6 top-performing estate agents in Realty Limited departed and listings rapidly decreased.  Upon further investigation and consulting with an alternative accounting firm, Mr. Rich learned that Realty Limited’s records and documents clearly showed a decreasing net profit in the last 18 months (as a new competitor had entered the market) and also included copies of the resignation notices of the 5 top-performing estate agents who had since left.

Part 2Contract& Agency 

Short Answer Question

Emma and Tom Fredericks wanted to sell their house. They went to Realty Limited and spoke to a real estate agent, Robyn Smith.  Robyn agreed to act for Emma and Tom and gave them a written agency contract to sign appointing Realty Limited as their agent. Emma and Tom took the contract to his eldest brother’s law office, who advised them that it was a standard agency contract. Emma and Tom signed the agency contract and returned it to Robyn the next day. Emma and Tom told Robyn that they needed the house to be sold as soon as possible at a sale price of at least $450,000. Robyn managed to sell the house by way of negotiation for $500,000, which was above the market value.

Subsequently, Robyn discovered that Emma and Tom are 17 years old twins and have not sought their parents’ consent for the sale. Their parents are contesting Emma’s and Tom’s legal capacity to appoint Realty Limited as their agent and Realty Limited’s authority to sell the house.

Part 3AML – Summary 

Mr. Rich has been told that the Anti-Money Laundering and Countering of Financing Terrorism Act 2009 require Realty Limited to “know their clients”.

Part 4Consumer Law

Short Answer Question

Realty Limited has placed the following advertisement in several local newspapers in New Zealand:

“Realty Limited is the best and top estate agency in New Zealand with clients including, Jeff Bezos and Bill Gates”

The above statement is untrue.

Kelly saw the advertisement and went to Realty Limited and spoke to Robyn Smith and appointed Realty Limited as her agent to sell her house for not less than $400,000. Two weeks later Kelly was worried that Robyn has not put up any posters or listed any advertisements for her house. When Kelly called Robyn, he explained that he just hasn’t got around to it yet. The following day, posters arrived but the details on the posters were wrong, i.e. the address was incorrect with an asking price of $370,000.

Kelly wishes to file a complaint and claim against Realty Limited under the Fair Trading Act 1986 and Consumer Guarantees Act 1993.

Part 5Privacy Law                                     

Short Answer Question

Mr. Rich acquired a property management company known as Reliable Property Management Ltd. He wishes to contact Reliable Property Management Ltd’s clients offering to sell their house through Realty Limited.