A seemingly gifted sales agent – motivated by a desire for fixed retainer remuneration rather than reliance on the ups and downs of sales commissions – has brought a developer and two real estate offices to their knees in a “scandalous deception” involving fictitious sale contracts.
From December 2006 until 18 May 2007, Richard Moody – who had no previous strata project history – presented 12 off-the-plan apartment contracts to developer Orchard Holdings who counted them among its pre-sale commitments, to green-light $30 million in Westpac funding and break ground on its inner city Highgate site.
That decision alone would prove crippling enough, but the fabricated sales so encouraged the developer, it fatefully resolved to withhold half the units from sale until construction completion drew nearer, in the hope even loftier returns could be had.
Instilling as it did, such grossly mis-placed optimism, the falsified sales inevitably hid problems of (non-prime) location, (too high) prices and (inadequate) marketing resources.
Not only did the developer fail to meet the falling market by adjusting price, director and builder Keith Anderson & his wife Sue-Ann, were made so oblivious to the generally deteriorating market, they also decided to upgrade their family residence on $4 million bridging finance, while awaiting the sale of their existing home that would not sell until twelve months later and only then at 40% below its original ask.
When suspicions finally were raised in December 2008, most “buyers” denied having signed at all and others were discovered to be entirely make-believe identities. Moody immediately confessed when confronted.
The fraud – totalling $12.5 million in contract face value – extended to generating fake correspondence confirming receipt of deposits and congratulating the developer on the deals.
Even Westpac – for whom solicitors, Freehills had vetted the soundness of the sales documentation – were satisfied of the authenticity of the Woodley Apartments project deals.
Orchard and the Andersons sued both agencies, Property People – where Moody had been engaged on commission only – and Pro Property/Coldwell Banker – to where he re-located on salary (as preferred, rather than commission) – for failing to sufficiently monitor their supposedly, high-flying star.
Had it not been misled – Orchard asserted – it would have sold an equivalent number to genuine buyers in the same period. Moody, it claimed with some justification, had sabotaged the sales campaign to further what it could only assume to be, “an undisclosed scheme”.
In fact the only satisfactory explanations for Moody’s irrational conduct, were perhaps the comparatively modest goal of the regular wage security offered by his aspirational, number two employer; and the need to satisfy rate-of-sales numbers, for the project general manager.
After 11 days of evidence, the Western Australia Supreme Court awarded damages against the real estate offices for just $450,000, being half the re-sale losses of the 12 fictitious sales, as assessed on valuation and the holding costs of those apartments.
Their claim for the losses on the bridging finance deal for the Anderson’s new Mossman Park residence, was refused.