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False or misleading representations in respect to property transactions

False and misleading representations in property transactions are governed by the Australian Consumer Law (ACL) under Schedule 2 of the Competition and Consumer Act 2010. There also exist a range of common law actions for false or misleading representations in property transactions. It is critical that agents, developers and individuals looking to purchase or sell property comply with these obligations, as the potential remedies for breach or default can be severe and include rescission, termination, damages, specific performance, injunction or pecuniary penalties.

Statutory Position

When engaging in dealings specifically relating to property, section 30 of the ACL ought to be considered.  Section 30 prohibits false or misleading conduct in connection with the sale, or possible sale, of an interest in land or in connection with the promotion of the sale of land regarding:

  • sponsorship, approval or affiliation of the person making the statement;
  • the nature of the interest in the land;
  • the price payable for the land;
  • the location of the land;
  • the characteristics of the land;
  • the use to which the land is capable of being put or may lawfully be put; and
  • the existence or availability of facilities associated with the land.

A breach of section 30 may result in a pecuniary penalty.

Types of representations

A false representation is considered to be a representation that is contrary to fact. [1] Representations are not limited to verbal or written statements and can extend to behaviour, gestures, demeanour and even silence. [2]

In establishing the existence of a misrepresentation, three key criteria are generally considered:

  • the context in which the statement (or conduct) was made;
  • whether there has been reliance on the representation; and
  • whether detriment has been suffered as a result of that reliance.

Common Law

Importance of true and correct advertising

Providing misleading and deceptive information when advertising the sale of land can result in excessive, unnecessary costs.

In 2012, the ACCC took action against Metricon Homes [3] for a series of misleading representations made in advertising material distributed by Metricon. Among other things, the alleged misrepresentations included inaccurate ‘Build Time Guarantees’ and house designs that were either unable to be provided by Metricon or designs that were unable to be provided at the advertised costs.

Justice Collier described Metricons actions as egregious and made reference to the substantial commitment that consumers were making in reliance upon the representations in question. As a result of multiple breaches of the Trade Practices Act and the Australian Consumer Law, the Federal Court ordered $800,000 in penalties against Metricon and an additional $50,000 towards the ACCC’s legal costs.

The Metricon case delineated the tolerance of the ACCC towards deceptive advertising and should prove as fair warning to agents and developers who are considering advertising the sale of land, on any scale of promotion.

Codifying your expectations into contract

In December 2011, the Supreme Court of Queensland delivered a decision in the matter of South Sky [4] that highlighted the importance of having your expectations of the transaction written into contract.

The purchasers in South Sky had originally contracted to purchase residential apartments off-the-plan from ‘The Oracle’. After the date of contract, the Peppers hotel and resorts chain obtained letting rights for the Oracle building, and proceeded to let apartments for both residential and short-term stays. The purchasers took action against the vendor on the basis that they were no longer purchasing an apartment from ‘The Oracle’ in a residential tower, and that they were receiving a substantially different product. As a result, it was alleged that the vendor had repudiated the contract.

The court determined that although contrary to the expectations of the purchasers, it was not an essential term of the contract for the apartment to be in a residential tower known as ‘The Oracle’. The fact that the apartments were now operated by the Peppers hotel and resort chain was not considered to render the apartments fundamentally different from those outlined in the contract, and as a result there was no repudiation.

Effect of a disclaimer in advertising material

It is a common misconception that the correct wording of a disclaimer will release liability for misleading representations in advertising material. When reviewing disclaimers in advertising material, the court will again take into account the context of the circumstances in which the disclaimer was provided, and the capacity of the purchaser.

In the case of Miletich v Murchie [5], a variety of verbal representations were made in conjunction with misleading advertising material. The court determined that the disclaimer within the material did not release liability, as it was reasonable for the purchaser to rely on the representations given the entirety of the circumstances.

For a disclaimer to be effective, it is important that agents ensure the disclaimer is given relevant prominence within advertising material and that it is drawn to the attention of potential clients throughout pre-contractual negotiations. Conversely, those looking to purchase should ensure that the provided advertising material aligns with the statements made to them by the agent and/or developer.

Whether you are a property developer, property  owner, real estate agent or purchaser who has been affected by false or misleading representations, please contact our team at Marino Law to find out how we can assist you.


 

[1] Given v CV Holland (Holdings) Pty Ltd (1977) 29 FLR 212.

[2] Given v Pryor (1979) 39 FLR 437.

[3] Australian Competition and Consumer Commission v Metricon Homes Qld Pty Ltd [2012] FCA 797 (Metricon)

[4] Gough & Anor v South Sky Investments Pty Ltd [2011] QSC 361

[5] Miletich v Murchie [2012] FCA 1013

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