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Misleading or deceptive conduct in property transactions.

 

With the competition of real estate listing being fierce, the potential for things to be taken out of context can happen, which may both mislead and deceive the seller and the potential purchaser or lessee. 

 

There has been extensive examination for the meaning of misleading and deceptive conduct under both the Australian Consumer Law and its’ predecessor the Trade Practices Act 1974. Generally, in claims raised against the agent, the court will consider whether on and objective basis the conduct is such that a reasonable person would be misled or deceived. However, where conduct is directed at an individual the crucial question is whether that person is misled, or likely to be misled. 

 

The law is settled that if conduct conveys as misrepresentation, it will be misleading or deceptive, or likely to mislead or deceive. Conduct which may be misleading includes false representations, statements that are only half true, false statements of opinion, statements of intention which are not held and silence, or other conduct that conveys a false impression. 

 

There is significant scope for a real estate agent to make a statement or engage in conduct that is misleading, particularly where the real estate agent gives assurances of the truth of the statement. 

 

A common area were a breach may occur by a real estate agent is the description of the property during the selling campaign. Generally, most real estate agents are precise with the details of description of the property, though difficulty arises if the vendor is not forthcoming with the correct information. If there is a failure by the vendor to provide accurate details on the property, the agent who uses the inaccurate details, or uses false information, may breach their duty of care contractually and tortiously to the purchaser, or tenant if a lease is involved. 

 

As the real estate agent has an implied authority to describe the property being sold, the principal of the agency will be vicariously liable for any inaccurate statements made by the agent. Generally, a concurrent claim in negligent misrepresentation and misleading conduct will be brought against a real estate agent by the buyer, or tenant if a lease involved. 

 

If a claim is to be brought against a real estate agent, and subject to the facts, the claim may have greater success if its directed under the statutory provisions preventing misleading conduct. This is because proof of misleading conduct only requires proof of the fact the statement or conduct is likely to or has led the purchaser or tenant into error. There is no requirement to prove intention of the real estate agent in making the statement or that a duty of care was owed. 

 

A good way to demonstrate is to look at a few court cases:  

 

MacCormick v Nowland (1988) where the court held the agent engaged in misleading conduct when the agent described the property for sale being made of brick and adjacent to parkland, when in fact it was made of concrete and not adjacent to parkland. 

 

Demagogue Pty Ltd v Ramensky (1992) where the court held the agent had engaged in misleading conduct when the purchaser was told there would be an access way to the property without disclosing the existence of a road licence over part of the driveway to the State Government. 

 

Latella v LJ Hooker Ltd (1985) where the court held the agent had engaged in misleading conduct when the property for sale was advertised as having a ‘superb 2 bedroom Home on a rear block' when the building could not be used for residential purpose. 

 

Benlist Pty ltd v Olivetti Australia Pty ltd (1990) where the court held the agent had engaged in misleading conduct when the property for sale was advertised as suitable for strata subdivision, when it was not due to an encroachment over the building. 

 

Whether conduct in negotiations for the sale of property will mislead or be deceptive under the Australian Consumer Law in trade or commerce, the principles can be drawn from the case of Elders Trustee & Executor Co Ltd v EG Reeves Pty Ltd (1987); which included that statements by the agent made pre and during the course of negotiations for the sale of property, need to be assessed in the overall context of the sale; and the claimant must show there was reliance on the statements made by the agent, and that there was sufficient connection with the agents conduct that resulted in the loss and damage claimed; and that the representation made by the agent induced the claimant to act upon it. 

 

A good way to consider this point is to look at a couple of court cases: 

 

Merost Pty Ltd v CPT Custodian Pty Ltd [2014] where the respondents conduct was found to be misleading as the information memorandum for the sale of a shopping centre contained incorrect information about the rent payable for one of the tenants. 

 

ACCC v Metricon Homes Qld Pty Ltd [2012] where the court held the respondent had engaged in misleading and deceptive conduct with its brochures. In this case the respondent advertised the price of building a house which included fixture and fittings. The price advertised was not correct as  it did not include specific features advertised in the brochure. The respondent failed to provide proper disclosure in its brochures about the correct fixture and fittings of the house on offer and the build time guarantee. 

 

Ackers v Austcorp International Ltd [2009] where the court held the respondent had engaged in misleading conduct in a sales brochure for resort development to the purchasers.The court also said that the respondent could not rely on the argument that they had not misled the buyers on the basis that the purchaser would use their own lawyers and professional advisers to correct any wrong impressions or statements made by the respondent. 

 

ACCC v Gary Peer & Associates Pty Ltd [2005] where the court held the real estate agent had engaged in misleading conduct when they advertised a house for sale at $600,000 and then later $650,000 when the vendors actually had the intention to sell the house for significantly more than the agent’s advertised price. 

 

The realestate market is thwart with risks for the unwary or unwise purchaser or lessee, and the prudent security is to get that legal advice to protect your legal rights and interests. 

 

The comments in the aforementioned do not constitute legal advice and are general in nature, and if legal advice is required please contact: John Melis at Legal AU Pty Ltd (03) 9999 7799 www.legalau.com 

 

Legal AU Pty Ltd Lawyers are “Liability limited by a Scheme approved under Professional Standards Legislation.”