Decisions Highlight Consumer Law

Decisions Highlight Consumer Law

Recent decisions on alleged misrepresentations by sellers and their agents have forced real estate agents, conveyancing solicitors, litigators and developers to take notice.

Decisions in Queensland’s Supreme Court and District Court have challenged long-standing consumer protection and misrepresentation precedents entrenched in state property law.

This article provides a brief summary of the decisions and their impact on current litigation and the property landscape.

In October 2011, the Supreme Court of Queensland delivered its decision in Nifsan Developments Pty Ltd v Buskey & Anor [2011] QSC 314 (Applegarth J 27/10/2011) in which deposits were successfully returned to buyers after the contract for the purchase of a penthouse apartment in Nifsan’s Emerald Lakes development was found to be void as a result of representations made by the developer’s agent.

The representations regarding views were found to be misleading and deceptive – terms used in the sections 52 and 53A of the Trade Practices Act 1974 (Cth) (now called the Competition and Consumer Act 2010, but the TPA still applies to acts or admissions prior to 1 January 2011 pursuant to section 6 of schedule 7 of the Trade Practices Amendment (Australia Consumer Law) Act (No.2) 2010 (Cth)).

In December last year, and in stark contrast to the decision in Nifsan, the Supreme Court delivered the decision in a number of claims against Oracle developer South Sky Investments Pty Ltd. In South Sky, eight individual purchasers sought to terminate their off-the-plan contracts, alleging various breaches of the Body Corporate and Community Management Act 1997 (Qld) (BCCM Act) by the developer, the primary assertion being a failure to disclose that the Oracle would be operated by the Peppers chain of resorts and hotels.

The plaintiffs in South Sky asserted that each had contracted to purchase an apartment in ‘The Oracle’, whereas each apartment in question was now in a hotel or resort branded by Peppers. The plaintiffs maintained that, on completion of the Oracle development, the purchasers were receiving a substantially different product than what they had contracted to purchase.

Ultimately, the purchasers failed in their claims against South Sky on the basis that the contracts implied that the apartments would be in a residential, not commercial, precinct as opposed to the strict interpretation of the term ‘residential’ being owner-occupier or long-term rental.

A recurring subject throughout the South Sky decision was that the applicants had failed to establish their pleaded case of inaccuracy (of the BCCM Act statements) and the inaccuracy found was not shown to be causative of material prejudice. The prejudice suffered by the applicants was because the contracts did not give protection to their expectations.

The importance of an accurately pleaded claim or defence was a significant theme within Applegarth J’s judgment (at paragraphs 285 and 351). His Honour also reminded the parties and litigants that the purchasers ought to have the evidence to support the allegations of misrepresentation and reliance.

The court placed more significance on the actual written terms of the contracts rather than the intention (or expectations) of the purchasers. By still delivering the purchasers with ‘an apartment’ in a ‘residential’ complex, the developer had substantially fulfilled its obligations under the contracts. On that basis, the purchasers were held not to have repudiated the contracts as there had been no breach of a material term of the contracts which would give rise to the purchaser's right to terminate. Had the purchasers sought to rely on the expectations placed on them, then they ought to have had those expectations written into the contracts.

The buyers in South Sky appealed Applegarth’s decision to the Queensland Court of Appeal. On 15 June 2012, their Honors McMurdo M, Muir and Wilson M dismissed the buyers’ appeal with indemnity costs in favour of South Sky.

The decision in South Sky will undoubtedly have off-the-plan buyers nervous about their position in respect of other developments in Queensland. Many developers expected buyers to complete their contracts throughout 2011, with many buyers refusing or failing to do so.

It is clear from these recent decisions that each matter will be taken on a case-by-case basis. Accordingly, it is imperative that your claim (or counterclaim) is impeccably prepared and that your evidence is strong enough to stand up in court.

In Nifsan, the court was persuaded by the evidence put forth by the buyers (and even that of the developer’s agent) whereby it was clear that the representations had been made, the buyers relied on those representations and the representations were made by the agent on behalf of the developer in circumstances where the developer had knowledge that those representations were false and made with the intention to mislead.

The decisions also have far-reaching impacts for conveyancing solicitors and advisory firms. If your clients intend to sign, or have recently signed, a contract for an off-the-plan unit in a development, the South Sky decision goes so far as to say that any and all representations concerning the buyer’s expectations for the development ought to be written into the contract.

Despite the South Sky decision, developers must ensure that they and their agents comply with the provisions of the Competition and Consumer Act 2010 (Cth) with respect to misleading and deceptive conduct and unconscionable conduct in the procurement of off-the-plan sales.

With the hearing of numerous claims in the District Court and Supreme Court throughout the state, it is certainly an interesting and exciting time for the development of property law and commercial litigation in Queensland.

Cronin Litigation Lawyers are currently acting for many buyers of off-the-plan residential units and houses on the Gold Coast and the greater Brisbane region. If you have purchased an off-the-plan property, please contact Melissa Coleman at Cronin Litigation Lawyers on (07) 5592 6633 to find out how we may be of assistance.