False and Misleading Representations in Property Transactions

The law protects parties to property transactions from deceptive conduct. Section 18 of the Australian Consumer Law prohibits a person in trade or commerce participating in conduct that is misleading or deceptive or likely to mislead or deceive.
This provision spans a wide range of conduct across all industries and has been the subject of many cases and judgments.
This post looks at misleading and deceptive conduct specifically in relation to property transactions and can hopefully give an overview of the type of conduct that is prohibited under the law in relation to property transactions.

What kinds of representations are prohibited?

The law prohibits false or misleading representations in connection with property transactions under Section 30 of the ACL. These prohibitions apply to statements that relate to:

• Sponsorship, approval or affiliation;
• The nature of the interest in land;
• The price to be paid for land;
• The location of land;
• The characteristics of land;
• The uses for which land may be used or for which it is capable of being used; and
• The existence or availability or facilities that could be associated with land.

This means that if a relevant person makes a false or misleading statement in relation to any of these matters, they will be in breach of the law.

This section applies if the representation is made in connection with transactions involving the sale of land however a sale does not actually have to have happened for the section to be engaged – it is enough that there is a potential transaction.

Where a relevant person breaches section 30, the party who has suffered loss as a result could bring a civil action for damages. It could also result in a remedial order, injunction or pecuniary penalty.

What is a 'representation' ?

The courts have thoroughly considered what will be deemed to be a false or misleading representation. The main points in relation to what will constitute such a representation are listed below.

Firstly, a representation is not limited to a verbal statement, it could also be :

• A statement made in writing
• A representation made by implication through certain language or gestures
• From a plan, drawing, map or photograph
• A gesture, a general demeanor or any other type of relevant conduct

Furthermore, even silence could constitute a representation. This could occur where a representation was made and it was previously true but this is no longer the case.

In addition, the representation does not actually have to be made to the person who brings the claim, in order to engage the section all that is required is that a false or misleading representation is made and as a result the person bringing the claim suffers loss or damage.

When is a representation 'false' or 'misleading'?

A false representation is very simply one that is contrary to fact. The person making the representation is not required to know that the statement they are making is false to be in breach of the legislation. Even where the person making the representation believes it to be true, if is contrary to fact they will still be held liable.

Determining whether a representation is misleading is slightly more complex. The entirety of the circumstances surrounding the representation will be taken into account including the context in which it was made.

Examples:

It may be useful to see real examples of circumstances the courts have deemed to be a breach of the legislation.

• A breach of section 30 was deemed by the courts to have occurred in ACCC v Gary Peer & Associates Pty Ltd [2005] FCA 404. In this case a real estate agent advertised a house for auction with a price guide of $600,000. In reality, the price at which the vendors were prepared to sell the property was substantially more.
• In Pryor v Given (1979) 24 ALR 442, a company was found to have breached section 30 of the ACL, after making misleading statements in relation to the sale of land. The advertisement for the sale of the land included pictures of houses and was captioned "a wonderful place to live". The court determined that the pictures and words together created a representation that houses could be built on the land. However, the land was subject to a planning scheme that required onerous conditions to be met and approved before anything could be built on the land.
• It was held in the case of Australian Equity Investors, An Arizona Ltd Partnership v Colliers International (NSW) Pty Ltd (No 4) [2011] FCA 442, that a valuation company breached section 30 by making false and misleading statements concerning the price to be paid for land.
• In Garvey v Vamamu Pty Ltd (1988) ATPR 41-656, a real estate company was found to have made false and misleading statements when an agent induced those bringing the claim to make an offer which they thought would be accepted by the owners. However, their offer was merely taken as a bid at an auction and the property was eventually sold to a higher bidder.

Theses cases show how a breach of the law can arise in relation to property. Whether you are buying or selling property you should seek legal advice as soon as possible especially if you have concerns about false or misleading representations.

Contact Us

If you are thinking about buying or selling property, or for any other matters relating to property, including property disputes, contact Szabo & Associates Solicitors today. At Szabo & Associates Solicitors we can help advise on all aspects of buying and selling property. Call us on (02) 9281-5088 or fill in the contact form to the right of this page.