Sale of Home – Does Purchaser recover due to misleading and deceptive conduct by the Vendor?

17/08/2015

Sale of Home –Does Purchaser recover due to misleading and deceptive conduct by the Vendor?   Is the Purchaser covered by Australian Consumer Law?  

The Supreme Court of Appeal on 29 June 2015 has considered a case involving the above question.  In 2003 Ms Dandris and Mr Williams purchased a property in Dover Heights and lived there and in about 2010 Mr Williams and Ms Dandris set about major renovations at the property. Ms Dandris obtained an owner/builder permit. 

In the initial hearing at the Supreme Court Ms Dandris was held responsible for the cost of rectification of the defective work as the Purchasers had the benefit of the statutory warranties pursuant to the Home Building Act 1999.  If neither of the Vendors had obtained an owner/builder permit then there may have been a different result in this regard, depending on the facts.  This article does not deal with the issue concerning the Home Building Act claim.  That is dealt with elsewhere on our website.

In this case the issue arose as to whether the Purchasers could claim against Mr Williams who was an owner but not the owner/builder. 

The Purchasers (being the plaintiffs in the Supreme Court Proceedings) claimed against Mr Williams on the basis that as a Vendor in the circumstances that had occurred was in breach of the Australian Consumer Law (ACL).  Pursuant to ACL a person must not in trade or commerce engage in conduct that is misleading or deceptive or likely to mislead or deceive. 

In 2011 the residential premises were advertised for sale on the “Domain” website.  The Purchasers having reviewed the advertisement, inspected the property and were handed an advertising brochure which contained statements concerning the property including a statement as to the high standard of renovations that had recently been carried out.

The Real Estate Agent apparently made statements about the competence of the builder and the nature of the renovations.

These representations induced the Purchasers to enter into a Contract to purchase the property. 

The purchase had been completed by the Purchasers in late 2012 and they had moved into the property.

Thereafter the Purchasers discovered difficulties with the building works which the Court held would costs in excess of $1million to rectify.

Separate from the claim against Ms Dandris for breach of the statutory warranties a claim was made against Mr Williams based on a claimed breach of the Australian Consumer Law in that he engaged in conduct that was misleading or deceptive or likely to mislead or deceive.  The representations made by the Real Estate Agent were deemed to be made by the Vendors.  It is clear that the representations were misleading.  However, was there a claim against Mr Williams for breach of the ACL? 

The Judge who heard the original case in the Supreme Court found that the Purchasers were induced to enter into the Contract for the purchase of the property by the representations made by the Agent with the authority of Mr Williams and Ms Dandris.  The Judge who originally heard the case found that the sale was a transaction in trade or commerce.  Part of the factual basis of finding that it was in trade or commerce was that the renovations were for the purpose of sale rather than to create a home for their personal use; and that the Vendors did not intend to live in the property for any significant period after the renovations were completed.  The initial Judge found that the renovations were for the purpose of improving the property and its sale value and in effect for their “investment strategy”.

Mr Williams who was only found to be liable for breach of the Australian Consumer Law appealed the decision.  The Supreme Court of Appeal by Judgment 29 June 2015 decided that the representations were not made in trade or commerce and accordingly Mr Williams was not in breach of Sections 18 or Section 30 of the Australian Consumer Law.  The Court of Appeal decided that the Vendors who had lived in the property for some time deciding to renovate the property with the view of selling it did not amount to conduct in trade or commerce.  Accordingly the Supreme Court of Appeal allowed the Appeal and set aside the Judgment against Mr Williams.  This did not affect the Judgment against Ms Dandris based on her breach of statutory warranties.

Each case will depend on its facts.  The outcome may be different if there is a history of a Vendor of purchase of a property, renovations and sale as this may constitute conduct in trade or commerce.  Careful consideration is needed to be had as to the factual matrix and to what one can prove.

There are often different persons or parties who have some input into the representations to achieve an outcome (such as an increase sake price) which is better than the outcome that would be achieved if the full facts were known to the Purchasers.  One needs to consider carefully the possible alternatives available in bringing proceedings and must always keep in mind the costs and benefit and alternatives that may be available.  For example, one always needs to keep in mind whether there is a benefit of Home Owners Warranty Insurance when considering whether to proceed initially or throughout in a claim against a builder whether a licensed builder or an owner/builder and have regard to cost benefit analysis.

Richard Watson seeks to raise these issues for persons who are aggrieved so that those persons who are aggrieved can make proper commercial considerations as to which course to adopt in attempting to resolve the difficulties that one finds themselves in.

If you are seeking a solicitor where experience matters, please do not hesitate to contact Richard Watson, a solicitor with in excess of 25 years experience in building and construction matters on 9221 6011.

This case was subject to Special Leave to Appeal to the High Court as at September 2015.

In December 2015 Special Leave to the High Court was refused and the decision of the Court of Appeal’s was upheld.