The Federal Court has handed down a decision which is likely to have a significant impact on how developers are able to market apartments being sold on an "off-the-plan" basis.
Key takeaways from the case: Ripani v
- Developers must ensure marketing materials issued to potential purchasers of off-the-plan apartments are accurate. Inaccuracies could constitute a misleading and deceptive representation which would entitle a purchaser to rescind a contract of sale.
- Exclusion clauses in a contract of sale may not be effective at remedying misleading and deceptive representations made in marketing materials.
- General disclaimers about the adequacy or accuracy of information in marketing materials may not preclude such material from being found to be misleading and deceptive.
- Inscribing 'artist impression' on an image used in marketing materials does not preclude that image from being misleading and deceptive.
Background
In 2017, Mr and
In deciding to enter into the contract, the Ripanis relied heavily on marketing materials provided by
The Brochure included the below render (Image: RotheLowman (accessed at http://www.austlii.edu.au/cgi-bin/viewdoc/au/cases/cth/FCA/2022/242.html)) which depicts a large free span opening between the inside of the living areas and the outside terrace of the apartment purchased by the Ripanis.
Despite extensive use of this render throughout its marketing campaign,
The Ripanis commenced proceedings against
Decision
His Honour, upon reviewing the evidence put forward by the Ripanis and
- the render represented that there would be a free span opening and seamless transition between the internal living areas of the apartment and the terrace;
- the Ripanis relied upon the representation conveyed by the render at the time they entered into the contract of sale; and
- the Ripanis would not have entered into the contract had they not believed at the time that the apartment would be constructed in conformity with the render.
In responding to each of the defences raised by
- Exclusion Clause: as it is well accepted that exclusion clauses are ineffective at excluding the operation of the ACL,
Century Legend made the novel argument that the clauses had the effect that no representations were made to the Ripanis. The exclusion clauses, which applied to both pre-contractual information and any representations made byCentury Legend , were described by the court as 'boilerplate', and found to have no corrective or curative effect on the misleading impression created by the render.
This was ultimately because the exclusion clauses were not expressed in a manner that would make the Ripanis aware the render was not a true depiction of what their apartment would look like when constructed. In reaching this conclusion, it was remarked the exclusion clause contained an acknowledgment that the Ripanis had entered into the contract following an inspection of the yet-to-be constructed apartment. - Artist impression: in the context of an off-the-plan sale where renders are a proxy for an inspection, the inscription of the words 'artist impression' on the renders did not have the effect of curing the misleading representation conveyed by the render.
- Disclaimer: the disclaimer, which was located towards the end of the Brochure and given no particular prominence, was described as vague, ambiguous and meaningless.
In light of this, and having not been specifically drawn to the Ripanis' attention (i.e. "it should not be expected that potential purchasers, like the Ripanis, would study a glossy marketing brochure with an eye to the fine print of a disclaimer at the back of the booklet"), the disclaimer failed to cure the misleading and deceptive representation conveyed by the render.
As a consequence, the Ripanis were entitled to rescind the contract under sections 237 and /or 243 of the ACL and recover their losses from
A focus on consumer protection
It is instructive to compare some of the conclusions in this case with the position in
Under this regime, developer must serve a Notice of Changes if there is a change in a material particular that adversely affects the use and enjoyment of the lot. If the purchaser would not have entered into the contract had the purchaser been aware of the inaccuracy and would be materially prejudiced by the change, the purchaser can either rescind the contract or make a claim for compensation.
Importantly, the legislation allows the purchaser to rescind without giving any reasons, and there is no longer a need to bring proceedings in the
To date, this legislation remains untested in the Courts however, as the market shifts there are likely to be cases that arise.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
Lawyers Weekly Law firm of the year 2021 | Employer of Choice for Gender Equality (WGEA) |
Ms
Level 25
3000
Tel: 29210 6500
Fax: 29210 6611
E-mail: jeremy.bojman@corrs.com.au
URL: www.corrs.com.au/insights
© Mondaq Ltd, 2022 - Tel. +44 (0)20 8544 8300 - http://www.mondaq.com, source