Representations by selling agents & misleading and deceptive conduct

Generally, purchasers will pursue selling agents for misleading and deceptive conduct under section 18 of the Australian Consumer Law where they believe that the representations made by the agent contain incorrect information.

This article focuses on a recent appeal decision, Hyder v McGrath Sales Pty Ltd.¹

A purchaser entered into a contract for residential property for $9.4 million. The purchaser’s husband, who had more than 15 years’ property development experience, negotiated the contract.

The property purchased was a battle-axe block formed from the subdivision of a larger parcel of land. Access to the property is along a concrete drive that lies over three parallel strips of land that form a right of way. Each strip was burdened by an easement for carriageway in favour of the other lots. At the time of the purchase, there were two signs on a wall abutting the strip. One sign stated “private parking” and the other contained the street number for the property purchased.

The agent described the property online as having a “double garage plus private off-street and driveway parking.” A site plan was also published showing three cars parked at the end of the strip. A disclaimer appeared beneath the site plan stating:

“Scale in metres. Indicative only. Dimensions are approximate. All information contained herein is gathered from sources we believe to be reliable. However we cannot guarantee its accuracy and interested persons should rely on their own enquiries.” ²

Legal and valuation advice was given by the purchaser’s lawyer in respect of the right of way.

Shortly after settlement, an adjoining lot owner advised the purchaser that the whole area was a right of way.³

The purchaser claimed damages against the selling agent for misleading and deceptive conduct and contented that she and her husband decided to purchase the property because of the parking spaces available (amongst other things).

Whether conduct is misleading or deceptive will turn on the circumstances of the case. ⁴

The agent was a mere conduit as it had formed the idea that the area was exclusive to the seller based on the information provided by the seller and the signs on the drive. The information in question, was not expected to be within the selling agent’s own knowledge or expertise because it was considered a small agent with no legal or valuation expertise and could not be expected to have investigated this information. Had the selling agent been larger, advertised its commercial experience and knowledge and endorsed itself as a “consultant to institutional investors”, the information and representations could have been found to be misleading and deceptive.⁵

The purchaser failed to take reasonable care in respect of their own interests and due diligence. The right of way was clearly disclosed in the title search annexed to the contract and the purchaser’s solicitor and valuer expressly reported the right of way. Even if the parking was of importance, the purchaser should have taken reasonable care rather than relying on the statements of the agent, turned their minds to the specific advice they received and would not have proceeded with the purchase.⁶

The appeal serves as a warning to agents to make it clear where information has been sourced and to take care in drafting disclaimers.

Agents should also take care when holding themselves to a particular level of experience or being seen as having particular expertise. This can lead to the view that the information has been adopted or endorsed by the agent, rather than being merely passed on.

No matter the level of experience, agents should also verify the correctness of the information provided, wherever or however it may be sourced.

The case is also a reminder to purchasers to take reasonable care in pre-contractual enquiries and to seek specific advice in respect of aspects that are of significant importance.