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Potentially significant implications for property development marketing methods in Australia
In November 2022, the Full Federal Court handed down an appeal judgment in Century Legend Pty Ltd v Ripani. The case concerned a drawing in a marketing brochure and whether it amounted to misleading and deceptive conduct. The Court allowed the appeal and ordered a new trial. So, although the issues are yet to be determined, the case signals some important considerations for property development teams when marketing off-the-plan properties for purchase.
Misleading and deceptive conduct case: the background
In early 2022, the Federal Court considered the property’s artistic drawing or “render” in the brochure. The purpose of the brochure was to market the property developer’s off-the-plan development, and the Court was asked to decide whether the render was misleading and deceptive. It showed a large indoor space and an outside terrace at the same level. But after signing the contract of sale, the developer told the purchasers that the apartment could not be constructed as shown in the render.
After the purchasers took legal action, the Court decided the render was misleading and deceptive.
Read more about the Court’s decision at trial.
The property developer appealed the decision to the Full Federal Court. The Court set aside the previous decision and ordered a new trial.
Why did the Full Federal Court allow the appeal?
At trial, the Court decided to exclude evidence from Kate Hart, who was an employee of the architecture firm engaged by the developer. Hart said that on several occasions, she had told the developer that the internal/external opening in the render was not possible to build.
However, the appeal mainly concerned the question of reliance, and the Full Federal Court highlighted two key findings of the primary judge:
- The developer’s disclaimer and exclusion clauses did not prevent the purchasers from relying on the misleading representations.
- The contract was subject to satisfactory approval of the floor plan, and the floor plan was attached to the final contract. It showed that the opening depicted in the render would not be constructed. Even so, the purchasers were entitled to rely on the render.
When the purchasers provided a bank guarantee, making the contract of sale unconditional, in effect they approved of the final floor plan.
At trial, the purchasers argued they did not fully understand the width of the opening as shown on the floor plan. However, Hart gave evidence that she informed the purchasers of this issue in various meetings. Ultimately, the trial judge preferred the purchaser’s evidence on this point.
On appeal, the Full Federal Court found that the trial judge made an error in rejecting Hart’s evidence about the floor plan and ordered fresh proceedings.
The findings of the new trial will impact many interested parties, including developers, purchasers, agents and architects.
What issues will be considered in the new trial?
The new trial will focus on whether the purchasers continued to rely on the developer’s misleading and deceptive conduct between the following dates:
- 1 April 2017, the date they signed a conditional contract to purchase the apartment; and
- 29 August 2017, the date the contract became unconditional.
If the new trial finds the purchasers did continue to rely on the representations for that period, the Court will grant some form of relief.
We will provide a further update on the outcome of the new trial.
Important things to consider
When selling or marketing properties to potential purchasers, developers should always keep in mind the following:
- Any statements or representations must accurately reflect the development.
- If any publications or marketing material become inaccurate after publishing, they should be updated to ensure accuracy.
- Immediately notify purchasers of any changes in circumstances that may adversely affect the use and enjoyment of the lot.
- Encourage potential buyers to seek independent professional advice and undertake due diligence and investigations before purchasing.
The final word
This case demonstrates how critical it is to have accurate information when making a significant purchase decision and the difficulties in managing the effects of inaccurate information. It also indicates that property development marketing may change enormously if the next decision favours the purchasers.
As Mcelwaine J stated in his reasons for judgment, this case:
“illustrates the inherent risk for a vendor in the marketing of an “off-the-plan” apartment development where the ability to construct a building does not ultimately match the pre-development promotional material, despite the inclusion of disclaimer and exclusion clauses in the formal contract of sale.”
