Case review: Federal Court decides that marketing materials contained misleading and deceptive representations August 19, 2022

The marketing campaign for an off-the-plan apartment came unstuck when two unhappy customers complained about misleading and deceptive representations

Marketing campaigns must comply with consumer protection laws and must not contain misleading and deceptive representations. This is particularly the case for off-the-plan property purchases where an artist’s impression is used to promote the property. The Federal Court of Australia’s 2022 decision of Ripani explored these issues.

This decision was successfully appealed in November 2022. For more information, please read our article about the appeal decision here.

What were the facts of the case? 

In 2017, Mr and Mrs Ripani purchased an apartment off-the-plan to be constructed in Melbourne’s CBD. Their decision was, in large part, influenced by the developer’s brochures promoting the property. The brochures were displayed at the site and available for prospective buyers to peruse.

The brochures showed computer-generated images, known as renders, of what the development would look like once constructed. Renders are commonly used to promote off-the-plan sales. The developer also hired a real estate agent to engage with prospective purchasers at the display site.

The Ripanis were particularly drawn to one of the renders in the brochure, depicting a large open plan space and outside terrace at the same level. They entered into a $9.58 million contract of sale for this property.

However, after they entered into the contract of sale, the Ripanis were told the apartment could not be constructed according to the design depicted in the render.

The Ripanis took legal action, claiming that they should have been able to expect that the apartment would conform with the render. They also claimed that the render images were misleading and deceptive representations under section 18 of the Australian Consumer Law (ACL).

What did the Court consider? 

The Court considered two key issues:

1. What reliance the Ripanis could have reasonably placed on one of the renders
2. Whether the Ripanis would have entered into the contract of sale, even if they had not believed the apartment would conform with the render

In dealing with the first issue, the Federal Court first needed to consider whether the render image did in fact convey a “free span opening and seamless transition between the internal living areas of the apartment and the terrace,” as claimed by the Ripanis. The Court said it did. 

Was there a deliberate deception?

The developer’s project manager gave evidence that it was actually impossible to construct the free span opening that was depicted in the render. On that basis, the Court said that the renders were not only misleading and deceptive, but made without a reasonable basis.

An architect involved in the development also gave evidence about a discussion between herself and the Ripanis, in which she informed them that the free span opening could not be constructed in the way it was depicted in the render. The Court rejected this evidence. 

The Court accepted and discussed the significance of other evidence, which included that:

• Although the opening was not specifically discussed, the marketing materials and the indoor/outdoor transition depicted in the render image (termed the hero render) was a feature that particularly attracted the Ripanis;
• The Ripanis made reference to the hero render and expressed that the image depicted “what they were looking for” in an apartment;
• It is usual practice to sell off-the-plan apartments by reference to marketing materials.

The Court found the Ripanis would not have entered into the contract of sale had they known this was an inaccurate representation of this feature.

What was the effect of disclaimers and inscriptions?

The developers sought to rely on the inscription “artistic impression” which accompanied the render. 

The Court rejected this and said that these words “do not suggest that the key elements of the render will not be constructed”. Secondly, the Court critiqued the utility of this statement altogether, stating that the render was “self-evidently an artist’s impression”.

In addition to the inscription, the marketing brochure included a disclaimer. The Court emphasised the important context of this disclaimer, including that it was contained in small font, on page 96 of a lengthy brochure. The Court said that even if the Ripanis had read the disclaimer, it was “meaningless” and failed to communicate anything that might have changed the Ripani’s impression of the render image. 

Therefore, these attempts to qualify the representations were ineffective due to:

1. The placement and prominence of the disclaimer; and 
2. The ambiguous language

Could the developer contract out of the ACL?

Century Legend also sought to enforce clauses in the contract of sale under which the purchasers acknowledge that, for example:

• The contract supersedes all pre-contractual negotiations and agreements; 
• Photographs and other images created for marketing purposes cannot be relied upon and are subject to change.

The Court affirmed the well-settled position that exclusion clauses will not be upheld to the extent they seek to exclude the operation of the ACL. However, it noted that these clauses are a relevant consideration in deciding whether or not pre-contractual representations were relied upon.

Summing up

The case is an important statement about various issues surrounding misleading and deceptive conduct in property transactions. The key findings relevant to the facts of this case included:

• The feature was of particular appeal to the Ripanis, and nothing indicated to them that the apartment would not conform with that render
• The inscription “artistic impression” accompanying the render was not sufficient to qualify representations depicted by the render 
• The render images of the apartment were clearly representations within the meaning of consumer law, capable of being reasonably relied upon
• The general disclaimer contained in the marketing brochure was inadequate
• The estate agent made misleading and deceptive representations in their capacity as agent for the developer. The agent was unaware of the inaccuracies and was therefore deemed a mere innocent conduit for the representations

The Court also made some more general observations:

• Developers should be mindful that inaccurate marketing materials for off-the-plan apartments can amount to misleading and deceptive representations
• A disclaimer drafted in clear terms and in a prominent position may be considered reasonable and acceptable to a court, however this always depends on the particular circumstances
• Clauses in the contract of sale cannot exclude the operation of the ACL

If you’re concerned about whether your marking materials may be misleading, or if you have questions about an off-the-plan purchase, our property and commercial teams can help. Contact us to learn more about misleading and deceptive representations in property transactions.  

By Milly Berry