Misleading and Deceptive Conduct in Property Transactions and Sales of Real Estate

Misleading and Deceptive Conduct in Property Transactions and Sales of Real Estate



Misleading and deceptive conduct in property transactions and sales of real estate

A real estate agent or seller’s misleading and deceptive conduct may allow buyer to terminate contract. Decisions in the Supreme Court on alleged misrepresentations by sellers and their agents have impacted the current litigation and property landscape.

Nifsan Developments

In Nifsan Developments Pty Ltd v Buskey & Anor [2011] QSC 314 (Nifsan), the Supreme Court decided that due to misrepresentations made by an agent on behalf of a developer, the contract for sale of a penthouse apartment was void.  Representations were made regarding views that were held to be misleading and deceptive conduct, and the deposits were successfully returned and the contract made void. This case drew on sections 52 and 53A of the Trade Practices Act 1974 (Cth), however this has been succeeded by the Competition and Consumer Act 2010 (Cth)(CCA), which contains similar provisions for misleading and deceptive conduct.

While the decision in Nifsan is on appeal, it is currently good law in Queensland that a contract for sale of property will be considered void where:

  1. the evidence makes it clear that representations have been made;
  2. that the buyer has relied on those representations; and
  3. an agent made the representations on behalf of the developer, who knew they were false and were made with the intention to mislead.

South Sky

In a decision which contrasts with the Nifsan position, South Sky Investments Pty Ltd v Hendrik Prins & Sokham Prins [2011] QSC 175 (South Sky), a number of claims against Oracle developer South Sky Investments Pty Ltd failed on the basis that the prejudice suffered by the applicants was caused by inadequate contract terms.

The plaintiffs claimed that they had contracted to buy off-the-plan apartments in ‘The Oracle’, whereas the apartment complex in question was to be branded by a different company. They pleaded that South Sky failed to disclose the change of branding and this was a breach of the Body Corporate and Community Management Act 1997 (Qld) (BCCM), and that they would get substantially different products from what they had initially contracted for.

The court held that they failed to establish their case of inaccuracy of the BCCM disclosure statements, and the inaccuracy found was not sufficient to cause material prejudice. The court also placed more significance on the written terms of the contracts, rather than the expectations of the buyers. As the developers had delivered ‘an apartment’ in a ‘residential complex’ they had fulfilled their contractual obligations. There was no right to termination and had the purchasers sought to rely on those expectations they should have incorporated them into the contracts.

This decision has since gone on appeal in the Queensland Court of Appeal and was dismissed with costs in favour of South Sky, solidifying the position.

Current position of Queensland law

The contrasting positions from the two Supreme Court matters will mean that until any further development of the law, claims will be decided on a case-by-case basis.

South Sky makes it clear that where purchasers are hoping to rely on any and all representations made to them by the developer of an off-the-plan unit, those expectations should be incorporated into a written contract.

Likewise, until an appeal decision on Nifsan is reached, it is imperative that developers and their agents comply with the provisions of the CCA with respect to misleading and deceptive conduct in property sales.

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