Off the plan misrepresentation – Case note on Ripani v Century Legend Pty Ltd [2022] FCA 242

THE KEY TAKEAWAYS

  1. The words “artist’s impression” do not detract from the materiality of an image and the representations it conveys.
  2. Boilerplate disclaimer clauses in marketing material and exclusion clauses in contracts are insufficient to exclude the statutory remedies under the Australian Consumer Law comprised in Schedule 2 of the Competition and Consumer Act 2010 (Cth) (ACL).
  3. Accuracy in the descriptions of a property being sold off the plan and any images or artists impressions must not be misleading or deceptive.
  4. Any visual or spoken or written matters which may be misleading or deceptive must be specifically referenced and corrected in the contract.

THE KEY ISSUE

Marketing material for a high end off the plan apartment included a depiction that there would be a free span opening and seamless transition between internal living areas and an outside terrace.

The apartment could not be constructed with the free span opening feature and there was evidence that the developer, Century Legend was informed it could not be achieved yet contracts were exchanged with the Ripanis, without the understanding by the Ripanis of the free span opening feature being corrected.

The Ripanis sought to rescind the contract because the depiction of their apartment in marketing material showing the free span opening feature was a misrepresentation and was deceptive under s18 of the ACL.

Both the marketing material and the sale contract contained ‘boilerplate’ exclusion clauses aimed at excluding spoken and visual representations, however those clauses do not exclude statutory remedies under the ACL.

THE KEY FINDINGS BY THE COURT

The Court in Ripani v Century Legend Pty Ltd [2022] FCA 242 (Ripani case):

  1. found that the Ripanis would not have entered into the contract had they believed that the apartment could not have been constructed as depicted;
  2. found that the Ripanis relied on the material showing the free span opening feature in entering into the contract; and
  3. ordered the rescission of the contract and payment of and recovery of the Ripanis’ losses and costs and return of their security under sections 237 and 243(a) of the ACL or alternatively in equity.

OFF THE PLAN AND LEGISLATION

The Ripani case is a reminder that legislation at the State and Commonwealth level continues to broaden the protections for purchasers of off the plan purchases. This includes the off the plan disclosure and vendor rescission regimes under the Conveyancing Act 1919 (NSW) and Conveyancing (Sale of Land) Regulation 2017 and the design and building practitioners compliance declaration regime under the Design and Building Practitioners Regulation 2021 (NSW).

The Ripani case is a reminder that developers and their marketing agents must also be aware of the application of the ACL when marketing off the plan units. It is clear from previous case law and the Ripani case that the commonly seen disclaimers and exclusion clauses in marketing materials and in contracts are insufficient to protect developers.

THE AUSTRALIAN CONSUMER LAW

The ACL expressly prohibits misleading or deceptive conduct in trade or commerce under section 18. Section 18 has two elements:

  1. the conduct must occur in the course of ‘trade or commerce’; and
  2. the conduct must be misleading or deceptive or likely to mislead or deceive.

‘Trade or commerce’ is to be given its ordinary meaning and can have occurred within Australia or between Australia and other jurisdictions, but it does not include, for example, purely private transactions.

For conduct to be ‘misleading or deceptive’ or ‘likely to mislead or deceive’, generally speaking, the impugned conduct must lead or be likely to lead an ordinary or reasonable member of the class of consumers likely to be affected by the conduct into an error.

If a conduct is found to be in contravention of section 18 of the ACL, the Court may make any order as it thinks fit under s237 of the ACL, including but not limited to those set out in s243 of the ACL such as termination of the contract and payment of loss and damage.

This publication is for general information purposes only and does not constitute legal advice. You should seek legal advice regarding your particular circumstances.