Recent court decisions help to clarify what may be regarded as misrepresentation by a vendor who is selling land.
In Commonwealth Bank of Australia v George Hilellis & Ors the vendors sold an investment property to purchasers who were introduced to the transaction by a mortgage broker. The contract showed a price of $550,000 but at settlement the vendors accepted a lesser amount equal to the amount of the mortgage loan made to the purchasers by the bank. The deposit cheque was not banked by the vendors. The court found that the property was worth less than the mortgage loan amount. The bank alleged misleading and deceptive conduct by the vendors, purchasers and mortgage broker.
The court held that the information about the price and deposit in a contract may amount to a representation which, for a contract which is subject to finance or an investment property, may constitute misleading and deceptive conduct.
In particular the court held that:
- the deposit shown in the contract is a representation that the amount is paid.
- the price shown in the contract is a representation that the amount is the market price.
- the representations in the contract were relied upon by the bank which suffered loss.
This case is consistent with decisions about the use of rebate clauses in contracts for the sale of land. A practice has developed where a vendor may agree to sell a property for a price which is shown in the particulars of sale of the contract. However, the transaction may also involve the purchaser being entitled to receive a rebate or reduction in price at settlement. The rebate or price reduction may not be immediately apparent from an examination of the cover or particulars of sale of the contract. It may be shown in the special conditions or in a separate document. In the NSW Supreme Court case of Miro & Ors v Fu Pty Ltd the court held that such rebates or price reductions, unless clearly and obviously disclosed, have the potential to mislead other persons such as brokers, valuers, lenders, the State Revenue Office or the market generally. This case is authority for the view that the use of contradictory clauses to achieve rebates or price reductions may lead to claims against the parties arising from their misleading and deceptive conduct.
For further information or assistance please do not hesitate to contact Tim Robertson.
