Are you selling land as a vendor in Trade & Commerce: Does Australian Consumer Law apply to you?

This article was written by Dominic Maley. Please contact Maclarens Lawyers on (02) 9682 3777 to discuss your liabilities and rights as a vendor.

The NSW Court of Appeal in Williams v Pisano (2015) NSW ConvR 56-349 has recently clarified the uncertainty of when a vendor will be deemed to be selling a property “in trade or commerce” for the purposes of the Australian Consumer Law ("ACL").

If you are deemed to be selling in the course of trade or commerce, then ACL provisions will apply, with the most notable example being the provision against conduct which is likely to mislead or deceive.

• What is the problem if the ACL applies?

The ramifications of the ACL applying relates to remedies. The remedies under the ACL are far more extensive than under common law for misrepresentation.

The ACL provides most pertinently the statutory remedies of injunctions, damages, compensation orders, orders for non-party consumers, public warning notices and undertakings.

You must accordingly take great care when you are selling a property, and the Australian Consumer Law applies.

• When does the ACL apply?

Usually, the Australian Consumer Law does not apply for an ordinary sale of residential premises.

In the primary decision of Bruno Pisano v Georgia Dandris [2014] NSWSC 1070, it was held by Hammerschlag J that Mrs Dandris, whom self-described as an interior designer, sold a property as an owner builder in the course of trade or commerce.

His Honour held at para [310]:

"I am satisfied that Dandris and Williams renovated not to create a house for their personal use but because they viewed it as an investment property. I find that their intention was to improve the house for resale for financial gain and I find that the sale, including its advertising, was the carrying into effect of their investment strategy."

Accordingly, when the property was represented as being one of high quality, when it was to the contrary riddled with defects pertaining to water penetration, the remedies of the ACL applied and a verdict was entered against Dandris and Williams for $1,064,659 plus GST of $106,465, totalling $1,171,124.

The Court of Appeal, however, overturned this decision.

Emmett JA, with whom Bathurst CJ and Justice of McColl JA agreed, concluded that the phrase "in trade or commerce" was a qualification.

If the ACL applied in every sale of land, it would render the phrase 'in trade or commerce' "quite otiose".

The NSWCA concluded that the primary judge had erred in focusing on the renovation of the property with the view of making a profit as being an operation in trade and commerce, particularly when the vendors had lived in the property for a significant period of time. Home renovations are not uncommon, and that in and of itself is not enough to amount to conduct to which the ACL should apply.

It should be noted that the court placed great weight on the criterion of Dandris and Williams having lived in the premises for a significant period. If the residence was only short-lived, one may query whether the same outcome would have resulted in the court.

If we go into the issue further, then you would say that someone who does not use it in those circumstances, but rather, operates more in a business context and does the renovations more in a business fashion with a view to making a profit, then the Australian Consumer Laws would apply. The Australian Consumer Laws clearly apply to developers.

Whilst developers need always factor in the possibility of remedies under the ACL applying, other persons engaged in quasi-development need to also make such allowances, as the Australian Consumer Laws may apply.

If you want to discuss your liabilities when selling a property, and whether the Australian Consumer Law applies, please contact Maclarens Lawyers on (02) 9682 3777.

Note: on 15 December 2015, a Special Leave Application was rejected by the High Court. Please ensure this article is read subject to any decision by the High Court.