Misleading and Deceptive Conduct by a Real Estate Agent – but the Buyer still loses the Case
- 27 Mar 2018
The NSW Supreme Court in the matter of Hyder v McGrath Sales Pty Ltd (2018) NSW ConvR ¶56-390 has provided a fresh analysis of the considerations which apply when a buyer seeks to sue an agent for misleading in deceptive conduct under s 18 of the Australian Consumer Law.
This is a matter where the agent's conduct did amount to misleading and deceptive conduct, but where the buyer still lost the case.
• The conduct in question
The property in question (Lot 4) was a "battle axe" block in Bellevue Hill, Sydney.
When the property was marketed for sale, McGrath Sales (or rather co-agents relying on McGrath's materials) both orally and in their marketing material made representation to Mr and Mrs Hyder that the eastern side of the driveway included "private parking" for the four cars in tandem.
The driveway was actually a 'shared' driveway.
Whilst the strip of the driveway in question was owned by Lot 4, this strip was actually subject to "right of carriageway" easements in favour of other parties.
The driveway was comprised of three strips land (Lots 5 & 7 owned the other two strips). Each Lot had the benefit of a right of carriageway easement over the other two relevant strips. Furthermore, 3 other lots (Lots 2, 3 and 6) also had rights of carriageway easements over all the strips of land which made up the driveway.
It appears that as of about 2014, the vendor of Lot 4 would use the eastern side of the driveway as "private parking" for Lot 4. The vendor indeed went and installed a "private parking" sign. The agent clearly and unequivocally conveyed to the Hyders that it was certainly an area of private parking.
Mr Hyder sought advice about the contract from a lawyer before exchanging, and the lawyer did point to the rights of carriageway over the driveway. Mr Hyder did not investigate how this would affect the right to park there.
Mrs Hyder then went on to buy the property for $9.4 million.
After settlement, the Hyders had a dispute with a neighbour about the neighbour's contractors parking on the eastern side of the driveway. The neighbour replied that the 'whole driveway was a right of way' and it was then that the Hyders investigated the matter and thus realised the true situation of the driveway parking.
• Was the agent's conduct misleading and deceptive?
Parker J held that the agent's representations were indeed misleading and deceptive.
The agent had advertised the property as having a "double garage plus private off street and driveway parking", and also had a plan prepared which depicted the eastern side of the driveway as "private parking" outlining three cars.
The plan had a disclaimer clause stating "All information contained herein is gathered from sources we believe to be reliable. However we cannot guarantee its accuracy and interested persons should rely on their own enquires [sic]" but Parker J found that this did not circumvent the operation of the Australian Consumer Law, and that a reasonable observer would understand it to relate to the accuracy of the boundaries depicted and not the accuracy of the use of the land altogether.
The Hyders further alleged that they were told by an agent that the driveway strip gave them private parking and that that feature increased the value of the property. This alleged statement was, however, rejected by Parker J.
Being that the agent misled the buyer, should the buyer then succeed in being able to sue the agent?
• Would the buyer have proceeded anyway?
Having established misrepresentation, the court then needs to deal with "causation".
The key question for the issue of causation is 'in the event there was no misrepresentation, would the buyer have proceeded anyway'? If the answer to that is yes, the buyer will fail in their claim.
According to Parker J, the parking was a 'positive factor' in the purchase but not an 'essential' one.
In evidence, Mr Hyder conceded his wife "loved the property".
His Honour placed some significance on the north facing aspect of the property and its potential as a 'family home',
One wonders whether there would have been a different outcome had the house not already had a two car garage.
Having found the buyer failed on a ground of causation, the trial judge Parker J did not need to quantify the 'loss'. His Honour did so in the event that his decision on causation is appealed and held to be wrong.
After scrutinising the evidence of each party's valuer, His Honour found that the property was worth "$150,000.00" less (plus stamp duty) without the private driveway parking.
• Contributory negligence by the Buyer
His Honour Parker J further held that the buyer was negligent in failing to carry out their own due diligence about the property.
Having regard to the price of the property, a reasonable person should have read the contract and made proper enquiries about the driveway parking.
The negligence of the buyer (or the buyer's husband buying in her name) meant that the award of damages should be reduced by two thirds (had it not failed altogether on the grounds of causation).
• Thoughts and conclusions
A diagram showing the relevant features of the property and driveway is annexed to the judgment. It is worthwhile viewing this annexure, as one can see how Lot 4's strip of driveway is shorter than the others, and (after the entrance to Lot 3) there forms a 'shoulder' that a buyer of Lot 4 may have viewed the agent's representation about being able to park there as one which is perfectly reasonable.
It shows then how important a thorough understanding is of a contract, as the contract would have shown this to be an incorrect position.
The case is also a useful reminder of the effect of an 'exclusion clause' in a contract for the sale of land. As the contract contained a special condition stating that the purchaser does not rely on any representations, the vendor was protected against a common law claim for misrepresentation. The vendor, furthermore, was not liable for a statutory Australian Consumer Law claim for misrepresentation as that the ACL only applies to people selling land 'in the course of trade and commerce' (see this author's article on Williams v Pisano which deals with this point on our website).
Arguably the most important reminder that this case serves is one of the importance of causation. Being misled is not enough. You need to show that the misleading conduct caused you a loss.
Here, the buyer would more likely than not have still proceeded to purchase. Accordingly, the misrepresentation did not cause the buyer to lose anything.
Secondly, the buyer here should have investigated this issue more thoroughly. Their failure to do so meant that they were held contributory negligent. Had they not failed altogether on the causation issue, they would have had their damages reduced by 2/3 because of their contributory negligence.
Whilst His Honour invited submissions to made after the case on the questions of costs, the prima facie order was that Mrs Hyder pay the costs of the defendant. Accordingly, this was a case with major repercussions for Mrs Hyder.
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