Allens

Real Estate

Focus: Room with a view: avoiding alleged misrepresentation in developments

14 September 2010

In brief: Two recent Queensland Supreme Court decisions have highlighted the need for developers to control the information their agents provide to prospective purchasers, after apartment buyers were unable to terminate contracts based on claims of misleading and deceptive conduct related to views from the apartments. Partners Tony Davies (view CV) and Tracey Harrip (view CV) and Lawyer Kris Byrne report.

How does it affect you?

Although in these two recent cases1, the developer, Mirvac, was found to have provided information that was not misleading or deceptive, the decisions highlight that developers will need to:

  • anticipate likely enquiries from apartment buyers about apartment features (including views), and providing agents with appropriate responses (for example, a manual or protocol); and
  • have models of a development accurately constructed, with consideration given to scale, surrounding structures and other salient features of the development.

These measures will be of significant assistance in addressing alleged representations that are said to be inconsistent with the appropriate responses or models.

Background

Mirvac Queensland Pty Ltd brought separate proceedings against the respective purchasers; however, as the facts and decisions were similar, we will examine them together.

In 2007, Mirvac entered into contracts with the purchasers for the sale of apartments in its Tennyson Reach development. In 2009, Mirvac called for settlement of the newly constructed apartments. The purchasers refused to settle, claiming that the statements made by Mirvac and its agents before the purchasers entered into the contracts were misleading and deceptive statements under sections 52 and 53A of the Trade Practices Act 1974 (Cth)).

The purchasers argued that Mirvac's agents had represented that the views from the apartments would be similar or identical to those enjoyed from the development's sales office. The sales office had an essentially clear view of the river, without significant interference by mangroves. As mangroves were at that time present between the apartments and river, the agents were also said to have represented that the mangroves would be substantially cleared or trimmed to provide such views.

Mirvac contended that the views from the apartments were described by Mirvac's agents to the purchasers as 'filtered' or 'through trees'. This was because the mangroves were not to be entirely removed, but rather trimmed according to guidelines agreed with the relevant government authority.

At trial, Mirvac disclosed a sales manual relating to the development, which it provided to its agents. Relevantly, the manual provided that certain mangroves would be selectively trimmed and there would be an ongoing maintenance program. The manual stated that it was anticipated that the existing mangrove canopy would filter views up to approximately level 4 of the relevant buildings in the development (both purchasers entered contracts for sale of apartments below level 4).

A model of the development was also present in the courtroom at trial. Justice McMurdo accepted that the model was on display at the time the contracts were entered into and adequately represented the extent of the mangroves.

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The decision

Justice McMurdo found that it was unlikely that the alleged representations had been made. Although the passing of time had affected the recollection of Mirvac's agents, Justice McMurdo considered it improbable that they would make such representations because they would have been inconsistent with the manual information and the model (and surrounds). For example, the model was present in the display centre before the contracts were entered into. According to Justice McMurdo, this meant it was unlikely that a representation that the views would be unobstructed was made while in the display centre (as was alleged), as it would have been directly inconsistent with the model. A prospective purchaser would have immediately contested such a representation, which was not shown to have occurred here.

In addition, the purchasers' and their witnesses' evidence was largely rejected by Justice McMurdo as being unreliable and inconsistent. The inconsistencies were found in their court documents, letters sent by the purchasers themselves before seeking legal advice, letters sent by their solicitors after legal advice was obtained and oral evidence during the trial.

The purchasers were ordered to specifically perform their obligations and settle the contracts of sale.

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Conclusion

The decisions highlight the importance of developers controlling the information that their agents provide to prospective purchasers. For example:

  • have a manual or protocol that provides development information, arrange training sessions for agents and actively encourage compliance; and
  • ensure models are accurate in all respects, particularly as to surrounding features.
Footnote
  1. Mirvac Queensland Pty Limited v Holland & Anor [2010] QSC 330 and Mirvac Queensland Pty Ltd v Tyan Pty Ltd ATF Tavakol Investment Trust [2010] QSC 333 (both decisions were delivered on 8 September 2010).

For further information, please contact:

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