Facts

Gary & Carol Avis and Grant & Lyn Brecht (the Buyers) separately purchased lavish off the plan penthouse apartments in the 2003 development known as “Number One Park” at Sunshine Beach, Queensland. The Buyers dealt with two separate real estate agencies (the Agents), that had been engaged by the developer, Mark Bain Constructions Pty Ltd (the Developer), to market the properties. The Agents represented to the Buyers that the apartments would exhibit panoramic views of the surf that could never be built out by other developments. These representations were exemplified in the words of one agent which were “you may not see waves breaking on the sand, but you will see waves breaking”.

Subsequently, the construction of a development named “Splash” commenced on the ocean side of Number One Park. The Agents assured the Buyers that Splash would not interrupt the views from the balcony’s of both apartments. They represented that they had confirmation from the local council that Splash’s height would be restricted. Upon completion, Splash was constructed significantly higher than had been represented. Even though Splash did not breach any council imposed height limitations, it resulted in a considerable interruption of views of the Buyers and loss of value of the apartments.  

Proceedings

Whilst the Buyers instigated separate lawsuits, they were heard together with the Developer named as first defendant and the Agents as second defendant in the matter. The Buyers bought proceedings against the Agents claiming that the representations regarding the views were false, misleading and deceptive in contravention of sections 52 and s 53A of the Trade Practices Act 1974 (Cth) (TPA).

The Buyers also instigated proceedings against the Developer arguing that the Agents were duly authorised to make the representations on behalf of the Developer and with the Developer’s knowledge and approval. The Developer denied any responsibility and countered that the Agents’ authority was solely limited to marketing the apartments for sale.  

Following the second day of the ten day trial, the Agents settled with the Buyers by agreeing to a payment of $200,000 including costs. The Buyers were then left to pursue the matter further against the Developer, which continued to deny any liability.

Issues

At trial, Justice Atkinson considered the following issues:

  • Were representations made by the Agents to the Buyers? If so, what were those representations and were they false, misleading or deceptive? If so, were the representations relied upon by the Buyers?  
  • Is the Developer liable to the Buyer for any such representations made by the Agents?  
  • Did the Buyers suffer damage as a result of any such representations and if so, what is the quantum of any damage?

Decision

Justice Atkinson found as follows:  

  • regardless of the fact that there was a clause inserted into both sale contracts stating that the Buyers could not rely on any representations made by the Developer or the Agents, the Agents had misrepresented the views and breached the relevant provisions of the TPA  
  • if the Agents had not made the representations about the views, the Buyers would not have entered into any contract to purchase the apartments  
  • section 84(2) of the TPA ensured that the Agents’ representations were deemed to have been made by the Developer. This was due to the fact that the Agents were engaged to market the apartments on the Developer’s behalf and subsequently made the representations within the course of their authority.

Order

Each of the Buyers were awarded in excess of $200,000.00 damages against the Developer on account of these false representations. These figures were reflective of the loss of value between the contract price paid for the apartments and the actual values which had considerably decreased after the views had been impinged.

Implications

This case highlights the need for developers to be vigilant when engaging real estate agents to market their developments. Where the conduct of the agents is within the agents’ actual or apparent authority, that conduct is taken to be the conduct of the principal unless the principal has taken reasonable precautions and exercised due diligence to avoid the conduct in question. The onus is on the principal to demonstrate this.