The Australian Consumer Law provides protection for certain buyers when sellers engage in misleading and deceptive conduct. However, such protection often does not extend to buyers of residential property.
Special Counsel, Anthony Pitt and Solicitor, Borcsa Vass discuss a recent New South Wales Court of Appeal decision which demonstrates the significance of buyers of residential property not having the protection of the Australian Consumer Law, and where they could turn to instead.
Williams v Pisano  NSWCA 117
In Williams v Pisano, Mr and Ms Pisano (Buyers) purchased a property (Property) from Mr Williams and his wife, Ms Dandris (Sellers). The Property was sold for $3.35 million.
The Sellers originally purchased the Property in 2003 and lived in it until 2010. Originally, it was a modest three-bedroom house. In 2010, they moved out to allow renovations to be carried out during 2010 and 2011. The renovations resulted in the Property being converted into a double-storey five-bedroom house with a swimming pool and a rooftop terrace with views of Sydney Harbour. The renovations were carried out largely under the supervision of Ms Dandris, without detailed architectural plans or supervision.
In late 2011, the Sellers retained a real estate agent (Agent) to market the Property for sale. The online advertisement contained statements about the quality and standard of the renovations carried out on the Property.
The Buyers saw the advertisement and on 19 December 2011, inspected the Property. At the inspection, the Buyers were given a brochure about the Property which also contained statements about the quality and standard of the renovations. During the inspection, the Agent also made oral statements about the renovations. Around this time, Ms Dandris handed Mr Pisano a business card describing her as an “interior designer”. The Buyers agreed to purchase the Property the following day.
After settlement, the Buyers moved into the Property. Problems however soon emerged, and on 16 April 2012, there was significant water penetration into the Property following rainy weather.
The Buyers sued the Sellers claiming a breach of section 18(1) of the Australian Consumer Law, which provides that:
“A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.” (our emphasis)
The issues at trial
The Sellers accepted that the representations about the quality and standard of the renovations were misleading or deceptive. The Sellers however argued that the conduct was not in “trade or commerce” and this meant that the Buyers were not entitled to the protection of section 18 of the Australian Consumer Law.
At first instance, the Supreme Court of New South Wales disagreed and found that the Sellers were liable under section 18 of the Australian Consumer Law.
The Sellers appealed. The Court of Appeal agreed with the Sellers, and found that the conduct was not in “trade or commerce” and therefore the Buyers could not succeed under section 18 of the Australian Consumer Law.
Wait, aren’t all sales in “trade or commerce”?
This was an argument put by the Buyers at one stage of the appeal. The Court of Appeal said no. The Court explained:
“In ordinary circumstances, a person who sells his home, whether by private treaty or by auction and whether he conducts the negotiations personally or through a real estate agent, would not be said to be undertaking those activities in the course of a trade or business or in a business context. Whether or not an estate agent is used and whether or not that agent advertises the house, by preparing brochures or other advertisements, and whether or not the agent sells by auction or merely negotiates by private treaty, the sale will normally remain a sale by the vendor of his house and not an act done in a business context.”
In the context of the Australian Consumer Law, “trade or commerce” requires the conduct to be in a commercial setting as opposed to a private setting, such as private sales between people who are not ordinarily in the business of selling that particular thing. One must consider the character of the parties involved, the motivation for the transaction and the relevant person’s role in the transaction in order to determine this question.
Sales of residential properties are often between a private person who has resided in the property for a length of time and a private buyer who then intends to reside in it for a length of time. Neither the buyer nor the seller can be said to be entering into the sale in furtherance of a commercial purpose or business. As such, these types of sales are generally considered not to be in “trade or commerce”.
The position would be different, however, if a developer (who is in the business of developing and selling properties) is selling a new property as part of a development. The fact that the sale is in furtherance of the developer’s business makes that type of sale transaction in “trade or commerce”.
This Alert concerns the position with respect to the Australian Consumer Law, but other remedies may well be available under the common law.