The Federal Court recently handed down a decision that will significantly impact how developers can market off-the-plan apartments. Attwood Marshall Lawyers Property and Commercial Law Graduate, Mieke Elzer, discusses the case and how it serves as an important reminder to agents selling properties off the plan that they must accurately represent the features of the development in their promotional and marketing materials.
Background of Ripani v Century Legend
In 2017, Mr and Mrs Ripani entered a contract with Century Legend Pty Ltd to buy a premium off-the-plan apartment in Melbourne’s CBD. As per the contract of sale, the Ripanis agreed to pay $9.58 million.
In deciding to enter into the purchase agreement, the Ripanis relied heavily on marketing materials provided by Century Legend. These included a hard-bound brochure containing various computer-generated images of what the new property was expected to look like.
In this instance, the images within the marketing brochures that the Ripanis relied upon in making their decision to purchase the apartment off the plan, were not a true reflection of what they would ultimately receive.
The key issue
Marketing material for the high-end off the plan apartment included a depiction that there would be a free span opening and seamless transition between internal living areas and an outside terrace.
Unfortunately, the apartment could not contain the free span opening feature. There was evidence that the developer, Century Legend, informed the sales agent that this was no longer possible and that the final product would deviate from what is being presented to potential buyers.
When it became apparent that the finished product would be significantly different from what was presented, the Ripanis sought to rescind the sales contract as they believed the developer had engaged in misleading and deceptive conduct under s18 of the Australian Consumer Law (ACL).
The sale contract and the marketing material contained ‘boilerplate’ exclusion clauses to exclude visual and spoken representations. However, those clauses do not rule out statutory remedies under the Australian Consumer Law.
Despite considerable use of this rendered image throughout its marketing campaign, Century Legend was aware it would be unfeasible to construct the Ripanis’ apartment in a way that would portray an appropriate resemblance to the render. Remarkably, the architect Rothe Lowman had informed Century Legend that the eight-metre free span space portrayed in the images could not be built due to development and structural requirements.
The Ripanis initiated proceedings against Century Legend in the Federal Court, alleging that they had engaged in misleading and deceptive conduct. In addition, the Ripanis pursued compensation (including rescission of the contract of sale) under the Australian Consumer Law and in equity.
Century Legend disputed the claims made by the Ripanis on several bases, including the fact exclusion clauses were included in the contract of sale, a disclaimer was enclosed in the marketing brochure, and the inscription of the words ‘artist impression‘ on the render was also present.
Justice Anastassiou found that the artist’s impression images provided to the Ripanis were misleading and deceptive and contravention of section 18 of the Australian Consumer Law.
His Honour concluded:
- The rendered image depicted that there would be a free span opening and seamless transition between the terrace and the internal living areas of the apartment
- The Ripanis relied upon the representation emanated by the render when they signed the contract of sale
- The Ripanis would not have entered the sale agreement had they not believed at the time that the apartment would conform with the rendered image.
In responding to each defence raised by Century Legend, the Court deemed as follows:
- The exclusion clauses, which applied to pre-contractual information and any representations made by Century Legend, were delineated by the Court as ‘boilerplate’ and found to have no corrective or curative effect on the misleading impression created by the rendered image. Exclusion clauses are ineffective at negating the operation of Australian Consumer Law.
- The exclusion clauses were not expressed in a manner that would make the Ripanis aware that the rendered image was not an accurate depiction of what their apartment would look like when constructed.
- The inscription on the rendered images of the words ‘artist impression’ did not have the effect of counteracting the misleading representation conveyed by the render.
- The disclaimer, hidden towards the back of the brochure, was described as ambiguous, vague and meaningless. It failed to counteract the misleading and deceptive representation of the rendered image.
Consequently, the Ripanis were entitled to rescind the contract under sections 237 and 243 of the Australian Consumer Law and recoup their losses from Century Legend. Recovering the losses included recovering interest and bank fees they had paid in connection with a bank guarantee provided to the developer.
A focus on consumer protection
The Ripani case serves as a reminder that legislation in each state, and The Commonwealth, continues to broaden the protections of consumers when buying property off-the-plan. These protections are highlighted in disclosure and vendor rescission regimes indicated in the Conveyancing Act 1919 (NSW) and Conveyancing (Sale of Land) Regulation 2017, and the design and building practitioners’ compliance declaration regime under the Design and Building Practitioners Regulation 2021 (NSW).
Developers and sales and marketing agents must be aware of the significance of consumer protections and the application of Australian Consumer Law when selling off the plan units.
Key takeaways from the case
- Agents and developers must ensure that the marketing materials purveyed to potential buyers of off-the-plan apartments are accurate and not misleading or deceptive in any way. Inaccuracies could constitute a misleading and deceptive representation that would enable a purchaser to rescind a contract of sale.
- Exclusion clauses in a contract of sale might not effectively remedy misleading and deceptive representations depicted in marketing materials.
- General disclaimers concerning the adequacy or accuracy of the information in marketing materials may not prevent such materials from being misleading and deceptive.
- Inscribing ‘artist impression‘ on an image used in marketing materials does not impede that image from being found to be misleading and deceptive.
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