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Warning to Agents: Don’t Just Rely on Vendor’s Instructions

A long running dispute about a car park space has resulted in a real estate agency firm unsuccessfully arguing that the loss suffered by a purchaser as a result of false and misleading representations made to the agency by the vendors’, should be entirely apportioned to the vendors as the agency was merely acting on the vendors’ instructions.

Facts

A Ray White Franchise were instructed by the vendors of an expensive Brisbane apartment, to advertise the apartment as having three car parking spaces when in actual fact, there were only two car parking spaces with a third storage area; the storage area contained a plinth or a platform which could technically be removed to create a third car parking space however, development approval precluded the use of the storage space for parking. The agency relied on this information and were not aware of this legal impediment (although the vendors apparently were).

The agency advertised the apartment on three occasions as having the additional car spot and on a further occasion, an in independent contractor of the agency (Mr Waight), advised the purchaser that the plinth could be removed to create the additional car parking spot and that he would personally remove it for her. He also told her that many apartment owners had removed the plinth in their storage area.

A combination of the advertisements, Mr Waight’s statement and promise to remove the plinth induced the purchaser to enter into the contract.

The purchaser became aware that the issues with the ‘third parking space’ prior to settlement and nevertheless, she settled (albeit some months after the date stipulated in the contract) in order to avert specific performance proceedings commenced by the vendors.

Following settlement, the purchaser commenced proceedings seeking damages in respect of the loss she suffered as a result of the apartment only having two car parking spots.

The agency and Mr Waight asserted that responsibility for any loss suffered by the purchaser should be apportioned entirely to the vendors as:

• only the vendors had known about the legal impediment to the use of the third space and the agency and Mr Waight were merely acting on the vendors’ instruction;

• the vendors alone had forced completion of the contract at a time when the apartment’s value had significantly diminished.

Section 87CD of the Trade Practices Act (now the Competition and Consumer Act 2010) deals with proportionate liability for misleading or deceptive conduct. The section has the effect of limiting the liability of a “concurrent wrongdoer” in respect of an apportionable claim to a proportionate amount that is just in light of the defendant’s responsibility for the damage or loss.

Trial

The trial judge held that the agency was not liable in negligence as they did not owe the purchaser a duty of care to ensure she was fully informed about how the space could be lawfully used however, the three advertisements and Mr Waight’s statement about other apartment owners having removed the plinth to use the space for parking constituted misleading conduct, contravening s 52 of the Trade Practices Act.

Although the vendors and the real estate agency were “concurrent wrongdoer[s]” for the purposes of s 87CD of the Trade Practices Act, the real estate agency’s relevant acts or omissions were the same as the vendors’. They were thus both responsible for the purchaser’s losses and there was no basis for a reduction of the agency’s liability (on the authority of Tomasetti v Brailey [2012] NSWCA 399). Additionally, in promising to remove the plinth (which he had no authority from the vendors or the agency to do), Mr Waight had contravened the misleading and deceptive provisions of then s 38 of the Fair Trading Act 1989 (Qld) and he was severally liable for the damages.

The trial judge accessed damages as the difference between the price the purchaser paid for the apartment ($2.5m) and what he found to be the actual value of the apartment ($2.25m) as at the date when the contract finally settled.

Appeal

The appeal court upheld the finding of the trial judge that there be no apportionment of liability between the vendors and agency as s 87CD had no application. The appeal court also upheld the damages.

If you have any queries regarding buying or selling of property or issues that any clients may have, please do not hesitate to contact our Lawyers direct or alternatively, contact our Department Manager, Holly Gilholme on direct line 07 5506 8202, mobile 0402 264 525 or Freecall 1800 621 071 or email hgilholme@attwoodmarshall.com.au and Holly will direct you to the appropriate Lawyer in our Property and Commercial Team or make a free initial appointment.

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