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Can a real estate agent be liable for misleading and deceptive conduct

In the recent case of Hyder v McGrath Sales Pty Ltd [2017] NSWSC 1647, the Supreme Court of NSW reviewed the issues that can arise when a purchaser seeks to sue a real estate agent for misleading and deceptive conduct pursuant to section 18 of the Australian Consumer Law.

Facts

The property (lot 4) was a battle axe shaped property located in Bellevue Hill. The driveway leading to the rear of the property carried rights of the carriageway in favour of other lot owners. The driveway was over 7 metres in width leaving room on either side for the residents to park.

From 2014, the owner of lot 4 would use the eastern side of the driveway as their private parking space and subsequently installed a private parking sign.

In the course of the sale of the property, the selling agent represented (both orally and in marketing material) that the property subject to the sale included "private off street and driveway parking". The private parking sign was also present at the time the purchaser inspected the property.

It is notable that there was little on-street parking on the street on which the property was located.

Mr Hyder reviewed the contract for a sale with a solicitor prior to exchanging and the rights of carriageway over the driveway were explained to him. However, he did not investigate further as to his ability or right to park in the driveway.  

Mrs Hyder entered into the contract to purchase the property for $9.4 million.

Issues arose between the Hyders and a neighbour after settlement when the neighbours' contractors began parking on the eastern side of the driveway. 

Decision

The court decided that the advertising by the agent was misleading and deceptive for the purposes of the Australian Consumer Law as the parking was not private as represented, but was subject to a right of way in favour of the other residents. The court rejected the argument of the agent that the descriptions were opinions of the agent as the right of way was a legal fact not disclosed by the agent.

However, the court held that the element of "causation" was not established.

The key question to consider was whether the purchaser would have proceeded with the purchase if the misrepresentations by the agent had not been made. The court decided this in the affirmative.

While the parking was a factor in the decision to purchase, it was not essential. When questioned as to why the Hyders had paid $400,000.00 over the valued price, Mr Hyder responded that his wife had fallen in love with the property. The court held that the reason why the property was purchased was due to "Mrs Hyder's emotional reaction" which was "derived from features such as its aspect and its potential as a family home, rather than the number of parking spaces".

The agent had therefore not caused any loss to the purchaser.

In relation to the issue of whether the owners of lot 4 had a greater right to park in the driveway, the court held that there was no absolute right to park there at any and at all times. The purpose of the right of way was to give the three lot owners equivalent rights over the whole area.

Conclusion

There are important lessons for both real estate agents and purchasers to draw from this case.

Firstly, real estate agents should ensure that they are accurate in their description of parking rights.

However, purchasers should also undertake due diligence when entering into contracts to purchase a property. The Hyders should have made further enquiries as to their rights to park on the driveway before exchange of contracts. The court described that if the test of causation had been met, the purchasers were still required to take reasonable care of their own interests which they failed to do and so the court would have reduced their damages (if ordered) by 2/3.   

 

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