Purchaser fails in claim against agent

In a recent High Court case, a purchaser claimed that the real estate agent had made misleading and deceptive representations about the existence of two tenders competing with the purchaser’s.

The purchaser claimed that because of those representations she paid more than $250,000 above the price she would otherwise have paid. She sought compensation under the Fair Trading Act 1993 (the Act).

Her claim failed entirely; the High Court ruled that not only did the agent not make the representations alleged (the High Court preferring the agent’s evidence over the purchaser’s) but that even if the purported representations had been made they would not give rise to a claim for compensation on the facts alleged.

The High Court held that, on the balance of probabilities, there was not enough evidence to show the real estate agent had made any misleading or deceptive representations.

While the case was a comprehensive win for the agent, litigation in the High Court was likely both costly and stressful for both sides.

Claims of this sort are likely to become more common following changes to the Act requiring representations made in the course of trade to be “substantiated” at the time they are made. This new, stricter obligation means that even comments which are true (but unsubstantiated at the time) could lead to fines under the Act.

To reduce the risk of any litigation, we recommend agents and other professionals review their compliance measures so that claims are less likely to be made and, if made, are easier to respond to.

Compliance measures should include:

1. policies that representations will not be made unless there is solid support for the representations (i.e. there are documents which demonstrate the truth of the statement or the statement is easily verifiable, such as the statement “wonderful views” being supported by the view from the window);
2. agents and employees should only rely on credible and reliable sources when justifying representations;
3. records of the sources of statements should be kept, and copies provided when statements are made;
4. those who make statements should write down what has been said to potential purchasers, vendors, or other customers;
5. the person who has been provided with information should be asked to sign a form stating what information has been provided and relied on; and
6. all notes, forms, and other records should be kept safe and organised, in case they are needed later.

It is also a good idea to put in place systems for responding to potential claimants. For example, it is often worth having an easy to follow “first port of call” complaints process. If those who have an issue are able to contact your team and have their issue handled appropriately in the first instance, this will reduce the risk of complaints being made in an adversarial forum.

Further systems can be set up for issues that escalate, to encourage possible claimants to engage with you in a solutions-focused manner outside of Court. Mediation, for example, is a great alternative to litigation because it allows parties to talk about all issues in a private forum with a view to achieving a mutually acceptable settlement.