Last year we outlined the impacts of the case of Ripani v Century Legend Pty Ltd [2022] FCA 242 where a developer had deceived purchasers by marketing an off-the-plan development with misleading artistic impressions.

You can read our article on the Federal Court decision handed down on 18 March 2022.

The developer applied for leave to appeal, and part of that case is now going to appeal. However, that doesn't mean the developer is off the hook. Read on to find out more. In an increasingly difficult market, there are a number of key points to remember in chasing those elusive sales.

Findings at first instance

The Ripani’s were successful in their claim at first instance and Justice Anastassiou found that Century Legend engaged in misleading and deceptive conduct in contravention of section 18 of the Australian Consumer Law (ACL).

His Honour accepted that:

• the renders of the apartment were misleading on the basis that the renders convey the representations that there would be a freespan opening and seamless transition between the internal living areas of the apartment and the terrace, which were not indicative of the apartment constructed. Century Legend did not have reasonable grounds for making those representations;
• the Ripani’s relied on the representations conveyed by the render at the time they entered into the contract to purchase the apartment; and
• the Ripani’s would not have entered into the contract to purchase the apartment had they not believed, at the time, that the apartment would be constructed in conformity with the image depicted in the render.

Appeal to the Full Court of the Federal Court

Century Legend appealed the Court’s decision to the Full Court of the Federal Court on the following four grounds:

1. the primary judge erred in rejecting Century Legend’s evidence that its architect, Ms Hart, informed the Ripani’s in around June 2017, prior to the Contract being entered into, that the freespan opening could not be constructed as depicted in the render
2. the primary judge erred in finding that the exclusions clauses in the Contract were ineffective in negating any misrepresentation or misleading or deceptive conduct
3. The primary judge erred in concluding the Ripani’s were entitled to statutory recission of the Contract pursuant to section 243(a) of the ACL, and
4. the primary judge erred in the exercise of discretion by concluding that the Ripani’s were entitled to equitable rescission.

Decision on appeal

On 30 November 2022, the Full Court allowed the appeal on the first ground. On appeal, the Court concluded that the primary judge erred in rejecting Ms Hart’s evidence, who had rejected this evidence on the basis that it was uncertain and unreliable.

The Court said that Ms Hart’s recollections of her discussion with the Ripani’s and meeting notes were sufficiently detailed and supported the assertions made by Century Legend that the Ripani’s were aware that the opening could not be constructed in conformity with the image depicted, prior to entering into the contract. As this conclusion by the primary judge was a fundamental element of the liability finding, it followed that ground one of the appeal was successful.

The Court held that the appeal on grounds two, three and four would not succeed.

Importantly for developers, the Full Court agreed with the primary judge that the disclaimer clauses were ineffective in correcting the misrepresentation conveyed by the render.

What the new trial will look at

The orders made at first instance were set aside. Century Legend was granted leave to amend the grounds of appeal, and the Court ordered there be a new trial of the proceedings, limited to the issue of whether the Ripani’s continued to rely upon the misleading or deceptive conduct of Century Legend from the time that Ms Hart allegedly informed them about the inaccuracy of the render (in or about April 2017), to the date the Contract became unconditional in August 2017.

The new trial will determine what information the Ripani’s relied on and when. If at the new trial, it is found that the Ripani’s relied on misleading and deceptive conduct during the period from April to August 2017, they will get relief to be determined by the Court at that stage.

What the new trial will not look at

Ground two: The primary judge found that the disclaimers in the Contract did not effectively correct the misrepresentation conveyed by the render to the Ripani’s. In its appeal, Century Legend argued that the primary judge erred in coming to this conclusion.

The Full Court agreed with the primary judge and concluded that the disclaimer clauses were ineffective and the new trial will not look at this issue.

Grounds three and four: The primary judge granted the Ripani’s relief in the form of statutory rescission of the contract. On appeal, Century Legend argued that it was not open to the primary judge to grant that relief because the Ripani’s did not prove they had suffered loss or damage by reason of the misleading conduct and that there was no appreciable difference between the render and the apartment as built. The primary judge reasoned that Century Legend did not lead any contrary valuation evidence, thus leaving open the conclusion that the Ripani’s had suffered economic loss.

The Full Court agreed with the primary judge and held that his Honour was entitled to find, in accordance with that evidence, that the respondents suffered detriment being the “substantial prejudice and disadvantage” of being held to purchase an apartment without the primary feature that was so attractive and important to them in their decision-making.

As such, Century Legend’s appeal on these grounds failed.

Century Legend also sought leave to produce new evidence to show that differences between the render and what was built was immaterial. The Full Court refused Century Legend’s application to adduce further evidence.

We await the outcome of the new proceedings.

Key takeaways

Developers must remember the following key matters when marketing and selling to potential buyers:

• Ensure that all representations and statements made accurately reflect the development constructed, including all publications at the time they are published.
• If a developer becomes aware of any change of circumstance that adversely affects the use and enjoyment of the lot, purchasers should be notified immediately.
• If marketing material becomes inaccurate after it is published, the publication should be updated to ensure it is accurate and current.
• Potential buyers should be encouraged to undertake their own investigations and seek professional advice.