Legal Insights

The importance of marketing – developer liable for misleading and deceptive conduct

By Robert Gregory, Viviane Karoumbalis

• 19 May 2022 • 5 min read
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We outline the impacts of a case where a developer had deceived purchasers by marketing an off-the-plan development with misleading artistic impressions.

The learnings of Ripani v Century Legend Pty Ltd

On 18 March 2022, the Federal Court found in Ripani v Century Legend Pty Ltd [2022] FCA 242 that a property developer had misled the purchasers by marketing the off-the-plan development with misleading artistic impressions. As a result, the Court ordered the contract be rescinded and for the developer to return the bank guarantee as well as paying damages, pre-judgment interest and costs to the purchasers.

The case is significant as it is a cautionary warning to developers that what they promote and market should be something that they can and will deliver, otherwise there is a risk of being found liable for misleading and deceptive conduct under section 18 of the Australian Consumer Law (ACL).

The case also confirmed the limitations of disclaimers, and highlighted the importance of having detailed disclaimers drafted for their specific purpose.

The Facts

The case involved a purchase by Mr and Mrs Ripani of a 14th floor premium apartment in the luxury ‘The Victoriana’ development on 20-21 Queens Road, Melbourne. The apartment was purchased ‘off-the-plan’ in 2017 for $9.58 million from Century Legend Pty Ltd trading as JD Group.

The Ripanis were impressed by Century Legend’s promotional materials which showed artistic renders of what the apartment would look like on completion. One of the images, particularly relevant to the case, showed the apartment as having a large free span opening connecting the indoor living areas and the outdoor terrace. While the width was not defined, the visualisation in the plan displayed an impressive width. This particular render was the ‘hero render’ used widely by Century Legend and even displayed as a large exhibit at the development display suite.

The Ripanis relied on this render together with oral representations made by the estate agents that they expected that apartment would conform to the render.

Century Legend had received advice before entering the contract of sale with the Ripanis from architects and builders that the opening’s width could not be achieved for structural reasons. Instead, the gap could only be approximately three metres wide. Notwithstanding this knowledge, Century Legend continued to use the render and did not convey it to the Ripanis until after they had entered the contract of sale.

The Ripanis commenced proceedings against Century Legend in the Federal Court alleging that the representations conveyed by the ‘hero render’ were misleading or deceptive within the meaning of section 18 of the ACL. The Ripanis sought relief under the ACL, including to rescind the contract of sale, and in equity.

Findings

Justice Anastassiou found that Century Legend engaged in misleading and deceptive conduct in contravention of section 18 of the ACL.

His Honour concluded that:

  1. the renders were misleading on the basis that the renders convey the representations that there would be a free span 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
  2. the Ripanis relied on the representations conveyed by the render at the time they entered into the contract to purchase the apartment
  3. the Ripanis 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.

In response to arguments raised by Century Legend, His Honour held that:

  • whilst the words ‘artist impression’ displayed next to the image should be read as a disclaimer may sometimes be the case, in these circumstances, the words did not cure the misrepresentation. The Court commented that while the words suggest that not all the details may be present in the final product, they do suggest that the key elements of the render will be built
  • the disclaimer contained at the end of the marketing brochure was found to be ineffective. This was because the disclaimer stated that the marketing materials may be regarded as ‘indicative’ only. The Court found that the renders was not indicative of the apartment because the width of the opening was not accurately reflected
  • while the Ripanis were accepted as sophisticated buyers, this did not mean that they were incapable of being misled
  • the agent in this case was not responsible for the developer’s misleading and deceptive conduct because he was not aware of what the developer knew, namely that, what was being promoted could not be built.

While the Court considered that artist impressions understandably do not always accurately reflect the final product, however if significant details are omitted, section 18 may be contravened. In this case, the Court considered the width of the opening between the interior and exterior significant. This was especially so in this case as the gap was a central feature in the image and the purchaser made it clear that the gap was a significant component of their interest in the property.

As a result, the Ripanis were entitled to rescind the contract of sale pursuant to ss 237 and 243(a) of the ACL, or, alternatively, in equity and recover their losses.

Since the decision, Century Legend has lodged an appeal.

Key takeaways

Developers should seek advice to ensure that their marketing renders reflect the development constructed and that they have reasonable grounds for making representations.

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.

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