ACL and Australian Consumer Law: Impact on Land Sales by Developers

This report examines key aspects of Australian Consumer Law (ACL) within the context of building law in Australia, specifically focusing on misrepresentation and unfair contract terms. It begins by outlining the foundational elements of Australian Consumer Law, including the Competition and Consumer Act, 2010, and how its provisions, particularly those related to misleading or deceptive conduct under section 18, impact developers. The report explains misrepresentation, providing examples such as false statements in advertising and the non-disclosure of crucial information. It also explores the implications of unfair contract terms, as regulated by the ACL, in standard form consumer contracts, particularly those related to the sale of land. The analysis includes a discussion on how contract clauses can be deemed unfair if they create an imbalance in the rights and duties of the involved parties, emphasizing the importance of transparency and fair practices in the industry. The report highlights the protection offered to both consumers and developers under the ACL, thereby promoting fair competition and consumer protection within the building and construction sector.

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Building Law
ACL
24-Aug-17
(Student Details: )

ACL 2
Introduction
In Australia, the building law covers a range of legislations which have to be strictly
followed by the parties on which such laws are applicable. For instance, the most basic law
which is applicable is contract law, as any building, whether its purchase or construction,
requires a contract to be drawn where the terms of the promise are covered. In case the same is
not done, it could result in a breach of contract, and likewise, would attract the penalties for the
breach of contract1. Due to the involvement of consumers in the building law, the Australian
Consumer Law also becomes applicable on the builders, developers and their agents. There is
also the involvement of work health and safety related provisions, based on the jurisdiction in
which the work is being done. However, the present discussion is restricted to two key elements,
i.e., misrepresentation and unfair contract terms, in the context of Australian Consumer Law2.
Even though misrepresentation is a term covered under the contract law, there are provisions
under the Australian Consumer Law which offer protection from such acts. In the following
parts, an attempt has been made to highlight these two terms based on Australian Consumer Law
and in the context of how these have an impact over the sale of land by the developers.
Australian Consumer Law
The provisions of Australian Consumer Law are covered under the Competition and
Consumer Act, 20103 which is an act of the commonwealth and has been drawn for protecting
the consumers and promoting competition. The provisions of Australian Consumer Law, i.e.,
1 Tom Davie, Tony Earls, and Jeremy Coggins, Understanding Construction Law (LexisNexis Butterworths, 2016)
2 Ian H. Bailey and Matthew Bell, Construction Law in Australia (Thomson Reuters Australia, Limited, 3rd ed,
2011)
3 Competition and Consumer Act, 2010 (Cth)

ACL 3
ACL, are covered under Schedule 2 of this act4. This act replaced the Trade Practices Act, 19745
and became applicable from 01st January 2001. The manner in which the provisions of ACL
apply on the developers, with regards to misrepresentation and unfair contract terms, have been
explained herewith6.
Misrepresentation
Misrepresentation is a situation in which one person makes a false statement to another
person, so that such second person enters in the contract. In order for a case of misrepresentation
to be made, it has to be shown that the false statement was made to induce the other party into
entering the contract7. In Holmes v Jones8, the man who was selling his farm stated that a
particular amount of cattle could be stored in the farm. Upon inquiry, the purchaser found this to
be false and still bought it. As the reliance was not found to be on the misrepresentation, the
damages were not awarded to the plaintiff. Further, it has to be a statement of fact and cannot be
claimed for an opinion9.
Under the ACL, misrepresentation is protected through section 18, which relates to the
misleading or deceptive conduct. The general protections pertaining to this are covered under
Part 2.110 and 2.211. As per section 18 of the ACL, while being engaged in trade or commerce,
the individuals should not indulge in any conduct which is likely to be misleading or deceptive or
4 Competition and Consumer Act 2010, sch 2
5 Trade Practices Act, 1974 (Cth)
6 Stephen G. Corones, The Australian Consumer Law (Lawbook Company, 2nd ed, 2012)
7 Neil Andrews, Contract Law (Cambridge University Press, 2nd ed, 2015)
8 (1907) 4 CLR 1692
9 John W. Carter, Elisabeth Peden and Greg Tolhurst, Contract Law in Australia (LexisNexis Butterworths, 5th ed,
2007)
10 Australian Consumer Law, pt 2.1
11 Australian Consumer Law, pt 2.2

ACL 4
does actually mislead or deceive12. In the case of Mike Gaffikin Marine Pty Ltd v Princes Street
Marina Pty Ltd13, the false statements which were made during the negotiations were held to be
misleading or deceptive conduct. This section provides the remedy in form of ancillary order for
varying of the drawn contract.
For the developers in the nation, they would be deemed to be indulged in misleading or
deceptive conduct when they make false statements during the course of negotiations. Also, it is
not necessary that such false statement has to be made while being in the physical presence of
the seller. The statements made through the adverts placed in magazines or newspapers, the
letters, and the emails, all would make them liable for the breach of section 18 of the ACL, if it
contains a misrepresentation14. Such statements could relate to a factually wrong statement,
which results in the creation of a false impression. Also, the non disclosure of crucial and
substantial information to the buyer would also contribute towards a misleading or deceptive
conduct, as non disclosure is also deemed false statement. In the similar manner, when crucial
information is left out or concealed, or the client is deliberately not provided the updated data or
a misunderstanding is willfully not correct, or even the making of inaccurate or false claims
would result in the breach of provisions of section 1815.
Another leading example is the photographic enhancement. The photographs of the
property which are touched up for hiding the characteristics which are not desirable and where
the features are enhanced could also mislead the consumers. So, the developers should refrain
from modifying or allowing the modified photographs to represent the property when they do not
12 Australian Consumer Law, s18
13 17 ACSR 495
14 Dilan Thampapillai, Vivi Tan and Claudio Bozzi, Australian Commercial Law (Cambridge University Press,
2015)
15 Department of Commerce WA, Australian Consumer Law (2013)
<https://www.commerce.wa.gov.au/sites/default/files/atoms/files/aclagentsmanual2013_0.pdf>

ACL 5
present a fair representation. They should also refrain from changing the property appearance by
digitally adding or removing certain features; though the adjustment of light to compensate for
poor lighting would not be a breach of this section16.
Price advertising is another thing which would be seen as the breach of the provisions of
the ACL. An agent should refrain from misrepresenting the price of property that has been put up
for sale or for lease. The prices which have been advertised have to be reasonable and fair and
they need to reflect the current expectations and market value of the seller. If any amendments
are made during the marketing campaign, it is likely to have an impact over the selling price and
this has to be properly reflected in the prices which are advertised. Also, there is a need to refrain
the quoting the price of the property which is less than the asking price of the seller, i.e., under
quoting. Under quoting takes place when the price of the property is advertised for sale at a price
which is less than the price which was asked by the vendor. This is because such prices mislead
the consumers by portraying an inaccurate appraisal of the property’s market price. Another
point which has to be kept in mind is the price range which is quoted or is advertised. The lowest
amount in the price range should not be less than the selling price of the vendor17.
A very crucial element which would be deemed as misrepresentation and which would
lead to a breach of section 18 of the ACL is the representation made regarding the characteristics
of land. There is a need to acknowledge the restrictions regarding the permitted use of buildings
or land, which can affect the property. Some of the issues included in this are the easements,
planning requirements and restrictive covenants. The representations regarding the land
16 News Media Works, Misleading and Deceptive Conduct in Real Estate (2017)
<http://www.newsmediaworks.com.au/misleading-and-deceptive-conduct-in-real-estate/>
17 Ibid

ACL 6
characteristic include the previous use of land, the suitability for residential development, the
ability to be subdivided, and state of repair and physical condition of the land18.
Juniper Property Holdings No 15 P/L v Caltabiano (No 2)19 was a case where the
developer had started the marketing of units, back in 2006, at the Surfers Paradise in the “Soul”
development. An “off the plan” contract was entered into by the developer for contracting to sell
the penthouse apartment at the decided price of $16.85 Million. The development was finished in
2012 and the buyer was called on for settling. The buyer applied for extension in the settlement
by two years and the developer agreed to it after applying penalty interest. The receivers and
managers were appointed later in 2012 for the undertaking, rights and property of the developer.
The buyer did not take part in the settlement and the contract was terminated for the breach on
part of the buyer. And the developer bought an action in the Supreme Court of Queensland. The
counterclaim of the buyer on this was on grounds of misleading and deceptive conduct20.
The buyer had to show that the conduct was he suffered a loss after relying on the
misleading or deceptive conduct of the developer. Though, the buyer failed in proving this,
which led to his counterclaims being rejected by the court. Further, the breach of contract was
found on the buyer’s part which led to an order where he was asked to pay $1.4 million, along
with the interest, to the buyer, in addition to the legal costs of the developer. Such cases show
that the provisions of ACL not only offer protection to the buyers, but also to the developers,
where a wrong claim for misleading or deceptive conduct is made by the buyer21.
18 At 15
19 [2016] QSC 5
20 Renee Lovelady Tomas, Misleading and Deceptive Conduct (2017)
<https://www.connollysuthers.com.au/misleading-and-deceptive-conduct/>
21 Supreme Court of Queensland, Juniper Property Holdings No 15 P/L v Caltabiano (No 2) [2016] QSC 5 (2016)
<http://archive.sclqld.org.au/qjudgment/2016/QSC16-005.pdf >

ACL 7
Unfair Contract Terms
As has been stated in the introductory segment of this discussion, the building law is such
a field where a number of contracts have to be drawn. And in this regard, it becomes very crucial
that such contract does not contain an unfair contract terms. The ACL regulates the standard
form of consumer contracts in the matter of unfair terms. The provisions contained in the ACL
have a major impact over the property developers22. In case a contract contains an unfair term in
the standard form contract, it is considered as void and makes the contract unenforceable owing
to ACL’s applicability. The unfair term provisions covered under the ACL apply to the consumer
contracts and standard form contracts when an unfair term is contained in these contracts. The
grant or sale of interest which is held in land is included under the consumer contracts, where the
individual makes use of these for domestic, personal or household purposes. Hence, the
definition not only covers the sale, but also goes beyond it and covers the developer’s powers
and privileges, regarding the particular land23.
The contracts which are made by the developer are considered as being unfair when a
major imbalance is caused in the rights and duties of the parties, or in such cases where the
legitimate interest of the developer is not protected in a key way, and also where such occurrence
would be disadvantageous for the buyer due to the faith they have put in the developer. When the
contract of sale is created or drafted by the developer, different clauses are inserted which favor
the developer and through which, the developers are given flexibility in different matters, but
which mostly relate to the project competition related issues. However, the provisions under the
22 Tom Davie, Tony Earls and Jeremy Coggins, Understanding Construction Law (LexisNexis Butterworths, 2016)
23 Justin Lethlean, Joanne Daniels, Murray Deakin and Travis Payne, Australia: How The New Australian Consumer
Law Will Affect Property Developers (11 May 2010)
<http://www.mondaq.com/australia/x/100132/How+The+New+Australian+Consumer+Law+Will+Affect+Property
+Developers>

ACL 8
ACL would be deemed to be violated only when it can be shown that an imbalance was caused
in the position of the buyer, due to the insertion of such clause by the developer. To evaluate the
presence or absence of such imbalance, different factors are considered, which include the
standard industry practice with regards to the competition time of a project, the warranties
offered, and the discretionary items24.
When a decision is required to be made for a specific item being important for protecting
the interest of the developer in a legitimate manner, the developers are required to put forward
the evidence for the market where they have their business operations, the requirement of a
particular level of flexibility in hands of the developers, the financier imposed economic factors,
regulations which the planning schemes and the councils impose, and the necessary evidence
regarding the market in which they operate. It becomes the duty of the developers to make
certain that the proper discretion required to deliver the end product to the consumer is covered
under the contract, and not such provisions are included which provide unwarranted freedom,
which would lead to the provisions been deemed as unfair as per ACL25.
Along with considering the detrimental position in which the purchaser can be placed,
there is also to consider the disadvantageous position in which the purchaser is placed, especially
when it comes to the matter of entirety of contract and the transparency in the same. The various
terms which can be taken as unfair have been properly explained under the ACL. Some of these
terms have been stated below:
Avoiding the performance of contract or limiting it knowingly;
24 Julian Bailey, Construction Law (CRC Press, 2014)
25 Justin Lethlean, Joanne Daniels, Murray Deakin and Travis Payne, Australia: How The New Australian Consumer
Law Will Affect Property Developers (11 May 2010)
<http://www.mondaq.com/australia/x/100132/How+The+New+Australian+Consumer+Law+Will+Affect+Property
+Developers>

ACL 9
Putting changes in the contractual terms;
Imposing limitations on the evidence which can be presented by the purchaser;
Placing evidentiary burden on the contract proceedings on the purchaser;
Modifying the price to be paid without the purchaser been given the opportunity to bring
the contract to an end;
Making changes in the interest of land;
Making changes in the characteristics of land;
Modifying the contract whereby the land can be sold off unilaterally;
The contract been assigned in a way which is detrimental for the purchaser where the
consent is not taken of the purchaser;
Unilaterally determining if the contract has been contravened or if it is interpreted
unilaterally
Limiting the vicarious liability of the developer’s agent;
If limitations are imposed on the purchaser right to sue the developer;
Imposing penalties for terminating the contract on the purchaser; and
Terminating the contract without proper cause26.
For a contract to be deemed as unfair for making it unenforceable under the law, the
situation which was present at the time of making the law and the circumstances which led to the
unfairness have to be considered. The term would not be unfair when the main issue of the
contract is covered under it, and the same has been expressly allowed through the law of state,
territory or the commonwealth, and also contains the upfront prices to be paid pursuant to the
contract. Even if a term is unfair, the attempt is first made to severe the term, as the severance
26 Ibid

ACL 10
clauses are usually covered in such contracts. Though, if the unfair term holds such significance,
that it cannot be severed, the contract in its entirety becomes unenforceable, and so void27.
For a successful claim to be made for such unfair terms there is a need to show that a
major imbalance was caused and that reliance on it would be detrimental. The key issue is to
establish that a major imbalance had actually taken place. The factors which would be taken into
consideration for this purpose include the clarity of terms, the term being clearly written and the
like. In ACCC v Chrisco Hampers Australia Ltd28, the court held that the terms used by the
defendant were false and misleading representation for the consumers due to the reason that they
were not stated clearly. Further, a reasonable person would not have been able to understand
such terms because if the consumer had actually understood the result of such terms, then by
being a prudent person, they would not have signed the contract. So, property developers have to
be careful that such terms are not included in the standard contract which cannot be interpreted
clearly.
A crucial requirement for a claim to stand for unfair contract terms is to show that if the
term is relied upon, it would prove to be disadvantageous for the party relying upon the same.
This detriment can be of delay, distress or financial detriment. This can be further clarified from
the case of Wakefield Trucks(P) Pty Ltd v Lach Transport Pty Ltd 29. In this case, the defendant
was sold a vehicle by the plaintiff and the plaintiff made certain representations regarding the
vehicle during the negotiations pertaining to the fuel consumption, which was less than the real
consumption of the fuel. As the defendant had relied upon this statement, the court held that the
defendant was entitled to get all of the resulting losses which flowed from this reliance. Along
27 Ibid
28 [2015] FCA 1204
29 (2001) 79 SASR 517

ACL 11
with this, the recovery of interest which was incurred, regarding the extra fuel cost was also
permitted by the court.
Some other factors which need to be considered for successfully claiming against the
developer includes the setting under the ACL, as the social, family or domestic setting cannot
give rise to a legal binding contract, as was held in the matter of Balfour v Balfour30. The
developers have the intention of selling the land and obtaining maximum monetary benefit out of
it. An unfair term, under the ACL, would be to allow a single party to terminate the contract.
Further, an offer once accepted by the buyer, cannot be withdrawn by the developer as was held
in the matter of Souter v Shyamba Pty Ltd 200231. Lastly, to consider the unfairness of a contract
term, the whole of the contract has to be taken into consideration, and not a small statement,
which can be interpreted in different manner, as was held in the case of Hussey v Horne-Payne32.
Hence, for the claims to be made against the developers there is a need to fulfill these
basic requirements on part of the buyer.
Conclusion
The discussion carried above highlights the manner in which the concepts of
misrepresentation and unfair contract terms are applied under the ACL on the developers when it
comes to the sale of land to a prospective buyer. Misrepresentation is a concept under the
contract law and is applied through section 18 of the ACL on the developers. Based on this
section, the developers are to refrain from indulging in such a conduct which can be considered
as misleading or deceptive conduct. This can be done in different ways, as has been stated above,
30 [1919] 2 KB 571
31 (2002) 11 BPR 20,369
32 [1879] 4 App Cas 311

ACL 12
for instance, advertised price being wrong or the photograph of the property being digitally
enhanced. The case of Juniper Property Holdings No 15 P/L v Caltabiano (No 2) made it very
clear that the provisions of ACL are not just meant to protect the consumers, but the developers
as well. The discussion then moved on to the unfair contract terms, which can make the contract
void based on the provisions of ACL. And when a case of unfair contract term is found, the
attempt is made to severe the term where possible, and when the same is not possible, the
contract becomes unenforceable as it becomes void due to the unfairness of the term.