An off the plan luxury unit buyer has persuaded a court to uphold the terminate the contract by reason of wholly inadequate disclaimers in relation to a display suite and floor plan representations as to its appearance.
David and Victoria Lonergan signed up for the $1.52 million buy of unit 1803 in Tower A of the four tower Prime development in November 2016.
The community title plan for the 840 apartments nearby the Macquarie Park shopping mall on Sydney’s north shore, was registered in November 2019 and completion was due the following month.
On inspecting the premises prior to the scheduled completion, the buyers were shocked to see two structural columns installed on the balcony and another in the living area.
The second “discrepancy” – compared to what they had viewed in the display suite and on the floor plan – was an air-conditioning unit installed on the floor of the balcony.
Third, the unit lacked black privacy screens on its balcony, contrary to an assurance made to them by the developer’s sales agent that the floor level on which their unit was located would be fitted with such screens.
The Lonergans refused to complete and demanded the return of their 10% cash deposit in January 2020. Developer JQZ purported to terminate the contract in reliance upon the buyers’ failure to complete.
Initially, they sought to negotiate a reduction in the price but absent a resolution, the buyers filed in the NSW Supreme Court in April 2021 for the return of the deposit with interest and damages.
They relied on s 18 of the Australian Consumer Law in respect of having been misled by the failure to disclose the presence of the columns and air conditioner in the finished apartment and the breach of the representation as to the privacy screens.
The Lonergans explained to Justice Stephen Robb they chose to buy a three-bedder on level 18 as it was the highest floor in the tower having the benefit of the privacy screens that were only allocated to every third level of the highrise.
The privacy screens were “a particularly attractive feature” because Victoria suffers from a skin condition activated by exposure to direct sunlight.
It transpired though that there was no level 4 in the building – such number being unlucky by Chinese custom – because the building was intended to be predominantly marketed to Chinese buyers.
Their level 18 unit was thus actually on the 17th floor and devoid of screens.
They also demonstrated that, as constructed – and shown nowhere on the plans or elsewhere – there was a 50 sq cm column that encroached on living room space and amenity and two columns on the balcony that did likewise by protruding 800 mm from its corners.
JQZ ultimately accepted that the representations regarding ‘level 18’ and the screens of agent Roger Zhu of CBRE, were deemed to be those of itself as principal.
That said, it contended that the floor plan from which Zhu was working to arrive at his “screen representation” may have caused confusion but was not sufficient to be classified as misleading.
It also pointed to numerous contractual exceptions and disclaimers. The contract allowed the developer to make any modification or variation that it “in its absolute discretion, believes it will require to permit it to carry out the Development or the Development Works”.
It also forbade the buyer from making any objections to changes unless they “substantially detrimentally and permanently” affected the property in a non-minor way or the floor area was reduced by more than 5%.
And the buyers had contractually acknowledged that the display suite was merely “indicative of the general style, quality and finish” and that plans “are not final, [and] are for marketing and illustrative purposes only”.
In the judge’s view, the developer had (unsuccessfully) attempted to create by way of contract disclaimers, an impregnable shield “in the aegis of Zeus”.
His honour found that the plan had been prepared before structural engineering input but “it is probable that its technical employees would have expected the likely need of structural columns” that would diminish their amenity to purchasers.
Against that background, Justice Robb noted that the buyers needed to establish that the developer’s misleading or deceptive conduct had caused them loss or damage.
It was no defence for the developer to assert that the buyers could have ascertained the true facts by examining the draft strata plan in the contract to discern that there was no level 14.
Apart from that proposition being “unrealistic” the judge noted that “conduct [that] is misleading or deceptive does not cease to have that character because a person who has been subject to it could have discovered the conduct by proper enquiries. Conduct that objectively leads one into error is misleading”.
JQZ also contended that being represented by solicitors to negotiate the contract, negated the buyers’ argument that they entered into the contract in reliance upon its misleading or deceptive conduct.
But the solicitor’s request that the contentious floor plan be attached to the contract to confirm that the vendor would construct the apartment in accordance with it, was refused.
Further it argued that – by reason of various exclusion and disclaimer clauses – the buyers were not permitted to rely on that plan and they did not in fact do so in entering into the contract.
The court agreed that because the plan was “rudimentary and incomplete” it left the buyer to face a substantially increased risk that it was insufficient as an adequate description of the property to be acquired.
But disclaimers preventing the buyers from relying upon representations by agents or of JQZ itself unless they were incorporated into the contract – when the buyers were in reality required to do so to have a reasonable level of understanding – were “unlikely to be effective to protect JQZ from liability”.
In the court’s view, the “substantial structural columns in the living areas of relatively small home units that significantly intruded into the living space” were contrary to the natural assumption of a buyer there would – by reference to the display suite and floor plan – be no such columns unless there was a “clear and prominent warning” that columns would or may be constructed.
The floor plan disclaimer was – in part because its font was too small – a “wholly inadequate” warning that the as-constructed unit, might have such columns.
It accepted the Lonergans’ evidence that they did in fact enter the contract believing that the unit would be constructed with black privacy screens and that there would be no structural columns in the living areas.
Interestingly the developer devoted its defence to defeating the privacy screen issue and ultimately made no submissions that the buyers did not rely upon the columns representation in entering the contract.
Justice Robb accepted that JQZ engaged in misleading or deceptive conduct in respect of the privacy screen representation and the columns representation but not in relation to the siting of the air-conditioning unit because that was not pursued by the Lonergans in evidence.
“The remedial character of s18 in relation to the protection of consumers must be respected and applied,” noted his honour in giving judgement for the buyers.
He ordered the developer to repay to the deposit plus interest and that it be prevented from prosecuting a claim against the buyers “under clause 9.3 of the contract or otherwise for breach of the contract”.
Lonergan v JQZ Eleven Pty Ltd  NSWSC 1461 Robb J, 27 October 2022 Read case