John R Ring Pty Ltd v The Commissioner of the Office of Consumer and Business Affairs
[2009] SASC 35
•18 February 2009
Supreme Court of South Australia
(Civil: Application)
JOHN R RING PTY LTD v THE COMMISSIONER OF THE OFFICE OF CONSUMER AND BUSINESS AFFAIRS
[2009] SASC 35
Judgment of The Honourable Justice Sulan
18 February 2009
CONVEYANCING - RELATIONSHIP OF VENDOR AND PURCHASER - STATUTORY PROTECTION OF PURCHASERS
PROCEDURE - MISCELLANEOUS PROCEDURAL MATTERS - DECLARATIONS - APPROPRIATE FORM OF RELIEF - DISCRETION OF COURT
PROCEDURE - MISCELLANEOUS PROCEDURAL MATTERS - DECLARATIONS - CRIMINAL PROCEEDINGS
Advertisements caused to be published by the plaintiff in marketing residential land make representation as to a likely price range for the sale of the land which is less than the prescribed minimum advertising price, as those terms are defined by the Land and Business (Sale and Conveyancing) Act 1994 (SA) ("the Act"), for the purposes of s 24A of the Act - appropriate to make a declaration to that effect, notwithstanding the impact that declaration may have on future criminal proceedings which may be commenced against the plaintiff under the Act.
Land and Business (Sale and Conveyancing) Act 1994 (SA) s 20, s 24A; Supreme Court Act 1935 (SA) s 31, referred to.
Australian Securities and Investments Commission v HLP Financial Planning (Aust) Pty Ltd and Others (2007) 164 FCR 487, distinguished.
Henderson v Pioneer Homes Pty Ltd (No 2) (1980) 43 FLR 276, discussed.
Ainsworth v Criminal Justice Commission (1992) 175 CLR 567; Australian Securities and Investments Commission v Intertax Holdings Pty Ltd [2006] QSC 276; Australian Securities and Investments Commission v Sweeney [2001] NSWSC 14; Corporate Affairs Commission (NSW) v Transphere Pty Ltd (1988) 15 NSWLR 596; Inglis v Moore (1979) 24 ALR 411; Johnco Nominees Pty Ltd v Albury-Wodonga (NSW) Corporation [1977] 1 NSWLR 43, considered.
WORDS AND PHRASES CONSIDERED/DEFINED
"likely price", "likely price range", "prescribed minimum advertising price", "sales agency agreement", "buyer inquiry range"
JOHN R RING PTY LTD v THE COMMISSIONER OF THE OFFICE OF CONSUMER AND BUSINESS AFFAIRS
[2009] SASC 35Civil
SULAN J: The plaintiff seeks declarations that particular advertisements it has published do not infringe s 24A of the Land and Business (Sale and Conveyancing) Act 1994 (“the Act”). The Commissioner for Consumer Affairs (“the Commissioner”) opposes the application and, by cross-claim, seeks a declaration that, for the purposes of s 24A(2) of the Act, the price range referred to as the “Buyer Inquiry Range” (“BIR”) in the advertisements represents “a likely price range for the sale of the land” the subject of the advertisement.
Background
Mr John Rodney Ring is a director of the plaintiff. The plaintiff trades under the business name “Ring Partners” as a real estate agent. Since July 2001, Ring Partners has used a marketing system which has two features known as “Set Sale” and BIR. The system has operated in South Australia since 1996.
The Act prescribes matters which must be included in an agreement between a land agent and a vendor. It prohibits certain forms of advertising. The Act was extensively amended in 2007. Prior to the 2007 amendments, before an agent could advertise and sell a property on behalf of a vendor, all the agent was required to do was to obtain an authority in writing from the vendor. In 2007, the Act was amended to require the inclusion of particular information in what is now defined in the Act as a “sales agency agreement”. I shall return to that information later in these reasons.
Prior to the 2007 amendments, Ring Partners’ advertisements described a particular property and provided a price range for that property, which is convenient to describe as the “vendor’s selling range”. The advertisements also included a BIR, the starting point of which was invariably a lesser price than the minimum price of the vendor’s price range. As part of the advertising, the BIR was explained in the following terms:
This is not the selling range but a buyer inquiry range. If you are looking for a home within this range we suggest you may be interested in this property and recommend an inspection.
After the 2007 amendments came into force, Mr Ring wrote to the Commissioner on 14 December 2007 setting out in detail the form of advertisement Ring Partners used. He contended that the form of the advertisement, which included a BIR, did not breach the Act. He sought the Commissioner’s opinion as to whether that form of advertisement complied with the Act. The Commissioner responded that he was unable to provide advice of the kind sought.
On 5 July 2008, Mr Ring advised the Commissioner that he had received advice that the use of a BIR in advertisements for the sale of properties did not breach the Act.
On 12 August 2008, the Commissioner responded in the following terms:
The Office of Consumer and Business Affairs is of the view that the advertising method used by Ring Partners, in particular the “Buyer Inquiry Range”, is contrary to the Land and Business (Sale and Conveyancing) Act 1994. I refer you to new sections 20 and 24A of the Land and Business (Sale and Conveyancing) Act 1994, which relate to representations in advertising about the likely selling price of residential land.
The Office of Consumer and Business Affairs requests that you cease the use of the “Buyer Inquiry Range” in your advertising of residential land. Any continued use of the “Buyer Inquiry Range” in your advertising of residential land will give rise to enforcement action.
Mr Ring sought further legal advice. A slight alteration was made to the form of the advertisement to distinguish between the vendor’s selling range and the BIR. Solicitors for the plaintiff responded to the Commissioner’s letter on 22 August 2008 advising of the adjustment to the form of advertising and making the following points:
The purpose of the “Buyer Inquiry Range” is to provide a range within which a purchaser may consider inspecting or enquiring about a particular property. It is not connected or directly linked with the actual sale price or vendor’s selling range but is [sic] simply suggests or recommends that a buyer may consider inspecting a particular property if it falls within the “Buyer Inquiry Range”.
The proposed advertisement clearly distinguishes between the two concepts and it is not ambiguous. If any further clarity in the advertisement could be provided, it would be provided.
On 5 September 2008, the plaintiff issued proceedings seeking certain declarations. I shall return to the detail of the declarations sought later in these reasons.
The Act
The Act regulates the sale of land and businesses. Various provisions regulate the relationship between a land agent and a vendor. The Act also regulates the terms on which a domestic property can be marketed to the public.
The 2007 amendments were made after the Attorney-General and the Minister for Consumer Affairs had received a report from Mr John Rau MP, which made recommendations about how industry standards might be improved and consumers protected from sharp practices.[1]
[1] Parliament of South Australia (Mr John Rau MP), Report into Practices in the Real Estate Industry in South Australia, December 2002.
The Real Estate Institute of South Australia had also expressed concern to the Minister about certain industry practices. The Minister responded by forming a working party to consider the Rau Report and make recommendations about which (if any) reforms were required to the law regulating the real estate industry in South Australia.[2]
[2] Office of Consumer and Business Affairs, Final Report of the Real Estate Working Party, July 2003.
The Rau Report made recommendations about “bait pricing”, which is a term given to the practice of agents advertising properties by reference to a price, or a price guide, that is significantly less than the agent’s estimation of the market value of the property, and less than the price the vendor is prepared to accept for the property. The Real Estate Working Party reported that it should be unacceptable for agents to advertise properties for less than the minimum market value, as estimated by the agent. The Working Party considered that “bait advertising” is misleading, and is capable of causing detriment to both vendors and prospective purchasers. It recommended that it should be illegal for agents to advertise a property below the agent’s estimated selling price, or the price lower than that recorded in the sales agency agreement.
Part 4 of the Act deals with “Special requirements relating to agents and sales representatives”. Sections 20(1)(a) and (b) provide:
20 – Authority to act as agent
(1) An agent must not act on behalf of a vendor in the sale of residential land unless the agent has been authorised to so act by an agreement (a sales agency agreement) that –
(a)specifies the agent’s genuine estimate of the selling price expressed without any qualifying words –
(i)as a single figure; or
(ii)as a price range in figures with an upper limit that does not exceed 110 per cent of the lower limit; and
(b)specifies the selling price sought by, or acceptable to, the vendor expressed without any qualifying words as a single figure; …
Section 24A provides:
24A – Representations as to likely selling price in marketing residential land
(1) For the purposes of this section –
(a)a representation is made in marketing land if –
(i)it is made in an advertisement for the sale of the land that is published, or caused to be published, by the agent; or
(ii)it is made (whether orally or in writing) to a purchaser who has not commenced negotiations for the purchase of the land; and
(b)information in an advertisement is a representation as to a likely price or likely price range for the sale of land if it could be reasonably taken to be such; and
(c)a statement as to the price actually sought by, or acceptable to, the vendor of land is not a representation as to a likely price or likely price range for the sale of the land provided that the amount stated as the price is the same as the selling price sought by, or acceptable to, the vendor as expressed in the sales agency agreement at the time of the statement; and
(d)prescribed minimum advertising price, in relation to a representation, is the amount that is the greater of –
(i)the agent’s estimate of the selling price as expressed in the sales agency agreement as a single figure at the time of the representation, or, if that estimate is expressed in the agreement at that time as a price range, the lower limit of that range; or
(ii)the selling price sought by, or acceptable to, the vendor as expressed in the sales agency agreement at the time of the representation.
(2) In marketing residential land that an agent is authorised to sell on behalf of a vendor, the agent or a sales representative employed by the agent must not –
(a)make a representation as to a likely price for the sale of the land that is less than the prescribed minimum advertising price; or
(b)make a representation as to a likely price range for the sale of the land specifying –
(i)as the lower limit of the range an amount less than the prescribed minimum advertising price; or
(ii)as the upper limit of the range an amount exceeding 110 per cent of the lower limit.
Maximum penalty: $10 000.
The effect of these provisions is that a land agent must not act on behalf of a vendor in the sale of residential land unless the agent has entered into a written sales agency agreement with the vendor in which the agent has specified the agent’s genuine estimate of the selling price, either as a single figure or as a price range, and the vendor has estimated the vendor’s selling price as a single figure.
The agent, or any employee of the agent, is prohibited from making a representation that the likely price or price range for the property is less than the estimated selling price of the agent, or the vendor’s expressed selling price, whichever is the greater. In other words, agents are required to specify in the sales agency agreement their genuine estimate of the likely selling price of the property being sold. If that price is expressed in terms of a range, the upper limit of that range must not exceed 110 per cent of the lower limit of the range. The vendor is also required to stipulate the price sought by, or acceptable to the vendor. By way of example, if the agent’s selling price is $300,000 to $330,000, but the vendor is not prepared to accept less than $350,000, the agent must not suggest a selling price or a range that includes any amount under $350,000. If the agent specifies a range, then the minimum price for that range must be $350,000, and the maximum price cannot be greater than $385,000, which is 110 per cent of the lower price in the range.
In considering a prospective purchaser’s offer, a vendor is not bound by the price range. The vendor is permitted to accept any price above the upper limit of the price range, or below the lower limit of the price range, or above or below the vendor’s selling price.
Declarations sought
The plaintiff seeks the following declarations:
1.That the form of advertisement used up to 24 August 2008 (depicted by exhibit JRR7 in the affidavit of John Rodney Ring sworn on the 5th day of September 2008, which affidavit supports this Application and in that affidavit called “the earlier advertisement”) does not infringe Section 24A of the Land and Business (Sale and Conveyancing) Act 1994 (“the Act”).
2.That the form of advertisement used from 30 August 2008 (depicted by exhibit JRR8 in the affidavit of John Rodney Ring sworn on the 5th day of September 2008, and in that affidavit called “the current advertisement”) does not infringe Section 24A of the Act.
The declaration sought by the Commissioner on the cross-claim is as follows:
A declaration that for the purposes of section 24A(2) of the Land and Business (Sale and Conveyancing) Act 1994, the price range referred to as the Buyer Inquiry Range in the advertisements depicted in Exhibits JRR7 and JRR8 to the affidavit of John Rodney Ring sworn on 5 September 2008 is a representation as to a likely price range for the sale of the land referred to in the relevant advertisement.
The JRR7 advertisements, which were published in The Advertiser and the Messenger Press appear at Annexure A to these reasons.
The suburb “Bellevue Hills” appears above a photograph of the subject property. The vendor’s price range is “$570,000 – $625,000”. The date when the property will be open for inspection is given. Under the price range is the address, “49 The Boulevard”. There is then a short narrative describing the property, including information such as the number of bedrooms and a description of the internal rooms. Immediately below the description appears the following:
*‘Buyer Inquiry Range’™ $525-$625,000
‘SET SALE’™ Offers close 15/9 (unless sold).
There are other properties advertised on the same page which also include a BIR. At the foot of the page appears the note used by Ring Partners to explain the BIR to which I referred earlier:
*Additional information for buyers: ‘Buyer Inquiry Range’™. This is not the selling range but a buyer inquiry range. If you are looking for a home within this range we suggest you may be interested in this property and recommend an inspection.
The JRR8 advertisement, which appears at Annexure B, is in the same form as JRR7 except that, before the vendor’s selling range of $570,000 to $625,000, there is a symbol “V” and, before the term “Buyer Inquiry Range”, is a symbol “B”. The symbols also appear in a separated highlighted box which has a legend describing “V” as the “Vendor’s Selling Range” and “B” as the “Buyer Inquiry Range™”. The BIR is then described using the same description as appears in JRR7. The change between JRR7 and JRR8 reflect those discussed by the solicitors for the plaintiff in their letter to the Commissioner of 22 August 2008.
A threshold question
A threshold questions arises. That is whether, having regard to the possibility that criminal proceedings may be instituted against the plaintiff in respect of the subject advertisements, this is an appropriate case to make declarations.
The parties agree that the Court should exercise its discretion and decide whether to make the declarations sought by the plaintiff. However, the plaintiff submits that the declaration sought by the Commissioner in its cross-claim is, in effect, a declaration that the plaintiff has committed an offence against the Act. The plaintiff submits that such a declaration antecedent to potential criminal proceedings is against public policy. The plaintiff submits that such a declaration will impinge upon any possible subsequent prosecution of the plaintiff and the declaration should, therefore, be refused in the exercise of the Court’s discretion.
The plaintiff’s submission as to the declaration sought by the Commissioner is inconsistent with its submission that the Court could and should make the declarations the plaintiff seeks. The declarations sought by the plaintiff are that the subject advertisements do not infringe s 24A of the Act. If the Court refuses the declarations on the ground that the plaintiff has failed to establish that the advertisements do not infringe the Act as a matter of law, then the effect of the Court’s decision is that the plaintiff has breached the Act.
The Commissioner, however, does not seek a declaration that the plaintiff has breached the Act. He seeks a declaration as to the legal character of the plaintiff’s advertisements. He submits that, to obtain a conviction under s 24A, more is required than the establishment of the legal character of the relevant representation. For example, the Commissioner would need to prove that the particular advertisement related to residential land. Further, to sustain a conviction, it is necessary to prove that the lower price range in the advertisement is less than the prescribed minimum advertising price. No declaration to that effect is sought. Further, the Commissioner contends that there is no authority which supports the plaintiff’s contention that a declaration in respect of a criminal offence is against public policy.
I do not agree with the contention that, because the Commissioner does not seek a declaration that the plaintiff has breached the Act, the Commissioner is, therefore, not seeking a declaration that the plaintiff has committed an offence. The effect of the declaration sought is that, as a matter of law, subject to a number of factual matters which are not disputed, the plaintiff is in contravention of the Act. Accordingly, I proceed to consider whether a declaration should be made.
Is this an appropriate case to make a declaration?
The statutory source of the Court’s jurisdiction to grant declaratory relief is to be found in s 31 of the Supreme Court Act 1935 which provides:
No action or proceeding shall be open to objection on the ground that a merely declaratory judgment or order is sought thereby, and the court shall have power to make binding declarations of right whether any consequential relief is or could be claimed or not.
As a superior court of record, the Supreme Court also has inherent power to grant declaratory relief. In Ainsworth v Criminal Justice Commission,[3] a majority of the High Court (Mason CJ, Dawson, Toohey and Gaudron JJ) observed:[4]
It is now accepted that superior courts have inherent power to grant declaratory relief. It is a discretionary power which “[i]t is neither possible nor desirable to fetter … by laying down rules as to the manner of its exercise.” However, it is confined by the considerations which mark out the boundaries of judicial power. Hence, declaratory relief must be directed to the determination of legal controversies and not to answering abstract or hypothetical questions. The person seeking relief must have “a real interest” and relief will not be granted if the question “is purely hypothetical”, if relief is “claimed in relation to circumstances that [have] not occurred and might never happen” or if “the Court’s declaration will produce no foreseeable consequences for the parties”. [citations omitted]
[3] (1992) 175 CLR 567.
[4] Ibid, 581-2.
The jurisdiction to grant declaratory relief is wide. The restriction on granting relief is substantially related to the exercise of a discretion rather than to jurisdiction. There are circumstances in which the Court may exercise its discretion to decline to grant declaratory relief. For example, it has been said that a declaration will not be made except in matters which have a real legal context and to the determination of which the Court’s procedure is apt.[5] The question must not be purely theoretical or hypothetical. The party seeking the declaration must have a true interest in having the question determined, and the party opposing must equally have a true interest in opposing the declaration. If the determination of the question will not impact on a party’s commercial or personal interests, now or in the future, no declaration will be made.
[5] See Johnco Nominees Pty Ltd v Albury-Wodonga (NSW) Corporation [1977] 1 NSWLR 43, 61.
The Court has a discretion to make a declaration that a person has or has not committed a crime, or to make a declaration in respect of a question or issue that might arise in criminal proceedings. In Inglis v Moore,[6] the applicant sought declarations that some acts done by individual defendants constituted the crime of unlawful conspiracy. The application for declaratory relief failed. Nevertheless, in the course of their joint judgment, Brennan and Davies JJ observed:[7]
… She also seeks declarations that some acts done by individual defendants were illegal, though no substantive relief is claimed. Although it cannot be said that a declaration that conduct constitutes a crime will never be made, the discretion to make declarations of that kind is cautiously exercised. [citations omitted]
[6] (1979) 24 ALR 411.
[7] Ibid, 421.
Courts have been reluctant to grant declaratory relief upon the application of statutory authorities seeking declarations in circumstances where conduct may amount to an offence. However, over the years, circumstances have changed and the earlier authorities have less relevance in today’s social climate.[8] The Court, in contemporary times, is more receptive in an appropriate case to granting such relief on the application of a statutory authority which exists to regulate an industry. The fact that the subject matter of the declaration is of public interest is an important consideration in favour of exercising the discretion to grant declaratory relief.
[8] See Corporate Affairs Commission (NSW) v Transphere Pty Ltd (1988) 15 NSWLR 596.
The declaration sought by the Commissioner is of general importance. It is of importance to the real estate industry to have clarification of the meaning and ambit of s 24A of the Act. It is also of general importance to the community to ensure that, in advertising properties, land agents are not contravening the legislation. In Australian Securities and Investments Commission v Sweeney,[9] Austin J in making declarations sought by ASIC, observed:[10]
According to s 1(2) of the Australian Securities and Investments Commission Act 1989 (Cth), in performing its functions and exercising its powers, the plaintiff must strive to achieve various objectives, including:
·to promote the confident and informed participation of investors and consumers in the financial system;
·to administer the laws that confer functions and powers on it effectively and with a minimum of procedural requirements; and
·to take whatever action it can take, and is necessary, in order to enforce and give effect to the laws that confer functions and powers on it.
These provisions imply that it is appropriate for the Commission to take civil proceedings for declaratory and injunctive relief in respect of past events, even if there is no risk of repetition, where the outcome may establish that the conduct complained of was wrongful (and thereby mark the Court’s and the community’s disapproval of it) and may deter other wrongdoers. It is appropriate for the Court to take these matters into account in the exercise of its discretion to grant or refuse such relief.
[9] [2001] NSWSC 14.
[10] Ibid, [34] – [35].
The Commissioner is charged with the responsibility of ensuring that land agents comply with the Act. In that regard, the Commissioner has an interest in preventing unscrupulous conduct by agents.
The Commissioner submits that no criminal proceedings are presently pending against the plaintiff, or any person in respect of the subject advertisements. That is a relevant matter. However, the Commissioner has reserved his position insofar as the institution of criminal prosecutions in respect of the subject advertisements. True it is, that this application is not interfering, fragmenting or impinging on current criminal proceedings. However, the effect of a declaration may impinge on future criminal proceedings, in that the subject advertisements may be the subject of criminal proceedings in the future, and a decision upon whether the advertisements infringe the Act or make representation as to a likely price range for the sale of the land referred to in the advertisements, will impact upon those criminal proceedings.
On the other hand, I accept the submission of both parties that the declarations sought solely relate to a question of law where the facts are not disputed. I agree with the Commissioner’s submission that the declaration he seeks is as to the legal character of the representations in the subject advertisements. The decision of this Court will deal solely with the legal interpretation of the relevant statutory provision. The question of whether the Commissioner has established that the plaintiff is guilty of an offence is a separate and distinct question although, as I indicated earlier, if a prosecution is instituted, the facts to be proved to establish the offence are unlikely to be controversial.
In these proceedings, the underlying facts are agreed. In the circumstances, the making of a declaration would not place the plaintiff at a forensic or evidentiary disadvantage in any criminal proceedings.
In opposing the Commissioner’s cross-claim, the plaintiff sought to rely on the decision of Finkelstein J in Australian Securities and Investments Commission v HLP Financial Planning (Aust) Pty Ltd and Others.[11]
[11] (2007) 164 FCR 487.
In that case, ASIC sought a declaration that a scheme operated by the corporate defendants, the HLP Group, was an unregistered management investment scheme and was, therefore, in breach of s 601ED(5) of the Corporations Act 2001 (Cth). ASIC also sought a declaration that the controller of the HLP Group operated the illegal scheme, and that he carried on a financial services business without an Australian Financial Services licence.
Finkelstein J observed that the real issue in the case was whether he should make a declaration that the operator had operated the scheme in contravention of the legislation, and whether he should make a perpetual restraining order against the operator of the scheme. At the time of seeking the declaration, counsel for ASIC advised the Court that ASIC was still considering whether to lay charges for particular offences against the operator. Finkelstein J considered the development of the law relating to the making of declarations in circumstances where criminal proceedings may be contemplated. Having considered a number of the authorities in the United Kingdom and Australia, he observed:[12]
It will be noticed that the cases referred to are concerned with either offences of a regulatory character or breaches of a statutory provision affecting a public right. They do not involve violations of the criminal law proper. This is not to suggest that a civil court will not interfere in cases which involve serious criminality. But, whatever type of criminal case, all the leading authorities caution against a court that is exercising civil jurisdiction attempting to supplant the criminal law. The consensus both in England and Australia is that this should only happen in exceptional circumstances.
[12] Ibid, 494 [24].
Finkelstein J embarked on an exhaustive consideration of cases in the area of company law and the development of the Court’s approach to the making of civil orders in respect of corporations and officers of corporations when criminal proceedings may still be contemplated. He concluded:[13]
I would sum up the position as I see it as follows. The English and Australian authorities that warn of the dangers of a civil court becoming involved in criminal conduct continue to apply in an appropriate company case. The general rule in a company case is that a civil court will usually be the appropriate court to deal with a contravention of the Corporations Act. But the court should be wary of granting relief, including the grant of a declaration or an injunction, if the case is likely to end up before a criminal court. Ordinarily, a civil court should not intervene in those circumstances unless its failure to do so will result in irreparable injury. That strict rule need not be applied if the case involves undisputed facts and the issue raised gives rise to a question of pure law. Then a declaration can be a very useful remedy.
[13] Ibid, 504 [58].
In the exercise of his discretion, Finkelstein J did not make the orders sought against the operator of the scheme. His reasons for so refusing were that, first, a criminal prosecution was on the cards; secondly, the facts were not agreed; thirdly, there was the potential for an adverse impact on any jury trial; and, finally, it was undesirable for a civil court to make a declaration which might be falsified by a subsequent acquittal in proceedings between the same parties.[14]
[14] See Australian Securities and Investments Commission v Intertax Holdings Pty Ltd [2006] QSC 276.
The circumstances in ASIC v HLP can be distinguished. This application is made upon agreed facts. Any subsequent prosecution would be a summary prosecution and, therefore, not be determined by a jury. Whilst a magistrate would be bound to have regard to a decision of this Court on a pure question of law, any decision of the magistrate would be made on facts determined at the trial to which the law must be applied. The magistrate, unlike a jury, is required to give reasons for his or her findings.
In my view, this case involves questions of public interest. The facts are undisputed and the issues raised give rise to a question of law upon the undisputed facts.
For the foregoing reasons, I consider that it is appropriate to consider the substantive arguments and to consider whether declarations should follow.
The subject advertisements
The case turns upon the analysis of the subject advertisements. It is not disputed that an agent or their representative must not make a representation as to the likely price of residential land that is less than the prescribed minimum advertising price.
Section 24A(1)(a)(i) of the Act provides that a published advertisement for the sale of residential land is a representation made in marketing that land. In determining whether information in an advertisement is a representation as to a likely price or likely price range, the question to be asked is whether a reader of the advertisement could reasonably take it as such. Practically speaking, the “likely price” or “likely price range” is what a reader could reasonably expect to be the figure of a successful offer, or what he or she could reasonably expect to be the price range within which a successful offer would fall. In determining what a reader could reasonably expect, it is necessary to have regard to the kind of reader who is likely to be reading the advertisement. Is the reader an informed person? Is the advertisement in a specialist publication, such as a professional journal? Is it aimed at a particular section of the community such as, for example, a publication aimed at the farming community?
The subject advertisements in this case were published in The Advertiser and Messenger newspapers. Both newspapers contain general information and are newspapers available to and targeted at the general public.
In Henderson v Pioneer Homes Pty Ltd (No 2),[15] the Full Court of the Federal Court considered certain questions which had been referred to it regarding the contents of advertisements which were made in connection with the sale of rights and interests in real property. Pioneer Homes advertised the sale of houses to the general public. One advertisement spoke of a “last chance” to buy one of two houses for a price of $37,600. The advertisement sought a deposit of $100 and repayments of $45 per week. The undisputed facts were that, after 12 months, the payment of $45 per week substantially increased. The statement was correct at the time of purchase and completion of the transaction. However, the statement failed to advise prospective purchasers that the payment increased in the second and future years. A question considered by the Full Court was whether the statement was false and misleading as to the existence or effect of any condition, warranty, guarantee, right or remedy in connection with the promotion of the supply of services.
[15] (1980) 43 FLR 276.
Smithers J summarised the position as follows:[16]
The question is, therefore, what would a reasonable reader of the class to which the advertisement was directed reasonably understand from the advertisement. Would he understand that he was being offered a deal in respect of which he would pay $45 for twelve months, or two years if he happened to be approved, and then have to do the best for himself that he could in the open market? The kind of reader concerned is quite likely to be a man or woman of indifferent education, unacquainted with conveyancing practice or the law and unaccustomed to analysing business documents. The advertisement invites the reader to have full confidence in Pioneer Homes, to rely on the advertisement as candid and bona fide, meaning what it says, speaking the language of the reader and to be read without suspicion. In World Series Cricket Pty. Ltd.v. Parish, Brennan J., in an application for interlocutory relief, made the following relevant statement: “Although knowledge may be a valuable barrier against deception, the question for the Court to determine is whether there is a prima facie case that the use of the terms complained of would mislead or deceive the class of persons to whom the advertising is addressed. In the present case, there is substantial evidence that the advertising is directed to the general public – the knowledgeable and those who are not, the superficial reader or viewer or listener as well as the profound, the gullible as well as the cautious”. [citations omitted]
[16] Ibid, 282-3.
Franki J referred to transactions that were promoted as providing for a payment of $100 deposit and weekly payments of $40, $45 or $50 during the period before the substitution of long-term finance. Thereafter, weekly payments were to be $75.42. Franki J said:[17]
In my opinion, each of the advertisements annexed to the case and referred to as Exs. E to O, would appear to the appropriate class of reader as an offer of a home for $100 deposit and either $40, $45 or $50 per week depending upon the particular advertisement. In some of the advertisements reference was made in small type to the cost for the first twelve months and to bridging finance and some were cast in a way that might suggest to a well-educated and cautious reader that the attractive proposition of paying only $40 to $50 per week might be subject to some qualification. However, these advertisements were directed to the general purchasing public and not only to the well-educated and cautious reader. Some of the potential readers were uneducated people on low incomes and, in some cases, people badly in need of accommodation.
I repeat what I said in relation to s. 52 of the Act in McDonald’s System of Australia Pty. Ltd. v. McWilliam’s Wines Pty. Ltd. (No 2): “Broadly speaking it is fair to say that the relevant persons are those not particularly intelligent or well informed, but perhaps of somewhat less than average intelligence and background knowledge, although the test is not the effect on a person who is quite unusually stupid”. [citations omitted]
[17] Ibid, 288.
Franki J concluded that the agreed facts supported a conclusion that the statements were misleading.
The subject advertisements in this case display a price range. Each has a vendor’s selling range. In JRR7, the vendor range for 49 The Boulevard, Bellevue Heights is $570,000 to $625,000. The BIR is $525,000 to $625,000. The same price ranges appear in JRR8 in respect of the same property.
The plaintiff contends that the BIR is something other than the selling price. The plaintiff contends that, in the legend, the BIR is described as “not the selling range”. The plaintiff contends that the legend conveys to a reader that if the buyer is considering a price within the BIR, then that buyer may be interested in the property, not because the vendor will accept, or invites, an offer within the BIR but, rather, it conveys to the buyer that, if the buyer inspects the property, the buyer will realise that the property is excellent value at the vendor’s range, and the buyer will then be prepared to pay the higher price for the property.
The plaintiff contends that no reasonable reader of the advertisements would conclude that the vendor is representing, or even hinting, that the vendor’s price might be lower than that advertised as the vendor’s price range.
The plaintiff submits that the BIR conveys to the average reader that the lower end of the BIR is not within the vendor’s price range, but it is a property which the buyer should consider because the upper end of the BIR is within the vendor’s price range and, therefore, not beyond what the buyer may be prepared to pay. It was submitted that the BIR conveys to a buyer that, at that range, it is worth inspecting, but that the buyer should lift his or her sights to the lower end of the vendor’s price range and consider the property at that figure. It is submitted that it is clearly conveying to a buyer that the buyer must be prepared to pay within the vendor’s price range to acquire the property. The lower price of the BIR will not be sufficient to acquire the property.
The Commissioner submits that what is required is an analysis of the substance of the advertisement and its effect on the mind of the reader, having regard to the reader being a person of average intelligence, not trained to analyse and interpret documents, and a person who will be left with a general impression from having read the advertisement.
The Commissioner submits that the relevant test is whether, when reading the advertisement as a whole, the reader could understand that the BIR is the likely price range. The Commissioner submits that the reasonable reader will conclude that the likely price range in respect of the Bellevue Heights property is $525,000 to $625,000. That is, that the property could be purchased for less than $570,000. The reasonable reader could conclude that, even though the vendor’s price range is $570,000 to $625,000, the vendor would negotiate between $525,000 to $625,000, and there is a realistic prospect that the vendor would accept a price less than $570,000. The person at whom the advertisement is aimed is the ordinary, average member of the general public, not particularly educated or uneducated, someone not specifically trained to analyse the words or form of the advertisement, and a person who will look at the advertisement and be left with an overall impression. The Commissioner submits the only reasonable conclusion that such a reader would draw is that he or she is being invited to inspect the property, because he or she may be able to purchase it at a price between $525,000 and $625,000.
If that be the case, the Commissioner contends, people who read the advertisements will be put to the expense of travelling, inspecting and giving up time in respect of that property. They may return to inspect it more than once. They may bring friends and relatives. They may speak to lenders. They may engage a professional building inspector. They may engage a termite inspector. They would do so under a misapprehension as to the price for which the property may sell.
The Commissioner submits that the plaintiff must establish that no reasonable reader could draw the conclusion that a price range for the property was within the BIR. For the plaintiff to succeed, the reader would have to conclude:
(i) the vendor is trying to attract buyers who are in the market for prices between $570,000 to $625,000;
(ii) the vendor is not interested in selling for less than $570,000;
(iii) the vendor will not sell for less than $570,000, but will talk to a person in a $525,000 to $570,000 range to convince them to offer at least $570,000; and
(iv) if a person who wants to pay $525,000 comes along, the vendor will try to talk them up to $570,000.
The Commissioner submits that is not the position a reasonable reader would take from reading the advertisement. The reasonable reader would conclude that, although the vendor may want at least $570,000, the vendor is prepared to negotiate a price between $525,000 and $570,000.
The question to be answered is not what the vendor intends or contends but, rather, what a reasonable person of the class to which the representations are directed could reasonably understand from the representation. The class of persons who read these advertisements are those described by Smithers J in Henderson’s case as being a man or woman of indifferent education, unaccustomed to analysing advertisements word for word. They are the type of people who would read the advertisement and the legend, and be left with a general impression of what the advertisement conveys. They would not read each word and carefully analyse and interpret what is said in the advertisement. The reader would consider the advertisement taken as a whole, not dissected line by line.
In my view, even if a person considered the wording carefully and line by line, in JRR8, for example, the message is ambiguous. The BIR is defined as not the selling range, but a buyer inquiry range. That conveys very little information to the reader. It does not convey to the reader that the vendor will not entertain an offer within the BIR. All it conveys is that the vendor’s range is higher than the BIR. If the advertisement or legend stated that the vendor will not accept offers in the BIR, then that would at least convey to a prospective buyer that, unless the buyer is prepared to increase their sights beyond the BIR, the property would not be available for sale. That is not conveyed to the reader. If it was, there would presumably be little, if any, need for the BIR in the first place. The impression conveyed by the subject advertisement to a reader is that, if his or her price range is within the BIR, then there is a reasonable prospect that the vendor may accept an offer within that range. The additional information in the legend that the BIR is not the selling range does not dispel that impression. Nor do the words “If you are looking for a home within this range (the BIR), we suggest you may be interested in this property and recommend inspection” clarify or support the plaintiff’s case. If anything, the additional words encourage a prospective buyer to inspect the property, not in order to raise their sights in terms of price, but rather because they may be able to purchase the property within the BIR. Further, the average reader is unlikely to analyse or even read the words in the explanatory section of the advertisement. The average reader is more likely to concentrate on the minimum price appearing in the advertisement and conclude that the vendor would accept offers at about that price.
Even an informed and astute reader attempting to reconcile the vendor’s selling range with the BIR would, in my view, conclude that the vendor is seeking to obtain a price within the vendor’s selling range, but would be prepared to entertain offers, and might sell for a price at the lower end of the BIR.
Section 24A prohibits the vendor from advertising a price range at which the property would sell at a figure below the prescribed minimum advertising price. In my opinion, taking the most generous view of the advertisements, the subject advertisements convey to a reasonable reader that the vendor wishes to achieve a price within the vendor’s price range, but would be prepared to negotiate a price within the BIR, which is less than the vendor’s price range. Section 24A prohibits such advertising. The advertisements do not convey, as the plaintiff submits, that the property is not available at the BIR but that buyers looking at a price within that range might be prepared to offer a price within the vendor’s price range, after inspecting the property.
I agree with the Commissioner’s submission that a reader is likely to conclude that what is being communicated to the reader is that it is worth the reader’s while to take the effort and expense to inspect the property because it might sell for a price within the BIR, which is less than the vendor’s price range.
I am satisfied that the reader of the advertisements could and, in my view, would conclude that the BIR represents a likely price range for the sale of the land.
For the foregoing reasons, the declaration sought by the plaintiff is refused, and a declaration in the terms sought by the Commissioner is granted, as follows:
For the purposes of s 24A(2)(b)(i) of the Land and Business (Sale and Conveyancing) Act 1994, the price range referred to as the Buyer Inquiry Range in the advertisements depicted in Exhibits JRR7 and JRR8 to the affidavit of John Rodney Ring sworn on 5 September 2008, and appearing as Annexures A and B respectively to these reasons, is a representation as to a likely price range for the sale of the particular land in respect of which the Buyer Inquiry Range is given in the advertisements.
ANNEXURE A
ANNEXURE B
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