MTECC NEWS 22.03 ||| The art of misleading marketing – the Federal Court finds an artist’s impression of an off the plan apartment was misleading in Ripani v Century Legend Pty Ltd  FCA 242
Significance: The case raised a number of issues of general interest and application to commercial property professionals (including agents and architects), developers, purchasers and lenders:
- The actionable potential of marketing materials;
- The significance of a notation that the depiction was an artist’s impression;
- The ineffectiveness of a disclaimer;
- The ineffectiveness of an exclusion clause in the sale contract; and
- The significance of meetings between the Ripanis and project architects and the corroboration of those meetings by contemporaneous record.
Facts: The Ripanis made a contract to purchase an expensive apartment off the plan from Century Legend. After making the contract to purchase but before settling, the Ripanis sought to rescind the contract because a depiction of their apartment in marketing material misrepresented that there would be a free span opening and seamless transition between internal living areas and an outside terrace (the pleaded form of representations can be found at ). The representations alleged were said to flow by inference from the depiction. Other more granular representations were alleged but not made out from the same source.
In fact, the apartment could not be constructed as depicted i.e. as a free span opening and seamless transition between internal living areas and an outside terrace, and Century Legend had been warned by the architect to that effect several times before contracting and that the depiction was misleading. The claim was framed as a contravention of s 18 of the Australian Consumer Law with consequential relief. In the result, the finding was that the Ripanis suffered loss and damage as required by s 237 because they entered into a contract which would not otherwise have occurred. The judge rejected contentions to the effect that rescission should be refused because practical injustice to Century Legend would follow such as loss of commission fees.
The actionable potential of marketing materials
Century Legend contested whether the representations alleged were reasonably conveyed, essentially on the basis that the depiction was mere puffery. That contention was rejected because although the depiction was produced and used as general marketing material for the development as a whole, it purported to depict the specific apartment of interest to the Ripanis and was effectively adopted by the selling agent for that purpose. In that context the Ripanis were explicit to the agent that they were attracted to the open transition features in the depiction. The context was held to be determinative. The statements by its selling agent were attributable to Century Legend as principal. That is, both the depiction itself and the use of it separately constituted representations.
Relatedly, Century Legend contended that the incontestable fact that the depiction was an artist’s impression meant that the salient design feature was not conveyed. It made a related submission that the depiction was patently unrealistic.
This contention was rejected for several reasons. The core reasoning was to the effect that the label “artist’s impression” does not detract from the materiality of the image and the representations it conveys. The depiction is reproduced in the reasons for judgment.
The marketing brochure included a disclaimer in the following terms, which the judge described as boilerplate:
While all reasonable care has been taken in the preparation of this brochure and the particulars contained herein, it is intended to be a visual aid and does not necessarily depict the finished state of the property or object shown. No liability whatsoever is accepted for any direct or indirect loss, or consequential loss or damage arising in any way out of any reliance upon this brochure. Purchasers must rely upon their own enquiries and inspections. Furniture is not included with the property. Dimension and specifics are subject to change without notice. Illustrations and photographs are for presentation purposes and are to be regarded as indicative only. This brochure does not form part of, and is not, an offer or a contract of sale.
The judge drew attention to several factors in holding this provision was ineffective. These included the lack of prominence of the provision in a lengthy package of materials and the equivocal and misleading nature of the disclaimer itself.
The reasons for judgment provide an informative critique of disclaimers of this kind. The short point is that it is not possible to have it both ways in providing a materially misleading depiction, the purpose of which can only be to be indicative and where the only enquiry and inspection possible was reliance on the depiction. The effect was that the disclaimer (if anything) reinforced the misrepresentations.
The exclusion clause
The sale contract included typical exclusion clauses purporting to cover precontractual information and representations. It is of course well recognised that provisions of this kind are ineffective to bar the statutory remedy but may have a bearing on causation. The reasons for judgment traverse the usual authorities.
Century Legend made a different contention than usual, to the effect that the exclusion clauses meant there had been no representation. That contention failed because of the potency of the depiction and the contextual facts surrounding its use by the selling agent. The judge also went further in holding that the exclusion clauses would need to specifically alert a purchaser to the fact that the depiction was inaccurate. A contention that the exclusion clauses meant there had been no reliance was rejected for that reason.
The narrative of events was typically complicated by meetings, conflicting recollections of meetings and iterations of draft plans. Ultimately, the Ripanis’ version of events was accepted on critical matters over an architect’s evidence to the effect that they were told by reference to plans that a free span opening and seamless transition between internal living areas and an outside terrace was not possible. This was for salutary forensic reasons reflecting a change of Century Legend’s case mid trial, the absence of any contemporaneous record and a lack of clarity in the plans. Unusually, the Ripanis were given leave to cross examine on the architect’s witness outline.
Century Legend has filed a notice of appeal from the trial judge’s decision and provided an undertaking to take all reasonable steps to expedite the listing and hearing of the appeal. The Court has correspondingly granted a stay of the trial judge’s orders. Commercial property professionals and their legal advisors may look forward to further developments in the matter in the near future.
Liability limited by a scheme approved under Professional Standards legislation.