Luxury Apartment Sale Rescinded for Misrepresentation

The recent case of Ripani v Century Legend Pty Ltd [2022] FCA 242involved a contract of sale for an apartment sold ‘off the plan’ in which the issues were whether the purchasers were misled or deceived by representations made by the vendor about certain features of the apartment, and whether the representations were sufficient to found a contravention of Australian Consumer Law. The vendor, Century Legend Pty Ltd, prepared promotional materials to be used to market the apartment building, and engaged real estate agents to assist in marketing the apartments. The promotional materials included brochures with images, known as ‘renders’ of what the development would look like once constructed. The centre of the proceedings was the question of what, if any, reliance did the purchasers place on the renders. The Court considered that Century Legend’s conduct was deliberately misleading given their knowledge that it was impossible to construct the apartment in conformity with the render. Additionally, their disclaimer was ‘inutile’ in the circumstances of the case, as it appeared on page 96 of the brochure and was given no prominence in the marketing materials (specifically because it was in a very small font compared to the rest of the brochure and was barely legible against a dark background).

Ultimately the Court held that the purchasers had been misled by the images on the brochures and would not have entered into the contract to purchase the apartment had they not believed that the apartment would be constructed in conformity with the image in the render. They were thereby entitled to rescind the contract pursuant to ss 237 and 243(a) of the ACL.

ACCC Commences Actions Against Airbnb

This month the ACCC commenced proceedings against Airbnb Inc. and Airbnb Ireland UC (Airbnb) for making false and misleading representations to consumers about pricing, alleging that Airbnb made misleading representations in breach of Australian Consumer Law and engaged in misleading and deceptive conduct in breach of the ACL.

Airbnb allegedly displayed and charged accommodation prices on its Australian websites and mobile apps in USD rather than AUD without making this clear to consumers. In particular, Airbnb represented prices as in ‘$X’ without designating the currency type. However, the fact that the web address for the website domains ended in ‘.au’ and the accommodation in question was in Australia, conveyed to consumers that the prices were in AUD, especially as a reference to USD only appeared once in fine print in the footer of Airbnb’s website and not in the apps. This deprived consumers of an opportunity to make an informed decision, and caused them loss from the price difference costs incurred from being charged in USD. These proceedings demonstrate the need to be transparent when it comes to representations to consumers.

$12 million Penalty Against Iconic Australian Ice-Cream Company

Peters Ice Cream Ltd (‘Peters’), an Australian ice cream brand established in 1907 was recently penalised by the ACCC for anti-competitive conduct. The company is a major manufacturer of single-wrapped ice cream and frozen confectionary products, and has historically partnered with PFD Food Services to transport these products and distribute them.

The ACCC alleged that the transport agreement between these two companies for the supply of products to various Australian convenience and petrol retailers was anti-competitive. Specifically, the agreement required PFD to obtain consent from Peters Ice Cream to sell or distribute any single-wrapped ice cream or frozen confectionary products which competed with Peters Ice Cream products in Australia. Peters Ice Cream admitted that this conduct amounted to exclusive dealing and limited the competition in the market.

Peters was fined $12 million and ordered to pay a $250 000 contribution to the ACCC’s legal costs.

Director Penalties for Failing to Pay Obligations

The ATO has been collecting overdue tax payments, including by serving Director Penalty Notices (DPNs) which were largely held in abeyance during the pandemic. A DPN is a notice to a director of a company which makes directors personally responsible for certain kinds of tax obligations of a company.

Division 269 of the Taxation Administration Act 1953 (Cth) imposes on directors liabilities to cause the company to comply with its obligations from the initial day on which a tax obligation accrues, and if the company fails to comply with its obligation by the end of the payment period, a penalty becomes due and payable by the director equal to the amount of the company’s obligation. Some of the obligations include Pay As You Go (PAYG) amounts and Superannuation Guarantee Charge (SGC) and Goods and Services Tax (GST).

The issuing of a DPN is a procedural step required by the ATO before it can commence proceeding against a director to recover accrued penalties.

Defences to avoid liability for failing to comply with a DPM include illness, which prevented the director to manage the company when it failed to comply with its SGC and PAYG obligations, or that the director took ‘all reasonable steps’ to ensure that the company complied with its obligations, but there were no reasonable steps that could have been taken to ensure that the company complied with its obligations, an administrator was appointed to the company, a small business restructuring practitioner was appointed, or the company was wound up.

Any director who receives a DPN should immediately seek legal advice as the DPN carries time-critical consequences. 

Big Changes to NSW Duty Laws

The State Revenue and Fines Legislation Amendment (Miscellaneous) Act 2022  which received assent on 19 May 2022, made amendments to the Duties Act 1997, Fines Act 1996, Fines Regulation 2020, First Home Owner Grant (New Homes) Act 2000, Land Tax Act 1956, Liquor Act 2007, State Debt Recovery Act 2018 and the Taxation Administration Act 1996. Importantly, there are significant changes to duties in relation to changes in beneficial ownership of dutiable property, declaration of trust measures and tax avoidance regimes. Some of the main changes are as follows:

Duties Act 1997

1.Changes in beneficial ownership

  • Imposing a duty on transactions that result in a change of beneficial ownership of dutiable property, including the creation or extinguishment of dutiable property, a change in equitable interests in dutiable property, and dutiable property becoming or ceasing to be the subject of a trust.
  • Importantly, because of the definition that includes ‘land’ as a category of ‘dutiable property,’ the new provisions will likely bring a broader range of transactions that have not been dutiable previously. For example, a grant of an option to purchase land or creation of a partnership interest that has partnership property that is dutiable property may now be dutiable. Certain transactions will be specifically excluded such as a grant of a lease or easement for no consideration or another ‘of a kind prescribed by the regulations.’
  • Whether leases are likely to be subject to duty will be made clear once regulations are made.

2. Changes to Declarations of Trust:

  • Charging a duty on acknowledgement of trust – including the making of a statement that purports to be a declaration of trust over dutiable property, and a statement that identified property is already held or is to be held in trust, is liable to duty
  • These provisions appear to have wide application, such that in the absence of express limits placed on them, they could potentially make statements made by trustees in routine documents such as resolutions, minutes and reports to regulatory authorities or security holders subject to duty.

3. Changes to Surcharge Purchaser Duty:

  • Extending the refund of surcharge purchaser duty that is paid in relation to a transfer of residential land, if after the transfer, the land is used by the transferee wholly or predominately for commercial or industrial purposes.

4. Changes to the division of relationship property:

  • Extending the exemption from duty for transactions made in accordance with an agreement for the division of relationship property on the breakdown of a de facto relationship, making it more similar to the division of matrimonial property.

First Home Owner Grant (New Homes) Act 2000

  • The total value of a comprehensive home building contract is, for the purposes of deciding eligibility for a first home owner grant, to be determined at the date the contract is completed rather than the date when the contract is made. The amendment extends a condition on the payment of a first home owner grant, made in anticipation of compliance with the eligibility cap, from the building of a home by an owner builder to a contract for the purchase of a home, and a comprehensive home building contract.

Land Tax Act 1956

  • Clarifying that for a person to be eligible for an exemption from surcharge land tax for land on the basis that the land is the person’s principal place of residence, the person must use and occupy the land for a continuous period of 200 days in a land tax year. If person is physically absent from Australia it does not count towards the 200 day period. The amendment also permits the Chief Commissioner of State Revenue to waive this requirement in exceptional circumstances.
  • Permitting surcharge land tax paid in relation to land to be refunded if the land is used by the taxpayer wholly or predominantly for commercial or industrial purposes.
  • Permitting a reassessment of liability to pay surcharge land tax more than 5 years after an initial assessment of liability.

Class Action Brought Against Bondi Sands for ‘Greenwashed’ Products

Iconic Australian sunscreen and tanning lotion brand ‘Bondi Sands’ may be the safer option for your skin in the sun, but a recent class action brought in the US against the brand shows that it may be at a cost to the environment.

The class action has brought claims that the sunscreens are harmful to the environment despite its claims to be ‘reef friendly.’ The claim has been filed in a US District Court of California, alleging that Bondi Sands has ‘reaped millions of dollars through its fraudulent scheme based on a calculated business decision that puts profits over people and the environment.’ The company has defended its sunscreens in a statement saying that their sunscreen products are compliant with the TGA in Australia, which are the strongest SPF guidelines in the world.

The Bondi Sands website promotes its products as ‘formulated to be reef-friendly to protect oceans and waterways.’ However, the class action alleges that the products include harmful ingredients including avobenzone, homosalate, octisalate and octocrylene which can endanger coral reefs and marine life. Last year, two of those chemicals were banned from being used in sunscreens in the US state of Hawaii on the grounds that they are harmful to coral reefs and cause coral bleaching. Following this action in the US it will be interesting to see if any similar actions will be brought in Australia under the Australian Consumer Law.

Rescission of Contract of Sale of Strata Plan Property

The recent case of Jin Yi Construction Pty Ltd v Romeciti Eastwood Pty Ltd [2022] NSWSC 56 considered whether it was possible to rescind a contract of sale of land in circumstances where the building constructed on the land was materially different from the draft strata plan attached to the contract.

The applicant paid a deposit for the purchase of land held by the first respondent, which at the time the parties entered into the contract was identified as Lot 3 in a ‘Draft Strata Plan.’ The contract required a 10% deposit, with the balance of the purchase price payable on completion of the contract.

The purchaser later sought to rescind the contract pursuant to a right conferred by a special condition of the contract, and sought a declaration that it had validly rescinded the contract and was entitled to recover the deposit. The respondent disputed the validity of the rescission and served a Notice to Complete on the purchaser, alleging that the plaintiff had repudiated the contract.

The court held that the change in the Strata Plan, which contained a ‘new storage space’ created a ‘substantial, detrimental, and permanent change to the shop,’ and deprived the purchaser of an unobstructed, open area of commercial space and reduced the amount of commercial space from the promised 110 to the available 102.8 square meters.

It was determined that the applicant was only entitled to rescind the contract by reference to a special condition which allowed a right of rescission for a minimum of 5% change in area, and this right carried an entitlement to recover the deposit. This case demonstrates the possibility to unwind a contract by construction of the express terms of a contract.

Hotel? Maybe not, Trivago

This month, Trivago was issued a $44.7 million penalty over misleading and deceptive conduct by the ACCC after falsely representing what the cheapest rates were for a hotel.  In this case, (ACCC v Trivago NV (No 2)) , Trivago portrayed itself as a company that made it easy ‘to find the ideal hotel for the best price.’

However, Trivago has been found to have been making misleading representations to consumers including using strike-through prices which give the impression that the Trivago rates represent in a saving when in reality, they often compare a standard room to a luxury room at the same hotel. The Federal Court also found that Trivago used an algorithm which gave significant weight to which online hotel booking site paid Trivago the highest cost-per-click fee, which obviously did not correspond with the cheapest rates for consumers.

This is the second time in 2 years that Trivago has been fined for breaching Australian Consumer Law by misleading consumers that its website provides consumers with the quickest and easiest way to identify the best deals available for a given hotel.

The significant fine represents a strong warning to businesses like Trivago about the seriousness of misleading and deceptive conduct.

Priceline Granted an Injunction to Recover Stock from Premise

The case of PL Town Hall Pty Ltd v Trust Co Ltd [2021] NSWSC 391 involved a dispute about a commercial tenancy agreement. PL Town Hall Pty Ltd (‘Priceline’), was a pharmaceutical company that failed to meet its rent requirements during the pandemic in one of its shops in the CBD. After serving a notice of termination of lease, the respondent eventually prevented Priceline from entering the premise.

In these proceedings, Priceline sought a mandatory interlocutory injunction allowing it to enter the premise to collect pharmaceutical and other stock, fixtures, confidential documents and chattels over a 7-day period. The difficulty of the case was determining what Priceline was entitled to remove from the premise, given the complexity of defining ‘plant and equipment’ and what items could be removed without causing damage to the premise.

In deciding whether the grant the injunction, the Court considered whether there was a serious question to be tried and whether the balance of convenience and questions of hardship and related factors warrant the grant of an interlocutory injunction. Importantly, Priceline had only a limited opportunity to retrieve its goods and that opportunity would not be available as final relief if not ordered at the interlocutory stage.

Priceline demonstrated that there were serious questions to be tried, but equity would require them to substantially comply with the previous consent orders which required a monthly occupation fee and a bank guarantee. The court ordered a 14-day licence for Priceline to recover the items under reasonable supervision of the respondent’s staff, on the condition that they provide the Court with an undertaking as to damages, and $88 188.58 as security for performance of their obligations, and paid the respondents further sums of $21 000 and $88 150.85 for access to the premises.

This case demonstrates the complexity of commercial tenancy agreement disputes.

Unfettered Discretion and Obligations to Act in Good Faith

The case of Growthbuilt Pty Ltd v Modern Touch Marble & Granite Pty Ltd [2021] NSWSC 290 considered whether the obligation to act in good faith applies to a contract which gives one party the power to act in their ‘sole discretion.’

Growthbuilt entered into four subcontracts for the supply and installation of various marble products with Modern Touch Marble, who failed to complete the works by the completion dates stipulated in the subcontracts.

Growthbuilt terminated the subcontracts and commenced proceedings to recover liquidated damages and post-termination costs incurred to complete the works. All of the subcontracts included an extension of time clause that Modern would be entitled to a ‘reasonable extension of time if Growthbuilt committed any act of prevention’ and that Growthbuilt could, ‘in its absolute discretion, extend the date of completion but was under no obligation to.’

The issue was whether Growthbuilt was obliged to act reasonably and in good faith in deciding whether to exercise its discretion to provide an extension to the date of completion and, whether Growthbuilt’s failure to issue an extension of the date of completion was an act of prevention, meaning that they were not entitled to claim liquidated damages.

The Court held that whether an implied obligation to act in good faith applied to the exercise of a unilateral contractual power depended on the wording of the particular term and could not extent to imposing obligations that are inconsistent with the terms of the relevant agreement itself. Ultimately Growthbuilt was not under an obligation to act in good faith in deciding whether to issue an extension to the completion date because of the wording of the contract.