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Australian Consumer Law Changes

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Australian Consumer Law Changes

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Discuss about the Consumer Law in Australia.

The building law in Australia comprises of different legislations, based on the particular aspect or the particular phase. This makes it crucial for the developers to be aware about these laws and fulfill them properly, so that they do not face the penalties for the undertaken contraventions. The different laws which have to be followed by the developers include the tort law, contract law, health and safety laws, consumer law, and are also required to obtain different permissions and licenses to undertake their work (Bailey, 2016). The discussion here is focused upon Australian Consumer Law, which is a crucial law for the protection of consumers in the nation. In the following parts, an attempt has been made to explain the manner in which the developers have to be careful based on the applicability of the Australian Consumer Law, with a particular reference to misrepresentation and unfair contract terms. The attempt here is to provide the view of both the sides, i.e., of the developers and the buyers, and the manner in which both of these sides have to take care, so that the provisions of Australian Consumer Law are not breached.
Australian Consumer Law
Before explaining the manner in which the Australian Consumer Law applies on the developers and the consumers, the foundation of Australian Consumer Law need to be clarified (Casey, 2011). Australian Consumer Law has been drawn as Schedule 2 of the Competition and Consumer Act, 2010 (Cth) (Australasian Legal Information Institute, 2017). This act replaced the erstwhile Trade Practices Act, 1974 (Cth) and is focused upon protection of the consumers and promotion of competition in the normal course of trade and commerce by the businesses (Commonwealth of Australia, 2017). The provisions of ACL came to force from January 01st, 2011 (Bruce, 2010).
Misrepresentation is a term of contract law, which makes the contract voidable. As per this concept, a false statement of fact is made by one party, to another party, so as to induce them into entering the contract (Andrews, 2015). It is crucial that the false statement which is made is a statement of fact and not of opinion. Under ACL, misrepresentation attracts different provisions, including section 18 and 29. Section 18 of the ACL relates to the misleading or deceptive conduct and it provides prohibitions on such conduct which can be deemed as misleading or deceptive, or is likely to deceive or mislead (Consumer Affairs Australia and New Zealand, 2017). So, the developers are required to stay away from any such conduct which would be considered as misleading to the buyer or which has the chance of misleading the buyers in future (Coorey, 2015).
The provisions covered under this section include any and all type of conduct and communication. This includes the negotiations made, the emails, adverts, discussion and letters. In order to consider a conduct as breaching this section, it has to be shown that it contained factually incorrect information which led to the formation of false impressions; a substantial or material information being left out; not providing the buyer with the updated information; staying silent about the key facts particularly because this would be deemed as non disclosure; not making true or accurate claims; and deliberately not correcting a misunderstanding. Hence, it is preferable for the developers to make true and well substantiated claims and to disclose all the material facts pertaining to the property (Department of Commerce WA, 2013).
One of the cases where the developer was protected under this section was the case of Juniper Property Holdings No 15 P/L v Caltabiano (No 2) [2016] QSC 5. In this case, as per the promise, the work was finished by the developer but the buyer asked for additional two years to settle the matter. During this time, the receivers and managers were appointed for the developer and they initiated action against the buyer in Supreme Court of Queensland as he failed to take part in the settlement and it was held that the contract had been breached by the buyer (Supreme Court of Queensland, 2016). The buyer instead claimed that the developer had been indulged in misleading and deceptive conduct. For this claim to be successful, it was required on part of the buyer to show that due to the reliance on the misleading and deceptive conduct, he had suffered loss. However, this could not be proved by the buyer, which led the court to make the order against the buyer and the claims of the developer were upheld for the breach of contract on part of the developer. As a result of this, the developer was paid $1.4 million by the buyer with interests and costs of litigation (Tomas, 2016).
Butcher v Lachlan Elder Realty Pty Limited (2004) 218 CLR 592 was another case where section 18 came for the defense of the developer. This case was related to the brochure which was given by the developer and which contained a disclaimer. It was held by the court that the conduct of the developer was required to be proved as such which would be deceptive or misleading and which had the capacity of inducing an error. The court took into consideration the brochure, the pertinent transaction and the nature of the parties to give the decision. The nature of the parties in this case was most important as it established that the plaintiff was not only rich, but was also very intelligent and shrewd. This led to the court stating that there was no misleading conduct (High Court of Australia, 2017). Hence, even though ACL has been drawn to help the consumers, often, the same is misused by the buyers to take actions against the developers, even when they are at fault. The provisions of the ACL, however, are used to good effect and adequately safeguard the right party.
Another ACL section which can be used in cases of misrepresentation is false or misleading representation pursuant to section 29 of the ACL. Under this section, the developers are prohibited from making any such representation which presents a misleading or false view of the property (Federal Register of Legislation, 2013). This could relate to the standard, sponsorship, warranty, approvals, quality or permits related to the land. The provisions of this section would be contravened if the developer, for instance, makes a claim that that it sold 150 flats and 300 lands in six months time frame. This statement alone would not be a misrepresentation; but when the facts of this statement are tried to be substantiated and they are proved wrong, which would then breach section 29 as a false statement has been made which misrepresented the facts. In the same manner, if the agent presents written testimonials of fake clients or such testimonials which he himself has written and which are not true, it would be deemed as a breach of this section (Department of Commerce WA, 2013).
Section 4 of the ACL can also be used for these purposes, as it pertains to a representation made for a future matter, where the reasonable grounds for making the representation were not present, thus making it misleading representation (Crawford and Humphery, 2010). This places a duty on the developers to refrain from making promises or giving predictions, for which, the reasonable basis is lacking. Some particular prohibitions have been presented through the ACL, regarding false representations in the matter of sponsorships and affiliations which relate to the sale of land, the availability of facilities, the prices of land, the location and the characteristics of the property, and the accreditations from competent authorities. This can be clearly explained through some examples. For instance, if the developer states that the land is not located in earthquake zone or does not inform the buyer that it is located in earthquake zone, it would be a breach of section 29. If a particular accreditation is pending for land and the developer states that such accreditation has already been obtained, it is again a false representation. There is a need to take precautions when quoting the prices of the land. They cannot be over or under priced to present a false view of the actual market price. On the basis of the wrong presentation of the prices, ACCC regularly obtains different complaints from the prospective buyers (Department of Commerce WA, 2013). 
There are certain examples where a breach can be claimed under either of the sections, i.e., under section 18 and section 29. The leading example of this is the photographic enhancements to the property by the developer. Often it is seen that the developers touch up the pictures of the property where the undesirable characteristics are hidden and the additions are made which enchases the viability of the property being purchased by the buyer as it is presented as being more attractive. However, this is a misleading conduct on part of the developer and presents a misleading representation of the property, due to the misleading features presented through the picture.  However, the mere adjustment of lighting in the photograph would not be deemed as misleading conduct or misleading representation (News Media Works, 2017).
Unfair Contract Terms
ACL dictates that whenever an unfair term is covered in the standard form contract, it would make the contract unenforceable due to the same being void. The unfair terms are such terms which put one of the parties in an unfair position, and it can be either of the developer or the buyer. The unfair contractual terms related provisions, provided through the ACL, cover the standard form contracts and the consumer contracts. The consumer contracts also cover such contracts where the interest in the sale or grant of land is given to a person, whether wholly or predominantly, for their personal, domestic or household usage. Hence, the ambit of ACL goes beyond the mere sale of the land by the developers and includes the rights or powers and the privileges which the developer gives to the buyer for the land (Lethlean et al. 2010).
The intention of the purchaser is considered as the main factor to consider if a particular contract would be deemed as a consumer contract (Latimer, 2012). The developers’ selling agents have to take the notes in details when it comes to the intentions of the future buyer and this could include an intention to buy for investment purpose or for their private use. However, the applicability of ACL is constricted to the sale made by developers to the buyers, where the criteria contained under section 3 of the ACL, regarding the consumer, and the definition of the consumer contract, is fulfilled. So, if the purchase is made for further resale, the provisions of ACL would not protect the buyer or the developer (Allen and Sheather, 2011).
Till the time the contrary can be proved by the developer before the court, the sale contract taking place between the developers and the buyers would be considered as standard form contract by default. The rationale behind this is lies in the preference of the developers towards the standard contracts, which helps in avoiding the inconsistencies with each development, when the requirements have to be met pertaining to the needs of the selling agents or the financiers (Davie, Earls and Coggins, 2016).
The ACL has brought forward certain challenges in form of increased compliances, which require the developers’ agent to record the negotiations taking place between them and the purchaser to clearly establish that the negotiations were effective and gave a genuine opportunity to the buyers, owing to the fact that the contract was not a standard form contract. The best interest of the developer lies in ensuring that proper chance is given to the buyer to get the contract reviewed by their solicitor and also the opportunity was presented to effectively negotiate on this matter, before the contract was ultimately signed. Agreed that this leads to a delay in the completion of the contract being signed by the buyer, along with some additional costs, but it does help in bringing down the risks which relate to the contract containing a term which can be claimed to be an unfair term, which would result in the contract being unenforceability owing to its voidable status (Lethlean et al. 2010).
The contract drawn up the developer would be considered as unfair under the provisions of ACL only when it results in a significant imbalance being caused regarding the rights and duties of the parties, and where the need for protecting the legitimate interest of the developer is not present in a reasonably major manner, and which causes a detriment to the buyer owing to the reliance made on the unfair term. In the contract of sale, there are different clauses which often are considered to favor the developers as they are provided with the competition of projects. Though, to show that such clauses cause a major imbalance, there is a need to prove the significant nature of the term for the ACL to be breached, and a mere disadvantage would not lead to the contravention of ACL. In making the decision of unfairness, the industry standards are taken into consideration, in the matter of discretionary terms, warranties, and the completion time, which can cause a significant imbalance, where the developer is favored (Lethlean et al. 2010).
When a term is found to be unfair, often the attempt is made to severe the term from the contract as the developers include severance clauses in the contract drawn between them and the buyers. So, by severing the unfair term from the contract, the contract is continued and the purpose is met. However, there are times when the unfairness contained in the term is such which cannot be removed, due to such term being a material issue to the contract, the severing of which could make the contract unusable or improper. In such situation, the only option is to declare the contract unenforceable as the presence of unfair term in a key term of the contract makes it void (Lethlean et al. 2010).
In order to make the decision that a particular term is crucial to the contract, particularly for protecting the developers’ rightful interest, the evidence has to be provided by the developers which relates to the market in which they operate, the economic factors imposed by financiers which are necessary for providing the flexibility to the developers and the regulations of the councils and the planning schemes. The developers need to take steps towards providing the requisite discretion in the necessary cases so that the end product which is delivered does not have the excessive freedom, which could be taken to be unfairness based on ACL provisions (Lethlean et al. 2010).
To conclude, ACL is a noteworthy legislation in the nation and forms a crucial part of the building laws applicable on the developers. ACL puts an obligation on the developers to not engage in any kind of misrepresentation and to not include any unfair terms in the standard contract form or in the contract of sale. In case such is done, the developers would be made liable for breaching the provisions of ACL, whether it relates to the misleading or deceptive conduct, misleading or false representation, or unfairness in contract terms. Where the former two attracts penalties, the latter makes the contract voidable at the option of the buyer, save for such cases where the unfair clause can be severed from the contract. The most noteworthy aspect of the ACL is that it not only protects the consumers, but also protects the developers from the false claims of the buyers.
Allen, N., and Sheather, C. (2011) The effect of the New Australian Consumer Law on Property Developers. [Online] Holding Redlich. Available from: https://www.holdingredlich.com/property-real-estate/the-effect-of-the-new-australian-consumer-law-on-property-developers [Accessed on: 26/08/17]
Andrews, N. (2015) Contract Law. 2nd ed. UK: Cambridge University Press.
Australasian Legal Information Institute. (2017) Competition And Consumer Act 2010 – Schedule 2. [Online] Australasian Legal Information Institute. Available from: https://www.austlii.edu.au/au/legis/cth/consol_act/caca2010265/sch2.html [Accessed on: 26/08/17]
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Bruce, A. (2010) Consumer Protection Law in Australia. Chatswood, NSW: LexisNexis Butterworths.
Casey, L. (2011) Australia: Australian Consumer Law changes – Competition and Consumer Act 2010. [Online] Mondaq. Available from: https://www.mondaq.com/australia/x/126518/Consumer+Law/Australian+Consumer+Law+changes+Competition+and+Consumer+Act+2010 [Accessed on: 26/08/17]
Commonwealth of Australia. (2017) Australian Consumer Law. [Online] Commonwealth of Australia. Available from: https://consumerlaw.gov.au/ [Accessed on: 26/08/17]
Consumer Affairs Australia and New Zealand. (2017) Australian Consumer Law Review. [Online] Consumer Affairs Australia and New Zealand. Available from: https://cdn.tspace.gov.au/uploads/sites/86/2017/04/ACL_Review_Final_Report.pdf [Accessed on: 26/08/17]
Coorey, A. (2015) Australian Consumer Law. London, United Kingdom: LexisNexis Butterworths.
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Crawford, R., and Humphery, K. (2010) Consumer Australia: Historical Perspectives. Newcastle: Cambridge Scholars Publishing.
Davie, T., Earls, T., and Coggins, J. (2016) Understanding Construction Law. Chatswood, NSW: LexisNexis Butterworths.
Department of Commerce WA. (2013) Australian Consumer Law. [Online] Department of Commerce WA. Available from: https://www.commerce.wa.gov.au/sites/default/files/atoms/files/aclagentsmanual2013_0.pdf [Accessed on: 26/08/17]
Federal Register of Legislation. (2013) Competition and Consumer Act 2010. [Online] Federal Register of Legislation. Available from: https://www.legislation.gov.au/Details/C2013C00620/Html/Volume_3#_Toc368657533 [Accessed on: 26/08/17]
High Court of Australia. (2017) Butcher v Lachlan Elder Realty Pty Limited [2004] HCA 60. [Online] High Court of Australia. Available from: https://eresources.hcourt.gov.au/downloadPdf/2004/HCA/60 [Accessed on: 26/08/17]
Latimer, P. (2012) Australian Business Law 2012. 31st ed. Sydney, NSW: CCH Australia Limited.
Lethlean, J., Daniels, J., Deakin, M., and Payne, T. (2010) Australia: How The New Australian Consumer Law Will Affect Property Developers. [Online] Mondaq. Available from: https://www.mondaq.com/australia/x/100132/How+The+New+Australian+Consumer+Law+Will+Affect+Property+Developers [Accessed on: 26/08/17]
News Media Works. (2017) Misleading and Deceptive Conduct in Real Estate. [Online] News Media Works. Available from: https://www.newsmediaworks.com.au/misleading-and-deceptive-conduct-in-real-estate/ [Accessed on: 26/08/17]
Supreme Court of Queensland. (2016) Juniper Property Holdings No 15 P/L v Caltabiano (No 2) [2016] QSC 5. [Online] Supreme Court of Queensland. Available from: https://archive.sclqld.org.au/qjudgment/2016/QSC16-005.pdf [Accessed on: 26/08/17]
Tomas, R.L. (2016) Misleading and Deceptive Conduct. [Online] Connolly Suthers Lawyers. Available from: https://www.connollysuthers.com.au/misleading-and-deceptive-conduct/ [Accessed on: 26/08/17]

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