Property buyer awarded $1.6M against a real estate agent acting for the seller


A buyer made enquires with a seller’s real estate agent prior to purchasing a commercial property.  During the buyer’s enquiries, the buyer was provided with written materials including an e-brochure listing, information memorandum (“IM”) and several emails containing further information regarding the property subsequently purchased by the buyer.

The IM contained the “usual” information such as rent, tenancy schedule, outgoings and included a formal disclaimer (at the back of the IM). The disclaimer in the IM provided:

  • all information in the document, and given orally, was given without responsibility;
  • intending buyers should not rely on the information but satisfy themselves as to it and as to any conclusions;
  • the agent gave no implied or express representation, warranty or undertaking as to the truth, accuracy, relevance or completeness of the information supplied.

The IM further stipulated under the heading “Sources of Information”, that the real estate agent had not independently checked the information and was merely passing it on. The IM advised any reader to rely upon their own enquiries.

Court’s decision

The Court noted in its decision that:

  • the clauses in the disclaimer were not effective to alert a reasonable person in the buyer’s position that the information in the IM was simply being passed on from the seller “for what it is worth without any belief in its truth or falsity”;
  • a special relationship developed between the real estate agent and the buyer during their discussions regarding the property, and some of the agent’s representations were found to have gone well beyond the information stated in the IM;
  • the buyer’s conduct was overly trusting and naïve, but the Court did not think it was unreasonable to conclude that it was the buyer’s reliance on the real estate agent’s representations which caused the loss;
  • the agent’s argument that the loss suffered by the buyer was “caused or contributed by the buyer’s own failure to take reasonable care with respect to their own interest…”, was rejected by the Court.

Lessons to be learnt

  1. Care needs to be taken when preparing an IM or marketing information.
  2. Traditional disclaimers may be insufficient where reliance is clear.
  3. Do not make statements beyond what is in the marketing information – although a “mere puff” defence is still available.
  4. Record and retain details of where and how information is collected – and confirm if possible.

Overall, the case confirms that the whole of the conduct will be considered in determining whether the disclaimer has the effect of negating any misleading conduct. If agents or sellers adopt an IM or marketing information and circulate its contents to buyers in a way that implies it should be relied upon and its contents are misleading, then the disclaimer will likely have no or minimal effect.

A seller generally has no control over its agent/s and what they say is probably one of the seller’s biggest risks to be managed in the sales process. Too often a seller only approaches their professional advisers after the marketing material and IM has been prepared and distributed. Macpherson Kelley have over 100 years experience in the property market and can review and make recommendations on effective disclaimers.

This article was written by Eddie Leong, Senior Associate – Property and Construction.