legal notebook

LEGAL
LEGAL NOTEBOOK
Recent cases, headline issues and new legislation
by Lindsay Joyce and James Morse, DLA Piper.
BRUNO PISANO V GEORGIA
DANDRIS [2014] NSWSC 1070
SNAPSHOT
A recent decision of the Supreme
Court of New South Wales, Bruno
Pisano v Georgia Dandris [2014]
NSWSC 1070, is authority for
the proposition that the sale of a
domestic residence will be considered
a transaction in trade or commerce
if, in all of the circumstances
in which it occurs, it discloses a
commercial or business character.
This decision also establishes that
disclaimers in advertising material,
acknowledgements in contracts for
sale and opportunities to inspect
premises may not break the chain
of causation between misleading
and deceptive conduct and
damages suffered.
FACTS
Bruno and Pia Pisano purchased
a property from Georgia Dandis
and her husband, Patrick Williams.
The house had been substantially
renovated from a three-bedroom
residence to a double storey,
five-bedroom home. Having obtained
an Owner-Builder Permit from the
Department of Fair Trading, Ms
Dandris, as owner-builder, arranged
for all works to be carried out.
Following the completion of the
renovations, Ms Dandis and Mr
Williams moved into the house, but
decided to sell it shortly thereafter.
Ms Dandris and Mr Williams
retained a real estate agent to sell the
property. The house was advertised
as a “brand new cutting edge
contemporary family residence”,
which had been “master built”
with “fixtures and finishes of the
highest standard”. A disclaimer was
provided on the property website
domain.com.au, as well as on the
reverse of an advertising brochure.
The disclaimer clause noted that:
The information contained
in this brochure has been
furnished to us by the vendors.
The plan is provided as a guide
only. While we trust it to be
correct, we cannot guarantee
its accuracy. Sizes and areas
indicated are approximate
only. We have not verified
whether or not the information
is accurate and do not have any
belief one way or another in its
accuracy. We do not accept any
responsibility to any person for
its accuracy and do no more
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than pass it on. All interested
parties should make and rely on
their own enquiries in order to
determine whether or not this
information is in fact accurate.
The contract for sale also
contained special conditions
including Special Condition 1 entitled
‘Purchaser’s Acknowledgment’, which
provided that:
The purchaser acknowledges
that he/she is buying the
property relying on his/her own
inspections, knowledge and
enquiries and not relying on
any representation, warranty,
statement or promise other
than as set out in writing in this
contract. This clause shall not
merge on completion.
Attached to the contract was
a Certificate of Home Warranty
Insurance, which referred to a defects
inspection report undertaken by DS
Building Consultants (DS Report).
The DS Report stated its purpose
was “to identify any areas where
poor workmanship, incomplete
works or rectification works are
DISCLAIMERS IN ADVERTISING MATERIAL,
ACKNOWLEDGEMENTS IN CONTRACTS FOR SALE
AND OPPORTUNITIES TO INSPECT PREMISES MAY
NOT BREAK THE CHAIN OF CAUSATION BETWEEN
MISLEADING AND DECEPTIVE CONDUCT AND
DAMAGES SUFFERED
666 ANZPJ SEPTEMBER 2014
required” and only identified two
minor items as requiring attention.
The DS Report contained numerous
disclaimers including:
• f urther concise report should
be requested to investigate
in greater detail prior to
purchase
• No liability shall be accepted
on account of failure of
the [DS] Report to notify
any problems in area(s)...
of the property physically
inaccessible for inspection
• T his report is NOT an
all-encompassing report
dealing with the building
from every aspect
Contracts were exchanged and the
sale of the property was completed.
Immediately after moving in,
Mr and Mrs Pisano became aware
of numerous defects that rendered
the house unfit for occupation as
a dwelling. Mr and Mrs Pisano
commenced proceedings in the
District Court of New South Wales,
which were later transferred to the
Supreme Court.
Relevantly, there were two main
components to the proceedings. First,
the Pisanos claimed damages from
Ms Dandris for breach of statutory
warranties under the Home Building
Act 1989 (NSW). Second, they
claimed damages as a result of Ms
Dandris’ and Mr Williams’ allegedly
misleading or deceptive conduct, in
contravention of section 18 of the
Australian Consumer Law.
The Pisanos sued Mr Williams
in negligence, although the claim in
negligence was not made out as no
duty was established.
The real estate agent was also
sued but was insolvent and without
insurance. As a result, the claim
against it was dismissed at the
commencement of the trial.
LEGAL
STATUTORY WARRANTIES
There was no dispute that Ms
Dandris was bound by the warranties
provided in section 18B of the Home
Building Act 1989 (NSW), or that Mr
and Mrs Pisano, as successors in title,
had the benefit of the warranties by
virtue of section 18C.
Having established that the
quantification of damages for breach
of the warranties was the amount
that was reasonable and necessary to:
• remedy the work that had not
been performed in a proper and
workman-like manner;
• provide materials that were suitable
for the purpose for which they were
to be used; and
• expend so as to result in a dwelling
that is reasonably fit for occupation
as a dwelling.
The judge, relying on expert
evidence, calculated the cost of
remedying the defects at over
$1 million.
DECEPTIVE CONDUCT
Perhaps more interesting was the
second component of the Pisanos
claim, wherein they alleged that
the Web advertisement, brochure
and oral statements made by the
agent, Ms Dandris and Mr Williams,
representing the impeccable quality
of the house, were misleading or
deceptive because the house was,
in fact, profoundly defective in
its construction.
The Pisanos claimed that
they relied on the representations
when purchasing the property
and as a result suffered loss and
damage. Having reviewed the
evidence and inspected the house
himself, the judge agreed that
the Web advertisement, brochure
and oral statements of the agent
representing the quality and
construction of the house were
manifestly false.
In response to this aspect of
the Pisanos’ claim, Ms Dandris
and Mr Williams raised five
counter-arguments.
First, it was submitted that section
18 of the Australian Consumer Law
had no application because the sale
of a family home was/is not “in
trade or commerce”. In addressing
this issue, the judge considered
numerous authorities and concluded
that a transaction involving the sale
of a domestic residence will be in
DS Report which advised that a
further report should be requested
to investigate in greater detail
prior to purchase and “strongly
recommended” that a more
comprehensive service be sought on
areas identified in the report;
• t hey afforded the Pisanos an
opportunity to inspect the house
before they bought it, which was
taken up;
• t he Pisanos elected not to
have their own professional
THE JUDGE, RELYING ON EXPERT EVIDENCE,
CALCULATED THE COST OF REMEDYING THE
DEFECTS AT OVER $1 MILLION
trade or commerce if, in all of the
circumstances in which it occurs, it
discloses a commercial or business
character, which is a question of
fact in each case. In light of the
evidence presented, the judge was
satisfied that Ms Dandris and Mr
Williams renovated the house with
the intention of improving it for
financial gain, not to create a house
for their personal use. As such, the
judge was satisfied that the sale of the
property was a transaction in trade
and commerce. The judge also found
that the advertising of the sale by way
of the web advertisement was conduct
in trade or commerce.
Second, Ms Dandris and Mr
Williams submitted that the conduct
was not misleading or deceptive or
likely to mislead or deceive because:
• d isclaimers were present in the Web
advertisement and brochure;
• t he Pisanos had acknowledged in
Special Condition 1 of the contract
that they were relying on their
own inspections, knowledge and
enquiries and not relying on any
representation, warranty, statement
or promise other than as set out in
writing in the contract;
• attached to the contract was the
pre-purchase inspection; and
• t he Pisanos were represented
by an experienced solicitor on
the purchase.
Third, it was submitted that the
Pisanos did not prove they suffered
any loss by the conduct complained
of, rather they caused their own
loss because they failed to get a
pre-inspection report.
Having established the falsity
of the representations (as outlined)
the judge held that despite the above
points, the conduct of Ms Dandris
and Mr Williams was still misleading
and deceptive. Indeed, none of those
matters evidenced non-reliance or
broke the chain of causation between
the misrepresentations made and the
loss flowing from entering into the
contract to purchase.
Importantly, Ms Dandris and Mr
Williams were aware of the numerous
defects in the house and continued
to represent that the house had
been meticulously built by a master
builder with no expense spared.
The existence of the disclaimers and
Special Condition did not “denude
the misinformation, disseminated
by Dandris and Williams, of its
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668 ANZPJ SEPTEMBER 2014
LEGAL
misleading character”. The judge
held that the DS Report, which
had deceptively only disclosed
one minor defect, combined with
the misleading representations,
provided a reasonable and rational
explanation for why the Pisanos
elected not to obtain a further
pre-inspection report.
Fourth, it was submitted that
the Pisanos did not prove the
amount of any loss and that the
only appropriate measure for
damages in the circumstances was
the difference between market
value of the house without the
defects and its value with them.
This submission was rejected, as
the judge found that the justice
and equity of this particular case
required the Court to select as the
measure of damages the reasonable
and necessary cost of fixing the
house. After all, the Pisanos bought
the house to live in and intended
to continue living in it. But for the
defects, they could do so. A potential
issue could also arise if the market
value of the house with the defects
was more or less than the price that
the Pisanos paid for the property less
the cost of repairs.
Finally, Mr Williams submitted
that the claim against him and
Ms Dandris was an apportionable
claim within the meaning of 87CB
of the Competition and Consumer
Act 2010 (Cth) and that, in all of the
circumstances, her responsibility
was greater than his. The judge was
not satisfied that apportionment was
warranted, as both were vendors
of the property and, despite Mr
Williams’ lack of participation in
the renovations, he was an equal
participant in the misleading
conduct, which played a part in
inducing the Pisanos to purchase
the property.
The Pisanos obtained a verdict
against both Ms Dandris and
Mr Williams.
IMPACT
This case is yet further authority
for the proposition that the sale of a
domestic residence may, dependent
on the facts, be characterised as an
activity in trade and commerce,
such that the provisions of the
Australian Consumer Law may apply.
A proper determination of this
issue will be a question of fact as to
whether, in all the circumstances,
the sale discloses a commercial or
business character. This obviously has
potential ramifications for all persons
involved in a property transaction.
It is also an important case for
vendors and real agents to remember
that their representations will be
scrutinised and may give rise to liability,
in certain circumstances. A court will
not tolerate false representations that
are intended to positively influence
a reader to purchase. Furthermore,
disclaimers may not break the chain of
causation between misrepresentations
inducing a purchaser to purchase a
property and the loss suffered as a result
where the house is plainly defective in
its construction. 
AUTHORS’ NOTE
The authors would like to take this
opportunity to thank Sarah Mellowes,
Solicitor at DLA Piper Australia, for
her substantial drafting assistance.
LINDSAY JOYCE
[email protected]
JAMES MORSE
[email protected]
LINDSAY JOYCE IS A PARTNER AT DLA
PIPER AUSTRALIA WHO PRACTISES
EXTENSIVELY IN THE AREA OF PROFESSIONAL
NEGLIGENCE AS IT AFFECTS PROPERTY
PROFESSIONALS, INCLUDING VALUERS.
BEFORE COMMENCING LEGAL PRACTICE IN
1979, MR JOYCE PRACTISED AS A VALUER
FOR 10 YEARS, BEING ADMITTED AS AN
ASSOCIATE OF WHAT HAS BECOME THE
AUSTRALIAN PROPERTY INSTITUTE (API)
IN 1973. HE ADVANCED TO FELLOW IN 1989
AND THEN LIFE FELLOW IN 2005.
JAMES MORSE IS A SENIOR ASSOCIATE AT
DLA PIPER AUSTRALIA AND AN ACCREDITED
SPECIALIST IN COMMERCIAL LITIGATION.
MR MORSE ALSO PRACTISES IN THE AREA
OF PROFESSIONAL NEGLIGENCE, INCLUDING
WITH RESPECT TO CLAIMS FOR AND AGAINST
VALUERS. HE REGULARLY ADVISES ON
VALUATION LIABILITY ISSUES, HAS GUEST
LECTURED AT THE UNIVERSITY OF WESTERN
SYDNEY AND HAS DELIVERED VARIOUS RISK
MANAGEMENT MODULES FOR THE API
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