A Guide to the Law of Securitisation in Australia - Clayton Utz

Corporations Act or that it was involved in the contravention forthe purposes of section 79 of the Corporations Act (see above).Another area of risk for dealers is that by innocently distributinga defective information memorandum, notwithstanding thedisclaimer referred to above, they will incur liability for acontravention of sections 1041H and 12DA.The difficulty for dealers in this area is highlighted by thedecision in John G Glass Real Estate Pty. Limited v KarawiConstructions Pty. Limited [1993] ATPR 41–249. There, a realestate agent, acting for the vendor in the sale of an officebuilding, passed on an incorrect figure for the net lettable area ofthe building. The figure was included in a brochure indicatingthat the source was a consultant acting for the vendor. The frontpage of the brochure contained the name of the real estateagent. The brochure also contained a disclaimer stating, amongstother things, that the information in the brochure had beenprepared with care by the real estate agent or had beensupplied to it by apparently reliable sources and that the realestate agent had no reason to doubt its completeness oraccuracy. The disclaimer went on to state that the real estateagent did not guarantee the information and that all interestedparties should make their own inquiries to verify the informationand that it was the responsibility of interested parties to satisfythemselves in all respects regarding the property.The Full Federal Court held that the real estate agent was liableunder section 52 of the TPA for damages to the purchaser for theincorrect figure. The court stated:“In our opinion an estate agent which holds itself out as,amongst other things, consultants to institutional investors andto developers of major properties would not be regarded bypotential purchasers of properties as merely passing oninformation about the property “for what it is worth and withoutany belief in its truth or falsity ... In the present case the [realestate agent] adopted the information in question andincorporated it as an essential and prominent feature of theirselling effort on behalf of the vendor. There was certainly noexpressed disclaimer of the [real estate agent’s] belief in thetruth of the information in the brochure – indeed there was anexpress assertion of such belief. As part of its ordinary businessthe agent was providing the information in a persuasive formwith a view to achieving a sale of its principal’s property and ofcourse earning commission. It was this conduct which the learnedtrial judge, correctly in our opinion, held to be misleading anddeceptive. Once the falsity of the figure was demonstrated, itseems to us that no other conclusion could follow.”In December 2004, the High Court of Australia handed down itsjudgment in Butcher v Lachlan Elder Realty Pty Ltd [2004] HCA260, in which it considered some of the issues raised in John GGlass Real Estate. In Butcher, the appellants had purchased avaluable waterfront property in Sydney and the respondent wasthe real estate agent that had acted for the vendor in that sale.The appellant had sued the real estate agent because, it claimed(among other things), a brochure issued by the real estate agentin connection with the property was misleading because itmisrepresented the location of one of the boundaries to theproperty.In denying the appellants’ claim, the majority of the High Courtfound that:“...it would have been plain to a reasonable purchaser that theagent was not the source of the information which was said tobe misleading. The agent did not purport to do anything morethan pass on information supplied by another or others. It bothexpressly and implicitly disclaimed any belief in the truth orfalsity of that information. It did no more than state a belief inthe reliability of the sources.”The majority then distinguished these circumstances from thecircumstances in the John G Glass Real Estate case on twogrounds. First, as noted above, the estate agent in John G GlassReal Estate would not have been regarded as merely passing oninformation to potential purchasers of property. Secondly, in JohnG Glass Real Estate, the net lettable area figure was one of hardphysical fact and essential to determining the profitability andvalue of the building, whereas in Butcher the correspondencebetween the property boundary and the survey diagram in thereal estate agent’s brochure was not a matter of hard physicalfact (although this seems to be a tenuous distinction). Further, inJohn G Glass Real Estate there was nothing to indicate that thenet lettable area figure had not been calculated by John G GlassReal Estate itself, whereas in Butcher the real estate agent hadobviously not prepared the survey diagram in the brochure. Themajority summarised this by endorsing the Court of Appealsstatement in its decision in respect of Butcher that in John GGlass Real Estate:“...the agents claimed relevant expertise, adopted the figures astheir own, and put them forward without any reference to theirsource. In [Butcher], the agents claimed no relevant expertise,and the diagram itself indicated that it was the work of aprofessional surveyor.”21