It’s all too common for agents to mistakenly believe that having a disclaimer or exclusion clause on marketing materials is enough to remove liability for claims of misleading and deceptive conduct made against them. But the courts have held on numerous occasions that the presence of a disclaimer is not a complete defence to avoid liability for claims.
It begs the question: In what circumstances can a disclaimer effectively relieve an agent from liability? And when is an agent simply the messenger of the information, rather than the source?
Acting as a “mere conduit”
Let’s consider the leading High Court case of Butcher v Lachlan Elder Realty (2004) 218 CLR 592, where the agent’s marketing brochure included inaccurate information.
The agent had prepared the brochure based on information given to them by the vendor. That information included a survey diagram indicating the property’s boundaries and showing the swimming pool as being wholly within those boundaries. The brochure included a disclaimer stating: “All information contained herein is gathered from sources we deem to be reliable. However, we cannot guarantee its accuracy and interested persons should rely on their own enquiries”.
The purchasers, relying on the information provided to them, purchased the property. It later transpired that the diagram was inaccurate. They sought the return of their deposit and pursued the agent for misleading and deceptive conduct.
The High Court found that the agent did not engage in misleading and deceptive conduct, stating that the agent’s conduct was to be viewed as a whole by taking into consideration the “nature of the parties, the character of the transaction contemplated and the contents of the brochure itself.”
The High Court noted that the agent didn’t present himself as “possessing research skills or means of independently verifying details” about the property. Nor did they do anything more than pass on information supplied by the vendors; they neither adopted or endorsed it. The agent was a “mere conduit” of the information. They had also “both expressly and implicitly disclaimed any belief in the truth or falsity of the information” contained in the brochure.
Based on these factors, the High Court found that it would have been obvious to a reasonable person in the purchaser’s position that the agent was not the source of the allegedly misleading information. The disclaimer was held to effectively exclude liability under the misleading and deceptive conduct provisions of the Trade Practices Act 1974 (Cth).
Another case to consider is Hyder v McGrath Sales Pty Ltd [2018] NSWCA 223, where proceedings were brought against an agent for alleged misleading and deceptive conduct regarding the availability of parking at a property. An online ad and printed brochures incorrectly stated that the property had a “double garage plus private off-street and driveway parking”. All forms of marketing material for the property included the same disclaimer as that in Butcher.
The agent argued that they were a “mere conduit” of the vendor and therefore had not engaged in misleading or deceptive conduct. The NSW Court of Appeal agreed and held that the agent hadn’t endorsed the information contained on marketing materials. Rather, they had expressly or impliedly disclaimed all responsibility for it.
Exercising professional judgment
In comparison, in a case before the NSW Court of Appeal, the agent was found liable for misleading and deceptive conduct.
In CH Real Estate Pty Ltd v Jainran Pty Ltd [2010] NSWCA 37, in a brochure circulated to all potential purchasers, the agent wrote that the property was a “solid investment” and a “great opportunity for long-term security and income”.
The Court of Appeal found that, by including this statement, the agent had held themselves out as being a commercial agent with specific expertise beyond that of a ‘normal’ agent. It was also found that a reasonable purchaser would have understood the information as coming directly from the agent, rather than being information merely passed on from the vendors. By exercising his own professional judgment, the agent was not acting as a “mere conduit” and was liable for engaging in misleading and deceptive conduct.
Clarity is key
It’s important that all disclaimers be written in a clear, readable font that doesn’t require magnification to be read by an ordinary person.
This point was made in Butcher, where it was acknowledged that disclaimers printed in tiny typeface in the footer of a brochure or those that cannot be read without undue difficulty can’t be considered to be effective in preventing conduct from being found to be misleading or deceptive.
Oral representations
So what happens in the case of oral representations?
In Borzi Smythe Pty Ltd v Campbell Holdings (NSW) Pty Ltd [2008] NSWCA 233, an agent made oral representations to a purchaser that a higher offer had been made by a third party prior to sale.
The NSW Court of Appeal held that the agent didn’t engage in misleading and deceptive conduct because they were acting on information obtained by the vendor's son and had disclosed this source to the purchasers.
While the agent didn’t verbally reiterate the disclaimer (as contained in the written materials) when conveying this information, the Court of Appeal found that it was enough that the agent had disclosed the source of the information as not being himself. Therefore, the Court was satisfied the agent was a “mere conduit” of information and this would have been understood by any reasonable purchaser.
Golden rules
Remember, there are three rules to keep in mind when it comes to disclaimers:
- Always include a disclaimer on all marketing materials, whether printed or online.
- Always state the source of the information in the disclaimer.
- Always disclaim all belief in the truth or falsity of the information.
Protect yourself
If the worst should happen and a claim is made against you alleging misrepresentation, it’s important to have the right professional indemnity insurance in place.
To discuss your professional indemnity insurance needs, contact Realcover by speaking with a JLT representative on 1800 990 312 or email [email protected]