Australia: Misleading And Deceptive Conduct In Relation To Property Sales Contracts

Last Updated: 26 February 2009

The use of rebate clauses in sales contracts has been widely debated, as their use can potentially mislead financiers, valuers and the market generally. In the case of Miro v Fu, Windeyer J even went so far as to say, a rebate clause "can be inserted for no purpose other than to mislead persons such as lending authorities and purchasers of other units".

The recent case of Commonwealth Bank of Australia v George Hilellis & Ors clarifies some of the issues surrounding the use of rebate clauses in sales contracts, and what constitutes misrepresentation in the context of a property sale.


Briefly, the facts of the case were as follows:

  • the husband and wife vendors were the owners of an investment home unit
  • the home unit was sold to two brothers who were introduced by a mortgage broker who knew both parties
  • the unit was sold for $550,000
  • at settlement the vendors accepted $440,000 (being the mortgage advance provided by the bank) instead of the price of $550,000
  • a deposit cheque for $55,000 was tendered but never banked
  • evidence showed that the real value of the home unit was approximately $370,000.


The bank claimed misleading and deceptive conduct on the part of the purchasers, vendors and an employee of the mortgage broker who introduced the purchasers to the bank for the procurement of the mortgage.

Findings of the judge

The judge held that:

  1. the statement of the sale price in the contract implies, especially in the context of a bank financed purchase, that the price is the market price
  2. the 10% deposit specified in the contract was a representation that a deposit was made and the reference to the agent as stakeholder was a representation that the agent would hold the deposit
  3. the representations made in relation to the sale of an investment property was an activity in trade or commerce within the meaning of the Trade Practices Act
  4. the representations were misleading or deceptive and the bank relied on the representations and suffered loss.

Lessons to learn from the case

Commonwealth Bank of Australia v George Hilellis & Ors offers us the following lessons:

  1. the price stated in the contract is a representation that the amount to be paid is the market value of the property
  2. the deposit stated in the contract is a representation that the deposit is paid and held by the stakeholder
  3. the representations were misleading or deceptive under the Trade Practices Act because the property was an investment property. The position may be different if the property being sold comprises a residential domestic premises rather than an investment property
  4. there was no rebate clause in the contract so the judge did not have to deal with this particular issue. However, it is likely that the same principles will apply so that any representation of the price on the front page of the contract is misleading or deceptive
  5. it is clear from the case how a bank can rely on information given and be misled or deceived, and consequently suffer loss. It is also quite possible that the information as to the sale price, when available in the public domain, may mislead a valuer or even a purchaser of property using the price of the particular property as comparable evidence, and lead to a claim for damages
  6. parties who need to take care to ensure that others, especially a financier, are not misled or deceived by information in a contract, transfer or sales advice include:
  • vendors and their solicitors
  • purchasers and their solicitors
  • estate agents
  • witnesses to signed documents
  • brokers, loan intermediaries and originators
  • outgoing mortgagees and their solicitors.

Steve Healy t (02) 9931 4725 e
Sally Tuckfield t (02) 9931 4906 e
Paul Spiro t (07) 3231 1502 e
Matthew Raven t (07) 3231 1641 e
Ian Compton t (08) 9223 9215 e
Peter Le t (08) 9223 9246 e
Malcolm Watson t (03) 9612 8218 e
Tony Greenaway t (03) 9612 8271 e

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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