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Property law: Concealment and sale of land

Property law: Concealment and sale of land

By Philip Barton

Real Property 

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Non-disclosure inducing a sale of land, not involving s32 statements, attracts civil litigation and the Sale of Land Act 1962 as amended in 2019 criminalises knowing concealment of material facts with the intention of inducing a sale.

Snapshot
  • Non-disclosure inducing a sale of land, falling outside s32 of the Sale of Land Act, can give rise to civil or criminal liability.
  • The central provision creating criminal liability, s12 of the Sale of Land Act, was amended in 2019 to create the crime of knowing concealment of a material fact inducing a sale.
  • The amendment is unsatisfactory because of obscurity as to what it covers, not elucidated by guidelines published by the Department of Consumer Affairs under s12A of the Act.

Disputes concerning non-disclosure preceding entry into contracts of sale chiefly involve s32 statements.1 This article does not cover that prolific topic but deals with non-disclosure founding other civil litigation and also with non-disclosure criminalised by the Sale of Land Act 1962 (Act)2 s12(d) which itself can ground civil litigation. The topic is live because of an unsatisfactory statutory amendment, being one of sundry amendments by the Sale of Land Amendment Act 2019. The unsatisfactory amendment has two parts. First, one of the offences created by s12(d), namely the prohibition on a person who, with the intention of inducing any person to buy any land, “conceals any material facts”, was amended by s14(1) of the 2019 Act by replacing “fraudulently” with “knowingly” as the word preceding “conceals”. Second, the 2019 Act s15 inserted s12A which enables the Director of Consumer Affairs Victoria to make guidelines, to which a court may have regard, to assist vendors and their agents to understand what a material fact is likely to be. These amendments commenced, and the Material Fact Guidelines were released, on 1 March 2020.

History of criminal provision

The first Victorian criminal provision did not cover non-disclosure. Section 41 of the Real Estate Agents Act 1930 broadly covered knowingly false representations intended to induce a sale, or which conveyed that the representor or someone else named would, at a profit for the purchaser, buy that or other land or a chattel or sell that land. This was repeated in s4 of the Sale of Allotments of Land Act 1958. The section was then amended by s2 of the Sale of Allotments of Land (Amendment) Act 1960 to considerably extend it including to cover non-disclosure. The 1930 version was broadly repeated in ss12(a)-(c) with the addition of criminalising any wilfully false promise. Section 12(d) covered any person who, with the intention of inducing any person to buy any land “makes or publishes any statement promise or forecast which he knows to be misleading or deceptive or fraudulently conceals any material facts” or recklessly made such a statement or forecast. Section 12(e) broadly covered any unwarranted statement concerning provision of governmental amenities or services. In 1962 this, with minor amendment and insertion of “or recklessly” in s12(a), became s12. Only the maximum fine was increased between then and the 2019 Act which made the amendments set out above and also by s14(2) again increased the maximum fine from 50 to 120 penalty units while retaining the maximum term of imprisonment at 12 months. 

A digression into civil law

The criminalisation of non-disclosure may be viewed against the background of the civil law. 

In Kadissi v Jankovic a vendor of a unit in a block of flats was held not liable for not disclosing foundation movement because: 

". . . in the absence of fraudulent concealment or of misrepresentation or of an express agreement, a vendor of real estate is not liable to a purchaser for defects in a building or land rendering it dangerous or unfit for occupation, even if the vendor has created the defects himself or is aware of their existence. As to such matters the maxim caveat emptor is applicable. It follows that a purchaser will not be entitled to rescind a contract on the ground of non-disclosure by the vendor of matters relating to the physical condition of the property”.3

This remains the law.4 As regards statutory misleading or deceptive conduct in trade or commerce,5 and so not normally applicable to the sale of a private house,6 the foundational case on silence is Demagogue Pty Ltd v Ramensky.7 A vendor who by silence gave an erroneous impression concerning access was held to have engaged in misleading or deceptive conduct or conduct which was likely to mislead or deceive. Black CJ stated that silence was to be assessed as a circumstance like any other, ie, having regard to all the relevant circumstances did the silence constitute such conduct?8 Gummow J noted, however: 

"unless the circumstances are such as to give rise to the reasonable expectation that if some relevant fact exists it would be disclosed, it is difficult to see how mere silence could support the inference that the fact does not exist".9

The Victorian misleading or deceptive conduct case with facts closest to those subsequently discussed under s12(d) is Charles Lloyd Property Group Pty Ltd v Buchanan,10 in which a vendor who did not disclose that a suicide had occurred on the land two years earlier was held not liable. Mukhtar AsJ held that the circumstances were not such as to give a reasonable expectation that this would be disclosed. 

Cases arising under s12 

If prosecutions for breach of s12 have occurred, they are not well known. However, the Victorian Civil and Administrative Tribunal (VCAT) can award damages or similar for breach of s12 by the combined effect of s48A of the Sale of Land Act and the Australian Consumer Law and Fair Trading Act 2012 (ACLFTA) s217.11 Section 217 in substance provides that a person suffering loss through a contravention of the ACLFTA may recover it from the contravenor or someone involved in the contravention. The chief source of what little litigation has occurred under s48A is non-disclosure preceding contracts of sale . Following two earlier cases awarding recovery of loss occasioned by non-compliant s32 statements,12 a purchaser in 2019 claimed for loss for contravention of s12(d) through a misleading or deceptive statement concerning the floor area of the property.13 Member Johnson observed that as this was a civil proceeding the civil standard of proof applied.14 The Member also noted that s13(1) provided that, if falsity of the statement and consequential inducement of the contract were proved, the maker was deemed to have made the statement with knowledge of the falsity unless proving reasonable ground to believe and actual belief of its truth, or no reason to suspect falsity, and had otherwise acted innocently. The Member found various elements in ss12(d) and 13(1) not established. 

By contrast, in Sully v Englisch15 Member Johnson found an estate agent liable under s12(d) for misrepresentations concerning the likelihood both of finance being obtained and of the vendor rescinding without penalty if it was not. The purchaser, who had been unable to obtain finance and had been successfully sued by the vendor, was awarded a sum representing her monetary liability to the vendor, her forfeited deposit, and her costs of the vendor’s proceeding against her. 

Hansard 

Although not proposing to amend the expression “material facts”, Hansard, both in debate of the Sale of Land Amendment Bill 2018 (which lapsed) and of the 2019 Bill, reveals parliamentary uncertainty about the scope of materiality ranging from the serious to the facetious. In the 2019 Second Reading Speech in the Legislative Assembly the Minister identified “disclosure of certain facts regarding a property for sale, for example, its history as the site of a homicide, or its past use as a site on which illicit drugs were manufactured”.16 Other parliamentarians spoke likewise, in particular mentioning “meth [methylamphetamine] laboratories”,17 but also like Ulysses voyaged far and wide into other possible events on a property, to wit: pollutants causing a death in a house;18 crimes against the person;19 some other tragic event;20 home invasion where people get bashed to within an inch of their life;21 previous ownership by a known criminal identity;22 a bit of a dodgy bloke who lived there 20 years ago;23 the garden being known to flood in winter;24 cladding;25 living over a mineshaft;26 an adjoining former goldmine27 and Collingwood supporters living next door.28 Accordingly s12A was enacted in the hope of providing clarity. However, given that courts have interpreted the expression “material facts” in s12(d) since 1960, it is not clear why the assistance of the Director of Consumer Affairs is now needed. As appositely stated:

“. . . the government is very much saying to the house ‘Take the government on trust with this provision. It is undefined. If you pass this legislation, we will now go and define what we mean by 'material facts'".29

The Material Fact Guidelines

Note at the outset that a court “may” (not “shall”) have regard to the guidelines. The Interpretation of Legislation Act 1984 s45 provides that where “may” is used in conferring a power, it shall be construed as meaning that the power so conferred may be exercised, or not, at discretion. The guidelines are four pages but the salient points are:

  • “It is not necessary to show that anything active was done to conceal the material fact” – it suffices to withhold a fact which the withholder knows to be material. (In passing, this article notes that the Macquarie Dictionary defines “conceal” as “1. to hide; withdraw or remove from observation; cover or keep from sight; 2. to forbear to disclose or divulge”.) 
  • Accordingly, the guidelines use “conceal” in its second meaning
  • a material fact is one important to or influencing a potential purchaser in deciding on purchase or price
  • a fact is not innuendo, gossip or mere speculation, but an expert opinion honestly held on reasonable grounds may be a “material fact”
  • a fact can in general be material if an average, reasonably informed purchaser with a fair-minded understanding of the market, including the role of an agent, would generally regard it as material
  • a fact can specifically be material if known by the vendor or agent to be important to a specific purchaser 
  • further indications relevant to determining materiality include: whether only the vendor knows it; the reaction of other potential purchasers to it; whether because of it the property is in a rare or unusual category or position.

General examples of material facts not obvious to a potential purchaser include: 

  • a structural defect, termite infestation, combustible cladding, asbestos or contamination
  • an underlying cause of an obvious physical defect not readily apparent on inspection, eg, defective stumping
  • a significant event at the property, including a flood or a bushfire
  • a history of pesticide use
  • non-obvious restrictions on vehicular access (such as truck curfews or where access is via an easement not apparent on the Certificate of Title or plans) 
  • facts about the surrounding neighbourhood not immediately apparent on inspection (such as sinkholes, surface subsidence, development proposals) but likely to affect use and enjoyment more than usual
  • illegal or unpermitted work
  • a serious crime on the property during the current or previous occupation, or an event which may create long-term potential risks to the health and safety of occupiers, eg, extreme violence such as a homicide, use for the manufacture of substances such as methylamphetamine, a defence or fire brigade training site involving hazardous materials. The guidelines continue:

“There is a community expectation that homicides that have occurred at a property be disclosed to potential purchasers. Other known acts of extreme violence should be disclosed if a potential purchaser makes a specific inquiry . . . 

“Defects and damage arising from prior significant events of the kind specified above, and contamination from prior uses will not be considered material if fully remediated”. 

Bad legislation 

Behaviour should not be criminalised without being properly identified, particularly where, as here, civil litigation (at VCAT) may also ensue. This was an issue even before the 2019 amendment, when the crime was fraudulent concealment and materiality of the fact concealed was left to be determined by judges without input from the Department of Consumer Affairs. “Fraud” in its common law meaning is established where the representor lacks belief in the truth of the representation or makes it recklessly not caring whether it is true or false.30 Accordingly “knowingly conceals” will be easier to establish than “fraudulently conceals”. Parliament should either not have enacted the legislation or should only have amended s12(d) to “knowingly”, not enacted s12A, and left it to the courts to, as they have always done, interpret both what is a material fact and31 what is “knowingly”.

In the author's opinion, the guidelines are deficient and disorderly as follows: 

  • under s12(d) the concealment must be with the intention of inducing a sale. It is hard to see how logically some of the concealed acts described, eg, that the vendor has suffered extreme violence on the property, could ever be with that intention
  • a fact being only known by the vendor is not relevant to determining materiality: materiality depends on the fact itself not on who knows it
  • the list of “General examples of material facts” overlaps greatly with and vaguely extends the existing disclosure obligations under ss32A-32P, carefully worked out for more than 35 years. Why is this additional amorphous layer necessary?
  • the legislation is unfair in punishing vendors for events beyond their control. If, for example, a registered proprietor murders someone on the property, or uses or fails to prevent it being used as a meth lab, there is a case for liability. But what if the registered proprietor tried to stop the murder or was greatly injured, eg, a parent defending a child? What is the evidence for the assertion that there is a community expectation that homicides be disclosed? Why should a battered spouse have to disclose “known acts of extreme violence . . . if a potential purchaser makes a specific inquiry”?32

It is accordingly fortunate that the word “may” occurs in s12A. ■


Philip Barton practises at the Victorian Bar in commercial, property and probate law. He is the author of the caveatsvictoria.blog.

  1. Sale of Land Act 1962 ss32, 32A-32P. 
  2. Statutory references are to this Act unless stated otherwise. 
  3. [1987] VR 255, 258 (Crockett J). 
  4. Eg, Walker v Masillamani [2007] VSC 172, at [20]. 
  5. Currently the Australian Consumer Law s18(1) applicable by Australian Consumer Law and Fair Trading Act 2012 s8.
  6. Argy v Blunts & Lane Cove Real Estate Pty Ltd [1990] 26 FCR 112, at [54] and [55]. 
  7. [1992] 39 FCR 31.
  8. Note 7 above, 32. 
  9. Note 7 above, 41. 
  10. [2013] VSC 148.
  11. Wagner v Usatov [2014] VCAT 1198, [48]. 
  12. Note 11 above; Hobson v Robinson [2017] VCAT 524. 
  13. Princess Chloe Pty Ltd v Bellaveau Pty Ltd [2019] VCAT 154. 
  14. Evidence Act 2008, s140. 
  15. [2020] VCAT 378.
  16. 21 March 2019, Hansard p1160 (page references below are to Hansard).
  17. Eg, Ms Richards, Legislative Assembly, 1 May 2019, p1404.
  18. Ms Ward, Legislative Assembly, 18 September 2018, p3365.
  19. Mr Angus, Legislative Assembly, 30 April 2019, p1299. 
  20. Note 19 above.
  21. Note 19 above.
  22. Mr Rich-Phillips, Legislative Council, 28 May 2019, p1440. 
  23. Ms Victoria, Legislative Assembly, 18 September 2018, p3352.
  24. Note 22 above. 
  25. Ms Halfpenny, Legislative Assembly, 1 May 2019, p1410. 
  26. Mr Howard, Legislative Assembly, 18 September 2018, p3366. 
  27. Ms Green, Legislative Assembly, 18 September 2018, p3361.
  28. Mr Finn, Legislative Council, 28 May 2019, p1440.
  29. Note 22 above, p1441.
  30. Derry v Peek [1889] 14 App Cas 337. 
  31. Eg, Property Law Act 1958, s199(1), strictly “knowledge”.
  32. Difficulties in applying the guidelines are also discussed in the LIV submission, and in the REIV’s response to Material Fact Guidelines, on the Department’s draft guideline.

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