Released 23/08/2019
The Commissioner for Fair Trading has today instituted proceedings in the ACT Supreme Court against a number of ACT property developing companies alleging false and misleading conduct.
ACT Fair Trading Commissioner David Snowden said the allegations relate to advertisements and marketing for the Geocon Grand Central Towers development in the Woden Town Centre.
The action was taken to protect the rights of consumers from false and misleading marketing practices. If proven, penalties of up to $10 million could apply.
“We allege that the claims in the marketing material for this development were false and misleading for consumers,” he said.
“We know that the purchase of a residential property is one of the largest investments a consumer can make and truth in advertising is critical to inform consumers so they are able to make informed and accurate decisions when purchasing goods and services.
“False and misleading representations undermine the level playing field and disadvantage others in the industry who may be doing the right thing when it comes to their marketing and promotions.”
The proceedings relate to alleged contraventions of the Australian Consumer Law (ACL) by Geocon Bowes Street JV Pty Ltd (Geocon), Zapari Property Bowes Street Pty Ltd (Zapari), Bowes Street Developments Pty Ltd (Bowes) and GZ Developments Pty Ltd (GZ).
It is alleged that from March 2018 the parties made a number of false and misleading representations when advertising the development including:
1.that Stage 2 of the Canberra Metro Light Rail would stop at, adjacent to or proximate to the Grand Central Towers development
2.that the travel time from Woden Town Centre to Canberra City on the Canberra Metro Light Rail would be under 10 minutes and that services would run every
5 minutes; and
3.that purchasers would be able to rent out a Unit in the development at market and obtain a 7 percent gross rental yield from a lessee.
The alleged representations were made on billboards at the development site, in a promotional brochure and video.
At the time Stage 2 of the Canberra Metro Light Rail had not been approved by ACT Government or Commonwealth entities and the route and location of stops had not been finalised.
The estimated travel time between Woden Town Centre and Canberra City on the Canberra Metro Light Rail was 25 to 30 minutes and the frequency of services had not been determined.
It is alleged that a 7 percent gross rental yield was not achievable for all units in the development, a ‘rental guarantee’ was not offered to all purchasers and where it was offered, the guarantee was subject to terms and conditions that were not disclosed on the billboards or the brochure.
It is also alleged that a ‘no reliance term’ contained in the standard form contract for sale was unfair and should be voided under the ACL. The ‘no reliance term’ requires the parties to agree that they entered into the sale contract without reliance upon any representation, statement or warranty (including sales and marketing material and preliminary art work), other than as set out in the sale contract.
The Commissioner for Fair Trading is seeking declarations, pecuniary penalties, injunctions, an adverse publicity order, an order for a compliance program and costs.
“This action sends a clear signal that we are actively scanning the market to ensure that representations made to consumers are accurate and not misleading,” he concluded.
Given the matter is currently before the ACT Supreme Court no further comment will be made at this time.
Background
Key points:
- Grand Central Towers is a residential development in Woden, ACT.
- It is two towers with a total of 429 apartments and is expected to be completed around August 2020.
- Geocon Bowes Street JV Pty Ltd is wholly owned by Geocon Development Holdings Pty Ltd. Nikolaos Georgalis is the sole director of both companies.
- Zapari Property Bowes Street Pty Ltd is the owner of the land at Block 5, Section 35, Phillip on which the development is being built. It is wholly owned by Zapari Developments Consolidated Holdings Pty Ltd.
- Nicholas Skepev is the sole director of both companies.
- Bowes Street Developments Pty Ltd is wholly owned by Zapari Developments Consolidated Holdings Pty Ltd. Nicholas Skepev is the sole director of both companies.
- GZ Developments Pty Ltd is the developer of Grand Central Towers. It is owned by Bowes Street Developments Pty Ltd and Geocon Bowes Street JV Pty Ltd in equal shares. Nikolaos Georgalis and Nicholas Skepev are the directors of GZ Developments Pty Ltd.
Allegations of false and misleading conduct through the ACL relate to claims made in marketing by the parties being:
- purchasers would be able to obtain a seven percent gross rental yield when renting their unit at market, when in fact the gross rental yield achievable for every unit is not seven percent, a ‘rental guarantee’ was not offered to all purchasers, and when it was offered was subject to undisclosed qualifications.
- Stage 2 of the Light Rail would stop in Woden and would stop at, adjacent to or proximate to, the Grand Central Towers development, when in fact Stage 2 of the Light Rail had not been approved by the ACT Government and Commonwealth entities, the route and location of the stops for Stage 2 were indicative only and had not been finalised;
- the travel time from Grand Central Towers on the Light Rail would be under 10 minutes and that the Light Rail service would provide light rail every five minutes between Woden and Canberra City, when in fact the estimated travel time on the preferred route from Canberra City to Woden was 25 to 30 minutes and the frequency of light rail services for Stage 2 of the Light Rail had not been finalised by the ACT Government; and
- a ‘no reliance term’ in the standard form contract for sale used by Zapari Property Bowes Street Pty Ltd and GZ Developments Pty Ltd is unfair and should be voided under the ACL. The term provides that parties agree that they entered into the contract for sale without reliance on any representations, including in sales and marketing materials, other than set out in the contract.
The maximum pecuniary penalties for corporations for a breach of the ACL, including making false or misleading representations, is the greater of:
- $10 million
- three times the value of the benefit received, or
- 10% of annual turnover in the preceding 12 months, if court cannot determine benefit obtained from the offence.
Unfair contract terms
Under Part 2-3 of the ACL, a term of a standard form consumer contract is void to the extent that it is found to be unfair in a court of law. A term of a consumer contract may be unfair if it:
- would cause a significant imbalance in the parties’ rights and obligations arising under the contract;
- it is not reasonably necessary to protect the legitimate interests of the party would be advantaged by the term; and
- would cause detriment (whether financial or otherwise) to a party if it were to be relied on.
- Statement ends -
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