Home' API Magazine : October 2014 Contents 70 n APIMAGAZINE.COM.AU n OCTOBER 2014
FROM TIME TO TIME SOME CONSUMER ADVOCATES SUGGEST TO
successful auction bidders, who might have a sudden change of mind,
that they should refuse to sign anything and walk away.
This is dangerous advice because in most parts of Australia
auctioneers may lawfully sign a sale contract on behalf of a reluctant
buyer and a hesitant seller. Even if there’s no signed post-auction
contract, a successful bidder who walks away may still wind up
defending a damages suit – as happened to experienced property
investor John Smith*
Earlier this year, Smith was the only genuine bidder at the auction
of a Western Australia home. Smith placed a bid of $3.6 million. With
the reserve price of $3.9 million not reached, the auctioneer told
those present he would seek the owners’ instructions whether the
property could be sold at the price of the last bid. He soon returned
to advise the property was on the market and that, if there were no
more bids, it would be sold. He re-opened the bidding, received no
other bids, called the price three times and knocked the property
down to Smith.
After congratulating Smith and his wife, the auctioneer invited
them into the home to sign the contract. As they walked into the
home, he asked if they had their chequebook. Mrs Smith tapped her
handbag and said, “Yes, we’ve come prepared.” Once inside, Smith
asked if the sellers would accept a 60-day settlement. No, replied
the auctioneer who explained that the auction terms provided for
settlement a month later.
But when Smith was asked to sign the contract, he said he no longer
wanted to buy the property and he and his wife abruptly left. Smith
ignored later written demands from the homeowners’ solicitors, no
deposit was paid and no settlement occurred on the allotted date. Or
at any other time. The property was placed on the market again, did
not sell and was subsequently rented out. In due course, Smith was
sued by the homeowners for damages on account of his misleading
and deceptive representations with respect to future matters, which
was contrary to Section 4 of the Australian Consumer Law.
There were two key aspects to their claim. Firstly that Smith’s bid
was a misleading and deceptive statement as to a future matter
and, secondly, that his conduct in allowing the auction to continue
without withdrawing his bid, together with his saying and doing
nothing to indicate he was not proceeding, misled them and “other
persons associated with the auction.” The homeowners’ claim relied
on the aggregate effect of Smith’s conduct.
As to the making of the bid, the judge found no breach of Section 4
because he was satisfied the bid not only constituted a representation
that Smith would comply with the auction conditions to complete the
purchase, but also demonstrated an intention to acquire the property
with Smith having the financial means to do so.
“It was an honest representation,” the judge concluded before
addressing the question of the post-bid conduct.
“I find that conduct (including silence) to have been misleading and
deceptive in any event,” the judge ruled.
Smith in the meantime had argued that, at the point when the
auctioneer returned and sought other bids, he decided not to proceed
with his bid. And when he and his wife went inside the property at
the conclusion of the auction, he was ‘confused and shocked’ and
thought he was being invited to re-negotiate the price.
In these fairly plausible circumstances Smith could, in the judge’s
view, still reasonably have been expected to take steps to ensure the
auctioneer understood “his new position”.
“His silence would’ve misled as to his intentions at that point, or
would’ve misled as to his state of mind at that point as to whether he
considered he’d acquired the property.”
Unfortunately for the homeowners the next question was
whether their post-auction losses were “because of ” Smith’s
misconduct. Trouble was, although his bid was genuine and not
misleading, Smith’s later mischievous silence caused a loss only of an
“opportunity” to restart the auction. As this loss was of “theoretical
significance”, the homeowners’ claim was dismissed. API
All names have been changed for privacy purposes.
WALKING AWAY FROM
A WINNING AUCTION
“This is dangerous advice because in most parts of
Australia auctioneers may lawfully sign a sale contract
on behalf of a reluctant buyer and a hesitant seller.”
n TIM O’DWYER is a Queensland solicitor, firstname.lastname@example.org
REAL ESTATE ESCAPES n Tim O’Dwyer
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