When selling land, vendors must not engage in misleading and deceptive conduct and must disclose all material facts that might prevent a person from entering into a contract for the sale of land.
This issue was explored in the recent case of Charles Lloyd Property Group Pty Ltd v Buchanan  VSC 148 (“Buchanan”), where a purchaser of land attempted to sue the vendor for failing to disclose a suicide that occurred on the land.
The case concerned the sale of a large parcel of vacant land in Mount Clear (near Ballarat). The purchaser was a property developer and entered into a contract to purchase the land. During the pre-contractual negotiations, the vendor failed to disclose that a young man committed suicide in a forested area on the land two years before the contract was made.
After signing the contract, the vendor received an email from the purchaser advising that it had come to its attention that the deceased’s family had been granted permission by the local council to erect a memorial on the land, and wished to contact the deceased’s family to extend condolences. The purchaser did not complain or indicate any objection to proceeding with the contract. The vendor was aware of the suicide, but not of the memorial. The memorial was to be erected in the forested area of the land, which could not be developed.
The purchaser then requested an extension to complete the sale and the vendor granted the extension. The purchaser and vendor entered into a deed of variation. Again, the purchaser did not raise the issue of the suicide, or complain that the suicide undermined the prospect of the land being subdivided. The purchaser failed to complete the contract and the vendor exercised its right to terminate for the breach.
The purchaser commenced proceedings on the basis that it was “led into error” because the vendor failed to disclose that:
- a memorial was being erected, which gave the deceased’s family a “right of access” to the property; and
- a suicide had occurred on the land, which rendered it “psychologically stigmatised”.
Should the suicide have been disclosed?
The purchaser contended that had it known about the suicide, it would not have entered into the contract, and therefore there was a “reasonable expectation” that the death would have been disclosed. The purchaser relied on a concept in legal discourse known as “psychologically stigmatised property”. Psychologically stigmatised property is concerned with a non-physical defect that causes emotional or psychological discomfort to a buyer.
This “stigma” was explored in Hinton v Commissioner for Fair Trading  NSWADT 257 (“Hinton”). In Hinton, a real estate agent in New South Wales was successfully prosecuted by the Commissioner of Fair Trading for marketing a home in North Ryde without revealing to prospective purchasers that a tragic triple murder had occurred in the house, which the media had dubbed “the Gonzales murders”.
In this case, the managing director of the purchaser company gave evidence that if he had been informed that someone had taken their life he “would not have purchased the Property as I have deep moral convictions about this and feel that by building a development on such Property, we would be desecrating it”. It was also argued that the extension was merely used as a tactic to “buy time” to be appraised of legal options available.
Mukhtar AsJ found in favour of the vendor, and rejected the purchaser’s arguments, essentially because the purchaser was aware of the suicide at the time that it requested the extension. This showed that the purchaser did not rely on the vendor’s “silence” or “misleading and deceptive conduct”. The deed of variation was made in circumstances where the purchaser already knew of the suicide and the memorial. This constituted a separate agreement from the original contract, and indicated that the purchaser intended to remain bound by the contract.
Although Mukhtar AsJ did not wish to delve into the merits of the purchaser’s arguments, the judgment begs the question as to what would have happened if the purchaser had not asked for the extension, and in what circumstances are vendors under an obligation to disclose a death on a property that they wish to sell? The judgment leaves these questions open.
Hinton indicates that in certain circumstances, there is a duty to disclose the occurrence of a death. Buchanan does not provide much guidance on this question, as Mukhtar J preferred to focus on the fact that the purchaser requested an extension. In any event, his Honour indicates his reluctance to compare a suicide in a forest with that of a publicized murder case in a suburban dwelling.
However, any vendor should tread on the side of caution and disclose any information that might give rise to this potential claim.
This article is intended to provide general information only and is not a substitute for legal advice. To obtain legal advice tailored to your situation please contact RKL on (03) 9519 9888.