WHETHER NEGLIGENT MISREPRESENTATIONS WERE MADE BY PROPERTY AGENT
This week’s blog covers Lam Wing Yee Jane v Realstar Premier Group Pte Ltd [2023] SGHC 344, a High Court case which discusses whether a property agent is liable for negligent misrepresentation to a purchaser when he passed on marketing brochures prepared by the seller to the purchaser.
Facts. The parties involved are as follows:
Ms Lam Wing Yee Jane (“Ms Lam”), the claimant and the purchaser of the property known as 12 Lewis Road, Singapore 258598 (the “Property”);
Mr Lam Kong Yin Patrick, Ms Lam’s father (“Mr Lam”) (Mr and Ms Lam collectively referred to as the “Lams”);
The defendant, Realstar Premier Group Pte Ltd, a real estate agency.
Mr Teo Eng Siong, a registered real estate salesperson with the defendant and its Director of Business Development (“Mr Teo”); and
Mr Tan Seng Heng Gregory, a real estate salesperson with Gregory Tan Realty Pte Ltd and the seller’s agent for the sale of the Property (“Mr Tan”).
On 14 December 2021, Mr Teo sent a message to Mr Lam indicating that the Property was for sale and that the Property was available as a “House for rebuilding”. Subsequently, Mr Lam asked to view the Property and a viewing was arranged on 15 December for Mr and Ms Lam to view the external compound of the Property. Mr Tan was also present at the viewing.
During the viewing, the Lams claimed that Mr Teo had shown them a hard copy of a marketing brochure consisting of a site plan, cadastral map, photographs of the external compound and a page depicting three potential layouts of the Property when it is redeveloped (“Marketing Brochure”). After the viewing, Mr Teo sent Mr Lam a soft copy of the Marketing Brochure. This Marketing Brochure was prepared by the seller but forwarded to the Lams by Mr Teo.
Ms Lam, the claimant, alleged that by showing the hardcopy and sending a softcopy of the Marketing Brochure to the Lams, Mr Teo represented that the entire land area of the Property (i.e. 12,454 square feet area) could be fully redeveloped, with there being no drainage reserve on the Property (“Alleged Misrepresentation”).
After the viewing, Ms Lam made an offer to purchase the Property and an option to purchase was issued on 16 December 2021. Ms Lam exercised the option on 29 December 2021. However, subsequently on 7 January 2022, the Lams discovered from their conveyancing solicitors that there was in fact a drainage reserve of 278.8 square feet on the Property and could not be used or taken into account for any redevelopment purposes.
Issue. Ms Lam’s case against the defendant was that Mr Teo made the Alleged Misrepresentation negligently and that the defendant was to be held vicariously liable for Mr Teo’s negligent misrepresentation.
This blog post will not discuss the judgment of the High Court (the “Court”) on vicarious liability. This is because the Court did not agree with the claimant’s argument on negligent misrepresentation, which made the issue of vicarious liability a moot point.
Negligent misrepresentation. To succeed in proving negligent misrepresentation, the court held that Ms Lam had to prove that (at [30]):
Mr Teo made a false representation of fact to her;
The representation induced her actual reliance;
Mr Teo owed her a duty to take reasonable care in making the representation;
Mr Teo breached that duty of care; and
The breach caused damage to her.
The focus of this article will be on the Court’s assessment of the first element.
In determining whether a statement of fact was conveyed, the courts will proceed on an objective basis and consider what “a reasonable person would understand was being conveyed by the words and conduct in question or would infer from them” (at [37]).
Therefore, the question before the Court was whether it was reasonable for Ms Lam to believe based on the Marketing Brochure and Mr Teo’s conduct that the entire land area of the Property could be fully redeveloped.
“Mere puff”? The Court first dealt with the defendant’s arguments.
One of the defendant’s arguments was that any statement of fact conveyed by the Marketing Brochure was “mere puff” and not to be taken seriously as statements of fact.
While statements made in the lead-up to a sale may be taken to be simply sales talk, and not to be taken seriously, factors such as (1) the degree or obviousness of the statement’s untruth; (2) the circumstances of its making; and (3) the expertise and knowledge attributable to the person to whom it is made are relevant in determining whether such lead-up statements should be more properly viewed as representations of fact (at [39]).
The Court held that the Alleged Misrepresentation, if proven to be derived from the Marketing Brochure, was not a statement of fact that was obviously untrue (at [40]). As such, the Court dismissed the defendant’s argument in this respect.
Next, the Court noted that the present case concerned a representation found within a Marketing Brochure which originated from the seller but was forwarded by Mr Teo to the claimant. The Court concluded that Mr Teo did not convey the Alleged Misrepresentation via showing and sending the Marketing Brochure to the Lams. This was based on three factors.
Mr Teo’s lack of knowledge of the presence or absence of drainage reserves. Where a representor had more knowledge than the representee, it will be more readily held that the representee is entitled to rely on a statement as a statement of fact.
However, Mr Teo did not have more knowledge than the Lams on the presence or absence of drainage reserves on the Property. In fact, Mr Teo only received the Marketing Brochure from Mr Tan in the morning of the day the Lams viewed the Property (at [43]).
The context in which the Marketing Brochure had been conveyed. The Court held that the way Mr Teo conveyed the Marketing Brochure to the Lams militated against finding that the Alleged Misrepresentation was made (at [45]).
It was Mr Tan (the seller’s agent) who, in the presence of the Lams, directed Mr Teo to forward the softcopy of the Marketing Brochure to Mr Lam, making it clear that the Marketing Brochure originated from Mr Tan and not Mr Teo (at [52] – [53]).
When Mr Lam inquired about the Marketing Brochure, it was also Mr Tan, not Mr Teo, who explained the materials to the Lams (at [52]).
Hence, the Court held that in forwarding the Marketing Brochure to the Lams, Mr Teo was simply passing on information as material from the seller or Mr Tan, the accuracy of which he has no responsibility for beyond ordinary duties of honesty and good faith (at [54]).
The claimant’s expertise in real estate development. The characteristics of the representee are relevant in determining whether an implied representation had been made (at [55]).
At trial, Mr Lam emphasised his experience in property development to support his testimony that the potential redevelopment concept drawings in the Marketing Brochure should be taken seriously.
The Court noted Mr Lam’s experience, but held that such experience work against the Lams instead. Because of the Lams experience in the real estate industry, the Court held that it was unreasonable for the claimant to argue that the Marketing Brochure conveyed the Alleged Misrepresentation (at [56]).
This is because it was reasonably known that redevelopment layouts are subject to change. In fact, the page in the Marketing Brochure containing the potential layouts of the Property was expressly marked to be subject to the relevant authority’s approval (at [56]).
Furthermore, given that the Lams’ familiarity, they would also be well acquainted with legal requisition clauses in property transactions, which allowed a purchaser to back out from a sale if the legal requisitions are unsatisfactory. Hence, for matters that are covered under the legal requisition clauses, such as the presence of road plans or drainage reserves, it is generally expected that the purchaser would make inquiries with the relevant legal authorities in the form of legal requisitions. (at [57]).
Considering the characteristics of the claimant, the Court held that a reasonable person would not have believed that the Alleged Misrepresentation was conveyed via the Marketing Brochures. In other words, the Marketing Brochure only amounted to visual representations of potential development layouts of the property, and not that the entire land area would be available for redevelopment (at [57]).
Significance. This case highlights the fact-sensitive approach that the Court takes towards determining if a property agent should be held responsible for information contained in any marketing material that the agent forward to its principal.
As a question of prudence, purchasers should exercise due diligence before purchasing any property, which includes checking and verifying information that they are relying on in property transactions.
A purchaser should also carefully consider the criteria on which replies to legal requisitions will be assessed. In this case, the claimant agreed in the option to purchase that any replies to legal requisitions that affect less than 5% of the land area of the Property will be deemed to be satisfactory. As the drainage reserve in this case only affected 2.23% of the land area of the Property, the claimant could not rely on the legal requisition clause to back out (at [68]).
This publication is not intended to be, nor should it be taken as, legal advice; it is not a substitute for specific legal advice for specific circumstances. You should not take, nor refrain from taking, actions based on this publication. Chancery Law Corporation is not responsible for, and does not accept any responsibility for, any loss or damage that may arise from any reliance based on this publication.