Seller Beware – Auction Bid Retracted with Impunity

Mr and Mrs Carter owned a property at Riverton Drive, Rossmoyne and offered the property for sale by auction. Mr Ilahi attended the auction and made a bid of $3.6m.  He was the only bidder at the auction and the Carters agreed to accept his bid. The auctioneer then knocked down the property to Mr Ilahi.

Mr Ilahi was invited into the house to sign the contract.  After much discussion, he announced that he did not wish to buy and declined all attempts to compel him to complete the purchase.  Subsequently, the Carters put the property up for sale again but were unable to find a buyer.

The Carters sued Mr Ilahi. They could not rely on an oral contract to buy because the Property Law Act requires that, to be enforceable, a contract for the sale of land must be in writing. The Carters’ legal action was based on a claim for misleading or deceptive conduct under the Australian Consumer Law.

The Court found that at the time he made the bid, Mr Ilahi genuinely intended to buy the property. He therefore changed his mind some time between making his bid and being asked to sign the contract.

The Federal Court found that Mr Ilahi had engaged in conduct which was misleading and deceptive by failing to reveal his intentions not to purchase the property until just before the time he left the property. The court found that his silence in the meantime amounted to misleading and deceptive conduct.

The Carters claimed damages of $325,000 being the difference between the current value of the property and the amount bid by Mr Ilahi.

However, no award of damages was made. The court took the view that all the sellers had lost as a result of the misleading and deceptive conduct was the opportunity to restart the auction.  As there were no other genuine bidders at the auction, the conduct had not resulted in the sellers losing a sale of the property. If there had been another buyer willing to buy at the auction, the sellers could have offered the property to them at that time. However, since Mr Ilahi was the only person there, they were left without redress.

[2013]FCCA 783

For more information on this article or any other property matters please contact David Miller on (08) 9321 3755.

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