Agents Beware – The legal risks of misrepresentation

The recent Supreme Court decision of Keci v Barnes [2026] NSWSC 521 serves as a timely reminder that what agents say during an inspection does matter. The case provides a cautionary example of the risks that can arise during a sales campaign, particularly where an agent speaks to matters that are central to a property’s value.

Background

The proceedings arose from the sale of a residential property in Bronte for $6.2 million, with contracts exchanged on 18 February 2026 and a 5% deposit of $310,000 paid.

A central feature of the sales campaign was the property’s ocean views, which were a key attraction for the purchasers. Immediately adjoining the property was a construction site with approval for a nine unit development. However, shortly before the sales campaign commenced, a proposal for 100 to 120 dwellings had been declared a State Significant Development.

The purchasers inspected the property on 15 February 2026 and again on 18 February 2026. During those inspections, they were told that the neighbouring development would consist of nine dwellings and would not materially affect the views. Their own due diligence, including council searches, confirmed the nine unit approval, and contracts were exchanged shortly thereafter.

In April 2026, while overseas, the purchasers became aware through media reporting of the larger proposed development. Upon confirming that the proposal was current, they sought legal advice and commenced proceedings on 1 May 2026 seeking rescission of the contract and repayment of the deposit.

The matter was heard on an urgent basis on 11 May 2026, the settlement date.

The case was expedited as the vendors had already committed to the purchase of another property, and the purchasers’ refusal to complete had placed that transaction at risk. Evidence was given that the vendors were incurring daily interest at a rate of 7% on their own purchase due to the delay.

What was said and what was left out

During inspections, the purchasers were told that nine dwellings would be built on the adjoining land.

At the first inspection on 15 February 2026, conducted by the selling agent, the purchasers observed both the ocean views and the adjoining construction site. As they were leaving, the agent stated, in substance, that nine houses were being built on the adjoining land and that they would not obstruct the ocean views.

However, what was not disclosed was the existence of the State Significant Development, a matter known to both the vendor and their agent, and one which had the potential to materially affect the ocean views, the very feature being used to market the property.

The Court’s Findings

The Court found that the statements made by the agent went beyond their literal meaning. In the context of promoting the property’s ocean views, they conveyed an implied representation that there were no other material matters known that would adversely affect those views.

Although the statements were, in a strict sense, accurate, they were misleading by omission.

Her Honour confirmed that a statement may be “literally true” and still amount to an actionable misrepresentation where it fails to disclose material information known to the vendor:

“The lack of a positive general duty of disclosure is not a licence for a vendor of land to make misrepresentations…”

The Court held that a reasonable purchaser would have understood the agents’ statements as covering everything material known about risks to the views. In that context, the failure to disclose the State Significant Development created a misleading impression.

The Court also rejected the defendants’ submission that the statements were made in casual conversation. Her Honour found that the representations were made by the agents in the course of the sales campaign, in circumstances where the property was being actively marketed on the strength of its views and the agents were encouraging the purchasers to regard those views as a key differentiating feature:

“The representation was made … in circumstances where the property had been advertised for sale in terms promoting its ocean views … and as one of the features that made it superior to other properties…”

Importantly, the Court held that it was irrelevant that the proposed development had not yet progressed through the full planning process. The question was not whether the development would ultimately proceed, but whether there was a real risk of it doing so.

That risk was sufficient to render the implied representation misleading.

The Court exercised its discretion to rescind the contract and ordered the $310,000 deposit be refunded to the purchasers.

Contributors

Sarah Sassine, Lawyer