Get it in writing: the risks of suing on the basis of oral conversations

By Tim Drok

9 June 2023

A recent decision by the New South Wales Supreme Court has highlighted the significant risks of commencing legal proceedings relying on oral conversations.

In Xue v Karimbla Properties (No. 45) Pty Ltd [2023] NSWSC 552, Justice Henry rejected the plaintiffs’ claim that an agent selling apartments made misleading or deceptive representations, in a ruling which ultimately turned on the reliability and credibility of the parties’ competing recollections of certain conversations.

Facts

In August 2017, the plaintiffs met with a selling agent several times before entering into a contract to purchase an apartment in Sydney. Although the parties discussed vendor finance and the rate at which it would be available during these meetings, the contract did not complete because, according to the plaintiffs, such finance was not forthcoming at the market interest rate.

The plaintiffs claimed the selling agent made oral representations amounting to misleading or deceptive conduct under the Australian Consumer Law and the Australian Securities and Investments Commission Act 2001 (Cth). They alleged during the August meetings, the selling agent orally represented that the property developer:

(a) was willing to help the plaintiffs by providing vendor finance at market price;
(b) would provide vendor financing if the purchaser could not obtain finance elsewhere; and
(c) “will definitely help the plaintiffs with vendor financing” with the applicable interest rate to be determined by the market interest rate at the time of settlement

The defendants denied such representations were made. Her Honour spent much of her decision considering this threshold factual question.

Ruling

In finding for the defendants, Justice Henry referred to past case law highlighting the fallibility of human memory and “the serious difficulties of proof” in the absence of reliable contemporaneous records: [114]. Her Honour’s reference to Watson v Foxman (1995) 49 NSWLR 315 revealed such difficulties are more acute in misleading or deceptive conduct claims in which the question of whether a representation is misleading may depend upon “relatively subtle nuances flowing from the use of one word, phrase or grammatical construction […] or the presence or absence of some qualifying word or phrase or condition”: [116].

Against this backdrop, Justice Henry considered the parties’ competing recollections of their conversations in August and ultimately preferred that of the defendants.

In reaching this conclusion, her Honour cast doubts on the reliability and credibility of Mr Xue’s description of the discussions in question. Pointing to inconsistencies in that evidence and the absence of support from contemporaneous documents, her Honour also referenced Mr Xue’s express statement in cross examination that he “didn’t pay attention to the details” of the conversations in question: [126]–[129].

In contrast, her Honour described the selling agent’s evidence in glowing terms. She considered it accurately given to the best of his recollection and consistent with the documentary evidence filed: [132].

Comment

Justice Henry’s concerns with the reliability of Mr Xue’s evidence ultimately proved fatal in a claim which depended upon the veracity of the parties’ recollections of what had been discussed.

Her Honour’s ruling underscores the difficulties in successfully prosecuting cases based on oral representations and the need for maintaining contemporaneous documentary records when transacting or negotiating with third parties.

Mikayla Ware assisted in the preparation of this article.

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