Hocking Stuart Richmond office fined in Federal Court for underquoting

Real estate agency Hocking Stuart has been slapped with a $330,000 fine after admitting to underquoting properties it advertised for sale.

The punishment — a record penalty for underquoting in Victoria — was handed down in the Federal Court on Thursday, sparked by a state government audit of the market last year.

Hocking Stuart Richmond will fork out the penalties for behaviour which Justice John Middleton told the court was serious.

“Price is an essential piece of information about the property being offered for sale for prospective buyers,” he said. “Buyers should be able to rely on correct information to make an informed decision.”

The agency admitted to misleading and deceiving buyers in 2014 and 2015. It was fined $30,000 for each of the 11 breaches of consumer laws by its Richmond branch associated with houses listed across Richmond and Kew.

Delivering his judgement on Thursday, Justice Middleton told the court that failure to provide the correct range of price was misleading.

“The conduct involved the creation of an enticing (but illusory and fictitious) marketing web for the sale of 11 … homes,” he said.

“The manipulation of the ‘agent’s estimate of selling price’ for the properties did demonstrate the lengths that Hocking Stuart Richmond went to in creating its enticing (but illusory and misleading) marketing web. There was a conscious decision to engage in the conduct.”

Several Hocking Stuart Richmond agents were under the court’s scrutiny, snagged in an underquoting blitz — at the height of the market last year — by the consumer watchdog.

Justice Middleton said many potential homeowners were likely to have deceived and disappointed by the conduct of the agency, led by director in effective control Peter Perrignon.

“Some [buyers] may have missed the opportunity to buy elsewhere, being lured to a bargain that did not, and was never going to, eventuate.”

Hocking Stuart Richmond asked the court that when it considered penalties, it would take into account that the court proceedings would “inevitably trigger another bout of negative publicity” which would place it “in a precarious position in the marketplace”.

Consumer Affairs launched court action against Hocking Stuart Richmond in February this year, the first to arise from a probe of 100 properties. Court documents pointed to one agent telling his vendor that creating “the illusion of a bargain” would help to achieve the best sale price for her Richmond house.

Vendor Margaret Smith and two Hocking Stuart Richmond agents signed paperwork on October 29, 2014, which set out the estimated selling price of her home, 17 King Street, as between $640,000 and $700,000, according to court documents.

Consumer Affairs said Hocking Stuart Richmond agents believed in late October 2014 that the house would sell for about $820,000.

On or about November 10, before the home had hit the market, the agent emailed Ms Smith to outline the how the agency intended to position her home.

The agent wrote that Hocking Stuart Richmond wanted to get the “best price” for her property and “the first step to do that was to create the illusion of a bargain”.

“Hocking Stuart wanted Smith to be aware of how competition works and that the momentum of the auction gets the price they wanted, not the initial price range,” a summary of the email said.

“Hocking Stuart Richmond intended to raise the price range during the campaign as interest gathered. However, this is no way affected or detracted from Hocking Stuart’s aim of getting a great price for Smith.”

No.17 King Street was sold at auction, fetching $891,000, according to Domain Group data.

In a statement, Hocking Stuart Richmond said it sincerely regretted the mistakes made last year.

“We want to assure our clients and buyers that we’ve already implemented a number of changes to ensure this doesn’t happen again,” the company said, noting it had implemented a compliance monitoring and training program.

Hocking Stuart chief executive Simon Jovanovic said he was disappointed with the severity of the penalty and the “example being made of our Richmond office for what is an issue that impacts the real estate industry as a whole”.