It was fifth and sixth time unlucky for Sunshine Beach developer Mark Bain Constructions when the company and two local real estate agents were found liable for damages of more than $900,000 for mis-describing the anticipated balcony views in a 2003 luxury off-the-plan penthouse project.
Gary & Carol Avis and Grant & Lyn Brecht (on behalf of their company Barnscape Pty Ltd) were assured by two separate agencies that the views from their yet to be built $1.2 million penthouses at “Number One Park” would have panoramic outlooks over the surf that could not be obstructed.
“You may not see waves breaking onto the sand, but you will see waves breaking” were the famous words of one agent that resonated with the buyers and also with the Supreme Court in its 56 page judgment delivered last month.
As it happened another development to the seaward side of “Number One” – the building “Splash” – was constructed higher than had been represented, resulting in mere ocean views for our hapless plaintiffs.
The buyers settled their contracts but valuers put the differential between the contract price and the as-constructed worth at $380,000 for one of penthouses $450,000 for the other.
Both agencies wisely settled with the buyers – after day two of what turned out to be a 10 day trial – by agreeing to pay them $200,000 each (inclusive of costs) and leaving them to continue to fight on against the developer who protested any responsibility.
Notwithstanding that the contracts specified that “the buyer has not relied on any representations by or from the seller” and that “the terms covenants and conditions … constitute the only agreement … to the exclusion of all other representations”, the court had no difficulty in holding the developer liable to the buyers for the untrue representations made by the agents about the unfulfilled white-water views.
To rub salt water into the developer’s wounds, he had already been party to four earlier contract terminations in the same development that were heard in the Supreme Court in 2006 – that time on PAMDA grounds – because the form 30C was not “attached” to the contracts. No doubt the agents involved in those transactions also paid a high price for those mistakes.
The developer successfully appealed the Avis and Barnscape (Brecht) matters with judgment delivered on 17 April 2012 reducing the compensation payable to them. The appeal court ruled that the plaintiffs could not recover the difference between the purchase price and the current value because they had not pleaded their loss in that way.
“The pleadings upon which Barnscape and Mrs Avis went to trial did not allege that they sustained a loss measured by the difference between contract price and value (at the time of acquisition of the unit or otherwise).”
The lower court ought not to have exercised its discretion to allow compensation to be claimed on this previously abandonned measure because to do so would cause substantial prejudice to the developer who would probably not have agreed to discontinue the third party proceedings against the agents, had a capital loss been formally pleaded.
“For those reasons, the judgments given by the trial judge cannot stand.”
Thus judgement on the basis of actual loss on resale was allowed in each case but interest on the purchase price was ruled out as an additional head of compensation.
Total compensation was reduced to about $500,000, a net gain to the developer of $400,000 but because of the substantial variation to the orders for payment of legal costs that accompanied the appeal decision, its overall position improvement is far far more.