Until Queensland’s residential contract compliance nightmare is resolved, agents and lawyers will continue to explore means to protect sellers from “settlement risk” inherent in PAMDA and Land Sales Act (“LSA”) buyer termination entitlements.
One such means was this week explored when distressed developer, Meridien tried to hold Ray Jackson and Darryl & Sue Tedesco to personal guarantees they signed for a pre-GFC off-the-plan apartment buy in the names of their companies.
The contract for the “Boathouse” resort apartment at Airlie Beach, was done on 2 January 2008 and after completing construction, the developer scheduled it for settlement in February 2011.
The buyers did not front for settlement and purported to terminate. Meridien had engaged in misleading and deceptive conduct, they claimed.
A lawsuit was filed. In November 2011 the buyers amended their defence to also assert that the expiration of the 3.5 year (from contract date) sunset period specified in LSA s 27 – that had rolled around on 2 July 2011, after the scheduled settlement and after the lawsuit had begun – afforded them a complete out.
The plain reading of the section, they argued, was that any developer unable to deliver title within that time no matter how this occurred, was at the mercy of buyers cancelling at their option.
But how could this be – countered the developer – when it was the buyers’ own default that prevented a timely settlement from occurring?
It also argued that any LSA termination entitlement had been waived as a result of the buyer’s failure to specify that ground, in its February 2011 notice of purported termination.
The Supreme Court accepted a statutory right could be waived and that this could occur by conduct.
But this conclusion was only the half way point of Meridien’s argument. The court went on to hold the buyers’ conduct before the expiration of the 3.5 year period – before the termination right accrued – was irrelevant.
“There was no such conduct in this case”. The buyers “right to avoid had not crystallised at the time [they] elected not to attend settlement [in February 2011]… [they] could not waive their rights until that point [2 July 2011]”.
Our buyers escaped their contract but the opportunistic route they took has now been closed off. An amendment to the LSA now specifically prevents buyers terminating because of expiration of the statutory period if their own default was the reason for settlement not occurring.
The potential for waiver of statutory PAMDA and LSA rights may nevertheless add a useful string to the somewhat battered bow, of resourceful residential contract draftsmen.