Agent Developer & Investor


Anatomy of a subdivision: Developer’s role reversal forces profit payment from lender

A seasoned civil works contractor keen to develop a major Lockyer Valley subdivision enlisted the support of an enthusiastic private lender.

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Agent forfeits deposit & “seizes” $20k comm; rapped for “self-interest” actions

A Sunnybank real estate office that paid commission to itself from a trust account deposit it had refused to refund to a buyer

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Flour Mill Developer Caught By Plummeting High-Rise Values

A developer who defaulted on the purchase of a $25m condominium project at the historic Albion Flour Mill site has been ordered to pay the vendor millions in compensation for the collapsed deal.

Fridcorp Group – operated by developers Paul Fridman and Chris Roche – signed up to buy the 12 lot FKP site in July 2015.

The company’s $400m “Odyssey” development was to consist of two 20-storey buildings totalling 634 residential units.

Council approval was received in August 2016, but in December the deal was pulled.

Fridcorp alleged FKP failed to disclose all required information, which, by their claim, breached statutory environmental protection rules.

But all necessary reports were available via a virtual “data room” that both parties had access to prior to signing the contract.

FKP sued in Brisbane’s Supreme Court for the difference between the sale price and the site’s diminished value as at the due date for settlement.

Justice David Jackson had no difficulty in ruling that notice had been duly given, because Fridcorp had specifically consented to documents being disclosed by way of the mutually accessible “data room”.

Justice Jackson said the use of the online platform satisfied all legal requirements and dismissed Fridcorp’s attempts to justify its withdrawal from the deal.

It was irrelevant, he reasoned, that the requisite contamination notice was one of scores of documents deposited into the data room because it was clearly titled and easily available.

Valuer Troy Linnane, head of residential development at Jones Lang LaSalle, argued by comparison with other developments in Bowen Hills and Newstead that the site’s value in December 2016 had dropped from $25m to $17m.

He then reasoned that by March 2017 the value had collapsed further to $15.75m.

Justice Jackson thought that to be too much of a stretch as such a conclusion was “unsatisfactory” and “inconsistent”.

There were also unresolved questions as to why the valuer rated an inferior comparison site at a far higher dollar rate per square metre than the Albion Mills site.

That said, the value drop to $17m was taken as reasonable conclusion, yielding a value collapse over just 18 months of $8m or 32%.

Given that a deposit of $2.75m had already been paid, the Fridcorp Group was ordered to pay $5.25m plus interest – a total of $5.46m – for what was ruled to be a serious contract breach.

For more details on the case, visit:

FKP Commercial Developments Pty Ltd v Albion Mill FCP Pty Ltd & Anor [2017] QSC 322


Punctuation mark invalidates personal guarantee

Credit account applications commonly contain – in the case of companies – a director’s guarantee.

Frequently the guarantee is in the form of a very brief “add-on” that holds the signer liable as guarantor, if they happen to be a director or shareholder.

Such was the case of a western NSW landscaping company whose truncated version simply stated “if I am a director/shareholder (owning at least 15% of the shares) of the customer, I shall be personally liable for the performance of the customer’s obligations under this contract”.

Paul Twyman was indeed a director of Aquawest’s customer Chatoyer Pty Ltd but it could not be shown his holding exceeded 15% or more of its shares.

After a series of part payments of its debt – the last one being in February 2014 – $55k remained owing to Aquawest. In May 2014 Chatoyer went into liquidation.

The supplier sued Twyman under the guarantee.

For information go to: Contract Disputes

When the matter first came before the court, the presiding magistrate ruled “I cannot be satisfied that Twyman signed the document intending to be bound as guarantor. There was no separate signing provisions and they could have been signing simply as someone accepting the terms and conditions.”

Twyman’s escape from the guarantee was affirmed on appeal to the Supreme Court of NSW.

It observed a forward slash is not a word but a form of punctuation that may be injunctive or disjunctive.

In this instance the phrase was capable of requiring the signer – to attract guarantor liability – to be both director and shareholder; or it may have intended to create such liability if the signer was either a director or a shareholder. Thirdly it was capable of referring to a signing director and/or shareholder, ie a person who is one or the other or both.

The phrase was thus “truly ambiguous” and was therefore void. Further, in a guarantee, it had to be construed strictly and contra proferentum such that Twyman could only be liable if he were proven to be a director and shareholder with at least 15% of the customer’s shares.

Thus according to multiple conclusions, Mr Twynam thus escaped liability under the purported personal guarantee.

Aquawest v Twynham Pty Ltd [2017 NSWSC 652, Lonergan J, 25 May 2017


Informal commercial lease format opens up battle on permitted use and rent

A landlord specified the permitted use for an auto repair premises at Moss Street, Slacks Creek as “storage” to better suit his insurance requirements, claimed tenants who also argued their agreed rent was $2.9k per annum.

Three months after Nicholas Rigney and Matthew Mahment signed on for their three-year sublease in December 2016, they notice the lessor to them was not the registered owner of the property. They requested a copy of the head lease.

They also sought clarification of the disparity between the very favourable rent specified in the Commercial Tenancy Agreement they signed and the $2.9k/month figure stated in an “agreement to lease” that was annexed to it.

For information regarding contracts, go to: Contract Disputes

When the head lease was not produced, they stopped all further rent payments claiming a substantial credit because the annual rent had previously been paid each month.

The lessor issued a notice to remedy breach of covenant and purported to terminate and changed the locks to the premises.

That brought the tenants before Justice Susan Brown in the Supreme Court in Brisbane on an application for relief against forfeiture and for orders against the landlords to cease unlawful entry to the premises.

The tenants’ claim against the landlord’s solicitors for having prepared and served the default notice – said to have been based upon a breach of the Australian Solicitors Conduct Rules and the Legal Profession Act – was the struck out on the basis that neither provided any cause of action upon which the tenants could rely.

The court decided that for determination of the correct rent and the permitted use, a trial was required.

In the meantime it ordered the status quo be preserved by allowing the tenant back into the premises provided they pay rent at the stated sum each month.

Rigney & Anor v  Absolute Automotive Solutions Pty Ltd [2017] QSC 124, Brown J, 20 June 2017


Neighbour stops development over crane boom airspace trespass

Construction of an inner-city apartment development has been brought to a standstill afteran injunction was granted preventing a tower crane from oversailing the home of adjacent occupiers.

Hadyn Janney and Carol Foti voiced their safety concerns to developer Steller Pty Ltd immediately on receipt of its notification the crane would be operational for at least half of the 12 month project period.

They asked the developer of the four-storey complex to move them at its expense to alternative housing. Too expensive cried Steller, which countered a $3k airspace use licence fee offer.

In its view, because it would ensure the jib would only traverse the neighbouring Elwood residence empty of load, any interference to their airspace rights would be trivial.

Because though it proposed that out of construction hours, the boom be allowed to swing or “weathervane” according to the prevailing wind direction – to avoid wind stress on the crane’s gears and the tower frame – the family faced the prospect of the boom sitting atop their home overnight and on weekends.

They appointed lawyers to seek an injunction in Victoria’s Supreme Court which prompted the 27 unit developer to belatedly come up with $20k towards the rental and removal costs Hadyn and Carol had first asked for.

By now though, their demand had escalated to more than $100k and the dispute headed into court.

Steller contended before Justice Peter Riordan that “the common law should now recognise the practical reality of the need for cranes in commercial construction” and that the balance of convenience was markedly in its favour.

The court took a much different view. According to the judge, airspace trespass was neither a trifling nor a “de minimus” interruption of a landowner’s rights and created a strong prima facie entitlement to an injunction.

“Owners of property should not have to live with the fear that at any time the boom of the crane may be above their home,” observed the court “and the risk (however small) that it may crash down on their family”.

Neither did his honour consider the encroachment to be of trivial financial value that could be adequately compensated by a small monetary payment.

The judge refused to determine the appropriate compensation, preferring to leave that to the parties. He noted though that the licence sought may well have “precisely the value the power of veto upon its use creates,” clearly indicating that the $100k sum asked for by the adjoining owners was not unreasonable.

In Queensland and New South Wales the situation is slightly different. Developers may apply to the court for a statutory airspace licence for upon the payment of reasonable compensation determined by the court.

Even in those states, this judgement is a useful and relevant guide for owners who wish to argue the compensation payable by developers should far exceed nominal sums that are often offered.

Janney & Ors v Stellar Works Pty Ltd [2017] VSC 363, Riordan J, 9 June 2017


EFT deposit due “on signing” hits account the next day. Can seller terminate?

It didn’t take long for the Red Rock Realty agent to get her seller’s signature on the buyers’ offer.
An email to buyers Joshua Long and Vanessa Wilson followed shortly after with a copy of the contract at around 2 pm.

The reference schedule for the Springwood sale amended the usual requirement for payment of the deposit from “on the day the buyers sign” to “on acceptance” of the contract.

With that in mind, Vanessa notified their solicitor to transfer the deposit to the agent’s trust account that day.
That occurred at 8:30 pm but the funds did not land into Red Rock’s trust account until the following day.

It was uncontroversial that the contract was formed once acceptance had been communicated to the buyer.
And because Red Rock had cautioned that if a deposit was to be paid by Internet banking or credit card, payment should precede the due payment time by 48 hrs, the seller contended it had not been paid as required, thereby entitling the seller to terminate.

On the other hand, Wilson and Long argued they should be entitled to specific performance of the contract that seller Milize Hijazi had repudiated by way of wrongful termination.

For information regarding contracts, go to: Contract Disputes

Judge Julie Dick in Brisbane’s District Court agreed. She noted the contract did not require the deposit to be paid contemporaneously with acceptance. Neither was there any specification for payment “by close of business” or within “banking hours”.

She had no difficulty in holding that there was no failure to pay the deposit by the due date and thus specific performance of the contract should be allowed.

The seller also argued she had been pressured into the sale without any legal advice or the opportunity to consult family. That argument gained no traction given that the Form 6 Appointment stated in clear terms that “the client is advised to seek independent legal advice before signing this form”.

In any event within 7 days of her purported termination, her solicitors notified the buyers that “she agrees that contract was still on foot and withdraws her termination”.

Thus if she were wrong as regards the validity of the deposit payment’s timing, Judge Dick reasoned the purported termination had been clearly and unambiguously withdrawn and therefore the contract had been validly reinstated.

It would therefore be unconscionable, she ruled, to allow the seller to rely upon any earlier breach by the buyer to avoid the contract.

Long and Wilson succeeded in their application that they be entitled to finalise their purchase of the property.


Property manager appeals “biased” tenant repair reimbursement ruling

A Brisbane agent has successfully appealed the “substantial injustice” of a tribunal ruling thatrequired a tenant to pay less than 15% of repair costs incurred on behalf of her residential landlord client.

Living Here Wilston filed a claim in the Queensland Civil and Administrative Tribunal for the recovery of a total of $7.1k against tenant William Clunesino for repairs, outstanding rent and utility charges.

The tribunal allowed a total of just $1.2k and ordered the balance of the residential tenancy bond to be repaid to the tenant.

Living Here’s Jesse MacDonald was incensed by the Adjudicator’s inflammatory language in ruling that many of her claims were “grossly overstated” and that the repairs could be “done for a lot cheaper than that”.

For information regarding contracts, go to: Contract Disputes

The Adjudicator – whose identity is not been revealed in the published ruling – had dealt with most of the claims by “splitting them in half” on an arbitrary basis.

McDonald took the matter to the QCAT appeals tribunals where Senior Member Peta Stilgoe – “concerned that the learned Adjudicator showed bias against property managers in general” – agreed to review the findings.

Noting that the Adjudicator’s comments were “unfortunate and unnecessary” she concluded that there was simply no basis for disallowing the invoices presented for garden work and light bulb replacement even though the latter was performed by an electrician at a higher rate than perhaps handyman may have charged.

She also reinstated a $1.2k claim for repairs to a bath tub and vanity that the Adjudicator ruled were unwarranted notwithstanding the damage was evidenced by comparison of entry and exit photos.

Likewise a $2k claim for repairs to wall and ceiling damage that had been disallowed as “fair wear and tear” when the evidence established it was mostly in the nature of “impact damage” that had not been present on the tenant’s entry to the residence.

McDonald was not as fortunate in respect to her claim for the cost of carpet replacement. Given that floorcoverings were already 7 years old, just 30% of the replacement cost was allowed.

Judge Stilgoe allowed the appeal and ordered Clunesino to pay up a total of $6.3k.

RWW Holdings Pty Ltd t/as Living Here Wilston v Clunesino [2017] QCATA 063 Senior Member Stilgoe OAM 26 May 2017


Directors sued over lease guarantee to prior landlord 20 yrs on

The former directors of a food-service business who sold down their shares to a new operator have been sued for the buyer’s rent arrears under a personal guarantee they signed 20 years earlier in favour of the property’s former owner.

Anthony Rich acquired the Rocklea warehouse from West Pacific Properties in July 1998. Just two weeks earlier the vendors had granted a seven-year lease with a three-year option to Comet Foods, secured by guarantees from directors David and Maria Ridout.

The company’s option expiring in July 2008 was not validly exercised but it nevertheless remained in occupation.

The Ridouts sold their shares in the restaurant supplier and resigned their directorships in January 2008, thereby severing all connection is with Comet.

Rather than commit to a new long term lease, in June that year the new shareholders negotiated a monthly tenancy for the Abercrombie St facility that could be terminated on 3 months’ notice.

In exchange for that flexibility, they agreed to a rent increase of 15%.

With the onset of the GFC, the company went into arrears to the extent of $92k. It was wound up November 2011.

For information regarding contracts, go to: Contract Disputes

Rich made a demand on the Ridouts for the debt under their ancient guarantee, to which they naturally enough took exception.

The dispute eventually arrived in the District Court in Brisbane on appeal from a Magistrates Court decision that had ruled in favour of the landlord and ordered the guarantors to pay all the arrears plus $38k in interest.

Judge David Andrews had to rule on the reach of the guarantee which was expressed to operate in respect of monies that became payable during the term or any “renewal, extension or holding over” under the lease.

The parties were taken to have conceded – despite protests from the guarantors on the appeal – that the guarantee covenants “touch and concern the land” such that Rich was taken to have received their benefit on transfer of the reversion to him.

That said, Comet’s occupation after the option period expired and new ownership was in place – when the arrears were incurred – was, Judge Andrews concluded, of a different character to that under the lease and option period.

That debt arose from obligations that were different – a monthly tenancy with “more onerous rent” – to those in the lease to which the guarantee related, he decided.

But what of the “all monies” provision in the guarantee that purported to extend to “any monies whatsoever payable as between the Lessor and the Lessee”?

The court reasoned that the particular provision had to be construed as meaning “other monies” that “were within the contemplation of the original lessors and the guarantors when the guarantee was executed”.

“Strictly construed” – ie on a contra proferentem basis – no intent could be assumed on the part of the guarantors to “accept prejudicial changes to the terms” created as a result of the 2008 monthly tenancy.

The situation would have been different – noted his honour – had the guarantee referred to an obligation on the part of the guarantor continuing after the term “while the lessor continued to be a tenant or otherwise continued in possession or occupation” rather than restricting the obligation to “this lease”.

 Ridout & Anor v Rich [2017] QDC 129 Andrews SC DCJ 8 May 2017


Developer must pay: option marketer wins $5.5mil for pushing units

An agency appointed for the exclusive marketing of a suburban high-rise into its predominantly Chinese clientele has received an average 14% commission on the sales.

The May 2012 terms allowed the developer to compel Property Investors Alliance to buy all 16 one-bedroom units within 30 days of registration of the community title plan at a total base price of $7.2 million.

PIA was entitled to introduce buyers for the units under construction in Ryde (Sydney) at higher prices and to keep the excess.

The base price was negotiated so as to yield the agent an anticipated 5% or so on each sale.

The arrangement was crafted as an exclusive agency coupled with put options in favour of developer, an arrangement which doesn’t attract stamp duty in the way a put and call option, under NSW law, does.

As well as locating a suitable property for them, PIA’s service to clients included finance assistance, a three year rent guarantee, a pre-completion inspection service, and ensuring defect rectification.

In November 2013 it entered into an almost identical agreement to market a further 51 units in the project – including 40 two bedders – under which PIA was obliged to return to the developer $31.4 million.

That arrangement was long in the making, with PIA’s Justin Wang initially reluctant. Sales had been slow. Wang had only been unable to move a single one bedroom model in the two years up to April 2014. He and developer Diaa Gabra were both unsure as to an appropriate “base price” for the two-bedroom version, settling at just above $600k for most.

In late 2013 Wang also secured an exclusive agency to sell the entire stock of another development in the same street, almost directly opposite. The “hot” market for the sale of units in that building – The Row – suggested Wang would be able to “ask more [Mr Gabra’s] units than he had anticipated”.

Wang sold out all but three of Gabra’s apartments under the November 2013 arrangement at about $60,000 above the developer’s base price and at least $100,000 above, for those in the first deal.

Gabra was stunned when he began receiving sales advices from PIA in March 2014. He called on Wang to adjust the base prices upwards which Wang refused to do.

The developer refused to settle on 3 of the sales whose initial buyers had rescinded but for whom Wang had introduced a replacement purchaser.

He contended that PIA as licensed real estate agent, had not complied with the relevant NSW regulations relating to its appointment and had failed to “act in the interest of his client [the developer] at all times”.

Justice Michael Ball in the NSW Supreme Court agreed that he was acting as agent for the developer but declined to intervene because the agreement was “negotiated between sophisticated and knowledgeable parties reflecting a commercial relationship in which all the risks and benefits of the sale to a third party were placed on PIA”.

“It would be unjust if PIA were entitled to obtain the benefits due to it under the contract,” he ruled.

Neither was PIA guilty of any breach of fiduciary duty or misleading conduct.

The court ordered the developer to pay over the $5.51 million together with additional surpluses due under the 3 contracts that he had refused to complete, namely $431k – making up a total payment of $5.5 million and an average “commission” rate of 14% – together with interest and legal costs.

Ryde Developments Pty Ltd v The Property Investors Alliance Pty Ltd (No 4) [2017] NSWSC 436 Ball J 21 April 2017

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