The buyer of a inner city hotel marketed as “subject to a long-term lease to a AAA tenant” was misled and deceived by the seller and its marketing agents’ non-disclosure of the tenant’s sale of its 15 year lease to a third party.
That was the claim by Steven Vouzas who signed a $12 mil contract for The Beach Hotel in November 2008 with the intention of simultaneously developing the site with adjoining properties already owned by his family.
Brochures promoting the security value of the first class tenant – prepared earlier in the year – were sent by the selling agents to Vouzas in September, after the seller had notified its consent under the lease to a Heads of Agreement for its assignment.
The selling agents did not disclose the HoA or the seller’s consent to the assignment. Settlement was due in May 2009.
Vouzas refused to complete and sued for the return of his $500k deposit. The Supreme Court judgment was handed down in October.
The seller conceded it had not disclosed all that it knew about the loss of the key tenant but argued that the buyer had knowledge of at least a conditional agreement by the Collingwood Football Club to sell the Albert Park, Melbourne lease and that he had made his own independent enquiries.
In fact – the seller argued – the club had announced on its website 3 months earlier that it was selling its interest as lessee in the hotel.
The court agreed: “The buyer knew of the potential assignment well before the contract was executed “and with that knowledge went ahead and signed.”
In all the circumstances, “the agents’ and sellers’ conduct was not enough to lead a reasonable person in the position of the buyer – an experienced property developer – to form any erroneous belief that the CFC would remain as tenant”, said the court.
Their conduct was therefore neither misleading nor deceptive, reasoned the court in its 38 page ruling.
Even had that ruling fallen against the seller or its agents, the court expressly found their conduct had not been the cause of the buyer signing up to the buy and that therefore his suit for recovery of the deposit must fail.
“He well knew of the real prospect that Collingwood be replaced and was content to into the contract regardless. His attempt to rescind on the basis that it was not until May 2009 that he discovered the true facts was purely optimistic”.
“The real reason for wanting to terminate had much more to do with the availability of finance.”