In a rising property market, some developers no doubt look for an opportunity to escape pre-sale contracts to escalate the return on their investment.

Even more so the case where the costs of construction comes in at a multiple that had previously been unthinkable, of the build cost estimate.

A dispute over 15 off-the-plan Royal Pines Projects contracts at around $500,000 each for condominiums near the eponymous golf course and resort in Benowa on the Gold Coast, provides a case study of how a rising market rescission might be attempted.

As construction was nearing completion and it was apparent the plan was about to be registered, the buyers’ solicitors wrote on 1 July 2024 to their counterparts opposite, requesting access for valuers appointed by their client’s financiers to conduct inspections of the various lots.

Later that day the developer’s solicitors gave notification the plan had registered and called for settlement in 14 days – as allowed for under the contracts – but did not respond to the access request.

Further access requests having been ignored, the buyers’ made an urgent application to the Supreme Court contending that although there was no specific requirement for the seller to allow pre-settlement access for a valuation inspection, such obligation was implied.

Before the hearing of that argument Justice Peter Applegarth had scheduled before him on Thursday 11 July, the sellers notified that they would consider each buyer’s request for valuation access.

They stressed they had not responded earlier only because of site accessibility issues due to the ongoing presence of tradesmen conducting.

On hearing the application relating to the implied duty, the judge heard that by failing to respond for a full week, the developer had left insufficient time for most buyers to have valuations completed in time for settlement on 16 July.

The seller had thus denied – so ran the buyers’ argument – sufficient time to have valuations completed and thereby could not rely on their failure to settle on the due date as grounds for terminating the contracts.

Because of the rapid pace of the court proceedings, no material was filed to address each individual buyer’s finance and valuation requirements.

Justice Applegarth was thus not in a position to make findings on 12 July in respect of each buyer or grant the declaratory relief the buyers sought.

He ruled though, that a term was implied in each contract requiring each party cooperate to allow the other party the contracts’ benefit.

He further reasoned that having regard to that implied term and “the commercial reality” that buyers would be relying on financiers, the seller should have allowed access when requested.

The seller’s one-week delay in even responding to the request was thus unreasonable and amounted to a breach of duty.

On that basis the court granted injunctions to protect the buyers’ positions by restraining the seller from purporting to terminate their contracts in reliance on a failure to settle on 16 July.

Royal Pines sought an urgent hearing of an appeal to challenge those rulings. The court of appeal obliged by hearing argument on 25 July at the conclusion of which, the court unanimously dismissed the appeal instanto.

The appeal judges’ decision published on 13 August observed that while none of the contracts were specifically subject to finance, they contemplated in their terms – e.g. by requiring the buyer to ensure any financier never lodged a caveat over the lot – that funds for the purchase might be borrowed.

Further – contrary to the developer’s submission – the judge had been entitled to take judicial notice of the fact that buyers are likely to obtain finance to complete such a contract, “either because they needed finance to complete or because of the negative gearing taxation advantages available” where the purchase is an investment.

“That is a very common method of purchasing homes and investment properties in Australia,” remarked Justice Jean Dalton in giving the lead judgement of the court.

The appeal court also ruled because the 14-day settlement notice was to be given at a time “reasonably determined” by the seller, it was required to act reasonably in determining the time it chose to give the notice.

The buyers were thus permitted to have their financiers’ valuers inspect their lots and then proceed to settlement on properties that had likely significantly appreciated in value above what they each were required to pay.

Brightman & Ors v Royal Pines Projects Pty Ltd [2024] QSC 149 Applegarth J, 15 July 2024

Royal Pines Projects Pty Ltd v Brightman [2024] QCA 147 Dalton JA and Wilson and Crowley JJ, 13 August 2024


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