A $2.7 million luxury Hamilton Island apartment sale signed up in September 2007 before the onset of the GFC, was lost by the seller over demands that the buyers sign a covenant to comport to the island’s “rules”.
Given the island’s leasehold tenure, ministerial approval and that of the head-lessor – Hamilton Island Enterprises – was required to give effect to the developer’s transfer of the apartment by way of sub-lease to the buyers, Keith and Jeanette Ronson.
It fell to the developer to ensure these consents were produced for settlement when it was called for, in August 2009.
As a pre-condition for its consent, HIE required the buyer to sign a covenant that the buyers contended asserted entitlements beyond those reserved to it under the sub-lease.
These “rules” – which fortuitously had only recently been considered by the Court of Appeal – were held to be contrary to the buyers’ right to quiet enjoyment and imposed restrictions which were “unrelated to the contract” and “would work to render nugatory” other rights under the sub-lease.
Among many over-reaches, the rules imposed greater restrictions on the use of motor vehicles on the island than did the sub-lease and could even allow HIE to prevent the buyers from even entering the island at all.
The developer countered that its demand that the Ronsons sign the deed was justified by a clause frequently found in such agreements that “each party must sign all documents and do all things to give full effect to this contract”.
However the Queensland supreme court ruled that requirement contained in such clauses, only refer only to “such documents and things that were reasonably required” and the deed was “an attempt to remake the contract in an important respect”.
Thus the buyer was correct in its refusal to sign the deed and the developer was the party in breach of the contract.
The reverse outcome was reached in relation to the statutory declaration that the buyers were asked to sign as a prerequisite for the ministers approval of the assignment of the sub-lease.
It was a document that could properly be described as one that was necessary to give full effect to contract and its completion would not expose the buyers to any additional obligations diminish their rights under the contract.
Thus the buyer was not entitled to terminate on the basis that at settlement the vendor did not have the written evidence of the ministers approval.