The marketing of house and land packages frequently involves telemarketing to locate leads and home visits for presentations on the advantages of obtaining an investment property in that way.
Such was the business model of Optima Homes based in Sanctuary Cove, in connection with its promotion of a land subdivision north of Mackay.
For each willing prospect, the sales consultant signed up a land contract and a building contract “dressed up” to appear it was with Optima but which was in fact with a builder arranged by the marketer.
The builder nominates one of its standard designs for each of the lots on the subdivision and specifies its price for each build. Optima nominates a higher price to each of its prospects and pockets a difference.
Optima manages the buyer and in many cases a realted company secures finance for land and the construction.
Optima “forges” progress payment invoices on the builder’s letterhead and sends them to the financier for payment, remitting to the builder the lesser sum it is obliged to pay under its own contract with the builder.
The business model depends upon a good relationship with the builder and owner and preventing all contact between them.
The consequences of a falling out between the builder and the marketer can bring the scheme undone.
Optima’s simmering quarrel with builder Michael Arthurs is a case in point.
Two of those deals have already been decided by Queensland’s District Court and there are further 23 proceedings pending.
In contest is Arthurs’ dispute that owners were entitled to terminate their building contracts to allow Optima to appoint another builder.
In the most recent decided case, owners Michael and Kerrie Isenbert were sued by the builder to recover his losses.
Optima signed with Arthurs for construction of the home at $240k and with the Isenberts for $298k.
At the first home visit in November 2012, the owners received a “welcome pack” included sales propaganda, a credit guide and a truncated version of the building contracts they would be required to sign should they decide to proceed.
At the second meeting two sales consultants arrived armed with the relevant building contract paperwork. Convinced of the merits of the deal after a further sales presentation, the buyers signed up and the consultants took the signed copy with them when they left.
In July 2013 Arthurs told Optima he was terminating their agency and made contact with Michael Isenbert who was incredulous that his building contract was actually with someone other than Optima.
Optima had already been in touch to notify of the falling out with “their builder” and that it now had a contractor “who would build a better house”.
In August 2013 the Isenberts purported to “withdraw” from the building contract due to them not having received a copy of the executed building contract from the builder promptly after its execution as required by Domestic Building Contracts Act ss 40 & 72.
Before Judge John McGill, Arthurs contended Optima’s receipt of the signed building contract as agent for the owners was sufficient compliance with the statutory requirement.
Judge McGill wrestled with the notion that Optima could have been agent for both builder and owner.
Were the marketer also the agent of the customer, the substantial undisclosed “kickbacks” it received would have been illegal secret commissions.
And what was the significance of the owners’ obvious misapprehension as to their true relationship with Optima.
Concluding in the end Optima was not the builder’s agent, it followed that its receipt of the signed building contract did not equate to the buyer having received same.
In the absence of evidence that the customer had otherwise been provided with a copy of the signed building contract, the court ruled the Isenberts were entitled notwithstanding any repudiatory conduct on their part – to withdraw from the contract as they had done.
Thus Arthurs’ claim against the owners was defeated.
Given that the Isenbert case was intended as a “test” of the remaining 23 disputes, it would seem that this chapter of the particular dispute is concluded.
One wonders though whether Mr Arthurs’ appetite for litigation is exhausted; and whether the owners themselves will bring any complaints against Optima.
M J Arthurs Pty Ltd v Isenbert [2017] McGill SC DCJ 12 April 2017
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