An off-the-plan purchase of a Canberra unit signed up in August 2016 was to be settled 14 days after the developer gave notice that the community title plan had been registered.
That notice was given in early December 2018 requiring the buyer to front up for settlement later that month.
Buyer – Young Forever Property – did not complete the $506k buy then or on two further occasions when settlement was called for.
Bowman Development Corporation – the developer – sued Young Forever and its director guarantors in Brisbane’s District Court for specific performance of the contract and in the alternative, damages.
Young Forever did not oppose an order for specific performance and did not argue damages would be an adequate remedy.
Bowman conceded the company had insufficient assets or income to complete and neither could it borrow funds to complete.
It contended though that the sale of the unit under default at a discount – to recoup part of its loss – would adversely affect the price at which it would be able to sell the other apartments especially given the market in Canberra for similar stock was already oversupplied.
Judge Ken Barlow – noting that Bowman still had 31 out of 74 apartments in the building unsold – accepted that in such circumstances and in the exercise of his discretion damages were not appropriate and ordered Young Forever to specifically perform.
Such an order against the buyer could not be said to be “futile” because there was no evidence before him as to its financial capacity to complete the contract.
The developer at the same time sought orders for specific performance against the guarantors given that they had agreed – in addition to paying any loss occasioned to the seller as a result of the buyer’s default – to perform the purchaser’s obligations if the purchaser did not and because it was “almost inevitable” the buyer itself would be unable to perform.
To overcome “any tension in the idea” of contemporaneous orders to perform Bowman submitted that those against the guarantors could be made conditional on the purchaser failing to perform under its order.
Against this “premature” measure, the guarantors naturally enough contended the court should wait to see whether or not Young Forever would perform.
Rather, the only decision for the court to make – so ran the guarantors’ argument – was what loss if any, the plaintiff sustained so damages could be assessed, adding that because the plaintiff had presented no evidence of the unit’s current value, the seller’s claim against them had to fail and should be dismissed.
Mindful of his obligation “to do complete justice between the parties, as well as to attempt to resolve the real issues at a minimum of expense” Judge Barlow declined to dismiss the proceedings against the guarantors. Instead, he allowed Young Forever 60 days to meet its obligations and adjourned the trial against the guarantors for a similar period.
That order was made in February 2020. By the time the matter came before the court again in May 2020, Young Forever had not complied with its specific performance order.
In an endeavour to persuade the court of the “futility” of them being compelled to perform and that damages should instead be ordered, Mr Young on this occasion swore by affidavit that neither he nor his co-guarantor could complete.
They again contended that because the absence of evidence as to the unit’s current value made it impossible for the court to assess an appropriate award, the claim claim against them should be dismissed.
Because he had already finally concluded against all defendants that damages were not an adequate remedy, His Honour ruled “It is not open to the guarantors now to submit in the alternative”.
In any event Mr Young’s evidence as to his assets and liabilities was imprecise. “Even the applications for finance [exhibited to his affidavit] appear to have been to void of substance and give the impression of simply going through the motions”.
The court was not prepared to accept the affidavit as evidence that the guarantors would be unable to perform.
His Honour ordered specific performance against the guarantors: “When faced with the possibility of being in contempt of the court for not complying with such an order, they may well find the wherewithal to comply with it”.