In May 2008 Kym Boylan sold her $5.5 million Nerang riverfront residence via Put & Call Option and last month finally recovered the $2.1 million re-sale loss she incurred after the buyer’s default.

The global financial crisis shook the world with the collapse of Lehman Brothers on September 15: just before the due date for Kym’s buyer to exercise the “call” option.

As might be expected the call option was not exercised and it fell to Boylan to “put” the sale to the buyer – ie require the buyer to purchase the property at the agreed price on the terms of the contract annexed to the option agreement.

As if according to a script, the buyer did not settle when required in January 2008 and when re-sold in April 2009 it fetched only $3.6 million.

Contending PAMDA non-compliance, the buyer argued she was not bound to the contract because her attention had not been drawn to the form 30c Warning Statement when the signed contract had been returned to her solicitors from the seller’s solicitors.

Thus – pursuant to PAMDA s 365(3) – she claimed to have become entitled to “withdraw her offer to purchase” and issued a lawsuit demanding return of the $250,000 deposit.

Boylan counterclaimed for damages for the buyer’s breach of the contract: the shortfall on re-sale plus expenses which totaled an agreed $2,100,000.

Successful at the initial trial in April 2011, the buyer’s case collapsed in September when the appeal court took the view – contrary to the buyer’s assertion – that its attention had been sufficiently drawn to the warning statement.

This had been achieved – so ruled the Court – merely by reference in the accompanying letter to the agreement to which the form 30c was attached: “It cannot be doubted that [the accompanying letter] referred to both the warning statement and to the deed since, being attached together by a staple, they formed one composite document”.

And further “The words ‘warning statement’ appeared in very large, bold type on the first page of the composite document [which the buyer’s] solicitor could not reasonably have failed to notice”.

It should be noted that in the incarnation of PAMDA under interpretation – before the October 2010 amendments – there was no requirement that there be a “clear statement drawing the buyer’s attention” to the warning statement if the signed contract was sent by post or delivered, rather than if sent by e-mail or fax.

Under the amended PAMDA that now applies, the only requirement when returning the signed contract to the buyer or solicitor, is that the warning statement be attached. Failure to do so creates an offence but does not diminish contract validity.

But agents and lawyers should note that in respect of “proposed contracts” section 368A(2)(c) of amended PAMDA requires that “a clear statement directing the buyer’s attention” to the warning statement and the contract must be given when the proposed contract is delivered to the buyer by whatever means.

If buyers can prove that their attention wasn’t so drawn, they have an escape and can prove costly in terms of a collapsed sale as well as legal costs, not to mention personal costs.

When will the PAMDA mess end?

Boylan v Gallagher [2011] QCA 240 Fraser and Chesterman JJA and Philippides J 16/09/2011


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