Seller Celal Tekin had progressively acquired the four parcels over the prior two decades and obtained a development approval for the construction of 22 townhouses.
Seller Celal Tekin signed up a buyer in October 2014 for a four allotment site he had progressively acquired over the previous two decades and on which he had obtained a development approval for 22 townhouses.
Upside Property agreed – on the strength of a $780k deposit, $300k of which was immediately released to Tekin to allow him to settle outstanding debts – to buy the site at $7.8 million with completion on 1 December.
The unusual terms of a “Side Deed” permitted either party – pending settlement – to market the property for resale to a third party on the basis that the first $1 million surplus on the re-sale was split 30% to Upside with it getting 100% of any excess over and above $8.8 million.
The price and terms of any re-sale by the vendor were expressed to be subject to the parties’ mutual consent.
If no resale was achieved prior to December, the buyer would transfer 25% of its shares to the seller on the basis they could be redeemed by the buyer for $1 million.
If Upside negotiated a “sub-sale” the seller’s reward was an additional $1 million on the sale price.
Auspiciously third-party offers of $10.9 million and $11.2 million were submitted by the local Ray White office in November.
Neither offer stuck so Upside negotiated for an extension on its obligation to settle.
On 4 December, Tekin’s solicitors sent a notice of complete requiring settlement by 18 December.
No movement from Upside saw Tekin terminate the contract in March 2015 as a result of which Upside asserted wrongful repudiation and itself purported to terminate.
Tekin’s return of Upside’s deposit did not prevent it issuing a lawsuit in the NSW Supreme Court claiming loss of potential resale profit of nearly $3 million.
The court was asked to decide whether Upside was entitled to terminate and if so whether it had been “ready willing and able” to perform its contractual obligations.
Justice Rowan Darke concluded that Upside’s delay was not a breach on its part because up until March 2015 “both parties conducted themselves in a manner suggesting that completion of the contract was not required” strictly in accordance with its terms.
Thus Tekin’s purported termination was a repudiation entitling Upside to terminate.
Upside produced no evidence that it has the funds available in March to settle and neither was its owner’s “aunty” – the suggested source of finance from China – called to give evidence.
In such circumstances His Honour was not satisfied that Upside had been “ready willing and able” to settle nor that the value of the site was anything more than the $7.8 million Upside had agreed to pay.
As potentially lucrative as the “Side Agreement” was for Upside, the buyers plan to reap a windfall profit was undone by the simple fact that the market did not recognise the site as holding any surplus value than that which the seller was in the first instance prepared to accept.
Its claim was dismissed and it was ordered to pay Mr Tekin’s legal costs.
Although the judgement is silent on the point, one suspects that in the fullness of time Tekin was able to later resell the property at a perhaps higher price.
Upside Property Group Limited v Tekin [2016] NSWSC 1260 Darke 12 September 2016 Read case
