A $4 million deal for the sale of a Cape Tribulation resort was as exotic as its location is spectacular. An 8 acre oasis in the World Heritage listed Daintree Rainforest, PK’s Jungle Village consists of four lots housing a hotel restaurant & bar, manager’s residence, supermarket, bathroom & shower facilities and a camping ground.
Seller Mark Biancotti agreed to the deal in exchange for two Gold Coast properties booked at $250k each, a $1.5 million boat and $2 million in cash.
All contracts – including the sale of the budget resort business – were to complete contemporaneously in May 2014.
When that didn’t happen the arrangement became even more complicated.
A “partial” settlement occurred in June 2014 when on signing over the Gold Coast properties and the 72’ Hershine motor cruiser to Biancotti, buyers Mark Seabrook and David Brucesmith took over the resort and became responsible for expenses, including the seller’s monthly mortgage.
The rejig required the buyers to stump up with another $625k – for which finance approval was imminent – within 30 days in exchange for unencumbered title to all but the “resort” land. The final $1.375 mil was deferred until July 2015.
When finance didn’t materialise, Biancotti agreed to keep the contracts on foot on the basis that the outstanding $625k was accruing 12% p.a. interest.
With suitable financiers to support the deal still to be found in early 2015, proposals were floated for the seller to retain the resort or for them to join together to sell the entire operation to a third-party. Neither idea was pursued and the buyers continued to source finance.
The supermarket at the complex presented another complication.
At contract time the tenant was month to month. But in March 2015 Biancotti granted Graham Williams a 5 year lease at the same $5k/month rent. Williams also agreed to take a 5 year lease of the adjoining vacant shop on a similar rental.
The buyers were aware of the leases but claimed to have had no knowledge of amendments agreed in February 2016, just prior to them being lodged for registration in anticipation of the final settlement that had been extended again to the following month.
Seabrook and Brucesmith refused to settle unless they were credited with a discount represented by the potential loss of rent on the second premises arising from a three months’ break lease provision and a 50% rent discount.
That they claimed represented $216k that should be deducted from the buy price under the contract.
After a two day trial in Brisbane’s Supreme Court, Justice Peter Flanagan rejected the contention that Seabrook and Brucesmith were unaware of the concessions that the supermarket tenant had demanded.
Williams swore that they had initiated the idea he sign leases at a higher rent to assist their financing “with a side agreement reflecting the actual deal” at $2k/month for the former pharmacy and a 3 month termination right.
“The success of my business, was dependent on these success of the resort,” Williams said in explanation for his insistence on the early termination right.
Justice Flanagan preferred him – “a forthright and credible witness” – over Seabrook whose testimony was “self-serving and disingenuous” in his view.
Seabrook’s account was also inconsistent with documents– so said the court – that revealed a clear intention to offer a side deed at a lower rent with a break lease option, “to help with finance”.
The court took the view that he had ultimately left it Biancotti and Williams to document the arrangement.
“The mere fact that settlement was delayed does not affect the authorisation given by Mr Seabrook to Mr Biancotti,” ruled Justice Flanagan.
The buyers’ claim for specific performance of the contract at the reduced price of $1.617 million was dismissed.
Whether or not the final settlement has occurred with the buyers paying over the full balance of $1.978 million the court ruled was due, remains unclear.
