Case Summary – Brightman & Ors v Royal Pines Projects Pty Ltd [2024] QSC 149
Introduction
In a recent landmark decision of Brightman & Ors v Royal Pines Projects Pty Ltd [2024] QSC 149 (“Brightman”), the Supreme Court of Queensland at Brisbane considered the obligations of parties to a transaction under their implied duty to cooperate with one another to enable performance of the contract and the consequences of a breach of that duty.
Brightman concerned the rights of 23 Buyers across 15 contracts with Royal Pines Projects Pty Ltd (“Developer”) in an of ‘off-the-plan’ development ‘Vantage View’ in Benowa on the Gold Coast.
Without the filing of an urgent proceeding, the Buyers could have forfeited an average deposit amount of $59,350 per unit and lost the benefit of a significant increase in property values of perhaps north of $300,000 per unit.
The Developer recognised a potential lucrative windfall as high as $5,390,250 by strictly maintaining its contractual position that, as the contract were not “subject to finance” the Developer was under no obligation to allow the Buyers’ valuers onto the site so that the Buyers could arrange their settlement funds.
Facts
Between 2021 and 2023, the 15 contracts were signed and the deposits paid by the Buyers.
The contracts did not include a typical 14 or 21 days “subject to finance” clause as contained in residential contracts because these off-the plan contracts were entered into years before the building works were completed.
It is common in many off-the-plan purchases for:
- Buyers to obtain finance to complete the purchase despite the contract not being expressly “subject to finance”; and
- For developers to allow a Buyer’s valuer on site to assist the purchaser to obtain finance.
The contracts included a term that once the building was constructed and the Registrar of Titles had issued a Registration Confirmation Statement then the Developer was entitled to call for settlement by notice to the Buyers at a date not less than 14-days from giving notice (“Notice Period”).
In accordance with the contracts, the Developer by correspondence sent on 1 July 2024 to our firm as the Buyers’ solicitors called for settlement to take place on 16 July 2024 with time being of the essence.
From 1 July 2024 to 5 July 2024, the Developer failed to respond to several requests for access to valuers for the Buyers to undertake valuations.
The Developer’s silence for 5 of the 14-days’ Notice Period, at a critical time for Buyers to get ready to settle, was the impetus to our firm filing an urgent proceeding on behalf of the Buyers to protect their rights.
On 5 July 2024, Applegarth J listed the matter for an urgent hearing on 11 July 2024.
On 8 July 2024, 3 days after the urgent proceeding was filed, the Developer recanted its earlier position by advising Buyers of a strict regime that would allow the Buyers to access the units for valuation purposes, without making any admission as to any duty to cooperate.
At the hearing, the Buyers were represented by Nick Ferrett KC and Alexander Choy of Counsel instructed by Mr Brodie Hatswell and Mr Cooper Haywood of our firm.
The Duty to Cooperate
The duty requires each party “to do all such things as are necessary on his part to enable the other party to have the benefit of the contract.”[1] This duty is well-established law and is cited with approval throughout Australia.
The Buyers’ case was that this duty included permitting access to valuers in order that each Buyer can obtain finance to complete the contract and gain the benefit of the contract, being a transfer of a unit to the Buyer from the Developer.
The Developer’s point of contention was that the contracts were unconditional and that the implied duty of cooperation was limited to the expressed terms of the contracts. As the contracts did not specifically provide the Buyers with a “subject to finance” clause, the Developer said it was not contractually bound to allow the Buyers’ valuers to attend the site for the purpose of the Buyers readying itself to obtain the purchase price to settle.
The Queensland Court of Appeal in the case of Grieve v Enge[2] previously considered the duty with respect a residential contract that was subject to finance. Chief Justice de Jersey held:
“finance was not necessary just to entitle the [purchasers] to ‘a benefit’ under the contract [but] necessary to assure their very capacity to complete and thereby obtain the fundamental benefit of the contract”
The position in Queensland was therefore unresolved with respect to off-the-plan contracts.
Brightman decision
Applegarth J recognised that off-the-plan contracts are distinguishable to a traditional residential contract given it is practically impossible to make an off-the-plan contract subject to finance approval at the time of entering the contract.
Ordinarily, when a financier makes an election as to whether to approve or to deny a loan application, they will make a determination as to whether it is feasible to secure the loan monies advanced against the value of the property being purchased.
As the contracts were signed several years before the building was built, it was impossible for any financier to make an election as to whether to approve finance at that time.
In this respect Applegarth J held:
“But in the real world, most financiers wouldn’t lend against blue sky or a half-built building or a property that a valuer hadn’t inspected and valued.”
Notwithstanding no expressed finance condition, it was submitted on behalf of the Buyers that the contracts made several references to a “financier” for the Buyers including placing a positive obligation on any financer for the Buyer not to lodge a caveat over the property prior to settlement.
The Buyers submitted that the parties at least contemplated that there “could” be a financier required for settlement.
Applegarth J agreed.
The Developer’s next argument was that by giving access on 8 July 2024, after the proceeding was filed, there remained ample time for Buyers to be ready to settle, and therefore, even if the Developer has a duty to cooperate, the duty was not breached by the Developer.
At that time, Buyers had 8 days within which to have their valuers inspect the premises, obtain a valuation, the valuation to be received by the financier, the financier to issue loan documents, those to be signed by Buyers and then the financiers to be ready for settlement.
In this respect, Applegarth J held:
“Unless you’re carrying $1 million in your knapsack, that’s what you do during the 14-day period.”
Ultimately, Applegarth J held that the Developer, in failing to respond, much less permit access, until day 7 of the 15-day notice period, the Developer burned half of the notice period contemplated by the contract which Buyers have to do all things necessary to be ready to settle on the settlement date including ensuring their financier is ready.
Therefore, Applegarth J held that the Developer had breached its implied duty of cooperation to the Buyers.
Applegarth J ordered that the Developer be restrained from calling for settlement on 16 July 2024 or purporting to terminate the contracts if Buyers could not settle on this date (“Restraint Order”).
The Developer was ordered to pay the Buyers’ costs.
The Settlement Date – 16 July 2024
On the settlement date, 2 of the 15 contracts could not settle.
In accordance with the Restraint Order, the Developer was unable to forfeit the remaining Buyers’ deposits totaling $160,500 and on-selling the units in a significantly stronger market to the detriment of the Buyers.
The Appeal
Not satisfied with the Orders of Applegarth J, the Developer filed an Appeal in the Supreme Court of Queensland Court of Appeal (“Court of Appeal”) in Brisbane on 16 July 2024.
Clearly, if successful on the Appeal, the Developer intended to terminate the remaining 2 contracts that did not settle on 16 July 2024 and benefit from its legal position set out above.
Time no longer being of the essence, either party could only call for a new settlement date by giving reasonable notice one to the other in writing.
By written notice the Buyers by our firm to the Developer’s solicitors dated and sent on 19 July 2024 the remaining 2 Buyers called for settlement to occur on 26 July 2024.
The matter was brought on before the Court of Appeal on 25 July 2024.
After consideration of the legal issues, the Queensland Court of Appeal before Dalton JA, Wilson J and Crowley J, dismissed the Developer’s Appeal and made a further costs order in favour of the Buyers.
On 26 July 2024 the remaining 2 contracts settled.
Outcome
In the circumstances, the Developer failed to terminate any of the 15 contracts or forfeit any deposit or on-sell any of the 15 units.
David 15 – Goliath 0.
The decision of Brightman will likely be authoritative law and relied upon in Queensland and applied around Australia for many years to come.
Moreover, as Applegarth J’s decision has now been affirmed by the Court of Appeal, being the highest Court in Queensland, no other developer in Queensland will be able to terminate a Buyer’s contract on these circumstances.
For legal practitioners and stakeholders in the real estate industry, this case serves as a critical reminder of the implications of implied duties in contracts and the importance of upholding mutual obligations in good faith.
The team at Broadbeach Law Group are very pleased with the result that we have been able to achieve for our clients.
[1] Butt v Mc’Donald (1896) 7 QLJ 68 at [70].
[2] Grieve v Enge [2006] QCA 213 at [34].
