On 12 July 2024, Justice Applegarth of the Queensland Supreme Court delivered a judgment for Brightman & Ors v Royal Pines Projects Pty Ltd [2024] QSC 149.

With the property market and building costs continuing to increase, the decision has particular implications and warnings for buyers and sellers of property.

The facts

The case arose from an application brought by certain purchasers of ‘off the plan’ apartments from developer Royal Pines Projects Pty Ltd. Key facts included:

  • at the time of entry into the contracts the apartments had not been constructed and there was nothing for a valuer to inspect for the purposes of obtaining finance;
  • the contracts were entered into between January 2021 and November 2023;
  • the contracts were not subject to finance. However, the contracts did contemplate the involvement of a financier; and
  • the contracts permitted the settlement date to occur on a date that was 14 days after the date on which the Respondent gave a notice of settlement.

On 1 July 2024, after sufficient construction of the apartments, the Applicants requested access for the purposes of valuations to obtain finance for completion. That same afternoon, the Respondent gave notice for each of the contracts requiring settlement on 16 July 2024 without responding to the access request. The Respondent failed to respond to a further request for access by the Applicants, and so on 5 July 2024 the Applicants sought an urgent listing before the Court. The matter was set down for hearing on 11 July 2024.

On 8 July 2024, the Respondent’s solicitors wrote to the Applicants setting out a ‘protocol’ for the buyer to obtain access for a valuer.

The core issues

A critical matter for determination was the scope of an implied term of a duty to co-operate in a commercial contract.

The Applicants alleged that:

  • because the contract provided for a 14-day period to prepare for settlement (including arranging required funds) the Respondent was under an implied duty to reply promptly during the notice period and permit access to a valuer; and
  • the Respondent breached this duty by delaying and denying the Applicants critical time needed to be ready for settlement, and the Respondent was therefore not entitled to rely upon a failure to settle on 16 July 2024.

The Respondent’s position was that it was not in breach because the contract was not subject to finance, and therefore the implied duty to co-operate would not extend to doing acts necessary for the buyer to ‘utilise the opportunity’ to obtain finance. The Respondent maintained that access could not be given before 8 July 2024.

Key findings

Justice Applegarth found and made a declaration in favour of the Applicants, relevantly holding that:

  • there is a general implied duty to do all that is reasonably necessary to secure performance of the contract, and to co-operate so as to give the other party the benefit of the contract;
  • even though the contracts were not ‘subject to finance’, the commercial reality was that finance was nonetheless required for the buyer to perform the contract and the Respondent would have been aware of this when entering into the contracts;
  • the duty to co-operate is not a duty to bring about something that is desirable but which ultimately is not required by the contract. Necessity is the touchstone. What is required is an analysis of ‘…the benefits conferred by the contract and what is necessary to allow a party to perform its obligations and have those benefits’; and
  • the necessity to obtain finance in order for a buyer to perform its fundamental obligation under the contract gives content to the seller’s duty to co-operate.

A critical issue giving rise to the content of the implied duty was that valuation could not occur until the lots had been sufficiently constructed. The outcome would likely have been different for a long-existing property that was able to be inspected well ahead of a settlement date.

In this case, the contract required as part of the scope of the implied duty of co-operation:

  • timely response by the Respondent during the 14-day settlement notice period; and
  • upon request, to permit access to a valuer for the purpose of enabling a buyer to obtain finance needed for completion.

By failing to do so, the Respondent breached the implied duty and was to be prevented from insisting upon performance of the contract on 16 July 2024. A declaration was made by the Court to that effect.

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