In the recent decision of Brightman & Ors v Royal Pines Projects Pty Ltd [2024] QSC 149, His Honour Justice Applegarth considered the implied obligation of contractual parties to cooperate in the context of a number of “off the plan” sales. 

Relevantly:

  1. The Applicants were buyers of lots in the “Vantage View” development who had entered into contracts to purchase the lots before they were built;
  • The respondent Royal Pines Projects Pty Ltd was the developer/seller;
  • While the contracts were not subject to financing being obtained, they did contemplate that some or all buyers would have a “financier”.  Also, His Honour found that the need for the overwhelming majority of buyers to finance their acquisitions was “notorious” and that the respondent could not have been in any doubt when it entered into the contracts that most buyers would need to obtain finance to settle.
  • As was fairly common, the contract provided that settlement would take place about two weeks after notice was given calling for settlement.  Shortly before construction as finished, the various buyers requested access for valuations so that they could obtain finance to complete.  The developer did not respond until 8 July 2024 (8 days before settlement was due).  The Respondent developer asserted that it could not give access before this date because the development remained under construction.
  • By that stage however, there were potential issues with obtaining valuations and then finance in time for settlement on 16 July 2024, meaning that the buyers would each be at risk of having their contracts terminated and at least loosing the deposit. 

The Applicant buyers bought the application before the Supreme Court for relief based upon the implied (ie not written in the contract) duty of the parties to cooperate.  This duty was discussed in His Honour’s judgment, including:

  1. That each party agrees to do all that is necessary to be done on their part to enable the other party to have the benefit of the contract;
  • That might involve an obligation to do something, or an obligation to refrain from doing something that would prevent, delay or hamper performance of the contract. 

While the contract was not subject to finance, the court considered that the necessity to obtain finance was in order to enable each buyer to perform a fundamental obligation under the contract (ie to pay the price) and that it was implicit that the contract promised that the buyer would have the opportunity to obtain that finance, in particular during the 14 day period following the notice to settle.  In the court’s view, in practical terms, this was a duty to cooperate by allowing access to the buyer for a valuation to obtain that finance.

At paragraph 71, the court indicated that it was inclined to declare that the developer’s duty to cooperate to allow the buyer the benefit of the contract required it to permit access to the property by a valuer appointed by the buyer in sufficient time to provide a valuation advice in advance of completion.

The court found that the developer had breached that duty by unreasonably delaying in responding to the requests for access and hindered the buyers obtaining finance.  While the developer argued that it was the buyers’ fault in not taking steps to organise third party finance ahead of the need to settle, the court noted that while a finance approval can be organised that is conditional on inspection and valuation, no such inspection or valuation was made possible until 8 July 2024 – well into the 14 day period. 

As a consequence, the court determined that the developer was not entitled to call for completion of the contract on 16 July 2024.  This had the consequence that the buyers would not be in breach if they did not settle on that date. 

The argument and decision raise a number of interesting questions.  It is not uncommon for developers to call for settlement when the titles office has created titles for the new lot but before work has completely finished in relation to those new lots.  Sometimes, those issues can have impacts on the final value of the property.  Does this mean that a contract is unfair if the developer can insist on settlement without allowing for valuation inspections a reasonable period before the settlement date?

For advice in relation to contractual obligations and commercial and property matters, please contact our commercial lawyers, Peter Muller at peterm@qbmlaw.com.au, Megan Sarroff at Megans@qbmlaw.com.au and Sally Chipman at sallyc@qbmlaw.com.au