You have to play fair – a lesson in cooperation | Brightman v Royal Pines Projects Pty Ltd [2024] QSC 149

In the recent case of Brightman v Royal Pines Projects Pty Ltd [2024] QSC 149, the court addressed the complexities involved in "off the plan" property purchases, focusing on the obligations of developers and the rights of buyers. This case provides significant insight into the implied duties of cooperation in real estate contracts and highlights the balance between contractual rights and practical fairness.

Background

The applicants, who were buyers of “off the plan” apartments, entered into contracts with the respondent, Royal Pines Projects Pty Ltd, for properties that were yet to be constructed. As is typical in such transactions, the buyers had no opportunity to inspect or value the apartments at the time of signing the contracts. The contracts assumed that buyers would secure financing but did not include a clause making the purchase contingent upon obtaining finance.

As the construction neared completion, the buyers requested that the respondent allow a valuer to assess the apartments. The respondent, however, did not respond to this request and instead set the settlement period as stipulated in the contract. The respondent eventually proposed a protocol for valuers to access the apartments, but this was done with only a week remaining until the settlement date.

Key Issues

The central issue in this case was whether the respondent breached an implied obligation to cooperate by failing to allow sufficient time for the buyers to obtain valuations and secure financing before the settlement date. The buyers argued that the respondent's actions effectively deprived them of half of the 14-day notice period intended for preparing for settlement.

Court’s Findings

Justice Applegarth recognised that the contracts implied a duty to cooperate, which included not hindering the buyers' ability to obtain finance. This duty was essential because the buyers' ability to fulfill their contractual obligations and benefit from the contract depended on securing finance, even though the contracts did not explicitly state this.

The court found that for the notice fixing the settlement time to be practically beneficial, the entire 14-day period needed to be available for the buyers to have the apartments valued and obtain the necessary financing. The respondent’s failure to provide timely access for valuations was seen as a breach of this implied duty.

Implications of the Breach

Justice Applegarth held that by setting a settlement date without allowing reasonable time for valuations and financing, the respondent breached its duty to cooperate. This breach precluded the buyers from obtaining the necessary finance, which in turn meant the respondent could not enforce the settlement date or penalise the buyers for failing to meet it.

The court declared that the respondent could not terminate the contracts due to the buyers' inability to settle on the fixed date, as this situation was a direct result of the respondent's breach. Furthermore, the court was inclined to issue an injunction preventing the respondent from terminating any buyer’s contract due to failure to settle by the specified date, although the final terms of such an injunction were to be further discussed.

Takeaways

The decision in Brightman v Royal Pines Projects Pty Ltd underscores the importance of the implied duty of cooperation in contracts, especially in "off the plan" property transactions. Developers must ensure that buyers have a fair opportunity to meet their contractual obligations, including providing adequate time for property valuations and securing financing. This case serves as a reminder that contractual rights must be exercised in good faith, and any conduct that frustrates the other party’s ability to fulfill their obligations can lead to significant legal consequences.