Barron Properties Pty Ltd (In Receivership) v Borhani-Shidani

[2010] QDC 253

DISTRICT COURT OF QUEENSLAND

CITATION:

Barron Properties Pty Ltd (In Receivership) & Ors v Borhani-Shidani [2010] QDC 253

PARTIES:

BARRON PROPERTIES PTY LTD ACN 100 292 895 (RECEIVERS AND MANAGERS APPOINTED)
and
RETAIL DEVELOPMEMT OPERATIONS PTY LTD ACN 099 059 220 (RECEIVERS AND MANAGERS APPOINTED)
and
THE PROPRIETORS OF PARININIHI KI WAITOTARA BLOCK ARBN 103 195 928 (RECEIVERS AND MANAGERS APPOINTED)
(applicants)
v
BORHAN BORHANI-SHIDANI
(respondent)

FILE NO/S:

BD 3301 of 2009

DIVISION:

Civil

PROCEEDING:

Application

ORIGINATING COURT:

District Court at Brisbane

DELIVERED ON:

24 June 2010

DELIVERED AT:

Brisbane

HEARING DATE:

19 April 2010

JUDGE:

Griffin SC DCJ

ORDER:

That a contract of sale dated 12 November 2004 was properly formed and both parties were bound by the terms of the contract;

That the respondent’s purported termination of the contract of sale was unlawful and was a breach of the terms of the contract;

That the applicant’s termination of the contract was lawful;

That upon terminating the contract the applicants became entitled to call upon the deposit guarantee provided by the respondent; and

That the deposit paid under the contract of sale and all interests and accretions thereon is forfeited to the applicants.

CATCHWORDS:

CONTRACTS – SALE OR DISPOSITION OF LAND – OFF THE PLAN CONTRACT – SUNSET CLAUSE – EXTENSION NOTICE – EXPERT ADJUDICATION CLAUSE – TERMINATION OF CONTRACT  – whether handwritten amendment to contract after signing valid – whether contract binding and valid on all parties – whether extension notice properly given and valid – whether termination of contract was lawful

COUNSEL:

S R Cooper for the applicants
L Stephens for the respondent

SOLICITORS:

Thynne & Macartney for the applicants
Cleary Hoare for the respondents

1. The proceedings before this court arise as a result of two applications brought by the parties in their own right, each seeking different types of declaratory relief in relation to a contract for the sale of a lot in the residential complex known as ‘Gabba Central Stage 3’ – referred to hereafter as ‘GC3’.

The first application

1. The first application, brought by Barron Properties Pty Ltd ACN 100 292 895 (Receivers and Managers Appointed) and Ors seeks declaratory relief – specifically:

(a)That a contract for sale [between the applicant and respondent] dated 12 November 2004 was properly formed and both parties were bound by the terms of the contract;

(b)That the respondents purported termination of the contract for sale was unlawful and was a breach of the terms of the contract;

(c)That the applicant’s termination of the contract was lawful;

(d)That upon terminating the contract, the applicants became entitled to call upon the deposit guarantee provided by the respondent.

(e)That the deposit paid under the contract for sale, and all interests and accretions thereon, is forfeited to the applicants;

1. The applicants also seek orders for costs and other administrative orders in relation to the payment of monies held by the Registrar of the court.

The second application

1. The second application, a cross application, by the respondent Borhan Borhani Shidani seeks declaratory relief – specifically:

(a)That the applicant and respondent did not enter into a concluded agreement in writing dated 12 November 2004 concerning the property at GC3 and that the respondent is entitled to a refund of his deposit;

Alternatively, the respondent seeks declaratory relief:

(b)That notices served to extend time for completion under clause 8 of the contract for sale are invalid;

(c)That pursuant to section 70 of the Property Law Act 1974 (Qld) the contract for sale concerning the property at Lot 366 of GC3 was validly terminated by the respondent and he is entitled to a refund of his deposit;

1. The respondent also seeks orders for costs and other administrative orders in relation to the payment of monies held by the Registrar of the court.

1. It should be noted that the District Court does not have jurisdiction to grant relief under section 70 of the Property Law Act 1974 (Qld).

The facts

1. The applicants were the owners and developers of land at 803 Stanley Street, Woolloongabba who intended to construct a residential complex known as ‘Gabba Central Stage 3’.

1. The respondent signed a draft contract with the applicants on 12 November 2004 to purchase Lot 366 and the car park C61 in GC3.  The respondent returned the contract to the applicants for execution.  The contract concerned a sale off the plan.

1. The contract contained the PAMD Form 30c and BCCM Form 14 warning statements and the terms of the contract were generally standard.  Three terms however are of significant importance to this dispute.  They appeared in the contract as follows:

8.2If the Seller has not given the Buyer notice that the GC3 Community Titles Scheme has been established, and that a Certificate of Classification has issued for the building containing the Lot, and that (in the reasonable opinion of the Seller) the lot is ready for occupation by 1 December 2006 31 March 2007 or by any extended date under Clause 8.3, then the Buyer or the Seller may terminate this Contract by giving notice of termination to the other party, whereupon the Deposit shall be refunded to the Buyer and neither party shall have any further Claim against the other.

(Italics indicate a handwritten amendment)

8.3The Seller may extend the date in Clause 8.2 by giving notice to the Buyer if there are delays in completion of any aspect of Stage 2 of the Residential Development because of:-

(a)bad weather;

(b)disputes with neighbours;

(c)industrial disputes;

(d)delays in obtaining approvals for the Entire Development;

(e)damage by fire, explosion or act of God; or

(f)a combination of these or any other cause beyond the Seller’s control.

8.4If there is any dispute between the Buyer and the Seller as to whether the delays in completion of any aspect of Stage 2 of the Residential Development have been caused by the matters referred to in Clause 8.3, the matter must be referred to the Architect to decide.  The Architect acts as an expert and not as an arbitrator and the Architect’s decision is final and binding.

1. The clause that appears in 8.2 is commonly referred to as a ‘Sunset Clause’.  This type of clause sets a date after which the agreement is no longer in effect and both parties are at liberty to terminate the contract without penalty.

The handwritten amendment

1. When the respondent signed the contract on 12 November 2004, the date for completion in clause 8.2 was 1 December 2006.    Before the applicants executed the contract of sale on 12 November 2004, a handwritten amendment was made to clause 8.2 which extended the sunset date from 1 December 2006 to 31 March 2007.  This handwritten amendment was made by Steven Cardell, a solicitor in the employ of Clarke Kann who was representing the applicants in relation to the conveyance of the property.

1. The applicants claim that Mr Cardell contacted the respondent via telephone, explained the amendment to clause 8.2 and the respondent subsequently agreed to the amendment.    In proof of this point, the applicants point to a handwritten file note which documents this phone call.  The applicants also point to a letter from Mr Cardell to the respondent which outlines the amendment made to clause 8.2 and encloses a copy of the executed contract.

1. The respondent claims that he never consented to the amended sunset date.

1. On 23 November 2004 the respondent wrote to Mr Cardell enclosing a bank guarantee for the deposit which was due under the contract.  Mr Cardell replied by letter on 23 December 2004 acknowledging receipt of the deposit.

The first extension notice

1. On 17 March 2006, Mr Cardell sent a letter to the respondent enclosing, inter alia, a Notice of Extension of Sunset Date (‘the first extension notice’) together with a letter from Tony Mifsud of AOM Developments Pty Ltd dated 3 March 2006.  Mr Mifsud represented AOM Developments Pty Ltd who were the project managers for the GC3 development.  This letter explained delays that had occurred to the project such as building approval delays, augmentation work and bad weather.  The letter expressly stated that:

“the period of time lost (close to 19 months) has been fully documented.  If you require detailed reports to substantiate the claim, please don’t hesitate to contact me”.

1. The first extension notice purported to extend the sunset date from 31 March 2007 to 31 December 2007.

1. The applicants claim that Mr. Cardell contacted the respondent via telephone on 3 May 2006 and the respondent indicated that he would return the Notice of Extension of Sunset date.  The applicants also claim that the respondent wished to transfer the contract into his wife’s name.  In proof of these facts, the applicants point to a handwritten file note of Mr Cardell which documents this phone call. 

1. On 23 June 2006 Mr Cardell advised the respondent that he no longer acted for the applicants and that Home Wilkinson Lowry Solicitors (‘HWL’) had taken over carriage of the conveyance.  HWL advised same by a letter to the respondent on 30 August 2006.

The second extension notice

1. On 19 January 2007, HWL sent a letter to the respondent enclosing, inter alia, an unsigned Notice of Extension of Sunset Date (‘the second extension notice’) together with the same letter from Mr Mifsud of AOM Developments Pty Ltd that had been earlier provided to the respondent on 17 March 2006.

1. The second extension notice purported to extend the sunset date from 31 March 2007 to 1 December 2007.

1. On 14 March 2007 the respondent’s solicitor, Ms Roberts of Wonderley and Hall Solicitors (‘WHS’), wrote to HWL via email requesting a copy of the ‘fully documented’ ‘detailed reports’ that Mr Mifsud had referred to in his letter dated 3 March 2006.

1. On 19 April 2007, HWL provided WHS a copy of the developers report regarding construction delay – this document was referred to as the Extension of Time Register.  WHS sent further letters to HWL dated 1, 14 and 17 May 2007 requesting further material to substantiate the claimed extension of the sunset date.  HWL replied by letter on 26 June 2007 and requested that the respondent provide a replacement deposit bond, bank guarantee or cash deposit by 27 July 2007 or the applicant would treat the failure to replace the deposit as an anticipatory breach and would therefore elect to terminate the contract.

The termination of the contract

1. On 27 July 2007 the respondent’s solicitors WHS sent a letter to HWL and terminated to contract.

The relevant issues

1. Two issues arise from the application and cross-application in this matter.  The first is whether the contract entered into was valid.  The second is whether, if there was a valid contract, either of the purported notices of extension of the sunset clause were properly given and valid.

The validity of the contract

1. The contract that was signed by the respondent was later amended by the solicitor for the applicant.  That amendment extended the original date of the sunset clause to 31 March 2007.  The respondent contends that the contract is invalid on the basis there was no agreement as to the amendment and therefore no agreement as to the terms and conditions of the contract.

1. Mr Cardell solicitor for the applicants gave evidence in relation to a conversation he had with the respondent about the amendment which he himself made by hand.  He made file notes and his evidence included a recollection of a telephone conversation with the respondent in relation to that amendment.  The effect of his evidence is that the respondent agreed to the amendment of the contract during the course of the telephone conversation, and further, the conversation was sufficiently specific about that matter.

1. The respondent’s evidence was that he could not remember any such conversation or at least any details of such conversation. 

1. In the event I accept Mr Cardell’s evidence that there was agreement by the respondent to the amended date of the sunset clause, that together with the later actions of the respondent which included forwarding of the balance of the deposit in accordance with the terms of the contract, and the way in which later discussions were had about the progress of building works, confirms, in my opinion, that the respondent believed that the contract was on foot. 

1. I am of the opinion therefore, having regard to these matters, that there was a valid contract entered into which continued until the attempted termination of it on 27 July 2007 by the respondent. 

The notices of extension

1. The facts set out above describe the course of events leading to the sending of two notices of extension of the sunset clause.  It is relevant to note that the second notice of 19 January 2007, although it did not extend the date of the sunset clause beyond 31 December 2007, (that is the date of the first extension of the sunset clause), that notice was, unsigned.  It is timely to deal with the issue of the unsigned “second” notice of 19 January 2007.

1. The notice was sufficiently specific, although it was unsigned, to provide the respondent with appropriate notice that the sunset clause was extended.  The fact that the notice was unsigned although commercially irregular, does not, in my opinion, however, vitiate the validity of that notice.  However, that notice itself did not extend the sunset clause beyond 31 December 2007, and in the circumstances of this case, whether the notice was in fact validly sent or not does not affect the question as to whether the contract could be terminated, and was properly terminated by the respondent on 27 July 2007.  The issue appears to be, in reality, whether the “first” extension notice of 6 March 2006 which purported to extend the sunset clause to 31 December 2007, is valid.

1. It is argued by the respondent that the notice is invalid because in effect it relied upon prospective events as well as events which had caused delays prior to the signing of a contract in November 2005. 

1. According to clause 8.2, 8.3 and 8.4 of the contract if notice was given of extension by the applicant, the respondent had the right to contest that through a procedure described in clause 8.4 by resort to an architect to determine the propriety of the notice.  No such course was undertaken or attempted.

1. The applicant argues that that in itself is an answer to the respondent’s submissions.  I am somewhat doubtful of this broadly based submission.  There must, I think, be demonstrated some prima facie basis for the issuing of such an extension notice by the applicant.  For example, a notice issued capriciously could never be regarded as one amenable to the determination by the architect pursuant to clause 8.4.  That, however, is not the position in this case.

1. The respondent challenges the validity of the first notice on the basis that the claimed extended date to 31 December 2007 was not calculated by reference to actual delay and the notice was, therefore, not authorised by clause 8.4 of the contract.  The contract dated 12 November 2004 was affected (so the project manager’s report dated 3 March 2006 claimed) by a period of time lost up to 19 months.  In Exhibit BSSDBS 6 to the affidavit of the respondent the extension was based upon augmentation works and “bad weather” after the building work proper commenced in August 2005.  These matters, in my opinion, clearly fall within clause 8.3(f), that is, “a combination of these or any other causes beyond the seller’s control”.  Sub-paragraph (a) includes extension on the basis of “bad weather”.

1. Whether the actual number of days or amount of time claimed by extension would ultimately have been sanctioned by the architect pursuant to clause 8.4 is a matter that was appropriately dealt with according to the regime to which the contracting parties agreed.  Prima facie, however, the notice of extension had a proper basis and was not, in my view, based entirely on prospective or imaginary events that were unsupported.  Furthermore, the augmentation works and bad weather although disregarded in the Extension of Time Register, as between the owner and building contractor were in part at least, in my opinion, an appropriate basis for the issuing of the first notice on or about 16 March 2006.

1. That being so, the extension of the sunset date to 31 December 2007 was, according to the contract, a valid notice of extension.  Whether there was a proper basis for the period sought in the extension, as opposed to the validity of the notice, was a matter entirely for the determination of the architect.

1. It follows that the first extension notice having properly been given the completion of the contract was not due until 31 December 2007.  The purported termination of the contract by the respondent was not a proper termination and was, indeed, a repudiation of the contract.  The applicants were then entitled to treat that repudiation as a basis for termination of the contract.

1. Accordingly, the declarations sought should be made in the applicant’s favour.

1. I declare that:

(1)         That a contract of sale dated 12 November 2004 was properly formed and both parties were bound by the terms of the contract;

(2)         That the respondent’s purported termination of the contract of sale was unlawful and was a breach of the terms of the contract;

(3)         That the applicant’s termination of the contract was lawful;

(4)         That upon terminating the contract the applicants became entitled to call upon the deposit guarantee provided by the respondent; and

(5)         That the deposit paid under the contract of sale and all interests and accretions thereon is forfeited to the applicants.

1. I will hear submissions as to costs.