Donalds on Danks Pty Ltd v Alio Pty Ltd

Donalds on Danks Pty Ltd, the vendor, sought damages for the loss of a bargain against Alio Pty Ltd, the purchaser, in relation to a contract for the sale of a restaurant business. The contract included a lease for the premises where the restaurant was to operate. Before the sale was finalised and the lease assigned, the purchaser entered the premises and started fit-out works without the lessor's consent. The lessor terminated the vendor's lease due to the unauthorised works, leading to the termination of the sale contract. The purchaser sought a return of the deposit, while the vendor claimed damages for the lost opportunity.

The primary legal issues revolved around whether the vendor had authorised the renovation works and whether the vendor or the purchaser was responsible for the lessor's termination of the lease. The court had to determine if the vendor's authorisation of the works was implicit or explicit and assess the impact of the lessor's actions on the contract's enforceability.

The court examined the evidence and concluded that the vendor did not authorise the renovation works, either explicitly or implicitly. The court found that the purchaser's entry and commencement of works without permission led directly to the lessor's termination of the lease. Given the lease was a critical component of the sale contract, its termination effectively nullified the agreement. The court held that the purchaser's actions were the proximate cause of the lease termination, absolving the vendor of any responsibility. Consequently, the court awarded the vendor damages for the loss of a bargain and rejected the purchaser's claim for a return of the deposit.

The final orders of the court were that the vendor was entitled to damages for the loss of a bargain, and the purchaser was to bear the costs of the proceedings. The deposit paid by the purchaser was to be retained by the vendor as compensation for the loss incurred.