Tony Brown

The full bottle: Bordeaux château flops Aussie wine injunction claim https://tonybrown0.blogspot.com/2024/03/the-full-bottle-bordeaux-chateau-flops.html A Bordeaux wine estate’s recent injunction claim against a Tasmanian winemaker has produced a rich blend of intriguing information about the international wine business and Australian wine consumption. Vieux Château Certain produces two types of expensive French red wine using various high-end grapes. It sued Australian brand Pipers Brook Vineyard, a company majority owned by Kreglinger for wrongly representing an association with and passing-off as its elite château product. VCC’s Federal Court injunction claim in Melbourne claimed a high degree of visual similarity between the presentation of its wine – the use of a pink cap, a label featuring a stately rural home, French text, and the name “Certan” – and Pipers Brook New Certan product and that the Tasmanian producer thereby represented it was in some way connected with or approved by VCC. . VCC produces 30,000 to 50,000 bottles annually but sales in Australia have been very limited. It retails here for between approximately $500 and $800 per bottle. One of Pipers Brook’s estate – Mount Pleasant – is situated on land owned by Paul de Moor, a Krelinger director who claimed to be a descendant of the Belgian wine merchant Georges Thienpont whose family had developed a VCC estate in Pomerol in the Bordeaux region of France that lies to the east of the Dordogne River, part of the wine making region referred to as the Right Bank. To decide the contest Justice Johnathan Beach heard evidence from 10 wine experts over six days to determine whether or not the similarities were likely to mislead consumers of fine wine and members of the fine wine trade to erroneously believe there was such an association. His 112 page judgment is a rich in observations from wine experts about French and Australian vino. Imported wines accounted for 31.4% of the Australian wine market by value, (US $1.907 billion) of which  the majority of those wines originate from France (37.6% by value) and New Zealand (40.1%). Bordeaux represents just 1% of all French wine sold in Australia for off-premises consumption. $25 is the demarcation price point for identifying non-premium product according to wine author and critic, Jeremy Oliver. A consumer purchasing a wine under $25 is someone who “likes wine but is not obsessed by it”. This type of consumer, he said, may buy a $50 bottle of wine for a gift or special occasion, but not very often. Such a consumer has minimal knowledge of Bordeaux estates but might have heard of some of the more elite châteaux like Lafite and Latour, and maybe even Haut-Brion from Graves. Buyers of $70 to $100 bottles of wine on the other hand are likely to be people with a cellar or collection, are wealthier, better educated about wine, subscribers to a wine publication or website, users of wine apps such as Vino and Decanter, members of a wine club or a wine group and visitors to wineries much of which they do to gain knowledge they can show off. A typical Australian buyer of a $500 Pomerol wine would generally obtain a personal allocation from a “negociant” and buy it to consume at the optimum time a decade or so later. Tasmanian pinot noir is typically light to medium body in structure and of medium flavour intensity – he observed – whereas the premium wines from the right bank in Bordeaux deliver significant depth of flavour and structure. In his opinion, they could hardly be more different. Mr Oliver said that in his experience a Tasmanian pinot noir drinker would be more expected to gravitate to and be far more interested in Burgundy and Rhone wine, unless they are an individual who likes and purchases every style of wine, which is rare. Other experts gave evidence including wine writer and critic Jane Faulkner, wine importer and distributor Daniel Airoldi, MW Master of Wine Andrew Caillard, Negociants Australia’s Timothy Evans and wine judge Philip Rich. None of these experts were in Justice Beach’s view “representative of the ordinary and reasonable consumer”. Huon Hooke – a professional wine writer and critic – and Ms Faulkner both swore they thought the pink cap and label similarities and name “Certan” spoke to them of a connection between Pipers Brook and VCC. In its defence Pipers Brook argued that despite the similarity of appearance, there was no risk of confusion because few Australian consumers of Tasmanian pinot noir would have heard of, far less be able to recall much if anything about the VCC product even if they had at one time or another encountered it. After all, the brand described it as Pinor Noir from Tasmania not a Bordeaux from France. And,  so ran their argument, New Certan is sold in a Burgundy shaped bottle – the bottle shape used for pinot noir – whereas VCC Wine is sold in a classic Bordeaux (cabernet sauvignon) shaped bottle. Justice Beach agreed. Very few consumers would ever have been exposed to the pink cap and other visual features of the VCC presentation and, he thought, they would not be representative of the ordinary and reasonable consumer. That said, he accepted that those very fortunate people who can afford to collect wines from Pomerol and Right Bank châteaux – typically deep enthusiasts – might also be prepared to buy a $75 to $95 Tasmanian pinot noir. Thus by a thin margin he was satisfied VCC has made out its case that at lease that narrow class of consumers – members of the fine wine trade who had knowledge of the French original – were likely to have been misled or deceived into thinking that the New Certan wine had some association with VCC. That though was only up to the time Pipers Brook changed the presentation of its New Certain pinot noir. The change to a bronze cap and an off white, straight-edged label, eliminated any prospect of confusion and therefore CVV’s request for an injunction should be refused. The judge – in assessing what loss VCC had suffered by reason of the “passing-off” for that limited period to a very limited class of consumer – concluded there had been no loss or damage to it from Piper Brook’s conduct. The judge also found Mr de Moor had not created the label with any intention to deceive or mislead: “His motivations for creating the New Certan wine were quite personal,” derived from his familial connection to VCC in that he was in fact the grandson of Georges Thienpont’s only daughter. He accepted Piper Brook’s undertaking not to sell the remaining 1,755 bottles of New Certan in pink cap bottles that had previously been marketed on the Kreglinger website and via the Qantas Frequent Flyer loyalty program. Justice Beach also refused CVV’s demand that the Piper Brook trademark for “New Certan” be cancelled  on the ground of its similarity to its “Vieux” (old) Certan label because that argument wrongly assumed Australian consumers understand the meaning of that word and would recollect the name Vieux Château Certan. Because each party had had “some measure of success” on their arguments, he ordered that Pipers Brook was not required to pay any of CVV’s legal costs of its claim. Societe Civile et Agricole du Vieux Chateau Certan v Kreglinger (Australia) Pty Ltd [2024] FCA 248 Beach J 15 March 2024 from https://qldbusinesspropertylawyers.com.au/blog/the-full-bottle-bordeaux-chateau-flops-aussie-wine-injunction-claim/ from https://qldbusinesspropertylawyers0.weebly.com/blog/the-full-bottle-bordeaux-chateau-flops-aussie-wine-injunction-claim from https://kathleenlett.blogspot.com/2024/03/the-full-bottle-bordeaux-chateau-flops.html from https://kathleenlett.weebly.com/blog/the-full-bottle-bordeaux-chateau-flops-aussie-wine-injunction-claim

Buyer falls flat: No PEXA extension for lenders failure to settle https://tonybrown0.blogspot.com/2024/03/buyer-falls-flat-no-pexa-extension-for.html A property developer who signed up the $4 million buy of a 52 acre development site in Rockbank, in Melbourne’s outer west in August 2017 has stumbled at the finish line when it failed to have finance available to settle 5 years later. The contract required VS Property to settle with sellers Nick and Sherryn Zurzolo on 5 November 2020. After signing, a dispute arose with the relevant water authority – to which the buyer became a party – in relation to the vendors’ grant of an easement to the authority over part of the subject land. The dispute remained unresolved due in part to the buyer seeking a significantly higher amount of compensation for the easement than that which the Zurzolos had agreed to. The settlement date of 5 November 2020 passed and with no resolution in sight. In March 2022, the Zurzolos – who were facing personal and financial difficulties due to the delay – called for settlement on or before 2 May 2022. Buyer and seller were both aware the value of the land had also increased significantly. After a further failure to settle on 11 May, the Zurzolos purported to terminate the contract due to the purchaser’s failure to settle. But then in late June they served a 14 day default notice on VS calling for settlement by 12 July under pain of termination. The water easement dispute was eventually settled in July with a settlement deed that agree the settlement date be extended to 15 September 2022. The buyer was however unable to put the finance required to settle in place and completion did not occur. The vendors – who had been ready, willing and able to settle – terminated pursuant to the settlement deed provision that treated the contract as automatically at an end by reason of the buyers not completing on the due date. VS contested the termination and issued court proceedings for specific performance. Its first contention was that the settlement deed automatic termination provision was not engage because the failure to settle was not a “default” on its part resulted only by reason of delay in their lender’s processes. Justice Michelle Quigly agreed there was a distinction between the terms ‘fault’ and ‘default’ but held the buyer’s conduct was indeed a ‘default’ notwithstanding it arose from someone else’s ‘fault’. The buyers further contended the termination – in the absence of a prior 14 day ‘Default Notice’ that the contract itself otherwise provided – was invalid. Justice Quigly also rejected this argument. In her view, the failure to settle triggered the operation of the termination clause but not to bring it to an automatic end but the settlement deed term specifying contract coming “immediately to an end” effectively overrode the 14 day default notice period in the contract itself. By notification of termination in the absence of a default notice, the sellers had – she ruled –  lawfully terminated the contract. Not to be outdone, the buyers also argued the seller’s termination was in breach of a special condition requiring – in the case of an electronic settlement – the parties to ‘do everything reasonably necessary to effect settlement on the next business day’ if it does not occur by the end of the agreed date. Justice Quigly noted the ‘next day’ settlement provision was only to apply in circumstances where the PEXA electronic workspace was ‘locked’ at the nominated settlement time but settlement has not occurred by 4:00pm (or 6:00pm, if the nominated settlement time is after 4:00pm). She noted the provision dealt with a situation where settlement does not occur because of some technical malfunction arising after the workspace has ‘locked’ and dismissed the assertion that the clause could be relied on in these circumstances. “I reject the notion that Special Condition 2.7 can be relied on in circumstances where settlement did not occur at the scheduled settlement time because the purchaser had failed to secure finance by the agreed settlement date,” she wrote in her 47 page judgment. “It would be a nonsensical interpretation to [say] it provides carte blanche to allow an additional day to complete settlement for a reason not associated with the mechanism and requirements of the technical procedure of the electronic settlement regime”. The buyer’s claim for specific performance was dismissed and damages for the buyer’s breach were ordered as was the removal of the buyer’s caveat. The judgment does not refer to any amount of damages that the seller’s had claimed. VS Property and Holding Pty Ltd v Zurzolo [2024] VSC 89 Quigly J, 6 March 2024 from https://qldbusinesspropertylawyers.com.au/blog/buyer-falls-flat-no-pexa-extension-for-failure-to-settle/ from https://qldbusinesspropertylawyers0.weebly.com/blog/buyer-falls-flat-no-pexa-extension-for-lenders-failure-to-settle from https://kathleenlett.blogspot.com/2024/03/buyer-falls-flat-no-pexa-extension-for.html from https://kathleenlett.weebly.com/blog/buyer-falls-flat-no-pexa-extension-for-lenders-failure-to-settle

Agency in rent roll contract win; judges errors prolong 6 year fight https://tonybrown0.blogspot.com/2024/03/agency-in-rent-roll-contract-win-judges.html Investors who defaulted on a rent roll buy have been ordered to pay more than $200,000 for the disruption caused to the seller by their last-minute refusal to settle. Babstock Pty Ltd sold its $800,000 residential management portfolio to Marburg Investments Pty Ltd – of which Dorothy Marburg was the sole director – in December 2017. The rent roll contract was due to complete in February but after a number of extensions settlement was set for May 2018. Alan Marburg – Dorothy’s husband who was to operate the business despite no experience in the role – spent 4 weeks or so prior to completion in the seller’s Bellbowrie office to learn the ropes and get a taste of how hard managing residential tenancies, tenants and owners might be. The couple also engaged an expert consultant – who reported only trivial irregularities in the management paperwork – to satisfy themselves of the agency’s paperwork compliance. When it came time to stump up with the cash, Mr Marburg alleged flaws he had discovered in entry condition reports (ECRs) for some 30 of the 148 properties under management even though the buyer had notified it was satisfied with such issues on due diligence. The seller called for settlement noting that the rent roll contract allowed for managements with unrectified documentation to be retrospectively rejected on the adjustment date 90 days following settlement and any money paid for them, refunded to the buyer from the retention fund. Babstock had already announced the sale and the retirement of its key staff to its owners and introduced Mr Marburg as a competent and reliable successor by the time the buyers’ new solicitor contended that the seller was “in anticipatory breach” and purported to terminate. The seller rectified most of the buyer-claimed paperwork defects before nominating a time and place for completion on the due date and when that didn’t occur, again one week later. The Marburgs refused to settle and alleged the seller to have been in breach. They then sued for recovery of their $40,000 deposit. The agency counterclaimed for the managements and revenue it lost after having to go cap in hand back to owners to get new appointments signed up. Judge Kenneth Barlow ruled in the Marburgs’ favour in the District Court in December 2020 by accepting their “anticipatory breach” contention. That decision was reversed by the Court of Appeal in April 2022 which concluded the seller had not breached the sale contract when insisting on settlement regardless of paperwork deficiencies. Its adherence to usual rent roll contract usual practice – for rejected managements to be accounted for at the end of the 90-day retention period if the deficiencies remained unrectified – was upheld. But because Judge Barlow had addressed neither the Marburg’s misleading conduct claim nor the agency’s counterclaim, the appeal judges remitted the case back to him for further argument and a decision on those points. In his second judgment in February 2023, the judge ordered the contract to be rescinded under Australian Consumer Law s 237 by reason of Alan Marburg having relied on misleading pre-contract statements. Those statements – contained in the business broker’s Sale Information Booklet – were that the ECRs were 100% “fully signed by all tenants and agency staff” and all properties were in the immediate locality. He concluded “at least 19 of the ECRs were not signed” or otherwise non-compliant and “16 properties were in suburbs other than Bellbowrie and Moggill” and that the buyer had relied on the former misleading statement (ECRs) but not on the second (property locations). The ACL s 237 ruling was made notwithstanding the entitlement to such relief hadn’t been sought by Marburg “in pleadings or at the conclusion of the trial” and had only been asked for in submissions more than three years following the trial’s end. The matter inevitably went to appeal for a second time. On 25 January 2024, the Court of Appeal again reversed Judge Barlow’s decision by reason of the “substantial injustice” of numerous errors in his reasoning. And in the absence of the determination of essential points by the judge, the appeal court was required to come to its own factual conclusions on many critical issues. The appeal judges reasoned Babstock had correctly terminated the contract due to the buyer’s repudiation and thus “had an accrued right to keep the deposit and an accrued right to damages for breach of contract” which it assessed at $190,000. Justice Jean Dalton in giving the lead judgment of the court concluded – by examining evidence that the trial judge hadn’t – that just 13 of the ECRs could not be described as “fully signed by all tenants and agency staff”. Regardless, the buyer company could not have relied on the representations – which the seller conceded had been misleading – because the testimony of Dorothy Marburg, its sole director, was that “she had nothing to do with the proposed purchase…it was all her husband’s doing”. “Mrs Marburg gave extraordinarily unhelpful evidence,” observed Justice Dalton. “I cannot see that any decision-maker could regard it as reliable, or a sufficient basis for a finding of reliance by Marburg Investments or by her as guarantor”. Even if Mr Marburg was a de facto director – something the evidence hadn’t established – he knew there were ECR deficiencies but decided to go ahead at due diligence regardless. “The trial judge was wrong to find that Marburg Investments relied upon the literal truth of the representations in the brochure; he ought to have found to the contrary”. Justice Dalton further reasoned – in overruling the trial judge’s finding that somehow the buyer was still relying on the brochure representations when deciding not to terminate on due diligence grounds – that even if such reliance had been proven, the chain of reliance causation had been broken by the buyer choosing to commission its own report upon which to rely. Finally, Justice Dalton observed the buyer had not proved that it would have sustained any loss as a result of the misleading statements had it been required to complete the contract. It could after all, have retrospectively rejected the tenancies still suffering from incomplete paperwork and be refunded the amount it had paid for them on the adjustment date. These were issues the trial judge did not consider. In a summation with which Justices Bond and Mullins concurred, Justice Dalton declared “the overwhelming weight of the evidence was against the trial judge’s findings; he misunderstood the significance of some important evidence; and he nowhere rests his finding on his observations of the Marburgs as they gave evidence”. Rescission of the contract should not have been ordered because the buyer’s case was simply wrong on all points. The appeal court – in doing what in retrospect the trial judge ought to have done in December 2020 – awarded Babstock over $200,000 in damages and interest as well as ordering the company and Mrs Marburg as guarantor to pay all the seller’s legal costs of the hearings and appeals. Once costs are accounted for, the buyers will likely have spent the full equivalent of the purchase price and – instead of an asset – have only the indelible scars that 6 years of ultimately unsuccessful litigation can leave, to show for it. Babstock Pty Ltd & Anor v Laurel Star Pty Ltd & Anor (No 5) [2024] QCA 3 Mullins P and Bond and Dalton JJA, 25 January 2024 from https://qldbusinesspropertylawyers.com.au/blog/agency-in-rent-roll-contract-win-judges-errors-prolong-6-year-fight/ from https://qldbusinesspropertylawyers0.weebly.com/blog/agency-in-rent-roll-contract-win-judges-errors-prolong-6-year-fight from https://kathleenlett.blogspot.com/2024/03/agency-in-rent-roll-contract-win-judges.html from https://kathleenlett.weebly.com/blog/agency-in-rent-roll-contract-win-judges-errors-prolong-6-year-fight

Court voids utterly crushing 417% p.a. interest; 70% p.a. ok https://tonybrown0.blogspot.com/2024/03/court-voids-utterly-crushing-417-pa.html A private lender’s interest rate of 417% has been ruled to be “utterly crushing” but a court has approved its 70% per annum rate on a $430,000 six-month loan. Connie Huang and her adult daughter Stephanie Chien applied for a “cash flow funding” loan in October 2019 through a website controlled by broker MaxFunding. They offered their Burwood residence to which they attributed a value of $3 million as security and disclosed that it had a current $1.5 million mortgage debt to NAB. MaxFunding referred the loan application to lender Commercial N who approved an advance repayable in 26 weeks with interest at 1.36% per week except when the lender notified in writing that it would accept interest at a lower rate of 0.35% per week. The borrowers received advice from a local solicitor they had chosen from those suggested in the area by the broker and signed the loan and security documents which also provided that the higher interest rate was payable in all circumstances when the borrower was in default. The valuation for the property came in late and low – just $2.6 million – resulting in reduction in the amount of the advance from $600k to $430k and denying the borrowers the additional cash they needed to service the interest for the six-month period. The proceeds were fully deployed to pay out arrears on the NAB loan, clear another short-term $370k loan and meet the lender’s expenses. When it came time to pay the first interest payment of $6,325 in November, they asked for a deferral and paid it in early December after a default notice had issued. No further payments were made. In March 2020 they were advised a payout figure of $530,000. The lender filed suit in November 2022 to recover the principal and interest of $3.2 million calculated on a monthly compounding basis at the higher rate which annualised at 70.72%. The borrowers retaliated with a challenge to the higher rate arguing it was as a penalty and therefore void. The contract provided the higher rate was payable at all times unless notified otherwise and was not one that increases the rate of interest upon failure to make prompt payment. The lender contented the interest rate provisions thus did not operate to penalise the borrower for breach but rather provided for a ‘concessional’ lower rate whilst ever there has been no default. Put another way – it argued – the liability to pay interest at the higher rate compounding monthly “does not impose an additional or different contractual liability that arises upon the non-observance of the primary contractual obligation”. Justice Trish Henry agreed. “The formula provides for an amount of interest that I would readily accept is seemingly extravagant, out of all proportion or unconscionable due to the operation of the capitalisation /compounding factor [but] I am not satisfied that those clauses are unenforceable as contractual penalties,” she decided. Mrs Huang and Ms Chen also argued the terms were unconscionable having regard to s 12CC(1) of the ASIC Act and s 22(1) of the ACL and should therefore be varied. The lender had known they were at a ‘special disadvantage’ – they alleged – particularly because Mrs Huang did not speak, read or write English and no translation certificate had been procured for her signing the documents. Further they were both financially experienced and the security documents were long and complicated. They also submitted that a reasonable lender would have known they were certain to have defaulted once the advance was reduced and there were no surplus funds to pay interest while their exit strategy was put in place. Justice Henry observed that an “unconscionability” finding requires more the mere breach of accepted standards of commercial behaviour and more than mere element of hardship or unfairness. Rather, she explained “it requires conduct that is characterised by a substantial departure from that which is generally acceptable commercial behaviour that is so plainly or obviously contrary to what is expected, that it is offensive”. The judge agreed that Mrs Huang’s inadequate English seriously affected her ability to make a judgement as to her own best interests and she therefore suffered a special disadvantage but concluded the loan was not unconscionable on that ground given there was “no doubt” both borrowers “understood the risk of not meeting their obligations to repay loan monies, particularly where secured by a registered mortgage against their residence”. Neither was the “very high” 70.72% annual interest rate unconscionable in the absence of expert evidence stating same to be “excessive or even unusual in the context of a short-term financing by way of a second mortgage”. That said, monthly capitalisation that lead to total interest of $3.2 million at an effective annual rate of about 417% “could never be said to be reasonably necessary for the protection of legitimate interests [and] is utterly crushing”. She declared the monthly capitalisation provision to be void by reason of its unconscionability and ordered the interest to be calculated on a simple basis at 70.72% p.a. totalling $882k. Commercial N Pty Limited v Huang & Ors [2024] NSWSC 23 Henry J, 31 January 2024 from https://qldbusinesspropertylawyers.com.au/blog/court-voids-utterly-crushing-417-p-a-interest-70-p-a-ok/ from https://qldbusinesspropertylawyers0.weebly.com/blog/court-voids-utterly-crushing-417-pa-interest-70-pa-ok from https://kathleenlett.blogspot.com/2024/03/court-voids-utterly-crushing-417-pa.html from https://kathleenlett.weebly.com/blog/court-voids-utterly-crushing-417-pa-interest-70-pa-ok

DIY litigant opens up Supreme Court on Sunday for a fence dispute https://tonybrown0.blogspot.com/2023/11/diy-litigant-opens-up-supreme-court-on.html A neighbour spat over trees and a dividing fence dispute that drafted not one but two Supreme Court duty judges into the the courtroom for an urgent weekend sitting has been listed for a final hearing just over three weeks after the court proceedings were filed. Rhonda Slattery’s residential lot – in picturesque Davistown near Kincumber on the NSW Central Coast – adjoined that of 30 yr career builder David Dunn and his wife Kim Dunn. In discussions over the development of their site – for which they had recently gained approval – she learned the Dunns wanted to replace the existing boundary fence which had been in situ for 16 years. Ms Slattery floated two options for modification of the fence – part of which likely encroached on the Dunns’ land – neither of which were suitable to the Dunns. Their proposal was to demolish the fence and rebuild a new one at their expense precisely on the common boundary and in the course of which “trim” the trunks of two paperbark trees and a concrete slab which they claimed encroached on to their land. Slattery was concerned the proposal would imperil her trees and damage the concrete slab. Her investigations revealed that the development consent from the NSW Central Coast Council did not provide approval for fencing work or demolition of the existing boundary fence. Her anxiety escalated to alarm when she received a letter from the Dunns on Saturday 7 October notifying her they intended to commence boundary fence demolition works at 7.00am on the coming Monday. Her response was to prepare paperwork for an urgent court application and drive to Sydney the following morning to open up the Supreme Court registry to file it and to find a judge to make orders to prevent the demolition. Ms Slattery swore in her affidavit that the application needed to be dealt with urgently because – among other issues – she had two large dogs that need to be confined. Siting in the Land and Environment Court, Justice Moore indicated he would grant the temporary injunctions to the self-represented – provided she gave the “usual undertaking”, ie to compensate the Dunns for losses suffered if their position prevailed over hers at the final hearing – restraining the Dunns from interfering with either of the paperback trees or demolishing any part of the concrete slab. The application to restrain the demolition of the dividing fence was though – in his view – outside the jurisdiction of that court. He therefore transferred the proceedings to the weekend Supreme Court equity judge, Justice Trish Henry, who considered the fence application later that Sunday also on an ex parte basis. Ms Slattery was – after having been again called on to give the “usual undertaking” and again obliging by giving it – granted her the stop-demolition injunction which she was ordered to serve on the Dunns before 8pm that night. The matter came before Justice Henry again two days later when she transferred it back to the Land and Environment Court thereby conferring on it the jurisdiction to deal the dividing fence issue which it had initially lacked. When the matter came before Justice Sarah Prichard in the Land and Environment Court on 12 October, Ms Slattery was represented by counsel. Mr and Mrs Dunn were self-represented but were armed with an arborists report and a survey plan to prove the alleged encroachments and the suitability of the proposed trimming of the paperbark trees’ trunks. The judge referred the matter for an on-site mediation and listed it for a further directions hearing on 18 October indicating it would be then listed for final hearing if not resolved. The injunctions were extended once again as were Ms Slattery’s undertakings. The parties participated in the mediation but that proved unsuccessful and when the matter was next dealt with on 18 October, Ms Slattery appeared by telephone from the Central Coast, self-represented. Justice Pritchard expressed her consternation that the matter hadn’t been resolved and warned them of the consequences of adverse costs orders and in Ms Slattery’s case, the risk of having to pay compensation by reason of her undertaking. When Ms Slattery informed the judge that she didn’t understand the obligations comprised by the “usual undertaking”, the term was explained to her in some detail prompting the response “Yes, I do” to the judge’s “Do you now understand ?” The matter was listed for a final hearing on 2 November but there is no record of a court determination on that date. This may suggest that the parties – when faced with the risk of adverse costs orders and in Ms Slattery’s case the undertaking risks – may have resolved the dispute among themselves with a modicum of common sense. Slattery v Dunn [2023] NSWLEC 107 Pritchard J, 18 October 2023 Read case from https://qldbusinesspropertylawyers.com.au/blog/diy-litigant-opens-up-supreme-court-on-sunday-for-a-fence-dispute/ from https://qldbusinesspropertylawyers0.weebly.com/blog/diy-litigant-opens-up-supreme-court-on-sunday-for-a-fence-dispute from https://kathleenlett.blogspot.com/2023/11/diy-litigant-opens-up-supreme-court-on.html from https://kathleenlett.weebly.com/blog/diy-litigant-opens-up-supreme-court-on-sunday-for-a-fence-dispute

Lessor floored; make good costs reduced by windfall benefit https://tonybrown0.blogspot.com/2023/11/lessor-floored-make-good-costs-reduced.html Landlords and tenants squabbling over make good costs in commercial leases should consider this dispute relating to an industrial warehouse leased to a heavy machinery hire company. Kingston Industries took up occupation of the western Sydney premises in August 2010 and after its lease extensions expired in July 2017, it continued occupation on a month-to-month basis until December that year. Landlord Diana Morabito claimed Kingston was responsible for the make good cost of replacing concrete surfaces in the warehouse and the car park which she claimed had been shattered by the tenant’s steel track earthmoving equipment. She demanded the former tenant pay $344,000 in make good costs plus lost rent of $295,000 for the 18-month period between when Kingston departed and the date the premises were re-let in June 2019. The lease – which specified a permitted use of “Plant Hire/Distribution” – contained the usual provisions in relation to the tenant’s maintenance and repair obligations but excluded damage caused by the landlord’s negligence or which occurred “outside its control” from the realm of tenant’s responsibility. The terms also prohibited the tenant from “allowing the floor to be broken or damaged by overloading”. The landlord was obliged to “maintain the structure of the premises in good repair” but it gave no warranty or representation that they were suitable for the tenant’s use. When Kingston refused to pay, the landlord filed proceedings to recover her make good costs in the NSW Supreme Court. Morabito contended that the permitted use did not extend to moving steel tracked equipment on the concrete surfaces without using protective measures of mapping or steel plates. Justice Elisabeth Peden had to consider whether machinery with steel tracks was “plant”- and therefore permitted – that would ordinarily be expected to be moved around. She saw no need to resort to the principle that lease covenants including those in relation to permitted use “are strictly construed against a lessor” because the word “plant” unambiguously included the tenant’s steel tracked equipment – some of over 22 tonnes in weight – of which the landlord had been aware. Suspecting that the concrete surfaces were defective, Kingston engaged engineers to inspect and test the damaged paving. Kingston managed to locate Fernando Algorry, the engineer who originally designed the concrete surfaces who swore that – because he was not provided with instructions about the type required – he had adopted a standard specification for concrete suitable for light to medium industry and machinery with pneumatic tyres only. He also attested that the concrete supplied to the job – by reference to the few cartage delivery documents the landlord produced in discovery – was even inferior to the grade of product he had specified. And had he known what was actually supplied, he “would not have certified” the low grade concrete that had been supplied. This allowed Kingston to argue the failure in the concrete fell into one of the exceptions to its maintenance and repair obligations because it was caused by the landlord’s negligence; beyond its control; or it had occurred as a result of “fair wear and tear”. Justice Peden accepted Kingston’s submission that Ms Morabito’s failure to produce many missing cement truck delivery dockets entitled the court to conclude they would not benefit her case and that it should conclude all batches delivered had been of low grade. She went on to conclude that the paving damage had not been caused by Kingston’s machinery or overloading but rather by “a matter beyond its control and for which it ought not be liable”. She went on to consider the validity of landlord’s figures to decide the damages to which she would be entitled should an appeal court decide otherwise regarding the concrete defects. In the absence of the landlord taking reasonable steps to mitigate her loss by promptly recruiting a replacement tenant, her claim for lost rent was dismissed. The court also decreed that any damages for the cost to replace the damaged paving should be reduced by “the betterment obtained from the new concrete”. That benefit was – having regard to the projected 50 year “life” of the new concrete paving – an additional 7.5 years. “A successful plaintiff should not be awarded a windfall amount by reason of obtaining a better outcome, than had the defendant performed its obligations”. Similar reductions apply if a landlord gains “greater efficiency or productivity” from the repairs conducted from make good funds. Thus Kingston – if it were to be liable at all – would have had to pay the replacement cost for the slabs, reduced in proportion by such “betterment”. And a $58,000 claim for other make good items was reduced to $3,320 because Mrs Morabito had not demonstrated the damage was caused by Kingston as opposed to “fair wear and tear”. Morabito v Kingston Industries Pty Ltd [2023] NSWSC 1020 Peden J, 31 August 2023 Read case from https://qldbusinesspropertylawyers.com.au/blog/lessor-floored-make-good-costs-reduced-by-windfall-benefit/ from https://qldbusinesspropertylawyers0.weebly.com/blog/lessor-floored-make-good-costs-reduced-by-windfall-benefit from https://kathleenlett.blogspot.com/2023/11/lessor-floored-make-good-costs-reduced.html from https://kathleenlett.weebly.com/blog/lessor-floored-make-good-costs-reduced-by-windfall-benefit

Form 6 fight: seller to pay agents 20% commission on terminated contract https://tonybrown0.blogspot.com/2023/11/form-6-fight-seller-to-pay-agents-20.html How often do real estate agencies get their hands on a commission from a deal that goes sour and how rarely does that turn out to be a motza? Consider this real estate deal that crashed in 2020 but nevertheless reaped a $1.5 million commission for the agent concerned. In January 2018, tourism group Sunshine Group Australia Pty Ltd appointed Cassowary Coast agency Andersons Real Estate for the sale of some 500 acres in Mission Beach. The Form 6 appointment, provided that it was a “continuing appointment” commencing on for an “open listing” at a list price of $12 million at an agreed of 4.4% of the sale price. Grahame Anderson was the agency’s sales manager and his wife its sole director. The property had local authority approval for subdivision, an 18-hole golf course and resort accommodation. Anderson was approached by Victor Soh who said he had “international buyers” who would be interested in the property. In May 2019, Soh, Anderson and Sunshine entered into a deed agreeing to a success fee of $500,000 plus GST being payable on the settlement of a sale at $6.5 million plus GST. Although the deed referred to a form 6 being attached, no form 6 was attached to the signed agreement. A form 6 was prepared later that month for a “single appointment” for an exclusive agency expiring at the end of July and thereafter continuing as an open listing. It provided for 4.4% commission for a sale price up to and including $6.3 million plus GST and if the sale price exceeded that sum, the agency was to be paid the entire excess plus GST. The form 6 appointment included the standard condition that commission was payable even if the sale contract was terminated. A contract was signed up with the Mayfair 101 group in August 2019 at $7.5 million with settlement 90 days after satisfaction of due diligence. In May 2020 the buyer’s solicitor requested a rescission so a new contract could be entered into on the same terms with a related entity as buyer. Although that contract envisaged an immediate settlement, that did not occur and Mayfair’s $750,000 deposit in the agency’s trust account was claimed by the seller. Anderson Real Estate claimed the full $1.65 million on account of commission worked out as per the May 2019 appointment and when Sunshine refused to pay, filed a lawsuit in the Supreme Court in Brisbane. Sunshine counterclaimed to recover the deposit in its trust account alleging – among other things – that the commission was not payable because the sale occurred after the term of the exclusive agency had expired. Chief Justice Helen Bowskill ruled otherwise, concluding the sale had occurred within the period envisaged by the May 2019 form 6 because it was signed up during the open listing that followed after the exclusive agency term. She also ruled that the failure to state in the appointment that commission would be calculated by reference to the “actual” sale price was immaterial. The appointment complied – she ruled – with the relevant sections of the Property Occupations Act because it was clear that it would only be payable by reference to the price for which the property was agreed to be sold, not the advertised or listed price. That conclusion was upheld on appeal. “There was no error in the primary judge’s conclusion that the omission of the word ‘actual’ before ‘sale price’ rendered the form 6 to be of no legal effect,” held Justice David Boddice with whom Justices Burn and Ryan concurred. “The words ‘sale price’ in the form 6 [refer] to the price for which the property was agreed to be sold, which, for the purposes of the section, is the actual sale price”. The appeal judges also upheld the chief justice’s finding that the agency had been the effective cause of the sale – rather than Anderson personally because it had been the party appointed under the relevant form 6. Sunshine also contended the May 2019 form 6 should be read as part of a wider transaction that involved the deed entered into a few weeks earlier that envisaged commission would be payable only in the event a sale proceeded to settlement. The trial judge and the appeal judges rejected that argument. In their views, the May 2019 form 6 appointment was to be read alone, thus entitling the agent to commission even if the sale didn’t settle and to the lavish commission that had been agreed. “The factual circumstances did not support a conclusion that the plain terms of the subsequent Form 6, as to payment of commission on a specified basis and in specified circumstances, including in the event of commission being payable even though the relevant sale did not proceed to settlement, was to be read down,” ruled the appeal judges. Not only does Andersons get to keep the $750,000 deposit but Sunshine must pay it a further $900,000 plus its legal costs of the trial and appeal! Sunshine Group Australia Pty Ltd v Trappando Pty Ltd [2023] QCA 214 Boddice JA and Burns and Ryan JJ, 3 November 2023 from https://qldbusinesspropertylawyers.com.au/blog/form-6-fight-seller-to-pay-agents-20-commission-on-terminated-contract/ from https://qldbusinesspropertylawyers0.weebly.com/blog/form-6-fight-seller-to-pay-agents-20-commission-on-terminated-contract from https://kathleenlett.blogspot.com/2023/11/form-6-fight-seller-to-pay-agents-20.html from https://kathleenlett.weebly.com/blog/form-6-fight-seller-to-pay-agents-20-commission-on-terminated-contract

Sale of business interest tangled in state ACL twist https://tonybrown0.blogspot.com/2023/11/sale-of-business-interest-tangled-in.html The Australian Consumer Law scheduled to the federal Competition and Consumer Act applies to corporations engaged in trade or commerce. The Australian Consumer Law (Queensland) adopts the federal Act and applies it to non-corporations engaged in trade or commerce by operation of the state’s Fair Trading Act. Similar laws in other states likewise apply the federal Act. What hasn’t been adopted in Queensland and other states are the various qualifications that apply to the federal ACL that are buried in the Competition and Consumer Act. The significance of absence of CCA qualifiers was recently demonstrated in a dispute relating to the sale of an interest in a business where it was alleged that individuals had engaged in misleading and deceptive conduct. Zhiren Li and Baotong Liu signed up in September 2016 for the purchase an interest in Forever Exotic – an online and pop-up retailer of natural skin, health and home products – from Zoe Mikkelsen. Ms Liu had been attracted to the business because the salt lamps her daughter Scarlett had acquired from it proved successful in treating her hay fever symptoms. Mikkelsen’s husband Jan proposed the incorporation of a business of the same name with Li and Liu being issued 36 of the 100 shares in the company in exchange for $630,000. That share issue valued the business at $1.75 mil. Jan Mikkelsen claimed – according to the buyers – that the business had consistently achieved a net profit margin of approximately 30% and that for FY 2016, profit was approximately $400,000. A “profit and loss cash statement” said to contain “unadulterated figures from last year” and showing a net profit of $392k on revenue of $1.4 mil was provided by Jan to Scarlett who passed it on to the buyers. Li and Liu inked the share sale agreement Scarlett translated for them without seeking independent accounting advice. They also contributed $60,000 by way of working capital to help fund a proposed expansion into Asia. The business did not perform as the buyers claim they were led to believe it would. They sued the Mikkelsens for having engaged in conduct that was misleading or deceptive, or was likely to mislead or deceive in trade or commerce and alternatively, for negligent misstatement. The Mikkelsens defended the claims on the basis that several other financial documents – depicting lower turnover and profit – had been produced to the buyers before they signed up to the deal. BAS statements for example showed turnover reduced by 50% and profit reduced by about 25%. Business Valuation Specialist, Victoria Wheeler assessed the actual FY 2016 net profit of the business at just $23,000, 4.61% of turnover and testified that in most prior years it had sustained a loss. Jan Mikkelsen argued that another $100,000 of cash sales not recorded on their “official books” should be added to those figures. The trial judge accepted the plaintiff’s account of the profit percent representations they had relied on that had been made by Jan and that the actuals were far lower. He also ruled that although Mr Mikkelsen was not himself or herself engaged in trade or commerce, the statements in the financial documents he provided were made “in trade or commerce” because they were designed to encourage others to invest in the trading entity. The trial judge concluded that the buyers would not have proceeded with the investment had the defendants not made the representations and ordered Zoe Mikkelsen pay compensation pursuant to ACL s 236. The sum they were directed to repay was the $630,000.00 purchase price discounted by 15% by reason of s137B of the CCA to account for their contributory negligence in having failed to engage an expert accountant for due diligence. The defendants must refund the sum of $535,500.00 (plus interest) to the plaintiffs with costs. Both parties appealed. The Victorian Court of Appeal rejected the Mikkelsens’ arguments that the buyer had not relied on the inflated and erroneous profit representations. It upheld the buyers’ contention that the case should have been decided under the Australian Consumer Law (Vic) because the parties who engaged in the misleading and deceptive conduct – Mr and Mrs Mikkelsen – were natural persons. It followed that CCA 137B could not apply because there no equivalent in state ACL Acts. Thus the contributory negligence deduction to the s 236 damages was reversed and the Mikkelsens were ordered to pay the buyers the total $630,00 investment. Mikkelsen v Li [2023] VSCA 255 Ferguson CJ, Beach and McLeish JJA, 26 October 2023  from https://qldbusinesspropertylawyers.com.au/blog/sale-of-business-interest-tangled-in-state-acl-twist/ from https://qldbusinesspropertylawyers0.weebly.com/blog/sale-of-business-interest-tangled-in-state-acl-twist from https://kathleenlett.blogspot.com/2023/11/sale-of-business-interest-tangled-in.html from https://kathleenlett.weebly.com/blog/sale-of-business-interest-tangled-in-state-acl-twist

Misleading financials: cheating the ATO or deceiving his buyers? https://tonybrown0.blogspot.com/2023/09/misleading-financials-cheating-ato-or.html A business owner who provided potential buyers with impressive financial accounts that differed from the loss-making figures he had filed with the ATO has been ordered to refund the purchaser $2,150,000 of the buy price as a consequence of the misleading financials. In early 2018 Bing Hu and Cindy Qiu were investigating the potential purchase of the café business at Melbourne’s Royal Children’s Hospital that was on the market for sale for $2.5 million. They received financial statements from the seller recording annual profits of $502k in 2016 and $542k in 2017 and a projected profit of $530k for 2018. John Zhang of seller Melbourne Café Pty Ltd was firm on his price but agreed to sell the business in April 2018 to Hu and Qiu’s company H & Q Café Pty Ltd, for $2.4 million. Settlement occurred in November 2018 with the purchaser funding the buy with a loan from CBA bank. In February 2019, Qiu discovered “hidden” records on a computer that had been acquired as part of the sale indicating losses of $174k and $265k for 2016 and 2017 and a projected profit for the 2018 year of around $150,000. The “hidden” records – which had never been disclosed to the buyer – were consistent with the information provided by the Seller to be ATO. The business traded poorly and in December 2019 when it was put up for sale through a broker, the only purchase offer received was at $250,000. H & Q commenced proceedings in the Victorian County Court seeking a refund of the purchase price for the business, together with lost profits, trading losses and interest on the CBA loan. It argued that had it been informed of the true financial position of the business, it would not have entered into the deal. Zhang unsuccessfully contended that the “represented” financials depicted the correct financial position of the business and that the lodged tax returns for 2016 and 2017 were inaccurate. He was found to have destroyed documents relevant to the business’ performance pre-acquisition and to have otherwise behaved deceitfully. Zhang ultimately accepted in cross-examination the falsity of the information provided to the buyer. The trial judge also took Ms Qiu to be an untruthful and unreliable witnesses. H & Q had concealed the poor trading performance from the CBA – in fear of its reaction – and supplied them with false information indicating a net profit of $175k for the period October 2018 to June 2019. Against that background, the judge was required to assess what damage the buyer had suffered. H&Q relied on expert evidence from CFAS chartered accountant Michael Smith who arrived at a value as at the date of sale – based on the “represented” misleading financials – of between $1.75 and $2 million. Victoria Wheeler of Munday Wilkinson – for Zhang arrived at a range between $2.28 and $2.57 million. Smith valued the business on the “hidden” financials at the date of sale at nil. He also returned a nil value based on post- acquisition trading and an operating loss during H&Q’s tenure of $623k. Wheeler was not asked to provide a figure based on the “hidden” financials but her value for the café business post- acquisition came in at between $92,000 and $103,500 with an operating loss over the period of $401k. The judge was not convinced that the losses were attributable to the seller’s misleading representations. “There seems to be a myriad of reasons why the business was not operating as successfully as it had been hoped. Based on the same observations, she ruled there was insufficient evidence to assess true value of the business as at the date of acquisition. She therefore awarded only nominal damages for the buyer’s reliance on the misleading financials. On appeal, the court did not disturb the judge’s conclusions as to Qiu’ lack of credibility as they were “neither glaringly improbable nor contrary to compelling inferences”. It noted that Zhang’s evidence was “breathtakingly disingenuous”. “One is left with the distinct impression after reading the transcript that he would say anything regardless of its veracity if he perceived that it improved his position,” the court’s judgment reads. “To the ATO in 2017 the business was a loser; to the prospective purchaser it was a winner. His evidence was in exactly that vein”. Neither did they disturb the nil damages ruling in relation to operational losses since acquisition, holding that the trial judge was entitled to have concluded that those losses could have arisen for a “myriad of reasons”. The position in respect of loss on the purchase of the business was though – they ruled – “considerably different”. They had no hesitation in deciding that the true value of the business at the time that it was purchased by H & Q was either nil – based on accountant Smith’s evidence which ought to have been accepted – or $250,000 (based on the offer to purchase the business). “Doing the best it could on the evidence adduced at trial”, the court – in adopting “a common sense approach” – the value of the business at the time of acquisition was $250,000. The appeal judges assessed damages at $2,150,000, being the difference between that sum and the purchase price. H & Q Cafe Pty Ltd v Melbourne Cafe Pty Ltd & Anor [2023] VSCA 200 Niall, Kennedy JJA and J Forrest AJA, 25 August 2023 from https://qldbusinesspropertylawyers.com.au/blog/misleading-financials-cheating-the-ato-or-deceiving-his-buyers/ from https://qldbusinesspropertylawyers0.weebly.com/blog/misleading-financials-cheating-the-ato-or-deceiving-his-buyers from https://kathleenlett.blogspot.com/2023/09/misleading-financials-cheating-ato-or.html from https://kathleenlett.weebly.com/blog/misleading-financials-cheating-the-ato-or-deceiving-his-buyers

Asset lending can be unjust; compounding interest unconscionable https://tonybrown0.blogspot.com/2023/09/asset-lending-can-be-unjust-compounding.html “Asset loans” – at very high interest rates – are particularly attractive to financially distressed borrowers who are not eligible to obtain a bank loan. Those borrowers are often over-optimistic about their own capacity to make high repayments and the lender is rarely interested in that capacity as long as the asset they are putting up as security will cover what will have to be paid in the event of a default. Once the lender increases the rate – in response to Reserve Bank rises – and other ordinary living costs sharply increase, borrowers can find themselves in an inescapable trap. In August 2018, Thuc Tran Huynh and Chau Quach borrowed $140,000 from a private lender on second mortgage security over a house in Fairfield. The loan – which was to finish construction of their own home, also in Fairfield – was subject to interest at 4% per month, compounding monthly and escalating to 6% per month in the event of default. Unsurprisingly, the borrowers did not repay the principal on the due date in November 2018. Demands were issued but the mortgage was not registered until September 2019 and recovery proceedings were not filed until September 2022. Those proceedings claimed an amount which by September 2023 had escalated to almost $1.4 million of which $1.119 million was interest. In their defence, the borrowers claimed the transaction terms were absent from the documents they signed; that the interest at the higher rate of 6% per month was a penalty and unenforceable; and that the delay in enforcing the mortgage was itself unconscionable given interest was still compounding at 72% p.a. They also counterclaimed to the effect that the lender’s conduct was unconscionable pursuant to ACL s 21 on the basis that what was said to be an “Asset Lend”, was unfairly designed to increase the borrowers’ debt. Justice David Davies  sitting in the NSW Supreme Court rejected the contentions that a high rate of interest of itself made the transaction unconscionable or that asset lending per se, fall into that category. “The system of asset-based lending could have been attractive to financially distressed borrowers who were not eligible to obtain a loan in the ordinary way,” he observed. Such loans, he noted are likely to be “paid off by sale or, far more likely, refinancing”. And if interest is paid upfront, “an enquiry about whether the borrower had sufficient income to service the loan would be pointless”. He observed though that asset lending may have features that were unjust. High rates in combination with monthly compounding was a feature that in this case – he concluded – supported a finding of unconscionability, that left it open to the court to grant relief. The court altered the terms to prevent monthly compounding but allowed the lender to recover the principal plus simple interest at 6% per month, ie 72% per annum for 5 years, $504,000. This was some $600,000 less them the interest the lender claimed but still a whopping amount in comparison to the sum borrowed. The judge dismissed the argument that the interest rate particulars were missing from the mortgage documents at the time they were signed by the borrowers and the submission that the delay in instituting the recovery proceedings – thereby allowing the lender to continue to charge interest at 6% per month – was unconscionable. Ledinh Sovereign Super Pty Ltd v CT Stone Pty Ltd [2023] NSWSC 1079 Davies J, 15 September 2023 Read Case from https://qldbusinesspropertylawyers.com.au/blog/asset-lending-can-be-unjust-compounding-interest-unconscionable/ from https://qldbusinesspropertylawyers0.weebly.com/blog/asset-lending-can-be-unjust-compounding-interest-unconscionable from https://kathleenlett.blogspot.com/2023/09/asset-lending-can-be-unjust-compounding.html from https://kathleenlett.weebly.com/blog/asset-lending-can-be-unjust-compounding-interest-unconscionable

Encroachment of neighbours garage: court orders land transfer https://tonybrown0.blogspot.com/2023/09/encroachment-of-neighbours-garage-court.html Agnieszka and Pawel Wardanski’s home at 10 Cynthia Crescent, Springwood that they acquired in 2003, adjoined that of Karen Mawby and Scott Marks who acquired their residence in 2014. Neither conducted a survey to confirm the boundary line between the properties or that the boundary fence – constructed decades earlier – was in the correct position. For several years, they lived happily next door to each other, each in the mistaken belief that the fence sat precisely on the boundary. When Mawby/Marks began renovations on their property in July 2017 it was discovered in the course of a survey that the Wardanski property extended beyond the fence line and includes part of the land former believed was theirs. They kept the matter to themselves for about 12 months until they met with their neighbours to seek consent for boundary works  purportedly at the request of their builder. What they proposed was an easement that would have allowed the encroaching structures to remain but withheld the survey plan from the Wardanskis so as not to reveal the extent of the problem. Realising what was afoot, Wardanski demanded the removal of the encroaching structures – a retaining wall, garden shed, gardens and part of a garage – and for the area of land of about 9 m2 extending along the entire 30m common boundary to be surrendered. Mawby/Marks on the other hand – because of the huge costs they would incur in removing the encroachment – proposed a boundary realignment, which would allow them to acquire that part of the Wardanski land on which the encroachments stood so that those structures – and further improvements that continued to conduct – could be retained. Project manager Beverly Hollands estimated the removal cost on their behalf, at $221,013, plus GST. Wardanski then set about designing improvements – a garage – to take advantage of their newly-discovered land holding. They requested builder Kent Jenner identify the costs of that renovation as well as the estimated costs their neighbours would incur to remove the encroachment. In August 2019 with no agreement in sight, Wardanski’s lawyers demanded the neighbours ‘cease and desist’ carrying out any repairs and refurbishments to the encroaching structures. When that was largely ignored, they applied to Queensland’s Supreme Court for an order pursuant to s 185(1)(c) of the Property Law Act for the encroachments to be removed and in the alternative $185,000 for the costs of modifications to the design and construction of their garage and other losses. It was not in dispute that Mawby/Marks were liable for the encroachment notwithstanding it had been “inherited”. They contented that Wardanski never held any intentions to build a garage or deck extension and that it was simply a ‘device’ to justify removal of the encroachment. While rejecting that submission, Justice Lincoln Crowley was of the view that the plaintiffs’ insistence on the removal of the encroachment so they could build their proposed garage and their unwillingness to consider potential alternative solutions that did not involve demolishing or moving the neighbour’s garage, to have been unreasonable. He accepted the evidence of civil engineer and project manager Bradley Schaper that it is feasible for the Plaintiffs to construct an adequately sized, enclosed double car garage on their property – albeit absent the storage they desired – without removal of the neighbour’s garage. While their rejection of the neighbour’s settlement offers was a continuation of their unreasonable conduct, the judge noted the matter was not to be determined, “by deciding whose conduct has been the most virtuous”. “Whilst I am mindful that the Plaintiffs are the owners of the land and that their property rights ought not be lightly interfered with,” he ruled “it is abundantly clear in this case that the prejudice that to the Defendants – as ‘largely innocent encroachers’ – by an order for removal of the encroachment outweighs the prejudice that to the Plaintiffs if no such order were made”. He ordered that Mawby/Marks pay Wardinski $16,087.50, being three times the unimproved capital value of the land burdened by the encroachment which was to be transferred to them and $5,000, for the resulting diminution in the value of their property. There was also a retaining wall that a builder had constructed negligently on part of the Wardinski land. The court considered that to be de minimus, ie so trivial that it was of no concern. Wardinski requested in relation to any land transfer, that it be of the total 19m2 piece of land, being the area between the existing fence and the true boundary. Justice Crowley rejected that submission holding that the Court’s power under s 185(1)(b) is limited to ordering the transfer of the land over which an encroachment extends. Wardanski & Anor v Mawby & Anor [2023] QSC 136 Crowley J 18 August 2023 from https://qldbusinesspropertylawyers.com.au/blog/encroachment-of-neighbours-garage-court-orders-transfer-of-land/ from https://qldbusinesspropertylawyers0.weebly.com/blog/encroachment-of-neighbours-garage-court-orders-land-transfer from https://kathleenlett.blogspot.com/2023/09/encroachment-of-neighbours-garage-court.html from https://kathleenlett.weebly.com/blog/encroachment-of-neighbours-garage-court-orders-land-transfer

Gold coast unit owner battles for long standing exclusive use https://tonybrown0.blogspot.com/2023/09/gold-coast-unit-owner-battles-for-long.html Can the owner of a community title lot – in the absence of a formal exclusive use resolution – justify improvements constructed on adjacent common property by demonstrating they were sufficiently authorised as part of the original scheme? “Malibu” is an iconic community titles scheme in Aquila Court, Mermaid Waters on the Gold Coast established by way of a group titles plan in 1978. It is comprised by eight adjoining two-storey townhouses that each back onto a spectacular canal outlook. Over the years various lot owners made improvements in the form of decks and extensions that encroach onto common property. In mid-2018 Nicholas Hronis – who acquired his lot one year earlier – installed a security gate and an enclosed sundeck that were later ordered to be removed because of such an encroachment. After removing his additions as per the order, he retaliated  by complaining about those made by most other owners and in particular those of his immediate neighbours Stuart Tume and Talia Marques, the owners of lot 8. He argued that their rear deck backed onto the common property and their upper deck encroached into common property airspace. Moreover, the railings and balustrades associated with those structures essentially cut of all of the common property at the rear such that it was ‘exclusively occupied’ by lot 8. On Hronis’s application, the couple were ordered in June 2021 – at the height of Covid restrictions when they were stuck in New Zealand – by a Body Corporate and Community Management adjudicator to remove the patio and upper deck and to reinstate the affected rear common area lawn. They appealed the adjudicator’s decision pursuant to s 289 of the BCCM Act to the QCAT appeals tribunal. They argued that they had been denied the opportunity to provide additional material to the adjudicator for his consideration by reason of the delay they had encountered in receiving it due to the COVID lockdown. The lot 8 owners argued before Senior Member Graham Traves that the patio and upper deck were built by the original owner in about 1980 as “original components of the scheme” in accordance with the original group titles plan, architects’ drawings and a 1999 general meeting approval for the construction of the sundeck. Ms Marques also appeared in QCATA on behalf of the Body Corporate in her capacity as chairperson and presented minutes of its March 2023 AGM as submissions. Member Traves concluded that in the absence of evidence to the contrary, the adjudicator was entitled to find that the encroachments must have been made after the original construction and were not protected by any approval granted on inception of the scheme. He declined to allow the introduction of the plans etc as “fresh evidence” but agreed Tume and Marques had been denied procedural fairness by reason of the adjudicator’s “failure to circulate evidence to the parties that he had gathered and submissions he had received. Observing that QCATA is strictly required to determine the appeal on the material that was before the adjudicator, he observed it could – pursuant to s 294 of the BCCM Act – also “exercise all the jurisdiction and powers of an adjudicator under the BCCM Act” and has power under QCAT Act s 146 to set aside an adjudicator’s decision and require it to be reconsidered. With that in mind he resolved that the denial of procedural fairness constituted an error of law warranting the June 2021 decision to be set aside and the remitting of the dispute for re-consideration. Given the critical records were not accessible to the lot 8 owners at the time of the BCCM adjudication despite their reasonable effort to obtain them, he directed a re-hearing of the dispute. Member Traves also rules the adjudicator was required to consider the additional and “apparently credible” evidence that Mr Tume and Ms Marques had produced that they believe will save their patio and deck from destruction. Hronis v Body Corporate for Malibu CTS 22174 & Anor [2023] QCATA 101, Senior Member Traves from https://qldbusinesspropertylawyers.com.au/blog/gold-coast-unit-owner-battles-for-long-standing-exclusive-use/ from https://qldbusinesspropertylawyers0.weebly.com/blog/gold-coast-unit-owner-battles-for-long-standing-exclusive-use from https://kathleenlett.blogspot.com/2023/09/gold-coast-unit-owner-battles-for-long.html from https://kathleenlett.weebly.com/blog/gold-coast-unit-owner-battles-for-long-standing-exclusive-use

Court upholds agents boozy lunch site introduction commissions https://tonybrown0.blogspot.com/2023/07/court-upholds-agents-boozy-lunch-site.html A property consultant who “sourced” early learning centres for investors at a fee of $2000 per approved child place has fended off allegations he was working unlicensed as a real estate agent to recover $1.2 million in site introduction commissions. Hilton Headley – whose previous experience at Colliers, JLL, Macquarie Group, Stockland and Colorado ensured he had a wide network of industry connections – had let his commercial real estate licence lapse in May 2014. He understood the use of his personal relationships to connect experienced childcare operators such as Guardian and Kids Club Childcare with agents and developers did not require any license. At an encounter at the Woollahra Hotel with former Stockland colleague Glenn Dumbrell in September 2017, Headley told the nascent ELC developer that he was “happy to steer” further opportunities his way for the same fee he charged others in the industry. Their renewed association developed quickly. Within days, Headley provided Dumbrell and his financial backer Simon Larcombe the first deal they would consummate, a 94 place childcare centre at Hurstville. The trio discussed the terms – $2000 plus GST “per kid” with half payable on signing a lease and the balance on opening of the centre – at a “boozy lunch” over several hours at the Woollahra Hotel’s Bistro Moncur. Headley knew Larcombe as a school friend of his younger brother and hence did not seek any written confirmation of the terms. Following the execution of an agreement for lease and development approval for the Hurstville site in June 2018, Larkham’s company paid 50% of Headley’s asking fee based on a downsized occupation of 72 children. Headley sourced a further seven sites in the ACT – through Burgess Rawson’s Guy Randell – that Larcombe’s company took on. By the end of 2019 – after Headley had received close to $500,000 in first stage payments for his introductions – Larcombe became frustrated with the delays being encountered on developer compliance with DA conditions and getting the centres opened. He proposed revised payment terms for each site, ranging from $500 to $1,650 “per pax” and “drop dead” dates for premises construction to begin. Under financial pressure of his own, Headley contemplated accepting the revised terms to ensure immediate payment, actions which Larkham interpreted as acceptance. Notwithstanding payment of reduce some, Headley filed proceedings to recover his full entitlement under the original terms. Justice Rees accepted that an agreement had been reached at Bistro Moncur or shortly thereafter substantially in the terms that Headley alleged noting that such terms had been observed by Larcombe until he made his counterproposal. The judge also rejected the contention that Headley was bound by his “agreement” to accept a lower fee noting that the absence of any consideration other than that which was by its nature “illusionary”. He closely examined Headley’s activities in relation to each property that he “sourced” and concluded that the introduction of particular properties on behalf of a developer or to an investor met the requirements of “carrying on business of real estate agent”. Because he had though in respect of the ACT sites worked through Mr Randall – himself a licensed agent who conducted all of the interaction between the relevant parties – such introductions were not in the capacity “of an agent” thereby avoiding the consequences of the NSW real estate licensing requirements. That was not the case in respect of Hurstville meaning – had the first payment not be made – that Headley would have been prohibited from recovering it. That said, Justice Rees declined to order that he be required to refund it. There was no dispute in respect of the second tranche of the Hurstville fee because the deal had been abandoned and Headley had not invoiced for the balance. The court ordered that Larcombe’s company pay Headley a total of $750,000 for the further sites he had “sourced” in respect of which leases had been executed and noted that a further sum of $418,000 would be payable on the opening of three further centres. Note that in Queensland the mere “introduction” of properties to a prospective buyer, lessee or seller does not appear to be an activity that requires a real estate licence if the introducer does not engage in any negotiation. That said, courts have in the past taken a broad approach to what they considered to be “carrying on business” as a real estate agent. White Pointer Investments Pty Ltd v Creative Academy Group Pty Ltd [2023] NSWSC 817 Rees J 25 July 2023 Read case from https://qldbusinesspropertylawyers.com.au/blog/court-upholds-agents-boozy-lunch-site-introduction-commissions/ from https://qldbusinesspropertylawyers0.weebly.com/blog/court-upholds-agents-boozy-lunch-site-introduction-commissions from https://kathleenlett.blogspot.com/2023/07/court-upholds-agents-boozy-lunch-site.html from https://kathleenlett.weebly.com/blog/court-upholds-agents-boozy-lunch-site-introduction-commissions

Court declares 95% of lenders fees to be penalty charges https://tonybrown0.blogspot.com/2023/07/court-declares-95-of-lenders-fees-to-be.html In June 2022 Steve Saad borrowed $60,000 – including loan establishment fees and legals – from a private lender and entered into a loan agreement that required repayment in full within 2 months. An additional amount was advanced by lender First Cash Flow Solutions the following month to bring the total principal up to $86,000. Interest – for on time weekly payments – was at the “lower” rate of 2.15% per month but escalated to the “base” rate of 4.00% per month if overdue. Arrears were capitalised and attracted interest at the higher “base” rate. The agreement specified a raft of other charges including a $33 monthly administration fee and a payment default fee of $1,100 if sums were not received by “within 48 hours of the due date for payment”. The breach of any of the several banking covenants – whether of trivial or serious consequence to the lender – triggered other obligations. At the same time as signing up the loan agreement and a second mortgage over his home as security, Saad executed two documents waiving the right to take legal advice and to take financial advice. The borrower made his first two interest payments but thereafter went into default prompting First Cash’s termination of the arrangement in August 2022. It thereafter notified Saad he was obliged to pay additional fees by reason of the default including a “risk fee” of 2% per month on the total outstanding and a default management fee of $440 per week. After NAB sold up the property for $870,000 in April 2023, the amount left to satisfy First Cash’s second mortgage was some $14,000. It filed a summons in November 2022 to recover $142,395 which – by the time the matter came before Justice Stephen Robb in the NSW Supreme Court in May 2023 – had ballooned to $222,200 and included $136,000 in interest and charges. Notwithstanding Saad had filed no defence and did not appear at the hearing, Justice Robb required First Cash to justify its claim and to overcome the presumption that the weekly default fee – because it imposed on the borrower same cost for both serious and trivial breaches – was a penalty. While the judge was not prepared to interfere with or criticise the rates of agreed interest, he was concerned with numerous default fees claimed for each week up to judgement. He noted that the weekly interest at the “lower” rate was $428 and that same escalated to $797 on default by reference to the “base” rate. But with the additional $1,100/week payment default fee, the weekly impost rose to $1,896. This was in his view “extravagant or out of all proportion to, or unconscionable” in comparison with the damage that might be anticipated to follow from the breach. The lender’s additional administrative overhead was – after all – already compensated by the right to capitalise unpaid interest and the borrower’s indemnity for all losses. The payment default fee thus were unenforceable penalty charges. And because the “risk fee” and “default management fee” were sought to be imposed after the loan agreement had been terminated by the lender, they too were unrecoverable. His Honour left open the question as to whether those fees also constituted penalty charges. The disallowed charges were payment default fees of $57,200; “risk” fees of $15,600; and default management fees of $17,200. First Cash was restricted in its recovery to a total of $132,000 – $90,000 less than the sum claimed – which includes just $4,000 of administrative etc charges after principal and interest. First Cash Flow Solutions Pty Ltd v Saad [2023] NSWSC 686 Robb J, 22 June 2023 Read case from https://qldbusinesspropertylawyers.com.au/blog/court-declares-95-of-lenders-fees-to-be-penalty-charges/ from https://qldbusinesspropertylawyers0.weebly.com/blog/court-declares-95-of-lenders-fees-to-be-penalty-charges from https://kathleenlett.blogspot.com/2023/07/court-declares-95-of-lenders-fees-to-be.html from https://kathleenlett.weebly.com/blog/court-declares-95-of-lenders-fees-to-be-penalty-charges

Home builder defeated on supply chain & materials cost contract price increase https://tonybrown0.blogspot.com/2023/06/home-builder-defeated-on-supply-chain.html In August 2022 Charith and Hew Perera entered into a “fixed price” $645k home build contract with an anticipated start date of 9 December having earlier paid a non-refundable deposit to secure the price. Just eight weeks later builder Bold Properties Pty Ltd notified the couple that the anticipated start date would not be met – due to COVID related “shortages in various key building trades and disruptions to the industries supply chain” – and that the customer must “share the burden of the additional costs”. On those grounds it imposed a price increase of $51,342. The Pereras contested the builder’s reliance on special condition 7 which purported to allow it to “increase the contract price to the current base price of the house type”. The clause permitted it to do so at its sole discretion “in the event that commencement has not taken place by the anticipated start date”. They applied to the District Court for an order declaring the price escalation clause to be void and severing it from the contract. Judge Kenneth Barlow KC observed, when the matter came before him by way of originating application, that although the price increase was to the “current base price” of the particular house type, the contract provided no indication as to how the base price was determined. “This leaves the respondent without any real constraint or reference criteria by which a price increase may be determined,” he noted. “Rather, the respondent may fix whatever price it determines as its current base price for the house type, including a price that has no correlation to the price that it agreed to charge”. In his view, the ability to change its price without any express criteria rendered the clause void for uncertainty. The court also considered section 14 of schedule 1B of the QBCC Act that requires domestic building contracts valued over $20,000 to specify the price or “the method for calculating it” and that a prominent warning be included with brief details as to the factors that might escalate the price. The warning on this contract’s first page adjacent to the specified price stated that it was “subject to change” by reason of factors contained in various contract clauses. The “subject to change” warning did not though refer to special condition 7 which only appeared on page 10 of the contract bundle, something the judge also thought was fatal to the builder. The “indirect” reference to the special condition did not in his view meet the consumer protection objectives of the QBCC Act and was therefore void on that basis as well. The court also considered the nature and effect of the delay to the build start date. Clause 2.1 specified the building works would start “on the later of the anticipated start date or 20 working days from the day” that various prerequisites had been completed. Clause 2.7 obliged the builder to ensure that building works would start “as soon as is reasonably possible”. On 22 November Bold had notified the owners that it anticipated commencing site preparations in January and the slab pour in February. It was not in dispute that the final start work prerequisite was satisfied when Bold received building approval on 23 November. By operation of clause 2- – the judge concluded – it was therefore obliged to have commenced work as soon as possible but no later than 21 December 2022. Judge Barlow observed that although special condition 7 was impliedly meant to allow an increase in the base price to reflect costs increases since the date of contract to that date in December – it was expressed in wider terms to permit any increase which thereby also made its potential effect uncertain. The outcome has the effect of requiring Bold to build the home at the original price. Perera v Bold Properties (QLD) Pty Ltd [2023] QDC 99 Barlow KC DCJ, 12 June 2023 from https://qldbusinesspropertylawyers.com.au/blog/no-right-to-apply-price-increase-on-house-build-contract/ from https://qldbusinesspropertylawyers0.weebly.com/blog/home-builder-defeated-on-supply-chain-materials-cost-contract-price-increase from https://kathleenlett.blogspot.com/2023/06/home-builder-defeated-on-supply-chain.html from https://kathleenlett.weebly.com/blog/home-builder-defeated-on-supply-chain-materials-cost-contract-price-increase

Landlord refused to negotiate COVID relief barred from recovery of arrears https://tonybrown0.blogspot.com/2023/06/landlord-refused-to-negotiate-covid.html Landlords who refused to negotiate COVID relief with their tenants for rent relief during the emergency response period remain at risk over demands on tenants to pay arears or for having taken unlawful rent recovery action. Consider this account of a Gold Coast restauranteur who leased a Paradise Point premises just days prior to the worldwide emergence of COVID. Keiran Temple took up the space on the Esplanade for a 12-month term from 27 January 2020 with 2 options of 1 year each. Base rent was $66,000.00 p.a. with the first month free for rent but not for outgoings. During the fit-out month he fell behind and in March requested his rent payments be reduced to reflect the inevitable loss he was going to experience due to lockdown induced trade losses. The COVID Emergency Response period ran in Queensland from 29 March 2020 to 31 December 2021. The emergency regulation applying to all leases required landlords to negotiate rent relief with tenants by way of abatements and deferrals. It also prohibited recovery action and lease terminations. In April 2020 landlord Heather Penney purported to serve a notice to remedy breach of covenant demanding outstanding rent of $5,500 from 27 February 2020 to 26 April. Temple offered to forfeit the complete $35,0000 fit out he had constructed – which sum included $23,000 for his own labour – if the landlord allowed him to walk away from the lease and all arrears liabilities. Penney – who contended the premises had been handed over with an operational kitchen and restaurant – then entered into negotiations but rather than withdrawing the notice to remedy, she held it over him “like the Sword of Damocles”. After she re-took possession and changed the locks, Temple filed QCAT proceedings alleging an entitlement to damages for the invalid termination and demanding the return of his goods. QCAT has jurisdiction over restaurant lease disputes because they are retail premises but its jurisdiction to determine disputes under the emergency response regulation extended to all leases, not just those of a retail nature. The dispute was resolved in Temple’s favour but Penney appealed. When it came before the QCAT appeals tribunal, Members Robert King-Scott, Donald McBryde and Neil Judge had no hesitation in concluding the termination had been unlawful. They observed the landlord had acted in complete disregard of the emergency response regulation by failing to negotiate before precipitously serving the notice and then re-taking possession. “We find that the landlord contravened section 11 by not attempting to negotiate any reduction in rent,” they ruled. As it happened the notice of breach was also defective for numerous other reasons. It mis described the premises. And the landlord re-entered before the period specified in the notice had expired. They also found that the landlord’s entry and change of locks was unlawful, thereby entitling Temple to damages. Unfortunately for the hapless tenant, he hadn’t produced any evidence of what his losses had amounted to and had ignored numerous directions to provide hose details, thereby preventing any order being made in his favour for damages. The landlord’s claim – in excess of $130,000 for loss of past and future rent, re-letting fees and restoration costs etc – was dismissed due to her breaches of the emergency response regulation and failure to substantiate her claims. The landlord succeeded in recovering just $630 for the cost of replacement plate glass broken by the tenant. Temple v Penney (No 2) [2023] QCAT 182 King-Scott, McBryde and Judge 22 May 2023  from https://qldbusinesspropertylawyers.com.au/blog/landlord-refused-to-negotiate-covid-relief-barred-from-recovery-of-arrears/ from https://qldbusinesspropertylawyers0.weebly.com/blog/landlord-refused-to-negotiate-covid-relief-barred-from-recovery-of-arrears from https://kathleenlett.blogspot.com/2023/06/landlord-refused-to-negotiate-covid.html from https://kathleenlett.weebly.com/blog/landlord-refused-to-negotiate-covid-relief-barred-from-recovery-of-arrears

Agent gives wrong keys after settlement; buyer 7 yrs in wrong home https://tonybrown0.blogspot.com/2023/05/agent-gives-wrong-keys-after-settlement.html Little did the agent know that when he mistakenly handed over the keys of a residence that adjoined and was identical to the one a buyer had actually acquired,  he had triggered a legal storm that would erupt six years later. Nawaz Sohtra purchased the property at 54 O’Reilly Road, Tarneit on the western outskirts of Melbourne in February 2013. He then subdivided it and built two identical homes on each of the two lots. His intention was to retain No 54A on Lot 2 as a passive investment and to sell off No 54B on Lot 1. It wasn’t long before Mukesh Kumar of Reliance Real Estate found a buyer who – in June 2016 – settled on the buy of Lot 1 with vacant possession for the sum of $285,000. Shortly after settlement Mamatha Peddi and her husband arrived at Reliance’s office and were handed the keys. Sohtra also engaged Reliance to rent out the other property for him which it did successfully up until 2020. In February that year Sohtra listed No 54A with Mr Kumar’s agency for sale only to discover it had been occupied since August 2016 by Ms Peddi and then later by her tenants. He asked Kumar to contact Ms Peddi to arrange a meeting so that the matter could be discussed and resolved amicably by way of a home swap. When that plan failed, he engaged lawyers who in March 2021 also offered an amicable resolution by allowing her possession of No 54B in return for her yielding up No 54A. Her response was to claim that she was occupying the property that she had inspected prior to the purchase which – she contended – must have been misrepresented to her as the one she had signed up to buy. Sohtra persisted with his demand through his lawyers and in October 2021, changed the locks on the front door to the premises only to learn that Peddi subsequently engaged another locksmith to change them again. Notwithstanding the demands she refused to give up possession of the property. When Sohtra called on Kumar to provide an affidavit as to how the confusion about delivery of the keys after settlement arose – for use in evidence – he went to ground. Proceedings were filed by Sohtra in the Supreme Court of Victoria in October 2022 to recover possession of No 54A on the basis that as he was the registered proprietor, Peddi’s occupation was a trespass that denied him the use and enjoyment of the property. Associate Justice Derham observed – in a hearing at which Mrs & Mrs Peddi did not appear and were not legally represented – that the sale contract was not invalidated by any “omission or mistake in the description or area of the land” and that “the purchaser cannot make any objection or claim for compensation for any misdescription” following settlement. He also noted that the tort of trespass “is concerned with protecting the right to exclusive possession of land, rather than ownership….however the party with immediate right to possession may often be, and in this case is, the owner”. Peddi was – he ruled – a mere licensee under an implied licence having been let into possession by Kumar as agent of the owner by mistake. But because from at least March 2021 she knew that any implied license to occupy the premises must have elapsed, her subsequent “interference with the land” had been unauthorised. “It is clear that an order should be made for the plaintiff to recover possession of the Subject Property….. including possession of the rents and profits arising from the property,” he declared. He also ruled that Peddi should pay the owners legal costs on an indemnity basis given that she had refused “very reasonable offers to resolve the situation and properly advised, should have known she had no means of successfully defending the claim”. There is no mention in the judgement of any fallout concerning the real estate agent Mr Kumar or whether Peddi was able to recover the rents received by Sohtra on her property – No 54B – over the same period. Sohtra v Peddi [2023] VSC 262 Derham AsJ, 18 May 2023 from https://qldbusinesspropertylawyers.com.au/blog/agent-shows-buyer-wrong-home-hands-over-its-keys-after-settlement/ from https://qldbusinesspropertylawyers0.weebly.com/blog/agent-gives-wrong-keys-after-settlement-buyer-7-yrs-in-wrong-home from https://kathleenlett.blogspot.com/2023/05/agent-gives-wrong-keys-after-settlement.html from https://kathleenlett.weebly.com/blog/agent-gives-wrong-keys-after-settlement-buyer-7-yrs-in-wrong-home

UFC fitness franchisees misled; win $6 mil from franchisor https://tonybrown0.blogspot.com/2023/05/ufc-fitness-franchisees-misled-win-6.html The Australian distributor of UFC gym franchises has been dealt a blow by a court ruling that voids the sale of three locations and requires it to pay a $6,000,000 damages award. Ultimate Franchising Group Pty Ltd signed up operators for locations at Balcatta in Perth and Blacktown and Castle Hill in Sydney following a marketing campaign in early 2016. The first cab off the rank – Balcatta – came to fruition after a lengthy period of negotiation starting with a PowerPoint presentation at Perth’s Hyatt Regency Hotel in January 2016. Maz Hagemrad – UFG’s founder and one of its directors – represented in his presentation that the start-up cost was likely to be in the range of $500,000 to $800,000, depending on the floor area of the gym, inclusive of the $60,000 franchise fee. That included – he said – fit out and all equipment which of themselves were costed at between $250,000 and $350,000. Similar representations were separately made to the prospective franchisees for the other two locations albeit in different sums reflecting each locations circumstances. It turned out however the establishment costs representation was in each case, incorrect because each franchisee would be required to pay in addition for equipment and fixtures. In the case of Castle Hill, Hagemrad also convinced the franchisee that membership would likely grow by between 71 and 150 new members each month to 1272 members within 10 months of opening. A similar statement – that they would likely have 1550 members after 12 months – was made to the prospective Blacktown franchisee. Assurances were given to the Castle Hill operator that the existing UFC gyms already open were profitable when in fact both the Balcatta franchise and Blacktown franchises were anything but. Hagemrad also convinced his prospects that they would benefit from numerous “preferential arrangements” he had and was continuing to negotiate with suppliers. The franchisees – who had no other connection with each other – sued in the same action in the Federal Court for rescission of their agreements and for losses incurred during their conduct of the ill-fated operations. UFG contended when the matter came before Justice Tom Thawley in Sydney that it should be exculpated for the franchisees misunderstanding that fit out and equipment costs were included in the total set up figure. Notwithstanding the inclusion of those figures as a separate line item in the franchisor’s projection template, the judge ruled that Hagemrad had stated “the equipment is already accounted for in the initial cost estimate”. “On no occasion were they expressly told that the amount of $500,000 to $800,000 which had been discussed did not include the Life Fitness equipment,” he observedin concluding the establishment costs representations were misleading and deceptive. His intimation of “preferential agreements” was also found to be in the same category. The only arrangement in place was one with fitness equipment supplier – Life Fitness – who offered a 10% discount to UFG so it could on-sell the equipment to the franchisees at full price. “This was more in the nature of profiteering from franchisees than securing preferential agreements for them with suppliers,” Justice Thawley noted. Everything supplied to franchisees was in fact substantially marked up in price. For example, a dumbbell set cleared by customs on entry “for home consumption” had a delivered cost of $9,500 but was on sold at $27,250, a nearly 300% mark-up. Hagemrad and his wife even had an interest in another company – not disclosed to franchisees – that disguised the substantial mark-ups he was passing on. And his brother operated another company that conducted the gym fit outs and had an unsubstantiated charge of $106k that the Balcatta franchisee claimed was a kickback to Hagemrad. Suffice it to say such arrangements could not be regarded as “preferential” to franchisees. Notwithstanding they had stated in the documentation they were not relying on any franchisor representations, the court was satisfied they did rely on all the representations that were conveyed. UFG did not take any submissions pursuant to ACL s4(2) that there were reasonable grounds for making the representations that they did in relation to future matters. Even if they had, the court would have in any event concluded that there were no reasonable grounds for the representations made. The court appointed a referee to determine the losses of each franchisee by valuing them at the date of entry into the relevant franchise and determining their trading losses. His Honour declared – after a seven-day trial – each of the three franchise agreements void by reason of the franchisor’s misleading and deceptive conduct. In the case of Balcatta, damages were awarded in accordance with the referee’s calculations for start-up costs of $1,399,184; net operating losses of $423,045; borrowing costs of: $ 97,067, less the value of plant and equipment at liquidation sale ($174,480) resulting in total damages of $1,744,816. For Blacktown the total damages came to $1,906,783 and for Castle Hill, $2,352,066 using the same methodology. The case also contains some cautionary observations about the presentation of affidavit evidence from multiple parties with the same cause of action and relating to similar factual circumstances. Girchow Enterprises v Ultimate Franchising Group [2023] FCA 420, Thawley J, 5 May 2023 from https://qldbusinesspropertylawyers.com.au/blog/ufc-fitness-franchisees-misled-win-6-mil-from-franchisor/ from https://qldbusinesspropertylawyers0.weebly.com/blog/ufc-fitness-franchisees-misled-win-6-mil-from-franchisor from https://kathleenlett.blogspot.com/2023/05/ufc-fitness-franchisees-misled-win-6.html from https://kathleenlett.weebly.com/blog/ufc-fitness-franchisees-misled-win-6-mil-from-franchisor

Non-refundable deposit instalment contract: buyer drops $365k deposit https://tonybrown0.blogspot.com/2023/05/non-refundable-deposit-instalment.html A buyer who failed to settle the purchase of what was claimed to be an instalment contract has lost its bid to recover a $365,000 deposit. Newlander Development Pty Ltd signed up for the buy of a luxury residence at Pallara in May 2021 with a long settlement. The initial $30,000 deposit it paid on signing was expressed to be “non-refundable after 48-hours from the contract date” and the balance – which was payable upon the contract becoming unconditional – “non-refundable after satisfaction of due diligence”. The balance deposit was paid promptly when it became due in      but when settlement date arrived in September 2022, the buyer failed to present at settlement to pay the purchase price which resulted in the seller terminating the contract the following day and forfeiting the deposit on the basis of that failure. Newlander lodged a caveat and filed proceedings seeking specific performance, contending that the termination was unlawful in the context of an instalment contract in the absence of 30 days prior notice from the seller of its intention so to do. It argued that – given the deposits were “non-refundable” – they were payments of the type contemplated by s 71 of the Property Law Act as the buyer did not become entitled to receive a conveyance in exchange. That was particularly so – it submitted – because the “non-refundable” special condition did not include words to the effect “except in the case of the seller’s default” Sellers Jung Kyun Han and Gyu Young Chae asserted that not to be the case by operation of standard conditions 2.4 and 9.5 of the REIQ format contract. Those clauses, they argued, preserved the buyers right to sue the seller for a refund of the deposit should they have terminated the contract as a result of a seller breach. Chief Justice Helen Bowskill agreed. Because the contract had not removed Newland’s capacity to sue for recovery of the deposit in those circumstances it was not truly “non-refundable” but rather, retained the character of a deposit that was liable to be forfeited by the seller in the event of the buyer’s default. The absence of words in the special condition to the effect “except in the case of the seller’s default” did not alter that conclusion. Only if standard conditions 2.4 and 9.5 had also been modified with explanation that the deposits or one of the we not to be refundable under any circumstances whatsoever, could a deposit have the character contended for by the buyer. Chief Justice Bowskill ordered in favour of the Seller that summary judgement  be entered against the buyer that its deposit be forfeited. Newlander Development Pty Ltd v Jung Kyun Han and Anor [2023] QSC 94 Bowskill CJ 4 May 2023 from https://qldbusinesspropertylawyers.com.au/blog/non-refundable-deposit-instalment-contract-buyer-drops-365k-deposit/ from https://qldbusinesspropertylawyers0.weebly.com/blog/non-refundable-deposit-instalment-contract-buyer-drops-365k-deposit from https://kathleenlett.blogspot.com/2023/05/non-refundable-deposit-instalment.html from https://kathleenlett.weebly.com/blog/non-refundable-deposit-instalment-contract-buyer-drops-365k-deposit

Agent sues seller for commission over false higher offer claim https://tonybrown0.blogspot.com/2023/05/agent-sues-seller-for-commission-over.html A sales agent with an open listing who was denied commission on a $10 mil property when it was sold by a competitor has sued the seller for falsely stating he had received a far higher offer. Freedom Development held call options to acquire two adjoining Sydney properties entitling it to introduce a third party to exercise it and proceed to settlement. It obtained development approval for the Randwick site in September 2019 for the construction of a boarding house and engaged a number of real estate agencies to on-sell the properties. The two-year option was to expire in December 2019 but was extended for a further three-month period. With no buyers to be found it reduced its price expectations from around $14 mil to $11.5 mil and listed it widely among agents. One of the agencies to whom it provided an open listing – requiring it to pay commission if the agent “effectively introduced” a purchaser – was D’Ettorre Properties (DRE). In December 2019 Mr D’Ettorre introduced Ben Ingram and his company IFM which agreed on a $10.2 mil price and then to increase its offer to $10.33 mil to cover Freedom’s cost of extending the exercise period. The holiday period intervened and delayed the preparation and completion of paperwork for the deal. It was then that Mr Fernon of Freedom notified D’Ettorre that he had an offer from a Chinese buyer who was prepared to pay $11.33 million. The agent tried to secure a matching offer from IFM and when that didn’t occur, gave up. In February 2020 a second agent – Steffan Ippolito – conveyed a $10.35 million offer to Freedom’s Mr Fernon from Ben Ingram’s nephew John. Fernon accepted the offer – which when put on paper was from WRR Pty Ltd of which both John and Ben were directors – on the basis that Ippolito accept a reduced commission. The deal was signed up with John and Ben both providing personal guarantees to secure WRR’s performance. When D’Ettorre learned of the sale, he contacted Fernon to enquire of the identity of the buyer and was told it had been “Johnny”. When it discovered Ben’s connection to the company, DRE filed a lawsuit claiming the commission under its agency agreement on the basis that DRE had “effectively introduced” WRR to the property via Ben Ingram. DRE also claimed damages against Freedom pursuant to ACL s 18 by reason of its misleading and deceptive statements firstly that there had been an offer from a Chinese buyer at $11.3 million and secondly that the ultimate sale had been to “Johnny”. The question of whether DRE had effectively introduced the actual purchaser was key to the case. The judge at first instance agreed that DRE had – by introducing Ben to the property – established its entitlement to the $154,000 commission. Her Honour also concluded there had been no offer from the Chinese buyer at the time Fernon had claimed to have received one. Freedom and Fernon appealed. The appeal judges found that DRE had not effectively introduced the purchaser and reversed the ruling that it was entitled to commission. “Merely acquainting a director of a company with the property was an insufficient causal nexus to the ultimate sale in February 2020”, they ruled. An introduction to an individual could not – so thought the judges – amount to an introduction to a different company in its capacity as a trustee. The fact that Ben Ingham was a director of the actual purchaser and gave a guarantee was “not commensurate with him having an ownership interest directly or indirectly in the actual purchaser”. They concluded that the first representation concerning the supposed offer from the Chinese buyer was false and that it had a tendency to mislead Mr D’Ettorre into error in believing he would need to have got his buyer to substantially increase its offer to secure the property. Unfortunately though, DRE’s case was incorrectly pleaded and it did not allege that it had been denied – by reason of such misleading and deceptive conduct – the opportunity to conclude a deal with IFM. Unable to prove any loss as a result of having been misled, no damages were awarded for Fernon’s false statement concerning the Chinese buyer’s offer. Fernon’s response to Mr D’Ettorre’s enquiry as to the identity of the buyer by saying “it was Johnny” – was not in the circumstances – misleading. Freedom Development Group Pty Limited v D’Ettorre Properties Pty Limited T/as D’Ettorre Real Estate [2023] NSWCA 81 Gleeson JA Leeming JA Kirk JA, 26 April 2023 Read case from https://qldbusinesspropertylawyers.com.au/blog/agent-sues-seller-for-commission-over-false-higher-offer-claim/ from https://qldbusinesspropertylawyers0.weebly.com/blog/agent-sues-seller-for-commission-over-false-higher-offer-claim from https://kathleenlett.blogspot.com/2023/05/agent-sues-seller-for-commission-over.html from https://kathleenlett.weebly.com/blog/agent-sues-seller-for-commission-over-false-higher-offer-claim