Developer found to have breached its implied contractual obligation to cooperate

In Brightman & Ors v Royal Pines Projects Pty Ltd [2024] QSC 149, the Supreme Court of Queensland applied the implied contractual duty to cooperate in the context of an “off the plan” apartment purchase from a developer.

The background

23 buyers commenced proceedings against Royal Pines Projects (the developer), asking the court to rule that the developer must allow sufficient time for their appointed valuers to access the properties in time to complete their valuations prior to settlement. The buyers also sought injunctive relief to prevent the developer from terminating the contracts on the basis of the buyers’ failure to settle on time.

In order to obtain finance and effect settlement, the buyers needed access to the apartments to obtain a valuation. However, the developer refused and delayed access to the properties. Instead, following the request, the developer fixed a settlement time, giving the buyers 14 days to settle.

The delay caused by the developer resulted in half of that notice period being lost as the buyers only had 7 days from inspection to settlement. This meant that the buyers were unable to obtain finance in time for settlement. The developer then exercised their contractual right to terminate. The buyers argued that the developer’s delay in allowing access was a breach of the developer’s implied obligation to cooperate under the contract.

The decision

Justice Applegarth stated:

The central question was whether the contract, having no “subject to finance” clause, required the developer to cooperate in respect of the buyers obtaining finance to perform at settlement by permitting access to the properties for the purposes of obtaining a valuation.

Justice Applegarth stated that the use of loans by an “overwhelming majority” of property buyers to finance their purchase is “notorious”, and that the developer would have therefore known that the buyers would need to obtain finance.

Justice Applegarth determined that the relevant benefits promised by the developer were:

1. being able to settle the contract and gain title after obtaining the finance necessary to complete and tendering it on a settlement date fixed in accordance with the contract;
2. having a full 14 clear days after the notice of settlement to arrange the things necessary to settle; and
3. the time at which the settlement notice is given be reasonably determined by the developer.

It was reasonable to conclude that, when the contract was formed, the parties contemplated that the buyers would need to obtain finance to complete the contract, and the lender would require a valuation of the completed apartments before the finance would be provided.

Additionally, it was found that the contract actually contemplated that the buyer would require finance.

The absence of a “subject to finance” clause was not a proper answer to the buyers’ case, nor did it alter the fact that finance was necessary for the buyers to perform the contract. The contract was construed so that the buyers would not be frustrated by the developer hampering the buyers' performance of their obligation to have obtained finance at settlement.

Expressed in practical terms, the implied duty to cooperate was to allow access for a valuation so finance could be obtained prior to settlement. The contract implicitly promised that the buyers would be given the opportunity to obtain finance during the 14 days following the settlement notice. This is so the buyers were able to pay the purchase price, which was their central obligation. The implication was necessary for the buyers’ performance of the contract and their enjoyment of the rights and benefits it conferred.

The developer did not allow sufficient or reasonable time for the valuations to be completed and for finance to be provided for the purpose of settlement. The buyers’ performance of their obligation to settle on time was hindered by the developer. The developer therefore breached the implied duty.

Further, the developer was not entitled to rely on its own breach in asserting a breach by the buyers for not settling the contract on time. Applying this “prevention principle”, Justice Applegarth held that the developer was not entitled to call for completion on the date it fixed for settlement.

Appeal

The seller appealed in Royal Pines Projects Pty Ltd v Brightman [2024] QCA 147, but the appeal was dismissed with costs. In upholding the trial Judge’s interpretation of the contract and decision, the Court of Appeal additionally noted that:

This decision underscores the importance of the implied contractual duty to cooperate, particularly in the context of property purchases where buyers rely on external financing. Justice Applegarth's findings emphasise that a developer cannot hinder a buyer's ability to obtain finance by delaying access to the property for valuation, as doing so would frustrate the buyer's performance of their obligations under the contract. The Court of Appeal affirming this decision further solidifies the principle that parties must act reasonably to give full effect to the contractual terms and the benefits each party is meant to receive. This case serves as a reminder that developers cannot rely on their own breaches to justify terminating contracts when such actions impede buyers from fulfilling their obligations.