Arete Real Estate Pty Ltd v realT Properties Pty Ltd
[2025] QCA 133
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- Unreported Judgment
- Appeal Determined (QCA)
- Arete Real Estate Pty Ltd v realT Properties Pty Ltd[2025] QCA 133
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Arete Real Estate Pty Ltd v realT Properties Pty Ltd[2025] QCA 133
Arete Real Estate Pty Ltd v realT Properties Pty Ltd[2025] QCA 133
SUPREME COURT OF QUEENSLAND
CITATION: | Arete Real Estate Pty Ltd v realT Properties Pty Ltd [2025] QCA 133 |
PARTIES: | ARETE REAL ESTATE PTY LTD (first appellant) KAREN LEANNE McDONALD (second appellant) v REALT PROPERTIES PTY LTD (respondent) |
FILE NO/S: | Appeal No 16278 of 2024 |
DIVISION: | Court of Appeal |
PROCEEDING: | General Civil Appeal |
ORIGINATING COURT: | District Court at Brisbane – [2024] QDC 180 (Kent KC DCJ) |
DELIVERED ON: | 25 July 2025 |
DELIVERED AT: | Brisbane |
HEARING DATE: | 23 May 2025 |
JUDGES: | Mullins P, Bradley JA and Callaghan J |
ORDERS: |
|
CATCHWORDS: | CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – DISCHARGE, BREACH AND DEFENCES TO ACTION FOR BREACH – REPUDIATION AND NON-PERFORMANCE – REPUDIATION – ANTICIPATORY BREACH – where the first appellant entered into a contract to purchase a rent roll comprising 46 appointments from the respondent – where the second appellant was a party to the contract as a guarantor of the first appellant’s obligations under the contract – where the Property Occupations Act 2014 dictates notice must be given by the assignee about the assignment of an appointment and that notice must include a statement that outlines the appointment may be revoked by the owner giving at least 30 days’ notice – where clause 10 of the contract contemplated an adjustment to the purchase price to reflect whether owners exercised their right of revocation of the appointment and the consequential reduction of income the appellant would receive from the appointments – where the owners of 11 properties gave notice of termination of their appointments to the respondent which meant the appointments would end within days after the due date for completion of the contract – where the first appellant purported to terminate the contract before the date for completion relying on anticipated breach due to the termination of the 11 appointments – whether the transfer of the 46 appointments was an essential term of the contract which gave rise to a right to terminate – where the respondent rejected the purported termination and was ready, willing, and able to complete the contract on the due date for completion – where the respondent commenced a proceeding seeking specific performance or, in the alternative, damages – where judgment was given against the appellants for debt and not damages for breach of contract – where there was no error in the trial judge finding the first appellant did not lawfully terminate the contract before the due date for completion – where the respondent was entitled to damages for breach of contract Property Occupations Act 2014 (Qld), s 102, s 106, s 113, s 114 Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37, cited |
COUNSEL: | L M Copley, with S L Philippou, for the appellants |
SOLICITORS: | McCarthy Durie Lawyers for the appellants |
- [1]THE COURT: The respondent realT Properties Pty Ltd as seller entered into a contract dated 15 May 2023 for the sale to the first appellant Arete Real Estate Pty Ltd as the buyer of a rent roll that comprised 46 appointments (the 46 appointments) under s 102 of the Property Occupations Act 2014 (Qld) (Act). The second appellant was a party to the contract as the guarantor of the buyer’s obligations under the contract. Completion was due on 30 June 2023. On or about 14 June 2023, the appellants became aware that owners of 11 properties had given notice of termination to the respondent which had the effect that those appointments would end within days after the date for completion. The first appellant therefore purported to terminate the contract relying on anticipated breach. The respondent rejected the notice of termination and treated the contract as continuing. The respondent was ready, willing and able to complete the contract on 30 June 2023. The appellants did not attend settlement nor make any payment to the respondent. The respondent’s claim and statement of claim seeking specific performance was filed on 18 September 2023.
- [2]The trial was conducted on the amended claim dated 18 June 2024 and the amended statement of claim. The respondent sought an order for specific performance of the contract or, alternatively, an order that the appellants pay to the respondent damages for breach of contract. The amount of damages was $258,816.63 plus interest calculated pursuant to clause 15 of the contract or the same amount plus interest less the adjusted market value of the rent roll after the application of an adjustment of the purchase price under the terms of sale to which another buyer could reasonably expected to have agreed and which the respondent could reasonably be expected to have entered into within a reasonable period of time after 30 June 2023. It was pleaded in paragraph 7D of the amended statement of claim that on 30 June 2023 the respondent had assigned to the first appellant each appointment which it held under s 102 of the Act. (That plea was inconsistent with pursuing the claim for specific performance.) The respondent pleaded in paragraph 15 of the amended statement of claim that, since 30 June 2023, it had been unable to assign to any person any of the appointments which was assigned on 30 June 2023 to the first appellant.
- [3]The trial took place on 26 and 27 August 2024. The parties were given time to file and serve written outlines at the conclusion of the evidence. In the respondent’s supplementary outline, the respondent’s counsel submitted that the respondent’s claim should properly be regarded as a claim for debt and sought leave to amend the relief sought in the claim and to make corresponding amendments to the statement of claim and for that purpose those documents were attached to the supplementary outline. Paragraphs 7D and 15 remained the same in the further amended statement of claim.
- [4]The trial judge published reasons for judgment on 12 November 2024: realT Properties Pty Ltd v Arete Real Estate Pty Ltd [2024] QDC 180 (the reasons). The orders made by the trial judge were:
“(a) Leave given to the [respondent] to amend the claim and statement of claim adding a claim in debt, in accordance with the draft attached to the [respondent’s] supplementary submissions.
- Judgment for the [respondent] on liability.
- The parties are to be heard as to
- Final assessment of quantum of the debt as reduced by the [appellants’] claim for set off;
- Interest; and
- Costs.”
- [5]After the publication of the reasons, the parties consented to the making of the following orders:
“1.The [appellants’] counterclaim is dismissed.
- The [appellants], jointly and severally, are to pay to the [respondent]:
a. $233,124.13;
b. the [respondent’s] costs, calculated on the standard basis, up to and including 5 July 2024;
c. the [respondent’s] costs, calculated on the indemnity basis, after 5 July 2024.”
- [6]An order was made by the consent of the parties in the District Court on 9 January 2025 disposing of the appellants’ application for a stay of the judgment pending the appeal upon the undertaking of the appellants to pay the judgment sum into an interest bearing bank account in the name of the respondent and upon undertakings of the respondent and its directors about not dealing with the judgment sum until further order of this Court or written agreement between the parties. The costs of the stay application were reserved pending the outcome of the appeal.
Grounds of appeal
- [7]The grounds of appeal set out in the notice of appeal are:
- The trial judge erred in law by finding that:
- the first appellant did not lawfully terminate the contract on 15 June 2023;
- the 46 appointments as property agent under the Property Occupations Act 2014 (Qld) that were subject to the contract of sale were validly assigned by the respondent to the first appellant; and
- the respondent performed all of its obligations under the contract and completion was effected;
- the appellants were indebted to the respondent as the contract completed on 30 June 2023 and the balance purchase price became due and owing as a debt;
- the respondent would succeed in its pleaded breach of contract claim as the respondent was “ready, willing and able to settle” the contract.
- The trial judge erred in law by not dealing with the counterclaim.
- [8]The respondent concedes grounds 1(b), (c) and (d) in its outline of argument filed on 12 February 2025 for the purpose of the appeal. The respondent accepts that the trial judge erred in finding (at [28] and [30] of the reasons) that the respondent had done everything in its power and everything necessary to assign the 46 appointments, they were assigned, and the respondent properly tendered performance. As the respondent now accepts that completion did not take place on 30 June 2023, despite the respondent’s being ready, willing and able to perform its obligations, the respondent also accepts that the trial judge erred (at [51] and [53] of the reasons) in finding the appellants were indebted to the respondent on the date of completion for the balance of the purchase price.
- [9]The respondent asserts that, in relation to ground 1(e), the trial judge correctly found that the respondent sought to, and did perform, all its obligations under the contract. The respondent in its written outline had submitted that the proper assessment of damages, including the point in time when damages should be assessed and what adjustments should be made for income received and expenses incurred in respect of the appointments the subject of the contract, would require evidence to be adduced and should be remitted to the trial judge for determination. By the commencement of the hearing of the appeal, however, the parties for practical reasons concerning the amount in dispute and the costs of a further hearing in the District Court had agreed on figures for two dates, if either of those dates was selected for the date of assessment of damages payable by the appellants. Those dates were 27 December 2023 and 26 August 2024. The only significance of those dates was that 27 December 2023 was the date under clause 10 of the contract (if it had been completed) for the adjustment of the final payment and at which the expert accountant had valued the rent roll. The date of 26 August 2024 was the first day of the trial. The figure calculated for damages at each of these respective dates is set out in exhibit 1 on the appeal and takes account of the income earned by the respondent from the appointments after the due date for completion until December 2024. The respondent therefore did not pursue its submission that, if the appellants were successful on the appeal, the assessment of damages should be remitted to the District Court.
- [10]As a result of these concessions, what remains in issue between the parties is limited to grounds 1(a) and (e) and 2. Both grounds 1(e) and 2 depend on the appellants’ succeeding on ground 1(a).
The contract
- [11]Under clause 1 of the contract, the respondent agreed to sell and the first appellant agreed to purchase the respondent’s rent roll for the purchase price of $287,574.04. The rent roll managed by the respondent was identified in recital C as “Annexure A”. That document was not annexed to the contract but for the purpose of the appeal the parties were agreed that the one page document that identified the 46 appointments and calculated the purchase price by applying a multiplier of 2.9 to the annual return from the fees generated from each appointment constituted Annexure A.
- [12]Clause 2 of the contract provided for completion of the purchase to be effected on 1 July 2023 or otherwise as mutually agreed. It was common ground that the parties changed the completion date to 30 June 2023. The purchase price was to be paid in accordance with clause 3 of the contract by the deposit of 10 per cent, by 80 per cent of the purchase price being paid on the date for completion, and with the remaining 10 per cent to be paid on completion to the solicitor for the respondent. That remaining 10 per cent was to be held in trust pending any adjustment made in accordance with the terms of the contract on the date that was 180 days after completion (which was calculated to be 27 December 2023 on the basis of a completion date of 30 June 2023). The remaining 10 per cent was referred to as “the final payment”.
- [13]Clause 4 of the contract specified that the rights and obligations attaching to the rent roll would pass to the first appellant upon completion. A period for due diligence was provided for in clause 5. On 6 June 2023 (which was prior to its expiry) the first appellant had confirmed that it was satisfied with its inquiries and the contract became unconditional. Clause 6 provided for the adjustment of income and expenses at the completion date. Clause 7 required the first appellant within 14 days of the date of the contract to draft new rental management agreements for each of the owners and submit them to the respondent, so that the respondent could arrange for the agreements to be signed by the owners with such notice of the sale only to be provided to the owners once the contract became unconditional. Under clause 8, the respondent was required immediately following the exchange of contracts with the first appellant to notify the owners under the 46 appointments of the respondent’s intention to sell the rent roll to the first appellant and, following such notice, submit the new rental management agreements received from the first appellant. Clause 10 of the contract which was referred to as the retention clause provided:
“On the day 180 days after completion an accounting will be taken to determine whether all properties the subject of the sale are still managed by the buyer. If some properties are no longer managed by the buyer due to no fault/error on the part of the buyer then, unless they have been replaced by other property of the same lessor, an adjustment of the final payment will be made to reflect the consequential reduction in the income to the buyer used to calculate the price. The adjustment shall never exceed the final payment and shall be calculated by deducting from the final payment the quantum of the reduction in income times two, less any income received by the buyer prior to loss of the management. The adjustment shall constitute a deemed reduction in the purchase price.”
- [14]Consistent with the potential for the adjustment to the purchase price under the retention clause, clause 11 contained a covenant by the first appellant that from and after the date of completion “to faithfully and conscientiously perform and observe the obligations and responsibilities of a managing agent in respect of the properties” having regard to standard practices. Clause 12 of the contract provided for the circumstance that if the first appellant sold “any right to commission in respect of any of the properties in the rent roll on or before the date of final payment” then the first appellant would not be entitled to any adjustment under clause 10 in relation to that appointment. Clause 13 was an “entire agreement” clause relating to the sale of the rent roll. Clause 15 provided for interest to be paid by the first appellant on any amount payable by the first appellant under the contract that had not been paid by the due date at the rate of 10 per cent per annum calculated from the due date for payment until the actual date of payment.
The nature of each appointment
- [15]The nature of the subject matter of the contract is relevant for the purpose of construing the contract. Each appointment of a resident letting agent must comply with s 102(4) of the Act. (The version of the Act which is relevant for this appeal is the version that was current at 30 June 2023.) There is a mandatory requirement under s 106(2) of the Act that the appointment must state, in writing, that the appointment may be revoked by either party giving the other party at least 30 days written notice of the revocation, unless the parties agree, in writing, to an earlier date for the appointment to end. The appointment is assignable under s 113 of the Act. It is mandatory under s 113(3) that the notice given by the assignee about the assignment of the appointment must include a statement that reflects s 106(2) that the appointment may be revoked by the owner by giving at least 30 days written notice of the revocation to the assignee, unless the owner and the assignee agree, in writing, to an earlier date for the appointment to end. Consistent with s 106(2) and s 113(3) of the Act, s 114(1) provides that the appointment is revocable by either party giving the other party at least 30 days written notice of the revocation, unless the parties agree, in writing, to an earlier date for the appointment to end. There was no challenge on this appeal to the trial judge’s explanation (at [21] of the reasons) as to the nature of the appointments which reflects these provisions of the Act:
“Appointments can be terminated at any time, without reason, by 30 days’ notice under section 114 of the Act. However under s 102[3](b) and s 113, the agent (here, the [respondent]) may assign such an appointment during its continuation in force for the 30 day notice period - the agent still ‘holds’ the appointment during this period, as set out in s 113 - and the obligation then passes to the assignee to, in effect, complete the assignment by giving written notices thereof within 14 days ‘after the assignment’. This suggests that the assignment occurs when the assignor performs the act of assignment; although, unhelpfully, there is no prescribed form for the assignment. The nature of this statutory assignment is of a particular kind (distinct from and containing different elements from assignment at common law or equity). It creates the position where the existing appointment is then taken to be an appointment by the landlord client of the assignee; this occurred here, to the assignee’s benefit. The assignee could thereafter collect rents and charge commission as if appointed by the client, which, by operation of the statute, in effect it was.”
- [16]Even though each of the 46 appointments that constituted the rent roll was sold by the respondent as a right or interest belonging to the respondent, each appointment had the inherent characteristic that a resident letting agent has no control over when or whether the owner of the residence decides (without having to specify a reason) to terminate the appointment on 30 days’ notice. Obviously, the agent could influence the owner’s decision, if the manner in which the agent provided the property services under the appointment satisfied the owners.
Ground 1(a) – Did the trial judge err by finding the first appellant did not lawfully terminate the contract of 15 June 2023?
- [17]The appellants’ primary submission on ground 1(a) depends on a construction of the contract that the transfer of the 46 appointments was an essential term of the contract which gave rise to a right to terminate when the respondent could not assign 11 of the appointments on the completion date. The appellants also had an alternative submission that, if the obligation to assign the 46 appointments was not essential, it was a sufficiently serious breach of a non-essential term which also gave rise to a right to terminate. For both submissions the appellants argued that the respondent was in breach of the contract when the owners of the properties for 11 of the 46 appointments had given notice on either 6 or 7 June 2023 revoking those appointments.
- [18]The contract was a commercial contract between parties who were, as noted by the trial judge (at [12] of the reasons), experienced in real estate and the first appellant had purchased rent rolls previously. The contract must be construed objectively having regard to the text, context and purpose of the transaction: Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104 at [46]. The nature of the appointments meant that it was in the contemplation of the parties at the time of entry into the contract that there was a possibility that any of the owners of the residential properties may exercise their right of revocation of the appointment. One way in which the parties addressed that risk by the terms of the contract was to provide for a due diligence period that expired less than 30 days before the completion date. The parties also addressed that risk by providing for the final payment of 10 per cent of the purchase price to be held by the respondent’s solicitor pending any adjustment under the retention clause as a result of the assignment of any of the appointments taking effect before 27 December 2023, provided the adjustment did not exceed the final payment. The risk that was assumed by the respondent of any of the appointments being revoked before 27 December 2023 was limited to the quantum of the final payment. The parties dealt with the risk of more appointments being assigned than would warrant an adjustment of no more than the final payment by leaving that risk to be borne by the first appellant. That is consistent with the obligation assumed by the first appellant under clause 11. The rationale for such a provision is that the carrying out by the resident letting agent of the services provided under the appointment to the acceptable standard provided for in clause 11 should minimise the revocations of the appointments before the date for adjustment of the final payment under clause 10. It is inconsistent with the adjustment mechanism provided for under the retention clause, and the further provisions in clauses 11 and 12, to imply a term that it was essential that all (or almost all) of the 46 appointments would remain extant at the completion date.
- [19]The appellants submit that the respondent could not assign the 11 appointments to the first appellant on the date for completion because the respective owners had revoked the appointments. As the revocations did not take effect until after the due date for completion and the 11 appointments would only remain in force for six or seven days after that date, they were able to be assigned from the respondent to the first appellant and would remain operative for that period after the date for completion. The appellants also argued that those 11 appointments would have been extended by operation of the notice given under s 113(3) of the Act which would have required 30 days’ notice of revocation to be given to the first appellant as the assignee. Even though any notice under s 113(3) would have included the statement about the right of the owner to revoke the appointment in favour of the assignee, that was meaningless when the notice of revocation had already been given and it was the notice period that was still running. As contemplated by s 113, the assignment of an appointment does not change the terms (or status) of the existing appointment other than by substituting the assignee and the assignee’s details for those of the assignor.
- [20]The appellants had no right to terminate the contract on 15 June 2023, when they became aware that the assignment of 11 of the appointments would take effect after the completion date. The appellants cannot succeed on ground 1(a). There was no error in the trial judge’s finding that the first appellant did not lawfully terminate the contract on 15 June 2023. It follows that the appellants also cannot succeed on ground 1(e) or 2. The appellants breached the contract in failing to complete on 30 June 2023 and the respondent is entitled to damages for breach of contract.
What date is more appropriate for assessing the damages?
- [21]When the first appellant failed to complete the purchase of the rent roll on 30 June 2023, the respondent elected to pursue the relief of specific performance or, in the alternative, damages for breach of contract. It was not unreasonable for the respondent in the first instance to pursue the claim for specific performance and the proceeding in the District Court was commenced in a relatively timely way. That disposes of the alternative dates of the due date for completion and 8 July 2023 put forward by the appellants for the assessment of the damages for breach of contract. The trial commenced about 11 months after the commencement of the proceeding. This could not be characterised as an unreasonable delay. By the amended statement of claim, the respondent continued to pursue the claim for specific performance (despite the inconsistencies within that pleading). As a result of the respondent’s submissions after the evidence at the trial concluded, the respondent elected to pursue a judgment for debt on the basis that the appellants did not pay the respondent 80 per cent of the purchase price on the due date for completion.
- [22]Of the two dates for which calculations were provided to this Court for the purpose of assessing the damages, the date of 26 August 2024, which is closer to the date on which the respondent, in effect, elected to forego the claim for specific performance and pursue a debt claim is therefore more appropriate for assessing the damages for breach of contract. On the basis of the figure provided for in exhibit 1, the appellants must pay the respondent damages for breach of contract assessed as at 26 August 2024 in the sum of $104,678.
Orders
- [23]During the hearing of the appeal, both parties requested that they be heard on the issue of costs after the Court’s reasons are published. Both parties in the proceeding took unsustainable positions that complicated the determination of the respondent’s claims. The appellants’ construction of the contract prompted them to assert anticipatory breach by the respondent and wrongfully to refuse to complete the purchase. This was compounded by the ultimate position taken by the respondent for the purpose of the trial, which was inconsistent with seeking specific performance (namely that the assignments of the 46 appointments from the respondent to the first appellant had been effected on the date for completion). These complications will no doubt be explored by the parties in their submissions on costs.
- [24]The question of interest on the amount of damages payable by the appellants to the respondent is affected by the operation of the consent order in respect of the holding of the judgment sum in an interest bearing account pending the outcome of the appeal.
- [25]The following orders should therefore be made:
- Appeal allowed.
- Set aside order 2 made by the trial judge on 9 December 2024.
- The appellants must pay the respondent damages for breach of contract assessed as at 26 August 2024 in the sum of $104,678.
- The costs of the proceeding in the District Court and the appeal and the question of the calculation of the interest to be paid on the damages are reserved to be determined on the papers.
- Each party’s written submissions on costs and interest must be filed and served within 10 business days of the date of publication of the reasons and must not exceed three A4 pages.