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Matos v JLF Corporation Pty Ltd[2016] QSC 32

Matos v JLF Corporation Pty Ltd[2016] QSC 32

 

SUPREME COURT OF QUEENSLAND

 

CITATION:

Matos v JLF Corporation Pty Ltd [2016] QSC 32

PARTIES:

JOEL MARIO MATOS

(applicant)

v

JLF CORPORATION PTY LTD
ACN 010 231 222

(respondent)

FILE NO:

SC No 1489 of 2015

DIVISION:

Trial Division

PROCEEDING:

Originating Application

ORIGINATING COURT:

Supreme Court at Brisbane

DELIVERED ON:

4 March 2016

DELIVERED AT:

Brisbane

HEARING DATE:

23 February 2016

JUDGE:

Ann Lyons J

ORDER:

  1. I will hear from the parties as to the precise form of orders and as to costs.

CATCHWORDS:

CONTRACTS – PARTICULAR PARTIES – VENDOR AND PURCHASER – GUARANTEES CONTAINED IN CONTRACTS AND COLLATERAL PROMISES – where the applicant purchased property off the plan from the respondent – where the applicant and the respondent entered into a put option agreement whereby the respondent agreed to purchase back the property if the applicant sent a contract contained in a schedule prior to a certain date – where the applicant sought to exercise the put option – where the contract contained in the schedule was a standard form REIQ contract – where the applicant used the most up-to-date REIQ contract in lieu of the contract attached to the put option – where the respondent did not sign the contract or acknowledge the applicant’s exercising the put option – where the respondent engaged two building inspectors without the applicant’s knowledge or consent – where the respondent alleges that the applicant breached the terms of the put option agreement, the contract for sale, and an equitable duty to keep the property in good repair and condition – whether the put option agreement was validly exercised by the applicant – whether specific performance should be ordered

CONVEYANCING – THE CONTRACT AND CONDITIONS OF SALE – OTHER PARTICULAR CONDITIONS – OTHER CASES – where the applicant purchased property off the plan from the respondent – where the applicant and the respondent entered into a put option agreement whereby the respondent agreed to purchase back the property if the applicant sent a contract contained in a schedule prior to a certain date – where the applicant sought to exercise the put option – where the contract contained in the schedule was a standard form REIQ contract – where the applicant used the most up-to-date REIQ contract in lieu of the contract attached to the put option – where the respondent did not sign the contract or acknowledge the applicant’s exercising the put option – where the respondent engaged two building inspectors without the applicant’s knowledge or consent – where the respondent alleges that the applicant breached the terms of the put option agreement, the contract for sale, and an equitable duty to keep the property in good repair and condition – whether the put option agreement was validly exercised by the applicant – whether specific performance should be ordered

CONVEYANCING – OPTIONS – where the applicant purchased property off the plan from the respondent – where the applicant and the respondent entered into a put option agreement whereby the respondent agreed to purchase back the property if the applicant sent a contract contained in a schedule prior to a certain date – where the applicant sought to exercise the put option – where the contract contained in the schedule was a standard form REIQ contract – where the applicant used the most up-to-date REIQ contract in lieu of the contract attached to the put option – where the respondent did not sign the contract or acknowledge the applicant’s exercising the put option – where the respondent engaged two building inspectors without the applicant’s knowledge or consent – where the respondent alleges that the applicant breached the terms of the put option agreement, the contract for sale, and an equitable duty to keep the property in good repair and condition – whether the put option agreement was validly exercised by the applicant – whether specific performance should be ordered

Clarke v Ramuz [1891] 2 QB 456, cited

Jensen v Jeffery [1957] NZLR 159, cited

Leighton Properties Pty Ltd v Hurley [1984] 2 Qd R 534, cited

Phillips Fox (a firm) v Westgold Resources NL [2000] WASCA 85, applied

Quadling v Robinson (1976) 137 CLR 192; [1976] HCA 31, considered

COUNSEL:

A Harding for the applicant

P D Hay for the respondent

SOLICITORS:

Macpherson Kelley Lawyers for the applicant

Hartnett Lawyers for the respondent

The issue

  1. The applicant argues that he validly exercised a put option on 16 December 2014 and that the respondent is now bound to purchase his property. He seeks a declaration that the option has been validly exercised and an order for specific performance of the signed contract. The respondent argues however that the put option agreement required the applicant to sign a contract in the form of the eighth edition of the Standard REIQ Contract but as the signed contract was the tenth edition of the Standard REIQ Contract the put option has not been validly exercised.

The purchase of the property “off the plan” in 2011

  1. The respondent, JLF Corporation Pty Ltd, is part of the JLF Group which is a privately owned property services provider which integrates property development and property marketing.
  2. The affidavit material[1] indicates that the JLF Group encompasses 26 separate entities, including Custodian Cunningham Rise Syndicate Limited as well as Custodian WealthBuilders. Custodian WealthBuilders offers investors residential investment properties. The JLF Group was established by John Fitzgerald in 1981. He is the current CEO of the group.
  3. On 14 October 2011 the applicant bought property off the plan from the JLF Corporation Pty Ltd trading as “Custodian WealthBuilders” (“CWB”).[2] The “Development Agreement” (“Development Agreement”) entered into on that date provides that the applicant was purchasing land for $199,000 with a house to be constructed on the land for $210,000, for a total price of $409,000. That Development Agreement provided at clause 6.1(c) that CWB would provide the “Custodian Care Programme” and at 6.1(e) would provide the “Custodian House and Garden Care Service”.
  4. The applicant became the registered owner of the property on 5 January 2012. At around the time of settlement of that contract in early 2012, the respondent entered into a put option agreement (“Agreement”) with the applicant. A copy of the Agreement was sent to the applicant under the cover of a letter dated 10 February 2012.
  5. The put option expiry date stated in the Agreement was 3.00 pm on 31 December 2014 with the settlement date specified to be 31 December 2015.
  6. The house was completed with the handover of the property on 3 August 2012. The applicant states that he was advised by the respondent that Ray White Aspley Real Estate would manage the property. Ray White placed tenants into the property on that date and the original tenants are still in occupation. Ray White has managed the property since that date.
  7. The applicant also states that he retained Custodian House and Garden Care Service to maintain the grounds and garden of the property on the recommendation of the JLF Group and that entity still maintains the property.
  8. On 2 September 2014, the CEO of the JLF Group wrote[3] to the applicant confirming that he had a right to exercise the put option but pointing out that land prices had increased due to the City Council’s “dual occupancy policy” which might be subject to change. The applicant was then asked to complete a form indicating whether he wished to elect to proceed with exercising the option and to the respondent lodging a dual occupancy application in the respondent’s name as follows:

“Buyback Option

In regards to your 995m2 property in Goodna, we are aware that you have the choice to elect the buyback option before 31 December 2014. We would appreciate your early advice on this matter.

…

You have the right to sell your property back to us, but irrespective of this, and to protect the property’s current value, we should endeavour to obtain dual occupancy approval as soon as possible. We are happy to lodge the application at our expense and on your behalf.”

  1. On 9 September 2014, the applicant completed that form, signed it and returned it to the respondent indicating that he intended to proceed with the buyback option and that he consented to JLF lodging a dual occupancy application in JLF’s name.[4]
  2. On 16 December 2014 the applicant’s solicitors wrote to the respondent enclosing copies of a written notice signed by the applicant and dated 11 December 2014 together with two copies of a signed contract to the respondent company. That letter was addressed to general counsel at JLF Corporation in the following terms:[5]

“PURCHASE FROM MATOS

PROPERTY: LOT 310 CUNNINGHAM RISE ESTATE, GOODNA

Please find enclosed:

  1. Put Option Exercise Notice; and
  1. Contract for Sale signed by the Seller.

Once the contract has been signed and dated by the Buyer please forward a copy to this office.”

  1. Between 27 January 2015 and September 2015 the applicant’s solicitors sought a copy of the “fully signed and dated Contract” from the respondent as buyer on a number of occasions without a response. On 21 September 2015 the solicitors for the applicant sent a further email seeking a copy of the signed contract, to general counsel for the JLF Group. He replied in the following terms.[6]

“We’ll attend to this in due course, well before the settlement date.”

  1. The applicant also deposes[7] that between March and October 2015 he received a number of phone calls from a representative of the respondent “pursuant to which the Respondent offered me cash payments that varied between $20,000.00 and $75,000.00 on condition that I keep the Property and not proceed with the sale pursuant to the Put Option.” He also outlined other proposals from the respondent to appoint agents to sell the property on his behalf.
  2. The settlement date was 31 December 2015 and on 26 October 2015 the solicitors for the applicant emailed general counsel for the respondent stating that all correspondence in relation to the settlement was to be directed to them and that they looked forward to receiving the fully executed contract.[8]
  3. On 6 November 2015 the respondent organised a building and pest inspection at the property without the applicant’s knowledge or consent. On 11 November 2015 general counsel for the respondent wrote to the applicant’s solicitors and referred to the Agreement and stated that the applicant had “a number of obligations in relation to the Agreement, understandably we require your compliance with these. Generally speaking, the building inspection report, a copy of which is enclosed, has found the property to be in a Below Average overall condition and has identified a large number of defects that require immediate rectification.” Notice was then given in accordance with clause 4.1(a) of the Agreement requiring rectification within 14 days.[9]
  4. Correspondence then ensued between the solicitors for the applicant and the respondent and a further building and pest inspection was conducted on 26 November 2015. On the same day the respondent wrote to the solicitors for the applicant stating that there had been a “complete and total failure” to maintain the property and to remedy the default as required by the Agreement. The letter then stated that “in accordance with clause 4.2 of the Agreement, JLF hereby gives written notice of the termination of the Put Option Agreement. The contract is now at an end.”[10]
  5. The applicant seeks a declaration that on 16 December 2014 he validly exercised the put option and an order for specific performance of that contract pursuant to the application filed on 10 February 2016.

The put option

  1. The Agreement[11] sent by the respondent to the applicant in February 2012, specifically provides that it is an Agreement between the applicant Joel Mario Matos as “Owner” and JLF Corporation Pty Ltd whereby “JLF grants Owner an option to sell the Property to JLF (‘Put Option’).” The “Purchase Price” is defined as “the sum of $509,000 – being the sum of $100,000 more than the owner paid for the Property”.
  2. Clause 1 of the Agreement is titled “Definitions and Interpretations”. The term “Agreement” is then defined as meaning “this document, including any schedule or annexure to it” and the term “Contract” is separately defined as meaning “a contract in the form of contract in Schedule 1”(my emphasis). The contract in Schedule 1 was the eighth edition of standard REIQ/Queensland Law Society Approved Contract.
  3. Clause 2 of the Agreement is titled “Grant of Put Option”. Clause 2.1 provides that “JLF acknowledges receipt of a put option fee of $1.00 from the Owner.” Clause 2.2 then provides as follows:

Clause 2.2:

“In consideration of the put option fee, JLF grants to Owner an option to sell the Property to JLF on the terms set out in the Contract, for the Purchase Price, with settlement of the sale and purchase to be effected on the Settlement Date and subject to the other provisions of this Agreement.”

Clause 2.3:

“The Put Option is irrevocable until 3 p.m. on the Put Option Expiry Date.”

Clause 2.4:

“The Put Option may be exercised from 9.00am on 1 December 2014 until the Put Option Expiry Date by the Owner delivering to JLF two (2) copies of the Contract, duly signed by Owner, to which a PAMD Form 30c is attached as the top page and with the following details completed in the Reference Schedule:

A.the full name and address of the Owner under ‘Seller’;

B.the address, description and other particulars of the Property under ‘Property’;

C.the tenants name, term and options, rent and name and address of the managing agent and other particulars under ‘Matters Affecting the Property’; and

D.the Purchase Price under ‘Purchase Price’. (my emphasis)

  1. The “Put Option Expiry Date” is defined in clause 1.1 as meaning “31 December 2014”.

Has the applicant validly exercised the put option?

  1. The respondent argues that the contract which was completed by the applicant and forwarded under cover of letter of 16 December 2014 was in the wrong form given it was the tenth edition of the REIQ Standard Form Contract and not the eighth edition, which was attached in schedule 1 of the Agreement. The respondent argues that there are differences between the two editions and that some of the terms in the eighth edition are altered in the tenth edition as utilised by the applicant. In particular the eighth edition was such that the PAMD Form 30c (constituting a warning statement) needed to be attached to the front cover of the contract whereas the tenth edition incorporated the PAMD Form 30c requirements within the contract.
  2. In this regard I note that in the tenth edition the new terms deal with the suspension of time at clause 6.2 in relation to a natural disaster and new calculations in relation to land tax at clause 2.6(4)(b). Both of these terms affect buyers and sellers equally. The other new clauses, however, impose more stringent requirements on a seller (the applicant). In relation to payments and adjustments at clause at 2.6(14) and (15) a seller cannot require payment other than by bank cheque without the buyer’s consent and a seller, on request from a buyer, must provide a written statement in relation to rent and outgoings. The new clauses at 8.3(2) and (3) also impose obligations on the seller after the contract date. 
  3. The respondent argues that the applicant has not exercised the option in accordance with the Agreement because it was not in the precise terms required by the Agreement and that strict compliance is required.
  4. In Quadling v Robinson[12] Gibbs J had held that “the exercise of an option, to be valid, must have been absolute and unqualified and must have bound the respondents to perform the very terms set out in the option.” There is no doubt in this case that the letter of 16 December 2014 was clear in its terms and stated that the signed put option notice was enclosed. Did it bind the respondents to perform the very terms as set out in the option given that there was no PAMD Form attached and the fact that a newer version of the Standard REIQ Contract had been signed?
  5. In Phillips Fox (a firm) v Westgold Resources NL[13] Owen J (agreeing with White J) referred to the necessity for there to be strict compliance with the form of the required notice as follows:

“[9]There are two additional factors that have not been mentioned or emphasised and which, in my view, lend support to the trial Judge’s conclusion that strict compliance with the exercise regime was required.  The first is that this is a put option. I think it is fair to say that the put option is a relatively strange species of transaction. In the property ownership and transfer structure that has been developed in the Western world it is unusual for a person to be forced to take ownership of property. Even in relation to gifts, settlements and testamentary transactions the grantee or beneficiary can disclaim property. This is not so in relation to a put option. This makes it even more amenable to the concepts implicit in the dicta of Lord Greene MR in Hankey v Clavering [1942] 2 KB 326 at 329, which both the trial Judge and White J have set out.

[10]The second point relates to the form of the notice set out in the schedule to the Deed. One thing that is noticeable about the form is that it is quite prescriptive and complete. Apart from the date of the Deed itself, the only “blank” is for the number of shares in St Barbara Mines Ltd in respect of which the put option is to be exercised. This is not surprising as cl2 and cl3 of the Deed contemplate that the option could be exercised in respect of all or some of the 20,000,000 shares that were the subject of the arrangement. The relative completeness of the form tends to suggest that the parties intended that the text and content of the form was more than merely a guide to, or example of the means by which the intention to exercise the option should be notified to the other party.

[11]If it be the case, as I think it is, that strict compliance was necessary it is difficult to resist the conclusion that the letter sent by the Bank to Westgold at about 6.30 pm on 30 June 1998 was ineffective as an exercise of the option. As the trial Judge commented, the disconformity was not trivial and neither was it the result of a slip.”

  1. In Westgold, White J quoted, with apparent approval, the judge at first instance who formulated the question before the Court as follows:[14]

“Therefore the big question in this case is whether strict compliance with the mode of exercise which is stipulated in the option deed was the only way the option could be exercised. In particular ought the form of notice of exercise which is scheduled to the deed have been followed; and ought the notice to have contained the information provided for in the form? Or does this option fall into the category of cases in which all that is required is an expression of intention to exercise the option?”

  1. When one considers the terms of the Agreement here the first question which must be answered is what was the intention of the parties at the time the Agreement was entered into? What was the mode of exercise which was stipulated? Was it that it was the actual eighth edition of the Standard REIQ Contract that had to be signed or was it that the current version of the Standard REIQ Contract at the time the option was exercised had to be signed? I note that the clause simply says “Contract means a contract in the form of contract in schedule 1” not “Contract means a contract contained in the eighth edition of the Standard REIQ Contract”.
  2. It cannot be ignored that the contract in the Schedule was simply the Standard REIQ Form and it contained no special conditions.  The contract related to a standard residential land transaction. The original contract for the purchase of the property was entered into in 2011 and the put option was exercised some three years later in 2014. It would seem to me that there is a good argument given that lapse of time, that the intention of the parties was that it was the version of the Standard REIQ Contract in use at the time of exercise of the option which was to be used.
  3. However the respondent also argues that it had to be the eighth edition because of the requirement in the Agreement at Clause 2.4 that two copies of the Contract had to be delivered “duly signed by the Owner, to which a PAMD Form 30c is attached as the top page, and with the following details completed in the Reference Schedule:

A.the full name and address of the Owner under ‘Seller’;

B.the address, description and other particulars of the Property under ‘Property’;

C.the tenants name, term and options, rent and name and address of the managing agent and other particulars under ‘Matters Affecting the Property’; and

D.the Purchase Price under ‘Purchase Price’.”

  1. The respondent, in its oral submissions, also relied on clause 1.2(f) contained under the heading “Interpretation” where it states: “a reference to a PAMD Form means that form as approved from time to time in accordance with section 598 of the Property Agents and Motor Dealers Act 2000 and includes other forms which replace renumber or amend it.” The respondent submits the parties, by virtue of the Agreement, intended that the PAMD Form was to be used and this would have been the most up-to-date PAMD Form available. However no PAMD Form 30c was attached to the signed contract forwarded on 16 December 2014 and the respondent argues that this reinforces the argument that the put option has not been validly exercised.
  2. The argument would also seem to be that because an updated Form 30c was specifically envisaged by the Agreement but there was no reference to an updated Contract Form then the eight edition had to be used and not an up to date REIQ contract .
  3. The respondent also submits that Clause 2.3, which states that the option was irrevocable, evinces an intention on the parties that the terms of the Agreement would not change.
  4. It is clear that a PAMD Form 30c was not delivered as a separate document. The tenth edition incorporated those warnings and notices into the contract itself. This was because the Property Agents and Motor Dealers Act 2000 (Qld) was repealed on 1 December 2014 and was replaced by the Property Occupations Act 2014 (Qld). The Property Occupations Act 2014 (Qld) removed the need to attach a separate warning statement in the form of PAMD Form 30c to the contract. Instead, s 165(2), (3) of the Property Occupations Act 2014 (Qld) requires that a warning statement, similar to the PAMD Form 30c, be incorporated into the contract itself directly above the buyer’s signature.
  5. Given that, as at the time the contract was sent by the applicant to the respondent, the Property Agents and Motor Dealers Act 2000 (Qld) had been repealed, it is difficult to accept that the applicant was required to attach a then obsolete form, in direct contradiction to statutory requirements, in order to validly exercise the put option. That could not have been the intention of the parties. It would, in my view, be an absurdity if the applicant was required to send an obsolete form and potentially be exposed to a penalty of up to 200 penalty units by virtue of s 165(5) of the Property Occupations Act 2014 (Qld).
  6. Rather, on the contrary, clause 1.2(f) in my view demonstrates that the parties intended that, when the put option was exercised, the applicant was required to comply with the legislative arrangements then in force. That is, a requirement to use the most up-to-date PAMD form evinces an intention that the applicant ensure current forms and requirements were adopted.
  7. If I am wrong in that regard and it was the eighth edition which had to be signed, the next question would be whether strict compliance with the mode of exercise is required or is it sufficient for there to simply be an expression of intention to exercise the option?
  8. It is significant in my view that in Westgold the trial judge noted that the disconformity with the mode of exercise there was not trivial and “[t]here was in truth no attempt at all to conform” in circumstances where the person who purported to exercise the option “did not know or did not have in mind, that any form of notice had been agreed on at all as a notice of exercise.”[15] That was particularly so in circumstances where it had been made very clear, when there was an earlier attempt to exercise the option, that Westgold would insist on “strict compliance with the terms of the put option deed, including the provision in relation to the form of notice”.
  9. In the present case it is clear that the signed contract was a later version of Standard REIQ Contract for the Sale of Residential Land and it contained all of the details which were required to be contained in the reference schedule in accordance with clause 2.4. It would seem to me therefore that there was an every effort was made to conform as all the essential terms were contained in that version and, indeed, the only substantial additions were in favour of the respondent.
  10. Furthermore, there had been no clear intimation from the respondent at any time in the period from 16 December 2014 to December 2015 that strict compliance was required as had occurred in Westgold. In particular I note that the delivery of the notice and the signed contract some two weeks before the expiry date did not evoke a response indicating that the wrong edition of the contract form had been used. Indeed, in my view, the email of 16 September 2015 inferred that the contract which had been sent would be signed and returned before the settlement date of 31 December 2015. It would seem to me that no issues were raised about the version of the Standard Form Contract which had been sent until the current application was filed.
  11. I also consider that the fact that clause 1.2(f) contemplated the use of a more up-to-date PAMD Form 30c, a new version of the Standard Form Contract which incorporated the PAMD requirements would mean that strict compliance was not in fact envisaged.
  12. I do not consider that the Terms of the Agreement were such that there was a clear intent that the option could only be exercised by precise and strict compliance with a prescribed method as was held to be the case in Westgold where White J cited, with apparent approval, the trial judge’s consideration that:

“On a plain reading of the two clauses, the prima facie conclusion is that the option could only be exercised by the giving of a form of notice in the form scheduled in the deed. It is that form of notice which the parties have agreed should be ‘the key which alone is capable of turning the lock’ (Mannai (supra) per Lord Goff at 754).

That this was their intention is confirmed by the commercial setting in which the put option deed was negotiated. The circumstances were such that one would expect a precise definition of the conditions which must be met before the option was exercised against Westgold.”

  1. Not only is there no clear intent in this case such that strict compliance was required but I also note that here the put option was not negotiated in a commercial setting which was such that strict compliance could be inferred. The applicant’s evidence is that the Agreement had been entered into by the respondent as an “incentive to purchase the property”.[16]
  2. In my view the put option was validly exercised when the applicant forwarded the signed tenth edition of the Standard Form Contract to the respondent. In any event the Agreement, in my view, did not require strict compliance in accordance with the principles enunciated in Westgold, but rather was a case where what was required was a clear intention to exercise the option.  I also consider that delivery of the signed contact without the PAMD Form attached would have nonetheless bound the respondent to perform the essential terms as set out in the option. In other words, the eighth edition contract attached to schedule 1 was just the standard form contract in operation at the time and the tenth edition which was signed was also the standard form contract in operation at the time, and the terms were no less advantageous to the respondent.
  3. In my view, completion of the eighth edition contract was not a mandatory requirement but rather a machinery provision and completion of the tenth edition contract was appropriate given it was accompanied by the very clear communication of the intention to exercise the option. I consider that there had been a clear and unequivocal exercise of the option on 16 December 2014.
  4. I also consider that the respondent’s subsequent conduct, including the email of 21 September 2015 and the subsequent correspondence to the applicant about various alternatives to the respondent’s purchase being offered, was such that the respondent clearly understood that the applicant had unequivocally exercised the option. Furthermore, a reasonable recipient of the notice would also have understood that the option had been exercised.
  5. I consider that the put option was validly exercised by the applicant and that there should be a declaration in the terms sought.

Should there be an order for specific performance?

  1. The respondent argues that specific performance is not available because there has been a breach of clauses 3 and 4 of the Agreement because the building, which was built in 2012, has been substantially damaged which inspection reports describe as “excessive”.
  2. The relevant clauses are as follows:

Clause 3.1:

“Whilst this Agreement or any variation of it is on foot, Owner must:

(a)at its cost maintain the Property in good repair and condition having regard to the condition of the Property as at the date of entry into this Agreement fair wear and tear accepted [sic];

(b)at its cost keep the grass and other vegetation on the Property at a length and in a manner that is visually appealing;

(c)at its cost pay all rates, taxes and other outgoings levied on the Property on or before the due date for payment and provide JLF evidence of payment within five (5) business days of a request;

(d)at its cost insure the Property for its full replacement value and provide to JLF evidence of insurance within five (5) business days of a request;

(e)not make or cause to be made any alterations or additions to the Property.”

Clause 4.1:

“Default under this Agreement occurs:

(a)if a party fails to perform an obligation under this Agreement and that default is incapable of being remedied, or if capable of being remedied, continues unremedied for 14 days after written notice of the default has been given to the defaulting party by the other”

Clause 4.2:

“A non-defaulting party may terminate this Agreement by written notice to the defaulting party if any of the events in clause 4.1 occurs.”

  1. The respondent also argues that this damage is in breach of the principle that a vendor is a trustee for the purchaser and is bound, whilst in possession, to use the same care in preserving and managing a property as a trustee.  In particular, the applicant as vendor of the property is to take reasonable care that the property is not deteriorated in the interval before completion and while it is in his possession.[17] In Jensen v Jeffery[18] it was held that such a duty exists whether the vendor is in occupation personally or by a tenant.  The basis of the rule is that a purchaser is to get on completion what they contracted to buy.
  2. The respondent also argues that where there is a deficiency in the subject matter such that there is a material difference between what was bargained for and what can be delivered, then there is one of two consequences:[19]
    1. a purchaser seeking to enforce may be entitled to specific performance plus compensation; or
    2. a purchaser is not required to complete the contract where the vendor is not able to convey substantially what the purchaser contracted for.
  3. Whilst the extent or money value of the subject matter affected is relevant, it is not conclusive and the court is not bound to have regard to only the written instrument but may take into account other factors. The respondent argues on their case that the duty to preserve and manage the property clearly applied even though no option had been exercised.  In particular, it is argued there are three different sources of duty. First of all, there is a duty to maintain and preserve which is expressly stated in clause 3.1 of the Agreement; secondly on the exercise of the option the equitable duty set out above applied; and thirdly on the exercise of the option, clause 8.3(1) of the contract for sale provided “The Seller must use the Property reasonably until settlement. The Seller must not do anything regarding the Property or Tenancies that may significantly alter them or result in later expense for the Buyer”.
  4. The respondent argues that the wording in the Agreement is sufficiently broad to encompass a contractual duty to maintain and preserve the property. The respondent argues that the applicant has refused to repair the property and offers no compensation and also argues that there is no evidence that the applicant has addressed the defects identified in the building reports. The respondent therefore argues that specific performance or damages in lieu should be refused because the applicant does not have clean hands, there is no mutuality of obligation and remedy, and any loss suffered by the applicant is due to his own breach of duty.
  5. The respondent also argues if it is found that the option was validly exercised and gave rise to a contract, then the contract was terminated on 14 December 2015 due to the applicant’s prolonged refusal to acknowledge and correct the maintenance problems. This is argued to constitute a breach of an essential term or alternatively a fundamental breach of an intermediate term of the contract entitling JLF to terminate the contract.

Do clauses 3 and 4 of the Agreement operate?

  1. The respondent relies in its argument on clauses 3 and 4 of the Agreement. The question is, however, whether that Agreement was still operative. It would seem to me that once the option was exercised a contract for the sale of the property was in fact concluded and that contract is the relevant agreement and not the put option Agreement. Accordingly, the relevant terms are the terms contained in the contract of sale.
  2. This is also clear when one looks at the terms of the Agreement. Clause 2.2 expressly provides that JLF grants to the applicant an option to sell the property on the “terms set out in the contract”. It is clear that clauses 3 and 4 operate in relation to the Agreement and not the contract. In particular, clause 3.1 provides that it operates “Whilst this Agreement or any variation of it is on foot” and clause 4.1 provides that default under “this Agreement occurs: (a) if a party fails to perform an obligation under this Agreement”.
  3. The Agreement in its very clauses does indeed distinguish between the term “Agreement” and the term “Contract”. Agreement means the put option Agreement and Contract means the Standard REIQ Contract in Schedule 1.
  4. In simple terms, the Standard REIQ Contract does not provide a right to the respondent to give a notice to remedy defects as the respondent attempted to do on 11 November 2015 or a notice of termination as the respondent attempted to do on 26 November 2015. Clause 4.1 of the Standard REIQ Contract (in both editions eight and ten) however provides that the contract is conditional on a buyer obtaining a satisfactory building inspector’s report and pest inspector’s report by the “Inspection Date” and if an Inspection Date is not specified in the contract then the contract is not subject to an inspection report.
  5. In the present case the “Inspection Date” section in the reference schedule was left blank and it would seem to me that there is an argument that the contract was not in fact subject to such a report. However, this was not fully argued before me and in my view it would be appropriate for this to be the subject of further argument.
  6. In terms of the argument that there has been a breach of an equitable duty as set out above, I consider that such an argument would need to be the subject of evidence at trial and not simply building reports obtained without notice to the applicant. A similar approach would also need to be applied in relation to the question as to whether there has been a breach of clause 8.3(1) of the contract for sale which provides that the applicant must use the property reasonably until settlement. An application of this nature is not a suitable vehicle for such expert evidence. The respondent remains at liberty to bring any such application it thinks fit in this regard.
  7. Given the disagreement regarding the state of the property and the current state of the evidence, I do not consider that an order for specific performance should be granted at this point in time.
  8. I therefore propose to make declarations in the following terms:
    1. that on 16 December 2014 the applicant validly exercised the put option contained in a written put option agreement between the applicant and the respondent dated February 2012.
    2. that on 16 December 2014 a valid and binding contract of sale was entered into by the applicant as vendor and the respondent as purchaser for the sale of the property situated at 3 Carnell Street, Goodna in the State of Queensland, more particularly described as Lot 310 on SP 244131, situated in the County of Stanley and Parish of Goodna, being the land contained in Title Reference 50853284 for $509,000 pursuant to the put option agreement.
  9. I will hear from the parties as to the precise form of orders and as to costs.

Footnotes

[1] Exhibit CHD-3 to the affidavit of Christian Hendrik Dreyer sworn 29 January 2016.

[2] Exhibit JDF-1 to the affidavit of James Dean Fitzgerald sworn 22 February 2016

[3] Exhibit JMM-4 to the affidavit of Joel Mario Matos sworn 5 February 2016.

[4] Exhibit JMM-5 to the affidavit of Joel Mario Matos sworn 5 February 2016.

[5] Exhibit JMM-6 to the affidavit of Joel Mario Matos sworn 5 February 2016.

[6] Exhibit JMM-8 to the affidavit of Joel Mario Matos sworn 5 February 2016.

[7] Affidavit of Joel Mario Matos sworn 5 February 2016, [14].

[8] Exhibit JMM-10 to the affidavit of Joel Mario Matos sworn 5 February 2016.

[9] Exhibit CHD-4A to the affidavit of Christian Hendrik Dreyer sworn 29 January 2016.

[10] Exhibit CHD-4F to the affidavit of Christian Hendrik Dreyer sworn 29 January 2016.

[11] Exhibit JMM-3 to the affidavit of Joel Mario Matos sworn 5 February 2016.

[12] (1976) 137 CLR 192, 200-201.

[13] [2000] WASCA 85.

[14] Phillips Fox (a firm) v Westgold Resources NL [2000] WASCA 85, [79].

[15] Phillips Fox (a firm) v Westgold Resources NL [2000] WASCA 85, [79].

[16] Affidavit of Joel Mario Matos sworn 5 February 2016, [4].

[17] Clarke v Ramuz [1891] 2 QB 456, 462.

[18] [1957] NZLR 159 (North J).

[19] Leighton Properties Pty Ltd v Hurley [1984] 2 Qd R 534, 543-544 (Connolly J).

Close

Editorial Notes

  • Published Case Name:

    Matos v JLF Corporation Pty Ltd

  • Shortened Case Name:

    Matos v JLF Corporation Pty Ltd

  • MNC:

    [2016] QSC 32

  • Court:

    QSC

  • Judge(s):

    A Lyons J

  • Date:

    04 Mar 2016

Litigation History

EventCitation or FileDateNotes
Primary Judgment[2016] QSC 3204 Mar 2016Application for specific performance regarding put option agreement for sale of real property granted: Ann Lyons J.
Notice of Appeal FiledFile Number: Appeal 3338/1601 Apr 2016-
Appeal Determined (QCA)[2016] QCA 35523 Dec 2016Appeal allowed; originating application dismissed: Fraser, Gotterson and Philip McMurdo JJA.

Appeal Status

Appeal Determined (QCA)

Cases Cited

Case NameFull CitationFrequency
Clarke v Ramuz [1891] 2 QB 456
2 citations
Jump To
Cite 1 - [1891] 2 QB 456
Cite 2 - [1891] 2 QB 456
Hankey v Clavering [1942] 2 KB 326
1 citation
Jump To
Cite 1 - [1942] 2 KB 326
Jensen v Jeffery [1957] NZLR 159
2 citations
Jump To
Cite 1 - [1957] NZLR 159
Cite 2 - [1957] NZLR 159
Leighton Properties Pty Ltd v Hurley[1984] 2 Qd R 534; [1984] QSCFC 42
2 citations
Jump To
Cite 1 - [1984] 2 Qd R 534
Cite 2 - [1984] 2 Qd R 534
Phillips Fox (A Firm) v Westgold Resources NL [2000] WASCA 85
4 citations
Jump To
Cite 1 - [2000] WASCA 85
Cite 2 - [2000] WASCA 85
Cite 3 - [2000] WASCA 85
Cite 4 - [2000] WASCA 85
Quadling v Robinson (1976) 137 CLR 192
2 citations
Jump To
Cite 1 - (1976) 137 CLR 192
Cite 2 - (1976) 137 CLR 192
Quadling v Robinson [1976] HCA 31
1 citation
Jump To
Cite 1 - [1976] HCA 31

Cases Citing

Case NameFull CitationFrequency
JLF Corporation Pty Ltd v Matos [2016] QCA 355 2 citations
1

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