Queensland Judgments
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Babstock Pty Ltd & Anor v Laurel Star Pty Ltd & Anor

Unreported Citation:

[2022] QCA 63


In this significant judgment, the Court of Appeal considered the sale to the respondent of the appellant’s sale of its appointments by property owners as a rental agent. Notably, Fraser JA (with whom Bond JA and Wilson J agreed), considered whether, under the Property Occupations Act 2014 and the contract, the appellant was required to procure written agreement from the property owners to the “assignment” of the appellant’s appointments to the respondent, and whether its failure to do so constituted repudiation of the contract.

Fraser and Bond JJA and Wilson J

29 April 2022

On 1 December 2017, the appellant entered into a contract with the respondent to sell its “rent roll”, being its appointments by property owners as a rental agent (then of 148 properties) (“the Rent Roll Contract”). [1]. The day before the contract was to settle, on 10 May 2018, the respondent wrote to the appellant, relevantly purporting to terminate the Rent Roll Contract for breach of contract for failing to assign its appointments. [2]. In subsequent District Court proceedings, the primary judge found that the respondent had validly terminated for repudiation by the appellant and awarded damages accordingly. [4].

On appeal, Fraser JA, with whom Bond JA and Wilson J agreed, commenced by assessing the terms of the Rent Roll Contract. Under the Rent Roll Contract, the appellant would “sell” its rent roll to the respondent by either assigning the property owners’ appointments to the respondent or procuring fresh appointments from the property owners to the respondent. [7]. As the respondent had not elected under cl 3.5 which form of performance was required, cl 3.6 applied and the method of performance was at the appellant’s “sole discretion”. [7]–[8].

Fraser JA noted that under the general law, the appellant could only assign its benefit – not its obligations – as a rental agent to the respondent. [9]. To be effective under general law, the “sale” would therefore have to include the novation of the existing agency agreements. [9]. However, under the Property Occupations Act 2014 (“POA”), the concepts of assignment and novation are conflated, and an “assignment” of an appointment as a rental agent is treated as operating as if it were a novation. [9]. This is exemplified by s 113(4) POA, which provides that an assigned appointment is taken to be an appointment by the client of the assignee and will continue to have effect according to the terms of the original appointment. [9]. That is, no agreement of the property owner is required for the assignment to be effective as a novation. [13].

Against this background, two issues arose:

a) whether the appellant had repudiated the Rent Roll Contract prior to the purported termination; and

b) whether, on a proper construction of cl 10.1.4 of the Rent Roll Contract, the appellant was obliged to go beyond the requirements of the POA and provide to the respondent assignments executed by the relevant property owners.

For the purposes of the first issue, Fraser JA proceeded on the assumption that the primary judge’s construction of cl 10.1.4 was correct. [14].

Turning to the findings made by the primary judge, Fraser JA noted that the appellant had communicated to the respondent its intention of providing assignments that were not executed by the property owners to the respondent at the settlement dates. [17]. His Honour found that it was not relevant that the appellant maintained the position that it was not required to obtain assignments executed by the property owners. [19].

Similarly, the context of the dispute showed that there was no “uncommunicated inability to perform the contract” which would give rise to an anticipatory breach. [20]. Rather, Fraser JA preferred the characterisation that the appellant had adopted a cooperative approach to the settlement process with the respondent and had communicated its intention to proceed to settlement without obtaining assignments signed by property owners. [29]. Owing to the absence of any communication from the respondent about any contrary interpretation of the appellant’s obligations, Fraser JA considered that, accepting the respondent’s characterisation of cl 10.1.4, this was a case of the appellant being willing to complete the contract under a misinterpretation of the Rent Roll Contract’s requirements. [30]–[34]. As such, the appellant’s insistence on its preferred construction should not be taken as meaning that the appellant was unwilling to perform the contract. [34].

While the appellant had written to the respondent the day before the contract was terminated, requesting that the transactions be settled and noting that it intended to proceed without obtaining assignments signed by the property owners, Fraser JA considered this did not mean the appellant was only willing to complete the contracts on that basis. [35]–[37]. Further, it could have changed its stance at settlement. [38]–[39]. Accordingly, his Honour found that the appellant did not repudiate the Rent Roll Contract. [40].

Fraser JA then turned to the construction of cl 10.1.4 of the Rent Roll Contract. While his Honour accepted that upon “a grammatical analysis”, cl 10.1.4 would require the assignments to be executed by each property owner, such a textual interpretation was at odds with the context of the clause and its commercial meaning. [42]–[43]. For instance, under both the general law and the POA, execution of the assignments by the property owners would have no legal effect (albeit for different reasons). [44]. As such, it would also be uncommercial as it would give rise to the risk of reducing the number of assignments which might be delivered at settlement while producing no commercial benefit to either party. [48]–[50]. Further, there is some textual support for this interpretation, including that the Rent Roll Contract defines “Assignment” as being “from the Seller to the Buyer”, and makes no mention of property owners, and the discretion given to the appellant to perform in a manner determined in its discretion in cl 3.6. [44]–[46].

Accordingly, Fraser JA also departed from the primary judge’s interpretation of cl 10.4.1, and found that the Rent Roll Contract did not require the appellant to obtain written consents from each property owner prior to completion. [51].

In the event, the appeal was allowed and the proceedings remitted to the District Court. [56].

M Paterson

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