Developer Ordered to Pay $6.1M for Invalid Off-the-Plan Termination

Damages Awarded Against Developer For Wrongfully Terminating An Off-The-Plan Contract

In a decision bound to have widespread ramifications, a developer was found to have given a notice of contract termination which was “unlawful, invalid and of no effect” and had damages awarded against it.

Facts

In JYP Jiang Pty Ltd v CAV Gasworks Pty Ltd [2025] QSC 134, a judgement was given against the developer for the wrongful termination of contracts for the sale of 2 lots “off-the-plan”.

Quantum

The quantum of the award was for sum of $6,100,000 being the difference between the amount payable under the contracts ($4,200,000) and the market value of the lots as at the date the contracts ought to have completed ($10,300,000).

The Contractual Terms

The off-the-plan contract contained a definition of the Completion Date which provided:

• The Completion Date (clause 7.1) for the contract, as defined in clause 1.1, was:

“Completion Date: means the later of:

• 14 days after the Seller gives written notice to the Buyer under clause 8; and
• 30 days after the Contract Date, provided that if a certificate of classification for the Building3 (or that relevant part of the Building) has not issued by the dates in (a) and (b), then the Completion Date is postponed until three Business Days after the Seller notifies the Buyer that a certificate of classification has issued.”

The contract also contained a definition of the sunset date in clause 8 which provided:

“Registration on Plan and CMS:

• The Seller must give the Buyer written notice after the Seller becomes aware that the Plan and CMS have registered, that the Scheme has been established and that a separate title for the Lot has been created. The Seller need not give the notice under this clause until the Seller is satisfied that all obligations required to be performed by the Seller under this contract or at law on or before on or before settlement will be completed within 14 days of the notice given to the Buyer.
• The Completion Date must not be (and settlement must not take place) earlier than 14 days after the Seller gives advice by notice to the Buyer of the registration of the Plan, recording of the CMS and that the Scheme has been established or changed.
• If the Seller cannot give the Buyer such notice within 5.5 years after the Contract Date (or by any extended date as referred to in sub-clause 8.4) then the Buyer or the Seller may end the Contract by giving written notice to the other and the Deposit and any interest earned on it shall be refunded to the Buyer.
• The Seller may at any time and more than once extend the date in sub-clause 8.3 by the length of any delay or delays in registering the Plan or CMS or completing the Building for any of the following reasons:

(a)      damage to or delay in the construction of the Building by fire, explosion, earthquake, lightning, storm, tempest, war, civil commotion or strikes;

(b)     disputes with an adjoining or neighbouring owner;

(c)      delay of any local or other authority in giving any necessary Approval;

(d)     inclement weather;

(e)      unavailability of materials or labour;

(f)      delay in registering the BMS, the Plan, or recording the CMS; or

(g)     any other cause, matter or thing beyond the control of the Seller,

but the date in sub-clause 8.3 may not be extended any further than 6 months after the Date referred to in clause 8.3, at which time the Contract shall automatically be at an end and the Deposit and interest earned on the Deposit shall be refunded to the Buyer.

• If the Seller extends the date under sub-clause 8.4 then the Seller must give the Buyer a certificate from the Seller’s architect stating the length of the delay and the reason for it, which shall be conclusive evidence.”

Consistent with most off-the-plan contracts, the Court noted:

“It may be observed, by reference to the whole of the agreement, that it is significantly weighted towards the seller’s interests.“

Notice of Termination

On 13 April 2023, the defendant purported to terminate the contract, under clause 8.3. The defendant did so by letter sent from its solicitor to the plaintiff’s (then) solicitor, which said:

“The Contract for the sale and purchase of the above property is dated 30 June 2017.

Our client experienced development and building approval issues involving the amalgamation of Lots that was critical to the overall project as well as construction and material delays due to Covid and the global pandemic, floods, rain events, supply chain and labour shortages which extended the completion date past the Sunset Date.

The date by which the Seller’s notice that the Plan and CMS have registered, that the Scheme has been established and that a separate title has been created (“the Seller’s Notice”) is 5.5 years after the Contract. That date is 30 December 2022 (“the Sunset Date”).

Clause 8.1 of the Contract provides that the Seller need not give the Seller’s Notice until the Seller is satisfied that all obligations required to be performed by the Seller will be completed within 14 days of the Seller’s Notice.

The Seller was not able to complete the Lot substantially in accordance with the Specifications for the purposes of clause 9.1. The Seller is not able to give a Certificate of Occupancy to give the Buyer vacant possession of the Lot by the Sunset Date for the purposes of clause 7.4(a). The issue of a Certificate of Occupancy is an Approval that is required for the Buyer to lawfully occupy the Lot and has not been given (for the purposes of clause 13.1(a)).

In accordance with clause 8.3 of the Contract, on behalf of our client, we give notice ending the Contract.

The Deposit and any interest earned on it will be refunded to the Buyer.”

In considering clause 8, the Court looked at the underlined bold terms and rejected the Developer’s arguments that it had acted properly in terminating the contract.

“I do not accept that a reasonable businessperson, in the position of the parties, would have understood clause 8.3 to permit the seller to end the contract in circumstances where the separate title conditions had all been met prior to the Sunset Date, but the seller had chosen, unilaterally, to delay giving the notice required by clause 8.1.”

The Court further held:

• the use of the word “cannot” in clause 8.3 refers to an inability to do a thing; an impossibility; and
• provided the seller (developer) “is able to” give the notices set out in clause 8.1 (albeit with a choice of “when” it may give the notices) then clause 8.3 does not operate to give the seller the right to unilaterally terminate the contract and deprive the buyer of the benefit of their bargain.

No Caveat Term

The Contract of sale contained a reasonably standard, “No Caveats” clause.

Clause 23 provided that:

“The Buyer must not lodge a caveat over the Land or any land containing the Lot. The Buyer may lodge a settlement notice over the Lot once the Scheme is established.”

The Court rejected the argument in the counter-claim of wrongful caveat of the lots stating that:

“The commercial purpose of clause 23 is to prevent a buyer from doing something that could affect registration on the title of the “Land” (as defined) or any other “land containing the Lot”, of any of the instruments which are required for the seller to perform its obligations under the contract or any other contract for sale of other proposed lots in the building. There is no commercial purpose in preventing a buyer, under the contract by which that buyer agrees to purchase a particular lot included in a community titles scheme, lodging a caveat over that lot. That would have no impact on the ability of the seller to perform its obligations under the contract with the buyer, or any contract with any other buyer in respect of other lots in the building.“

Further, the court looked at the Developer’s conduct:

“One might think that in this case there plainly was a causal connection between the defendant’s repudiatory conduct and the actions of the plaintiff in lodging the caveat, which ought to prevent it from doing so”.

Summary

The decision has been appealed and so needs to be treated with a degree of caution.

The decision does turn on the express wording of specific terms in the off-the-plan contract and the timing of the notice of termination that was given the buyers. However, it does merit consideration in terms of the express wording of the sunset terms in off-the-plan contracts as well as the need to exercise care and caution before proceeding to terminate an off-the-plan contract. It also follows a line of cases where the Courts are increasingly willing to scrutinise the  termination of off-the-plan contracts under sunset clauses, particularly in circumstances where the properties are re-sold at higher prices to new (or even existing) buyers.

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