The issues of (1) properly disclosed site contamination and (2) a subsequent value fall 30% below the purchase price, were pivotal in the high-profile dispute over an iconic Brisbane development site sale. Queensland’s Court of Appeal confirmed the initial award of $8 million for failing to complete the deal, plus interest and costs.
The site was contracted July 2015 for $25 million with plans for a $400 million development. The settlement date was due 31 March 2017 but the contract was terminated four months earlier following non-payment of an additional $1.1 million deposit and a dispute over the environmental notices.
The parties used a secure Dropbox data room by which the seller provided various details about the property, including a folder labeled ‘Land Contamination’. The buyer subsequently argued this did not constitute proper notice as required by the Environmental Protection Act.
The Supreme Court ruled otherwise finding that “the simplicity of the requirement conforms to the purpose for which such a notice is given: to inform the buyer only of the fact of the registration of the particulars of the land and the details of any plan” and consequentially the buyer was not able to rescind the contract. The Appeal Court affirmed the original decision that if notice was in writing and it reached the attention of the purchaser to allow them to be informed of the contamination, notice was deemed to have been given for the purpose of the Act. It has been industry practice for some time to use similar electronic means of providing information, consequently the decision came as no surprise to most.
What is unusual about this matter is that the change in value of the property between the date of contract and the date of settlement was included in the claim for loss. It put a spotlight on the fall in value Brisbane redevelopment sites during that period … a short-term occurrence in the usual time span of normal property market life cycles.
Valuation evidence was provided in the Supreme Court by the seller, but notably none offered by the buyer in its defence. Whilst there were some concerns regarding that evidence, the Supreme Court accepted the core of that evidence finding that the value of the property had fallen from $25 million proposed sale price in July 2015 to $17 million as at March 2017.
The Court concluded that the appropriate amount of damages was the difference between the purchase price payable under the contract and the value of the land at the date of performance of the contract, being an amount of $8 million less $2.75 million already paid under the contract, therefore the seller was entitled to a further $5.25 million for damages for breach of contract, as well as interest on that amount.
The Court of Appeal confirmed those conclusions noting several points concerning expert valuation evidence quoting earlier precedents including;
There is no hard and fast rule by which a valuer can draw the line that clearly separates sales that are comparable from those that are not. It is a matter of degree. Some adjustment is always necessary but too much adjustment may render it unsafe to use a sale. Where the line is to be drawn is a matter for the expert valuer to determine. Further, just because a sale is excluded from use in the comparable sales reasoning process does not necessarily mean that it is irrelevant. …And …
It is quite true that in all valuations, judicial or other, there must be room for inferences and inclinations of opinion which, being more or less conjectural, are difficult to reduce to exact reasoning or to explain to others.
FKP Commercial Developments Pty Ltd v Albion Mill FCP Pty Ltd & Anor  QSC 322
Disclaimer : This publication is intended only to provide a summary of the subject matter covered. It does not purport to be comprehensive or to render professional advice and neither purports nor is intended, to be advice on any particular matter. No reader should act on the basis of any matter contained in this publication without first obtaining specific professional advice. This article is copyright. For permission to reproduce this article please contact us.