Background
Fitch Resorts Pty Ltd, as trustee for the Fitch Family Resort Trust, agreed on 3 March 2026 to sell a Surfers Paradise apartment to Peter Zhe Kuk and Cindy Kuk for $7.5 million. The buyers had a due-diligence termination right until 11 March 2026 and received body corporate search material identifying a proposed extraordinary general meeting that would consider increases to administration, sinking and special levies. They elected to proceed.
The body corporate passed resolutions on 25 March 2026. The annual administration and sinking fund contributions for the lot increased from $27,949.92 to $36,893.71, an increase of $8,943.79 a year, excluding special levies. The seller did not provide the meeting notice or resolutions under clause 12.10(1) of the contract. On 10 July 2026, shortly before settlement, the buyers purported to terminate under clause 12.10(2), asserting material prejudice from the increased levies.
The Court’s Holding
Treston J declared the purported termination invalid. Properly construed, clause 12.10(1)’s obligation to provide meeting notices and resolutions did not itself create a termination right; clause 12.10(4) expressly provided a damages remedy for failure to provide resolutions. The termination right in clause 12.10(2) depended on the buyers being materially prejudiced by an undisclosed resolution.
The buyers bore the onus of proving material prejudice and did not discharge it. They knew during due diligence that levy increases and a special levy were proposed, yet chose to continue. Their solicitors also had the relevant increased levy information before settlement. The court found no evidence that the apartment’s value or saleability had been affected, that the levies were outside the expected range for comparable property, or that the increase materially affected the buyers’ financial position. Specific performance was ordered.
Key Takeaways
- A contractual right to terminate for “material prejudice” requires proof of a substantial, consequential disadvantage.
- A large percentage increase in body corporate levies alone does not establish material prejudice.
- Where a contract provides damages for a disclosure failure, that failure does not necessarily create a separate right to terminate.
Why It Matters
The decision underscores that buyers invoking a body-corporate-resolution termination clause must produce evidence connecting the resolution to a material disadvantage in their particular circumstances. Awareness of a proposed change before expiry of due diligence may be significant when assessing whether later prejudice is material.
The court ordered the buyers to specifically perform the contract, settle by 20 November 2026, pay contractual default interest at 10.84% per annum from 10 July 2026 until settlement, and pay the seller’s standard-basis costs.