Background
In 2017, CAV Gasworks agreed to sell JYP Jiang two proposed lots in the Luminare apartment development in Newstead, Brisbane, for $4.2 million. The buyer paid a $420,000 deposit. Clause 8.3 permitted either party to terminate if the seller “cannot” give the notice contemplated by clause 8 within 5.5 years of the contract date. Although the lots’ separate titles had been created before that period expired, construction and other obligations required for settlement had not been completed.
The seller purported to terminate on 13 April 2023 and later sold the lots to others. After treating those sales as a repudiation, the buyer sued for damages. The Supreme Court held that the seller’s termination was ineffective because creation of the separate titles meant it was possible to give the clause 8 notice. It awarded the buyer $6,097,841.42, including interest, representing the difference between the lots’ assessed market value and the contract price after accounting for the deposit.
The Court’s Holding
By majority, the Court of Appeal allowed the seller’s appeal. Crow J and Hindman J concluded that “cannot” in clause 8.3 was not confined to literal or physical impossibility. Read in the context of the contract as a whole, the notice was not practically capable of being given until the seller, acting honestly and reasonably, could be satisfied that it would perform its contractual and legal obligations within the ensuing 14-day settlement period. Because the seller was not in that position by the sunset date, clause 8.3 entitled it to terminate.
The majority judges reached that result through somewhat different reasoning, but both rejected the view that creation of separate titles alone extinguished the clause 8.3 termination right. They agreed that clause 13.1(c), the seller’s alternative ground, operated prospectively and did not authorize termination after the clause 8.3 period had elapsed. Bradley JA dissented, reasoning that clause 8.3 concerned inability to meet the separate-title requirements and that the seller’s termination was therefore ineffective once those requirements had been met.
The Court set aside the damages and costs orders, dismissed the buyer’s claim except for the existing declaration concerning its entitlement to the deposit and accretions, and ordered the buyer to pay the seller’s costs of the claim and appeal on the standard basis. No costs order was made on the counterclaim.
Key Takeaways
- Contractual language such as “cannot” is construed in its full textual, statutory and commercial context and need not mean literal impossibility.
- A notice that triggers settlement may be treated as practically unavailable when giving it would require completion before the seller could reasonably perform its settlement obligations.
- A contractual right to terminate upon forming an opinion that a sunset clause “will apply” may operate only prospectively, despite language allowing the opinion to be formed “at any time.”
Why It Matters
The decision illustrates how Australian courts may interpret off-the-plan sunset provisions by reference to the entire settlement mechanism rather than title creation in isolation. Developers do not necessarily lose a termination right merely because separate titles have issued, where the contract links notice to practical readiness to complete and constrains the seller through obligations of honesty and reasonableness.
The divided reasoning also underscores the importance of precise drafting. Parties should state expressly whether a sunset right depends on title registration, completion of construction, readiness for settlement, or some combination of those events.