Background
FINAO Pty Ltd, controlled by Terry Down, and Rosebery 2021 Pty Ltd, controlled by Geoffrey Cottrell, made an oral arrangement to buy, renovate and sell a Mosman home. Cottrell’s company funded the project through loans secured by a mortgage; FINAO was to manage the development. After repayment of loans, interest, costs and liabilities, FINAO was to receive the remaining profit as a “Development Fee.”
The property sold in January 2022. The parties agreed the profit was $215,302, but Rosebery did not pay it to FINAO. Rosebery argued the arrangement was unenforceable because FINAO was unlicensed under the Home Building Act 1989 (NSW), and cross-claimed for a declaration that any profit was held on trust for the private school fees of Down and his former wife’s children.
The Court’s Holding
Hammerschlag CJ in Eq held that FINAO could enforce the arrangement and entered judgment against Rosebery for $215,302. Although FINAO managed the development, all residential building work was performed or supervised by licensed contractors. FINAO therefore fell within the supervision-only exclusion in sch 1, cl 2(3)(i)(iii) of the Home Building Act. The Court also considered that the claim was, in substance, for Rosebery’s failure to hand over the enterprise profit after the work was completed.
The Court accepted that Down and Cottrell had agreed that the profit was intended to benefit the children’s school fees. But that understanding was a moral, not legally binding, obligation: it was too uncertain and did not show an intention to create a trust. Rosebery’s cross-claim was dismissed. FINAO’s claim against Cottrell personally was dismissed.
Key Takeaways
- Supervision of residential building work may fall outside the licensing prohibition where all work is done or supervised by appropriately licensed contractors.
- An expressed family purpose for project profits does not itself establish an enforceable trust.
- The Court awarded FINAO the agreed project profit, $215,302, and dismissed Rosebery’s cross-claim.
Why It Matters
The decision distinguishes an unlicensed agreement to carry out residential building work from a project-management role involving licensed contractors. It also underscores that family arrangements, even where parties share a genuine expectation about how money should benefit children, require clear and certain terms if they are to create binding contractual or trust obligations.