Buyers of a 3 Property Group townhouse are taking the developer to court over its attempt to walk away from the contract, in what their lawyers say will be a test case.
Nelson & Hill Lawyers managing director Nathan Kuster said the firm had been contacted by 10 people who had bought off-the-plan from 3 Property Group across four developments – Allegro and Vivace in Throsby, Debut in Wright and Form in Coombs.
Buyers say 3 Property Group is rescinding contracts so it can re-sell the properties for much higher prices in Canberra’s booming housing market.
Nelson & Hill had explored a class action but has opted instead for single cases to be heard at one time.
Leading off is Hon Teo Tee, 74, and his 43-year-old daughter Hyi Syim Tee of Moncrieff, who bought a townhouse in Vivace off the plan in August 2018, paying a $23,950 deposit.
According to the statement of claim filed with the ACT Supreme Court on Friday (15 October), the pair did not hear from 3 Property Group, apart from a 25 February 2020 letter from its lawyers extending the unit registration date to 30 November 2021, and then again on 3 May 2021 when it attempted to exercise the rescission clauses of the contract.
In letters to buyers, 3 Property Group said that the company was rescinding their contracts due to approval delays and being prevented from proceeding with building works for more than 90 days due to circumstances beyond their control.
Nelson & Hill will argue that 3 Property Group’s actions, in this case, are unlawful under ACT law and misleading or deceptive conduct under Australian Consumer Law, and that the developer has acted unconscionably and not in good faith.
Mr Kuster said there was a lot of case law that talks to what has to happen in rescissions and a 2019 decision in NSW that upheld the rights of buyers in similar circumstances.
“The contracting party that seeks to rescind has to act in good faith and there are a number of equity principles that would apply in this situation,” he said.
Mr Kuster said the company’s lack of advice of any delay and decision to extend the unit registration date affirmed the contract and meant that his clients believed the development was proceeding.
The claim says that 3 Property Group’s delay in obtaining the relevant approvals, registering the units plan, and/or attempting to exercise its discretion to rescind under special conditions 9.1 and 10.1 breached the terms and conditions of the contract.
“In Vivace, in particular, they sought to extend the dates for unit registration on two occasions – one to 30 November and 22 May next year,” Mr Kuster said.
“We say the actions of doing that was electing to protect the contract on foot and affirming the contract and that the attempted backflip on that was an unconscionable act.”
The statement of claim says there are express constraints upon the exercise of rescission clauses and nothing in the material relied upon by 3 Property Group to date provides a sufficient basis for using special condition 10.1.
It says that townhouses in Vivace are being sold and/or re-sold at significantly inflated prices.
“It’s pretty clear in this case 3 Property Group has sought to increase the sale prices and take advantage of a booming market, something the ACT hasn’t ever seen,” Mr Kuster said.
Nelson & Hill is seeking damages for delay, damages for breach of contract or for breaches of Australian Consumer Law of between $170,000 and $220,900 plus interest and costs, or compensation of the same amount if the court finds the rescission valid.
Mr Custer said that even if this action was successful, Attorney-General Shane Rattenbury, who has told his directorate to investigate a legislative response, would still have to legislate to outlaw the practice and make clear it is unlawful.
“I can’t see that he can get around it, given what’s happened in NSW,” he said.
Liberal MLA Peter Cain has prepared a bill which he plans to present to the Legislative Assembly on 9 November.
Similar to NSW laws that were amended in 2015, the bill would amend ACT legislation so developers would require consent from the buyer or a Supreme Court order to rescind a contract.
Last month Nelson & Hill took action in the Supreme Court to prevent 3 Property Group from selling the Vivace property.
Construction has started on the development and is continuing.
It is believed up to 90 people may have had their contracts rescinded across 3 Property Group developments, with Adero Law mulling a class action.
Comment was sought from 3 Property Group, but a social media post today from director Jaime Farrelly in response to a media report said the company had been blasted by unfortunate events, including the Black Summer bushfires, COVID-19 restrictions and disputes with builders.
Mr Farrelly said there had been supply chain delays and cost blowouts that had impacted productivity.
“Contracts provide, among other things, protection so that the development is not destroyed by items such as the increased costs which are a commercial reality,” he said.
Mr Farrelly said the company supported all laws and law reforms provided that all affected parties were considered on an equitable basis.
“We definitely acknowledge there are serious issues here for both sides,” he said.