Implied term that vendor must act in a reasonable manner when selling land pursuant to liquidated damages clause

What duties does a vendor have in selling land pursuant to a liquidated damages clause in the sale contract following a default by the purchaser?

There are three possibilities:

(a)  if a vendor acts unreasonably in failing to minimise loss arising from a purchaser’s breach, any damages will be reduced to the extent that the vendor’s loss would have been reduced had the vendor acted reasonably;

(b)  the duty imposed on a vendor is similar to that imposed on a mortgagee exercising a power of sale granted under a security, the duty being to act in good faith;

(c)  there is an implied term in the contract for the sale of duty that a vendor will exercise the power of resale in a reasonable manner.

In Portbury Development Co Pty Ltd v Ottedin Investments Pty Ltd [2014] VSC 57 Garde J rejected the first two possibilities and held that there was an implied term in the contract that the vendor would act reasonably in the exercise of its power of resale and that this implied term extended to all aspects of the resale. The contractual provision considered by the court was general condition 28.4 of the general conditions which provides:

“If the contract ends by a default notice given by the vendor:

1. the deposit up to 10% of the price is forfeited to the vendor as the vendor’s absolute property, whether the deposit has been paid or not; and
2. the vendor is entitled to possession of the property; and
3. in addition to any other remedy, the vendor may within one year of the contract ending either:
4. retain the property and sue for damages for breach of contract; or
5. resell the property in any manner and recover any deficiency in the price on the resale and any         resulting expenses by way of liquidated damages; and
6. the vendor may retain any part of the price paid until the vendor’s damages have been determined and may apply that money towards those damages; and any determination of the vendor’s damages must take into account the amount forfeited to the vendor.”

His Honour held that the implied duty to act in a reasonable manner in exercising the power of resale did not mean that a vendor had to put the interests of the defaulting purchaser ahead of his own. At [175] His Honour said:

“Where the interests of a vendor and the purchaser in breach are in conflict, for example as to the urgency or method of the resale, the vendor is entitled to prefer his own interests to those of the purchaser in breach, provided that in so doing the vendor acts in a reasonable manner. The obligation on the vendor to act in a reasonable manner has been held to apply to price, time of resale and conduct in the form or method of resale. It would also extend to the terms of resale to be offered by the vendor.”

Author: Robert Hays Barrister subject to copyright under DMCA.

If you wish to retain my services I can be contacted via this link http://www.greenslist.com.au/ 

Leases, Litigation and Liquidations - Robert Hay Barrister Promo

ROBERT HAY BARRISTER - Promo

Greens List compiles all the lecture series we prepare at  http://www.greenslist.com.au/  and 

their dedicated YouTube Channel  is located at : //www.youtube.com/channel/UCJ3Bl4-13XSRgzE_c8Ow__g

Re-entry and Relief from Forfeiture in Commercial Leases - Robert Hay

ROBERT HAY COMMERCIAL BARRISTER 

Greens List compiles all the lecture series we prepare at  http://www.greenslist.com.au/ and their dedicated YouTube Channel is located at this link : //www.youtube.com/channel/UCJ3Bl4-13XSRgzE_c8Ow__g

General Information - Profile - Links - E-commerce

Thank you for your patience, this blog is now up and running with a translator facility for readers whose language is other than English or English as a Second Language.

My blog is also mirrored at WordPress however it is without a translation facility
and a direct link to WordPress is:  https://roberthaypropertybarrister.wordpress.com/

I am unable to provide a direct eCommerce link which takes you directly to my publications however Lexis Nexis, will create a URL specific to each publication and this blog will be updated as soon as it is available. The current link takes you to Lexis Nexis for ease of purchase of the Hard Copy Loose Leaf Service, Books or Ebook format of publications authored by Robert Hay ( and co authors) whichever is your preference.

Please feel to browse the through the vast publications available through Lexis Nexis using the link provided.  http://www.lexisnexis.com.au/en-AU/home.page

My twitter account is: https://twitter.com/hay_rhay

Chambers Robert Hay Commercial Barrister Google Map Address

My clerk can be contacted via this link http://www.greenslist.com.au/ if you wish to retain my services for any legal matter which is within the gamut of my legal experience.

Please note that whilst I am an Australian Legal Practitioner who practices as a Barrister I am able to provide advice to companies, entities, individuals all over the world about Commercial Transactions in Australia such as Leasing, Property Law Purchases and other inquiries you may have to ensure a cohesive purchase process and or investment strategy within the Australian Jurisdiction.

The link to Australian Case Law is http://www.austlii.edu.au/

This blog is Authored by Robert Hay Commercial Barrister and is subject to copyright under DMCA.

Creation of Social media platforms - Corinne Jones with the support of Dave McLoughlin

Franchisees beware of arbitration clauses

Please note for members of the public or practitioners in the legal profession where English is your second language a translation key for languages worldwide is available on this blog to assist you. 

The plain English blog without translation facilities is located at http://roberthaypropertybarrister.wordpress.com

Prospective franchisees should be cautious about agreeing to the inclusion of arbitration clauses in franchise agreements. It is common for a franchisee to enter into an 'occupancy' or 'licence' agreement with an entity associated with the franchisor which entity is the lessee of the premises from which the franchisee will conduct its business. At the sane tine the franchisee usually enters into a franchise agreement with the franchisor. The so-called 'occupancy' or 'licence' agreement commonly has all the characteristics of a lease with the consequence that the agreement is a lease. 

In Victoria, if the 'occupancy' or 'licence' agreement is a lease any dispute will constitute a  'retail tenancy dispute' governed by Part 10 of the Retail Leases Act 2003 (2003 Act). VCAT has exclusive jurisdiction to hear and determine 'retail tenancy disputes'.  If the dispute resolution provisions in the franchise agreement require that disputes under that agreement be referred to arbitration the franchisee could be in the difficult position of having to prosecute or defend two proceedings at the same time - one  in VCAT and another before an arbitrator.  

This is the consequence of the Court of Appeal's decision in Subway Systems Australia v Ireland [2014] VSCA 142. In that case the franchisee conducted its business from premises in Doncaster, Victoria.  The arbitration clause in the franchise agreement required the arbitration to take place in Queensland. VCAT held that the "licence" agreement was a sub-lease with the consequence that that dispute will be determined as a 'retail premises dispute" in VCAT in Victoria under the 2003 Act. 

VCAT also decided that it  could hear and determine the dispute under the franchise agreement. The Court of Appeal held that VCAT did not have jurisdiction to hear and determine the dispute under the franchise agreement which will have to be heard and determined by an arbitrator in Queensland.

Author: Robert Hays Barrister subject to copyright under DMCA.

If you wish to retain my services my clerk can be contacted via this link http://www.greenslist.com.au/ for any legal matter which is within the gamut of my legal experience.

VCAT is Court and therefore arbitration clause effective

Please note for members of the public or practitioners in the legal profession where English is your second language a  translation key in all languages of the world is available on this blog to assist you. 

The plain English blog without translation facilities is located at http://roberthaypropertybarrister.wordpress.com

In  Subway Systems Australia Pty Ltd v Ireland [2013] VSC 550 Croft J held that a requirement in a franchise agreement that disputes be referred to arbitration did not prevent VCAT hearing and determining the dispute. The matter came before Croft J as an application for leave after a VCAT member declined to find that the Tribunal was bound by  s.8 of the Commercial Arbitration Act 2011 (Vic)) (CAA) to refer the dispute to arbitration.  In broad terms s.8 of the CAA requires a court before which an action is brought in a matter which is the subject of an arbitration agreement to refer the matter to arbitration if one of the parties makes that request. Croft J held that VCAT was not a “court” for the purpose of s.8(1) and therefore VCAT was not bound to refer the dispute to arbitration. In Subway Systems Australia Pty Ltd v Ireland [2014] VSCA 142 the Court of Appeal allowed an appeal from Justice Croft's decision. Maxwell P and Beach JA held that VCAT was a "court" for the purposes of s.8 of the CAA. Kyrou AJA dissented. This means that the dispute must now be referred to arbitration. The Court of Appeal's decision can be found here:

Subway Systems v Ireland_merged_17114[1]


My clerk can be contacted via this link http://www.greenslist.com.au/ if you wish to retain my services for any legal matter which is within the gamut of my legal experience.

Author: Robert Hays Barrister subject to copyright under DMCA.

Mortgagee lender does not have duty of care to ensure that a loan isappropriate for borrower

Please note for members of the public or practitioners in the legal profession where English is your second language a  translation key in all languages of the world is available on this blog to assist you. 

The plain English blog without translation facilities is located at http://roberthaypropertybarrister.wordpress.com

Defaulting mortgagor borrowers defending court proceedings by the mortgagee lender often allege that the lender owed them a duty to investigate their income and assets and liabilities to determine whether the loan could be serviced. The legal basis for such a claim was recently rejected by the Supreme Court of New South Wales in Westpac Banking Corporation v Diagne [2014] NSWSC 822. Among the many claims made by the defaulting mortgagor borrowers was that the lender had a duty to "[p]rudently investigate the income, assets and liabilities of [the borrowers] and the proposed business plan of [the borrowers] in order to determine serviceability" and "[t]o take reasonable remedial action when the loans fell into arrears, including investigating the causes of the arrears, working with [the borrowers] to remedy the problems identified and continuing to monitor the ability of the borrowers and guarantors to adequately service the facilities". Included in the alleged duty was a duty "to appropriately set and alter limits on overdraft facilities".

Ball J rejected the borrower’s claims. His Honour applied Tai Hing Cotton Mill Ltd v Liu Chong Hing Bank Ltd [1986] AC 80  and held that the lender did not have a duty of care to investigate the borrower’s circumstances to determine whether the loan that was made was appropriate for them.

Author: Robert Hays Barrister subject to copyright under DMCA.

My clerk can be contacted via this link http://www.greenslist.com.au/ if you wish to retain my services for any legal matter which is within the gamut of my legal experience