Case update - did the size relate to the duplex as a whole, or each residence within the duplex? A lesson in contractual drafting.
Jul 13, 2022Paolucci v Makedyn Pty Ltd [2021] NSWCA 215
In September 2021, the Supreme Court of New South Wales’ Court of Appeal dealt with a matter concerning a dispute between a property owner (Paolucci) and the developer (Makedyn Pty Ltd) regarding Paolucci’s large parcel in western Sydney which had been rezoned residential. Paolucci transferred the land to Makedyn, in return for a sale of price of $3,500,000 consisting of:
- a payment of $2,500,000; and
- the transfer to her of two newly created lots on which the developer was to have built a house (on one lot) and a duplex (on the other lot) (with an imputed value of $1,000,000).
The deal was reflected in 3 documents – a sale contract, a “Deed of Agreement” and a “Reconveyance Contract” (by which the newly created lots would be transferred back to Paolucci). The deal required Makedyn to have transferred the lots and dwellings to Paolucci by May 2017, but it was only in October 2018 that Makedyn provided layout plans of the house and duplex, which then led to a dispute about the dimensions of the duplex.
What was the agreed size of the duplex?
Paolucci contended that the statement in the original agreement was that the duplex would consist of 2 x 3 bedroom residences “on the one lot of no less than 241.54m2” meant that each residence within the duplex would be no less than 241.54m2 whereas the developer contended that the reference to 241.54 m2 related to the size of the duplex as a whole.
The issue arose when the Layout Plans which were supposed to have been annexed to the Reconveyance Contract from the outset were not so annexed, and were only provided in October 2018, after the subdivision was effected earlier in 2018.
Orders sought
Paolucci argued that had the Layout Plans been provided more promptly, then the dispute concerning the dimensions would have been resolved sooner, and then the buildings could have been constructed sooner. She sought orders that Makedyn re-transfer the newly created subdivided lots to her as vacant lots, and damages reflecting the diminished value of the land (that is, the difference between the value of the vacant lots compared to the lots with residences constructed on them and lost rent). She also sought a declaration as to the size of the duplex.
Court’s decision
At first instance, the primary judge dismissed the claim, not finding any grounds to grant the requested order for specific performance or damages. She then appealed to the Court of Appeal, which dismissed the appeal. It was held that:
- Despite Makedyn breaching the obligation to “use reasonable endeavours” to provide the Layout Plans once the subdivision had been approved and the plans registered, this failure to provide the Layout Plans had long since been cured and Paolucci had not shown that it was not just for her to be confined to a remedy of damages;
- The contract provided for the construction of 2 residences comprising the Duplex which (together) were to be of no less than 241.54m2.
Lessons to be learned
- Ensure that all annexures to contracts, as referenced within the contract, are duly annexed to the contract. If documentation that is proposed to be annexed cannot for whatever be annexed at that point in time, then the terms of the contract should reflect this accordingly.
- Poor contractual drafting is the cause of many disputes. In this matter, further detail and clearer drafting could have been included in the contract regarding the proposed dwellings and, in particular, the lot size of the duplex and each residence within the duplex.
Contact the Shire Legal team if you have any questions.
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