Category Archives: Contracts

Mirvac-Dunworth Case Finally Settled

Posted on by

The well-known property developer Mirvac has failed to get special leave to appeal to the High Court of Australia against a Queensland Court of Appeal decision which allowed a buyer to rescind a contract to buy a multi-million dollar unit made uninhabitable by the January 2011 Brisbane floods.

That failure brought to a close the final chapter in a long, brawling legal saga.

In July 2007 Mrs Dunworth, the wife of former Wallaby footballer David Dunworth, agreed to buy a $2.155 million unit in a residential complex to be constructed beside the new Tennyson tennis centre, in Brisbane’s inner suburbs.  Mrs Dunworth later refused to settle the contract, citing flood levels (based on the 1974 floods) that would impact upon her unit if she bought; this phase of the litigation pre-dated the 2011 floods.  She was ordered to specifically perform the Contract and complete the settlement on 8 February 2011.

However, before that completion date, the finished unit was flooded in January 2011 – before the unit would be habitable, it was necessary to remove gyprock sheeting from the walls and to disconnect the electrical wiring and appliances to the unit.  Mirvac needed four months to complete the restoration work, which it offered on January 24 2011 to carry out.

Mrs Dunworth however rejected the offer to restore the unit, and on January 28 purported to rescind the contract on the grounds that the unit had been rendered unfit for occupation.  Her position relied on a seldom used section of the Property Law Act (“PLA”) that requires a property to be habitable at the date of completion (i.e. on 8 February 2011).

This further dispute (seen as a test case on the use of section 64 of the PLA) went to the Supreme Court in February 2011, when a judge found against Mrs Dunworth and allowed Mirvac until June to complete the restoration work.

Mrs Dunworth then appealed that decision.  In a unanimous judgment, the Court of Appeal:

  • upheld the appeal,
  • set aside the Supreme Court orders,
  • declared she had validly rescinded her contract with Mirvac on January 28, and
  • awarded costs to Mrs Dunworth.

The only and last option available to Mirvac was to seek “special leave” to appeal to the High Court of Australia.  But last Friday the High Court refused the application, bringing this long running case to a final close.

How do I retain ownership of goods supplied on credit?

Posted on by

In this edition of The Queensland Law Blog, we will look at how suppliers can ensure they retain ownership of goods supplied to customers on credit, until those goods are paid for in full.

What is retention of title?

A Retention of Title clause in a contract for the supply of goods, either in a Credit application or Terms and Conditions of Sale, allows a supplier to retain ownership of the goods you supply, to your customer until such times as the goods are paid for in full.

What does it mean to you?

The effect of this is that the title to the goods remain with you, the supplier, and in the event that your customer goes into liquidation, or becomes bankrupt, you may recover the goods supplied if they have not been paid for.  A properly drafted contract should
allow you the right to have the goods returned by the liquidator rather than being
sold by the liquidator because the goods have been deemed to be the property of
the liquidated company, not you, the supplier.

It can also mean that you as a supplier can collect the goods if your customer simply refuses to pay, saving the need to commence legal proceedings for unpaid invoices.

The Australian Courts have upheld the enforceability of such clauses in supply contracts.  However the clauses must be clear and  specifically worded.

How can you protect your interests?

Your supply contract does not need to be a long legalistic document.  In certain circumstances, such clauses can be inserted onto invoices or attached to invoices as Terms and Conditions of Sale.  However, if you have customers for whom you supply on credit and in volume, then a full Credit Application with a specific Retention of Title clause should be sought.  Personal guarantees of the directors of your customer companies should also be obtained.

To achieve this, you may need to review your contract procedures.  A separate agreement covering all sales could be made with each major customer.  If the Retention of Title clause is in a standard form “Terms and Conditions of Sale” or other document, steps must be taken to ensure that this standard form becomes part of each contract made.

A Retention of Title clause is essential to prevent your customer from becoming the owner of the goods until such time as the full price for the goods is paid, even if you had delivered the goods prior to settlement.  The clause can provide for your customer to store the goods so that they remain easily identifiable as your goods and easy to trace.  Provision is also usually made for the buyer to sell the goods in the ordinary course of business as agent,
for you the supplier.

What if your customer sells the goods and you still don’t get paid?

A difficult issue arises with Retention of Title clauses when goods supplied are on-sold.  The clause must be drafted correctly to allow you as a supplier to claim the proceeds of that sale or to claim the goods manufactured with your goods.  In such a case, the danger is that a court will interpret the clause as creating a charge and a charge requires
registration under the Corporations Act.

However, the Australian High Court has suggested that the concepts of a Trust can be used to give you as a supplier an interest in those proceeds.  Again, the clause must be carefully drafted and other safeguards should be put in place.

If you would like to consider obtaining, or updating your Credit Applications, Terms and Conditions of Sale and other Sale Contracts or require assistance with your business  legal
needs generally,  please contact Steven Morris at stevenm@whd.com.au.  We can assess your current supply agreements to ensure that they comply with current law.