The NSW Supreme Court has upheld a developer's rescission of
34 off the plan contracts to be in line with the contract's
sunset clause in Wang v Kaymet Corporation Pty Ltd 
Between November 2009 and April 2010, the plaintiffs exchanged
contracts with the developer and defendant, Kaymet Corporation Pty
Ltd, for the purchase of residential apartments in Wolli Creek.
Completion of the contracts was subject to registration of the
relevant strata plan. Each contract contained a condition that the
developer use its "reasonable endeavours" to register the
strata documents by the sunset date (30 months from the date of
The contracts also contained a sunset clause stating either
party could rescind the contract with written notice at any time
before the strata plan was registered, if the strata documents were
not registered by the sunset date.
In 2013 and 2014 the developer invoked the sunset clause to
rescind the 34 contracts.
The plaintiffs initially argued that the developer deliberately
delayed work on the project so that it could rescind the contracts
and sell in the rising market. Despite it being common ground that
the apartments were worth more, this line of argument was not
pursued by the purchasers. The purchasers argued that the developer
was not entitled to rescind the contracts because they had failed
to use their reasonable endeavours to register the strata documents
by the sunset date.
For the purchasers to be successful, the Court held that they
had to establish:
the developer failed to use their reasonable endeavours to
register the strata documents by the sunset date, and
had the developer used their reasonable endeavours, the project
would have reached the stage where the strata documents could have
been registered by the sunset date.
The purchasers argued there were 10 different periods of delay
where the developer had failed to use reasonable endeavours to
register the strata documents by the sunset date.
The Court was persuaded that the defendant failed to use
reasonable endeavours in only one of these 10 periods, being a
six-week delay in piling works. However, this delay did not
constitute breach of the sunset clause because the purchasers
failed to demonstrate this delay caused the delay in registering
the strata documents.
The developer relied on a number of reasons to explain the
delays, including availability of equipment, congestion and access
issues to the site, effective height issues, delays caused by the
local council, the "water logged site" and delays caused
by wind and rain.
The Court accepted the developer's evidence and held that
the purchasers had failed to prove the developer had not used
reasonable endeavours to register the strata documents. The
developer was therefore entitled to rescind the contracts in line
with the sunset clause.
For purchasers of off the plan apartments, this decision
demonstrates that it is up to them to prove a failure of reasonable
endeavours on the developer's part and unreasonable delays
regarding sunset dates.
While this decision has been welcomed by developers who, subject
to being able to provide reasons for delays, can rely on sunset
clauses to rescind off the plan contracts, the NSW Government has
announced plans to restrict the use of sunset clauses in off the
plan residential contracts.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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Warranties can be risk-shifting mechanisms when the party giving the warranty is not the party at fault for the defect.
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