In brief - Plaintiff fails in bid to enforce commercial property option arrangement

The recent decision in Perception Investire Pty Limited v Bassal Holdings Pty Limited [2015] NSWSC 1954 shows that you need to make sure that you always have documented changes to arrangements. Relying on previous course of dealings or the goodwill parties have engendered throughout a transaction may not be sufficient when things do not go as all parties expect. You also need to ensure that the correct people sign so as to bind other parties to the transaction.

Option arrangement on commercial property fails

Perception Investire Pty Limited v Bassal Holdings Pty Limited involved an option arrangement with respect to a commercial property at Campbelltown, in New South Wales.

In brief, there was a contract which was rescinded and then a new option was entered into. One of the parties alleged that a number of subsequent variations were agreed to, but these were not properly documented.

The decision looked in detail at the conflicting evidence given. It is true to say that the judge did not find the evidence of any of the witnesses compelling and found that each party's recollection of discussions, conversations and alleged agreements somewhat favoured the outcome that the respective parties were seeking at this hearing.

In this case, the plaintiff who sought to enforce the option failed for two significant reasons.

Documentation was not binding on Saxon Developments

The first reason was that the documentation was not properly executed by each of the landowners. There were three companies that owned the property, but Mr Bassal really only represented two of the landowners. The third was an independent company which was "associated" with Mr Bassal, but he was not the director.

The developer's failure to do a company search to ascertain who the correct parties were who should sign to bind each of the entities which own the property was critical in the Court finding that the documentation did not bind one of the parties, Saxon Developments Pty Limited, and therefore the option and subsequent variation documentation were invalid.

Variations not properly documented and not signed by all parties

The second reason was the issue of not documenting all of the changes alleged to have been agreed and having it signed (properly) by all of the parties.

Effectively, as both parties were legally represented, it was expected that there would be proper documentation to evidence the alleged variations to the original option document.

Document all arrangements and ensure all parties are bound to agreement

It is essential that you check that all arrangements are properly documented and that whoever signs the documents has the authority to bind all other parties.

This is commentary published by Colin Biggers & Paisley for general information purposes only. This should not be relied on as specific advice. You should seek your own legal and other advice for any question, or for any specific situation or proposal, before making any final decision. The content also is subject to change. A person listed may not be admitted as a lawyer in all States and Territories. © Colin Biggers & Paisley, Australia 2019.

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