Court of Appeal accepts that Developer reasonably represented future of development
On 3 July 2012, the NSW Court of Appeal delivered its judgment in Awad v Twin Creeks Properties Pty Limited  NSWCA 200. Surry Partners acted for Twin Creeks at both the trial and the subsequent appeal.
Twin Creeks is the developer of an 800 acre residential subdivision in Luddenham. The project commenced in 2003. When finished, the development will comprise 285 lots (of which 231 will be no less than 1 acre, with the remaining 54 lots no less than 1,500m²), a resort and an 18 hole championship golf course. The Graham Marsh designed golf course was opened in early 2006 and all but one stage of the project has been released for sale.
The plaintiffs, Mr and Mrs Awad, purchased a lot in the Twin Creeks development in 2005. They alleged that they were induced into purchasing their lot as a result of statements made by Twin Creeks concerning the number and size of the lots that would be available in the development and also as to the operation of the resort. It was intended that Peppers would manage the resort complex.
The trial judge (Justice Brereton) found that while Twin Creeks had reasonable grounds for making the statements made regarding the number and size of lots, it did not have reasonable grounds for stating the development would include a Peppers resort. In the view of the trial judge, Twin Creeks had failed to show that, at the time the statements were made, it had the financial capacity to build the resort.
The trial judge determined that the statements regarding the Peppers resort hotel was one of the factors (but not the only factor) that the Awads considered in deciding to purchase their lot. As a result, Justice Brereton awarded the Awads $75,000 in damages plus 50% of their costs.
The Awads appealed the trial judge’s findings as to the statements concerning the lots, as well as the decision to award damages, instead of rescission of the purchase contract. Twin Creeks cross-appealed on the basis that the trial judge had made the following errors:
- The question of whether Twin Creeks had the financial capacity to build the resort had not formed part of the Awads’ case as pleaded and it was therefore impermissible to have allowed that argument to be advanced at trial;
- In any event, Twin Creeks had adduced sufficient evidence during the trial to show that, at the time the statements were made, it did have the financial capacity to build the resort;
- Resort facilities had in fact been constructed at Twin Creeks – all that was missing were two 20 room accommodation blocks.
The Court of Appeal found that based on the above arguments, Twin Creeks had reasonable grounds to have made the statements concerning the resort hotel and confirmed that the trial judge had correctly determined that Twin Creeks had reasonable grounds on which to have made the statements concerning the number and size of lots.
The Awads were ordered to repay the $75,000 in damages, as well as Twin Creeks’ costs of the trial and the appeal.
Developers are on notice that if they make representations about future events, that they must be able to show that at the time the representations are made, they not only intend to proceed with those events, but they have the financial capacity to undertake them.