A hotel by any other name: buyers fall short in resort to shut down million dollar sales
It should be of little surprise few of the 18 investors, whose bids this month to escape their 2006 off-the-plan apartment deals in the “iconic” Oracle complex were hosed out by the Supreme Court, had considered in detail the accompanying phone-book size BCCMA contract disclosure documents for the development.
Their complaint as settlement date approached was that the developer was no longer capable of delivering “a lot in a residential tower called The Oracle” but – having contrary to expectation sold the letting and management rights to a hotel chain – could only deliver title to a lot in “a hotel branded Peppers Broadbeach“.
The buyers did not allege having been misled. Rather, their case was that the contract itself – into which BCCMA s 215 deems disclosure statements incorporated – dictated a more sedate style of property management for the Broadbeach edifice, that would yield medium to long term tenancies.
The plaintiffs terminated eight separate contracts for their “luxurious up-market” residences and sought declarations that the seller – a Niecon company now in receivership – had repudiated because of the “hotel” branding.
Always a problem for their side of the contest was that the complex – to be managed by Mantra who also owns the down-market “Breakfree” brand and to which our investors may well have taken an equivalent umbrage – differed little as to its proposed configuration, to countless other rental pool residential towers on the glitter strip.
Perhaps best described as it is by online travel reservation site Expedia.com as an “aparthotel”, the court noted that participating investor apartment “guestrooms” are unlike those of a true hotel because they are fully self-contained multi-room apartments. Yet the complex includes hotel-like features: a restaurant and bar (still under construction) and offers valet parking and room service.
These attributes and the high guest throughput due to Peppers’ inevitable concentration on short-term stays would – so said the buyers – generate a tenancy turnover which was incompatible with the “World Class Lifespace” description under which the complex was marketed.
Fatally for them as it turned out, a resort or even a hotel (into which definition his honour declined to include it), is “residential” as opposed to commercial – the sense in which the contract employed the term.
The finding in the buyers’ favour that their units had indeed been sold to them as part of “The Oracle“ but had since been all but completely re-branded as “Peppers Broadbeach“, did not assist: this wasn’t something their contracts prevented.
And although satisfied that some plaintiffs were even materially prejudiced by this change, his honour also denied any BCCMA termination entitlement as the prejudice did not come about by any incomplete or inaccurate disclosure.
While the buyers vaguely claimed various deficits – loss in value, higher than usual rent collection commission, higher rate of depreciation, higher body corporate expenses such as insurance, obstacles to long term rentals from off-site real estate agent – there was no evidence called to prove any such harm.
No doubt with hindsight Niecon would have included a “naming rights” clause to have put the issue beyond dispute. Its absence leads one to the conclusion that the rights negotiation with a “hotel” chain may well have been an afterthought.
So in reality buyer and seller likely envisaged a management/caretaker arrangement like so many other Gold Coast high-rises, well let’s face it, aparthotels: where there are always a high number of short term guests.
One did not need to defer to any Oracle to prophesise that. Foreseeing the intervening GFC was another matter entirely.
Had the buyers devoted the same level of attention to their contract paperwork that they gave to their litigation, it may have alerted them to consider exactly the style of residential arrangement they were signing up to. It was always open to propose a special condition to specify that rentals must be, for example, of at least a 12 month term.
What’s in a name? When you get down to dollars and cents, probably not a lot.
Gough & Anor v South Sky Investments Pty Ltd; Wicks v South Sky Investments Pty Ltd; NOA 8338 Pty Ltd & Anor v South Sky Investments Pty Ltd; Ryan v South Sky Investments Pty Ltd; Linemint Pty Ltd & Anor v South Sky Investments Pty Ltd; Walsh & Anor v South Sky Investments Pty Ltd; Taylor & Anor v South Sky Investments Pty Ltd; Parsons & Anor v South Sky Investments Pty Ltd  QSC 361 (10/12179) Brisb Applegarth J 2/12/2011