Significance of Gumland Property Holdings Pty Limited v Duffy Bros Fruit Market (Campbelltown) Pty Limited [2008] in Australian Commercial Law

The case of Gumland Property Holdings Pty Limited v Duffy Bros Fruit Market (Campbelltown) Pty Limited [2008] is significant for the owners and renters of property in Australia. The case discusses the right of owners to get hold of damages such as loss of bargain damages following the termination of contract in case of violation of terms and conditions of the contract by the renters. The case also discusses the violation of essential terms of ‘Lease and Deed’ under clause 4 of the Real Property Act of New South Wales and the consequences of false misrepresentation and non-disclosure under Section 28(2) of the Insurance Contracts Act 1984. Lastly, the case discusses the applicability of the Contract Law of Australia and the significance of consideration for the formation of a contract.

Australian Commercial Law

Table of Contents
Part C...............................................................................................................................................3
Part D...............................................................................................................................................5
Part E...............................................................................................................................................7
References........................................................................................................................................9

Part C
In Gumland Property Holdings Pty Limited v Duffy Bros Fruit Market (Campbelltown) Pty
Limited [2008], the decision of High Court was found to be significant for the owners and the
renters of property because it was supported by the court that owners of the property should be
provided with the right to get hold of the damages such as loss of bargain damages following the
termination of contract in case of violation of terms and conditions of the contract by the renters.1
Facts of Case
Transit Management Pty Ltd (Transit) was the owner of a grocery shop in a shopping complex,
to which he leased to Duffy Bros Fruit Market Pty Ltd (Duffy) for 15 years in the year 1993. Due
to financial losses in business since 1999, Duffy was not paying the rent timely to the owner.
Owing to all this, Tansit and Duffy entered signed a deed that Transit would make efforts for
sub-tenancy of the property but the rent of the property would be the liability of Duffy but the
rent that was being paid by Duffy would reduce on this consideration. It was also agreed upon in
the deed that in case of no further violations of lease by Duffy, he would not be held liable to pay
full rent of the property. The terms of the lease were decided between the two and were
confirmed. In 2001, Transit sold a part of the property to Gumland Property Holdings Pty ltd.
(Gumland) but he did not document the lease till 2005.2 On the expiry of lease in 2002, with an
intention of not to extend the lease, the sub-tenant entered into over-holding period and started
paying 50% as decided under the process of sub-lease. Gumland claimed that Duffy did the
violation of deed as well as lease and issued default notice against him and demanded for the
1 Gumland Property v Duffy Bros Fruit, S395/2007 (High Court of Australia March 27, 2008).
2 High Court of Australia. (2008). Gumland Property Holdings Pty Limited And Duffy Bros Fruit Market
(Campbelltown) Pty Limited & ORS. Retrieved from Hcourt.gov.au:
http://eresources.hcourt.gov.au/downloadPdf/2008/HCA/10

arrears. Because of non-payment of lease, Gumland terminated the lease contract in the year
2003 and sought compensation of $2,096,514 along with interests from Duffy.3
Issue - Was the owner of the property liable to get compensation for loss of bargain damages?
Rule - The Supreme Court held that the sub-tenant was unable to pay rent which was considered
to be as the violation of essential terms of ‘Lease and Deed’ under clause 4 of the Real Property
Act of New South Wales.4 That is why, Gumland was allowed to recover the amount of
compensation along with the damages for loss of bargain.5
The judgment of the Supreme Court was reversed when the Court of Appeal mentioned that it
was not essential condition for violation of deed to pay or no to pay full rent and Gumland had
terminated the lease contract because of which, he was entitled only to recover the compensation
and not the bargain damages.
Application - It was the argument placed by Duffy that Gumland had not any right to terminate
the lease contract as to pay the rent was not the essential term of the lease contract and right to
take legal action was only possible when Duffy had not agreed to the terms of the contract that
was not signed between them. Furthermore, the Contract Law of Australia also allows the
innocent party to terminate the contract of lease and to recover the loss of bargain damages in
case of violation of lease contract by the other party to the contract.
Conclusion - The High Court allowed the appeal by Gumland and all the damages sought were
ordered to be compensated. Duffy was held liable to pay full rent after 7 days of due rent in
3 Lethlean, J. (2008). Australia: A Landlord´s Right To Recover Loss Of Bargain Damages. Retrieved from
Mondaq.com:
http://www.mondaq.com/australia/x/62514/landlord+tenant+leases/A+Landlords+Right+To+Recover+Los
s+Of+Bargain+Damages
4 Austlii. (2018). Conveyancing Act 1919 - SECT 117. Retrieved from Austlii.edu.au:
http://classic.austlii.edu.au/au/legis/nsw/consol_act/ca1919141/s117.html
5 Austlii. (2017). Real Property Act 1990. Retrieved from Austlii.edu.au:
http://classic.austlii.edu.au/au/legis/nsw/consol_act/rpa1900178/

accordance with the Clause 3.2 of the Act. As per the general contract principles, the innocent
party is allowed to terminate the contract in case of violation by the other party to the contract,
which enabled Gumland to recover the damages caused due to loss of bargain.
Part D
Facts of Case
Mr and Mrs. Newsland entered in a contract with a property developer in the year 2007 for
constructing a three storey housing property for them along with sanitation and other interiors to
be left. After the construction completed by the property developer, Newslands found that there
were various structural flaws and they sued the developer in Victorian Civil and Administrative
Tribunal (VCAT). In 2010, VCAT ordered the developer to pay compensation amount of
$400,000 to Newslands. Later on in 2010 itself, Newslands sold out their property to Mr.
Kalabakas on discounted rate on the basis of incomplete construction. Mr. Kalabakas get the
property insured with Chubb Insurance Company and got it renewed in 2011.6 However, the
process of insurance was done by the broker of Mr. Kalabakas who took all essential information
from him over phone. In 2012, the property was destroyed due to fire and Mr. Kalabakas claimed
for insurance of amount &1.4 million.7 Also, he claimed for contents and demolition mentioned
in the policy but the claim was denied by the insurance company on the basis of fraudulent
misrepresentation and non-disclosure of facts by the claimant.
Issue - Was the Insurance Company liable to compensate to the claimant?
6 Probert, A., & Boughton, L. (2016). Australia: Fraudulent non-disclosure and misrepresentation in
property claim successfully proven. Retrieved from Mondaq.com:
http://www.mondaq.com/australia/x/480002/Insurance/Fraudulent+nondisclosure+and+misrepresentation+i
n+property+claim+successfully+proven
7 Kalabakas v Chubb Insurance Company of Australia Ltd, S CI 2013 02801 (Supreme Court of Victoria
December 11, 2015).

Rule - According to Section 21(1) of the Insurance Contracts Act 1984, it is the liability of
insurance holder to disclose all the information in knowledge before the insurer and which is
essential to be in knowledge of the insurer to take decisions regarding risk acceptance. In a
similar manner, Section 26 of the Act states that when the statements made by a person related to
the insurance contract are found to be false knowingly and that it would affect the decision of the
insurer regarding insurance facility to the insurance holder or the risk acceptance after the factual
revelation of the information.8 The consequences of the false misrepresentation and non-
disclosure are discussed under Section 28(2) of the Act. This section enables the insurer to
terminate the contract in such conditions.9,10
Application - The insurer appealed that claimant did not disclose the information knowingly and
violated Section 21(1) because the information provided by him would have been the decisive
factor for the insurer whether to accept the risk or not. The information that should have been
disclosed by the insurance holder were that the construction was incomplete till the initiation of
the policy, property under dispute due to structural flaws, lack of resolution of the structural
flaws, and lack of legal residence certificate.11 Section 28(2) of the Act considered such kind of
non-disclosure as fraud and thus, policy renewal was annulled.
8 Law Teacher. (2018). Introduction to Contract Law. Retrieved from Lawteacher.net:
https://www.lawteacher.net/modules/contract-law/
9 Australian Contract Law. (2016). Australian Contract and Consumer Law. Retrieved from
Australiancontractlaw.com: https://www.australiancontractlaw.com/
10 Hodges, K. (2015). Non-disclosure and misrepresentation: Underwriting records prevail Ð Kalabakas v
Chubb Insurance Company of Australia Ltd [2015] VSC 705. Retrieved from mccabecurwood.com.au:
https://mccabecurwood.com.au/non-disclosure-and-misrepresentation-underwriting-records-prevail-
kalabakas-v-chubb-insurance-company-of-australia-ltd-2015-vsc-705/
11 Thomson Reuters. (2018). When Will a Promise or Statement Be Considered a Binding Contract?
Retrieved from Findlaw.com: https://smallbusiness.findlaw.com/business-contracts-forms/when-will-a-
promise-or-statement-be-considered-a-binding.html

Conclusion - The Court gave the decision that the liability of the insurer becomes zero when the
disclosure information is not appropriately provided by the insurance holder. In order to decide
whether to accept the risk or not, insurer needs appropriate disclosure of information even of it is
misrepresentation or not, if it is improper, the liability of the insurer become zero as mentioned
under Section 28(3) of the Act. This case implies that accusations of fraud must be pleaded in an
appropriate manner and there should be sufficient documentary evidence to support the plea.12
Part E
Facts of Case
Two retailers Pedro and Lisa used to sell French jewellery in Melbourne. At the time of selling
entire business to Pedro, Lisa made a contract with Pedro that she would not carry on or engaged
in the trade of imported French jewellery for two years from the date of initiation of contract all
across the Australia. After a period of 1 year to the contract, Lisa got into a new retail business of
selling imported French jewellery in Cairns situated in Queensland.
Issue- Can Pedro impose contractual promise on Lisa?
Rule - In this case, there is applicability of the Contract Law of Australia which provides rules
and provisions regarding contract established between contracting parties.13 The Australian
Contract Law requires consideration at the time of formation of contract between the contracting
parties. Although, there are various other requirements for the contract formation but
consideration is must.14
12 Monash University. (2017). Commercial law: Contract law. Retrieved from Lib.monash.edu:
https://guides.lib.monash.edu/commercial-law/contract-law
13 ACCL. (2016). Australian Contract and Consumer Law. Retrieved from Australiancontractlaw.com:
https://www.australiancontractlaw.com/
14 ACCL. (2018). Contracts & agreements. Retrieved from Accc.gov.au:
https://www.accc.gov.au/consumers/contracts-agreements

The Common Law requires the agreement between the parties to the contract to be obligatory.
The promise must be followed by a certain type of consideration which might be a certain
amount of money as a promise.15 The consideration in the form of cost determined by the
promisor can be utilized in a wider perspective such as it is not essentially to be monetary,
however, it must include certain kind of disadvantage by the promisee in case of non-fulfilment
of the promise.16 Thus, there is extreme significance of consideration for the formation of
contract which could be anything taken into consideration in a lawful manner.17 In addition to it,
all the other terms and conditions essential for the formation of contract are considered to be as
binding for parties entering into a contractual relationship, all of which is referred to as terms of
contractual promise between the contracting parties.18 The parties to the contract violating any of
these terms and conditions are considered to be as breaching the contract.19
Application - As found Pedro and Lisa were in a contractual relationship made between them at
the time of Lisa selling her entire business to Pedro. She agreed upon under the contract that she
would not perform or be involved in the trade of imported French jewellery for two years from
the date of initiation of contract all across the Australia. The promise she made in the contract
was a type of consideration as termed for contract purpose. Lisa established her own retail
business within a year of the contract and that too of selling French jewellery in Cairns i.e. in
Australia. It is evident that she breached the terms of contract or the promise or consideration she
15 Clarke, J. (2015). Consideration. Retrieved from Australiancontractlaw.com:
https://www.australiancontractlaw.com/law/formation-consideration.html
16 Lavan. (2018). Contractual promises – are they binding? Retrieved from Lavan.com.au:
https://www.lavan.com.au/advice/property_leasing/contractual_promises_are_they_binding
17 Estes, C. J. (2009). Contract: A Promise or an Agreement? Washington University Law Review, 11(4).
18 The Free Dictionary. (2018). Contracts. Retrieved from thefreedictionary.com: https://legal-
dictionary.thefreedictionary.com/Nature+and+Contractual+Obligation
19 Rule of Law Institute of Australia. (2018). Case Note – Contract Law. Retrieved from Ruleoflaw.org.au:
https://www.ruleoflaw.org.au/contract-law/

agreed upon, at the time of formation of contract.20 She had entered into contractual promise with
Pedro not to perform or engage into business of French jewellery for two years and she broke the
promise. It was her obligation to be bound to the contractual terms till the completion of the
contract.
Conclusion - Lisa broke her promise and Pedro can impose contractual promise on Lisa but only
through court. Pedro can sue Lisa in the court because there was existence of valid enforceable
contract between the two contracting parties. The court will order compensation to be given by
Lisa to Pedro because of financial loss faced by him due to Lisa. So, Pedro should take the
matter to the court and should demand compensation for the financial loss caused to him.
References
ACCL. (2016). Australian Contract and Consumer Law. Retrieved from
Australiancontractlaw.com: https://www.australiancontractlaw.com/
ACCL. (2018). Contracts & agreements. Retrieved from Accc.gov.au:
https://www.accc.gov.au/consumers/contracts-agreements
Austlii. (2017). Real Property Act 1990. Retrieved from Austlii.edu.au:
http://classic.austlii.edu.au/au/legis/nsw/consol_act/rpa1900178/
Austlii. (2018). Conveyancing Act 1919 - SECT 117. Retrieved from Austlii.edu.au:
http://classic.austlii.edu.au/au/legis/nsw/consol_act/ca1919141/s117.html
20 LaMance, K. (2018). What Are Contract Obligations? Retrieved from Legalmatch.com:
https://www.legalmatch.com/law-library/article/contract-obligations.html

Australian Contract Law. (2016). Australian Contract and Consumer Law. Retrieved from
Australiancontractlaw.com: https://www.australiancontractlaw.com/
Clarke, J. (2015). Consideration. Retrieved from Australiancontractlaw.com:
https://www.australiancontractlaw.com/law/formation-consideration.html
Estes, C. J. (2009). Contract: A Promise or an Agreement? Washington University Law Review,
11(4).
Gumland Property v Duffy Bros Fruit, S395/2007 (High Court of Australia March 27, 2008).
High Court of Australia. (2008). Gumland Property Holdings Pty Limited And Duffy Bros Fruit
Market (Campbelltown) Pty Limited & ORS. Retrieved from Hcourt.gov.au:
http://eresources.hcourt.gov.au/downloadPdf/2008/HCA/10
Hodges, K. (2015). Non-disclosure and misrepresentation: Underwriting records prevail Ð
Kalabakas v Chubb Insurance Company of Australia Ltd [2015] VSC 705. Retrieved
from mccabecurwood.com.au: https://mccabecurwood.com.au/non-disclosure-and-
misrepresentation-underwriting-records-prevail-kalabakas-v-chubb-insurance-company-
of-australia-ltd-2015-vsc-705/
Kalabakas v Chubb Insurance Company of Australia Ltd, S CI 2013 02801 (Supreme Court of
Victoria December 11, 2015).
LaMance, K. (2018). What Are Contract Obligations? Retrieved from Legalmatch.com:
https://www.legalmatch.com/law-library/article/contract-obligations.html
Lavan. (2018). Contractual promises – are they binding? Retrieved from Lavan.com.au:
https://www.lavan.com.au/advice/property_leasing/contractual_promises_are_they_bindi

ng
Law Teacher. (2018). Introduction to Contract Law. Retrieved from Lawteacher.net:
https://www.lawteacher.net/modules/contract-law/
Lethlean, J. (2008). Australia: A Landlord´s Right To Recover Loss Of Bargain Damages.
Retrieved from Mondaq.com:
http://www.mondaq.com/australia/x/62514/landlord+tenant+leases/A+Landlords+Right+
To+Recover+Loss+Of+Bargain+Damages
Monash University. (2017). Commercial law: Contract law. Retrieved from Lib.monash.edu:
https://guides.lib.monash.edu/commercial-law/contract-law
Probert, A., & Boughton, L. (2016). Australia: Fraudulent non-disclosure and misrepresentation
in property claim successfully proven. Retrieved from Mondaq.com:
http://www.mondaq.com/australia/x/480002/Insurance/Fraudulent+nondisclosure+and+m
isrepresentation+in+property+claim+successfully+proven
Rule of Law Institute of Australia. (2018). Case Note – Contract Law. Retrieved from
Ruleoflaw.org.au: https://www.ruleoflaw.org.au/contract-law/
The Free Dictionary. (2018). Contracts. Retrieved from thefreedictionary.com: https://legal-
dictionary.thefreedictionary.com/Nature+and+Contractual+Obligation
Thomson Reuters. (2018). When Will a Promise or Statement Be Considered a Binding
Contract? Retrieved from Findlaw.com: https://smallbusiness.findlaw.com/business-
contracts-forms/when-will-a-promise-or-statement-be-considered-a-binding.html