Restoration Island Pty Ltd v Longboat Investments Pty Ltd and Anor [2012] QSC 208 provides warning on the consequences of not acting within a reasonable time to fulfil an implied term of a development contract.

Restoration Island, a registered lessee, was seeking to recover possession of land in far North Queensland which it had subleased to a developer, Longboat Investments.

On 22 February 1994, a Heads of Agreement was entered into between the parties that provided for the development of a resort on the land. Clause 3.1 specified that the developer shall use its reasonable endeavours to comply with the Development Schedule which was in Annexure 1. The development schedule required Longboat to obtain a building approval (BA) by 21 January 1995 and to commence construction by the 30 April 1995. Clause 3.2 set out that the developer shall not be responsible for delays due to actions of Government.

On 14 October 1996, Restoration Island entered into a sublease with Longboat Investments until February 2039. Longboat successfully made an application for development approval in February 1996 upon the condition that $11,000 be paid to the Council. By 1 March 2000, the Restoration Island gave Longboat 30 days notice to remedy the failure to obtain a BA. By this time, 6 years had passed since the signing of the Heads of Agreement and over 5 years since the date identified in the development schedule for the lodging of the BA.

The Court held that there was a deliberate decision on behalf of Longboat to not pay the $11,000 to council on the basis that once it was paid timeframes in relation to BA would start to run.

However, a repercussion of not paying the $11,000 within two years of the conditional DA being issued resulted in the application being void.

Since there was no express provision as to when an act required by the terms of the contract was to be performed by, then it was to be performed within a reasonable time. This view was to give business efficacy to the agreement.

Therefore, Longboat had breached this implied term to perform its obligations within a reasonable time and the Heads of Agreement was terminated. Consequently, the sublease was also terminated due to the operation of a clause in the Heads of Agreement. As such, Restoration Island was able to recover possession of the leased land.