In brief – Purchasers succeed in avoiding
It may be possible to succeed in rescinding a contract on the
basis of a pre-contractual promise, even though it is not included
in the contract.
Development consent for townhouses on two properties
The NSW Court of Appeal case Saleh v Romanous  NSWCA 274 was handed down on
28 October 2010 and concerned the sale of 163 Kissing Point Road,
Dundas. The appellants, Michael and Rose Saleh, owned 163 Kissing
Point Road and Michael's brother, Edmond, who lives in Adelaide
owned the house next door at 165 Kissing Point Road. The Salehs
obtained development consent of eight strata titled two storey
townhouses on the two properties.
Sale of property on assumption that development would
The Salehs entered into a contract with the respondents, Harris
and Philomena Romanous, to sell 163 Kissing Point Road for an
agreed sum which had been negotiated on the assumption that the
property, along with the neighbouring property, would be developed
into eight two storey townhouses.
Prior to the exchange, Harris and Philomena Romanous were given
a statutory declaration dated 10 May 2004 which stated that Edmond
had appointed Michael "as his agent for negotiating" with
Harris and that "all communications and correspondence
concerning the development" were to be made to Michael.
After exchange it became apparent that Edmond did not want to
proceed with the plans to develop the properties. so the Romanouses
instructed their solicitors to rescind the contract.
Supreme Court finding of pre-contractual promise
In the earlier case, the Supreme Court of New South Wales found
that the Salehs had made a pre-contractual promise to the
Romanouses, assuring them that if the neighbour, Edmond, did not
want to build, they would not have to purchase the property and
would get their money back (at ).
The Supreme Court also noted that the Romanous' solicitors
made no attempt to have the pre-contractual promise included in the
contract. Because they had attempted to have two other special
conditions of lesser importance included in the contract, the
Supreme Court had been asked to infer that their solicitors were
not informed about the pre-contractual promise.
Court can order repayment of a deposit with or without
The Court of Appeal rejected the appeal, as well as the
Salehs' argument that a pre-contractual statement which cannot
be enforced as a collateral contract due to inconsistency, can also
not be enforced as promissory estoppel (at ).
Their Honours noted that promissory estoppel is a ground on
which equity will protect one contracting party from inequitable
conduct by the other (at ). The Court further noted that
"promissory estoppel is a restraint on an enforcement of
rights, and thus unlike proprietary estoppel, it must be negative
in substance" (at ).
Purchasers benefit from Section 55(2A) of Conveyancing
However, the court concluded that the limitations on the scope
of promissory estoppel do not matter in this situation, as the
Romanouses can rely on the statutory remedy conferred by
s 55(2A) of the Conveyancing Act 1919 (NSW).
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
This means that where the court refuses to grant specific
performance of a contract for the return of a deposit, the court
may, if it thinks fit, order the repayment of any deposit to the
purchaser, with or without interest.
The Court of Appeal held that the trial judge erred when he held
that the promissory estoppel entitled the Romanouses to rescind and
recover their deposit. Rather, the Court of Appeal held that
promissory estoppel prevented the Salehs from enforcing the
contract and entitled the Romanouses to an order under s 55(2A) to
recover their deposit.
This case demonstrates that even though the pre-contractual
promise was not included in the contract, the purchasers were still
able to rely on it to avoid the contract.
We discuss whether certain clauses commonly found in ordinary commercial contracts could be considered to be penalties.
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