Australia: Purchaser not able to settle but avoids direct liability for breach of contract

Last Updated: 2 July 2012
Article by Chris Rumore

In brief – Notice to complete ineffective but interest still payable

The recent case of Bone v Wallalong Investments (No.2) in the Supreme Court of NSW involved a purchaser who did not have finance and was not able to settle on the due date, but was able to avoid direct liability for breach of contract.

However, when an extension of time was granted pursuant to a deed of variation of contract, there was a guarantee given by three directors of certain of the buyer's obligations. Some of the obligations were still held to be enforceable by the vendor.

Contract for sale of rural property in 2005

The contract was entered into in January 2005 for the sale of a rural property.

The date for completion was 9 August 2005 but, by agreement, it was extended to 9 February 2006.

The variation of the contract was documented by a deed and, pursuant to that deed, interest was to be paid for the delay in settlement.

The purchaser failed to complete in February 2006 and there were numerous extensions granted.

Vendor issues notice to complete in 2010

The situation was that ultimately, some four years later, in February 2010, the vendor issued a notice to complete.

The purchaser contended that the vendor was not ready, willing and able to settle, that the vendor was not entitled to issue a notice to complete and that the vendor's purported termination of the contract after the expiry of the period under the notice to complete, was in fact ineffective.

Was the vendor ready, willing and able to settle?

The Supreme Court's decision is summarised in the three points below.

First right of refusal not exercised

The fact that there was a caveat on the title, with regards to a first right of refusal, did not make the answers to the requisitions given by the vendor inaccurate.

A copy of the caveat was attached to the contract and there has been significant correspondence establishing that the first right of refusal was not exercised so, therefore, the answer to the requisition, even if it was technically incorrect, could not be held to have misled the purchaser in any way. Therefore, this issue did not mean the vendor was not ready to settle.

Venue changed the day before settlement

The notice to complete required settlement in Broadmeadow (a suburb of Newcastle).

However, the day before settlement, the vendor's solicitor indicated that settlement had to take place at Espreon, a legal agent in Sydney, due to matters that had to be attended upon at the settlement. The vendor attended settlement but the purchaser did not.

The vendor's representative had acted correctly in attending at settlement but, as the notice to complete had specified a place for settlement, and as the vendor had then changed this only the day before settlement, it was held that reasonable notice had not been given to the purchaser to be able to attend settlement at the changed venue.

As the vendor had not attended settlement at the place for settlement appointed by the notice to complete (but in fact attended at the Sydney office of Espreon), it was held that the vendor was not ready, willing and able to settle.

Therefore, the notice to complete was ineffective.

Interest obligations held to be valid

The interest obligations under the deed of variation of the three guarantors was held to be valid and the vendor could still claim this amount from the guarantors (which totalled several million dollars).

Useful lessons for property lawyers and conveyancers

There are many practical lessons from this decision.

These are the major ones:

  • Make sure that your notices to complete merely state what they have to state. In other words, what they should state is that the party issuing the notice to complete is ready, willing and able to settle, that time for settlement is being made of the essence and what the consequences are of not complying with the notice to complete.
  • Make sure that plenty of notice is given to parties in relation to the venue for settlement and the giving of settlement figures, so that the courts do not hold that giving some of this information the day before settlement is unreasonable.
  • Make sure that your answers to requisitions (seen by many people as a mere formality) are correct and accurate, so as to not to afford a party seeking to avoid contractual obligations the ability to do so on a technicality.

For more information about property acquisition, development and sale, please see the website of Colin Biggers & Paisley or contact Chris Rumore at

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.

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Chris Rumore
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