We use cookies to give you the best online experience. By using our website you agree to our use of cookies in accordance with our cookie policy. Learn more here.Close Me
In brief - Notice to complete still valid even though
interest calculation wrong
In a NSW Court of Appeal decision handed down on 3 July 2012 in
Carrapetta v Rado [2012] NSWCA 202, the court held
that an erroneous settlement statement issued on behalf of the
vendor did not undermine the validity of the notice to
complete.
Although the settlement figures were calculated incorrectly due
to an erroneous interpretation of the interest clause under the
contract, the court held that this did not constitute a breach of
any identifiable provision of the contract as it did no more than
make an unenforceable demand.
Handwritten amendment to interest payable under special
condition of contract
Rado, the purchasers had entered into a standard form contract
with Carrapetta, the vendor of a property at Mosman in Sydney. The
contract included special condition 34(b), which provided that if
the contract is not completed by the completion date, being 1
December 2011, the purchaser will be liable to pay interest on the
balance of purchase monies calculated at the rate of 12% per
annum.
The form of specific condition 34(b) referred to the 12% in two
places, however both of the exchanged contracts had handwritten
alterations, amending 12% to 8%.
Vendor serves notice to complete and purchaser
challenges its validity
The purchasers wished to delay settlement and the vendors
refused. On 1 December, the purchasers wrote to the vendor's
solicitors and confirmed that settlement "will not be
occurring today" and that they "anticipate settlement to
occur within the next 14 days as required". On the same day,
the vendor's solicitors served a notice to complete.
By 14 December the matter remained unsettled. The vendor's
solicitor issued another letter confirming settlement on 16
December and enclosed an erroneous settlement statement which
designated interest payable calculated at 12%. In a letter dated 15
December, the purchaser's solicitors wrote the vendor's
solicitor to challenge the validity of the "purported"
notice to complete.
When is a notice to complete invalid?
A notice to complete will be rendered invalid if the issuer is
"in default" or "in breach" or not
"innocent" or not "ready, willing and able" at
the time the notice was given. The submission by the purchasers was
that notice was invalid because the interest, calculated by the
vendor at 12%, was inconsistent with the terms of the contract,
namely 8%.
Incorrect settlement statement does not breach any
provision of the contract
In assessing the validity of the notice, Barrett JA considered
the effect of a settlement statement and found that the submission
by one party entails no more than a mere request or confirmation of
the figures and calculation set out in the statement. This view
affirms that courts should be slow to conclude that a party who
delivers a settlement statement intends to adopt a particular
construction of a contract unequivocally to the exclusion of other
possibilities.
Although the settlement statement was in fact incorrect, the
court found that it did not constitute a breach of any identifiable
provision of the contract as it did no more than make an
unenforceable demand, which did not undermine the validity of the
notice to complete.
Further, since the purchasers' solicitors had not
communicated the incorrect nature of the interest calculations
before the service, they could not rely on the miscalculation to
challenge the validity of the notice.
It is important to note that the court found that at all
relevant times the vendor was ready, willing and able to complete
the contract according to its terms and therefore was more inclined
to find the notice to complete valid.
Wrong calculation on settlement statement needs to be
addressed before completion
This decision clarifies that a purpose of a settlement statement
issued by one party is to request confirmation that the receiving
party agrees with the calculations set out in the statement.
Therefore, a erroneous calculation on a settlement statement must
be addressed prior to the completion and cannot itself render a
notice to complete invalid.
Parties to a contract for sale must ensure that they are ready,
willing and able to complete when they issue the notice to complete
and remain so until completion.
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.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
