Australia: Consequences of errors in transfers during sale of property

Last Updated: 9 November 2015
Article by Gary Newton and Jackie Cheung

In brief - Vendors should ensure that all details of property transfer are correct

While the purchaser of a property is responsible for preparing the transfer, a vendor who fails to advise the purchaser of any errors in the transfer may be disentitled from terminating the contract.

Contract of sale between purchaser and vendor

The case of Jaswil Property Pty Ltd ATF Jaswil Unit Trust v Barrak Corporation Pty Ltd [2015] NSWSC 391 considered the validity of a termination of contract which arose by reason of the failure of the purchaser to settle by the completion date due to an inappropriately executed transfer provided on behalf of the vendor company.

The purchaser and plaintiff, Jaswil Property Pty Ltd, entered into a contract with the vendor and defendant, Barrak Corporation Pty Ltd, for the purchase of land at 63 Victoria Road, Parramatta ("the land"). Completion of the contract was due on 30 January 2015. The said land is subject to a development approval granted by Parramatta City Council and the intention of Jaswil Property is for the development of apartments in accordance with the development consent.

During the course of the conveyance, Barrak Corporation was represented by Mr Benjamin Barrak of Barrak Lawyers, who was also the sole director and secretary of Barrak Corporation, while Legal One were the representatives for Jaswil Property.

The contract provided for the sale of a house and garage, which were sold subject to an existing tenancy to Ms Najat Barrak, the sister of Mr Barrak. From the contract, it appeared that the signatory for Jaswil Property signed pursuant to section 127 of the Corporations Act 2001 (Cth) and Mr Barrak signed on behalf of Barrak Corporation.

It is important to note, however, that there was no identification of Mr Barrak's signature, nor was there any indication as to the capacity in which he had signed the contract.

Incorrect transfers provided by purchaser

In preparation for the completion, Legal One submitted a signed transfer ("the first transfer") on 24 October 2014 "for signature by the vendor and holding upon escrow for stamping at settlement". The standard form of execution was used for transferor's execution.

On this occasion, the transferor noted on the transfer was incorrectly spelt and this was subsequently brought to Legal One's attention by Mr Barrak. An amended transfer ("the second transfer") was provided to Barrak Lawyers with the correct spelling of the defendant's name on 26 October 2014.

On 23 January 2015, a further transfer ("the third transfer"), which had been stamped and which was on the same terms as the second transfer, was submitted to Barrak Lawyers. Legal One indicated that the signed and stamped transfer was for "signature by the vendor and holding upon escrow for settlement".

Vendor serves Notice to Complete on purchaser

While the evidence suggests that the parties were working towards completion to occur on 30 January 2015, by 29 January 2015 Legal One advised Barrak Lawyers that Jaswil Property's incoming mortgagee was not in a position to settle.

On 2 February 2015, Barrak Lawyers served a Notice to Complete on Jaswil Property, requiring completion to take place on or before 3pm on 17 February 2015. Between 12 to 13 February 2015, further discussions took place between Barrak Lawyers and Legal One, which resulted in completion being rescheduled for 16 February 2015.

Evidence was also presented that during the discussions, Mr Barrak advised Legal One that their client, Jaswil Property, had placed a number of items of construction equipment on the land for excavation and construction works. In his capacity as solicitor for the tenant, Mr Barrak advised that the tenant did not consent to any works on the land and requested that the unauthorised equipment be removed.

Purchaser's mortgagee refuses to accept transfer in its existing form

On 16 February 2015, the representatives for both parties and the incoming mortgagee for Jaswil Property, Westpac, attended settlement. The representative for Barrak Corporation was, in fact, Ms Barrak, the tenant and sister of Mr Barrak.

Despite the fact that Legal One and Westpac had all necessary things for completion to be effected, Westpac did not accept the transfer in its existing form as it had been signed for the defendant by an unidentified individual as opposed to the company itself.

In particular, Westpac indicated that the transferor's execution clause must be signed pursuant to the Corporations Act 2001 (Cth) and advised that the problem could be resolved if authority was obtained from Mr Barrak to amend the attestation clause.

Subsequently, Ms Barrak advised that she "left a message for the solicitor" and left the premises. Further efforts were made to contact Mr Barrak throughout the afternoon, but these were unsuccessful.

Which side was responsible for the failure to settle?

On 17 February 2015, Legal One and Mr Barrak had a telephone conversation to discuss arrangements for completion. During this conversation and in further correspondence that day, Mr Barrak insisted that the purchaser acknowledge liability for completion not being effected due to the use of a wrong execution clause in the transfer.

A new transfer ("the fourth transfer") with the correct execution clause for the transferor was provided to Barrak Lawyers with a covering letter stating that settlement was booked for 2:30pm. By 2:26pm, Mr Barrak advised that settlement could not be achieved as he was unable to organise the outgoing mortgagee to attend settlement.

Further discussions took place after 17 February 2015 regarding which party was liable for settlement not occurring by the due dates. With Barrak Corporation insisting on the validity of its own Notice to Complete, on 20 February 2015 Jaswil Property served a Notice to Complete on Barrak Corporation.

Notice of Termination served by vendor

On 26 February 2015, Barrak Corporation served a Notice of Termination on Jaswil Property on the grounds of Jaswil's failure to complete the contract under the terms of the contract and the Notice to Complete.

Jaswil Property then commenced proceedings in the Supreme Court on 6 March 2015.

Purchaser's responsibility for preparation of transfer

The court was required to determine which party bore liability for the failure to complete the contract.

In discussing clause 4.1 of the contract, the court observed that there is no doubt that the purchaser, Jaswil Property, had the contractual liability to prepare the transfer to be served on the vendor. As the vendor's solicitor is not empowered to execute a transfer on their behalf, it means that in a purchase from a vendor which is a corporation, the purchaser's solicitor should prepare a transfer with either:

  • an execution clause without the common seal of the corporation pursuant to section 127(1) of the Corporations Act
  • an execution clause with the common seal of the corporation pursuant to section 127(2) of the Corporations Act

Court finds that vendor entitled to serve Notice of Termination

A purchaser's solicitor is also required to know in advance of the preparation of the transfer which execution clause the vendor intends to utilise. This requirement gives rise to clause 4.2 of the contract, which provides that a vendor is to provide "any information needed for the form of transfer" that is not disclosed in the contract.

In these circumstances, the court found that the purchaser, Jaswil Property, had the obligation to include a form of transfer which has the proper clause for execution by the vendor and therefore, it was necessary for Jaswil's solicitors to enquire of Barrak Corporation as to the method it was going to adopt in executing the transfer before the completion of section (J) of the transfer.

In addition, as Jaswil Property served a transfer in the wrong form and requested for completion to be rescheduled for the day after 16 February 2015 once this problem was discovered, the court determined that the time frame provided to Barrak Corporation for a settlement was unreasonable in light of the fact that time was of the essence and the plaintiff was in default. Accordingly, the defendant was entitled to serve the Notice of Termination on 26 February 2015.

Court grants purchaser relief against termination of contract

While the court held that Barrak Corporation was entitled to serve the Notice of Termination and hence, terminate the contract, it observed that relief should be provided in favour of Jaswil Property. In particular, the court noted the following:

  • The purchaser's breach of the essential time stipulation was not wilful, but resulted from the unforeseen requirements of Westpac
  • Both parties failed to recognise that section (J) of the transfer did not refer to the vendor as a corporation or to the method of execution, either with or without a common seal
  • Once Mr Barrak raised matter of the spelling error on the first transfer, it appears that both parties were lulled into the belief that the transfer was otherwise in a proper form
  • It is unsatisfactory that a firm of solicitors is unable to be contacted at a time when a significant settlement is occurring, preventing both its employee and the purchaser�s solicitors from making contact with the principal

Vendor contributed to purchaser's breach of essential time stipulation

Ultimately, the court held that the failure of Barrak Corporation to turn its mind to the proper execution of the transfer which did not refer to the vendor as a corporation, or to the method of execution, contributed significantly to Jaswil Property's breach of the contract.

Jaswil Property was therefore entitled to be granted relief against forfeiture on the ground that the vendor had significantly contributed to the purchaser's breach of the essential time stipulation in completing the contract and therefore it was unconscientious for Jaswil Property to be precluded from obtaining relief against termination.

Consequently, Barrak Corporation was unable to terminate the contract and Jaswil Property was able to proceed with the purchase of the property.

Vendors who contribute significantly to purchaser's breach may be disentitled from terminating contract

In light of this case, practitioners and corporate vendors under a contract for sale should ensure that they pay proper attention to the execution clause of the transfer.

Although it is accepted that a purchaser is responsible for the preparation of the transfer, the vendor or their representatives should ensure that they promptly advise the purchaser or their representatives of any incorrect references or errors in the transfer submitted to the vendor at a reasonable time prior to completion.

It is important to note that the failure to do so may disentitle a vendor from terminating a contract if they are found to have contributed significantly to the purchaser's breach of the time stipulation under the contract.

Gary Newton
Property, acquisition, development and sale
Colin Biggers & Paisley

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.

Authors
Gary Newton
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.