Australia: Is it repudiatory for a vendor to erroneously claim interest after issuing a notice to complete?

Last Updated: 1 September 2017
Article by Bede Haines

Most Read Contributor in Australia, August 2018

Mehmet v Carter[2017] NSWSC 1067

Interest for delayed completion

A fraught situation can arise where a land sale contract fails to complete and where its terms entitle the vendor to interest on the balance of the purchase price if this failure was not the vendor's fault (often regardless of whether it was also the purchaser's fault). This then prompts the vendor to serve a notice to complete appointing a new date for settlement and the vendor's settlement figures include a component for interest on the balance of the purchase price for the period between the two completion dates.

Depending on why completion failed - for instance if the purchaser had what it considered as being a genuine basis not to complete, or if the purchaser lacked the wherewithal to complete, but believes that funds will soon become available, so that the purchaser is not prepared to simply walk away and forfeit its deposit - the purchaser is likely to contend that due to a default by the vendor (which will need to be articulated) the purchaser was not obliged to have completed on the first completion date.

What then should the vendor do about claiming interest? Put another way, if the vendor insists on being paid interest at completion, but is not entitled to any interest, is the vendor exposing itself to a claim that it is repudiating the contract by only performing it in a manner inconsistent with its terms? If so, the vendor risks having the contract terminated and becoming liable in damages to the purchaser for the sake of what may be a relatively small amount of money. This issue, whilst not entirely new, was just considered in Mehmet v Carter [2017] NSWSC 1067.

Completion, notification of registration and the Aboriginal object

The completion of a sale of land contract was to occur on the later of two dates: 5 August or 14 days after the vendor notified the purchaser that title was registered in his name as an executor, by way of a transmission application, following the death of the registered proprietor.

The transmission was registered on 17 June but not notified until 4 August. No issue was taken with this and the parties worked toward a 5 August settlement as though obliged to do so by the contract.

Settlement did not occur on 5 August. The purchaser contended that the vendor was not proffering good title due to there being an undisclosed 'Aboriginal object' on the land. Pursuant to legislation, its presence was said to restrain the purchaser's ability to develop the land.

The vendor issued a notice to complete nominating 10 September as the completion date. The notice was issued with draft settlement figures that included a component for interest payable by the purchaser from 5 August. This was said to be payable pursuant to a special condition that entitled the vendor to interest if settlement did not occur "without default by the vendor".

On 10 September, both parties attended settlement, but there was no completion, again due to the presence of the Aboriginal object.

The next day, the vendor issued a further notice to complete nominating 28 September for settlement and several days later issued draft settlement figures. These figures included payment of interest by the purchaser from 5 August.

On 23 September, the purchaser asserted that the vendor was not entitled to have issued the notice to complete since he was unable to convey good title and further that the vendor was unable to claim any interest because he had not previously been in a position to convey good title. The vendor was also said to have repudiated the contract by manifesting an intention to only perform the contract in a manner inconsistent with its terms, essentially concerning the obligation to convey good title. The vendor persisted with his notice to complete and maintained his entitlement to interest.

On 25 September, the purchaser purported to accept the vendor's alleged repudiation and terminate the contract. Because the time for completion had not passed, the repudiation was founded upon an anticipatory breach.

On 6 October, the vendor contended that the purchaser had had no basis to terminate and that his conduct was itself repudiatory. The vendor then purported to terminate.

The decision

The matter proceeded to court, each party asserting the other was wrong, and with attention focused upon whether the Aboriginal object affected the vendor's ability to convey good title. This question was decided in favour of the vendor - the presence of an Aboriginal object was not a defect in title (a matter of interest in itself, but not considered here).

The purchaser, in order to maintain the lawfulness of his termination, claimed that even if the Aboriginal object did not affect the vendor's ability to convey good title, the vendor was never in a position to have demanded interest from 5 August. This was because completion was not to occur until the later of 5 August or 14 days after the registration of the transmission was notified. Since notification of the transmission only occurred on 4 August, completion was not to occur until 18 August. That is, on any view of it, the vendor was asserting a right to something it was not contractually entitled to receive – interest from 5 August.

The court was required to consider whether it could be inferred, from the vendor's conduct in insisting incorrectly on an entitlement to interest from 5 August that the vendor had repudiated the contract. That is, would the vendor's conduct convey to a "reasonable person in the position of the [purchaser] that the [vendor was] renouncing the contract". The court found no such inference:

  • It was correct that the vendor was not entitled to interest from 5 August. However, the parties acted as though 5 August was the date for completion and completion did not occur on that date because of the Aboriginal object issue. The argument between the parties after this time, including in respect of interest, was postulated upon the consequences of there being an Aboriginal object on the land. It had never been suggested that 5 August was not the original date for completion due to the failure to notify the registration of the transmission or some other basis to show that completion did not occur due to a default by the vendor
  • Considering DTR Nominees Pty Ltd v Mona Vale Homes Pty Ltd (1978) 138 CLR 423, a party may assert an incorrect construction of a contract prior to the time for performance, but in fact would be willing to perform in accordance with the correct interpretation if explained to them. However, the purchaser's argument as to why interest was not payable was not articulated upon 5 August not being the first completion date, but because the purchaser had not been obliged to complete due to the Aboriginal object. In the absence of a clear enunciation of the contract being put to the vendor, and where repudiation is based upon anticipatory breach, it is difficult for a court to conclude that the vendor would have persisted with his erroneous construction
  • In the terms of the argument between the parties, the vendor was in fact correct in asserting that a conveyance with the Aboriginal object on the land delivered good title, which was the only reason why completion did not occur on 5 August
  • The parties' conduct in acting as though 5 August and then 10 September were contractual dates for completion justified the vendor's belief that he could issue notices to complete. Given that a court should not lightly infer repudiatory conduct, there is no basis to find that a reasonable person in the purchaser's position would have considered the vendor to be repudiating the contract.

Given the above, the purchaser was not entitled to purport to terminate the contract on 23 September and the vendor was entitled to accept this conduct as repudiatory and himself terminate.

Some consideration, including merger

This note began by posing the question as to what a vendor should do about claiming interest if the purchaser has a tenable argument that completion failed due to the vendor's default.

While the vendor may have been correct in the stance he took in Mehmet v Carter, the purchaser's point was certainly arguable and had the facts only been marginally different could have resulted in the purchaser being entitled to have terminated.

Perhaps a different and more prudent approach would have been not to insist upon interest at completion, but for the vendor to reserve its position. That is, the vendor would reserve their rights, such as they are, in reliance upon the terms of the contract and, if so minded, to sue for interest following completion.

One further issue here for a vendor is to ensure that such rights survive completion of the contract. This is because normally the ability to bring a claim merges on completion to enable finality, meaning that an effective non-merger clause will need to be considered. The purpose of such a clause is to make it clear that the parties intended the relevant rights to survive post completion. (See also Carrapetta v Rado [2012] NSWCA 202, where the notice to complete did not contain interest figures, and Neeta (Epping) Pty Ltd v Phillips (1974) 131 CLR 286, where it did and which also concern issues where a vendor insists upon the payment of interest as a condition of completion. Concerning merger, see Fu v Bucasia Pty Ltd [2014] NSWSC 325 and the authorities it cites – in this case the relevant clause was not determinative).

This publication does not deal with every important topic or change in law and is not intended to be relied upon as a substitute for legal or other advice that may be relevant to the reader's specific circumstances. If you have found this publication of interest and would like to know more or wish to obtain legal advice relevant to your circumstances please contact one of the named individuals listed.

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
Similar Articles
Relevancy Powered by MondaqAI
 
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”

Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
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
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 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
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

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 or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq 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 of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions