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

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
 
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 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
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.

Emails

From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .

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.