The decision in Vella v Ayshan  NSWSC 84 delivered by
White J, a single judge in the Equity Division of the New South
Wales Court of Appeal, is a warning to vendors that any deficiency
in the subject matter of a sale is a breach of an essential term of
a contract that can entitle purchasers to rescind the contract.
The plaintiff purchasers (Mr Vella and another) and the
defendant vendors (Mr Ayshan and others) entered into a contract
for the sale of a townhouse which was to be constructed. There were
two special conditions relating to the construction:
1. Special Condition 15 (SC
"Prior to completion the vendor
shall in a proper and tradesmanlike manner cause a residence to be
erected... in accordance with the terms and specifications as
approved by the Campbelltown City Council and the vendor shall not
less than 14 days prior to completion, serve on the purchaser an
2. Special condition 16 (SC
"Any defects or faults due to
faulty materials or workmanship which appears in the property and
are notified in writing to the Vendor [shall] be amended and made
good by the vendor...."
The purchasers noticed defects in the construction of the
townhouse and in accordance with SC 16 notified the vendors.
Despite assurances from the vendor that the defects had been
rectified, the purchasers relied on SC 15 and refused to complete
the purchase of the townhouse on the basis that the vendors had
failed to cause the residence to be constructed in a proper and
tradesmanlike manner and in accordance with the plans and
specifications approved by Campbelltown City Council.
Was there a breach of SC 15 and did it permit the purchasers to
rescind the contract?
The Court found that the vendors breached both limbs of SC 15 by
failing to erect the townhouse in a proper and tradesmanlike manner
and by failing to erect the townhouse in accordance with the plans
approved by Council. However, the term "prior to completion
the vendor shall in a proper and tradesmanlike manner" was not
an essential term that required strict and literal performance.
Therefore, the purchasers could not rely on this breach of SC 15 to
rescind the contract. Conversely, the term "in accordance with
the terms and specifications as approved by the Campbelltown City
Council" was an essential term because it described the
subject matter of the sale and as such, any substantial departure
by the vendors from the agreed subject matter of the contract,
permitted the purchasers to rescind and have their deposit
Defects in construction – not in a proper and
The vendors had failed to comply with several Australian
building codes and standards, but relied on an occupation
certificate to argue that despite the defects, the residence was
fit for habitation. However, the Court determined that the
obligation to erect a residence in a proper and tradesmanlike
manner should not be interpreted to merely mean erecting a
residence fit for habitation. As the defects were not trivial or
isolated defects, but were departures from mandatory building
standards, the vendors breached SC 15 by failing to cause the
residence to be erected in a proper and tradesmanlike manner.
Departures from approved plans by the Council
The Court referred to the decision in Travinto Nominees Pty Ltd
v Vlattas (1973) 129 CLR 1 where Menzies J said that, at common
law, any difference, however trivial, between the land described in
the contract and the land produced constituted a defect which
entitled the purchaser to rescind.
In this case, the Court held that the term "in accordance
with the terms and specifications as approved by the Campbelltown
City Council" was an essential term because it described the
subject matter of the sale. There were three departures from the
approved plans by Council and although the departures were not
detrimental, the purchasers had not approved them. More
importantly, the departures were substantial: the landscaping was
not completed, the kitchen bench was shortened and the laundry and
toilet were combined so that a door was removed. As a result, the
purchasers were permitted to rescind the contract and have their
Notably however, the Court determined that had no part of SC 15
been an essential term, the vendors could have sought specific
performance and prevented the purchasers from rescinding the
contract because the breaches did not deprive the purchasers of the
substantial benefit of the residence and the defects could have
been readily rectified.
Vendors should ensure that the land that they deliver to
purchasers be substantially identical to the subject matter
described in the contract of sale. If a building is to be
constructed in accordance with plans and specifications attached to
the contract, vendors must ensure they build in accordance with
those plans and specifications. A failure to do so may provide
purchasers with a valid basis for rescinding the contract.
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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