Australia: Could the property seller issue a Notice to Complete, terminate the contract and keep the 10% deposit? Which case won?

Last Updated: 11 September 2019
Article by Daniel Ponepaseut

The Facts

Property buyer to provide form of transfer of property

On 23 October 2014, two companies entered into a standard NSW contract for the sale of land with a sale price of close to $2 million. The contract specified a fixed completion date of 30 January 2015 and a paper-based settlement. The contract required that the buyer prepare and provide the seller with the form of transfer of the property at least 14 days before the completion date.

Property seller issues buyer with Notice to Complete

As the completion date approached, the buyer's solicitor advised that the buyer would not be ready to settle on that day.

The seller issued a Notice to Complete to the buyer, advising the buyer that it must complete the contract "on or before 3pm Tuesday 17 February 2015", adding that "in this respect time is of the essence of the contract."

The buyer provided the seller with the form of transfer of the property. However, it was not in the correct form and the seller could not execute it as a company. The director for the seller instead executed the transfer in his personal capacity as an individual.

Defect in transfer document spotted at settlement conference

The parties agreed to complete the contract on 16 February 2015. At the settlement conference, the buyer's agent pointed out that the transfer had not been properly executed. The parties decided to reschedule completion for the next business day, 17 February 2015.

However, the mortgagee for the seller later advised that it would not be able to effect settlement on 17 February 2015 as, due to an internal policy, it required three clear business days to reschedule a settlement. Nevertheless, the buyer's solicitor advised that it remained "ready, willing and able" to complete the contract the next day.

The contract was not completed on 17 February 2015 and on 26 February 2015 the seller served a notice of termination of contract on the buyer, advising the buyer that the contract was terminated and that the 10% deposit paid by the buyer was now forfeited.

The property buyer commenced proceedings against the seller to recover the deposit.

case a - The case for the seller

case b - The case for the buyer

  • The buyer provided an incorrect form of transfer on three occasions. It was the buyer's responsibility under the contract to supply the correct form of transfer at least 14 days before the completion date.
  • Our only obligation was to execute the form of transfer submitted by the buyer.
  • The buyer should have advised well ahead of the completion date that the transfer was not in the correct form for execution by a company. We were not required to bring this defect to the buyer's attention.
  • The settlement did not occur on 16 February 2015 because of the incorrect form of transfer supplied by the buyer, so the sale falling through is entirely the buyer's fault.
  • The buyer defaulted on the contract by failing to complete in accordance with our Notice to Complete.
  • As a result of this default, the court should find that we were entitled to terminate the contract and retain the 10% deposit paid by the buyer.
  • It was the seller's responsibility under the contract to produce at the settlement conference all documents necessary for us to be able to effect registration of the transfer with the Land Titles Office.
  • The seller failed to fulfil this condition by incorrectly executing the transfer as an individual, instead of as a company.
  • The settlement could still have taken place on 16 February 2015 as the transfer could easily have been amended by hand at the settlement conference itself. That option was acceptable to us, however the signatory for the seller was not present or contactable by phone.
  • We indicated to the seller's legal clerk that if she was prepared to stay at the settlement conference, the matter could easily be rectified. However, she had to leave because she was "busy".
  • We were ready, willing and able to complete the transaction on 16 February but the seller was not. When settlement did not take place that day, we were again ready, willing and able to complete the transaction on the following day, but again, the seller was not.
  • Because the seller was not ready to complete the transaction, it should have withdrawn its Notice to Complete. The court should find that we are not in default and that the seller is not entitled to terminate the contract or retain the 10% deposit.

So, which case won?

Cast your judgment below to find out

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.

Daniel Ponepaseut
Property law
Stacks Law Firm

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