The Facts
Purchaser and vendor enter into a contract for sale of land
A recent case in the NSW Supreme Court illustrates just how insidious cybercrime can be, and also how easy it is to suffer from the actions of a cybercriminal.
The vendor and purchaser entered into a contract for sale of land for a residence in NSW.
The contract was generally of the usual form, and included a clause requiring that the purchaser pay the 10% deposit, being $56,000, either by cash of up to $2000, or by cheque.
The contract required payment of the deposit by two instalments, the first instalment on the day the contract was entered into, and the second of $54,600 on a later date.
Vendor’s agent instructs purchaser to pay deposit via electronic funds transfer
Shortly before the contract was entered into, the real estate agent representing the vendor sent an email to the purchaser, directing the purchaser to pay the deposit into the agent’s trust account by electronic funds transfer.
The email included the bank account details for the agent’s trust account.
The purchaser paid the first instalment of the deposit on the contract date by electronic funds transfer to that account.
A few days before the second instalment of the deposit was due to be paid, the agent sent the purchaser another email, reminding the purchaser to make this payment, and again setting out the bank account details for the agent’s trust account.
So far, so good.
Agent’s email is hacked causing purchaser to pay deposit into fraudulent bank account
However, two days later the purchaser received another email, to which was attached an invoice for $54,600, being the amount of the second instalment of the deposit.
Both this email and the invoice had all the appearances of being from the agent and included the chain of earlier emails passing between the purchaser and the agent.
This email also included the details of a new, different bank account to which the second instalment of the deposit was directed to be paid. Not only were the details of the new bank account included in this email, but the bank account details included in the earlier emails in the chain had also been changed to the details of the new account.
So, the purchaser proceeded to pay the $54,600 second instalment of the deposit by electronic funds transfer into the new bank account as the email directed.
Unfortunately, the email with the new bank account details was fraudulent, having been sent by a hacker who had illegally accessed the agent’s email account.
As a result, the $54,600 paid by the purchaser was paid into the bank account of the cybercriminal, not into the trust account of the agent.
Vendor purports to terminate contract and purchaser applies to Supreme Court
When the vendor did not receive the second deposit instalment of $54,600, it purported to terminate the contract.
The purchaser applied to the NSW Supreme Court to restrain the vendor from dealing with the property in any manner other than by completing the sale.
Expert commentary on the court's decision
Supreme Court rules in favour of vendor
In the case of Deligiannidou v Sundarjee ([2020] NSWSC 437, the Supreme Court of New South Wales ruled against the purchasers, Efthalia Deligiannidou and Patrick Sven, finding that the vendors, Hasmukh and Jesal Sundarjee, were entitled to terminate the contract.
Agent not authorised to direct purchaser to pay via EFT
The court found that the contract for sale of land required that the deposit be paid by either cash of up to $2000, or by cheque.
The contract did not provide for the deposit to be paid by electronic funds transfer.
Neither the general authority of the agent, nor the specific authority of the agent pursuant to the document by which the agent was appointed to represent the vendor, authorised the agent to give the purchaser directions on behalf of the vendor as to payment of the deposit.
Consequently, by paying the second instalment of the deposit by electronic funds transfer, the purchaser was in breach of the requirement of the contract that the deposit be paid by cash or by cheque.
The vendor was entitled to terminate the contract.
Always verify payment details contained in an email before making any payments
The purchaser in this case learned the hard way that email is not always a secure form of communication and is open to fraud.
As a general rule, anyone who is asked to send money electronically should not rely on payment details provided in an email.
You should always check that the payment details provided in the email are correct by making personal contact with the intended recipient of the money.
If making contact via phone, you should first ensure that you independently verify the phone number provided in the email.
Could the purchaser have made a claim against the agent?
In this case, the court was not required to consider whether the purchasers could have made a claim against the agent for the loss they suffered.
Potentially though, they could have argued that the agent was liable for their loss, as the agent should not have given a direction to them requiring that the deposit be paid in a manner that was not authorised by the contract.