Which case won?

casea
The case for the property buyer
  • Both vendors were always aware that the property was for sale. Irrespective of the fact the husband did not sign the contract, the wife acted as his representative in the transaction, with his knowledge and permission.
  • According to a professional valuer, the value of the property increased by $165,000, or 47%, between exchange of contracts and registration of the plan of subdivision. This is why the vendors want to terminate the contract.
  • The contract was not terminated, as the notices I was sent did not conform to the requirements of section 66ZL of the Conveyancing Act.
  • I was at all times ready, willing and able to complete the transaction.
  • As the contract is valid and the vendors have not terminated it, the court should make orders for the specific performance of the contract so that the sale of the land can proceed.
caseb
The case for the property sellers
  • My wife and I did not both sign the contract to create a legally binding and enforceable agreement.
  • As a vendor, I did not know that my wife might sign the contract on my behalf and I never specifically gave her permission to do so.
  • If a contract does exist, we insist as vendors that either or both Notices of Rescission were valid, as we were unable to register the plan of subdivision by the sunset date. Registration took place almost twelve months after the sunset date, allowing the contract to be terminated.
  • Section 66ZL of the Act has no application under the terms of the contract to our notices to terminate the contract.
  • It defeats the purpose of having a special condition with a sunset date if we are unable to rely on it and the court should rule that we validly terminated the contract.

So, which case won?

Cast your judgment below to find out
Case A Case B

Case A won. You were right!

How people voted
a69%
b31%

Expert commentary on the court's decision

“The judge concluded that the wife was placed in a position of a representative in the sale transaction with the knowledge and approval of her husband. Consequently, signing on behalf of her husband was an act done within the scope of the authority conferred upon her to create a legally binding and enforceable contract between the parties.”
Supreme Court rules in favour of buyer

In the case of Klein v McMahon [2017] NSWSC 1531, the Supreme Court of NSW made an order for specific performance to enforce the sale of the property by the vendors, Mr and Mrs McMahon, to the buyer, Mr Klein, even though the sunset date had passed.

Was there a legally binding and enforceable contract?

The court first considered whether a binding agreement existed between the parties.

It was accepted by both parties that Mr McMahon did not sign the contract for sale as vendor. However, a number of concessions were made during the course of cross examination, including that he and his wife wished to subdivide their property and sell the property in question for $350,000.

While Mr McMahon never gave express permission for his wife to sign the contract, he was aware that a contract had been entered into with a buyer. Mr McMahon conceded that he had left everything of a financial or business nature in the transaction to his wife, as was apparently customary. His subsequent behaviour showed that he was satisfied for the sale to proceed.

Wife found to have represented husband with his approval in sale of property

The judge inferred from the evidence that a relationship of principal and agent arose between the Mr and Mrs McMahon. The court concluded that Mrs McMahon was placed in a position of a representative in the sale transaction with the knowledge and approval of her husband.

Consequently, signing on behalf of her husband was an act done within the scope of the authority conferred upon her to create a legally binding and enforceable contract between the parties.

Does section 66ZL of the Conveyancing Act apply to this contract?

The termination of a contract by a vendor under a sunset clause for an off-the-plan sale is affected by section 66ZL of the Conveyancing Act. This section was introduced into the act by the Conveyancing Amendment (Sunset Clauses) Act 2015 (NSW). The section applies both retrospectively and to existing contracts.

Subsections 66ZL (3) and (4) operate to restrict the circumstances in which a vendor may terminate an off-the-plan contract under a special condition if the subject lot has not been created by the sunset date.

Under the Conveyancing Act, such an action requires written notification twenty-eight days before the proposed termination of the contract, specifying why the vendor is proposing to terminate it and the reason for the delay and including the consent in writing to the termination of the contract from the purchaser.

The sellers of the property did not validly terminate the contract pursuant to the Act. As such the Notices of Rescission were not effective and therefore allowed the agreement to remain on foot between the parties.

Orders by the court for vendors to pay costs of purchaser

At all times the purchaser was ready, willing and able to complete the transaction. The court made an order for specific performance of the contract so that the sale of the property could be completed.

Mr and Mrs McMahon were also ordered to pay Mr Klein’s legal costs.

Contracts containing sunset clauses must conform with statutory obligations to be validly terminated

This case sets out the requirements for a vendor to terminate an off-the-plan contract. Unless the termination of the contract conforms with statutory obligations, a Notice of Rescission will be ineffective and the seller will be obliged to complete the contract.

Alternatively, the seller is required to make an application to the Supreme Court for termination of the contract, provided it is just and equitable in all the circumstances.

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