Was it repudiation of contract? Should the property buyer get the deposit back? Which case won?
Buyer and sellers exchange contract for sale and purchase of land
On 19 January 2018, a buyer and seller exchanged contracts for the sale and purchase of a property in Kissing Point Road, South Turramurra, in NSW. The sale price was $2.83 million, with a 10% deposit of $283,000.
The buyer was a company. The sole director and secretary of that company signed the contract as guarantor.
On exchange of contracts, the buyer paid a five per cent deposit of $141,500. A clause in the contract provided for the balance of the deposit to be paid “on or prior to completion”.
The date for completion was 19 July 2018, being six months from the date of exchange.
Under the contract, if the buyer did not complete on the due date then the sellers could issue a notice to complete, making time of the essence. The new completion date set out in the notice to complete had to be “not less than 14 days after the date of service of the notice”.
Buyer unable to settle, sellers issue notice to complete
As the 19 July 2018 settlement date approached, the buyer gave notice that it may not be able to settle on that date because it could not finalise its finances in time. However, it stated that it could settle by 21 August 2018.
At 6:22am on 20 July 2018, the sellers issued the buyer with a notice to complete, requiring completion of the sale on or before 3pm on Friday 3 August 2018.
The notice to complete stated that time was of the essence, and that unless the buyer completed within the time specified, the sellers would be entitled to terminate the contract.
Sellers agree to extend completion date under notice to complete
The buyer subsequently notified the sellers that its finance had been approved, but that the bank had arranged a new valuation of the property, which was $510,000 less than the purchase price.
The buyer needed more time to organise the shortfall in funds and requested that the date for completion under the notice be extended to 23 August 2018. The sellers agreed to this extension.
Buyer still unable to settle and sellers terminate contract
On 23 August 2018, the buyer notified the sellers that it had failed to rectify the shortfall in funds.
On 27 August 2018, the sellers terminated the contract by notice to the buyer and sent the buyer and guarantor a demand for payment of the balance of the deposit, plus interest, and reserved their rights to claim damages.
Buyer claims sellers repudiated contract, legal proceedings commence
In response, the buyer alleged that the sellers’ purported termination was invalid and amounted instead to a repudiation of the contract by the sellers. The buyer gave notice that it accepted the sellers’ repudiation, that it was itself terminating the contract and demanded that the sellers repay the five per cent deposit already paid.
In November 2018, the sellers commenced legal proceedings against the buyer and the guarantor in the Supreme Court of NSW.
Prior to the hearing date, the sellers sold the property to another purchaser for $2.23 million, which was $600,000 less than the original sale price which the buyer had agreed to pay.