Insights

Notice to complete upheld; vendor entitled to deposit and damages

By Chris Rumore
 

In brief - Purchaser fails to complete and vendor terminates contract

Pantlin v King involved a contract which was exchanged for the sale of a property with a 5% deposit and an extended settlement. The purchaser failed to complete. After a number of extensions, the vendor terminated the contract.

Ultimately, the vendor's notice to complete was upheld and the vendor was entitled to release of the deposit and damages.

Notice to complete held to be valid

The court held that the vendor's solicitor was not bound to answer requisitions out of time but in any event had done so on a without prejudice basis and that the answers had been sent (even though the purchaser denied that she had received them).

The notice to complete was held to be valid and to have been delivered in accordance with the terms of the contract (even though, again, the purchaser denied she received it). It was also held that by virtue of the provisions of the contract, a 14 day period was a reasonable period to require completion.

Wisely, the solicitor for the vendor attended the place of settlement on the settlement date in the notice to complete and waited for about an hour to establish that the purchaser would not be settling.

The vendor's notice of termination issued was therefore valid.

Court rejects purchaser's claim that property substantially damaged

The purchaser maintained that there was substantial damage to the property, both at the time the notice to complete was issued and at the time set down for completion, and that the purchaser was therefore not required to settle.

On the facts, the court found that, subject to one minor item, the condition of the premises was in the same state as it was at the time the purchaser had exchanged contracts. The one item that it was proven had been damaged between exchange and settlement could have been rectified for a fairly minimal cost (about $300, on the evidence) and this did not entitle the purchaser to delay completion.

Vendor attempts to claim capital gains tax from purchaser

One of the major issues for the vendor was that, as the property had not sold within two years of the death of former registered proprietor, capital gains tax was payable.

The vendor sought to claim this from the purchaser as well as the other damages and forfeiture of deposit.

However, as the vendor did not seek to resell the property within 12 months of the contract's termination, as required by the standard form of contract, this head of damages was held not to be recoverable. The court held that the vendor could have resold the property and still have brought proceedings against the purchaser for damages and that the vendor had an obligation to mitigate his loss and therefore this head of damage was not claimable.

Party which terminates contract and seeks damages must mitigate its loss

Firstly, it is essential that someone seeking to rely on a notice to complete does all that is necessary to demonstrate to the courts that the person is ready, willing and able to settle on the completion date.

Secondly, it is essential that a party who terminates the contract and then seeks damages has done all that it is able to do to mitigate its loss and is cognisant of the provisions of the standard contract in New South Wales requiring a claim to be made within 12 months, so any action that needs to be taken to mitigate losses needs to be undertaken within this period.

This article has been published by Colin Biggers & Paisley for information and education purposes only and is a general summary of the topic(s) presented. This article is not specific legal advice. Please seek your own legal advice for any questions you may have. All information contained in this article is subject to change. Colin Biggers & Paisley cannot be held responsible for any liability whatsoever, or for any loss howsoever arising from any reliance upon the contents of this article.​

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