In brief – Notice to complete ineffective but interest still payable
The recent case of Bone v Wallalong Investments (No.2) in the Supreme Court of NSW involved a purchaser who did not have finance and was not able to settle on the due date, but was able to avoid direct liability for breach of contract.
However, when an extension of time was granted pursuant to a deed of variation of contract, there was a guarantee given by three directors of certain of the buyer's obligations. Some of the obligations were still held to be enforceable by the vendor.
Contract for sale of rural property in 2005
The contract was entered into in January 2005 for the sale of a rural property.
The date for completion was 9 August 2005 but, by agreement, it was extended to 9 February 2006.
The variation of the contract was documented by a deed and, pursuant to that deed, interest was to be paid for the delay in settlement.
The purchaser failed to complete in February 2006 and there were numerous extensions granted.
Vendor issues notice to complete in 2010
The situation was that ultimately, some four years later, in February 2010, the vendor issued a notice to complete.
The purchaser contended that the vendor was not ready, willing and able to settle, that the vendor was not entitled to issue a notice to complete and that the vendor's purported termination of the contract after the expiry of the period under the notice to complete, was in fact ineffective.
Was the vendor ready, willing and able to settle?
The Supreme Court’s decision is summarised in the three points below.
First right of refusal not exercised
The fact that there was a caveat on the title, with regards to a first right of refusal, did not make the answers to the requisitions given by the vendor inaccurate.
A copy of the caveat was attached to the contract and there has been significant correspondence establishing that the first right of refusal was not exercised so, therefore, the answer to the requisition, even if it was technically incorrect, could not be held to have misled the purchaser in any way. Therefore, this issue did not mean the vendor was not ready to settle.
Venue changed the day before settlement
The notice to complete required settlement in Broadmeadow (a suburb of Newcastle).
However, the day before settlement, the vendor's solicitor indicated that settlement had to take place at Espreon, a legal agent in Sydney, due to matters that had to be attended upon at the settlement. The vendor attended settlement but the purchaser did not.
The vendor's representative had acted correctly in attending at settlement but, as the notice to complete had specified a place for settlement, and as the vendor had then changed this only the day before settlement, it was held that reasonable notice had not been given to the purchaser to be able to attend settlement at the changed venue.
As the vendor had not attended settlement at the place for settlement appointed by the notice to complete (but in fact attended at the Sydney office of Espreon), it was held that the vendor was not ready, willing and able to settle.
Therefore, the notice to complete was ineffective.
Interest obligations held to be valid
The interest obligations under the deed of variation of the three guarantors was held to be valid and the vendor could still claim this amount from the guarantors (which totalled several million dollars).
Useful lessons for property lawyers and conveyancers
There are many practical lessons from this decision.
These are the major ones:
- Make sure that your notices to complete merely state what they have to state. In other words, what they should state is that the party issuing the notice to complete is ready, willing and able to settle, that time for settlement is being made of the essence and what the consequences are of not complying with the notice to complete.
- Make sure that plenty of notice is given to parties in relation to the venue for settlement and the giving of settlement figures, so that the courts do not hold that giving some of this information the day before settlement is unreasonable.
- Make sure that your answers to requisitions (seen by many people as a mere formality) are correct and accurate, so as to not to afford a party seeking to avoid contractual obligations the ability to do so on a technicality.
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 or financial advice. Please seek your own legal or financial 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.