Can a vendor cancel a contract of sale and keep the deposit? Which case won?

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Discusses a dispute concerning whether or not a property vendor was entitled to cancel a contract of sale & keep the purchaser's deposit. Who won?

Australia Real Estate and Construction

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The Facts

Property owner enters into contract of sale for parcel of land

A dispute heard in the NSW Court of Appeal concerned whether or not a property vendor was entitled to cancel a contract of sale and keep the purchaser's deposit.

A parcel of land in Fairfield, Sydney, was sold at auction for $1.46 million. The buyer and seller entered into a contract for sale and the buyer paid a ten per cent deposit of $146,000. The contract stated that the completion date was to be 20 June 2015.

Some time prior to entering into the contract, the vendor had performed earthworks on the property. The local council had declared the earthworks illegal and issued an order requiring that the seller reinstate the property to its previous condition.

By a special condition contained in the contract, the seller agreed to reinstate the property as required by the order "before completion". The contract stated that the buyer would be entitled to terminate the contract and be repaid the deposit if the seller failed to do so.

Purchaser cancels contract of sale and vendor refuses to refund deposit

When the completion date of 20 June 2015 arrived, the seller had not complied with the special condition. The buyer issued a notice requiring the seller to complete the work by 29 July 2015 and when that date came and went without the work being done, the buyer terminated the contract and sought repayment of his deposit. The seller refused.

Some months later, the seller finished the work and approached the buyer to complete the contract. When the buyer failed to comply with a notice to complete, the seller terminated the contract and declared that the buyer had forfeited his right to the deposit.

It was up to the court to determine who had validly terminated the contract and who could keep the deposit – the buyer or the seller?

CASE A

The case for the buyer

CASE B

The case for the seller

The contract said that the seller had to complete the works and comply with the council order before completion, and the completion date specified in the contract was 25 June 2015.
The seller did not complete the works by the completion date.
I issued a Notice to Perform to give the seller another chance to meet his obligations under the contract and he again failed to do so.
The seller was plainly in breach of the contract and I was therefore entitled to terminate. The court should order that I be repaid my deposit.

In the contract, "completion date" and "completion" did not have the same meaning.
"Completion" meant the actual time by which the contract had to be completed by both parties. While the "completion date" was specified in the contract as 20 June 2015, that was not an essential date. It often happens that parties to a contract for sale of land can't complete on the date specified.
There's no debate that I had not complied with the special condition by 20 June 2015, but that did not mean I was in breach of the contract. The buyer's notice of termination was therefore invalid.
I did ultimately comply with the special condition and I remained ready, willing and able to complete the sale. It was the buyer who was not willing to complete.
I validly terminated the sale and I should be allowed to keep the deposit due to the buyer's breach.

So, which case won?

Cast your judgment below to find out

David Crossan
Property and building disputes
Stacks Law Firm

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