A recent decision handed down in the Court of Appeal, Supreme Court of New South Wales, Barrack Corporations Pty Limited v Jaswil Properties Pty Limited [2016] NSWCA 32, held that a vendor could not rely on its Notice to Complete to terminate a contract for sale unless they were “ready, willing and able to pass legal title” at the time specified for settlement.

Facts

Jaswil Properties Pty Limited (Purchaser) and Barrack Corporations Pty Limited (Vendor) entered into a contract for sale of land (Contract). Mr Barrack, the sole director and secretary of the Vendor, was also the principal of the solicitors acting for the Vendor.

The specified date of completion in the Contract was 30 January 2015.

On 2 February 2015, the Vendor served a Notice to Complete (Notice to Complete) on the Purchaser, requiring completion on or before 3pm on 17 February 2015. The Notice made clear that time was of the essence, and warned that the Vendor was entitled to terminate the Contract if there was no completion.

On 16 February 2015, the parties met with a view to settle the sale. However, the Transfer was rejected by the Purchaser because it was incorrectly executed by the Vendor.

The Purchaser’s solicitors requested that the settlement be re-booked for 17 February 2015. However, this did not proceed.

The Vendor did not withdraw its Notice to Complete.

On 20 February 2015, the Purchaser served a further Notice to Complete.

On 26 February 2015, the Vendor served a Notice of Termination (Notice of Termination) on the Purchaser.

On 6 March 2015, the Purchaser commenced proceedings against the Vendor for relief against termination of the Contract.

Findings on first instance

The primary judge, Chief Justice Bergin, found that it was the Purchaser’s obligation to include in the Transfer to the Vendor, the proper clause for execution, and as such, the Vendor was entitled to sign the Transfer as it was presented.

Her Honour also concluded that the Purchaser did not provide the correct execution clause to the Vendor until just three hours before the time the Purchaser had fixed for settlement, and three and a half hours before the expiry of the essential time stipulation in the Vendor’s Notice to Complete of 2 February 2015.

As such, Her Honour concluded that:

“the Vendor was entitled to serve the Notice of Termination” and “the Purchaser had served a Transfer in the wrong form and the Vendor signed it as it was presented to it…and the time frame that was given to the Vendor for settlement on 17 February 2015 was [not] reasonable in the circumstances.”

Current appeal

The issue in consideration in this appeal was whether the Vendor was entitled to give a Notice of Termination on 26 February 2016.

The Court of Appeal overturned the primary judge’s findings, and rather than focussing on the Purchaser’s obligations, focussed on the Vendor’s responsibilities.

His Honour Justice Beazley stated that:

“it was a fundamental principle of land law that a party who seeks to terminate a contract for breach of an essential stipulation, must itself be ready, willing and able to complete.”

His Honour quoted Chief Justice Young in Malouf v Sterling Estates Development Corporation Pty Limited [2002] NSWSC 920, stating that:

“if a vendor wishes to issue a notice to complete, it will only be able to do so…if it is able to proceed to completion and deliver all the purchaser is entitled to under the contract no later than the expiry of the notice to complete.”

Rather, it was the Vendor’s obligation to bring the defect to the attention of the Purchaser, and if required, change the wording in the printed execution clause to ensure that the Transfer was in registrable form.

In relation to the further settlement re-booked for 17 February 2016, the Court also found that the Purchaser was not in default by not serving the correct Transfer documents earlier. Rather, the Vendor should have withdrawn its Notice to Complete if it was not able to attend at the specified time stipulated in the Notice to Complete. Hence, the Vendor was not entitled to serve a Notice of Termination to the Purchaser.

Take home message

It is extremely prudent that a vendor relying on a Notice to Complete to terminate a contract must have the documents of title available in order to be ready, willing and able to pass legal title to the purchaser. Therefore, it is the obligation of the party seeking to terminate the contract to ensure that it must itself be ready to complete.

Lawyers and conveyancers acting for both Purchasers and Vendors need to be cautious in making sure that all clauses, particularly the execution clauses, are in registrable form so that they can be executed during settlement. All requirements as stipulated in the Corporations Act 2001 (Cth) need to be strictly adhered.