In a sign of an accelerating property market, the seller of an industrial site in western Brisbane has purported to terminate the sale contract because the buyer did not pay the deposit on the day it signed, but on the following day when the contract and deposit were presented.
The action arose out of the exercise of an option by DN Holdings when his solicitors delivered a signed call option exercise notice; two copies – both signed and completed by inserting specified particulars – of the purchase contract; and a bank cheque to the deposit to the specified address before 5:00 pm on 30 September 2021.
The purchase contract the buyer was required to sign – and which had been annexed to the option deed – was in REIQ format.
By standard condition 3.1 and item O of the reference schedule, the contract required the $350k initial deposit to be paid “on the day the buyer signs a contract unless another time is specified below”.
DN’s solicitors had attempted to send the documents by fax as by standard condition 7.1, this was a permitted method for delivery of notices. This method proved unsuccessful because the “fax line was registering as engaged or busy”.
The solicitors had also unsuccessfully attempted to contact the seller – to the knowledge of its solicitors – because a concern had been raised about whether the specified document delivery address in Bowen Hills was occupied.
Although they had taken steps to ensure that the exercise of option mechanism had been strictly adhered to, DN’s solicitors had perhaps anticipated that – on the very next day – the seller’s solicitors purported to terminate the deal for reasons that might have included their client’s belief that a higher sale price could be achieved.
What may have surprised them though were the grounds upon which the seller relied namely, that the deposit had not been paid on the same day as the contract was signed as required by clause 3.1 – by reference to the date 29 September entered into the contract – but on the following day as expressly permitted by the option deed.
The buyer resisted the termination and filed proceedings in the Supreme Court in Brisbane.
“In my view, this makes no commercial sense,” observed Justice Thomas Bradley who adjudicated the dispute in November.
He pointed to the option deed itself which did not require payment of the deposit until delivery of the other items required for a valid exercise and noted that the contract condition should be “read so they are consistent with the specifically agreed terms in the deed” because “the provisions of the contract have obviously been modified” by those terms.
But even if that were not the case, His Honour preferred an interpretation of the contract which did not allow a buyer to be immediately be in breach if the contract presented to a seller with payment of the deposit had been signed a day or two earlier.
“I would still read the provision in item O of the contract as requiring the initial deposit to be paid on the day the buyer signs the contract and provides it to the vendor,” he concluded.
He made declarations to the effect that the option had been duly exercised on 30 September and that the purported termination arising out its exercise was invalid and ineffective.
An appeal has been filed against the ruling.