The Brisbane District Court has had to adjudicate a provision in an installment contract for the sale of land that permits the seller to retain all payments made by the buyer up to the date of contract termination in the event of buyer breach.
Kelvin Jones entered into the $32,000 buy for the 5 Cork Lane Mt Morgan home in January 2003 and was allowed into possession, on condition he kept up the $225 monthly installments in reduction of the purchase price and interest.
The seller sold his interest to the current owner in August 2004 and a formal notice of the transfer was given to the buyer in October that year.
Jones’ fortnightly payments became erratic from early 2007 and he failed to pay rates and keep up home insurance.
Payments stopped in August 2010 and in October 2011, the owner sent a notice of default pursuant to s 72 of the Property Law Act referring to installment arrears, unpaid rates and excess water.
A notice of termination of the contract was sent one month later after no response was received.
In January 2012, solicitors acting on Jones’ behalf lodged a caveat but took no further action.
The owner eventually filed an application in May 2013 to confirm the contract had been duly terminated and that the payments could be forfeited.
The owner had a fundamental difficulty in its litigation, in that it could not locate any copy of the installment contract. Affidavit evidence asserted that the contract was thought to be in a standard REIQ format and annexed a copy of the special conditions that applied.
One of the special conditions specified that the seller could retain all installments paid after the date of termination as a result of the buyer’s breach, “as compensation to the seller for the buyer’s use and occupation of the property “.
When service of court process was attempted, the property appeared abandoned with “an overgrown yard, overflowing mailbox and have generally neglectful appearance”. Neighbours reported that Jones had “done a runner five months previously” and that police were looking for him to interview.
An order for substituted service was made in July 2013 allowing service by post and publication of the application details in the Courier-Mail. Jones did not appear at the August hearing.
Persuaded that the buyer had “clearly evinced an intention to no longer be bound by the contract”, the court ruled that Jones’ repudiation entitled the owner to validly terminate and that it be entitled to recover possession.
The court also ordered the seller retain all installments received, either as a contractual entitlement or by way of reasonable compensation for Jones’ use and occupation of the property during the nearly 10 year period.