Off-the-plan buyer escapes thru settlement date slip-up

A generous approach to the calculation of the settlement date following registration of a community titles plan, has rebounded on a North Queensland solicitor after the Supreme Court ordered* a developer client to repay the forfeited $90,000 deposit to an off-the-plan buyer.

The buyer signed the contract for a luxury unit at Nelly Bay, Magnetic Island on 13 January 2005. It provided for a 10% deposit and specified a finance date of 12 November 2004 – a date several months prior to the date of the contract.

Settlement was specified to be 14 days “after the seller notifies the buyer that the scheme has been established” i.e. the minimum period allowed by section 212 of the BCCMA.

The plan was registered on 27 July 2007 and the seller’s solicitors notified the buyer the same day that settlement was to be effected on 13 August. The correct calculation in accordance with the contract – 14 days from registration – was however, 10 August.

The buyer’s solicitors did not respond to the notice. When 10 August 2007 came, the developer’s solicitors asked the buyer’s side to confirm that they were ready to settle on 13 August. Still no response.

The seller subsequently demanded settlement whereupon the buyer – represented by Boulton Cleary & Kern – then purported to terminate on grounds that it had never obtained finance approval.

A finance date that predated the contract meant, so said the buyer, the parties intended an open-ended finance out, that could be utilized to terminate the contract at any time. Alternatively, argued the buyer, the term carried the implication that finance was to be obtained within a reasonable time.

His Honour concluded that a “pre-occurring” finance date meant nothing:  the contract could not be considered to be conditional in any way as to finance. However – in an issue that did not surface until the matter was before the court – the judge ruled that the contact had been “abandoned” because the seller let the due date for settlement pass it by.

It was not the case that the buyer’s failure to answer correspondence had conveyed “that it would be pointless to attempt to settle” on the due date “thus relieving [the seller] from any obligation to be ready willing and able to settle”: Ireland v Leigh  distinguished. There were steps the seller had not taken and it was never in a position to require settlement.

The plaintiff buyer – who had no finance arranged and itself was not in a position to settle – was therefore entitled to recover the money paid to the seller under the deposit bond, not as damages for breach of contract but as “monies had and received” according to the equitable doctrine of unjust enrichment.

The developer’s counterclaim arising out of the re-sale of the apartment at a loss – was dismissed.

The buyer had also sought relief from reimbursement of the $90,000 to the deposit bond financier, who it joined as defendant. It was however – as the buyer had conceded in argument it was obliged to do – ordered to re-pay the recovered proceeds of the forfeited bond to the financier.