The Facts
Property sale contract requires payment of deposit on 4th month after contract date
On 4 April 2019, a purchaser and vendors exchanged contracts for the sale of a residential property in Vaucluse, Sydney. The purchase price was $4,830,000 with a 5% deposit.
Special condition 38 of the contract provided that the deposit was payable in two instalments.
The first instalment of $150,000 was payable on exchange, while the second instalment of $91,500 was payable “on the 4th month after the contract date”.
Vendors and purchaser disagree on final date for payment of deposit
On 1 July 2019, the purchaser travelled with his family to Greece, believing that under special condition 38 he had until 31 August to pay the second instalment of the deposit.
In July, the vendors’ agent sent two emails to the purchaser regarding payment of the second instalment. One required payment “by or before 5 August” and the other required payment “on or before 4 August”.
The purchaser said that he did not see these emails until 1 August, the same date that he had sent an email to the vendors’ agent saying: “…with regards to the second part of the deposit I’m currently overseas and have been for the past 5 weeks. However I will be returning on 6th August and will be depositing the balance there shortly after.”
On 2 August, the vendors’ agent replied saying that payment was due on 4 August. However, the purchaser was in transit from Greece to Australia and said that he did not see the email until he landed in Abu Dhabi at midnight on 5 August.
Vendors terminate contract for non-payment of deposit and purchaser seeks order for completion of sale
Meanwhile, on 5 August at 6pm, the vendors’ solicitor issued a notice terminating the contract due to the purchaser’s failure to pay the second instalment of the deposit by 4 August.
The purchaser returned to Australia on 6 August.
On 7 August, he paid the second instalment of $91,500 to the vendors’ agent and notified the vendors’ solicitor of his belief that the contract was still on foot, due to the defective notice of termination.
The vendors’ solicitor responded that the contract had been terminated on 5 August and that the $241,500 deposit paid by the purchaser was forfeited.
The purchaser commenced proceedings in the NSW Supreme Court, seeking an order that the vendors complete the sale.
Expert commentary on the court's decision
Court finds that vendors validly terminated contract and can keep deposit
In Alexakis v Wan [2021] NSWSC 367, the NSW Supreme Court found that the purchaser, Mr Theo Alexakis, had breached the contract by not paying the second instalment of the deposit of $91,500 by 4 August 2019.
The court ruled that the vendors, Mr Chi Wan and Ms Kwan Chan, had validly terminated the contract and were entitled to keep the whole of the $241,500 deposit.
Mr Alexakis was also required the pay the vendors’ costs of the proceedings.
Special condition 38 requires payment of second instalment no later than 4 August
The court accepted Mr Wan’s and Ms Chan’s argument that the statutory definitions of “month” and “calendar month” meant that the fourth month after the contract date started at the beginning of 5 July 2019 and finished at the end of 4 August 2019.
The court also said that it was “unable to discern from the language of the contract, the commercial purposes of the contract, or the surrounding circumstances known to the parties, any intention to give ‘month’ a meaning different from the statutory definition”.
The court did not think that reasonable business people in the position of the parties would have understood special condition 38 to provide that the second instalment of the deposit was to be paid during the month of August.
Clause 21.5 of contract does not extend time for payment
Clause 21.5 of the contract provided that if the time for something to be done was a day that was not a business day, then the time was extended to the next business day, except in the case of clause 2.
By clause 2.3, the time for payment of the second instalment of the deposit was essential.
Clause 9 gave the vendors a right to terminate for breach of an essential term.
The court interpreted these clauses to mean that clause 21.5 did not operate to extend the date to pay the second instalment of the deposit to 5 August 2019. Therefore, Mr Wan and Ms Chan were legally entitled to terminate the contract for breach of an essential term.
Purchaser not entitled to equitable relief
Mr Alexakis argued that if special condition 38 was not construed to make payment due on 31 August, he should nevertheless be granted equitable relief in relation to the vendors’ exercise of their legal right to terminate.
Mr Alexakis said that his belief that the deposit was due by 31 August was a mistake, based at least in part on the agent’s statement that the vendors were not too concerned about the timing of the second part of the deposit, as long as they ended up receiving a 5% deposit.
The court rejected Mr Alexakis’s version of events, as well as his argument for equitable relief.
The court noted that neither Mr Wan, nor Ms Chan, nor their agent had misled Mr Alexakis or caused him to misinterpret the terms of the contract.
Rather, Mr Alexakis had “acted in a cavalier fashion” in response to the agent’s emails.
The court also observed that Mr Alexakis had the funds available to make the payment by 4 August, and presumably could have accessed the internet from Athens to make the payment.
Appeal of decision dismissed
In Alexakis v Wan [2021] NSWCA 172, Mr Alexakis appealed this decision on the basis that the primary judge had erred in concluding that clause 21.5 did not operate to extend the time for payment of the second instalment.
The appeal was dismissed.
Always ensure that contractual terms are unambiguous
This case highlights the importance of ensuring that all contractual terms are clearly and unambiguously worded.
Ultimately, Mr Alexakis lost out on the house and forfeited his $241,500 deposit due to an awkwardly worded clause in the contract.
It is also important to ensure that you understand all of the crucial terms of a contract and if in doubt, get legal advice.
If there is any doubt or uncertainty about a term of a contract, ensure that it is clarified in writing by all parties’ solicitors, well before any relevant critical date. If necessary, have the contract varied to resolve any doubt or uncertainty.
Avoid unnecessary travel during important property transactions
If possible, also avoid travelling overseas or going on holidays in the middle of an important property transaction.
Remain in contact with your advisers and be in a position to receive advice and communications conveniently and quickly and to give instructions.