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Essential and Non-Essential Terms; Dangers of Standing on Technical Legal Rights

A vendor (Barrak) contracted to sell property (to Jaswil) in October 2014.  Amongst other conditions, the contract required Jaswil to tender a registerable transfer to Barrak 14 days before settlement (with the intent that the vendor could sign and return it at settlement, so the purchaser could become the registered owner).

Settlement was due on 30 January 2015 but did not occur.  Barrak issued a Notice to Complete, requiring settlement on 17 February 2015 and making time “of the essence“.  Completion did not occur on 17 February 2015 and Barrak terminated the contract.

As it transpired, an appointment to settle had been arranged, but it was discovered at that appointment that the transfer by Barrak to Jaswil had not been correctly signed under the Corporations Act.  Jaswil indicated it was prepared to reschedule an appointment to settle but, for a variety of reasons that did not occur and Barrak terminated the contract.  Jaswil then commenced proceedings for breach of contract.  The primary judge concluded that Jaswil was in breach of contract and that Barrak was entitled to terminate; but this was reversed on appeal.

The Court of Appeal repeated the well-known principle that a party seeking to terminate a contract for breach of an essential stipulation must itself be ready, willing and able to complete.  In this case, because Barrak had not signed the transfer in favour of Jaswil in a way that enabled Jaswil to transfer ownership of the property to itself, the Court held that it was not “ready, willing and able” to settle.  Further, because Barrak itself had made time of the essence it was not itself able to perform its obligation to settle in accordance with the Notice to Complete.  It was therefore not entitled to terminate the contract as it had purported to do.  The consequence was that Barrak was the party which breached the contract.  It was therefore held liable in damages to Jaswil (and the case was remitted to the Supreme Court for those damages to be assessed).

The Court of Appeal went on to briefly consider another issue arising from the primary judge’s decision.  She had held that, although the vendor was entitled to terminate the contract, Jaswil was entitled to equitable relief because Barrak’s reliance on that strict entitlement would have been unconscientious in the particular circumstances.  That issue did not strictly arise on the appeal because of the finding that Barrak was not entitled to terminate at all; but the Court of Appeal agreed with the trial judge’s view that there were circumstances where it would be unconscionable to allow a party to rely on its strict legal rights.

The case merits close reading for property lawyers and licensed conveyancers.  It illustrates the importance of paying close attention to the form of the documents required at settlement, so as to avoid disputes of the kind that emerged in this litigation.  Also, and while it was not ultimately fundamental to the appeal decision, it makes clear that just because a party to a contract has a technical right – for example to terminate a contract for breach by a counter party – that is not necessarily the end of the matter.  In some circumstances Courts will intervene to prevent unconscientious reliance upon technical rights, although that will depend on the particular circumstances of any given case. 

Barrak Corporation Pty Ltd v Jaswil Properties Pty Ltd [2016] NSWCA 32

Liability limited by a scheme approved under Professional Standards Legislation

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