More on the Willmott decision – disclaimer of a contract of sale of land?

For those interested in the Court of Appeal’s recent decision in the Willmott case, the decision was referred to recently by Beach J in the Victorian Supreme Court decision of Grant v Harlgate Pty Ltd & Anor [2012] VSC 464 (9 October 2012).

The decision is also relevant to conveyancing lawyers faced with an insolvent vendor.

In that case the vendor under a contract of sale was placed into liquidation. The Liquidators sought to disclaim the contract of sale prior to settlement. The purchaser stated in responsive correspondence that it considered the contract of sale to have been rescinded. The purchaser sued the stakeholder (joining the vendor) to recover her deposit.

Relying on Warren CJ and Sifris J’s joint judgment in the Willmott case, the stakeholder sought to resist repayment of the deposit on the grounds that disclaimer extinguished all rights under the contract of sale including, it appears, the purchaser’s right to repayment of its deposit.

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However, neither party were pressing for settlement of the contract of sale and Beach J found that:

43 The present position is the liquidators have, on behalf of the vendor, disclaimed the contract of sale. The date for settlement has passed, and neither party to the contract of sale seeks its completion or settlement. The deposit was paid to the first defendant as a stakeholder, pending payment to the vendor, or otherwise, in accordance with the provisions of the Sale of Land Act. Circumstances entitling the vendor to payment of the deposit have never arisen. The plaintiff is entitled to the return of the deposit, together with interest. Alternatively, she is entitled to damages equivalent to the amount of the deposit and interest. It is no answer to the plaintiff’s claim that at the time of disclaimer, either or both of the parties to the contract may have had some pre-existing interest or right. What is clear from the evidence is that on and from 23 August 2012, the vendor has not sought to complete the contract (and has been prepared to treat the contract as being at an end); and that from 3 September 2012, the plaintiff has been content to accept this position.

44 Further, it is now tolerably clear (receivers and managers having subsequently been appointed on 19 September) that, without any default on the part of the plaintiff, the contract of sale will not be completed. The contact was terminated on 3 September 2012, if not on 23 August. In the circumstances, the plaintiff is entitled to judgment for the amount of the deposit, together with interest.

As I read the decision, the Court found that the parties to the contract of sale were both treating the contract of sale as being at an end and, one way or another, the contract would not now be performed. As a result, the deposit was to be repaid and the question of the effect of disclaimer did not arise.

Thanks to my colleagues Garry Bigmore QC, Bill Rimmer and Matt Kennedy for discussing this case with me.