In Eng Kiat Tan and Cheng Lo v Thomas John Russell [2016] VSC 93, Cameron J of the Supreme Court of Victoria had to determine whether a purchaser had validly terminated a Contract of Sale of Real Estate pursuant to the cooling off rights granted under section 31 of the Sale of Land Act 1962 (Vic).
The deceptively simple issue that the Supreme Court of Victoria had to decide was whether the vendor’s real estate agent was an “agent” for the purpose of being given a cooling off notice.
Background
The purchasers entered into a contract in April 2014 to purchase a property at 43 Erin Street, Richmond (‘the Property’) for $4.48million. They paid a deposit of $350,000, with the remaining $98,000 due in June 2014.
Within three clear business days after signing the contract, the purchasers gave notice to the real estate agent that they did not wish to proceed.
The vendor refused to accept that the contract had been terminated validly. He asserted that the purchasers had repudiated, and he resold the property at a loss for $4.07million.
The purchasers commenced a proceeding seeking recovery of the deposit; the vendor counterclaimed seeking the balance of the deposit and the loss suffered on the resale of the property.
Arguments
The purchaser argued that the expression “agent” in section 31 must extend to the vendor’s real estate because, among other things, the purchaser had only three days to make inquiries as whether a person was or was not an “agent” with authority to accept the termination notice.
The purchaser also referred to Lloyd and Rimmer’s Sale of Land Act Victoria where the authors say that for the purpose of section 31 “agent” includes but is not limited to the estate agent engaged by the vendor in connection with the sale.
The vendor argued that section 31 did not create a statutory authority to receive a termination notice: the purchaser had to establish that the vendor’s real estate had actual or ostensible authority to accept the termination notice and there were no facts which established any authority in the vendor’s real estate agent beyond that usually granted to real estate agent.
Conclusion
The Honourable Justice Cameron held that section 31 did not create a statutory authority in a real estate agent to accept a termination notice.
As a result, she found in effect that the Contract had not been validly terminated, and the purchasers' failure to pay the balance of the deposit when due amounted to repudiation.
Cameron J gave judgment on the counterclaim to the vendor.
Implications
This decision had far reaching implications: it seemed as though it would not just relate to Cooling Off Notices under section 31. A real estate agent could be the vendor's agent for other purposes associated with the sale; as a result, property lawyers, conveyancers and real estate agents were left in a state of uncertainty.
Recommendation
Purchasers need to ensure that the Contract of Sale clearly sets out who a termination notice under section 31 can be given, or the place where a notice can be left.
Special Conditions to the standard form of Contract of Sale of Real Estate should be drafted to clarify the role of a real estate agent.
Appeal
The decision of Cameron J was appealed to the Court of Appeal. The decision of the Court of Appeal will be dealt with in a subsequent post.
Legislative amendment
Sub-section 31(3) was replaced and section 31A was introduced into the Sale of Land Act, 1962, with retrospective effect, to clarify the position of service of a Notice of Cooling Off on a real estate agent.
It is now clear that real estate agents are agents for the purpose of section 31 of the Sale of Land Act, 1962.
WG Stark
Hayden Starke Chambers
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