this product is unavailable for purchase using a firm account, please log in with a personal account to make this purchase.

Property: In pursuit of perfection

Every Issue

Cite as: Jan/Feb 2010 84(1/2) LIJ, p.70

While some matters are mandatory in rescission notices, there is provision to forgive minor mistakes.

One of the urban myths of conveyancing is that a rescission notice must be perfect. While an admirable aspiration, the reality may be different.

Some matters are mandatory. The notice must specify the contractual basis for rescission.1

Thus the notice must refer to Condition 6(2) of Table A2 (now General Condition 28(2)(a)of the 2008 contract).

Service is another “must have”. Service by fax must comply with the Supreme Court Rules, including provision of a cover sheet. Failure to include a cover sheet will invalidate service.

As a matter of interest, it has been held that service by fax is achieved when the fax is received into the fax machine of the recipient, irrespective of whether the fax is printed by that machine.3 Were it to be otherwise, the recipient could avoid service by simply removing paper from the fax machine.

Another important requirement relates to certainty. If the notice is issued on the basis of non-payment by one party to the contract, that party “is entitled to be informed, accurately and in writing, of exactly how much must be paid if the default is to be remedied”.4

Thus a notice that failed to take into account the fact that the deposit had been paid and called on the purchaser to pay the full contract price was invalid. However, it was doubted that failing to take adjustments into account when calculating the amount required to remedy the default would invalidate the notice.

Despite this apparently strict approach, not all errors will invalidate the notice – minor mistakes may be forgiven.

Amanatidis v Syed5 concerned a notice alleging failure to pay the residue of the purchase price on the due date, 26 December 2008, when in fact it should have referred to 2007.

The court was satisfied that “the mistake was obvious, was readily appreciated by [the recipient] and occasioned no misunderstanding. The mistake was immaterial and in the circumstances was not such as to affect the validity of the notice”.

In Burke6 a notice that claimed interest at 14 per cent when the rate should have been 13.5 per cent was accepted. However, the notice failed for other reasons and a different result may have followed if the incorrect claim for interest was the only defect in the notice, as it affected the certainty of the notice.

Rescission often occurs “in the heat of battle” and may indeed be a negotiating tool.

In such cases, the party who issues the notice may be prepared to extend time for performance as part of a negotiated settlement. However, the risk is that the failure to insist on timely enforcement of legal rights may be construed as an indication that time is no longer of the essence.

If that is the case, the defaulting party is entitled to a reasonable time to complete and the party who granted the indulgence may be required to give notice that time is of the essence again and require performance within a reasonable, specified time before being entitled to issue a rescission notice.7

Such a notice (making time of the essence again) was referred to as a “notice to complete” in Naval & Military Club v Southraw Pty Ltd.8

Service of a notice to complete entitled the party giving that notice to serve a rescission notice at the expiration of the reasonable, specified period, in that case 14 days.

The case involved three rescission notices. The first was supplanted by a deed of variation of contract that extended time for performance.

The second was issued on failure by the purchaser to settle on the extended date. However, doubt was cast on the vendor’s right to issue this second notice on the basis that the deed of variation had resulted in time no longer being of the essence.

To overcome that problem the vendor issued a notice to complete, giving the purchaser 14 days to complete the transaction, and on the expiration of that 14-day period a third rescission notice was served.

While the court endorsed this procedure, unfortunately for the vendor, the court held that the vendor had not been entitled to serve the second rescission notice as it was not at that time “ready, willing and able” to settle because the corporate vendor was subject to unreleased ASIC charges.

While the vendor had secured release of those charges by the time it issued the third rescission notice, that notice claimed interest for a period of time before the release was secured.

This unjustified claim for interest resulted in the third rescission notice being struck out.

Care needs to be taken with rescission, but there is some wriggle room.

RUSSELL COCKS is the author of 1001 Conveyancing Answers.

1. Hillswick Investments Pty Ltd v Monash Mansions Pty Ltd [1998] VSC 167.

2. Of the Seventh Schedule of the TLA.

3. Zebicon Pty Ltd v Remo Constructions Pty Ltd [2008] NSWSC 408.

4. Kuzamanovic v Elliminyt Pty Ltd [2002] VSC 363 at [7].

5. [2009] VSC 359.

6. Burke and Riversdale Road Pty Ltd v Gemini Investments Pty Ltd [2003] VSC 33.

7. Greydae Pty Ltd v Malilane Pty Ltd [2003] VSCA 27, however compare McMahon v Shadbolt [2009] VCC 746.

8. [2008] VSC 593.


Leave message

 Security code
LIV Social