This case study explores a recent County Court dispute involving the sale of a property in unpredictable times (the COVID-19 pandemic) and the Court’s assessment of fault and damages when buyers fail to complete such purchases.
The Commercial Litigation Team at Robinson Gill Lawyers assisted the vendors in this matter, who resold their property at a lower price during the pandemic. The case highlights the court’s focus on vendor obligations to act reasonably when assessing property dispute damages, and discusses the standard for such conduct when the market is more volatile.
Background
The vendors, Mr and Ms Balboa (pseudonyms) sold their home to the purchaser, Mr Lang (also a pseudonym) for $3.42 million in August 2018. Mr Drogo (also a pseudonym) guaranteed the sale.
Mr Lang failed to complete the purchase, leading to the contract's cancellation. The property was later resold for $3.02 million (less than the property’s true value) in June 2020. Mr and Ms Balboa commenced court proceedings and sought to recover their losses totalling $400,000 (the difference between the price of the original sale and the price on re-sale).
Buyer’s defence against damages covering full difference in sale price
Whilst Mr Lang and Mr Drogo accepted that they defaulted on the sale, and that they should pay damages, they argued that they should pay $195,000 (the difference between the price of the original sale and the true value of the property) instead of $400,000.
Mr Lang and Mr Drogo argued for this reduction of damages on the basis that Ms and Mr Balboa failed to take several reasonable steps as vendors to guarantee the reduction of their losses, namely:
1) the vendors did not wait until COVID-19 restrictions were lifted to get a better price; and
2) the vendors neglected to market the property properly leading to the sale of the property for less than its true value.
What did the Court say?
The Court confirmed that, as vendors of the property, Mr and Ms Balboa had an obligation to act reasonably when reselling the property.
However, contrary to the arguments of the buyer, the Court found that the vendors here had in fact acted reasonably in the resale of their property. In particular, the court found that:
1) the timing of the resale was justified (before the end of lockdown) given that the vendors were under financial pressure; and
2) the vendors had acted reasonably in marketing their property by following professional advice they received from an experienced sales agent.
As a result, the losses suffered by Mr and Ms Balboa and the damages owed by the first buyer did amount to $400,000.
Critical reminders to vendors
This case highlights the importance of acting reasonably in property resales, especially during unpredictable times such as the COVID-19 pandemic.
For vendors, seeking professional advice from an experienced sales consultant or agent on whether offers for resale should be accepted — even where vendors are entitled to accept offers without waiting for market conditions to improve — can become crucial to recouping losses in court.
For more information or legal advice on similar matters, please contact our property disputes team.
How can I learn more?
Lu Cheng.
Principal.
- Disputes & Business Law
- 03 9890 3321
- Email Address: l.cheng@robinsongill.com.au
Lu is an Accredited Specialist in Commercial Litigation. She holds a Bachelor of Law from the University of Melbourne and was admitted to practice in 2008.
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