What you need to know
If you intend to claim for interest on late settlement, make sure you follow the terms and conditions to the letter.
When buying or selling real estate in Western Australia, it is not unusual for there to be a claim for interest on late settlement. This could be following a delay due to unforeseen circumstances, or due to the fault of one of the parties.
The Western Australian Joint Form of General Conditions for the Sale of Land (“General Conditions”) allows for interest or compensation to be paid to the non-defaulting party by the party who causes the delay in settlement. These provisions set out certain conditions which must be satisfied before a party is entitled to such interest or compensation.
The recent Court of Appeal decision in Love v Simmons [2016] WASCA 176 highlights the importance of strictly adhering to the requirements of the General Conditions when claiming interest on a late real estate settlement.
Delay of over 12 months
The facts of the case involved a Seller (“Love”) contracting to sell a proposed lot in City Beach to the Buyers, Mr Simmons and Ms Gimondo (“Simmons and Gimondo“), for $1.03 million. Due to reasons related to a delay in the issue of titles, the transaction settled just over 12 months after the Settlement Date named in the contract. Simmons and Gimondo claimed contractual compensation for the settlement delay.
Clause 4.5 of the General Conditions relevantly provides that:
(I)f the Buyer is not ready, willing and able to complete Settlement on the Settlement Date the Buyer is not entitled to compensation … until:
the Buyer is ready, willing and able to complete Settlement; and
the Buyer has given Notice of that fact to the Seller.
Ready, willing and able
The decision turned on whether Simmons and Gimondo really were “ready, willing and able” to complete settlement.
On the evidence, the judge found that Simmons and Gimondo were not able to establish that they were “ready, willing and able”, even though they had enough funds available to complete the purchase on the Settlement Date.
The Court of Appeal did not disturb that finding.
One might wonder how it can be that the Buyers, having the funds to complete the transaction, were found not to be “ready, willing and able”. Often a buyer is not ready because they do not have the funds ready to go on the day.
On the facts, although Simmons and Gimondo did have sufficient available funds to complete settlement, they had repeatedly told Love that they would use a National Australia Bank (“NAB“) facility to pay $500,000 of the purchase price.
Although the Contract did not require the Certificate of Title to have issued by the Settlement Date in order for settlement to proceed, the NAB would not provide the funds until the Certificate of Title issued. As they wanted to use the NAB funds, Simmons and Gimondo were not willing to settle until the Certificate of Title had issued.
Able, but not ready or willing
Therefore, the Court found that although they were “able” to settle, they were not “ready” or “willing” to settle.
Again, going back to the General Conditions, the party claiming compensation or interest on late settlement, must give notice to the other party that they are ready, willing and able to settle, and must in fact be ready, willing and able to settle, before being entitled to compensation.
The failure to adhere to the requirements of the General Conditions cost Simmons and Gimondo their compensation.
About the author
Glen was admitted to practice in 1997 and his areas of expertise are mortgaging and finance, property, leasing, wills and estate planning, transactional work, revenue law, general commercial, and corporate law. He is a member of the Law Society of Western Australia.