D5080491 Unit 6 Equity and Trusts

Question

• Malcolm Trumble [‘Mal’] lives in a modest cottage which he rents in Westville, an outer Sydney suburb. Mal (aged 64) never had much education and although he speaks English well, he has the reading ability of a 12 year old. He has never married and has worked all his life as a labourer for the local Westville Council.
• Mal is a man of simple tastes: a beer with his fellow council workers at the pub on a Friday night, a punt on the horses every Saturday, and watching his beloved Westville Wombats football team on weekends. The one luxury Mal allowed himself was his annual camping holiday to the town of Shortensville on the north coast of New South Wales. So much does he love the location that he has always dreamt of retiring there.
• Whilst at Shortensville over the Christmas period in 2016, Mal sees a property named ‘Abbottsvale’ for sale for $400,000. After a careful inspection he decides to purchase the property as it is exactly the type of place he had always imagined he would retire to. The contract prepared for the sale of Abbottsvale is the standard Contract for the Sale of Land and provides for the usual 10% deposit (in this case $40,000) to be paid at exchange of contracts. Under the contract, the balance of the purchase price is payable at settlement, which is stated to be 35 days after exchange, in accordance with standard conveyancing practice.
• In addition, to accommodate Mal’s timeframe of retirement and access to superannuation, the vendor agrees to an extended settlement, which was now to be Monday 3 July 2017. Further as the vendor has already vacated the property, she agrees to allow Mal access to Abbottsvale in order that he may commence the renovations and improvements he wishes to undertake prior to settlement. The vendor instructs her solicitor to amend the contract accordingly. This is done.

The contract contains, inter alia, the following clauses:

(1) The parties agree that the deposit payable pursuant to this contract is 10% of the purchase price, being the sum of $40,000. Notwithstanding anything else contained in this contract, the vendor shall accept, upon exchange of this contract, the sum of $20,000, being 50% of the full deposit. Both parties further agree that the balance of the deposit shall become due and payable at settlement.

(2) If the purchaser defaults in respect of any obligation that arises under this contract which is, or becomes, an essential term of the contract, then the second instalment of the deposit due in accordance with Special Condition one (1) above shall be immediately payable and the purchaser shall forfeit the full deposit of $40,000.

(3) Both parties agree that should either party fail to complete on 3 July 2017, then the party not in default shall be entitled to serve on the other party a Notice to Complete giving the party in default 14 days to settle in accordance with the terms of this contract, and both parties agree that for the purposes of this clause 14 days shall be considered a reasonable period of time in order to comply with this clause.1

(4) Further to clause three (3) above, both parties agree that should settlement not take place within 14 days following the issuing of a valid Notice to Complete, then if the party in default is the purchaser, the purchaser shall forfeit the property, and vendor shall be
entitled to retain the benefit of any capital improvements made to the property in the period after exchange.