Bavulo Pty Limited v Zhang Property Pty Limited

Bavulo Pty Limited (the vendor) and Zhang Property Pty Limited (the purchaser) were parties to a contract for the sale and purchase of land. The vendor issued a notice to complete, but completion did not occur by the stipulated date. Subsequently, the vendor issued a notice of termination. The purchaser then sought specific performance of the contract, alleging that the vendor was in breach of contract. The purported breach concerned the vendor's obligation to serve a notice of attornment and hold it in escrow at least two business days prior to completion. The central question for the Court of Appeal of New South Wales was whether the vendor's failure to serve the notice of attornment constituted a "disentitling breach" relevant to or connected with the securing of completion.

The court was required to determine whether the vendor's non-compliance with the requirement to serve and hold the notice of attornment in escrow prior to completion amounted to a breach of contract that would disentitle the vendor from relying on the purchaser's subsequent failure to complete, thereby precluding the vendor from terminating the contract and justifying the purchaser's claim for specific performance.

The Court of Appeal dismissed the appeal, upholding the primary judge's decision. The court reasoned that the requirement for the notice of attornment to be served and held in escrow was a condition precedent to the vendor's right to insist on completion and, by extension, to terminate the contract for non-completion. The vendor's failure to fulfil this obligation meant that it was not in a position to validly demand completion or to terminate the contract. Therefore, the vendor's conduct was a "disentitling breach" which prevented it from relying on the purchaser's subsequent failure to complete. The court found that the purchaser was entitled to specific performance.

The appeal was dismissed, with costs awarded to the respondent.