Knight v Johnstone

Knight v Johnstone concerned a dispute between a vendor and a purchaser over a contract for the sale of land. The purchaser, Knight, sought to terminate the contract, alleging that the vendor, Johnstone, had failed to provide vacant possession as required by the contract. The vendor maintained that the contract had been validly terminated by the purchaser and that the vendor was entitled to forfeit the deposit. The matter came before the High Court of Australia.

The primary legal issue before the High Court was whether the vendor had provided vacant possession of the property by the settlement date as stipulated in the contract. This involved an examination of the terms of the contract and the circumstances surrounding the vendor's occupation of the property at the time of settlement. A secondary issue concerned the consequences of any breach of the vacant possession clause, including whether it entitled the purchaser to terminate the contract and whether the vendor was entitled to retain the deposit.

The High Court, in allowing the appeal, held that the vendor had not provided vacant possession by the settlement date. Their Honours found that the vendor's continued occupation of a portion of the property, even if minor, constituted a breach of the contractual obligation to give vacant possession. Consequently, the purchaser was entitled to terminate the contract. The Court further held that as the purchaser had validly terminated the contract due to the vendor's breach, the vendor was not entitled to forfeit the deposit. The principles of contract law regarding the essential nature of vacant possession and the consequences of its absence were central to the Court's reasoning.