McPhee v Zarb

The appeal before the court involved the parties McPhee and Zarb, specifically LBS Holdings Pty Ltd and Australasian Theatrical Investments Pty Ltd. The nature of the dispute pertained to a real estate transaction where the purchasers sought to rescind the contract due to the vendor's failure to provide the release of mortgage by the agreed settlement date. The Court of Appeal was tasked with determining several legal issues, including whether the agreement to extend the settlement date waived the clause that time was of the essence, and whether the purchasers' rescission was a wrongful repudiation of the contract.

The court first examined whether the agreement to extend the settlement date constituted a waiver of the "time is of the essence" clause. The purchasers had reserved their rights when extending the settlement date, which the trial judge found was an affirmation of the contract, thereby destroying the essentiality of time. The Court of Appeal disagreed, distinguishing the case from Foran v Wight, and found that the agreement to extend the settlement date did not amount to an affirmation of the contract. Furthermore, the court considered the purchasers' conduct in failing to tender the price on the extended settlement date, which did not equate to conduct affirming the contract and destroying the essentiality of time.

In addressing the issue of rescission, the court found that the trial judge had erred in holding that the purchasers' purported rescission constituted a wrongful repudiation of the contract. The court held that the purchasers had valid grounds to rescind due to the vendor's repeated failure to provide the release of mortgage at the agreed dates. Finally, the court considered the effect of section 87(1) of the Property Law Act, concluding that the vendor could rescind once the power of sale was exercised by the mortgagee, even though this resulted in the vendor losing all rights to settle.

The court's findings led to the orders that the appeal be allowed, the judgment and orders appealed from be set aside, the respondent's application for summary judgment be dismissed, and the appellants' cross-application for summary judgment be granted. Additionally, the respondent was ordered to pay the appellants the sum of $15,000 with interest from 28 June 2001 until judgment, along with the appellants' costs of the appeal and the proceedings at first instance.