Sedrak v Starr

In *Sedrak v Starr*, the purchaser (appellant) sought the return of a deposit paid under a contract for the sale of a pharmacy business, having rescinded the contract. The vendor (respondent) terminated the contract on the grounds that the purchaser's rescission constituted a breach of an essential term and subsequently called on a bank guarantee provided by the purchaser for part of the deposit. The dispute concerned whether the purchaser had complied with a warranty to do all things necessary to obtain the landlords’ consent to the assignment of the lease, and whether the landlords' consent could not have been obtained in any event. The matter was heard in the Court of Appeal of New South Wales.

The legal issues before the court were: (1) the construction of the warranty requiring the purchaser to do all things necessary to obtain the landlords’ consent to the assignment of the lease; (2) whether the purchaser had breached this warranty by failing to provide adequate information to the landlords; and (3) whether the landlords' consent could not have been obtained regardless of the purchaser's actions, thereby entitling the purchaser to rescind the contract.

The Court of Appeal, upholding the primary judge's decision, found that the purchaser had breached the warranty. The primary judge interpreted "references" in the contract to mean written appraisals of the purchaser and his business capacity, and that the landlords' request for information, including a statement of assets and liabilities, bank statements, and a valuation report, was not unreasonable. The purchaser's failure to provide sufficient detail regarding his assets, liabilities, and business experience, and his failure to identify his jointly owned residential property as security, constituted a breach of his obligation to provide all reasonable information. The court concluded that the purchaser was in breach of the warranty when he issued the notice of rescission, and therefore, his right to rescind under Special Condition 12 was conditional upon him not being in breach of that warranty.

The appeal was dismissed, and the appellant was ordered to pay the respondent's costs of the appeal.