Case Review: Lee v Lee [2022] NSWSC 181

In the world of property law, special conditions are often treated as "boilerplate" until they aren't. The Supreme Court of New South Wales decision in Lee v Lee serves as a stark reminder that when a contract labels a term as "essential," the court is inclined to believe it — even if the vendor isn't exactly "ready, willing, and able" to close the deal themselves.

The Facts: A Unit in Enfield

In February 2021, Sieun Lee (the Purchaser) entered into a contract to buy a unit in Enfield from Annie Lee (the Vendor) for $600,000. The contract included Special Condition 56 (SC 56), which explicitly prohibited the Purchaser from registering a caveat against the property and declared this to be an essential term.

The relationship soured when the Vendor’s solicitor claimed the contract wasn't binding. Fearing for her interest, the Purchaser lodged a caveat on May 19, 2021. Fast forward to September: the Vendor "repented" her claim that the contract wasn't binding, but immediately turned around and terminated the contract because the Purchaser had breached SC 56 by lodging that caveat.

The Legal Battle: Three Key Arguments

The Purchaser challenged the termination on several grounds, but the Court, led by Darke J, systematically dismantled them:

1. Is a "No Caveat" Clause Really Essential?

The Purchaser argued that SC 56 shouldn't be seen as essential, pointing to other conditions (SC 44) that seemed to acknowledge caveats might exist.

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  The Verdict: The Court held that the parties’ clear expression of intent—labeling the term "essential"—was paramount. You can't ignore the plain English of a contract just because you think the term is minor.

2. Did the Vendor "Induce" the Breach?

The Purchaser claimed she only lodged the caveat because the Vendor was acting like there was no contract.

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  The Verdict: While the Vendor’s conduct may have "prompted" the decision, it wasn't an "invitation" to breach. The Purchaser chose to lodge the caveat of her own volition.

3. The "Ready, Willing, and Able" (RWA) Defense

This was the most complex point. The Purchaser argued that because the Vendor herself wasn't RWA to complete the sale at the time, she shouldn't be allowed to terminate for the Purchaser's breach.

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  The Verdict: Darke J clarified a critical distinction in contract law. While you usually need to be RWA to terminate for a breach of a mutual obligation (like the final settlement), you do not need to be RWA to exercise an express contractual right to terminate for a breach of a unilateral essential term.

  
  

The Decision

Darke J dismissed the summons and ordered the Purchaser to pay the Vendor’s costs. The contract was validly terminated as of September 16, 2021. The Purchaser lost the unit and her legal costs, all because of a caveat meant to "protect" her interest.

Surge Legal Takeaways

• Essentiality is King: If a special condition says it is "essential," treat it as a landmine. Don't step on it.

  
  

• Think Before You Caveat: In NSW, "No Caveat" clauses are enforceable. If you lodge one in breach of an essential term, you give the vendor a "get out of jail free" card to terminate the contract.

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  RWA is Contextual: A vendor who is in breach of their own obligations can still terminate your contract if you breach an independent, essential term.

How We Can Help

Navigating property transactions can be complex, and a single misunderstood clause can have devastating consequences for your investment. If you are dealing with a property dispute or require expert guidance on your contract, contact our office today.

Surge Legal provides free initial legal advice for all conveyancing and property enquiries. If you need assistance at our Sydney, Parramatta and Lindfield locations, our team is dedicated to ensuring your rights are protected. For more information on how we handle these matters, please visit our Property Law page.