When Finance Falls Through: A Lesson for Buyers

You've signed the contract, arranged your deposit bond, and started planning the move. Then, weeks before settlement, your finance falls through. Can you still walk away — and keep your deposit? A recent NSW Supreme Court decision suggests the answer is very often no, and that trying to argue your way out of a forfeited deposit is much harder than it looks.

The Case: A $3.7 Million Purchase That Fell Through

In May 2024, the buyer agreed to purchase a $3.7 million property at Brighton Drive, Bella Vista, from the vendor. Contracts were exchanged, a 10% deposit bond was arranged, and settlement was set for 26 weeks after the "contract date." Six months later, the buyer still hadn't secured the finance he needed to complete the purchase. When settlement deadlines came and went, the vendor terminated the contract and kept the $370,000 deposit. The buyer took the matter to the Supreme Court of NSW, arguing the contract's start date should be read differently — a six-day difference that, if accepted, would have made the vendor's termination invalid altogether.

A Six-Day Argument Worth $370,000

The vendor said the contract began on 17 May 2024, the day contracts were formally exchanged. The buyer argued it should be treated as beginning on 23 May 2024, the day his deposit bond and a mandatory land tax certificate were finally provided. That gap mattered enormously, because settlement was due 26 weeks after the contract date. Under the vendor's timeline, a Notice to Complete requiring settlement by early December 2024 was valid. Under the buyer's version, it wasn't.

When the buyer failed to settle even after an extension, the vendor terminated the contract and later resold the property to new purchasers for $3.8 million. The buyer asked the Court to rectify — effectively rewrite — the contract to reflect his preferred date, arguing that was what the parties had really intended all along. In the alternative, he argued that even if the termination was valid, fairness required his deposit to be returned given the vendor's profitable resale.

Why the Court Refused to Rewrite the Contract, or Return the Deposit

Justice Pike was not persuaded on either front. Rectifying a contract requires clear and convincing proof that both parties shared a genuine common intention different from what was actually written down. Here, the correspondence chasing the buyer for his deposit bond and paperwork was found to be entirely consistent with a contract that was already binding from the moment of exchange on 17 May 2024, not evidence of some later, unwritten agreement. The contract date stood, the Notice to Complete was valid, and the termination was lawful.

That left the fallback argument: even a lawfully forfeited deposit can sometimes be ordered returned under section 55(2A) of the Conveyancing Act 1919 (NSW), where keeping it would be unjust or inequitable. The buyer pointed to the vendor reselling for $100,000 more and collecting rental income in the meantime. The Court accepted the vendor was likely somewhat better off overall — but found that alone wasn't enough. Drawing on the NSW Court of Appeal's reasoning in Havyn Pty Ltd v Webster, the Court emphasised that a deposit exists as an earnest of performance, a genuine financial commitment that gives contracts their seriousness. A vendor doing reasonably well out of a resale doesn't, by itself, make it unjust for them to keep a deposit forfeited through no fault of their own. The claim was dismissed.

What This Case Means for You

If you're buying property in NSW, this case is a reminder that the contract date is set at exchange, not at some later point when all the paperwork happens to be finalised. Assuming you'll have more breathing room than the contract actually gives you can be a costly mistake.

It's also a warning about timing your finance. Say you exchange contracts on an apartment and arrange a deposit bond, but your lender withdraws approval three weeks before settlement. If you can't complete, the vendor is entitled to terminate and keep your deposit — and the fact that they might later resell the property for a similar or higher price won't automatically get your money back.

Finally, if you're a vendor facing a buyer who can't settle, this case confirms that Australian courts are genuinely reluctant to interfere with a validly forfeited deposit. The threshold for a court stepping in is deliberately high, and a modest windfall on resale isn't enough to meet it.

Whether you're buying, selling, or already facing a dispute over a stalled settlement, getting advice before you exchange — or before you assume a deposit is recoverable — can make all the difference.

If you're dealing with a property settlement that has gone wrong, or want your contract reviewed before you sign, get in touch with our team on (02) 8551 7851, contact us online, or book a consultation. You can also learn more on our Property Law page.

This article is a general summary of Grubisa v Zhou [2025] NSWSC 942 for information purposes only. It does not constitute legal advice. Please contact Surge Legal to discuss your individual circumstances.