Background
In March 2021, the plaintiffs May Shuan Chin Chong and Houzhong Yu contracted to purchase Lot 20 in a proposed strata scheme development at Norwest, NSW for $1,160,000. The draft strata plan showed Lot 20 comprising 273 m², including a townhouse, garage, and separate 13 m² car space. The contract included special conditions permitting the vendor to alter lot configurations, provided alterations did not reduce the lot’s area by more than 5%.
When the strata plan was registered on 1 August 2025, Lot 20’s area had been reduced to 263 m² and the car space was reassigned to Lot 34, a separate utility lot. The vendor asserted it made this modification to accommodate a dedicated waste collection room instead of truck-based collection. The plaintiffs rejected the change and demanded either reversion to the original plan or compensation. After the vendor failed to respond substantively, the plaintiffs lodged a caveat on 28 August 2025 over Lots 20 and 34 to protect their contractual interest.
The vendor then served a Notice of Breach claiming the caveat violated clause 55 of the contract, which prohibited caveats that prevent giving effect to contract provisions. When the plaintiffs refused to withdraw the caveat, the vendor served a Notice of Termination on 12 December 2025. The vendor also later claimed it could not complete the sale due to a mortgage shortfall of approximately $340,000.
The Court’s Holding
Richmond J made orders for specific performance of the contract. The court rejected the vendor’s termination notice as invalid. The court found that although clauses 46 and 72 of the contract permitted the vendor to modify lot configurations and car space arrangements, these powers were not absolute and remained subject to good faith obligations and equitable principles. The removal of the car space was not a modification of 5% or greater that would have entitled the purchasers to rescind; it was instead a fundamental breach of the vendor’s primary obligation to sell the property as contracted.
The court held that the plaintiffs’ caveat did not breach clause 55 because it did not prevent giving effect to the contract itself—rather, it protected the plaintiffs’ contractual right to the car space pending resolution of the dispute. The caveat was a legitimate protective measure, not an impediment to the contract’s performance. The vendor’s financial inability to complete (due to the mortgage shortfall) was not a defence to the plaintiffs’ right to specific performance; it was the vendor’s own responsibility to manage its financial affairs.
Key Takeaways
- Contractual powers to modify lot plans and car spaces in off-the-plan strata developments are not unlimited; they remain subject to good faith and cannot be exercised to deprive the purchaser of essential inclusions.
- A purchaser’s caveat lodged to protect a contractual interest does not breach an anti-caveat clause if it does not prevent the contract itself from being performed.
- A vendor’s financial inability to complete (such as mortgage shortfall) does not justify termination of the contract or defeat an order for specific performance where the vendor is in breach.
- Clauses permitting modifications only up to 5% of lot area do not authorise removal of separately identified inclusions like car spaces without meeting substantive thresholds.
Why It Matters
This decision reinforces that off-the-plan purchase contracts, even with flexible modification clauses, impose genuine obligations on vendors to deliver the agreed property. While such contracts often include discretionary variation provisions, courts will not permit vendors to use them to strip away material components of the sale without lawful justification. The decision is significant for developers seeking to modify strata plans and for purchasers relying on contractual protections via caveat.
The judgment clarifies that a purchaser’s lodgment of a protective caveat is not, ipso facto, a repudiation of the contract that justifies vendor termination. Courts will examine whether the caveat genuinely impedes contract performance or merely secures the purchaser’s position pending resolution of a substantive dispute. This protects purchasers in long-settlement off-the-plan transactions where developer conduct may change between contract and completion.