Thinking of buying or selling property during COVID-19? If so, keep these hard learned lessons in mind…7-May-2020 Fraud and Insolvency Property By Jamal Bakalian
A recent decision of the Supreme Court of New South Wales released on 23 April 2020, Deligiannidou v Sundarjee  NSW SC437, provides us all with a timely reminder that more than ever, we need to be hypervigilant about the clauses in our Contracts when buying or selling property.
Due to the increased use of technology amid the COVID-19 pandemic, purchasers are at their most vulnerable when buying property. Read on to find out how one purchaser was royally duped during the conveyancing process earlier this year.
The Facts of the Case
The Purchasers were the Deligiannidou family and they exchanged contracts with the Vendors who are the Sundarjee family, on 1 February 2020.
The Purchasers were intending to buy in Sans Souci for $560,000.00. In the Contract of Sale there was a specific clause which stated that a 10% deposit ($56,000.00) was to be paid along with an initial holding deposit of $1,400.00 to be paid by 1 February 2020. The balance of the deposit, being $54,600.00, was to be paid by 12 February 2020.
The Contract required that the deposit could only be paid by cash (up to $2,000.00) or by cheque. Interestingly, the contract specifically prohibited the Purchasers from making the payment for the deposit via electronic funds transfer (EFT).
However, there was a third party in these circumstances – the Sales Agent. The Sales Agent was San Souci Developments Pty Ltd t/as Caruana Real Estate. On 31 January 2020, Ms Cathy Caruana, a representative of the Agent, sent the Purchaser Ms Deligiannidou an email suggesting that if she wished to secure the property on a 5 day cooling-off period so that no other offers could be taken on the property, she should pay the initial holding deposit directly into the Agent’s Trust Account. In that email, Ms Caruana provided the BSB and Account No for the Trust Account of the Agent.
On 7 February 2020, despite the fact that the Contract did not allow for payment of the deposit by EFT, Ms Caruana sent an email to Ms Deligiannidou stating that the remainder of the 10% deposit ($54,600.00) should be paid into the Agent’s Sales Trust Account before 5.00pm on Wednesday, 12 February 2020. In that email, Ms Caruana sent the BSB and Account No of the Trust Account for the Agent which was the same details that were provided in her earlier email of 31 January 2020.
Then everything went wrong.
On 9 February 2020, Ms Deligiannidou received what appeared, at face value, to be a further email of Ms Caruana, the representative of the Sales Agent. That email said that there was an invoice attached that was to direct the remainder of the 10% deposit. In that invoice there was a BSB and Account No that purported to be the Agent’s Trust Account details. However, they were not.
They were in fact the BSB and Account No of a different account. This is referred to as the “fraud account”. The fraudulent email looked as though it had come from a chain of emails from Ms Caruana. However, the BSB and Account details were altered.
The Court found that there was no suggestion that Ms Caruana had any involvement in sending the fraudulent 9 February 2020 email. Neither Ms Deligiannidou nor the Sales Agent noticed the change in the BSB and Account Numbers from the original details given by the Sales Agent to the Fraudulent details.
On 12 February 2020, Ms Deligiannidou sent Ms Caruana a screenshot which showed the transfer of the $54,600.00 by EFT. Neither Ms Deligiannidou nor Ms Caruana noticed that the screenshot showed a different set of BSB and Account details than those pertaining to the Agent.
Terminating the Contract for Sale of the Sans Souci Property
Sadly for the Purchasers, on 19 March 2020 the Vendors who had no direct dealings with the Purchasers, served a Notice of Termination of the Contract because neither they nor their Agent had received the deposit of $54,600.00. FYI…this matter has also been referred to the police and is currently under investigation. So watch this space.
Feeling the heavy burden of this situation, the Purchasers, on 8 April 2020, filed in the Supreme Court of New South Wales against the Vendor and the Agent…after all the Purchaser had not done anything wrong, right?
The Question for the Court to Consider
The Purchasers were seeking a declaration from the Court that the Contract for Sale of the Sans Souci Property remained valid and enforceable. The Purchasers were also seeking damages from the Agent due to alleged misleading and deceptive conduct.
The Court’s Decision
Justice Stephenson decided to reject the Purchaser’s request. Justice Stephenson decided that the Vendors should be allowed to deal with the property at Sans Souci in any which way they want, without having to uphold to validity and enforceability of the original Contract that was exchanged on 1 February 2020 with these Purchasers.
The Court’s Reasoning
The Court had two main reasons for their Decision to reject the Purchasers’ request:
- Although the Vendors appointed their Sales Agent to find a Purchaser for their property at Sans Souci, it did not mean that the Sales Agent was authorised to bind the Vendor to any other additional terms with the Purchaser that were outside the terms of the Contract; and
- The Sales Agent is only authorised to receive the deposit in accordance with the strict terms of the Contract (i.e. this means it was not valid for the Sales Agent to even invite the Purchaser to pay the deposit by EFT when the Contract did not say that was permitted).
During the COVID-19 crisis, we know that property is not being bought or sold in the traditional way, and that there is an increased reliance upon technology for these transactions. At Streeterlaw, we have an expert team of Conveyancing and Commercial Litigation Solicitors who would be more than willing to ensure that you will be taken care of by advising you of your rights so that your interests are protected. Speak to one of our Streeterlaw Solicitors today on 02 8197 0105 to ensure that you receive the proper guidance and advice during these uncertain times.
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