Bailey v Woondella Pty Ltd [2012] VSC

A borrower sold property ahead of an auction by the lender but the lender refused to withdraw the property from auction unless the mortgage debt was repaid before auction. The borrower’s purchaser bid at the auction but was unsuccessful and the borrower’s purchaser sued the borrower claiming $5m in lost profits from the proposed development or the difference between the auction price and the price agreed under the contract.

The court found for the borrower on the grounds that the contract contained an implied term that the sale was conditional on the lender withdrawing the land from sale and cooperating in the settlement because it was so obvious it went without saying.

The court also held that both parties treated the contracts as at an end when the mortgagee refused to cooperate. There was mutual discharge or abandonment of the contract. The court also found the contract was frustrated and terminated because the property was sold at auction to a third party. 

The purchaser’s claim was dismissed.

Click here to read the full judgment.

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