You Can’t Always Rely On Your Lawyer’s Signature

Posted on July 26, 2010 by | 5 Comments

Tim O'Dwyer M.A., LL.B OPINION
by Tim O’Dwyer M.A., LL.B
Consumer Advocate

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Several months after contracting to buy six beach resort units, as well as the resort’s management and letting rights, Fred Sutton had second thoughts about his company’s purchase.

No matter that the seller company had already made some post-contract concessions:  a price reduction on the rights contract, and extensions of time for finance and the completion date of both contracts.  Each contract was conditional on the other, so a valid termination of one meant the consequential crashing of the other.
“Can you get me out?” Sutton asked his conveyancing lawyer – two days before settlement.

Because the signed, sealed and delivered contracts appeared binding, with everything in place for settlement, the lawyer was not hopeful.  But, in the course of anxiously looking for any less-than-obvious loopholes, he mentioned what he was about to his secretary.

“I have a vague recollection,” she volunteered, “that the disclosure statement was unsigned when the draft contracts arrived.”  “I think I made a note,” she added.

When her boss revisited the files, he was delighted to discover that his secretary (bless her precautious heart!) had made more than a note.  This law office veteran had actually fixed a stick-it-note (with the words “not signed by seller”) on this critical document, then she had taken a photocopy of the duly noted signature-less disclosure statement.

Section 206 of the relevant state statute requires unit sellers to give prospective buyers, before they enter into contracts, a statement “signed by the seller or a person authorised by the seller” disclosing financial and other details about the body corporate.  A buyer may cancel a subsequent contract anytime before settlement if the seller has not complied with this section.  Sellers (agents and lawyers) beware!

Here the seller’s lawyer had sent Sutton’s lawyer a letter enclosing the proposed units contract, the proposed rights contract and a detailed disclosure statement.   None of these had been signed, apart from the letter (which the seller’s lawyer had signed).  After some minor amendments had been agreed to Sutton signed all three documents.  These were then returned  to the seller’s lawyer who, after the seller had signed and dated the contracts and disclosure statement, forwarded them to Sutton’s lawyer.

Clearly, in Sutton’s lawyer’s opinion, Section 206 had not been complied with before either contract was entered into.  So he promptly terminated each contract and requested the refund of his client’s deposits.

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  • http:// says:

    Just wondering – how come the solicitor is not considered negligent in his duty to bring the unsigned disclosure notice to the clients attention earlier in the transaction ?
    The secretary did her part but it seems the solicitor did not follow through. If the market had moved in the opposite direction , would that have meant that the vendor could have used this as a loop hole to get out of the deal and sell to someone else at an increased price ?
    Regardless i wouldn’t be using that solicitor again

  • http:// says:

    To answer your first question, Trish:

    A silent solicitor in that situation may well be considered negligent, and possibly guilty of unsatisfactory professional conduct.

    And yes, the solicitor could have been similarly guilty and liable for his client’s losses if the market had moved upwards and the vendor used the loophole.

    Who would want to be a conveyancing solicitor?

  • http:// says:

    After re-reading the piece and checking the wording of the section, Trish, I must point out that the loophole could be used only by the buyer to get out of the contract.

    My rhetorical question still stands.

  • True, the best thing is you fully understand the process of buying a property

  • He was very lucky indeed, I don’t think there would be very many solicitors secretaries that would be so diligent, a sticky note perhaps, but to take a photograph as well…

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