Is it fair for a vendor
to rescind a non-compliant property option and keep the
In an interesting judgment, Emmett AJA has found that a
vendor is entitled to rescind and to keep the payments
received under two residential property options which failed
to comply with section 66ZI of the Conveyancing Act
The judgment is Sieve-Storm Pty Ltd ACN 160 562 354 as
trustee for Affordable Property Trust v Murphy 
NSWSC 1800 (15 December 2016) in the Equity Division of the
Supreme Court of New South Wales.
In this article we examine why the options failed to comply
and why the purchaser’s claims for restitution or
compensation for the payments made under the options failed.
Why did the options fail to
comply with Section 66ZI?
The Conveyancing Act 1919 (NSW) (Division 9 of Part
4: sections 66Z to 66ZK) contains a number of requirements
for “Options for Purchase of Residential Property”.
Section 66ZI(2) specifies that required documents are
to be attached to the option, namely:
a copy of the proposed contract for the sale of the
property, excluding particulars of the purchaser but
including particulars of the purchase price; and
the documents required by section 52A to be attached to
a contract [i.e. title search, plan, covenants, planning
certificate, sewer diagram, and so forth] before
signature by the purchaser.
Section 66ZI(1) gives both the vendor (the grantor) and the
purchaser (the grantee) the right to rescind the option
if the required documents are not attached to the option
document at the time it is granted.
The vendor (Murphy) granted two options to the purchaser
The first option was the Robertson Road Option, which was
entered into on 27 July 2013 for a term of 3 years. The
option document was a printed form completed by the
purchaser. Neither party had legal assistance. The court
described the form as “quite ill-suited for the grant of an
outright option to purchase”. The form failed to comply with
section 66ZI(2) in that the required documents were
not attached – neither the proposed contract for sale nor
the documents required by section 52A. The vendor rescinded
the option under section 66ZI(1) by notice dated 24 March
2016, almost 3 years after it was entered into.
The second option was the Gillies Street Option, which was
entered into on 5 September 2013 for a term of 24 months
(extendable). The option document was prepared by a lawyer.
Both parties had legal advice. The required documents
were attached, but contract failed to comply with section
66ZI(2)(a) because the contract did not include particulars
of the purchase price. The vendor rescinded the option under
section 66ZI(1) by notice dated 24 March 2016, 2 ½ years
after it was entered into.
The purchaser accepted at the hearing that both of the
options had been validly rescinded.
The purchaser argued that the vendor was estopped by her
conduct from asserting that the options were void. The Court
observed that estoppel could be raised only if the purchaser
had wanted to exercise the option and was able to
demonstrate that it was induced either to enter into
possession or to make the payments in question by any
conduct on the part of the vendor.
In this case, the court did not consider that Ms Karin
Siekaup (the sole director of Sieve-Storm) relied upon or
was induced by anything done by Ms Murphy, and so no
estoppel was raised.
Is the purchaser entitled to
a restitution or compensation for unjust enrichment?
Section 66ZE deals with the consequences of a rescission
under section 66ZI.
Section 66ZE(1) treats the rescission as being ab initio
(i.e. from the date the option was granted), but reserves
rights and obligations created by the section.
Section 66ZE(7) contains this statement of rights and
(7) Either party is entitled to make a claim for:
such compensation, adjustment or accounting as is
just and equitable between the vendor and purchaser
where the purchaser has received the benefit of
possession of the property, or
the payment of damages, costs or expenses arising
out of a breach of any term, condition or warranty
contained or implied in the option,
The intent of section 66ZE(7) is that neither the vendor nor
the purchaser can receive an unfair profit if they rescind
the option. This explains why section 66ZI gives the vendor
as well as the purchaser the right to rescind an option,
even though it might appear unfair for a vendor to have this
right, given that the policy underlying Division 9 of the
Conveyancing Act 1919 is the protection of prospective
The purchaser alleged that it was entitled to compensation
because the vendor had engaged in unconscionable conduct
within the meaning of the unwritten law and the terms of
section 21(1) of the Australian Consumer Law.
Justice Emmett set out these considerations in relation to
It may be that Sieve-Storm would be entitled to
restitution, to the extent that Ms Murphy has benefited
from the payments made by Sieve-Storm.
However, allowance would need to be made for a
reasonable occupation fee for the possession of the
Robertson Road Property and the Gillies Street Property
enjoyed by Sieve-Storm. Alternatively, Sieve-Storm would
be required to bring to account moneys received by it
from the occupiers of the Robertson Road Property and
the Gillies Street Property.
The facts in this case did not follow the usual pattern of a
purchase option in which a substantial option fee is paid on
entry of the option. If the purchaser is granted possession,
market rental and outgoings (Council rates, water rates and
insurance) are paid.
In this case the purchaser was entrepreneurial. It paid a $1
option fee on entry of the option, was given possession, and
paid the vendor’s mortgage payments and outgoings. The
purchaser made a profit by sub-letting both properties to
occupiers for more money than it paid to Ms Murphy. It also
had the opportunity to sell the property at a higher price
than the option price.
Justice Emmett made these concluding comments:
No claim for restitution or unjust enrichment has been
quantified by Sieve-Storm, nor has Sieve-Storm applied
for the taking of accounts. Having regard to the [fact]
that Sieve-Storm received more from occupiers that it
paid to Ms Murphy, it may be that no such application
will be made.
It follows from the conclusions I have reached above
that Sieve-Storm has failed to establish any entitlement
to relief. The proceedings should therefore be dismissed
The provisions dealing with Options for Purchase of
Residential Property in the Conveyancing Act 1919
contain several ‘trip wires’ which can either be used to
treat the option as void (e.g. 66ZG) or to rescind and make
the option void (e.g. 66ZH and 66ZI).
Either the vendor or the purchaser can use these ‘trip
wires’ to rescind an option.
In this case, the vendor succeeded in rescinding the options
without refunding over $50,000 she received under each
option and without payment of compensation for unjust
The decision is a warning to both the vendor and the
purchaser legal advisers that they need to strictly comply
with the Conveyancing Act 1919 when entering into an
option for purchase of residential property.