Purchaser's nominee: Don't be left out in the cold

428 Little Bourke Street Pty Ltd v Lonsdale Street Cafe Pty Ltd [2009] VSC 133

The Issue

What rights do nominee purchasers have to enforce a contract of sale?

What happened?

In a recent Supreme Court case, a purchaser to a sale of land nominated an associated company as the alternative purchaser. During the course of the contract, the purchaser and nominee became aware of various alleged misrepresentations. Their representative made the decision to proceed to settlement and then issued proceedings for breach of contract and alleged misrepresentation after settlement on behalf of the nominee, who was ultimately the transferee.

The proceedings failed on both grounds. In relation to the breach of contract, the Supreme Court relied on the doctrine of privity and held that the nominee lacked the ability to enforce a contract to which it was not a party. In relation to the alleged misrepresentation, the Court held that, by the time the nominee knew of the alleged deficiencies in the property, it still elected to settle, despite the fact that, as a non-party to the contract, it had no obligation to do so. As a mere nominee, it could have walked away from the contract but it chose to proceed and thereby caused its own loss.

Practical tip

An agent should be aware that, in the situation where the original purchaser has nominated an alternative purchaser, original purchaser continues to be bound by the contract and not the alternative or nominee purchaser.

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The information contained in this article is intended to be of a general nature only and should not be relied upon as legal advice. Any legal matters should be discussed specifically with one of our lawyers.

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