The Facts

Purchaser and vendor enter into a contract for sale of land

A recent case in the NSW Supreme Court illustrates just how insidious cybercrime can be, and also how easy it is to suffer from the actions of a cybercriminal.

The vendor and purchaser entered into a contract for sale of land for a residence in NSW.

The contract was generally of the usual form, and included a clause requiring that the purchaser pay the 10% deposit, being $56,000, either by cash of up to $2000, or by cheque.

The contract required payment of the deposit by two instalments, the first instalment on the day the contract was entered into, and the second of $54,600 on a later date.

Vendor's agent instructs purchaser to pay deposit via electronic funds transfer

Shortly before the contract was entered into, the real estate agent representing the vendor sent an email to the purchaser, directing the purchaser to pay the deposit into the agent's trust account by electronic funds transfer.

The email included the bank account details for the agent's trust account.

The purchaser paid the first instalment of the deposit on the contract date by electronic funds transfer to that account.

A few days before the second instalment of the deposit was due to be paid, the agent sent the purchaser another email, reminding the purchaser to make this payment, and again setting out the bank account details for the agent's trust account.

So far, so good.

Agent's email is hacked causing purchaser to pay deposit into fraudulent bank account

However, two days later the purchaser received another email, to which was attached an invoice for $54,600, being the amount of the second instalment of the deposit.

Both this email and the invoice had all the appearances of being from the agent and included the chain of earlier emails passing between the purchaser and the agent.

This email also included the details of a new, different bank account to which the second instalment of the deposit was directed to be paid. Not only were the details of the new bank account included in this email, but the bank account details included in the earlier emails in the chain had also been changed to the details of the new account.

So, the purchaser proceeded to pay the $54,600 second instalment of the deposit by electronic funds transfer into the new bank account as the email directed.

Unfortunately, the email with the new bank account details was fraudulent, having been sent by a hacker who had illegally accessed the agent's email account.

As a result, the $54,600 paid by the purchaser was paid into the bank account of the cybercriminal, not into the trust account of the agent.

Vendor purports to terminate contract and purchaser applies to Supreme Court

When the vendor did not receive the second deposit instalment of $54,600, it purported to terminate the contract.

The purchaser applied to the NSW Supreme Court to restrain the vendor from dealing with the property in any manner other than by completing the sale.

case a - The case for the vendor

case b - The case for the purchaser
  • The purchaser hasn't paid us the deposit as required by the contract and so we are entitled to terminate the contract.
  • The contract required that the purchaser pay the deposit either by cash of up to $2000, or by cheque.
  • The purchaser instead paid the second instalment of the deposit by electronic funds transfer at the direction of the agent. This is clearly not in compliance with the contract.
  • It is unfortunate that the agent's email was hacked, causing the purchaser to make the payment into a fraudulent account, but legally it's not our problem.
  • The general authority that we granted to the agent was to find a purchaser for our property. This authority did not extend to directing the purchaser to pay a deposit in a way that is not provided for in the contract of sale.
  • Nor did the document under which we appointed the agent authorise them to direct the purchaser to pay the deposit in a manner that was not provided for in the contract.
  • Since the agent had no authority to direct the purchaser to make the payment by electronic funds transfer, the purchaser cannot claim to have paid the deposit as required by the contract.
  • If the purchaser has suffered a loss due to its deposit money being stolen, it should take that up with the agent. As for the purchaser's contract with us, they are in breach of it and the court must find that we are entitled to terminate the contract.
  • We paid the second deposit in accordance with a valid direction received from the vendor's real estate agent. Therefore, the vendor is wrong to assert that we haven't paid the deposit as required by the contract.
  • It is unfortunate that the agent's email was hacked, causing the vendor not to receive the deposit, but legally it's not our problem.
  • The agent was appointed by, and is the representative of, the vendor.
  • The document by which the vendor appointed the agent authorised the agent to do all things to facilitate the purchase of the property by the purchaser.
  • Payment of the deposit is one of the things that facilitates the purchase of the property by us as purchaser.
  • It follows that the agent was authorised by the vendor to direct us to pay the deposit by electronic funds transfer, which is what the agent did.
  • Since we paid the deposit in an authorised way, we have satisfied our obligation under the contract, and are entitled to proceed with the purchase.
  • The vendor is therefore obliged to complete the sale, and the court must restrain the vendor from dealing with the property otherwise.

So, which case won?

Cast your judgment below to find out

Tony Mitchell
Contract disputes
Stacks Law Firm

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