Prospective home buyers cautioned

A property sale gone wrong has led to a Court of Appeal judgement that cautions would-be house buyers to do all they can to fulfil their side of the deal.

In 2014, David Grey reached conditional agreement with Matthew and Tracey Strack to buy the Stracks' Maori Hill, Dunedin,  home for $1.2million.

Days later, Mr Grey tried to withdraw from the deal, citing concerns about retrofitted insulation and doubts that he could achieve a finance clause.

With Mr Grey resolute he would not complete, the Stracks cancelled the deal.

They later sold the home for $1.05million, and sued Mr Grey for the $150,000 they would have gained had their sale to him gone ahead.

In an earlier High Court hearing, the judge found Mr Grey's concerns about the insulation were ill-founded, but awarded only nominal damages as his chances of obtaining finance were negligible.

In the Court of Appeal, the Stracks argued for full "expectation damages" of $150,000 - the difference between Mr Grey's accepted offer and the eventual sale price to a third party.

For the Stracks, Dean Tobin said Mr Grey "had to do all things reasonably necessary" to satisfy the finance condition, but had not approached other banks or mortgage brokers, or asked the Stracks if they would consider a vendor finance agreement - which was a clause in a back-up offer to that of Mr Grey.

For Mr Grey, Len Andersen said the key issue was whether Mr Grey could have raised the money needed, in the time available and based on the facts the judge's findings said were open to him.

At the time the deal collapsed, it was still conditional on finance, and there remained a risk Mr Grey would not have succeeded in raising the money.

The Court of Appeal said although Mr Grey's position was that he would not have received a finance offer, he should have made appropriate efforts to try to obtain one.

"Having made no effort, he cannot seek shelter by claiming that he would have found any offer unsatisfactory."

Mr Grey "plainly" should have pursued his own bank, and if there was any doubt about it agreeing to finance, he should have gone to the market.

"A court may excuse a purchaser's failure to make reasonable efforts if satisfied they would have been futile ... We are not satisfied of that in this case."

Having not proven, on a balance of probabilities, that he would not have succeeded in raising finance, Mr Grey was liable for damages on an all-or-nothing basis.

The Court of Appeal awarded the Stracks $150,000 plus costs, and asked the lawyers to make submissions on how to handle the question of whether interest was payable on the damages award.

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