NSW Supreme Court Confirms Vendor Entitled to Keep Deposit in Property Sale Dispute

A recent decision of the Supreme Court of New South Wales clarified the binding effect of contract dates and the restrictions on reclaiming deposits when a property sale does not go ahead. Justice Pike’s judgment confirms that the buyer carries the risk of settlement delays and cannot assume automatic return of their deposit.

In Grubisa v Zhou [2025] NSWSC 942, the dispute concerned the sale of a property at Brighton Drive, Bella Vista, NSW. In this case, settlement was required within a set period from the contract date, but the buyer was unable to complete on time. The seller issued a notice to complete and later sought to terminate the contract. The buyer initially sought to enforce the sale and lodged caveats on the property but eventually abandoned that claim and requested the return of the deposit.

The central issue was when the contract became legally binding: the seller argued it was upon the exchange of contracts, while the buyer claimed it only became binding once the deposit bond and statutory certificate were provided. The buyer also sought the return of the deposit under s 55(2A) of the Conveyancing Act 1919 (NSW), arguing it would be unfair for the seller to retain the deposit given that the property had been resold at a higher price and rented out in the meantime.

The Court held that a binding agreement was formed when the contracts were exchanged, regardless of when the deposit documentation or statutory certificates were finalized. It also found that the deposit still functioned as a guarantee for performance, and there was no unfairness sufficient to justify its return.

Accordingly, the buyer’s claim was dismissed, and the seller was entitled to retain the deposit.

Key Takeaways:

• The contract date is determined by the exchange of executed documents, not subsequent actions such as provision of a deposit or certificates.
• A deposit functions as a security for performance and will generally not be returned unless it is clearly unjust or inequitable.
• Parties must ensure timely compliance with settlement obligations and understand that delays in securing funding do not automatically invalidate termination notices.