This article was written by Nancy Wang Principal Solicitor at W & G Lawyers.
Most people assume that if you go ahead with a deal knowing something is wrong, you’ve made your bed — you can’t complain about it later. A recent Queensland Supreme Court decision shows that’s not always how the law works. A buyer who knew about a serious problem with a property before it signed the contract still walked away and got its $275,000 deposit back. Here’s how, and what it means for anyone buying property.
The deal
A developer wanted to buy three lots at Beenleigh to build a childcare centre. Rather than buy straight away, it took out an “option” — effectively paying for the right to buy the land later at a fixed price, while it did its homework and lodged a development application. It paid a $275,000 deposit to lock that in. The full price was $2.75 million.
While the developer was working through the council approvals, a problem surfaced: the State government planned to take part of the land — about 580 square metres off the road frontage — for a road project. (In Australia this kind of compulsory acquisition is called a “resumption.”) Losing that strip would seriously hurt the childcare-centre plan.
Crucially, this road proposal had not been mentioned in the contract. And the contract had a clause that said: if the land is affected by an undisclosed transport proposal like this, the buyer can cancel before settlement and get its deposit back.
The twist
Here’s what makes the case interesting. The buyer found out about the road problem before it formally committed to buy. It exercised its option and signed the contract with its eyes open. Then, a few weeks later, it cancelled and demanded its $275,000 back.
The seller refused, and ran three arguments that probably sound like common sense:
First, it said the contract really only allowed a refund if the seller did something wrong — and the seller hadn’t. Second, it argued the buyer had effectively chosen to go ahead despite knowing about the road, so it couldn’t now turn around and pull out — in legal terms, it had made an “election.” Third, it said the buyer had “waived” — given up — its right to cancel.
The court rejected all three. The buyer got its money back.
Why the “you only get it back if we breach” argument failed
The contract had two separate refund provisions. One (a special condition) said the deposit comes back if the deal ends because of the seller’s fault. Another (a standard clause) said it comes back if the buyer cancels because of an undisclosed problem like the road.
The seller argued the first cancelled out the second. The judge said no — the two clauses simply cover different situations, and there’s nothing odd about a contract providing for a refund in both. If the parties had wanted “seller’s breach” to be the only way to get a refund, they could easily have said so in plain words. They didn’t. And commercially, it would make no sense for a buyer to silently give up its right to a refund when a serious hidden problem turns up. A deposit on a land sale is normally refundable when the buyer validly cancels — that was the whole point.
Why “you chose to go ahead” failed — the part that surprises people
This is the heart of the case. The seller’s instinct — you knew, so you chose, so you’re stuck — feels right, but the law looks at it differently.
The legal idea of “election” is about being forced to choose between two rights you can’t have at the same time — for example, the right to cancel a contract versus the right to hold the other side to it. The important thing about an election is that once you genuinely make it, you’re locked in. Unlike some other rights you can give up and later take back, a true election is final: choose to go ahead, and you’ve given up the right to pull out for good, and you have to see the deal through. That finality is exactly why the stakes were so high here. If the buyer had truly “elected” to proceed, it wouldn’t just have lost a bargaining chip — it would have been bound to complete the $2.75 million purchase and could never have recovered its deposit.
Because the consequences are so serious, the law doesn’t treat people as having made that choice lightly. The act said to be an election has to be clear and unequivocal. And the judge pointed out a simple problem with the seller’s timing argument: you can’t choose between rights you don’t yet have.
Until the buyer signed the contract, it had no contract rights at all — including no right to cancel. That right only came into existence the moment the contract did. So signing the contract wasn’t “giving up” the right to cancel; it was the very thing that created it. Knowing about the road problem at that point didn’t matter, because there was no earlier inconsistent right to abandon. (It also helped that the option and the contract involved two related-but-separate companies, but the timing point was enough on its own.)
It helped the buyer that, every step of the way, it said in writing that it was keeping its right to cancel. When it signed, its lawyers expressly “reserved its rights.” It said the same thing again later. The judge drew an important line here: there’s a big difference between looking into a problem to decide what to do and committing to go through with the deal. The buyer spent June investigating how bad the road resumption really was — exactly what a sensible buyer does before deciding whether to pull out. Because pulling out and proceeding are mutually exclusive — and choosing to proceed would have been final — the law was careful not to treat mere investigation as locking the buyer in. That conduct was consistent with keeping the right to cancel, not giving it up.
The same went for the buyer lodging a “caveat” (a notice on the land’s title protecting its interest). Far from being inconsistent with cancelling, it was a sensible step to protect its claim to get the deposit back.
The “waiver” argument failed for related reasons: to give up a right this way, you also have to do something clear and unequivocal, and the buyer never did. And here the contrast with election is telling — a waiver, unlike a final election, can usually be taken back with reasonable notice. So even if the buyer had somehow waived its right, the judge said it had effectively taken that back when it reasserted its position. An election would have given the seller no such second chance — which is all the more reason the buyer’s careful, consistent reservation of its rights mattered.
The one thing the buyer didn’t get
The buyer also claimed it should have a security interest — an “equitable lien” — over the land not just for the deposit, but also for interest and its legal costs.
The judge agreed the buyer had a lien for the deposit itself. When you’ve paid money toward a purchase and the deal falls through without your fault, the law treats you a bit like a secured creditor: you have security over the land for getting your money back.
But he drew the line at interest and costs. The contract spelled out that any refund would be made “without interest, costs or damages.” Having agreed to that, the buyer couldn’t use the lien to claw back interest and legal costs through the back door. (The buyer could still ask for interest and costs as ordinary court remedies — they just weren’t secured against the land.)
What this means if you’re buying property
A few practical lessons fall out of this case:
- Knowing about a problem doesn’t automatically cost you your rights. If your contract gives you a right to cancel because something wasn’t disclosed, that right generally exists from the moment the contract does — separate from what you knew beforehand.
- Reserve your rights in writing, and keep doing it. The buyer here won partly because it repeatedly and clearly said it wasn’t giving anything up. Silence or ambiguous conduct is where people get into trouble.
- Investigating is not the same as committing. You’re allowed to look into a problem — talk to the council, get advice, weigh up whether the deal still works — without being treated as having decided to go ahead.
- Read the deposit clauses carefully. They decide not just whether you get your deposit back, but what else comes with it. A clause refunding the deposit “without interest, costs or damages” means exactly that.
The bottom line
The seller’s gut feeling — you knew, so you’re stuck with it — is a natural one, but it isn’t the law. A buyer can know about a problem, sign anyway while clearly keeping its options open, investigate, and then validly pull out and recover its deposit. What matters is not just what you knew, but what rights you actually had, when they arose, and whether you ever clearly gave them up.
How W & G Lawyers can help
Disputes like this one rarely turn on a single dramatic moment. They turn on the wording of a clause, the timing of a right, and what was said — or not said — in writing along the way. That is exactly where good advice early makes the difference. At W & G Lawyers, our property and dispute resolution team can help buyers, sellers and developers with:
- Options, put-and-call deeds and “subject to” arrangements — structuring and reviewing the deal so your rights to investigate, walk away, or nominate a buyer are clear and protected from the outset.
- Due diligence and development sites — identifying risks like resumptions, planning constraints and undisclosed adverse matters before you are committed, and advising on how the contract allocates those risks.
- Terminating (or resisting termination of) a contract — assessing whether a right to terminate exists, how and when to exercise it, and how to do so without accidentally giving it away.
- Reserving your rights — making sure your conduct and correspondence keep your options open, rather than locking you in to a deal you may want to exit.
- Recovering (or retaining) a deposit — advising on refund clauses, “full and final satisfaction” wording, and what you can realistically claim, including interest and costs.
- Caveats, equitable liens and securing your position — protecting your interest in land while a dispute is resolved.
- Litigation and dispute resolution — running or defending proceedings in the Supreme Court and other courts where matters cannot be resolved by negotiation.
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Disclaimer
This article is general information only and does not constitute legal advice under Australian law. For advice specific to your situation, please contact W & G Lawyers. For further details, please click here to view our disclaimer.