Alexakis v Wan

Case •

[2021] NSWSC 367

•

12 April 2021

No judgment structure available for this case.

Supreme Court


New South Wales

Medium Neutral Citation: Alexakis v Wan [2021] NSWSC 367
Hearing dates: 29-30 March 2021
Date of orders: 12 April 2021
Decision date: 12 April 2021
Jurisdiction:Equity
Before: Darke J
Decision:

Defendants held to be entitled to terminate the contract and recover the deposit.

Catchwords:

LAND LAW – contracts for the sale of land – deposit payable in two instalments – second instalment payable “on the 4th month after the contract date” – contract dated 4 April 2019 – whether second instalment required to be paid by 4 August 2019, or by 31 August 2019 – held that payment was required by 4 August 2019 – vendors held to be entitled to terminate contract on 5 August 2019 – Conveyancing Act 1919 (NSW) s 181(1)(d) definition of “month” as “calendar month” – Interpretation Act 1987 (NSW) s 21 definition of “calendar month”

EQUITY – equitable remedies – relief in respect of exercise of legal rights – exercise of right to terminate contract for sale of land – breach giving rise to right of termination brought about by purchaser’s mistake – mistake not caused or contributed to by conduct of vendors – serious breach in failing to pay part of deposit within time agreed to be essential – no substantial loss or prejudice to vendors if contract ordered to be performed – not unconscientious of vendors to rely upon their termination – equitable relief declined – forfeiture of deposit of 5% of the price not unjust or inequitable in the circumstances – no order made for return of deposit under s 55(2A) of Conveyancing Act 1919 (NSW)

Legislation Cited:

Conveyancing Act 1919 (NSW) ss 55(2A), 181

Interpretation Act 1987 (NSW) s 21

Cases Cited:

Auburn Shopping Village Pty Ltd v Nelmeer Hoteliers Pty Ltd (2018) 19 BPR 38,569; [2018] NSWCA 114

Auburn Shopping Village Pty Ltd v Nelmeer Hoteliers Pty Ltd [2017] NSWSC 1230

Brien v Dwyer (1978) 141 CLR 378; [1978] HCA 50

Dodds v Walker [1981] 1 WLR 1027

Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2017) 261 CLR 544; [2017] HCA 12

Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7

Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37

Re Weston Application; Employers Mutual Indemnity (Workers Compensation) Ltd v Omni Corporation Pty Ltd (2009) 255 ALR 362; [2009] NSWSC 264

Romanos v Pentagold Investments Pty Ltd (2003) 217 CLR 367; [2003] HCA 58

Rushcutters Bay Developments Pty Ltd v Dragon Asset Investment Pty Ltd (No 2) (2017) 18 BPR 37,025; [2017] NSWSC 866

Shiloh Spinners v Harding [1973] AC 691

Tanwar Enterprises Pty Ltd v Cauchi (2003) 217 CLR 315; [2003] HCA 57

Category:Principal judgment
Parties: Theo Alexakis (Plaintiff/Cross-Defendant)
Chi Hing Wan (First Defendant/First Cross-Claimant)
Kwan Yee Chan (Second Defendant/Second Cross-Claimant)
Representation:

Counsel:
Mr D R Pritchard SC with Mr M H Southwick (Plaintiff/Cross-Defendant)
Mr D W Rayment with Mr A Smorchevsky (Defendants/Cross-Claimants)

Solicitors:
Mavrakis & Associates (Plaintiff/Cross-Defendant)
Frank Low Yeung (Defendants/Cross-Claimants)
File Number(s): 2020/57530
Publication restriction: None

Judgment

Introduction

  1. In these proceedings the plaintiff, Theo Alexakis, seeks specific performance of a contract for sale entered into with the defendants, Chi Wan and Kwan Chan. The contract, which is dated 4 April 2019, was entered into on that day by the plaintiff as purchaser and the defendants as vendors in respect of an unoccupied residential property in Kings Road, Vaucluse.

  2. The purchase price under the contract is $4,830,000. The front page of the contract indicates that the deposit is $483,000 (being 10% of the price), but Additional Condition 38 provides for a deposit of only $241,500 (being 5% of the price), payable in two instalments. It is common ground that the deposit is in fact only $241,500. There is no doubt that the plaintiff paid the first instalment of $150,000 to the depositholder on the exchange of contracts as required.

  3. The dispute between the parties is centred upon the true construction of the obligation to pay the second instalment of $91,500. Additional Condition 38 provides:

The parties agree that the purchaser shall pay the amount of $241,500.00 as the deposit payable in 2 instalments. The first instalment shall be $150,000.00 on the exchange of contracts and the second instalment shall be $91,500.00 on the 4th month after the contract date.

  1. The defendants took the view that Additional Condition 38 required payment of the second instalment by no later than 4 August 2019. As the plaintiff did not pay the second instalment by that date, the defendants purported to terminate the contract on 5 August 2019.

  2. It is not in dispute that if the second instalment was required to be paid on 4 August 2019 then the plaintiff breached the contract in an essential respect, and the defendants had a right to terminate under cl 9 of the contract. However, the plaintiff contends that under Additional Condition 38 the second instalment was not required to be paid until 31 August 2019, or alternatively until 5 August 2019, and in either case the defendants’ purported termination, prior to the end of 5 August 2019, was ineffective.

  3. The plaintiff in fact paid $91,500 into the depositholder’s account on 7 August 2019, after the purported termination of the contract.

  4. In the event that the termination is held to be valid, the plaintiff seeks equitable relief, described as relief against forfeiture, in relation to the defendants’ exercise of the legal right to terminate. This relief is sought so as to allow orders in the nature of specific performance to be made. In the further alternative, the plaintiff seeks an order under s 55(2A) of the Conveyancing Act 1919 (NSW) for the return of the deposit.

  5. By their Cross-Claim, the defendants seek orders for the recovery of the deposit of $241,500, together with interest thereon. The defendants also seek an order requiring the plaintiff to withdraw a caveat that he has lodged against the title to the property.

Summary of salient facts

  1. Mr Alexakis was informed about the property being for sale by the defendants’ agent, Mr Courtney Wong (of Phillips Pantzer Donnelley) in about late March 2019. Mr Wong showed the property to Mr Alexakis and there followed some discussion about price and an extended settlement period. Mr Alexakis said he would pay $4.5 million with a one year settlement period.

  2. Mr Alexakis deposed that on the following day he had a conversation with Mr Wong over the telephone in the following terms:

Mr Wong:   The owners have rejected your offer.

Mr Alexakis:   What do they want?

Mr Wong:   You raise your offer to $4,830,000 but not keen on the one-year settlement perhaps six months settlement, we may have a deal subject to confirmation of the owners.

Mr Alexakis:   Why the $30,000?

Mr Wong:   It’s a Chinese thing

Mr Alexakis:   Alright, I’ll give them what they want, $4.830 m but I also require nine months delayed settlement, I will pay $150,000 on exchange as the deposit.

Mr Wong:   Well they prefer a minimum of 5%.

Mr Alexakis:   I’ll pay 5% deposit in two instalments, the first instalment of $150,000 at the exchange and the second instalment any time after four months.

Mr Wong:   The Vendors aren’t too concerned about the timing of the second instalment of the deposit so long as they end up getting 5%. Their main priority is the price and completion date. If you could settle in six months, I know that they will accept it.

Mr Alexakis:   No, I need a minimum of nine months. I also require the Vendors allow me to apply for a development application with Woollahra Council after the exchange.

Mr Wong:   I’ll get back to you. I don’t think the DA will be a problem.

Mr Alexakis:   Ok, thanks.

  1. Mr Wong did not give an account of the conversation in his affidavit, but he denied that Mr Alexakis said that he would pay the second instalment of deposit “any time after four months” and he denied that he told Mr Alexakis that the vendors “aren’t too concerned about the timing of the second instalment of the deposit so long as they end up getting 5%”.

  2. Mr Alexakis further deposed that Mr Wong called him on the telephone on the following day and there was a conversation to the following effect:

Mr Wong:   Theo, I spoke to the Owners and they accept your offer. Get your solicitor to put your terms in writing and send it to me.

Mr Alexakis:   Ok, I will. Please send me a copy of the contract.

  1. Mr Wong sent a draft contract for sale to Mr Alexakis on the evening of 1 April 2019. On 2 April 2019 Mr Alexakis sent the draft contract to his solicitor, Mr Mavrakis. The covering email was in the following terms:

Attached is a contract for sale

Looking at purchasing with conditions as follows-

-purchase price $4,830m

-9 months delayed settlement

-vender [sic] to allow access to submit any docs relating to a Da with council

-they want 5% deposit but will ask for $150K deposit

Will talk tomorrow

  1. On 3 April 2019 (at 1:06pm) Mr Mavrakis sent an email to Mr Wong that included the following:

We act for Theo Alexakis.

Our client has handed us a copy of the contract for the above property and we are instructed to request the following:

Purchase price - $4,830,000.00

Completion Date – 9 months after the contract date or with the option to settle beforehand on 14 days written notice.

Deposit - $150,000.00 on the exchange of contracts and a further $91,500.00 on the 4th month after the contract date to total 5% deposit.

Additional Clauses – Please insert clause number 37.

Additional Clause 37 concerned the making of a development application by the purchaser.

  1. At 1:15pm Mr Wong responded to Mr Mavrakis by email in which he stated that he would shortly be in touch.

  2. At 2:40pm Mr Wong sent an email to Ms Deanna Salis of the defendants’ solicitors (Frank Low Yeung) which included much of the content of Mr Mavrakis’ earlier email, and concluded with the following:

I’ve spoken with Mrs Wan and she has advised she is acceptable to the above only if she gets her asking price of $4.83m. Please confirm this and I await your response to the above. Thanks so much.

  1. At 4:23pm Ms Salis responded to Mr Wong by email in the following terms:

Thank you for your email. We are instructed to reply as follows:-

Not agreed. Our clients request for 6 months after the Contract date and not 9 months.

Agreed.

Agreed. Special Condition 37 attached.

  1. At 4:44pm Ms Salis sent another email to Mr Wong. The email was in the following terms:

We have been further instructed that our client will now agree to the 9 months settlement, with the option to settle beforehand on 14 days written notice provided Contracts are exchanged with a Section 66W Certificate before 5pm, Monday, 15 April 2019.

  1. At 5:51pm Mr Wong sent an email to Mr Mavrakis (copied to Mr Alexakis) in the following terms:

All amendments agreed. I’ll attend to the exchange tomorrow and advise you once this has taken place.

  1. On 4 April 2019 (at 8:15am) Mr Mavrakis sent an email to Mr Wong (copied to Mr Alexakis) in which he stated that he would send Mr Wong a version of the contract for signing.

  2. At 2:58pm Mr Wong forwarded an email to Mr Mavrakis (copied to Mr Alexakis) which confirmed that the defendants were Australian citizens.

  3. At 3:52pm Mr Mavrakis sent an email to Mr Wong (copied to Mr Alexakis) which attached a certificate under s 66W of the Conveyancing Act (dated that day) and a form of additional clauses 38 and 39 to be inserted into the contract. The additional clause 38 provided for the payment of the deposit by two instalments. The additional clause 39 contained a warranty that the defendants were Australian citizens. Both clauses were included (as Additional Conditions 38 and 39) in the form of contract that was later executed and exchanged.

  4. Mr Alexakis attended Mr Wong’s office during the afternoon of 4 April 2019. On that occasion he signed the contract for sale and gave Mr Wong a cheque in the sum of $150,000 for the first instalment of the deposit. The cheque was made out to Phillips Pantzer Donnelley, who were named as the depositholder under the contract.

  5. At 4:12pm Mr Wong sent an email to Mr Mavrakis (copied to Mr Alexakis) confirming that an exchange of contracts had taken place.

  6. At 4:42pm Mr Wong sent a further email to Mr Mavrakis (copied to Mr Alexakis) which attached signed copies of the front pages of the counterparts of the contract. Mr Wong stated in the email that he would send “the original counterpart” to Mr Mavrakis in the post. A letter dated 4 April 2019 was in fact sent by Phillips Pantzer Donnelley to Mr Mavrakis which enclosed the vendor’s signed counterpart of the contract and a Purchaser Sales Advice form.

  7. The contract employed the 2018 edition of the Law Society/Real Estate Institute standard form, supplemented by a number of Additional Conditions. As already mentioned, the price was $4,830,000 and, despite what appears on the front page of the contract, a deposit of $241,500 was payable in two instalments in accordance with Additional Condition 38. The second instalment was thus payable “on the 4th month after the contract date” [of 4 April 2019]. By cl 2.3, the time for the payment of the instalment was essential. The date for completion was expressed to be 9 months after the contract date.

  8. On 1 July 2019 Mr Alexakis travelled to Greece with his family. He deposed that he understood and believed that he could pay the balance of the deposit “on a date on or later than 5 August 2019 or at any time in the month of August”. This understanding and belief was stated to be based, at least in part, upon the statement allegedly made by Mr Wong that the vendors were not too concerned about the timing of the second instalment so long as they ended up getting 5%.

  9. On 5 July 2019 Mr Wong sent an email to Mr Alexakis (copied to Mr Mavrakis) in the following terms:

Hope you’re well. Just a reminder that the balance of the 5% deposit ($91,500) is due and payable in one month’s time (by or before 5 August). Would you kindly forward me a receipt once you’ve attended to payment. Thanks in advance!

  1. Mr Alexakis deposed that he did not become aware of this email until the evening of [Thursday] 1 August 2019 (Athens time). He said that he was not constantly looking at his emails as he was travelling around Greece and France.

  2. On 29 July 2019 Mr Wong sent an email to Mr Mavrakis (copied to Ms Salis) in the following terms:

Hope you’re well. As per the Contract, your client is required to transfer the balance of the 5% deposit ($91,500) on or before 4 August – please refer [sic] our Trust Account details below. Kindly forward receipt of payment once this has been attended to.

[Trust Account details included]

  1. The email was marked as being of high importance. Mr Mavrakis, without including any comment of his own, forwarded the email to Mr Alexakis almost immediately.

  2. Mr Alexakis deposed that he became aware of this email (and Mr Wong’s 5 July 2019 email) on the evening of 1 August 2019 when he was in Athens. Mr Alexakis gave evidence that he promptly responded by email to Mr Wong (copied to Mr Mavrakis) in the following terms:

Hope this email finds you well.

With regards to the second part of the deposit I’m currently overseas and have been for the past 5 weeks.

However I will be returning on 6th August and will be depositing the balance there shortly after.

  1. The email was delivered to Mr Wong’s mailbox at 4:45am on 2 August 2019. At 11:05am Mr Wong sent an email to Mr Alexakis (copied to Mr Mavrakis) in the following terms:

Contract provides for payment no later than 4th of August. Kindly provide receipt of payment.

  1. Mr Alexakis deposed that he did not see this email until about midnight on 5 August 2019 (Sydney time) when he landed at Abu Dhabi airport on his way back to Australia. Mr Alexakis deposed that he had flown out of Athens “on Sunday early afternoon and spent Friday and Saturday packing up and preparing my family for the return flight”. He further deposed that had he seen the email he would have disputed that he was required to pay by 4 August 2019.

  2. On 5 August 2019 (at 6:07pm) Mr Yeung of the defendants’ solicitors sent an email to Mr Mavrakis which attached a letter in the following terms:

We have been instructed to advise that the vendor has elected to terminate the contract dated 4 April 2019 for the sale of property 48 Kings Road Vaucluse because of the purchaser’s failure to pay the balance of the deposit of $91,500.00 in accordance with clauses 2 and 38 of the contract.

  1. Mr Alexakis returned to Australia late in the afternoon of 6 August 2019.

  2. On 7 August 2019 Mr Alexakis made a deposit of $91,500 into the trust account of Phillips Pantzer Donnelley. Later on 7 August 2019 Mr Mavrakis sent an email to Mr Yeung, advising that the second instalment of the deposit had been paid to the agent’s trust account. The email attached a letter which included the following:

We refer to the purported notice of termination of the Contract received by us on 5 August 2019 at 6.07pm.

From our analysis of the Contract and the notice issued, we believe that the notice and the purported termination by the Vendors is defective in a number of respects:-

In form and substance;

The regime for the payment of the deposit is governed by Special Condition 38.

The obligation of the purchaser to pay the second instalment of the deposit is required to be made “on the fourth month after the Contract date.” The condition does not require the payment “on or before the date which is four months after the date of the Contract”, that is 4 August 2019. On our interpretation of the condition, therefore, our client is entitled to pay the second instalment of the deposit without being in breach at any time in the period from 3 August 2019 to 2 September 2019. Time has not lapsed.

It is our further contention that Special Condition 38 will be construed strictly against the Vendors attempting to rely on same in the circumstances.

In this regard, we are instructed, however, that the purchaser has paid the second instalment of the deposit today as he previously advised the agent. The deposit has been [sic] in full and we believe in accordance with the provisions of Special Condition 38. We enclose a copy of the bank deposit slip into the agent’s trust account.

Whilst our client maintains that the purported notice of termination is defective in form and substance our client requires the provision by the Vendors of confirmation that the Contract does in fact remain on foot, failing which we have instructions to approach the Court for Orders that the Contract remains on foot.

The letter enclosed a copy of a bank deposit slip in relation to the deposit made earlier that day by Mr Alexakis.

  1. Also on 7 August 2019 a caveat (AP448096) was lodged by Mr Alexakis against the title to the property claiming an interest pursuant to the contract dated 4 April 2019.

  2. On 6 September 2019 Mr Yeung sent a letter in response to Mr Mavrakis’ letter of 7 August 2019. Issue was taken with the plaintiff’s interpretation of the contract in relation to the payment of the second instalment of the deposit. It was stated that the contract was terminated on 5 August 2019 and the deposit of $241,500 was forfeited.

  3. The parties have thereafter maintained their respective positions. The plaintiff asserts that the contract remains on foot and he seeks to have the contract performed. The defendants assert that the contract has been terminated and that they are entitled to forfeit the deposit of $241,500. The proceedings were commenced by Statement of Claim filed on 21 February 2020.

The meaning of Additional Condition 38

  1. The first issue to consider is the proper construction of Additional Condition 38, in particular the meaning of the expression “on the 4th month after the contract date”. That expression marks the time when the second instalment of the deposit is payable. There is no doubt that the contract date is 4 April 2019.

  1. The plaintiff advanced three contentions as to the meaning of the expression. The primary submission of the plaintiff was that “the 4th month after the contract date” is August 2019 and that “on” means at any time during that month. On that basis the second instalment of the deposit was not required to be paid until the end of 31 August 2019, and the defendants were not entitled to terminate the contract on 5 August 2019.

  2. The second submission made by the plaintiff, which was put in the alternative, was that the fourth month after the contract date included 5 August 2019. On that basis, the second instalment of the deposit was not required to be paid until the end of 5 August 2019 (the plaintiff having the whole of that day to make the payment), and the defendants were thus not entitled to terminate the contract when they did at 6:07pm on 5 August 2019.

  3. The third submission made by the plaintiff, put in the further alternative, was that if the fourth month after the contract date ended on 4 August 2019 (as contended by the defendants), then as that day is a Sunday cl 21.5 of the contract operated so that the time for the payment to be made is extended to 5 August 2019. Again, it was said that as the plaintiff had until the end of 5 August 2019 to pay the second instalment of the deposit, the defendants were not entitled to terminate the contract when they did at 6:07pm on 5 August 2019.

  4. Clause 21.5 provides:

21.5   If the time for something to be done or to happen is a day that is not a business day, the time is extended to the next business day, except in the case of clauses 2 and 3.2.

Clause 2 of the contract is concerned with the payment of the deposit, and provides in clauses 2.2 and 2.3 that time in respect of payments of the deposit is essential. Clause 3.2, which is concerned with the giving of a deposit-bond for the deposit, is not applicable here.

  1. The defendants submitted that the fourth month after the contract date was a period that commenced on 5 July 2019 and concluded on 4 August 2019. Accordingly, the defendants submitted that they were entitled to terminate the contract on 5 August 2019. The defendants referred to s 181(1)(d) of the Conveyancing Act, which applies to the contract, and provides, unless the contrary intention appears, that “month” means “calendar month”. The defendants then referred to the definition of “calendar month” found in s 21 of the Interpretation Act 1987 (NSW) which provides that in any Act or instrument calendar month means:

a period commencing at the beginning of a day of one of the 12 named months and ending –

(a)   immediately before the beginning of the corresponding day of the next named month, or

(b)   if there is no such corresponding day, at the end of the next named month.

(Named month is itself defined in s 21 of the Interpretation Act to mean January, February, March, April, May, June, July, August, September, October, November or December.)

  1. Applying the definition of “calendar month” (and excluding the date of the contract from the reckoning), the defendants calculated that:

  1. the first month after the contract date commenced on 5 April 2019 and concluded on 4 May 2019;

  2. the second month after the contract date commenced on 5 May 2019 and concluded on 4 June 2019;

  3. the third month after the contract date commenced on 5 June 2019 and concluded on 4 July 2019; and thus

  4. the fourth month after the contract date commenced on 5 July 2019 and concluded on 4 August 2019.

  1. The defendants submitted that the terms of the contract did not reveal any intention to the contrary of the meaning of “month” supplied by the statutory provisions.

  2. Accordingly, the defendants submitted that even assuming the plaintiff had until the end of the fourth month after the contract date to pay the second instalment of the deposit, payment was required by no later than 4 August 2019. It was put that payment after 4 August 2019 could not rationally be described as payment “on” the fourth month after the contract date. I should note that the defendants accepted that the reference to payment “on” the period of time should be understood in the same way as “during” or “within” the period of time.

  3. The defendants submitted that the circumstances in this case involve an application of the so-called “corresponding date rule” referred to by the House of Lords in Dodds v Walker [1981] 1 WLR 1027. That case concerned a statutory provision that required a certain application to be made by a tenant “not less than two nor more than four months after the giving of the landlord’s notice”. The landlord’s notice was given on 30 September 1978 and the tenant’s application was made on 31 January 1979. The House of Lords held that the application had been made one day too late.

  4. Lord Diplock said (at 1029-30):

My Lords, reference to a “month” in a statute is to be understood as a calendar month. The Interpretation Act 1889 says so. It is also clear under a rule that has been consistently applied by the courts since Lester v. Garland (1808) 15 Ves.Jun. 248, that in calculating the period that has elapsed after the occurrence of the specified event such as the giving of a notice, the day on which the event occurs is excluded from the reckoning. It is equally well established, and is not disputed by counsel for the tenant, that when the relevant period is a month or specified number of months after the giving of a notice, the general rule is that the period ends upon the corresponding date in the appropriate subsequent month, i.e. the day of that month that bears the same number as the day of the earlier month on which the notice was given.

The corresponding date rule is simple. It is easy of application. Except in a small minority of cases, of which the instant case is not an example, all that the calculator has to do is to mark in his diary the corresponding date in the appropriate subsequent month. Because the number of days in five months of the year is less than in the seven others the inevitable consequence of the corresponding date rule is that one month’s notice given in a 30 day month is one day shorter than one month’s notice given in a 31 day month and is three days shorter if it is given in February. Corresponding variations in the length of notice reckoned in days occur where the required notice is a plurality of months.

…

In the instant case the corresponding date rule presents no difficulty. I would apply it and dismiss this appeal.

  1. Lord Russell of Killowen said (at 1030-1):

My Lords, it is common ground that in this case the period of four months did not begin to run until the end of the date of the relevant service on September 30-i.e. at midnight September 30/October 1. It is also common ground that ordinarily the calculation of a period of a calendar month or calendar months ends upon what has been conveniently referred to as the corresponding date. For example in a four month period, when service of the relevant notice was on September 28, time would begin to run at midnight September 28/29 and would end at midnight January 28/29, a period embracing four calendar months.

…

Accordingly I am of opinion that the corresponding date principle is applicable in this case, that the four month period expired at midnight January 30/31, and that the application made on January 31 was out of time and could not be entertained. Consequently I also would dismiss this appeal.

  1. The other Law Lords agreed with Lord Diplock and Lord Russell of Killowen.

  2. The defendants also referred to Re Weston Application; Employers Mutual Indemnity (Workers Compensation) Ltd v Omni Corporation Pty Ltd (2009) 255 ALR 362; [2009] NSWSC 264 where Barrett J (as his Honour then was) applied the corresponding date principle in relation to a statutory provision that required a certain application to be made during a period beginning on the “relation-back day” and ending “3 years after the relation-back day”. Barrett J said (at [14]):

To identify the end of the period of three years “after” 16 January 2006, one applies the “corresponding date” principle discussed by the House of Lords in Dodds v Walker [1981] 1 WLR 1027. Dealing with identification of the period of 4 months “after” a particular event, their Lordships regarded two principles as well-established: first, that in calculating the period that has elapsed “after” the event, the day of the event itself is excluded from the reckoning (that is the force of s 105 of the Corporations Act as it applies to the present case); and, second, that when the period is a month or a number of months “after” the event, the general rule is that the period ends on the corresponding date in the subsequent month, that is, the day of that subsequent month that bears the same number as the day of the earlier month on which the event happened. The House of Lords discussed adjustments and refinements (irrelevant to the present case) that must be applied where the date in the earlier month is the 31[st] and the later month has fewer than 31 days and where the starting date is 28 or 29 February.

  1. In that case, the relation-back day was 16 January 2006, and the relevant application was filed on 16 January 2009. Barrett J held (at [16]) that the application was made on the last day of the period ending 3 years after the relation-back day.

  2. The task of construing Additional Condition 38 requires the Court to apply the well-established principles concerning the construction of written commercial agreements, as laid down in cases such as Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7 at [35]; Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37 at [46]-[52]; and Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2017) 261 CLR 544; [2017] HCA 12 at [16]. In accordance with those principles, the meaning of the terms of the agreement is to be determined by what reasonable business persons would have understood the terms of the contract to mean. In making that determination it is necessary to consider the language employed by the parties as well as the surrounding circumstances known to them, and the commercial purposes or objects to be secured by the contract.

  3. The language of Additional Condition 38 must, of course, be viewed in the context of the contract as a whole, including its commercial purposes or objects as a contract for the sale of real property. It may be observed at the outset that the contract contains numerous provisions which, in various ways, deal with periods of time. The date for completion, for example, is described as “9 months after the contract date”. Clause 4.1 requires the purchaser to serve certain documents “at least 14 days before the date for completion”. Another example is cl 5.2 which allows the purchaser to do certain things “within 21 days after” particular dates. Further examples can be found in Additional Condition 32.1 (“not less than 14 days from” an event) and Additional Condition 34.2 (“within 30 days after” presentation of a petition). Other examples can be readily found.

  4. The plaintiff placed some emphasis upon the difference between the words on the front page of the contract concerning the date for completion, and the words in Additional Condition 38 concerning the time when the second instalment of the deposit is payable. It is true that the parties have not stated that the second instalment of the deposit is payable “4 months after the contract date”. It seems to be accepted that, had the parties so stipulated, the instalment would have been payable on 4 August 2019. However, the fact that the parties did not so stipulate does not necessarily lead to the conclusion that the parties must have intended something different, such that the construction favoured by the defendants is incorrect. I do not think that too much weight should be placed on the difference that is highlighted by the plaintiff. As noted above, differences in language amongst the various contractual provisions as to time are legion. Differences of that type should be noted, but should not distract from a clear focus upon the language of the particular provision under consideration.

  5. The formulation chosen in Additional Condition 38 is “on the 4th month after the contract date”. The language is awkward in that it is not usual to speak of money being or becoming payable “on” a particular month, as opposed to “on” a particular day. Nevertheless, in the absence of words that would require the payment to be made on a particular day in the month, I think that “on” would be understood by reasonable business persons in the position of the parties to mean during or in the course of “the 4th month after the contract date”.

  6. The notion of “the 4th month after the contract date” seems to me to imply the notional existence of a first, a second, and a third month after the contract date. Employing the definition of “month”, as supplied by s 181(1)(d) of the Conveyancing Act and interpreted in accordance with the definition of “calendar month” contained in s 21 of the Interpretation Act, the first month after the contract date (of 4 April 2019) would be a period commencing at the beginning of 5 April 2019 and ending immediately before the beginning of 5 May 2019. That is, a period commencing at the beginning of 5 April 2019 and ending at the end of 4 May 2019. The end of 4 May 2019 is of course immediately before the beginning of 5 May 2019.

  7. If the same approach is applied to the later months:

  1. the second month after the contract date starts at the beginning of 5 May 2019 and finishes at the end of 4 June 2019;

  2. the third month after the contract date starts at the beginning of 5 June 2019 and finishes at the end of 4 July 2019; and

  3. the fourth month after the contract date starts at the beginning of 5 July 2019 and finishes at the end of 4 August 2019.

  1. If this is correct, the calculations contained within the defendants’ submissions should be accepted, and the plaintiff’s second submission, that the fourth month after the contract date includes 5 August 2019, must be rejected.

  2. The statutory definition operates unless the contrary intention appears. I am unable to discern from the language of the contract, the commercial purposes of the contract, or the surrounding circumstances known to the parties, any intention to give “month” a meaning different from the statutory definition. There are no words that state that “month” refers to something different, such as a named month as distinct from a calendar month. There is nothing in the terms of the contract that would cause the defined meaning of month to produce absurd or inconvenient outcomes. To require payment of the second instalment of the deposit during the period from 5 July 2019 to 4 August 2019, when completion of the contract is not due until January 2020, is in harmony with one of the main purposes of deposits, being the payment of a sum in earnest of future performance. I do not think that such purpose would be served any better if the obligation was instead to pay the second instalment during August 2019. In each case, the plaintiff would have a thirty-one day period, several months prior to the date for completion, to pay the instalment.

  3. The plaintiff submitted that in circumstances where the language of Additional Condition 38 differs from that used on the front page in relation to the date for completion, the ordinary meaning of “4th month after the contract date” is August 2019. The submission is tantamount to a submission that “month” in Additional Condition 38 means “named month”. So, the first named month after 4 April 2019 is May; the second named month after 4 April 2019 is June; the third named month after 4 April 2019 is July; and the fourth named month after 4 April 2019 is August.

  4. That is an arguable construction of the relevant part of Additional Condition 38, but I am not satisfied that it is the true construction. As I have said, I do not discern an intention that is contrary to the statutory definition. Moreover, had it been the intention of the parties to require payment of the second instalment of the deposit during August 2019 it would have been very simple to so provide in plain language. The parties have chosen language that includes the general notion of a month rather than language that includes the notion of a named month or language that refers to a specific month. In these circumstances I do not think that reasonable business persons in the position of the parties would have understood Additional Condition 38 to provide that the second instalment of the deposit was to be paid during the month of August 2019. I am therefore unable to accept the plaintiff’s primary submission.

  5. The plaintiff also submitted that whilst the principle discussed in Dodds v Walker (supra) would operate, for example, in relation to the date for completion (“9 months after the contract date”), the parties here deliberately chose different language. It seemed to be suggested that the principle would not operate in relation to the differently worded Additional Condition 38. Strictly, it is the statutory definition that applies (absent a contrary intention) rather than the corresponding date rule as such, although the statutory definition is consistent with the rule. However, the operation of the definition (or the rule) is not confined to cases where the calculation is of a period that immediately follows the happening of a particular event. The definition operates upon the word “month”, unless the contrary intention appears. In the absence of a contrary intention it is my view that it operates in Additional Condition 38 in relation to the concept of the 4th month after the contract date. Accordingly, it is my opinion that reasonable business persons in the position of the parties would have understood Additional Condition 38 to provide that the second instalment of the deposit was to be paid during the calendar month that starts at the beginning of 5 July 2019 and finishes at the end of 4 August 2019.

  6. In these circumstances it is necessary to consider the plaintiff’s third submission, that cl 21.5 operates so as to extend the time for payment to 5 August 2019. Clause 21.5 is set out above at [45]. It applies where the time for something to be done or to happen is not a business day. As 4 August 2019 was a Sunday it is not a business day as defined in the contract. Clause 21.5 would therefore operate to extend the time for payment to 5 August 2019 unless the exception to the clause was engaged. The exception is engaged “in the case of clauses 2 and 3.2”.

  7. As already mentioned, cl 2 is concerned with the payment of the deposit, and provides in cll 2.2 and 2.3 that time in respect of payments of deposit is essential. Clause 3.2, which concerns the giving of a deposit-bond for the deposit, also provides for time to be essential. It therefore seems that the exception to cl 21.5 is concerned with particular circumstances involving the deposit, where the time for payment is essential. The exception applies “in the case of clauses 2 and 3.2”. So, where either of those clauses operates in relation to the time for the thing to be done or to happen, cl 21.5 does not operate so as to extend the time. In the present case, as Additional Condition 38 requires the purchaser to pay part of the deposit at a time after the making of the contract, cl 2.3 operates to make the time essential. I therefore think that cl 21.5 does not operate in relation to the time for the payment of the second instalment of the deposit. The time for payment, which is made essential under cl 2, cannot be extended through the operation of cl 21.5.

  8. It follows from the above that the second instalment of the deposit was required to be paid by the plaintiff no later than 4 August 2019, and in that respect time was essential. The failure of the plaintiff to make the payment within that time had the consequence that the plaintiff failed to comply with the contract in an essential respect. Accordingly, the defendants had the right under cl 9 of the contract to terminate the contract and thereafter to keep or recover the deposit of $241,500 (being 5% of the purchase price). The defendants exercised that right of termination on 5 August 2019.

  1. I turn now to consider the plaintiff’s claim for equitable relief in relation to the defendants’ exercise of their legal right to terminate.

Equitable relief in respect of the termination

  1. The plaintiff alleges that it would be unconscientious in all the circumstances for the defendants to rely upon their termination of the contract as an answer to the plaintiff’s claim for specific performance. In this regard, the plaintiff invoked the notion of mistake, one of the “special heads” identified by Lord Wilberforce in Shiloh Spinners Ltd v Harding [1973] AC 691 at 722-3 that can ground equitable intervention to preclude the exercise of legal rights. The plaintiff submitted that if his construction of Additional Condition 38 is not accepted then he was relevantly mistaken in relation to the contract in as much as he held the belief that he was able to pay the balance of the deposit “on a date on or later than 5 August 2019 or at any time in the month of August”. This belief is said to be based at least in part upon the statement allegedly made by Mr Wong that the vendors were not too concerned about the timing of the second instalment so long as they ended up getting 5%. It is thus necessary to revisit the evidence given by Mr Alexakis and Mr Wong about their conversations prior to the exchange of contracts.

  2. Mr Alexakis’ affidavit evidence on this matter is set out above at [10]. Mr Wong, in his affidavit, denied that Mr Alexakis had said he would pay the second instalment of deposit “any time after 4 months”, and he denied that he told Mr Alexakis that the vendors “aren’t too concerned about the timing of the second instalment so long as they end up getting 5%”. He maintained those denials in cross-examination, although he seemed to accept that there was a conversation in which Mr Alexakis said that he would pay the 5% in two instalments, with $150,000 paid on exchange of contracts.

  3. For the reasons which follow, I generally prefer the evidence of Mr Wong over that of Mr Alexakis on these matters.

  4. On Mr Alexakis’ account, he raised the possibility of paying the deposit in two instalments in a conversation with Mr Wong that occurred before he received the draft contract from Mr Wong on 1 April 2019. If Mr Alexakis did raise that possibility in the terms he suggests it seems doubtful that Mr Wong would immediately respond, without speaking to the defendants, that the defendants were not too concerned about when they would receive the second instalment. Further, if such a conversation had occurred as alleged by Mr Alexakis, there is reason to think that he would have mentioned it in his email to Mr Mavrakis on 2 April 2019, yet the email contains no such reference. In fact, the email referred only to the vendor’s desire for a 5% deposit and Mr Alexakis’ intention to request a deposit of only $150,000. I note that at one point in his cross-examination, Mr Alexakis appeared to accept that had such a conversation occurred he would have mentioned it in his email to Mr Mavrakis. Mr Alexakis then disagreed that the absence of any reference was due to the fact that there was no such discussion.

  5. There is no documentary evidence that supports the contention that Mr Wong ever said words to the effect that the vendors were not too concerned about when they would receive the second instalment. Not only did Mr Alexakis fail to refer, in his 2 April 2019 email to Mr Mavrakis, to any such words or some understanding based upon such words, he failed to do so in his response to Mr Wong on 2 August 2019 when Mr Wong was asserting that the balance of the deposit was required to be paid on or before 4 August 2019. There is also no reference to any such words or understanding in Mr Mavrakis’ letter of 7 August 2019 after the termination of the contract.

  6. In these circumstances, and bearing in mind that the conversation is said to have occurred over the telephone well over a year before Mr Alexakis swore his affidavit, and is not the subject of any notes made at the time, I am not prepared to find that there was a conversation about paying the deposit in two instalments in terms to the effect of that deposed to by Mr Alexakis. In this regard I accept the denials given by Mr Wong, which were firmly maintained in the witness box. That includes the denial that Mr Alexakis said he would pay the second instalment “any time after four months”. Mr Wong, who appeared at least initially to be somewhat nervous and diffident, created a favourable impression as a witness who was trying to give truthful answers as accurately as his plainly imperfect recollection would allow.

  7. Neither am I prepared to find (as urged to do by Senior Counsel for the plaintiff) that there was a conversation to that effect between Mr Alexakis and Mr Wong at a later time, around the afternoon of 3 April 2019. The emails in evidence do not suggest that there was any controversy about Mr Alexakis’ proposal (contained in Mr Mavrakis’ 1:06pm email) for a deposit payable in two instalments, with the second instalment payable on the 4th month after the contract date. Ms Salis’ email at 4:23pm shows that the defendants simply agreed to the proposal.

  8. Mr Wong spoke to the first defendant before he sent his email to Ms Salis at 2:40pm. It seems that the first defendant conveyed to Mr Wong that the plaintiff’s proposals would be acceptable only if the price was the asking price of $4.83 million. Mr Wong then requested Ms Salis to confirm the acceptance. Ms Salis responded by email at 4:23pm in terms which showed that the only matter not agreed was the completion date. At 4:44pm Ms Salis informed Mr Wong that the 9 months settlement period was now agreed provided contracts were exchanged with a s 66W certificate by 15 April 2019. Mr Wong informed Mr Mavrakis at 5:51pm that all amendments had been agreed.

  9. Mr Wong said that he could not recall speaking to Mr Alexakis on the afternoon of 3 April 2019. He agreed that it was possible that he did. However, even if Mr Wong had spoken to Mr Alexakis during the afternoon of 3 April 2019, it seems unlikely that he would have said anything to the effect that the vendors were not too concerned about when the second instalment would be paid. The timing of the second instalment of the deposit was simply not an issue, and I accept Mr Wong’s evidence that the first defendant did not tell him that she was not concerned about when the second instalment would be paid. Again, I accept Mr Wong’s denials that he said the vendors were not too concerned about when the second instalment was paid. If there was any conversation between Mr Wong and Mr Alexakis it is likely that it was primarily concerned with arrangements for an exchange of contracts to occur on the following day. Of course, it should not be overlooked that Mr Alexakis himself gave no evidence that he had a conversation with Mr Wong on 3 April 2019 about the second instalment of the deposit.

  10. To the extent that Mr Alexakis held a belief about when the second instalment of the deposit had to be paid, the belief was not based upon anything said by Mr Wong to the effect that the defendants were not too concerned about when the payment would be made.

  11. Mr Alexakis had great difficulty in the witness box trying to explain how the other matters said to be relevant to his belief about the second instalment actually contributed to the belief. Those other matters were in any event not said to be acts or omissions of the defendants or their agents.

  12. I am nonetheless prepared to accept that in some fashion Mr Alexakis came to believe that he had until the end of August 2019 to pay the second instalment of the deposit. That he held such a belief is at least consistent with his attitude towards payment as expressed in his email response to Mr Wong on 2 August 2019 and his conduct thereafter. However, I do not accept his evidence to the effect that this belief was based, or partly based, on any statements made by Mr Wong. The most likely explanation is that the belief was based upon Mr Alexakis’ own understanding of Additional Condition 38. I note that in the witness box Mr Alexakis gave at least two answers to the effect that his belief was based on what was in the contract.

  13. Additional Condition 38 took the form of the additional clause that Mr Mavrakis sent to Mr Wong on 4 April 2019 shortly prior to the exchange of contracts. The s 66W certificate that Mr Mavrakis sent at the same time indicates that he explained the effect of the contract to Mr Alexakis. It can be inferred that such explanation would have touched upon the effect of Additional Condition 38. To the extent that Mr Alexakis’ understanding of Additional Condition 38 came from something other than his own reading of the contract, it may have come from Mr Mavrakis. It is not necessary to come to any conclusion about that. Most importantly, I do not accept that the understanding came from anything said by the defendants or their agents.

  14. Where mistake is the ground relied upon to support equitable relief of this character it is not necessary to show that the other party has caused or contributed to the mistake or the breach (see Tanwar Enterprises Pty Ltd v Cauchi (2003) 217 CLR 315; [2003] HCA 57 at [58]; see also Auburn Shopping Village Pty Ltd v Nelmeer Hoteliers Pty Ltd [2017] NSWSC 1230 at [259] per Ward CJ in Eq; Auburn Shopping Village Pty Ltd v Nelmeer Hoteliers Pty Ltd (2018) 19 BPR 38,569; [2018] NSWCA 114 at [62] per Bathurst CJ). Accordingly, the fact that the defendants (or their agents) did not cause or contribute to the plaintiff’s erroneous understanding of Additional Condition 38 is not determinative. It remains necessary to consider the mistake, together with all the other relevant circumstances, in order to come to a conclusion about whether the defendants’ termination of the contract for the plaintiff’s breach is unconscientious.

  15. Numerous matters were raised in submissions by the plaintiff as relevant to that question. Aside from the mistaken belief itself, the plaintiff mainly pointed to the following:

  1. the emails sent by Mr Wong on 5 July 2019 and 29 July 2019 which referred to different dates for payment of the second instalment of the deposit (viz, by or before 5 August 2019, and on or before 4 August 2019);

  2. the absence of any communication from the defendants’ solicitors to clarify the position;

  3. the fact that the plaintiff was in the course of international travel at the relevant time;

  4. the fact that the plaintiff indicated that he would pay the second instalment within days, upon his arrival in Australia (and in fact did so);

  5. the lack of any warning from the defendants’ solicitors that the defendants might terminate the contract if the second instalment was not paid by 4 August 2019;

  6. the fact that the amount of the second instalment was relatively small ($91,500);

  7. the fact that completion of the contract was not due until January 2020;

  8. the fact that the plaintiff had lodged a development application in relation to the property (which had been vacant for several years);

  9. the lack of any evidence from the defendants as to any loss or prejudice if specific performance was granted;

  10. the clear evidence of the plaintiff’s readiness, willingness and ability to complete the purchase;

  11. the lack of any delay in the commencement of proceedings; and

  12. an offer by the plaintiff to pay the costs of the proceedings.

  1. The plaintiff relied upon essentially the same matters in relation to the alternative claim for the return of the deposit.

  2. I have considered these matters and indeed all of the circumstances surrounding the plaintiff’s failure to pay the second instalment of the deposit by 4 August 2019 and the defendants’ termination of the contract for that breach.

  3. As I have said, I accept that the plaintiff believed that he had until the end of August 2019 to pay the second instalment of the deposit. Given that the construction of Additional Condition 38 favoured by the plaintiff seems to me to be arguable (albeit incorrect), I am prepared to regard the belief as one not unreasonably held by the plaintiff. It remains the position, however, that whatever the actual ground or grounds for the belief, it was not based upon anything said by Mr Wong. I do not see this as a case where the relevant mistake was caused or contributed to in some significant respect by the conduct of the other party. The defendants did no more than agree to Additional Condition 38 in the form that was put forward by the plaintiff’s solicitor.

  4. Mr Alexakis became aware of Mr Wong’s 5 July 2019 and 29 July 2019 emails when he was in Athens on the evening of [Thursday] 1 August 2019. It is true that those emails are inconsistent in that the earlier email refers to payment of the second instalment by or before 5 August 2019 and the later email refers to on or before 4 August 2019. Either view, however, was inconsistent with the plaintiff’s own understanding of the position. Nevertheless, the plaintiff did not respond to the emails by asserting that Mr Wong’s understanding was wrong, or that the payment could actually be made at any time in August. The plaintiff did not even respond by asking how Mr Wong came to think that payment was required within the next few days, or by asking him to explain the discrepancy between the dates referred to in the two emails. Mr Alexakis simply responded with a statement that he would pay the second instalment of the deposit shortly after he returned to Australia on 6 August 2019.

  5. Notwithstanding the fact that Mr Wong’s 29 July 2019 email had been forwarded to him by Mr Mavrakis, Mr Alexakis did not seek (or obtain) any advice from Mr Mavrakis about the matter. The plaintiff said in cross-examination that he didn’t seek the advice of his solicitor “because I knew I had the month of August. It was as simple as that”.

  6. Mr Alexakis was evidently very confident about the correctness of his own understanding. He gave evidence in cross-examination to the effect that the discrepancy as to dates in Mr Wong’s emails made it obvious that Mr Wong had got the dates wrong, or was not aware of exactly what Additional Condition 38 said. He said that Mr Wong obviously wasn’t aware of exactly the condition “as I knew it”. Mr Alexakis essentially discounted Mr Wong’s emails because they were contrary to his own firmly held view. Mr Alexakis was not confused by the discrepancy in the dates. At most, the discrepancy confirmed to him that Mr Wong was himself mistaken.

  7. In my view, Mr Alexakis acted in a cavalier fashion in response to Mr Wong’s emails. Mr Alexakis had funds available to make the payment by 4 August 2019. It was not suggested that the funds could not have been transferred by Mr Alexakis into the agent’s account by that time. Mr Alexakis was in Athens on both 2 August 2019 and 3 August 2019 and presumably could access the internet if he wished. Mr Alexakis nonetheless chose to wait until he returned to Australia.

  8. Mr Alexakis denied that he was prepared to take a risk that the payment would not be made on time. It seems that Mr Alexakis may not have considered himself to be taking a risk because he was so confident of the correctness of his belief about Additional Condition 38. However, I do not think it was reasonable for the plaintiff to have had such confidence.

  9. In my opinion, whilst the breach of Additional Condition 38 can be seen as a product of a mistake on the plaintiff’s part, it was not a mistake that was relevantly caused or contributed to by the conduct of the defendants or their agents. Indeed, Mr Wong’s emails served as reminders that the payment was about to fall due. The defendants were under no obligation to provide any such reminder. Neither was it incumbent upon the defendants or their solicitors to clarify the position. If the references to the two dates in Mr Wong’s emails had actually caused any confusion for the plaintiff (which I do not accept), this was not made known by the plaintiff. The breach can be seen to be the result of the plaintiff’s unreasonably high degree of confidence in his own understanding of Additional Condition 38.

  10. The breach of Additional Condition 38 was of course a serious breach of the contract. The amount of $91,500 is relatively small compared to the purchase price under the contract, but it is nonetheless a significant sum of money. It also forms part of the deposit, which customarily plays a central role in contracts for the sale of land. The time for payment of the second instalment of the deposit was expressed to be essential, and the contract provided the defendants with a right of termination for any breach of the contract in an essential respect.

  11. It is true that the plaintiff indicated that he would pay the second instalment only a matter of days after 4 August 2019. It is also true that the time for completion was still about 5 months away. The defendants might have regarded a short delay as acceptable, but they were not bound to do so when the contract stipulated that time was essential. It is also clear that the defendants or their solicitors were under no obligation to warn the plaintiff that the defendants might terminate the contract if the payment was not made by 4 August 2019 (see Brien v Dwyer (1978) 141 CLR 378 at 393, 397, 401 and 407; Romanos v Pentagold Investments Pty Ltd (2003) 217 CLR 367; [2003] HCA 58 at [20]).

  12. I have taken into account the absence of any evidence from the defendants as to any loss or prejudice they might suffer if the termination is not permitted to stand, and the contract is ordered to be performed. I proceed on the basis that no substantial loss or prejudice would be suffered, noting that the contract provides for interest for late completion (see Additional Condition 33), and the plaintiff has offered to pay the costs of the proceedings. No valuation evidence was adduced as to the current market value of the property. I note further that the evidence shows that the plaintiff is in fact ready, willing and able to complete the purchase, and there is no apparent reason to decline specific performance if the termination is not allowed to stand.

  13. The fact that the plaintiff lodged a development application in relation to the property, and may be presumed to have spent some money in that regard, is of little moment in circumstances where the application was rejected by Woollahra Council in March 2020.

  14. I do not think that the circumstances of this case warrant the conclusion that it would be unconscientious of the defendants to rely upon their termination of the contract. The plaintiff failed to pay part of the deposit within the time expressed by the contract to be essential. That was a serious breach of the contract. Mr Alexakis, who had considerable experience of buying and selling real property, understood that if the deposit was not paid on time he risked losing the ability to buy the property and losing the deposit he paid. To the extent that the breach was the result of a mistake on the part of the plaintiff, the defendants cannot be said to have caused or contributed to the mistake. The defendants cannot even be said to have been aware of the mistake. The plaintiff, confident that his own understanding was correct, effectively ignored Mr Wong’s emails which indicated that payment was required by 4 August 2019 (or possibly 5 August 2019). I am not prepared to hold that the termination of the contract by the defendants, and the associated forfeiture of a deposit in an amount equal to 5% of the purchase price, is an unconscientious exercise of their legal rights. The grounds for equitable relief to preclude the defendants from relying upon their termination of the contract had not been made out.

Claim for the return of the deposit

  1. This claim is made under s 55(2A) of the Conveyancing Act, which provides:

In every case where the court refuses to grant specific performance of a contract, or in any proceeding for the return of a deposit, the court may, if it thinks fit, order the repayment of any deposit with or without interest thereon.

  1. An adequate summary of the applicable principles may be found in Rushcutters Bay Developments Pty Ltd v Dragon Asset Investment Pty Ltd (No 2) (2017) 18 BPR 37,025; [2017] NSWSC 866 at [68]-[71] as follows:

As explained by Santow JA in Havyn Pty Ltd v Webster (2005) 12 BPR 22,837; [2005] NSWCA 182 at [137], s 55(2A) created a jurisdiction to relieve against forfeiture of a reasonable deposit that was hitherto unknown to courts of equity (see also Luu v Sovereign Developments Pty Ltd (2006) 12 BPR 23,629; [2006] NSWCA 40 at [24]).

In Lucas & Tait (Investments) Pty Ltd v Victoria Securities Ltd [1973] 2 NSWLR 268, Street CJ in Eq stated at 272:

It is one thing to recognise that there is a wide discretion conferred upon the court under this section; it is another thing to determine the guidelines for the exercise of that discretion. The section was designed to provide relief to a purchaser against an unjust and inequitable consequence of forfeiture of a deposit. It is clear enough that at law a vendor’s right to forfeit a deposit to himself in the event of a purchaser’s default bears no necessary relation to the damages actually suffered by a vendor. At law a forfeited deposit could result in a vendor making a profit which in justice and equity he ought not to be permitted to enjoy at the purchaser’s expense. In a complementary sense, an order for the return of the deposit does not necessarily affect the vendor’s right to sue a defaulting purchaser at law and recover against him such damages as the vendor can prove. The jurisdiction under s 55(2A) does not give to a court an overall discretionary supervision of monetary adjustments between parties to a contract under which a deposit was paid but which has been terminated. A vendor who forfeits a deposit in strict enforcement of his legal rights is not to be deprived of it under s 55(2A) unless it is unjust and inequitable to permit him to retain it.

It is not necessary to demonstrate special or exceptional circumstances in order to justify an exercise of the discretion under s 55(2A) (see Harkins v Butcher (2002) 55 NSWLR 558; [2002] NSWCA 237 at [77]; Havyn Pty Limited v Webster (supra) at [149]). However, a proper approach to the discretion must appreciate the legal context of the established nature of a deposit as an earnest of performance in conveyancing transactions (see Havyn Pty Limited v Webster (supra) at [150]-[151]).

As Santow JA stated in Havyn Pty Limited v Webster (supra) at [155]:

For these reasons, I do not consider that there is anything controversial in the submission of the vendor that the grounds in support of an application to repay the deposit must be sufficient to warrant a departure from holding the purchaser to its obligations under the contract. Indeed, this goes to the “justice and equity” of the case, drawing on the observations of Street CJ in Eq in Lucas & Tait. That conclusion must be correct, if the notions of justice and equity conditioning the discretion are to have some meaning drawn from the purpose of a deposit and the circumstances in which it is forfeited. The purchaser must therefore do more than merely show that the deposit has been forfeited, and that it will thus result in a ‘windfall’ to the vendor as will usually be the case. The Court should not take an approach to ordering the return of deposits under s 55(2A) which weakens the proper function of a deposit in providing a sanction so that purchasers treat the making and completing of contracts with due seriousness: Wilson v KingsgateMining Industries [1973] 2 NSWLR 713 at 735, Fraser v L O’Malley & Sons Pty Ltd [1975] 2 BPR 9133 at 9139-40. In so saying, I am not to be understood as putting a gloss upon the plain words of s 55(2A), but merely highlighting the critical importance of a judge exercising the wide discretion according to its plainly beneficial purpose to consider ‘justice’ and ‘fairness’ in their proper context.

See also the observations of Kirby J regarding the important role played by the payment of deposits in contracts for the sale of land in Romanos v Pentagold Investments Pty Ltd (2003) 217 CLR 367; [2003] HCA 58 at [54].

  1. For reasons similar to those set out in the preceding section of these reasons, I do not think that the forfeiture of the deposit, which is only 5% of the purchase price, would be unjust or inequitable in all the circumstances. The forfeiture is the result of the plaintiff’s serious breach of the contract, which occurred without any relevant contribution on the part of the defendants. The contract was on foot between 4 April 2019 and 5 August 2019. During that period the plaintiff had the benefit of the contract (including the right to lodge a development application) and the defendants were unable to freely deal with the property. Regard must also be had to the important role played by deposits in contracts for the sale of land, including as an earnest of performance by the purchaser. I do not perceive any injustice to the plaintiff or any inequity in allowing the defendants to retain the deposit in the circumstances of this case. No order will be made under s 55(2A) of the Conveyancing Act.

Conclusion

  1. It follows from the above that the plaintiff’s Statement of Claim must be dismissed. It also follows that the defendants are entitled to orders on their Cross-Claim for the recovery of the deposit of $241,500. The plaintiff accepted that in these circumstances it would be appropriate for the Court to make an order requiring the plaintiff to authorise and instruct the agent to release to the defendants the sums totalling $241,500 that were paid to the agent, together with any interest earned on those sums. The Court will make such an order in the expectation that recovery of the deposit will thus be effected, obviating the need for the giving of a monetary judgment. Liberty to apply will nonetheless be reserved in case any difficulties are encountered in that respect. In addition, the Court will order that the caveat lodged by the plaintiff (AP448096) be withdrawn.

  2. There is no apparent reason why costs should not follow the event. Accordingly, the Court will also order that the plaintiff/cross-defendant pay the defendants/cross-claimants’ costs of the proceedings.

**********

Decision last updated: 12 April 2021

Actions
Download as PDF Download as Word Document
Cases Citing This Decision

2

Alexakis v Wan [2021] NSWCA 172
Mirvac Funds Management Ltd v Value Lodging Pty Ltd [2022] NSWSC 787
Cases Cited

16

Statutory Material Cited

2

Auburn Shopping Village Pty Ltd v Nelmeer Hoteliers Pty Ltd [2018] NSWCA 114
Auburn Shopping Village Pty Ltd v Nelmeer Hoteliers Pty Ltd [2018] NSWCA 114
Auburn Shopping Village Pty Ltd v Nelmeer Hoteliers Pty Ltd [2017] NSWSC 1230