Budiyanto v Kpi 6 Pty Ltd

[2018] NSWSC 1313

Supreme Court

New South Wales

Medium Neutral Citation:	Budiyanto v KPI 6 Pty Ltd [2018] NSWSC 1313
Hearing dates:	20 August 2018
Date of orders:	28 August 2018
Decision date:	28 August 2018
Jurisdiction:	Equity
Before:	Darke J
Decision:	Vendor’s termination of contract held to be invalid.
Catchwords:	LAND LAW – contract for sale of land – failure by purchaser to replace deposit bond within a certain time – whether a breach of an essential term giving vendor right to terminate contract – time stipulation not essential – no notice to perform issued so as to make performance by new time essential – vendor not entitled to terminate contract
Cases Cited:	Shepherd v Felt & Textiles of Australia Ltd (1931) 45 CLR 359 Louinder v Leis (1982) 149 CLR 509 Neeta (Epping) Pty Ltd v Phillips (1974) 131 CLR 286 Gustin v Taajamba Pty Ltd (1988) 4 BPR 97,274
Category:	Principal judgment
Parties:	Adi Budiyanto (First Plaintiff) Anggayasti Aulia Sutejo (Second Plaintiff) KPI 6 Pty Ltd (Defendant)
Representation:	Counsel: Ms B K Nolan (Plaintiffs) Mr R Notley (Defendant)   Solicitors: David Leamey Solicitor & Barrister (Plaintiffs) Paramonte Legal (Defendant)
File Number(s):	2018/66735
Publication restriction:	None

Judgment

1. These proceedings concern a contract for the sale of a lot in an unregistered strata plan to be created as part of a multi-level unit development in Merriville Road, Kellyville.

2. The contract was entered into on 2 April 2014 between the plaintiffs as joint purchasers and the defendant as vendor. The dispute centres upon the provisions of the contract that deal with the deposit. The contract provided for a deposit of $38,500, being 10% of the purchase price of $385,000. The contract contemplates that the vendor might accept a bond as the deposit. That occurred in this case. The contract further provides that in certain circumstances the purchaser must provide a replacement for a deposit bond.

3. The defendant claims to have validly terminated the contract on 25 October 2017 on the ground that the plaintiffs were in breach of essential terms of the contract in relation to the deposit bond and its replacement. The plaintiffs dispute the validity of the termination and claim that the contract remains on foot.

4. The contract employs the 2005 edition of the Law Society of New South Wales/Real Estate Institute of New South Wales standard form, together with Additional Clauses. Clause 2 of the standard form, that would otherwise deal with the deposit, was deleted (see Additional Clause 18.1(a)). The deposit is instead dealt with in the Additional Clauses, notably cll 12, 13 and 14. These clauses are in the following terms:

12.   DEPOSIT

12.1   Investment of deposit

(a)   If this contract says the deposit is to be invested, the deposit holder must invest the deposit (at the risk of the party who becomes entitled to it) with a bank, building society or credit union, in an interest-bearing account in NSW, with interest to be reinvested, and after deduction of all proper government taxes and financial institution charges and other charges, pay the interest to the parties equally if this contract completes or to the party who is entitled to the deposit, if this contract is rescinded or terminated.

(b)   The parties direct the deposit holder:

(i)   at the request of the Vendor, to withdraw the deposit and interest on it in anticipation of settlement; and

(ii)   to withdraw the deposit and interest on it on rescission or termination of this contract.

13.   BOND

13.1   When this clause applies

This clause applies if the Vendor has accepted a Bond as the deposit or as any part of the deposit.

13.2   Payment of deposit

(a)   On and as a condition of completion, the Purchaser must pay to the Vendor the deposit in cash or by unendorsed bank cheque.

(b)   If the Purchaser fails to comply with clause 13.2(a), then:

(i)   the Purchaser is immediately and without notice in breach of an essential term of this contract; and

(ii)   the Vendor may demand payment from the issuing party of the lesser of the amount stipulated in the Bond and the amount owing by the Purchaser to the Vendor under clause 13.2(a).

(c)   If the Vendor serves a notice claiming to forfeit the deposit, then that service will operate as a demand on the Purchaser for payment of the deposit immediately (or so much of the deposit as has not been paid). If the Purchaser fails to pay the deposit within 2 business days of service of the notice then:

(i)   the Purchaser is immediately and without notice in breach of an essential term of this contract; and

(ii)   the Vendor may demand payment from the issuing party of the lesser of the amount stipulated in the bond and the amount owing by the Purchaser to the Vendor under clause 13.2(c).

14.   REPLACEMENT OF BOND

14.1   General

The Purchaser must arrange for the replacement of the Bond in the circumstances required by this clause. Where in this clause 14 the Purchaser is required to replace the Bond, the Purchaser may provide cash or an unendorsed bank cheque for the amount stipulated in the Bond, or a replacement bond in identical terms as the Bond with an issuing party approved by the Vendor.

14.2   Insolvency Event

(a)   If prior to completion, termination or rescission of this contract an Insolvency Event occurs in connection with the issuing party, then at any time after the Insolvency Event the Vendor may serve written notice on the Purchaser that the Bond is no longer acceptable to the Vendor and requiring the Purchaser to replace the Bond.

(b)   The Purchaser must replace the Bond and provide the Vendor with the replacement Bond within 10 business days of receiving a notice under clause 14.2(a).

14.3   Replacement of Bond

(a)   If the Registration Date is extended then the Purchaser must replace the Bond and provide the Vendor with the replacement Bond within 10 business days of being advised of the extended date. The replacement Bond must have an expiry date not earlier than 3 months after the Registration Date (as extended in accordance with this contract).

(b)   If the Bond expires prior to the Registration Date or prior to 3 months after the Registration Date then the Purchaser must replace the Bond and provide the Vendor with a replacement Bond no later than 1 month prior to expiration of the Bond.

14.4   Vendor’s obligations

On receipt of the cash or replacement Bond as required by this clause 14, the Vendor must give the Purchaser the Bond for cancellation. Cash must invested as the deposit in accordance with clause 13.

14.5   Re-issue of Bond to another party

The Vendor may require the Purchaser to have the Bond reissued to another party in the following manner:

(a)   the Purchaser must deliver to the Vendor the replacement Bond within 7 days of written request from the Vendor; and

(b)   the Vendor must pay the Purchaser’s reasonable costs in complying with this clause.

14.6   Expiry date of Bond

It is an essential term of this contract that the Bond (or any replacement bond) has no expiry date or an expiry date not earlier than 3 months after the registration date (as extended in accordance with this contract).

5. Additional Clause 13 applies because the vendor accepted a Bond (as defined) as the deposit. In particular, it appears that the vendor accepted a deposit guarantee issued on behalf of CBL Insurance Limited for a maximum amount of $38,500. The Bond was issued on 20 March 2014, and had an expiry date of 31 March 2017. In that regard, the Bond did not comply with Additional Clause 14.6 because the registration date was 31 March 2017 when the contract was entered into (see the definition of Registration Date).

6. There is evidence that the Registration Date was subsequently extended to 15 January 2018. It is not clear when that occurred, other than that it was before 6 September 2017.

7. The Registration Date can be extended in accordance with Additional Clause 3.5 which provides:

3.5   Extension of the Registration Date

(a)   By written notice or notices served on the Purchaser, the Vendor may extend the Registration Date by a day for each day construction of the Building is delayed by an Event of Delay by specifying the number of days in the relevant notice.

(b)   The Registration Date will be automatically extended by that number of days when a notice is given.

(c)   The number of days shall be determined by the Vendor’s architect or project manager, whose decision shall be final and binding on the parties.

(d)   The Purchaser may not make any objection, requisition, claim or rescind, terminate or attempt to rescind, terminate or refuse to complete or threaten not to complete this contract as a result of anything arising out of this clause.

(e)   Notwithstanding the clauses above, the vendor must not extend the Registration Date past 12 months from the original Registration Date.

8. On 6 September 2017 the solicitors for the vendor sent a letter to the solicitors for the purchasers in the following terms:

We refer to the above matter and to exchange of contracts on 2 April 2014.

Pursuant to special condition 3.5 of the Contract of Sale, we hereby give you notice that the Vendor extends the Registration date by 112 days, from 15 January 2018 to 7 May 2018.

Please find enclosed the Notice from the Vendor’s project manager, explaining the events of delay.

Should you have any queries please do not hesitate in contacting our office.

9. The enclosed notice was in the following terms:

We hereby advise the Building and associated building Works are delayed due to an Event of Delay as defined below.

This statement verifies and sets out the Event of Delay and associated impact on the registration Date of 15/01/2018.

We Note the following Events of Delay.

1.   Delays in obtaining approval from Endeavour Energy in relation to obtaining consent to install a Substation on the premises – 63 Days

2.   Delays in obtaining major rain delays in the first quarter of 2017 – 49 Days

Total number of delay days attributed to events of Delay 112 Days.

Based on the above the revised Registration Date is 07/05/2018.

10. It should be noted that an extension of the Registration Date to 7 May 2018 is contrary to Additional Clause 3.5(e) which prohibits extension of the Registration Date beyond 12 months from the original Registration Date of 31 March 2017.

11. On 21 September 2017 the vendor’s solicitors sent an email to the purchasers’ solicitors in the following terms:

We refer to the above matter and confirm that contracts were exchanged on 2 April 2014.

Please note that your client’s Deposit Bond expired on 31 March 2017; however, we have yet to receive a replacement or a deposit cheque for same.

We confirm that your client is now is [sic] breach of an essential term of the Contract, time being of essence.

Accordingly, we are instructed to demand that your client provides us with the 10% deposit, being the sum of $38,500.00 by no later than Wednesday, 28 September 2017.

We further confirm that our client reserves their full rights under the Contract.

We look forward to hearing from you as a matter of urgency.

12. This prompted the first plaintiff to instruct his solicitors to seek to have “the deadline pushed back” to the end of October. It appears that such a request was made to the vendor’s solicitors, who sent an email to the purchaser’s solicitors on 22 September 2017 in the following terms:

Further to my email below, we are now instructed that our client is amenable to allow your client an extension until Friday, 20 October 2017.

Please note that no further extensions are to be granted in this regard.

We look forward to receiving the deposit in due course.

Let me know how you go.

13. On 9 October 2017 the first plaintiff instructed his solicitors to see if the vendor would accept, instead of cash, an extension of the bond until May 2018. The solicitor seems to have misinterpreted this request. Later on 9 October 2017 the purchasers’ solicitor sent an email to the vendor’s solicitors in the following terms:

Can I [sic] client arrange for the bond to be lifted and provide a cash deposit instead? Pls asdvise [sic] urgently.

14. Still later on 9 October 2017 the vendor’s solicitors responded by email which included the following:

We refer to your email below and we are instructed that the Vendor has agreed for your client to replace the deposit bond with a cash deposit.

We advise that our Trust Account details for payment of the full 10% deposit are as follows: -

…

Kindly forward to us a copy of the remittance advice once payment has been made, so that we may account for same.

Alternatively, we kindly request that your client arranges for a bank or trust cheque in favour of Paramonte Legal Law Practice Trust Account.

We look forward to hearing from you shortly.

15. At about 11am on 20 October 2017 the vendor’s solicitors sent an email to the purchasers’ solicitors in the following terms:

We refer to our email correspondence below.

Would you kindly advise whether your client has attended to payment of the deposit?

In the event that the funds have been transferred to our Trust Account, we kindly request that you forward to us a copy of the remittance advice evidencing payment.

We look forward to hearing from you shortly.

16. About 5 minutes later the purchasers’ solicitors sent an email to the vendor’s solicitors in the following terms:

Can they issue another bond? If not they are refinancing to get the extra money from their home loan and request an extension to mid nov.

17. No payment was made by the purchasers on 20 October 2017 even though no response had been received to the request for an extension of time.

18. On 24 October 2017 at about 11:30am the vendor’s solicitors sent a response to the purchasers’ solicitors in the following terms:

We refer to your email below and we are instructed that our client has agreed to allow the purchaser a final extension on the following conditions: -

A replacement Deposit Bond is provided to our office by no later than close of business Friday, 27 October 2017; OR

Proof of your client’s re-finance is provided to our office by no later than close of business Friday, 3 November 2017; OR

The full 10% deposit is paid into our office Trust Account by no later than close of business Wednesday, 15 November 2017. We note that these details were previously provided to you, and are noted in our email correspondence below.

It is essential that you provide our office with a copy of your client’s proof of the refinance as soon as possible, noting that the matter has now prolonged for longer than anticipated.

We are further instructed that the Vendor puts the Purchaser on final notice, and will reserve its full rights under the Contract in the event that the above conditions are not met.

We look forward to hearing from you as a matter of priority.

19. This email was forwarded to the first plaintiff at about 5pm on 24 October 2017. Shortly thereafter, the purchasers’ solicitors sent an email to the vendor’s solicitors in the following terms:

The client wants to know

RE the Deposit Bond, can you pls confirm that they will accept with 7-May-2018 expiry date? Need to know what expiry date they are going to accept before applying for extension of the bond.

20. On 25 October 2017 the vendor’s solicitors sent a reply in the following terms:

We refer to the above matter and to our numerous email correspondence below.

Please find attached herewith the [sic] our letter of even date along with its enclosures. We confirm that the original Notice of Termination has also been served on your client today.

We trust that this matter will be dealt with in an amicable and prompt matter.

We await your urgent and favourable reply in this regard.

21. The attached letter included the following:

We refer to previous correspondence in relation to the above matter, and in particular to Mary Marco’s email of Tuesday, 24 October 2017 at 5:34PM.

Please find enclosed a further copy of Special Condition 14.3 of the Contract for Sale for your ease of reference.

You will note that the terms of the contract clearly state that: -

A replacement Deposit Bond must have been provided to our office within 10 business days of our office advising you that the Registration Date had been extended; and

The replacement Deposit Bond must not have an expiry date less than 3 months prior to the new Registration Date.

We confirm that your clients have breached an essential term of the Contract, time being of essence.

We are now instructed to withdraw the Vendor’s instructions of Tuesday, 24 October 2017 at 11:29 AM, and terminate the contract forthwith as these delays are unacceptable.

Please find enclosed for your attention Notice of Termination, and we confirm that our client reserves its full rights under the Contract.

…

22. A Notice of Termination was enclosed with the letter. It was in the following terms:

NOTICE OF TERMINATION OF CONTRACT

…

Re:      KPI6 Pty Ltd Sale to Budiyanto & Sutejo

PPTY:      Lot 8/6A Merriville Road, Kellyville

By contract for the sale of land dated 2 April 2014 (contract) KPI6 Pty Ltd ACN 147 643 543 of 20 Fennell Street, Parramatta, NSW 2150 (vendor) agreed to sell and Adi Budiyanto and Anggayasti Aulia Sutejo of 13/16 Carson Street, Dundas Valley, NSW 2117 (purchaser) agreed to purchase the property being the whole of the land in title reference known as Lot 8/6A Merriville Road, Kellyville (property) for .

As a result of your default under the contract, and in particular Special Condition 14.3 making time of the essence for completion of the contract, we give you notice that the contract is terminated and is entirely at an end. The vendor will take action for recovery of the deposit and damages resulting from your default.

Dated: 25 October 2017

23. Later on 25 October 2017 the purchasers’ solicitors sent an email to the vendor’s solicitors in the following terms:

Our client was in a position to respond to you today on acceptance of your 3 options and forward you the required documents as per your email.

Our client kindly ask your client to withdraw the termination notice and please find enclosed bond which he applied [sic]. Attached is a copy and email copies of the updated on[e] can be sent tomorrow to you if your client agrees.

We look forward to hearing from you.

24. There is evidence that the purchasers were by that time in the process of applying for a new deposit guarantee in the sum of $38,500. An incomplete application form for such was forwarded to the vendor’s solicitors shortly prior to 5pm on 25 October 2017.

25. On 27 October 2017 the purchasers paid a total sum of $38,500 into the trust account of the vendor’s solicitors.

Contentions of the parties

26. The plaintiffs submitted that the purported extension of the Registration Date on 6 September 2017 to 7 May 2018 was of no effect because Additional Clause 3.5(e) precluded any extension beyond 31 March 2018. It was submitted that even if there was a valid extension to 31 March 2018 such that the purchasers were required to arrange a replacement for the bond, the purchasers were not in breach of the contract in any essential respect on 25 October 2017 when the vendor purported to terminate the contract. In summary, the purchasers submitted that:

1. it was not open to the vendor to rely upon any breach of the essential term contained in Additional Clause 14.6 in respect of the Bond provided in March 2014 because the vendor had since that time affirmed the contract by extending the Registration Date;

2. the stipulation in Additional Clause 14.3(a) that the Bond be replaced within 10 business days of being advised of an extended Registration Date was not an essential term of the contract;

3. in any event, the parties varied the contract by agreeing to a different regime, ultimately embodied in the vendor’s solicitors email of 24 October 2017, and the purchasers were not in breach of the agreement as varied; and

4. alternatively, the terms of the vendor’s solicitors email of 24 October 2017 give rise to an estoppel that precludes the vendor from asserting that it validly terminated the contract.

27. The vendor accepted that the Notice of Termination incorrectly referred to Additional Clause 14.3 making time of the essence for completion of the contract. It was submitted, correctly, that it nonetheless remained open to the vendor to justify the termination of the contract on any ground that was valid at the time of the termination (see Shepherd v Felt & Textiles of Australia Ltd (1931) 45 CLR 359 at 377-8).

28. The vendor submitted that as the expiry date of the Bond provided in March 2014 (being 31 March 2017) was at all times contrary to the essential term set forth in Additional Clause 14.6, the vendor was entitled to terminate the contract. The vendor did not expressly address the argument put against it that it could not terminate for that breach because it subsequently affirmed the contract.

29. The vendor submitted that it validly extended the Registration Date on 6 September 2017 to 31 March 2018, and the purchasers were thus obliged under Additional Clause 14.3(a) to replace the Bond within 10 business days. It was submitted that the purchasers failed to do so within that time, and failed to do so at any time up to the time of service of the Notice of Termination. The vendor contended that the importance of the obligation under Additional Clause 14.3, particularly when read in conjunction with Additional Clause 14.6, was such that it was an essential term or condition of the contract, the breach of which gave rise to a right to terminate. It was also contended that the provision of a deposit was an essential term of the contract.

30. The vendor took issue with the contention that the contract was varied as set forth in the 24 October 2017 email. The vendor also submitted that no estoppel arose in the circumstances. It was submitted that there was nothing unconscionable about its termination of the contract, particularly having regard to the failure by the purchasers to provide a replacement for the Bond by the agreed extended date of 20 October 2017.

Determination

31. It is clear that the notice served by the vendor on 6 September 2017 was not effective to extend the Registration Date to 7 May 2018. Additional Clause 3.5(e) plainly prohibits any extension beyond 31 March 2018. A question then arises as to whether the notice was nonetheless effective to extend the date to 31 March 2018.

32. In my opinion it was not so effective. Additional Clause 3.5 enables the vendor, on one or more occasions, to extend the Registration Date by a day for each day construction of the building is delayed by an Event of Delay (as defined). The relevant notice to be served on the purchaser pursuant to Additional Clause 3.5(a) must specify the “number of days”. Additional Clause 3.5(b) then operates to automatically extend the Registration Date by “that number of days”. It is evidently intended that the “number of days” specified in the notice will be the number of days by which the Registration Date is to be extended. The number of days the building has been delayed by an Event of Delay is to be determined by the architect or project manager in accordance with Additional Clause 3.5(c). That sets a limit upon the number of days by which the vendor can extend the Registration Date. That limit is itself subject to the limit imposed by Additional Clause 3.5(e), which operates notwithstanding anything in the preceding parts of the Additional Clause 3.5. Constrained by those limits, the vendor can serve a notice under Additional Clause 3.5(a) that has the effect of automatically extending the Registration Date by the number of days specified in the notice. I do not think that the language of Additional Clause 3.5, in particular Additional Clause 3.5(b), allows a notice that specifies a number of days to be read as if it specified a different number of days so as to avoid an impermissible extension. The Registration Date thus remained 15 January 2018.

33. If that is correct, Additional Clause 14.3(a) did not operate, upon service of the notice on 6 September 2017, to require the purchasers to provide the vendor with a replacement Bond within 10 business days.

34. However, the purchasers were in breach of the contract because the expiry date of the Bond that was provided in March 2014 was not in accordance with Additional Clause 14.6 and the purchasers failed to replace the Bond after its expiry (on 31 March 2017) as required by Additional Clause 14.3(b).

35. The breach of Additional Clause 14.6 was a breach of an essential term, giving rise to a right in the vendor to terminate the contract. I agree that this right to terminate was lost because the vendor subsequently elected to affirm the contract by extending the Registration Date to 15 January 2018. As noted earlier, the evidence does not establish when that occurred.

36. Unlike a number of the provisions within the Additional Clauses, the obligations contained within Additional Clause 14.3 for replacement of a Bond are not expressed to be essential terms. Moreover, the obligations within Additional Clause 14.3 are required to be discharged within certain periods of time. Clause 21.6 of the contract provides that subject to any other provision of the contract, the time by which something must be done is fixed but not essential. I do not accept the submission made by the vendor that Additional Clause 14.3, in conjunction with Additional Clause 14.6, made time of the essence for the replacement of the Bond. It seems to have been suggested that the essentiality referred to in Additional Clause 14.6 was effectively imported into Additional Clause 14.3. However, the provisions deal with different subjects. The former is concerned with the duration of a Bond that is accepted or a replacement Bond that is put in its place, whereas the latter is concerned with the circumstances in which, and the time within which, a replacement Bond must be provided by the purchaser. In these circumstances, it is my opinion that whilst a failure by the purchaser to replace a Bond as required by Additional Clause 14.3(b) is a breach of contract, it does not amount to a breach of the contract in an essential respect such as would give the vendor a right to terminate.

37. The vendor, if not itself in default, could have issued a notice to perform so as to fix a further time for the performance of the obligation, and make performance within that time essential. In Louinder v Leis (1982) 149 CLR 509 Mason J (with whom Stephen J agreed and Gibbs CJ and Wilson J generally agreed) referred (at 523) to the joint judgment of Barwick CJ and Jacobs J in Neeta (Epping) Pty Ltd v Phillips (1974) 131 CLR 286 at 299 where their Honours said:

In cases where the contract contains a stipulation as to time but that stipulation is not an essential term then before a notice can be given fixing a time for performance, not only must one party be in breach or guilty of unreasonable delay, but also the party giving the notice must himself be free of default by way of breach or antecedent relevant delay. Only then may a notice be given fixing a day a reasonable time ahead for performance and making that time of the essence of the contract.

Mason J continued (at 524):

In my view Barwick CJ and Jacobs J were right in saying that a mere failure to comply with a non-essential stipulation as to time justifies the giving of a notice having the effect of making time the essence of performance of that stipulation, even though the failure to comply does not involve an unreasonable delay. The non-essential stipulation as to time is a term of the contract enforceable by an action for damages and it is the breach of this term that justifies the giving of the notice.

38. The notion of a notice to perform was later discussed by Mahoney JA in Gustin v Taajamba Pty Ltd (1988) 4 BPR 97,274. After referring to Neeta (Epping) Pty Ltd v Phillips (supra) and Louinder v Leis (supra), Mahoney JA stated:

It appears now settled that a distinction is to be drawn between, as I have described them, a notice to perform and a notice to complete. Where a party does not in due time perform an obligation prior to the obligation to complete, the other party may, by a notice, fix the time for the performance of that obligation. The effect of such a notice to perform, properly given, is twofold: it fixes a further time for the performance of the obligation; and it makes the obligation an essential obligation of the contract, in the sense that failure to perform it by the new time is a ground for termination of the contract for breach.

39. The vendor did not take that course. The vendor appears to have assumed, contrary to my conclusion concerning Additional Clause 14.3, that the failure of the purchasers since 31 March 2017 to replace the Bond amounted to breach of an essential term of the contract in respect of which time was of the essence. That stance is made clear by the terms of the vendor’s solicitor’s email of 21 September 2017. The email contained a demand that “the 10% deposit, being the sum of $38,500” be paid by no later than 28 September 2017. However, the email cannot be regarded as (and it was not suggested to be) a notice to perform in respect of the obligation to replace the Bond. I note further that by Additional Clause 14.1 that obligation is able to be satisfied by means of cash, bank cheque or replacement bond. It was not open to the vendor to insist upon a cash deposit.

40. The purchasers’ solicitors did not take issue with the contention that the purchasers were in breach of an essential term. They requested more time for the making of a cash deposit, and the vendor agreed to extend the time in that regard to 20 October 2017. Nonetheless, effective steps were not taken to fix that date for performance of the obligation to replace the Bond, and make performance by that date essential. That is the position even if, contrary to the view earlier expressed, the Registration Date had been extended to 31 March 2018 such that an obligation to replace the Bond had arisen under Additional Clause 14.3(a).

41. It follows from the above that the failure of the purchasers to replace the Bond by 20 October 2017 (or indeed at any time since that date) was not a breach of the contract in an essential respect. Neither is it correct to say more broadly that the provision of a deposit was an essential term of the contract. In circumstances where cl 2 of the standard form was deleted and the vendor accepted a Bond as the deposit, the position is governed by the terms of Additional Clauses 13 and 14. Additional Clause 13.2(a) requires the deposit to be paid on completion, failing which the purchaser is then in breach of an essential term of the contract (see Additional Clause 13.2(b)(i)). Additional Clause 14 then deals with the circumstances in which the purchaser must arrange for the replacement of a Bond.

42. For the above reasons, it is my opinion that the vendor did not have the right to terminate the contract on 25 October 2017. The Notice of Termination served on that day was not effective to bring the contract to an end.

43. I should add that the vendor served a further Notice of Termination on 16 January 2018. This notice, which was said to have been given “without any admissions as to the validity of that earlier notice”, recited additional defaults under the contract, being a breach of Additional Clause 14.6 and failure to remedy the defaults “within the extended timeframes as agreed in writing”. I did not understand the vendor to rely upon the second Notice of Termination, or submit that if the termination on 25 October 2017 was invalid the contract was nonetheless validly terminated on 16 January 2018.

44. It is not necessary to consider the plaintiff’s further arguments:

1. that the contract had been varied so as to include the terms of the vendor’s solicitors email of 24 October 2017; or

2. that the vendor is estopped from asserting that it validly terminated the contract.

I will nonetheless briefly state my conclusions on those matters.

45. As to (a): The purchasers were in default of the contract in September 2017. The vendor asserted that by failing to replace the Bond the purchasers were in breach of an essential term of the contract. There were then negotiations concerning the date by which the purchasers had to rectify the situation. The vendor agreed that the purchasers could have until 20 October 2017. On that day the purchasers’ solicitor enquired whether another Bond could be issued and, if not, requested an extension to mid-November.

46. The vendor’s solicitor’s email of 24 October 2017 indicated that the vendor was prepared to allow the purchasers more time to rectify the situation, upon certain conditions, including that the purchasers could have until 15 November 2017 to pay the deposit in cash.

47. Even if the 24 October 2017 email is regarded as an acceptance of an offer made in the email of 20 October 2017, I do not think that a binding variation of the contract was effected. The purchasers did not provide any consideration for the vendor’s promises. The promises were given in response to requests made by the purchasers entirely for their own benefit. In essence, the 24 October 2017 email was no more than a statement of the vendor’s position in relation to the rectification of the purchaser’s default under the contract. Accordingly, had it been necessary to do so, I would not have concluded that the contract had been varied so as to include the terms of the 24 October 2017 email.

48. As to (b): Each plaintiff gave evidence in the following terms:

On the 20th October 2017 I had at least the sum of $38,500 in cash in my Bank accounts being joint accounts with my spouse. I wanted to use a deposit bond instead of cash. If I was told that there was no extension in the time for payment of the replacement deposit, then I would have abandoned the attempt to use a deposit bond and I would have paid the 10% cash deposit immediately. There was a delay in part in obtaining the replacement deposit bond because of the extension in the registration date, making it long term bond.

49. This evidence was not challenged. I am prepared to accept that as at 20 October 2017 there was at least $38,500 in joint accounts held by the plaintiffs. Further, as noted earlier, there is evidence that by 25 October 2017 the plaintiffs were in the process of applying for a new deposit guarantee. However, the evidence given by the plaintiffs fails in my view to establish with sufficient clarity what they relied upon and how their reliance operated to their detriment. The third sentence of the evidence quoted above is ambiguous. It is not clearly related to the contents of the 24 October 2017 email. In these circumstances, I would not have been prepared to conclude that the plaintiffs relied on the contents of that email (including its penultimate paragraph) and as a result failed to make a cash deposit prior to the vendor terminating the contract. Had it been necessary to do so, I would not have been satisfied that the plaintiffs had made out an estoppel that would preclude the vendor from asserting that it validly terminated the contract.

Conclusion

50. The plaintiffs have succeeded in establishing that the termination of the contract by the vendor on 25 October 2017 was invalid. The contract remains on foot. Declarations to that effect should be made.

51. It follows that it is also unnecessary to consider the plaintiffs’ alternative claim under s 55(2A) of the Conveyancing Act 1919 (NSW) for the return of the deposit that was paid on 27 October 2017.

52. It was agreed that the plaintiffs’ claim for specific performance of the contract (which was added by amendment to the Summons at the hearing, in view of the registration of the Strata Plan on 31 May 2018) would be dealt with in a later hearing if necessary. It should be noted that the defendant has reserved its position in relation to the costs of the specific performance claim.

53. However, as the plaintiffs have succeeded on the matters the subject of the hearing, it is appropriate that the defendant should pay the plaintiffs’ costs of the proceedings to date.

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Decision last updated: 28 August 2018