Castaway Avenue Pty Ltd v CSC1957 Investments Pty Ltd

SUPREME COURT OF VICTORIA

COURT OF APPEAL

S EAPCI 2022 0097

CASTAWAY AVENUE PTY LTD (ACN 636 822 412)	Applicant
v
CSC1957 INVESTMENTS PTY LTD (ACN 600 333 542)	Respondent
S EAPCI 2022 0110

CSC1957 INVESTMENTS PTY LTD (ACN 600 333 542)	Cross-Applicant
v
CASTAWAY AVENUE PTY LTD (ACN 636 822 412)	Cross-Respondent

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JUDGES:	BEACH, HARGRAVE JJA and J FORREST AJA
WHERE HELD:	Melbourne
DATE OF HEARING:	31 January 2023
DATE OF JUDGMENT:	27 February 2023
MEDIUM NEUTRAL CITATION:	[2023] VSCA 30
JUDGMENT APPEALED FROM:	[2022] VSC 547 (Gorton J)

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REAL PROPERTY – Agreement – Sale of land – Contract of sale – Deed entered into at same time as contract of sale – Whether contract of sale and deed constituted the one transaction – Whether purchaser breached clause of deed – Whether purchaser breached term of contract of sale – Whether purchaser repudiated agreement – Whether agreement terminated because of purchaser’s repudiation.

REAL PROPERTY – Sale of land – Particulars of sale – Particulars of sale having priority over special and general conditions – Deposit – Whether amount required to be paid on signing of contract into purchaser’s solicitor’s trust account and held until settlement was a deposit – Whether amount required to be paid was an earnest of performance or security for purchaser’s performance – Whether amount required to be paid constituted deposit monies within meaning of ss 23 and 26 of Sale of Land Act 1962.

Sale of Land Act 1962, ss 23 and 26.

Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104, McVeigh v National Australia Bank Ltd (2000) 278 ALR 429, Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115, Carr v J A Berriman Pty Ltd (1953) 89 CLR 327, Luu v Sovereign Developments Pty Ltd [2006] NSWCA 40, Iannello v Sharpe (2007) 69 NSWLR 452 and Commissioner of Taxation v Reliance Carpet Co Pty Ltd (2008) 236 CLR 342 referred to.

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Counsel
Applicant/Cross Respondent:	Mr JA Ribbands
Respondent/Cross Applicant:	Mr IH Percy and Mr H Hill-Smith
Solicitors
Applicant/Cross Respondent:	Melbourne Legal Chambers
Respondent/Cross Applicant:	Stenta Legal

BEACH JA
HARGRAVE JA
J FORREST AJA:

In December 2019, the applicant (as purchaser) and the respondent (as vendor) entered into a contract for the sale of a residential property situated in Nicholson Street, Fitzroy. The particulars of sale in the contract of sale provided that the purchase price was $3.4 million, payable by:
•a ‘deposit’ of $100,000, to be paid into the applicant’s solicitors’ trust account on the signing of the contract;
•$2.213 million at settlement, which was to take place on 23 December 2019; and
•the balance of $1.087 million on 23 December 2020 (the ‘deferred payment’).
The deferred payment was to be secured by a mortgage over the property in favour of the respondent. There was, however, concern on the respondent’s part about the applicant borrowing money against the property to such an extent that the applicant would not have sufficient equity in the property to permit the respondent to recover the deferred payment when it became due. That concern was sought to be addressed by a deed of settlement entered into between the parties at the time of the entry into the contract of sale.
By the terms of the deed, the parties acknowledged that the applicant was not providing any purchase monies apart from the deposit. Additionally, the deed provided that the applicant could obtain a mortgage over the property to a maximum value of $2.5 million. Clause 2.2.1 of the deed dealt with the rate of interest upon which the applicant could borrow money against the property. It provided:
2.2.1The obligation on the part of the purchaser to pay interest on the $2.5 million mortgage(s) must not exceed 5% per annum as an acceptable rate and not greater than 6.5% per annum as a higher rate in the event of default. The purchaser will provide proof the mortgage(s) do not exceed this requirement.[1]
The ultimate effect of the deed was that the property was to be mortgaged by the applicant to secure the amount due at settlement, and the deferred payment was to be secured by a lower-ranking mortgage to the respondent.
[1]Emphasis added.
On or about 17 December 2019, the applicant obtained finance from two entities for the total amount of $2.5 million. Following the entering into of the contract of sale and the deed, the parties exchanged a number of communications relating to cl 2.2.1 and the applicant’s obligation to provide proof that monies borrowed by it had been borrowed at interest rates that did not exceed those set out in cl 2.2.1.
At 4:11 pm on Friday 20 December 2019, the respondent’s solicitor emailed the applicant’s solicitor alleging that the applicant had not complied with cl 2.2.1 of the deed (in that it failed to provide the proof required by cl 2.2.1) and that:

In the circumstances, and in the absence of the provision of that proof our client will not be proceeding with the sale to your client.

On Monday 23 December 2019, the day of the proposed settlement, the respondent’s solicitors emailed the applicant’s solicitors and confirmed that the respondent would not be proceeding with the sale and the proposed settlement did not take place.
On 14 February 2020, the applicant commenced a proceeding in the Trial Division against the respondent seeking specific performance of the contract of sale. On 26 March 2020, the respondent filed a defence and counterclaim in which it sought an order compelling the applicant to pay to it the $100,000 deposit which had been payable into the applicant’s solicitors’ trust account on the signing of the contract of sale.
The trial of the proceeding was heard by Gorton J over three days in August 2022. On 10 October 2022, pursuant to reasons delivered on 15 September 2022,[2] his Honour dismissed both the applicant’s proceeding and the respondent’s counterclaim for $100,000. In dismissing the applicant’s proceeding, his Honour made a declaration that the contract of sale was validly terminated by the respondent. Essentially, the judge concluded that the contract of sale was validly terminated by the respondent because the applicant had not provided the proof required by cl 2.2.1 of the deed. His honour considered that the deed and the contract of sale formed a single agreement, and that non-compliance with cl 2.2.1 of the deed constituted a breach of an essential term of that agreement.[3] In dismissing the respondent’s monetary counterclaim, the judge concluded that the deposit was not ‘an earnest for the performance by [the applicant] of the obligations on it that were contained in the contract of sale’.[4]
[2]Castaway Avenue Pty Ltd v CSC1957 Investments Pty Ltd [2022] VSC 547 (‘Reasons’).
[3]Ibid [39]–[42].
[4]Ibid [82].
The applicant now seeks leave to appeal from the judge’s orders dismissing its claim. Its proposed grounds of appeal are:
1.His Honour erred in the construction of cl 2.2.1 of the deed in determining what was required to be done by the applicant so as to provide ‘proof’ within the meaning of that clause.
2.His Honour erred in finding that the respondent was entitled to, and in fact did, terminate the contract of sale:
(a)as a consequence of the alleged failure on the part of the applicant to satisfy the requirements of cl 2.2.1 of the deed; and
(b)without first providing a notice of default in accordance with general condition 27 of the contract of sale.
The respondent seeks leave to appeal from the judge’s dismissal of his monetary counterclaim. Its proposed ground of appeal is as follows:
1.His Honour erred in concluding that [the respondent] was not entitled to the $100,000 upon termination of the contract of sale and the deed as:
(a) the deed and the contract of sale constituted a single agreement;
(b)the deposit was an ‘earnest’ of both the contract of sale and the deed; and/or
(c)[the respondent] was entitled to the deposit by reason of s 26(1)(a) of the Sale of Land Act 1962 (Vic).
In addition to filing it’s cross-application for leave to appeal, the respondent filed a notice of contention seeking to uphold the dismissal of the applicant’s proceeding on grounds that the applicant’s breaches of the deed and its failure to pay the $100,000 deposit into its own solicitor’s trust account constituted repudiations of the contract of sale and the deed, entitling the respondent to terminate the deed and the contract of sale without notice. In the alternative, the respondent contended that the relationship between the contract of sale and the deed was governed by a term implied into the contract of sale, that if the deed was terminated for breach or repudiation then the contract of sale was also terminated.

The facts in more detail

Prior to 2014, the property was the family home of an undischarged bankrupt, Tom Karas. In 2014, the respondent became the registered proprietor of the property. Mr Karas and his family remained in occupation pursuant to a lease, but were subsequently evicted after failing to pay rent. In 2019, Mr Karas decided to purchase the property. He approached Craig Charter, who then owned and controlled the respondent, and his brother, Shane Charter, and indicated his desire to do so. A price of $3.4 million was agreed. Because he was an undischarged bankrupt, Mr Karas was unable to enter into the contract himself. He asked Alexanndar Gulabovski, who was then a financial consultant, to ‘assist’ him to ‘purchase [his] home back’. Mr Gulabovski, who controls the applicant, agreed to ‘put forward’ his company as purchaser and to ‘arrange whatever necessary finance was required’. The applicant then engaged Melbourne Legal Chambers, a firm of solicitors, to act for it in the sale.
On or about 6 December 2019, the parties entered into the contract of sale. At about the same time, the parties, Mr Karas’s wife and Mr Gulabovski executed the deed.[5] As we have already observed, the contract of sale provided that the purchase price was $3.4 million, payable by an amount of $100,000 on the signing of the contract of sale, an amount of $2.213 million at settlement, with the deferred payment ($1.087 million) to be paid on 23 December 2020.
[5]Mr Gulabovski executed the deed in his personal capacity, as well as in his capacity as a director of the applicant and in two other capacities which it is not necessary to describe in these reasons. Mr Karas’s wife executed the deed in two capacities which are also not necessary to identify in these reasons.
The contract provided that the sum of $100,000, which was described as a deposit, was to be paid:
on the signing of the contract of sale … to the Trust Account of Melbourne Legal Chambers [the applicant/purchaser’s solicitors] and held until settlement of the sale when it is to be paid to the Trust Account of Conlan Cummings Lawyers [the respondent/vendor’s then solicitors].
Clause 1.3 of the deed permitted the applicant to obtain a mortgage or mortgages to a maximum value of $2.5 million. As set out above, cl 2.2.1 of the deed provided that ‘the obligation on the part of the purchaser [the applicant] to pay interest on the $2.5 million mortgage(s) must not exceed 5% per annum as an acceptable rate and not greater than 6.5% per annum as a higher rate in the event of default’ and that ‘[t]he purchaser will provide proof the mortgage(s) do not exceed this requirement’.
Subsequently, the applicant obtained two letters of offer in relation to potential loans. The first was from Rothman Consulting Pty Ltd for $500,000. The mortgage securing that loan was executed by the applicant on 17 December 2019. The second letter of offer was from Southage Pty Ltd for $2 million. The mortgage that related to that letter of offer was executed on 18 December 2019.
Both letters of offer were four pages long, with the fourth page being the ‘certificate of acceptance’ that provided for execution by the applicant as borrower and Mr Gulabovski as guarantor. The letters of offer were written by Velos Lawyers and each commenced with the sentence, ‘On behalf of our client we are pleased to offer you a loan facility in accordance with the terms and subject to the conditions set out below.’ Each letter of offer contained 18 numbered conditions, as follows:
(1)The 18 conditions in each loan were identified as ‘1. Borrower’; ‘2. Mortgagor’; ‘3. Guarantor’; ‘4. Mortgagee’; ‘5. Purpose of Loan’; ‘6. Principal Sum’; ‘7. Date of Advance’; ‘8. Date for Repayment’; ‘9. Loan term’; ‘10. Rate of interest’; ‘11. Interest payment’; ‘12. Security’; ‘13. Account Name’; ‘14. Conditions’; ‘15. Special Conditions’; ‘16. Offer period’; ‘17. Acceptance’; and ‘18. Costs’.
(2)Condition 10 was on the first page of each of the letters of offer and provided that the rate of interest offered on each loan was to be, ‘5% per annum with default rate of 6.5% if payment of interest is not paid on date due’.
(3)In relation to the Rothman Consulting letter of offer, conditions 1 to 11 were on page 1, conditions 12 to 17 and the first six lines of condition 18 were on page 2, with the balance of condition 18 being on page 3. Whereas, with the Southage letter of offer, only conditions 1 to 10 were on page 1, conditions 11 to 17 were on page 2, and the whole of condition 18 was on page 3.
(4)Condition 14 of both offers provided that the relevant offer had been drawn on the basis of information supplied by the borrower and guarantor and that the mortgagee reserved the right ‘to amend/vary the terms of this offer or to withdraw the offer altogether in the event of any new information or any change in circumstances that [were] discovered by the mortgagee’.
(5)Condition 18 of both offers set out the costs (fees) which would be payable by the borrower. In relation to the Rothman Consulting offer, those fees included a loan application fee of $5000 and a deferred establishment fee of $25,000. In relation to the Southage offer, those fees included a loan application fee of $20,000 and a deferred establishment fee of $100,000. The loan application fees were payable at settlement, and the deferred establishment fees were payable within 30 days of the draw down of the loan facility.
(6)While the Rothman Consulting loan application fee ($5000) appeared on page 2 of its offer, the deferred establishment fee appeared on page 3, and all of Southage’s proposed fees (totalling in excess of $120,000) appeared on page 3 of its letter of offer.
On 11 December 2019, the respondent’s solicitors emailed the applicant’s solicitors and asked for the evidence required by cl 2.2.1 of the deed to be provided. That was a reference to the requirement to show proof that the interest rates on any borrowing by the applicant did not exceed the rates specified in cl 2.2.1. A follow up email was sent on 13 December 2019.
On 17 December 2019, the applicant (as borrower) and Mr Gulabovski (as guarantor) executed the certificates of acceptance on the fourth page of each of the letters of offer.
On 18 December 2019, the applicant’s solicitors wrote to the respondent’s solicitors and provided the first page of each of the letters of offer (containing details of the loan offers, including the amount to be loaned and the interest rates – 5% per annum, with a default rate of 6.5%).
On 19 December 2019 at 1:15 pm, the respondent’s solicitors sent an email to the applicant’s solicitors asserting that the applicant was required by the deed to supply ‘proof’ of the first and second loans. The respondent’s solicitors asked for ‘executed copies of the respective letters of offer’.
On 19 December 2019 at 5:39 pm, the applicant’s solicitors emailed the respondent’s solicitors and provided the first two pages of each letter of offer. While the executed copies of the letters of offer only bore Mr Gulabovski’s signature on the fourth pages, with the second pages of those documents not bearing any signature or date, the second page of each of the two page documents provided by the applicant’s solicitors to the respondent’s solicitors bore Mr Gulabovski’s signature and the date 17 December 2019. We interpolate, that the failure to provide page 3 of each letter of offer to the respondent resulted in it not being told about the liability of the borrower to pay fees totalling $150,000 in addition to the amounts required to be paid for interest.
On 19 December 2019 at 9:23 pm, the respondent’s solicitors emailed the applicant’s solicitors seeking complete copies of the letters of offer or any loan agreements, noting that there was ‘a clause in the loan offer which indicate[d] that the loan offer may be varied in certain circumstances’. This was a reference to condition 14, on the second page of each of the loan offers.
On 19 December 2019, but not known to the respondent’s solicitors, the sum of $500,000 was paid by Rothman Consulting into the trust account of the applicant’s solicitors. The payment was recorded by the applicant’s solicitors (Melbourne Legal Chambers) as ‘[b]eing receipt of [m]onies to be advanced to [the applicant]’.
On Friday 20 December 2019 at 11:03 am, the applicant’s solicitors sent an email to the respondent’s solicitors asserting that ‘the terms of the loans [were] as stipulated [in letters] previously provided to your office’. The applicant’s solicitors also asserted that the clause which provided that the loan offer may be varied was no longer relevant because the security documents for the loans had now been signed. The respondent did not accept this position.
At 1:49 pm on the same day, the respondent’s solicitors emailed the applicant’s solicitors and attached a proposed statutory declaration to be completed by the lenders; to the effect that (extracts from) the loan offers which had been provided were ‘accurate and not subject to change’. At 2:21 pm, the respondent’s solicitors sent a further email which said amongst other things, that the respondent would proceed to settlement once the proposed statutory declaration had been ‘addressed’. A conversation between the solicitors then took place. In substance, the applicant’s solicitor said that it was unlikely that the lenders would sign the statutory declaration, the applicant was not prepared to sign the statutory declaration, and the applicant ‘would not provide any more of its loan documentation’.[6] At 4:11 pm, the respondent’s solicitors emailed the applicant’s solicitors in the following terms:
Your client has failed to comply with clause 2.2.1 of the Deed ... in that it has failed to provide ‘proof’ that the interest rates provided for in said Deed do not necessarily apply to your client’s loan.
The loan that has been approved, according to the letters of offer, provides for various variations pursuant to item 14 of said loan offer, which include the possibility of the final loan interest rates being greater than those stipulated in clause 2.2.1 of the Deed.
Therefore, it is our position that your client has indeed failed to provide the ‘proof’ required by the Deed.
In the circumstances, and in the absence of the provision of that proof our client will not be proceeding with the sale to your client.
[6]Reasons [28(d)(iv)].
Further emails were exchanged between the solicitors. In those emails, the applicant’s solicitors continued to urge that settlement of the sale take place on the following Monday, 23 December 2019.
On Monday 23 December 2019 at 11:42 am and 12:01 pm, the respondent’s solicitors sent emails to the applicant’s solicitors, continuing to assert that the requirement for proof under cl 2.2.1 of the deed had not been met by the applicant and confirming that, ‘as a result of these failures’, the respondent would not be proceeding with the sale. As we have already noted, the respondent did not thereafter proceed with the sale.

The contract of sale

As we have already noted, the particulars of sale in the contract of sale provided for the purchase price of $3.4 million to be paid by an initial amount of $100,000 on the signing of the contract into the trust account of the applicant/purchaser’s solicitors (Melbourne Legal Chambers) and ‘held until settlement of the sale when it [was] to be paid to [the trust account of the solicitors for the respondent/vendor]’; the payment of $2.213 million at settlement; and the deferred payment, ‘secured by a mortgage to be paid on 23 December 2020’.
The contract of sale provided that its terms were contained in the particulars of sale, 14 special conditions and 28 general conditions, ‘in that order of priority’. The particulars of sale identified the property, the relevant parties, the purchase price (specifying it was to be paid in the manner we have already described) and the date of settlement as being ‘23 December 2019 or earlier by agreement’.
The applicant relied upon two of the special conditions (special conditions 13 and 14) in support of the argument that the contract of sale and the deed did not constitute a single agreement, but were separate agreements giving rise to discrete rights and obligations. Special condition 13 relevantly provided:
Special condition 13 – Third Mortgage by Vendor
The purchaser will enter into a third mortgage with the vendor to secure $1.087M (“the sum”) of the purchase price with interest being payable retrospectively on the whole of such sum …
Special condition 14 relevantly provided:
Special condition 14 – Consent of First and Second Mortgagee to registration of Vendor Third Mortgage
14.1The purchaser must arrange for any first and second mortgage [sic] assisting it to consent to the registration of the vendor as a third mortgage [sic] …
General condition 27 of the contract of sale provided:
27. DEFAULT NOTICE
27.1A party is not entitled to exercise any rights arising from the other party’s default, other than the right to receive interest and the right to sue for money owing, until the other party is given and fails to comply with a written default notice.
27.2The default notice must:
(a)specify the particulars of the default; and
(b)state that it is the offended party’s intention to exercise the rights arising from the default unless, within 14 days of the notice being given–
(i)the default is remedied; and
(ii)the reasonable costs incurred as a result of the default and any interest payable are paid.
In the cross-application for leave to appeal, there is an issue between the parties as to whether the payment of $100,000 to be made on the signing of the contract of sale was in truth a deposit, or merely a first instalment of the purchase price. The payment was described as a ‘deposit’ in the particulars of sale and under a heading in the contract, ‘Payment (General Condition 11)’. General Condition 11 relevantly provided:
11.     PAYMENT
11.1     The purchaser must pay the deposit:
(a)      to the vendor’s licensed estate agent; or
(b)if there is no estate agent, to the vendor’s legal practitioner or conveyancer; or
(c)if the vendor directs, into a special purpose account in an authorised deposit-taking institution in Victoria specified by the vendor in the joint names of the purchaser and the vendor.
In support of the contention made by the respondent (cross-applicant) that the $100,000 was a deposit to be forfeited if the contract was terminated because of a breach of it by the purchaser (applicant), the respondent relied upon general condition 28.4, which relevantly provided:
28.4 If the contract ends by a default notice given by the vendor:
(a)The deposit up to 10% of the price is forfeited to the vendor as the vendor’s absolute property, whether the deposit has been paid or not; …

The deed

There were six parties to the deed: the first two parties were the respondent and applicant respectively; the third to sixth parties were Mr Gulabovski and Mr Karas’s wife, each executing the deed in more than one capacity, including as the appointers and principal beneficiaries of an identified trust.
The deed contained two recitals, which provided:
A.The vendor, in consideration of this deed executed by the parties, has agreed to a contract of sale to sell the property … to the purchaser for a sale price of $3,400,000 …
B.The vendor has insisted on the other parties entering into this deed due to its concern that any breach of the terms of this deed or of the contract of sale will diminish the value of[7] the property and, if that occurs, it wishes to establish a method of recovering the diminished value from the other parties to this deed.[8]
[7]As the judge observed at Reasons [6] the words ‘the value of’ should be read as ‘the [purchaser’s] equity in’.
[8]Emphasis added.
Clause 1.3 of the deed relevantly provided:
The purchaser may obtain a mortgage or mortgages to a maximum value of $2,500,000.00 …
Clause 2 of the deed was headed ‘Operative provisions’. It contained two clauses: cl 2.1, headed ‘Extent of possible damages claim’; and cl 2.2, headed ‘Terms of this deed’.
Clause 2.1 relevantly provided:
2.1.1The second, third, fourth, fifth and sixth parties [which includes the applicant] acknowledge that the purchaser is not providing any purchase monies apart from the deposit of $100,000.00 … to the purchase price of the property …
…
2.1.3The parties acknowledge that each is aware of the vendor’s concern of the possible diminishment of the value of the property from the end price arising from the possible breach of this deed and/or the contract of sale by the purchaser. To mitigate this concern, Alexanndar Gulabovski agrees to provide to the vendor accurate information as required by this deed. In the event that inaccurate [or] misleading information is provided to the vendor in relation to this deed, then Alexanndar Gulabovski agrees to be personally liable for any loss suffered by the vendor, as caused by the inaccurate or misleading information, to a maximum value of the vendor’s mortgage.
…
Having regard to the applicant’s submissions in this Court, it is necessary to set out the entirety of cl 2.2 (including cl 2.2.1 which we have already set out above).[9] Clause 2.2 provided:
2.2.1The obligation on the part of the purchaser to pay interest on the $2.5 million mortgage(s) must not exceed 5% per annum as an acceptable rate and not greater than 6.5% per annum as a higher rate in the event of default. The purchaser will provide proof the mortgages(s) do not exceed this requirement.
2.2.2The vendor is to be supplied with a monthly statement from Alexanndar Gulabovski not later than seven (7) days after the end of any month emailed to [a specified email address].
2.2.3The purchaser, from the later of the settlement of the contract of sale or until the mortgage provided by the vendor is paid in full, must not rent the property or pass with the possession of the property unless the vendor has approved the arrangement in writing.
2.2.4The third party agrees, until all mortgage monies and any interest that accrues, are paid in full, he will not use the power of appointment pursuant to (the Trust Deed) by adding to or replacing himself as the sole trustee of the trust.
2.2.5The third party acknowledges the trust referred to in clause 2.2.4 is operative and he is able to bind the trust to its obligations created by this deed.
2.2.6The purchaser hereby grants to the vendor an unlimited power of attorney to deal in any manner with the property to recover damages howsoever arising from any default on its part in connection with the contract of sale or in this deed provided this default is not remedied within 10 business days of a written notice of breach served by the vendor.
2.2.7The parties agreed that while a debt is owed to the vendor, the purchaser may only sell the property if the sale price facilitates the fully [sic] payment of the vendor's debt at the settlement of such sale.
[9]See [3] above.
Under the heading, ‘Entire agreement’, cl 4 of the deed provided:
This deed is the entire agreement and understanding between the parties on everything connected with the subject matter of this deed, and supersedes any prior understanding, arrangement, representation or agreements between the parties as to the subject matter contained in this deed.
Clause 9 of the deed provided that notices or other communications to a party were required to be in writing and delivered in one of four specified ways. Unlike the contract of sale (which contained general condition 27), the deed did not contain any clause requiring a party to it, who alleged that another party was in default of a provision of the deed, to give a notice particularising that default before seeking to terminate the deed.

The judge’s reasons

The judge commenced his analysis with an examination of what was meant by the requirement in cl 2.2.1 of the deed to ‘provide proof’ that the borrowings did not exceed the specified rates of interest. His Honour said that the obligation to provide proof, ‘would clearly be discharged if the loan documents were provided’.[10] His Honour then said:
But the obligation to ‘provide proof’ could not be discharged, for example, simply by providing documents that only suggested, in the absence of any indication to the contrary, that the interest rates were as alleged. For example, the obligation could not ordinarily be discharged by providing information that a certain interest rate had been offered by the lender, or that a loan at a certain interest rate had been applied for by the borrower, if there was otherwise no proof of the terms of the interest rates actually agreed.[11]
[10]Reasons [17].
[11]Ibid.
On the issue of whether the applicant breached its obligation to provide the proof required by cl 2.2.1, the judge noted that the consequence of providing only the first two pages of the loan offers was to withhold from the respondent the full set of fees that were payable on the loans, including the deferred establishment fees.[12] His Honour noted that no explanation was given for the decision to provide only the first two pages of the letters of offer, and he inferred that ‘it was a conscious decision by or on behalf of [the applicant] to withhold from [the respondent]’ the fact that the applicant had agreed to pay the fees set out on page 3 of each loan agreement.[13]
[12]Ibid [28(c)(ii)].
[13]Ibid.
The judge held that, in the absence of being provided with all of the terms of the loan agreements, the respondent was reliant upon the applicant’s mere assertion that there were no other terms and conditions of the loans which could lead to the interest rates being varied so as to exceed the percentages set out in cl 2.2.1 of the deed. To borrow from the judge’s words, for all the respondent knew, there were other terms and conditions on subsequent pages of the loan agreements that might have provided for higher interest rates than those contained on the second pages of those documents.[14] The judge held that, in those circumstances, the applicant had not provided proof as required by cl 2.2.1. As the judge put it:
It [the applicant] provided material that suggested the interest rates that applied, but withheld any proof that the contract as ultimately formed provided for interest, in all circumstances, only at those rates.[15]
[14]Ibid [34].
[15]Ibid [35]. Emphasis added.
Next, the judge concluded that cl 2.2.1 of the deed was an essential term, the breach of which entitled the respondent ‘to terminate the agreement including any obligations on it under the contract of sale’.[16] The judge said that the applicant’s emails sent at 4.11 pm on 20 December 2019 and on 23 December 2019 communicated the exercise by the respondent of its right to terminate the deed and the contract of sale.[17]
[16]Ibid [41]–[42].
[17]Ibid [42].
The judge rejected a submission made by the applicant that, even if there was a breach of cl 2.2.1 and that cl 2.2.1 was an essential term, the respondent was not entitled to terminate the contract of sale because it had not given a default notice as required by general condition 27.[18] The judge said that the respondent’s entitlement to terminate the contract of sale for the breach of cl 2.2.1 of the deed included the termination of any requirement to serve a default notice as provided for in general condition 27.
[18]Ibid [51]–[52].
At trial, the respondent contended that its refusal to settle could also be justified on the basis of the applicant’s failure to pay the $100,000 into its own solicitors’ trust account when the contract of sale was signed. The judge held that, in the absence of a notice under general condition 27, any such failure would not give rise to a right to terminate unless the failure could be seen as evincing an intention no longer to be bound by the contract.[19] The judge said that, in the light of his finding that the respondent was entitled to refuse to settle because of the applicant’s failure to comply with cl 2.2.1 of the deed, it was not necessary for him to determine that issue.[20]
[19]Ibid [56].
[20]Ibid.
In relation to the respondent’s counterclaim in which it sought the sum of $100,000 from the applicant, the judge concluded that the amount required to be paid was not an ‘earnest of performance’ of the applicant’s obligation to provide proof of the interest rates as required by cl 2.2.1 of the deed.[21] The judge said that, because the deposit was not an earnest of performance of the applicant’s obligation to provide the proof required by cl 2.2.1 of the deed, upon the termination of the agreement between the parties (including the contract of sale) on the grounds that the applicant had breached cl 2.2.1, the deposit was not forfeited.[22]
[21]Ibid [83].
[22]Ibid [84].

The issues in this Court

The issues raised by the application for leave to appeal, the notice of contention and the cross-application for leave to appeal are as follows:
(1)Whether the deed and contract of sale together constituted the one agreement, requiring them to be read together and so construed.
(2)The proper construction of cl 2.2.1 of the deed.
(3)Whether the applicant breached cl 2.2.1 of the deed by failing to provide proof that the interest rates in the mortgages taken out by it did not exceed the rates set out in that clause.
(4)Whether there was a breach of the contract of sale by the applicant in failing to pay the sum of $100,000 into its own solicitor’s trust account on the day the contract of sale was signed.
(5)Whether any failure by the applicant to comply with cl 2.2.1 of the deed and/or any failure by it to pay the deposit constituted a repudiation of the contract of sale.
(6)In the event that the applicant was shown to have repudiated the contract of sale, whether the respondent accepted that repudiation and thereby terminated the contract.
(7)In the event that repudiation was not established, whether cl 2.2.1 of the deed was an essential term of the agreement between the parties entitling the respondent to terminate the contract of sale upon any breach by the applicant of that clause.
(8)In the event that the respondent was entitled to terminate the contract of sale as a result of the applicant’s breach of cl 2.2.1 of the deed, whether it was necessary for the respondent to give a notice of default in accordance with general condition 27 of the contract of sale before the contract of sale could be terminated.
(9)The proper characterisation of the deposit of $100,000, and whether the respondent was entitled to an order for the payment of that sum to it by the applicant.
Issues 1–8 arise from the application for leave to appeal and the respondent’s notice of contention. Issue 9 arises from the respondent’s cross-application for leave to appeal.

Construction of contracts: applicable legal principles

At the heart of a number of the issues in this proceeding is the proper construction of the contract of sale and the deed. The relevant principles to be applied when construing contracts of the present kind were set out by French CJ, Nettle and Gordon JJ in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd[23] as follows:
The rights and liabilities of parties under a provision of a contract are determined objectively, by reference to its text, context (the entire text of the contract as well as any contract, document or statutory provision referred to in the text of the contract) and purpose.
In determining the meaning of the terms of a commercial contract, it is necessary to ask what a reasonable businessperson would have understood those terms to mean. That enquiry will require consideration of the language used by the parties in the contract, the circumstances addressed by the contract and the commercial purpose or objects to be secured by the contract.[24]
[23](2015) 256 CLR 104 (‘Mount Bruce Mining’).
[24]Ibid, 116 [46]–[47] (citations omitted). See also 116–7 [48]–[51].

Issue 1: Did the deed and contract of sale constitute the one agreement?

The applicant contended that the contract of sale and the deed operated separately from each other. The applicant submitted first that the deed is merely a contextual matter which may be taken into account in construing the contract of sale. Second, the applicant submitted that a breach of the deed could not constitute a breach of the contract of sale giving rise to a right to terminate it. The first submission is not controversial. The second should be rejected in the circumstances of this case. For the reasons given below, this is a class of case where the two documents should also be treated as constituting one transaction; as the judge correctly decided.[25] The relevant law was summarised by Finkelstein J in McVeigh v National Australia Bank Ltd:[26]
In some cases it is also permissible to have regard to other instruments. Thus, where several instruments are made as part of one transaction they will be construed together and each will be construed with reference to the other. In Smith v Chadwick (1882) 20 Ch D 27, Jessel MR said (at 62-63):
“that when documents are actually contemporaneous, that is, two deeds executed at the same moment, a very common case, or within so short an interval that having regard to the nature of the transaction the Court comes to the conclusion that the series of deeds represents a single transaction between the same parties, it is then that they are all treated as one deed; and, of course, one deed between the same parties may be read to show the meaning of the sentence, and be equally read, although not contained in one deed, but in several parchments, if all the parchments together in the view of the Court make up one document for this purpose.”
The rule applies whether the documents are executed contemporaneously or at different times: see Norton on Deeds 2^nd ed (1928) at p 87-89 and the cases there cited. The reason for the rule is that when a series of documents is necessary to give effect to a single transaction each is executed on the faith of the others being executed and each is intended to operate only as part of that transaction and therefore, as a matter of substance, they should be regarded as one: Manks v Whiteley [1912] 1 Ch 735 at 754.[27]
[25]Reasons [39].
[26](2000) 278 ALR 429 (‘McVeigh’).
The applicant submitted this was not a single transaction case because the contract of sale dealt with matters agreed between the parties up to and including the time of settlement; whereas the deed governed matters occurring after settlement. It submitted that the purpose of the deed was to provide a means for the respondent to recover damages or an indemnity from the other parties to the deed, in the event that the applicant mortgaged the property otherwise than in accordance with cls 1.3 and 2.2.1 and thereby diminished the applicant’s equity in the property to a point where it was not sufficient to secure the amount of the deferred payment. Thus, the applicant submitted that:
… the purpose of the deed was to establish a means whereby any of the parties to the deed could be called upon to compensate the vendor in the event of some loss arising from a breach along the way.

In support of its submission that cl 2.2.1 of the deed only had application once settlement of the contract of sale had occurred, the applicant referred to recital B of the deed, which it said showed that the deed was concerned only with recovering damages for breach, and noted that each of the other operative terms of the deed (cls 2.2.2 to 2.2.7), by their terms, only applied after settlement occurred. The applicant’s argument was that, as cls 2.2.2 to 2.2.7 applied only to post-settlement matters, cl 2.2.1 should be similarly confined. In further support of this argument, the applicant noted that special conditions 13 and 14 (dealing with first, second and third mortgages) were contained in the contract of sale — indicating the objective intention of the parties that pre-settlement matters be dealt with in the contract of sale and post-settlement matters be dealt with in the deed.
For the reasons which follow, the applicant’s submissions must be rejected.
First, as recital A of the deed provided, the respondent agreed to enter into the contract of sale in consideration of the parties executing the deed. Recital B recorded that ‘the vendor has insisted on the other parties entering into this deed’. The deed and the contract of sale were entered into at the same time. The contract of sale provided that the deferred payment would be secured by a mortgage over the property. The deed addressed a concern on the respondent’s part about the applicant borrowing money against the property to such an extent that the applicant would not have sufficient equity in the property to permit the respondent to recover the deferred payment when it became due 12 months after settlement. Looked at objectively, the contract of sale and the deed were in effect one agreement between the applicant and the respondent. Notwithstanding the presence of the entire agreement clause in cl 4 of the deed and the additional parties to the deed, properly construed the agreement the applicant and the respondent entered into concerning the sale and purchase of the property was contained in both documents: with each document dealing with pre and post-settlement rights and obligations.
Second, notwithstanding that recital B provided that the vendor (respondent) had insisted on the parties to the deed entering into the deed because of a concern that a breach of the deed or the contract of sale might diminish ‘the value of the property’ (properly understood in context as the purchaser’s equity in the property) or that the respondent ‘wish[ed] to establish a method of recovering the diminished value’, no operative term of the deed gave the respondent the right to claim compensation from the parties to the deed in the event of some loss arising from any breach of the deed. The only term of the deed that gave the respondent an entitlement to damages was cl 2.1.3 which required Mr Gulabovski to provide certain information which, if inaccurate or misleading, made Mr Gulabovski personally liable for any loss suffered by the respondent to the maximum value of the respondent’s mortgage.
Third, notwithstanding that some or all of the other operative provisions of the deed might only have had operation post-settlement, there is no basis for limiting the operation of cl 2.2.1 to post-settlement events. The terms of cl 2.2.1 do not contain any temporal limit on their operation. The more sensible and likely construction of cl 2.2.1 is that it operated both pre-settlement and post-settlement. In its pre-settlement operation, it permitted the respondent to make enquiries to ensure that the applicant had not mortgaged the property beyond the maximum amount and at higher interest rates than permitted by the deed, so that the respondent (in the event that the applicant had mortgaged the property in breach of cl 2.2.1) could choose whether or not to settle the sale of the property in those circumstances. Such a construction accords with the likely – indeed obvious – commercial purpose of the obligation to provide proof of the interest rates payable under the mortgages.
Fourth, while the applicant accepted that the deed did not actually provide for the respondent to be indemnified in respect of any loss suffered as a result of any breach of cl 2.2.1 of the deed, it contended that cl 2.2.1 should be construed on the basis that the purpose of the deed was to provide such an indemnity. By that means, it submitted that cl 2.2.1 of the deed only had operation post-settlement when any loss suffered by the respondent as a result of any breach by the applicant of the term could be assessed. As we have said, the difficulty with this argument is: first, the deed (and in particular its operative provisions) do not provide for any such indemnity; secondly, there is nothing in the deed that suggests that cl 2.2.1 should be limited to the period after settlement; and thirdly, the more obvious and likely construction is that cl 2.2.1 is the means by which the prohibition upon the applicant borrowing at rates greater than those specified in the deed could be prevented by the respondent.

Issue 2: The proper construction of cl 2.2.1

We have already dealt in part with the proper construction of cl 2.2.1. What remains is to give meaning to the words ‘provide proof’ in the second sentence of the clause which provides that the applicant ‘will provide proof the mortgage(s) do not exceed [5% per annum as an acceptable rate and … 6.5% per annum as a higher rate in the event of default]’. The meaning of these words must be understood in the context of the commercial purpose identified above.
The applicant sought to distinguish between a case where a party was required to prove a matter, and a case where that party was required to provide proof of that matter. It observed that cl 2.2.1 did not require it to prove that the interest rates did not exceed those set out in the clause, but merely to provide some proof that the interest rates were no more than those specified.
The words in cl 2.2.1 are ordinary English words which should be given their natural and ordinary meaning. In our view, little is to be gained from contrasting the words used with different words which could have been (but were not) used. The obligation to provide proof contained in cl 2.2.1 involved no more and no less than the applicant providing the respondent with material which a reasonable party in the position of the respondent would accept as being proof that the interest rates on any mortgage taken out by the applicant did not exceed the rates set out in the clause. In the circumstances where mortgages had actually been entered into by the acceptance of letters of offer, provision of proof within the meaning of cl 2.2.1 involved, at a minimum, the provision of complete copies of the executed letters of offer.
Contrary to the applicant’s submissions, we do not accept that the applicant’s obligation to provide proof in the circumstances we have described could be met by the provision of incomplete or edited copies of the letters of offer: the provision of such copies left open the possibility that, upon the proper construction of the whole of the document, some particular statement or assertion in the part provided may take on a different meaning or be affected in some other way.

Issue 3: Did the applicant breach cl 2.2.1?

It follows from what we have said above that, in providing incomplete copies of the letters of offer, the applicant breached cl 2.2.1. The respondent’s requests to be provided with complete copies of the letters of offer were reasonable. The applicant’s refusal to provide complete executed copies deprived the material which it did provide of the necessary quality of proof that the interest rates on the mortgages taken out by the applicant did not exceed those specified in cl 2.2.1.
As the judge observed, no explanation was given for the decision to provide only the first two pages of the letters of offer to the respondent.[28] His Honour inferred that the decision to provide only the first two pages was a conscious decision by or on behalf of the applicant to withhold the fact that the applicant had agreed to pay fees totalling $125,000.[29] One might equally infer that the desire to withhold this information might have been motivated by a concern that disclosure of the full extent of the fees referred to in the letters of offer might have resulted in a dispute as to whether the terms of the applicant’s mortgages complied with cl 2.2.1 of the deed. However, it is not necessary for us to go so far, or to draw either of these inferences. It is sufficient for us to say that we see no error in the judge’s conclusion that the applicant failed to provide the proof required by cl 2.2.1 and thereby was in breach of its provisions.

Issue 4: Did the applicant breach the contract of sale by failing to pay $100,000 into its own solicitor’s trust account?

[28]Reasons, [28(c)(ii)].

[29]In fact the total amount of the fees not disclosed to the respondent was a little over $150,000.

The contract of sale required the applicant to pay the sum of $100,000 into its own solicitor’s trust account on the signing of the contract of sale (6 December 2019). However, no such amount was paid at that time. As we have already noted, on 18 December 2019 the mortgage relating to Rothman Consulting’s loan of $500,000 was executed. A trust account receipt produced by the applicant’s solicitors shows that on 19 December 2019 the sum of $500,000 was received by those solicitors from Rothman Consulting. The trust account receipt shows Rothman Consulting to be the client, and states that the monies were received for the purpose of being advanced to the applicant. As we understood it, the applicant submits that the receipt of these monies by its solicitors (on behalf of Rothman Consulting as a client of the solicitors in its own right) satisfied the applicant’s obligation to pay the sum of $100,000 as required by the contract of sale.
This submission must be rejected. There is no basis upon which moneys paid by Rothman Consulting to its solicitors to be held on Rothman Consulting’s behalf can be considered to contain monies required to be paid by the applicant (and presumably held on behalf the applicant) 13 days earlier. Plainly, in not paying the sum of $100,000 at any time prior to the proposed settlement of the contract of sale, the applicant breached the contract of sale.

Issue 5: Did the applicant repudiate the agreement?

In Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd,[30] the plurality[31] discussed the different senses in which the term ‘repudiation’ is used. Their Honours said:
First, it may refer to conduct which evinces an unwillingness or an inability to render substantial performance of the contract. This is sometimes described as conduct of a party which evinces an intention no longer to be bound by the contract or to fulfil it only in a manner substantially inconsistent with the party's obligations. It may be termed renunciation. The test is whether the conduct of one party is such as to convey to a reasonable person, in the situation of the other party, renunciation either of the contract as a whole or of a fundamental obligation under it.[32]
[30](2007) 233 CLR 115 (‘Koompahtoo’).
[31]Gleeson CJ, Gummow, Heydon and Crennan JJ.
[32]Koompahtoo (2007) 233 CLR 115, 135 [44]. Emphasis added.
Their Honours then dealt with the question of whether a term in a contract is an essential one.[33] In the course of this discussion, their Honours set out a passage from the well-known exposition of Jordan CJ in Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd,[34] as follows:
The question whether a term in a contract is a condition or a warranty, ie, an essential or a non-essential promise, depends upon the intention of the parties as appearing in or from the contract. The test of essentiality is whether it appears from the general nature of the contract considered as a whole, or from some particular term or terms, that the promise is of such importance to the promisee that he would not have entered into the contract unless he had been assured of a strict or a substantial performance of the promise, as the case may be, and that this ought to have been apparent to the promisor. If the innocent party would not have entered into the contract unless assured of a strict and literal performance of the promise, he may in general treat himself as discharged upon any breach of the promise, however slight. If he contracted in reliance upon a substantial performance of the promise, any substantial breach will ordinarily justify a discharge.[35]
[33]Ibid 136–7 [47].
[34](1938) 38 SR (NSW) 632, 641–2.
[35]Koompahtoo (2007) 233 CLR 115, 136-7 [47].
The contract of sale provided for the deferred payment to be secured by a mortgage over the property. In this context, the applicant’s ability to make the deferred payment was of fundamental importance to the respondent and was, objectively, the primary purpose of the deed. In furtherance of that purpose, cl 1.3 of the deed required that the prior ranking mortgage or mortgages not exceed $2.5 million, and cl 2.2.1 required proof that the interest rates under the prior mortgage(s) not exceed those specified. Viewed objectively, both of these obligations in the deed were essential promises by the applicant. Thus, cl 2.2.1 was an essential term of the agreement between the parties. In our view, the applicant’s continued refusal to provide proof that the interest rates in the mortgages taken out by it did not exceed those specified in cl 2.2.1 of the deed amounted to a repudiation of the agreement between it and the respondent. By its refusal to provide the complete letters of offer to the respondent, the applicant conveyed to a reasonable person in the position of the respondent renunciation of the essential, or fundamental, obligation imposed by cl 2.2.1 of the deed.[36]
[36]Ibid 135 [44].
While it is not necessary for us to determine whether the failure by the applicant to pay the $100,000 in accordance with the contract of sale amounted to a repudiation on its own, or in combination with the applicant’s failure to comply with cl 2.2.1 of the deed, we would simply observe that the failure to pay this sum makes the conclusion that the applicant repudiated the agreement between the parties all the stronger.[37]
[37]See Carr v JA Berriman Pty Ltd (1953) 89 CLR 327, 351.

Issue 6: Acceptance of the repudiation and termination

At 11:42 am on Monday 23 December 2019, the solicitor for the respondent sent an email which noted (for at least the third time) the applicant’s failures to provide proof that the interest rates on mortgages taken out by the applicant did not exceed the rates specified in cl 2.2.1. Having noted the applicant’s ‘failures’, the email concluded:
As a result of these failures, our client will not be proceeding with the sale.
Plainly, by this email, the respondent accepted the applicant’s repudiation of the agreement between the parties. During the course of the hearing in this Court, the applicant accepted that this was the case.

Issue 7: Was cl 2.2.1 of the deed an essential term of the agreement?

For the reasons we have already given, cl 2.2.1 of the deed was an essential term of the agreement. Having regard to our conclusions on the issue of repudiation by the applicant and the acceptance of it by the respondent, it is not necessary for us to say anything further about this issue.

Issue 8: Was notice required by general condition 27?

Similarly, having regard to our conclusion that the agreement between the parties was terminated by the respondent’s acceptance of the applicant’s repudiation of it, it is not necessary for us to express a view about whether, in the event that there was no repudiation, in order to terminate the agreement for a breach of cl 2.2.1 the applicant was required to give a termination notice under general condition 27. For completeness, however, we will express our conclusion on this issue briefly.
The respondent contended that general condition 27 of the contract of sale had no application to cl 2.2.1 of the deed. It submitted that general condition 27 only had application in respect of breaches of the terms of the contract of sale. It pointed to the notice provision in the deed (cl 9) as being the provision governing any necessary notice required under the deed.
The respondent’s submissions must be rejected. Clause 9 of the deed merely provided ways by which any notice otherwise necessary under the deed might be given by a party to the deed. Consistently with our conclusion that the deed and contract of sale constituted the one agreement between the parties, general condition 27 operated not only with respect to breaches of the contract of sale, but also with respect to breaches of the deed by the applicant and/or the respondent. But for the applicant’s repudiation of the agreement and the acceptance of that repudiation by the respondent, the respondent would have been required to give a notice under general condition 27 before it could terminate the agreement for the breach of cl 2.2.1.

Issue 9: Is the respondent entitled to be paid the $100,000?

The respondent submitted that the $100,000 amount referred to in the contract of sale was a deposit in the ordinary sense,[38] which fell to be forfeited (paid) to the respondent upon the termination of the agreement brought about by the applicant’s repudiation of it. The respondent claimed to be entitled to the deposit both in accordance with ordinary principles of contract law, and also by the terms of s 26(1)(a) of the Sale of Land Act 1962, which relevantly provides:
[W]here in a transaction for the sale of land –
(a)the vendor rescinds the contract as the result of a default by the purchaser, the vendor shall be immediately entitled to be paid the deposit monies in his own right;
The term ‘deposit monies’ is relevantly defined in s 23 of the Act to include:
… any monies which are part of the purchase price received by the vendor or on behalf of the vendor before the purchaser becomes entitled to a transfer or conveyance of the land …
[38]As Lord Macnaghten said in Soper v Arnold (1889) 14 AC 429, 435:
Everybody knows what a deposit is.
In order to determine whether or not the respondent is entitled to receive the $100,000 sum referred to in the contract of sale, it is necessary to look at the character of the payment the applicant was required to make and the terms of its obligation to make it.[39] While the label the parties might give to a particular payment may have some relevance, the mere name ascribed to the payment cannot be determinative.[40] The question in the present case is whether the $100,000 payment was in truth a deposit which had the ‘character of earnest money’ to be paid to secure the purchaser’s performance of the contract of sale,[41] or deposit monies within the meaning of ss 23 and 26 of the Sale of Land Act.
[39]Iannello v Sharpe (2007) 69 NSWLR 452, 461 [31] (Hodgson JA, with whom Santow and Basten JJA agreed) (‘Iannello’).
[40]Ibid.
[41]See Luu v Sovereign Developments Pty Ltd [2006] NSWCA 40, [24] (Bryson JA, with whom Handley and McColl JJA agreed). See also Commissioner of Taxation v Reliance Carpet Co Pty Ltd (2008) 236 CLR 342, 351 [25]–[26]; and Iannello (2007) 69 NSWLR 452, 461 [31].
General conditions 11 and 28.4 suggest that the amount referred to as the ‘deposit’ in the particulars of sale is a deposit in the sense ordinarily understood. The particulars of sale, however, provide that this ‘deposit’ is to be paid to the trust account of the purchaser’s solicitors and ‘held until settlement of the sale’ when it is to be paid to the vendor’s solicitors. Nothing in the contract of sale requires the amount to be held on trust by the applicant’s solicitors for any party other than their own client — the applicant/purchaser. Indeed, on their face, the term in the particulars of sale dealing with the payment of the sum of $100,000 would have permitted (if not required) the applicant’s solicitors to repay any amount (including the $100,000) to the applicant at any time prior to settlement upon being instructed by the applicant to do so.

While it might be thought that there is a tension between the provisions in the particulars of sale and the general conditions regarding the so-called deposit, it is to be remembered that, by its terms, the contract of sale provides that the particulars of sale have priority over the general conditions of the contract of sale. Giving priority to the particulars of sale in the contract of sale, the payment of $100,000 referred to as a deposit was not an earnest for the purchaser’s performance and did not provide any form of security to the vendor (respondent) for the applicant’s performance of the contract of sale. It was not payable to the respondent or on its behalf until settlement. Viewed objectively, it was in the nature of a demonstration by the applicant that it was in fact ‘providing’ $100,000 of the purchase price from moneys other than the permitted mortgage loan proceeds, as acknowledged in cl 2.1.1 of the deed. It follows that the judge did not err in concluding that the $100,000 payment provided for in the particulars of sale was not intended as an earnest in the sense discussed. This result is consistent with the reasoning in Iannello,[42] and Blanco v Wan,[43] where part payments of the ‘deposit’ which were not payable until settlement were held not to be intended as an earnest for performance of the contract of sale.
[42]Iannello (2007) 69 NSWLR 452, 461 [32].
[43][2021] NSWSC 273, [65]-[78].
Similarly, the $100,000 did not constitute deposit monies within the meaning of s 23 of the Sale of Land Act. The $100,000 was neither received by, nor on behalf of, the respondent/vendor. While the definition of deposit monies in s 23 is an inclusive one, a particular payment must have the characteristics of a deposit in the sense we have described before the payment can be held to be deposit monies within the meaning of the section. The use of the word ‘includes’ in the definition does not give a payment which would not ordinarily be regarded as a deposit the characteristic of being deposit monies.

Conclusion

The issues raised by both the application for leave to appeal and cross-application for leave to appeal are sufficiently arguable to justify leave to appeal and leave to cross-appeal being granted. However, in light of our conclusion that the deed and contract of sale were validly terminated by the respondent’s acceptance of the applicant’s repudiation of the agreement between the parties, the applicant’s appeal must be dismissed. Similarly, in light of our conclusion that the $100,000 required to be paid under the contract of sale was not a deposit or deposit monies within the meaning of the Sale of Land Act, the cross-appeal must also be dismissed.
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[27]McVeigh 438 [30] emphasis added; see also [68] – [69] (Kenny J). This approach applies even where one of the two documents has added parties, as here, a matter not referred to in argument. See [31]-[32] per Finkelstein J.

[2023] VSCA 30

27 February 2023