Detmold v Oldtex Pty Ltd

[2005] NSWSC 1197

CITATION:	Detmold v Oldtex Pty Ltd [2005] NSWSC 1197
HEARING DATE(S):	16/11/05
JUDGMENT DATE :	17 November 2005
JURISDICTION:	Equity Division
JUDGMENT OF:	Young CJ in Eq
DECISION:	Contract rescinded by plaintiffs on 5 April 2004; Plaintiffs entitled to damages from first and second defendants; First and second defendants to pay third defendant $40,500 plus interest.

CATCHWORDS:	CONVEYANCING [11]- Deposit- Deposit by insurance bond- When bond terminates. CONVEYANCING [65]- Time- Notice to complete- Original solicitors for each party replaced by new firms- Who may give or receive notices. TRADE & COMMERCE [92]- Misrepresentation- "Off-the-plan" contract for sale of apartment- Vendors represented to purchasers that apartment would be built to certain layout- Apartment built to different layout- Whether exculpatory clause in contract barred rescission under Trade Practices Act- Whether representation induced purchasers to enter contract.
LEGISLATION CITED:	Conveyancing Act 1919, s 55(2A) Trade Practices Act 1974 (Cth) ss 51A, 52, 87
CASES CITED:	Butcher v Lachlan Elder Realty Pty Ltd (2004) 79 ALJR 308 IOOF Australia Trustees (NSW) Ltd v Tantipech (1998) 156 ALR 470 Jarvis v Swans Tours Ltd [1973] QB 233 Kramer v McMahon [1970] 1 NSWR 194 Re Ronim Pty Ltd [1999] 2 Qd R 172 Redgrave v Hurd (1881) 20 Ch D 1 Waltip Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 11 ATPR 40-975
PARTIES:	Johanna Jane Detmold (P1) Gerard Anthony Verus (P2) Oldtex Pty Limited (D1) Baron Corporation Pty Limited (D2) Employers Reinsurance Corporation Limited (D3)
FILE NUMBER(S):	SC 3528/04
COUNSEL:	D P Robinson SC and T Leibman (P) D L Warren (D1 & 2) P Moloney (S) (D3)
SOLICITORS:	NOT Lawyers (P) Summit Law (D1 & 2) Moloney Lawyers (D3)

LOWER COURT JURISDICTION:

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

YOUNG CJ in EQ

Thursday 17 November 2005

3528/04 – DETMOLD v OLDTEX PTY LIMITED

JUDGMENT

1 HIS HONOUR: This is a claim by plaintiffs who contracted to purchase a unit off the plan at Rosebery. The contract was in the 2000 edition of the standard form, and was made on 4 October 2001. The contract contained, among other provisions, the following:

First, a description of the land, which was:

“ND2.26/741 Botany Road, Rosebery ... Unregistered plan: Lot 26 in an unregistered plan (copy attached) (clause 28) which is part of the land contained in folio identifier ... ."

2 The only plan that was annexed was a draft plan, which merely contained a description of the size of the “boxes" and their position on various levels. There was a deliberate decision, on the evidence by the solicitor of the vendors, not to include any plan as to the layout of the individual units.

3 The definition clause defined "solicitor" in relation to a party as:

“The party's solicitor ... named in this contract or in a notice served by the party".

4 Clause 20.6 provided that a document under or relating to the contract is served if it is served by the party or the party's solicitor, and served on the party's solicitor.

5 Clause 28 deals with unregistered plans and provides that the vendor must do everything reasonable to have the plan registered within six months, but nothing turned on that in this case. Clause 28.5 provides that the completion date becomes the latter of the completion date and 21 days after service of the notice, the "notice" being the notice that the relevant plan had been registered.

6 Then there are a series of additional definitions and interpretations commencing at cl 30. Although these are not part of the standard 2000 form, they are, it would seem, standard clauses for each of the many, many units in this development and so it may be quite wrong to differentiate them as typed conditions, as opposed to printed conditions, when one is looking at inconsistencies.

7 Clause 30.1 makes the completion date fourteen days from the date the vendor notifies the purchaser in writing of the registration of the strata plan (cf 28.5). "Plans" are defined as:

“The Plans for the proposed subdivision, Stage 1 Strata Plan and the Strata Plan"

Unfortunately the present unit is part of stage 2.

8 Clause 31 is headed "Acknowledgements" and reads:

“31. The Purchaser acknowledges and agrees that in entering into this agreement the purchaser has not relied upon any inducement, warranty or representation made or given by or on behalf of the vendor except as expressly stated in this contract.”

9 Clause 43 is headed "Conditions precedent, Amendments to the Strata Plan and Disputes". Clause 43.2 is subdivided into seven points with the opening words:

“The Purchaser acknowledges having inspected the Plans and will not make any objection, requisition or claim for compensation in relation to the Plans or in relation to any of the following matters:
43.2.1 any minor modifications to the Plans which may be required by a Relevant Authority to obtain its approval of the plan;
43.3.2 any modifications to the Plans which may be required by Land and Property Information NSW to obtain the registration of the Plans."

43.8 reads:

“The Purchaser cannot make any requisition, objection and/or claim; rescind the contract; or terminate the contract because of any amendments contemplated in clauses 43.2, 43.3 and 43.7."

(43.7 related to car spaces, and 43.3 to the title deeds).

10 The case involves a number of questions and it seems to me best that I deal with them under the following headings:

(1) The claim under the Trade Practices Act 1974 (Cth).

(2) Questions of conveyancing law.

(3) Principles of general equity.

(4) The deposit and s 55(2A) of the Conveyancing Act 1919.

(5) Questions relating to the deposit bond; and

(6) The result of the case.

11 The case was commenced before me on 16 November, Mr D P Robinson SC and Ms T Leibman appearing for the plaintiffs, Mr D L Warren appearing for the vendors, the first and second defendants and Mr P Moloney, solicitor, appearing for the third defendant, who provided the bond in lieu of cash deposit.

12 The argument finished shortly before 4pm yesterday and, as promised, I am giving judgment today.

13 I will now deal with the matter in the order in which I indicated a little while ago.

1. TRADE PRACTICES ACT

14 As counsel acknowledged, basically this is a question of fact. The female plaintiff swore that she and her partner were on the look-out for a property to buy in which they could live as a family.

15 One day they called at the office of City Project Marketing Pty Ltd, the vendors' real estate agent, and they saw a Mrs Yeates. The vendors had provided a sales office and had produced a brochure with an orange cover, which was to be available to persons who were inquiring about a unit to purchase in the proposed development.

16 The plaintiffs were handed a copy of this brochure. They looked at the various plans, other material and the brochure and they decided that they would like to purchase the subject unit. They placed a holding deposit of $1,000, which they were told would hold it for two weeks. The vendors' solicitor sent the draft contract to the plaintiffs' then solicitor, Mr Gibson. The plaintiffs noted that the contract did not include a floor plan.

17 On 4 September 2001 Mrs Yeates telephoned the female plaintiff and asked whether the plaintiffs were ready to exchange, to which the answer was:

“Yes, we are, but before we do we need to get confirmation of the floor plan. We are still waiting on the floor plan that we asked you for a few weeks ago."

18 Mrs Yeates said she would get on to that straight away, but she did not. However, at some time afterwards a plan was received from Mrs Yeates highlighting the subject apartment in pink. The female plaintiff says that after reviewing the floor plan, and all other documents, and following discussions with her solicitor, the plaintiffs signed the contract on 26 September 2001 and forwarded it to the solicitors with instructions to exchange.

19 Nothing happened for quite a while. However, in November 2001 Mr Gibson withdrew from the matter and the purchasers retained Mr David Evans of NOT Lawyers. There was then correspondence with the new firm that had taken over from Ms Deigan as the vendors' solicitor, who described themselves as Summit Law.

20 The early indications were that the building would be completed by mid to late 2003, but the purchasers, who tried to inspect it in late 2003, were told that access could not be allowed "for safety reasons". They were told that they would be called when it was ready to be inspected. However, it was not until late January 2004 that an indication was given that the property was able to be inspected and the plaintiffs could not inspect it until 5 February 2004.

21 When they did so, they found that the subject apartment had been reconfigured and its floor plan bore little resemblance to the floor plan which had been provided in the initial plan in 2001. Miss Detmold says that the original floor plan appealed to her as it meant that it was easy for people working in the kitchen to communicate with guests in the living area, and also enjoy the view from the apartment; the entry into the downstairs bedroom was immediately opposite the entry to the flat; the downstairs bedroom had an ensuite bathroom, and the subject apartment would have an open, spacious feel to it.

22 However, the room immediately facing the entry to the flat was now the laundry, there was a lot of floor space devoted to lengthy corridors, the lower floor bedroom no longer had an ensuite bathroom, there was less privacy for people staying in that room, access for larger pieces of furniture was restricted, and the upstairs ensuite bathroom no longer had a bath, though there was now a bath in the downstairs bathroom.

23 She says that the plaintiffs were purchasing the apartment to live in and the configuration was just unacceptable and that she would not have entered into the contract had the unit been configured in the way it was ultimately built.

24 The male plaintiff gave evidence to the same effect that he did not like the way in which the unit had been built, he would have not entered into the contract had it been in that form, and generally corroborated the evidence of his partner.

25 Both plaintiffs were cross-examined thoroughly by Mr Warren. The cross-examination went to a couple of discrete issues. One was that the real reason why the plaintiffs were seeking to exit from the contract was not because of the layout but because they did not have their finance available and no longer wished to spend so much money on a new dwelling. This was an odd attack, in view of the fact that the court, in accordance with its usual practice, had directed that there be notes of the matters which the court would have to decide, and there was not one reference to this particular point.

26 The plaintiffs gave evidence to say that they had no trouble at all in raising finance. They had approximately $100,000 in cash, and that they had already received approval in principle from a lending institution for another $320,000. There were no vouchers or statements to support this, but, as Mr Robinson put, when this issue was not forecast as being an issue, one would not have expected that the plaintiffs would bring to court every piece of paper that would possibly be of relevance in the case.

27 It just does not seem to me that there is any basis for concluding that the plaintiffs did not have the funds to complete the purchase or that funding was a reason why they did not proceed.

28 The other main thrust of the cross-examination was an unsuccessful endeavour to show that the unit as constructed was just as spacious and attractive as the one shown in the early plan.

29 There is also no dispute at all that the layout of the unit was changed from what was shown on the plan presented to the plaintiffs prior to their signing the contract. Indeed, the evidence was a little more developed than that.

30 Evidence was given on behalf of the first and second defendants by Mr McNamara, who was a leading executive worker, if I could describe him that way, of the builder, and Mr Armstrong, who was the architect. Both gentlemen made it fairly clear that with this sort of project everyone in the industry would expect that there would be departures from the initial plans. Mr McNamara said that "After the concept plan is prepared and lodged with the Council for development approval … the plans are further refined to comply with Council's ... statutory requirements and also to address issues regarding the construction of the development. ... In my experience it is highly unusual that a building of this type will be constructed in accordance with the plans as initially approved."

31 In oral evidence he sometimes used the term "not uncommon" rather than "highly unusual".

32 Mr Armstrong is an architect who trades under the name ARC Architects. He gave evidence that once the plans have been submitted and the development application approved there will usually be alterations for a number of reasons, one being the need to accommodate all the services, but another being the type of construction that is preferred by the builder. The builder, Baseline Constructions Pty Ltd, prides itself on being a leader in putting together buildings of this nature by prefabricated concrete structures and, needless to say, that was the way in which this particular building was constructed. That led to some alterations, but why there was a complete reconfiguration in the way in which the plaintiffs described was never properly explained to me.

33 There was in evidence minutes of the first design coordination meeting, a set of meetings, as one would expect with a building of this nature, which were held monthly, at which it is said that Mr McNamara outlined the time lines for the stage 2 works.

34 Mr Armstrong then outlined the scope, and the minutes then say:

“3.2 Let out implications of units at north end of blocks c & e noted".

"Let out" means expansion of the size in order to accommodate services. Block "c" was where the subject unit was situated. The minutes then continued:

“3.3 MA (that is Mr Armstrong) advised these units have been signed off by client but feedback is awaited from Real Estate/Marketing people.”

35 The vendors had set up a marketing office close to the premises and it was well-known to them that the agents, including City Project Marketing Pty Ltd, were marketing the units to members of the public, and that they were using a brochure with an orange cover. That brochure is in evidence as AX5 and following.

36 Page 2 of the brochure is headed "Reclaim the Metropolis". The buildings are called Metro and it reads:

"Metro hits the style accelerator. For the first time in living memory, cutting edge design and intelligent architecture burst onto the scene in what will soon be the city's fastest growth location, Roseberry.
Bringing together the considerable talents of Sydney's own ARC architects and Melbourne's most talked-about designers, SJB Interior Designs, Metro unveils a style of living that is not afraid of the metropolis. Presenting a collection of one and two bedroom apartments with single and multi-layered configurations, Metro uses clean rectilinear design to reclaim and define open space."

37 There was obviously hyperbole in that statement, but I accept the submission of Mr Robinson that there is a focus on not only the position of the units, but their inner design. They are said to be designed, and that surely can only refer to the interior design, by Melbourne's most talked-about designers. I interpolate that Mr Armstrong said that, as far as he knew, SJB Interior Designs were not Melbourne's most talked-about designers, but that particular misrepresentation does not feature further in the case.

38 The focus is, however, on the open space and the interior design of the units. Now, Mr Warren's cross-examination, especially of the male plaintiff, concentrated on the open space. Of course, it is quite easy to build open space; one just does not build a wall, and Mr Verus said in effect that, yes, it has open space, but that's really not the main problem. The main problem is the way in which the initial plan that was given to the plaintiffs and which they relied on, they would not have signed the contract without it. Indeed they waited for the plans before signing the contract and now everything is completely altered.

39 Now, I can't see any reason for disbelieving that. Not only did the plaintiffs present well, their demeanour did not show any reluctance to meet the questions of Mr Warren head on. He cross-examined without any padding for just under half an hour. The answers that were given by the plaintiffs appeared to be reasonable. There was no evidence called from Mrs Yeates, or anybody else, which would tend to contradict it and, accordingly, in my view, I should accept the plaintiffs' evidence that the reason why they did not proceed with the contract was because of the representations which were made in the brochure, and on the plan that they were given, that that was the configuration of the unit, and that was a vital matter to them.

40 I suppose one has to look now to technicalities under the Trade Practices Act. Section 52 of the Act provides that:

“(1) A corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.”

41 There is no doubt the vendors are a corporation and they are in trade and commerce. There is also no doubt that where a vendor employs an agent and arms the agent with brochures, that the conduct of the agent is able to be attributed to the vendors, and is an a fortiori case, as in the present, when the vendors have on-site selling offices armed with the material.

42 The question is whether this is a representation of an existing fact, or whether it is a representation of future intention.

43 A representation of existing fact would be as at this point in time we intend to build the units like this and to have this internal configuration. On the evidence of Mr McNamara and Mr Armstrong this would be a mis-statement of existing fact because they all knew that there would be many alterations made from the time of that plan until the time of the final building. If, on the other hand, it is evidence of future intention, then one must look at s 51A(2) that:

“… in relation to a proceeding concerning a representation made by a corporation with respect to any future matter, the corporation shall, unless it adduces evidence to the contrary, be deemed not to have had reasonable grounds for making the representation".

44 There was no evidence on the part of the defendants on this issue. The conduct referred to in s 52 of the Trade Practices Act includes misrepresentation. It includes innocent misrepresentation, and, indeed, it includes conduct which under the general law would not be a representation at all.

45 It seems to me that in all the circumstances of this case the conduct in issuing the brochure and in issuing the plans, was conduct which was misleading within the meaning of the section.

46 One then has to work out whether it was relied on by the plaintiffs, and on the facts, as I have found them already, the answer to that question must be yes. One then has to work out under s 87 of the Act whether there should be relief given as to rescission and/or compensation.

47 Before, however, I deal with that I must deal with the defence that cl 31 of the contract, which I have set out earlier, means that the plaintiffs cannot rely on the representation, or, alternatively, that I must discount the evidence because of it.

48 There have been a number of cases in which courts, mainly the Federal Court, have had to consider the effect of a clause such as cl 31. Clause 31, it must be noted, is not in the usual strong form, in that it is not, strictly speaking, a sole contract clause. Furthermore it might also be construed as not covering a matter which was not included in the contract because it is clear that there were matters other than in the contract which were relevant to the parties' intention. But putting that aside, such a condition is not a bar to a claim under the Trade Practices Act; see for instance Waltip Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 11 ATPR 40-975, referred with approval recently by the High Court in Butcher v Lachlan Elder Realty Pty Ltd (2004) 79 ALJR 308 at 320. In IOOF Australia Trustees (NSW) Ltd v Tantipech (1998) 156 ALR 470 at 480 the Full Federal Court said that although an exculpatory clause, such as cl 31, cannot be relied on to answer a claim based on s 52, the fact that an applicant states that he was not induced to enter an agreement in reliance on representations may bear upon the question whether he should be believed when he asserts that the representations were an inducement. I have taken that into account.

49 The first thing to be said is that Miss Detmold said that she left the reading and the understanding of the contract to Mr Gibson, so that there was no evidence that this particular clause was ever brought to her attention and, secondly, the whole of the evidence, which I have accepted, shows that the representation did induce, no matter what cl 31 might have said.

50 I should add that it is another significant matter that the brochure did not contain any disclaimer. Indeed, at no stage did any of the plans contain any disclaimer, or any indication that things might be different to what was said to be the case by the marketing people. In that context, cases like Butcher are to be put to one side.

51 Accordingly, the Trade Practices count is made out.

52 What should be the consequences? The answer is that the plaintiffs are entitled to have the contract rescinded, if it has not already been rescinded, and are entitled to compensation for loss.

53 I should go back to the facts as at January 2004.

54 On 27 January 2004 the agent indicated that the strata plan had been registered and that the units could be inspected between 2 and 4pm on 31 January 2004. This was not suitable to either of the plaintiffs who were working on that day and arrangements were made to inspect on 5 February. NOT Lawyers made requisitions and these were answered by the solicitor purporting to act for the vendors on 29 January. A transfer was submitted on 30 January. This again indicates that before the inspection the purchasers were ready, willing and able to complete.

55 On 4 February Summit Law indicated that completion was to take place before the expiration of 14 days from the notification of registration of the strata plan, and they expected completion by 6 February.

56 On 6 February NOT Lawyers wrote that:

“Following a number of requests from our clients and delays on the part of your clients in acquiescing, our clients were finally able to inspect the property yesterday."

57 The solicitors indicated their surprise as to the state of the premises. Not only were there defects, but also problems with the configuration.

58 On 7 February Summit Law wrote saying:

"We have forwarded your letter to our clients for their urgent instructions.”

59 On 12 February there was a reply from Summit Law as to the defects. On 20 February NOT Lawyers said to the effect that, "yes, you have answered the defects, but you haven't addressed the issue of the reconfiguration of the floor plan" and pointed out that the plaintiffs had gone to considerable trouble prior to exchange to obtain a copy of the floor plan and they had purchased it as their home and wanted it the way it was, and noted that they were considering rescinding the contract under s 87 of the Trade Practices Act.

60 On 24 February in a piece of paper headed "Without Prejudice" the vendors' solicitors referred to cl 31 of the contract, and said, "We are of the view that your client has no ground to rescind this contract … ."

61 On 26 February NOT Lawyers forwarded a copy of the original plan and pointed out the problems. However, the vendors' solicitors showed no interest in this whatsoever, and it would appear that this was on direct instructions from the vendors not to reply to these allegations.

62 On 9 March 2004 Ms Maitland, who signed herself as solicitor for the vendors, purported to give a notice to complete. I think there were a number of matters wrong with that notice to complete, but that does not matter very much because it was not followed up.

63 On 5 April NOT Lawyers pointed out that the vendors had simply ignored the requests of the purchasers and they said:

“As a result of the misleading and deceptive conduct engaged in by your client, our clients are exercising their right to treat the contract as voidable on their election and this letter serves as notice of that election."

64 Nothing happened and on 6 May 2004 Ms Maitland wrote to NOT Lawyers enclosing a notice to complete and saying without prejudice she reserved the clients' rights in respect of damages. The notice to complete suffered from the same defects as the earlier one.

65 The purchasers' solicitors wrote saying:

“Your client appears not to have accepted that election and has issued a Notice to Complete."

66 The notice to complete provided for completion at 3pm on 21 May but at the settlement room of Summit law. At 3pm the purchasers did not attend, but the evidence is that the vendors at that stage would have been unable to have provided a discharge of the mortgages, though they would have been able to do so within a quarter of an hour afterwards. Of course, under the authority of cases such as Re Ronim Pty Ltd [1999] 2 Qd R 172, this would not have been sufficient.

67 The deposit under the contract was secured by a deposit bond issued by the third defendant in the sum of $40,500. On 21 June 2004 Ms Maitland wrote to the issuers of the bond enclosing a notice of termination of the contract for sale, advising that the deposit had not been paid and demanding payment.

68 On 25 June that $40,500 was paid to Oldtex Pty Ltd. On 25 June the issuers of the bond claimed on the plaintiffs, pursuant to the indemnity agreement which they had signed, $40,500, and in due course claimed interest as well.

69 On 28 May Ms Maitland wrote to NOT Lawyers:

“We refer to the above matter and to your letter dated 19 May 2004 and confirm that our client terminates the contract. Our client is entitled by reason of such termination to call upon the deposit bond.”

70 It is odd that this letter talks about confirming the termination. There does not appear to have been any actual termination. However, for all intents and purposes certainly after May 2004 each party recognised that the contract was no longer on foot.

71 So then there has been, on the part of the purchasers, a rescission of the contract, as they were entitled to do. They were entitled to do this either in equity, under the doctrine of innocent misrepresentation (see eg Redgrave v Hurd (1881) 20 Ch D 1) or under the Trade Practices Act. Rescission basically is an act of the parties, provided that the contract is executory, and there is no need to make any restitution, as appears to be this case (see eg Kramer v McMahon [1970] 1 NSWR 194).

72 As the parties have indicated, both parties have accepted the contract is at an end, so I do not see any need to make any further order. However, the plaintiffs are out of pocket by the conveyancing costs, which they have incurred, and they are also possibly liable to the issuers of the bond. Accordingly, they must be compensated for these amounts, and I think also a small amount for what might be called Jarvis v Swans Tours Ltd ([1973] QB 233) damages. However, all of that is a relatively modest sum.

2. QUESTIONS OF CONVEYANCING LAW

73 In view of my findings on the Trade Practices Act, it is really not necessary to go into great detail about the problems with the vendors' purported termination on 28 May. Accordingly, what I will merely do is indicate the problems that there were and my view that the notice to complete and the termination were not properly effected, and I do that mainly in case the matter goes to the Court of Appeal because the court and the parties are entitled to know my views on the matter. I will not go into great detail because there is no practical benefit.

74 It will be noted that the contract in the 2000 edition defines who is the solicitor for the purchasers and for the vendors. The solicitor's name for the vendors was Ms Deigan, and the solicitor for the purchasers was Mr Gibson. Now both sides changed solicitors, but there does not appear to have been any notice given, or any notice served, which has to be served in writing under cl 1 of the standard contract, changing the solicitors. Accordingly, any notice to be given on behalf of the vendors had to be given by Ms Deigan, and not by a partner of Summit Law let alone its employed solicitor, Ms Maitland, and the purchasers could only effectively be served if the notice was served on Mr Gibson, not on Mr Evans. So that there is a strong argument, and I think it is right, that there was never any notice to complete given.

75 The notice to complete does not recite the default. I do not think that is fatal, but it is certainly not good practice; see Lindgren on Time in the Performance of Contracts, 2nd ed (Butterworths, 1982) para [499.13].

76 The place of completion under the contract was the office of the vendors' solicitor, which would have been Ms Deigan's office at Neutral Bay. There does not appear to have been any authority by notice to have altered the place for completion (the Ronim point I have already mentioned) and it seems to me that there was insufficient to justify non-compliance with the notice to complete as being a sufficient reason for termination.

77 Mr Warren truly says that one can justify termination on any ground, and that the vendors could have justified the termination on the purchasers' repudiation of the contract by the solicitor's letter purporting to terminate because of the problems under the Trade Practices Act.

78 There are two answers to that. First of all, I have held that that rescission was justified and, secondly, that it may well have been waived by the correspondence, which I have already set out. Accordingly, in my view, if one merely looks at the matter on the law of conveyancing, it would reinforce there being a verdict for the plaintiffs.

3. RULES OF GENERAL EQUITY

79 The same can be said about general equity (Redgrave v Hurd and like principles) which again reinforces the idea that the plaintiffs should succeed.

4. THE DEPOSIT AND SECTION 55(2A) OF THE CONVEYANCING ACT

80 Section 55(2A) of the Conveyancing Act 1919 confers on the court a fairly wide discretion to return the deposit if it is just and equitable so to do. In view of my findings under the first heading of these reasons, it is not necessary to employ s 55(2A) because the purchasers are entitled to the return of the deposit, or its equivalent under the general law. However, I would indicate that if I were wrong on other matters this would be almost the perfect case for an order for the return of the deposit because of the reliance placed by the plaintiffs on the initial plans, the absence of any reason as to why they were not informed in the three years between contract and completion that the configuration was changed, the difficulty in inspecting and their acting quickly after their inspection on 5 February.

5. THE BOND

81 I need to spend perhaps a little time on this.

82 The deposit bond was issued by the third defendant. The third defendant undertook, subject to, and in accordance with, the terms and conditions of the bond, to pay a maximum of $40,500 to the vendors. It was unconditional. The insurer guaranteed to the vendors that it would make payment within five business days of receipt from the vendors of (a) the original bond; (b) a copy of the notice of termination or rescission of the contract served by the vendors on the purchasers; (c) a statement in writing that the deposit had not been paid; and (d) a demand.

83 Now, as I have set out, on 24 June Ms Maitland provided that material to the vendors. Unfortunately, the way this bond is drawn there was no provision for the third defendant to investigate whether the solicitor's statement was accurate or not.

84 However, the bond further on says that it expires on the contract for sale being terminated or rescinded and the purchaser being entitled to a refund of the deposit. Mr Robinson argues that the bond came to an end when NOT Lawyers gave the notice rescinding the contract because of the default under the Trade Practices Act. This occurred on 5 April 2004. Accordingly, on 24 June the bond had expired and conferred no warrant to the third defendant to pay any money to the vendors.

85 I cannot see any answer to Mr Robinson's arguments, and I accept them.

86 There is, accordingly, as far as I can see, no need to look into the terms of the counter-indemnity that was signed by the purchasers. However, the third defendant has paid out $40,500 of its money on a false, though probably innocently false, representation by the vendors' solicitors and it is entitled to have the money restored with interest.

6. THE RESULT OF THE CASE

87 Accordingly, I will stand the matter over for short minutes to be brought in at an appropriate time.

88 The essential orders will be that the court declares that the contract between the parties was rescinded by the plaintiffs on 5 April 2004. An order that the first and second defendants compensate the plaintiffs for the damages that I have already indicated, and an order that the first and second defendants pay the third defendant $40,500, plus interest, and the appropriate order for costs.

89 I stand the proceedings over to my list on 6 December 2005 at 9.30 am.

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