Iannello v Sharpe

[2007] NSWCA 61

Reported Decision: 69 NSWLR 452(2007) NSW ConvR 56-179

New South Wales

Court of Appeal

CITATION:	Iannello & Anor. v. Sharpe [2007] NSWCA 61
HEARING DATE(S):	13 March 2007
JUDGMENT DATE:	23 March 2007
JUDGMENT OF:	Hodgson JA at 1; Santow JA at 40; Basten JA at 41
DECISION:	1. Appeal allowed. 2. Orders of the primary judge set aside, and in lieu thereof: (a) judgment for the purchaser on the vendors’ claim. (b) judgment for the vendors on the purchaser’s cross-claim. (c) subject to any previous orders, vendors to pay one-half the purchaser’s costs of the proceedings below. 3. Purchaser to pay the vendors’ costs of the appeal, and to have a certificate under the Suitors’ Fund Act if otherwise eligible.
CATCHWORDS:	CONVEYANCING - Relationship between vendor and purchaser - Creation of contract by exchange of counterparts - Counterpart signed by purchaser altered by purchaser's solicitor without authority - Whether alterations material - Provision as to payment of part of deposit in the event of default - Whether a penalty.
CASES CITED:	Ashdown v. Kirk [1999] 2 Qd.R. 1 Luu v. Sovereign Developments Pty. Limited [2006] NSWCA 40 Romanos v. Pentagold Investments Pty. Limited (2003) 217 CLR 367
PARTIES:	Michael Iannello and Anna Iannello - appellants Malcolm Sharpe - respondent
FILE NUMBER(S):	CA 40480/06
COUNSEL:	Mr. M. Orlov for the appellants Mr. G. Inatey SC with Mr. E.A. Hyde for respondent
SOLICITORS:	Verekers Lawyers, Sydney for appellants Malcolm Johns & Co., Sydney for respondent
LOWER COURT JURISDICTION:	Supreme Court - Equity Division
LOWER COURT FILE NUMBER(S):	SC2896/05
LOWER COURT JUDICIAL OFFICER:	Windeyer J
LOWER COURT DATE OF DECISION:	13 July 2006
LOWER COURT MEDIUM NEUTRAL CITATION:	[2006] NSWSC 713

CA 40480/06
SC 2896/05

HODGSON JA
SANTOW JA
BASTEN JA

Friday 23 March 2007

IANNELLO & ANOR. V. SHARPE

Judgment

1 HODGSON JA: On 13 July 2006, Windeyer J gave his decision in proceedings in which the appellants (the vendors) had sued the respondent (the purchaser) claiming among other things what was described as the balance of the 10% deposit under a contract of sale between the vendors and the purchasers; and in which the purchaser had cross-claimed for $225,000.00 which he had paid in connection with a purported contract of sale. The primary judge gave judgment for the purchaser on the vendors’ claim, and gave judgment for the purchaser on the cross-claim against the vendors for $225,000.00, and subject to any existing orders, ordered the vendors the pay the purchaser’s costs of the proceedings.

2 The vendors have appealed from those orders.

CIRCUMSTANCES

3 The case arises out of the purported entry into a contract for the sale by the vendors to the purchaser of a house at Hunters Hill for a price of $4.5 million, by exchange of counterpart contract documents on 4 April 2003 at the office of the vendors’ solicitors. At the time of this exchange, $225,000.00 was paid as a deposit.

4 The documents as exchanged were in the same terms, but the evidence established that two alterations had been made to the purchaser’s counterpart after the purchaser had signed it, and no case was made out by the vendors that the alterations were made with the purchaser’s actual or ostensible authority.

5 One alternation was that the words “or nominee” appearing after the name of the purchaser on the front page of the contract were deleted.

6 The other alteration was made to material appearing in the box on the front page of the contract giving the price, deposit and balance. As signed by the purchaser, the material showed the price of $4,500,000.00, deposit of $225,000.00 followed by the words “(5% of the price, unless otherwise stated and paid in accordance with Special Condition 14)”, and a balance of $4,275,000.00. The alteration changed the amount of the deposit to $450,000.00, the figure 5% to 10%, and the balance to $4,050,000.00.

7 In order to assess the materiality or otherwise of these alterations, it is necessary to have regard to other provisions of the contract, in particular Special Condition 14 and Standard Conditions 2, 4, 9 and 16.7-16.10. They are as follows:

14. Reduced Deposit
Notwithstanding anything else herein contained, the Vendor shall accept, on exchange of this Agreement, payment of $225,000.00 being part of the deposit. The parties expressly agree that if the Purchaser defaults in the observance or performance of any obligation hereunder which is or has become essential the balance of the deposit, namely $225,000.00, shall become immediately due and payable and the Purchaser shall forfeit the whole of the sum of $450,000.00 pursuant to Clause 9 hereof to the Vendor.

2 Deposit and other payments before completion
2.1 The purchaser must pay the deposit to the depositholder as stakeholder.
2.2 Normally, the purchaser must pay the deposit on the making of this contract, and this time is essential.
2.3 If this contract requires the purchaser to pay any of the deposit by a later time, that time is also essential.
2.4 The purchaser can pay any of the deposit only by unconditionally giving cash (up to $2,000) or a cheque to the depositholder or to the vendor, vendor's agent or vendor's solicitor for sending to the depositholder.
2.5 If any of the deposit is not paid on time or a cheque for any of the deposit is not honoured on presentation, the vendor can terminate. This right to terminate is lost as soon as the deposit is paid in full.
2.6 If the vendor accepts a bond or guarantee for the deposit, clauses 2.1 to 2.5 and 3 do not apply.
2.7 If the vendor accepts a bond or guarantee for part of the deposit, clauses 2.1 to 2.5 and 3 apply only to the rest of the deposit.
2.8 If any of the deposit or of the balance of the price is paid before completion to the vendor or as the vendor directs, it is a charge on the land in favour of the purchaser until termination by the vendor or completion, subject to any existing right.
…

4 Transfer
4.1 Normally, the purchaser must serve the form of transfer at least 14 days before the completion date.
4.2 If any information needed for the form of transfer is not disclosed in this contract, the vendor must serve it.
4.3 If the purchaser serves a form of transfer and the transferee is not the purchaser, the purchaser must give the vendor a direction signed by the purchaser personally for this form of transfer.

…
9 Purchaser's default
If the purchaser does not comply with this contract (or a notice under or relating to it) in an essential respect, the vendor can terminate by serving a notice. After the termination the vendor can:
9.1 keep or recover the deposit (to a maximum of 10% of the price);
9.2 hold any other money paid by the purchaser under this contract as security for anything recoverable under this clause -
9.2.1 for 12 months after the termination; or
9.2.2 if the vendor commences proceedings under this clause within 12 months, until those proceedings are concluded; and
9.3 sue the purchaser either -
9.3.1 where the vendor has resold the property under a contract made within 12 months after the termination, to recover -

· the deficiency on resale (with credit for any of the deposit kept or recovered and after allowance for any capital gains tax or goods and services tax payable on anything recovered under this clause); and

· the reasonable costs and expenses arising out of the purchaser's non-compliance with this contract or the notice and of resale and any attempted resale; or

9.3.2 to recover damages for breach of contract.

…
Purchaser
16.7 On completion the purchaser must pay to the vendor, by cash (up to $2,000) or settlement cheque, the price, (less any deposit paid) and any other amount payable by the purchaser under this contract (less any amount payable by the vendor to the purchaser under this contract).
16.8 If the vendor requires more than 5 settlement cheques, the vendor must pay $10 for each extra cheque.
16.9 If any of the deposit is not covered by a bond or guarantee, on completion the purchaser must give the vendor an order signed by the purchaser authorising the depositholder to account to the vendor for the deposit.
16.10 On completion the deposit belongs to the vendor.

8 After the purported exchange, conveyancing steps were taken; but the purchaser was unable to raise finance to complete the purchase and, after giving a Notice to Complete, the vendors purported to terminate the contract on 12 February 2004.

9 On 3 March 2004, the vendors commenced these proceedings, claiming among other things $225,000.00 as the balance of the deposit. The purchaser cross-claimed seeking the return of $225,000.00, on the basis that no contract was entered into; and in the alternative seeking an order for return of the deposit under s.55(2A) of the Conveyancing Act.

10 The case came on for hearing before the primary judge on 12 July 2006. On the second day of the hearing, after the close of evidence, Counsel for the vendors sought leave to put on a Reply to the Amended Grounds of Defence, alleging that the purchaser had ratified the contract as exchanged on 4 April 2003, or was estopped from denying that an agreement was entered into on that day.

11 The primary judge refused that application, and proceeded to give an ex tempore judgment, in which he found no contract had been entered into by reason of the unauthorised amendments. The main reasons for this finding are set out in par.[9] of the judgment:

9 It is clear that these amendments were made in accordance with instructions given by the vendors and required by them or by their solicitor. It is also clear that those amendments were made after Mr Sharpe signed the contract. It is not really necessary for me to decide whether or not the deletion of the words "or nominee" was a significant or material alteration. In ordinary terms, Mr Sharpe could have required the vendor to transfer to his nominee. That might have had some stamp duty consequences, but probably no more than those which would have arisen had the words remained. The change, however, to the deposit provision is, I consider, a material alteration. It is material because it is generally regarded at law in conveyancing matters that no penalty arises if there is provision for forfeiture of a deposit of up to 10 per cent. It is also significant because the change would give some work to special condition 14 of the contract because it would have allowed the deposit to be paid by two instalments, yet the amount of $225,000 not paid on exchange would still remain part of the deposit and become liable to forfeiture upon termination if that termination occurred as a result of default by the purchaser. Had the deposit figure remained at $225,000 then that would have been the amount of the deposit liable to forfeiture under clause 9 and the vendor would have been left to any right in damages to claim any additional amount.

ISSUES

12 In their Notice of Appeal, the vendors rely on the following grounds:

1. The primary judge erred in holding that:
a. when the respondent (purchaser) signed the contract, on the true construction of the deposit provision on the front page of the contract and Special Condition 14, the contract provided for a deposit of $225,000, being 5% of the purchase price - [5] to [7];
b. for that reason, the changes made by the respondent’s solicitor to the deposit provision, after the respondent had signed the contract, were a material alteration to the contract - [8] and [9];
c. in particular, the effect of the change was to:
i. enliven the operation of Special Condition 14 of the contract, which otherwise had no purpose or effect - [7] and [9];
ii. make the sum of $450,000, instead of $225,000, liable to forfeiture in the event that the contract was terminated as a result of a default by the respondent - [9];

d. for those reasons, a contract did not come into existence between the parties - [3] and [10].

2. The primary judge should have held that:
a. when the respondent signed the contract, on the true construction of the deposit provision on the front page of the contract and Special Condition 14, the contract provided for a deposit of $450,000 (being 10% of the purchase price) of which an amount of $225,000 (being 5% of the purchase price) was payable as the deposit on exchange of contracts but, in the event that the contract was terminated as a result of a default by the respondent, the full amount of the deposit ($450,000) would be forfeited;
b. for that reason, the changes made by the respondent's solicitor to the deposit provision, after the respondent had signed the contract, were not a material alteration to the contract;
c. in particular, the changes clarified the meaning of the deposit provision when read together with Special Condition 14, without altering the effect of the deposit provision or the effect of the contract as a whole;
d. by reason of those circumstances, a contract did come into existence between the parties.

3. Alternatively, the primary judge erred in refusing [at T59.40-49] the appellants' application on the second day of the hearing:
a. for leave to file a reply and an amended defence to the first cross claim which pleaded, inter alia, that the respondent, by his conduct after contracts were exchanged on 4 April 2003, ratified the unauthorised changes to the contract made by his solicitor; and
b. to vacate the hearing and refer the proceedings to the Registrar for directions in relation to further evidence and a new hearing date, and that the appellants pay the respondent's costs on an indemnity basis since the proceedings came before Austin J on 16 February 2006; or
c. alternatively, to adjourn the proceedings part heard, to give the parties the opportunity to adduce further evidence relating to issues raised by the reply and amended defence, and that the appellants pay the respondent's costs upon such terms as the Court may impose.

4. In particular, the primary judge erred in exercising the Court's discretion by failing to have regard to:
a. the dictates of justice, as required by s.58(1) of the Civil Procedure Act 2005;
b. the very substantial degree of injustice that the appellants would suffer if the application was refused, compared to the absence of injustice to the respondent if the application was allowed, as required by s.58(2)(b)(vi) of the Civil Procedure Act 2005;
c. the absence of any prejudice to the respondent which could not be remedied by an appropriate order for costs;
d. the substantial miscarriage of justice that would result if the application was refused.

13 The purchaser has put on a Notice of Contention, raising the following grounds:

1. The primary judge erred in holding that, if there was a binding contract between the appellants (vendors) and the respondent (purchaser), there would be no defence to the claim of the appellants [3].

2. The primary judge should have held that, if there was a binding contract between the appellants and the respondent:
(a) in so far as the appellants claimed the sum of $225,000.00 pursuant to special condition 14 of the contract:
(i) the deposit provision on the front page of the contract and special condition 14 of the contract, on their proper construction, constituted a penalty and, as such, special condition 14 was unenforceable by the appellants; and
(ii) further or alternatively, special condition 14 of the contract, on its proper construction, was not expressed to survive the termination of the contract and, as such, was unenforceable by the appellants following the termination of the contract by the appellants on 12 February 2004; and
(b) in so far as the appellants claimed damages as a result of the breach of the contract by the respondent:
(i) the appellants did not suffer any loss or damage as a consequence of the breach; or
(ii) alternatively, the appellants did not suffer any loss or damage as a consequence of the breach that exceeded the balance of the deposit retained by the appellants.

14 It is common ground that if the alterations did not make any difference to the meaning and effect of the contract, they were immaterial and would not prevent the contract coming into existence.

15 The purchaser has not by Notice of Contention or otherwise suggested that the alteration made by deletion of the words “or nominee” made any difference to the meaning or effect of the contract; and in fact cl.4 makes it clear that in any event the purchaser could direct that the transfer be made to another person. The purchaser has not by Notice of Contention or otherwise sought to pursue his application for relief under s.55(2A) of the Conveyancing Act.

16 So the issues are:

1. Were the alterations affecting the deposit material?
2. Was there error by the primary judge in refusing the amendment?
3. Was the provision concerning the second instalment of $225,000.00 a penalty?

17 It turns out that issues 1 and 3 are closely related, and on the view I have taken it is unnecessary to deal with issue 2. I will proceed to deal with issues 1 and 3 together.

DEPOSIT AND PENALTY

18 In my opinion it is clear that the alteration did not make any difference to the amounts required to be paid under the contract or to the time and circumstances in which they were required to be paid. Both before and after the alteration, Special Condition 14 had the effect that $225,000.00 was payable on exchange of contracts, and a further $225,000.00 was payable “if the purchaser defaults in the observance or performance of any obligation hereunder which is or has become essential”.

19 The circumstance that, on the front page, $450,000.00 was said to be the deposit rather than $225,000.00 does not make any difference to this. The circumstance that, on the front page, the balance is said to be $4,050,000.00 rather than $4,275,000.00 also makes no difference to the effect of the contract, because cl.16.7 requires the purchaser on completion to pay “the price (less any deposit paid)”; so the purchaser would still be paying $4,275,000.00 on completion, if only $225,000.00 had been paid as a deposit, even though the balance stated on the front page is $4,050,000.00.

20 Mr. Inatey SC for the purchaser did not contest the above propositions in any significant way; but he submitted that the alteration did make a material change because it had the effect of making the whole $450,000.00 properly characterised as a deposit and therefore not subject to the rules concerning penalties. Alternatively, he submitted that, if the alterations did not make that change, the position both before and after the alteration was that the provision in Special Condition 14 about the second $225,000.00 was a stipulation for damages on default, not for a deposit, and was invalid as a penalty. He relied particularly on Luu v. Sovereign Developments Pty. Limited [2006] NSWCA 40.

21 Mr. Orlov for the vendors submitted that, both before and after the alteration, Special Condition 14 was a provision for payment of a deposit by instalments; and he relied particularly on Ashdown v. Kirk [1999] 2 Qd.R. 1 and Romanos v. Pentagold Investments Pty. Limited (2003) 217 CLR 367 at [19]-[20]. He submitted that in Ashdown, default by the purchaser accelerated the vendors’ entitlement to a second instalment of the deposit to the date of default, so that the provision that the instalment be paid on default did not alter its character as a deposit. In a case such as the present, what operated as an earnest for performance of the contract was the purchaser’s unconditional promise to pay the balance of the deposit.

22 The case of Luu is closest to the present case, although it is different in respects that could be important; and it is necessary to consider it in some detail. In that case, the front page of the contract in which the price was $6.6 million provided for a deposit of $65,000.00, followed by the words “(10% of the price unless otherwise stated)”. Special Condition 5 of the contract provided:

5. In the event that the Purchaser pays less than ten percent (10%) of the purchase price as deposit then if the Purchaser commits a default hereunder the whole of the 10% deposit shall become due and payable notwithstanding that this Contract is not completed. This clause shall not merge on completion and the Vendor shall be entitled to sue for recovery of so much of the 10% deposit that remains outstanding as a debt due by the Purchaser to the Vendor.

23 Later variations of the contract increased the price to $6,810,000.00. The purchaser defaulted, and the vendor claimed $616,000.00, being the difference between $65,000.00 and 10% of $6,810,000.00. The primary judge gave judgment for the vendor for $616,000.00. The Court of Appeal upheld the purchaser’s appeal, holding that this amount was not part of the deposit but was a penalty.

24 The leading judgment in the Court of Appeal was that of Bryson JA. At par.[14], Bryson JA noted that the assumption in Special Condition 5 that the deposit was to be 10% was inconsistent with the clear provision on the front page that the deposit was to be $65,000.00; and he held that this clear provision was not overcome by the implication in Special Condition 5 that the deposit was 10%.

25 At par.[24], Bryson JA said this as to the relationship between deposits and penalties:

24 Where parties make an agreement for a sale which is to be completed at some time in the future it is unremarkable and only to be expected that the vendor will require the purchaser to pay some part of the purchase money straight away so as to show that the purchaser is in earnest in committing himself to pay the rest, on the understanding that the purchaser will not get his earnest money back if he does not complete the sale. For contracts of sale of land it has long been customary practice and established law that the purchaser pays a deposit on account of the purchase money when the contract of sale in writing is made, and cannot recover that deposit if he later fails to complete the bargain and pay the rest; whether or not the vendor’s losses are actually more or less than the amount of the deposit. Notwithstanding the apparent inconsistency the invalidity of contractual penalties does not apply to contractual provisions for forfeiture of reasonable deposits in sales of land. In New South Wales it has long been usual to require a deposit of 10% of the purchase money, and this practice has not encountered challenge; on the other hand provisions relating to forfeiture of purchase moneys other than a reasonable deposit should be regarded as open to challenge. The assumption that provisions for forfeiture of deposits of reasonable amount are effective underlies statutory provisions for relief against their forfeiture; see s.55 of the Conveyancing Act 1919. The exception from the law relating to penalties relates and relates only to deposits, that is, to payments which truly have the character of earnest money paid on or in relation to entering into the Contract, and although provisions of contracts almost always establish what the deposit is, it is not open to parties to avoid the operation of penalties law by designating a payment or an obligation as a deposit if it does not otherwise have that character.

26 Subsequently, at par.[34], he said this on the question whether Special Condition 5 provided for a penalty:

34 The references in Special Condition 5 to the deposit in the context of the obligation to pay up to 10% of the purchase price on default are confusing elements which do not, in my judgment, affect the essential character of the obligation as an additional payment which the purchaser must make if the purchaser is in any way in default. Where the additional payment was not made and, as in this case, the Contract has been terminated and the vendor sues for it as a debt, its character as a penalty, quite unrelated to any damage or loss incurred by the vendor, is in my opinion quite clear. If an attempt is made to consider it as a pre-estimate of damage, it is obvious that it is a grossly excessive amount in relation to some of the defaults upon which it may become payable, such as late delivery of the draft transfer, while for others, such as delay in completion or failure to complete by an essential time, the lack of any relation between a percentage of the purchase price and a pre-estimate of damage for breach demonstrates, to my mind, the absence of any justification.

27 It appears from these passages that there are two possibly significant differences between that case and this one. First, Bryson JA was able to say that the front page made it clear that the deposit was $65,000.00, and that the Special Condition in that case related to something which the contract was not treating as a deposit. Second, the amount in Special Condition 5 was payable on any default, no matter how trivial, so that its character as a penalty was clear.

28 On the first matter, in the present case the reference to deposit on the front page is expressly qualified by reference to Special Condition 14; so it is not possible to say that the front page makes it clear that the second $225,000.00 is not part of the deposit. It can also be said that this is clearer in the altered form of the contract, where the front page refers to the deposit as being $450,000.00 or 10% of the price.

29 The second matter is not directly relevant to the question of whether the second $225,000.00 is a deposit; but rather is relevant to the question whether, accepting it is not a deposit, it is or is not a pre-estimate of damages. That is a question on which Mr. Orlov did not address submissions; and in my opinion, accepting that the obligation to pay the second $225,000.00 would only arise in circumstances where the vendors have lost their bargain, nevertheless it cannot be considered a pre-estimate of damages. The first $225,000.00, which was undoubtedly a deposit, would be greatly in excess of expenses that could be lost in connection with the terminated contract; and there is no evidence to suggest that the loss of the bargain would involve other loss, for example because of some problem in effecting a re-sale for a similar price. In fact, it appears that the re-sale was for a higher price; and although this is not directly relevant, it tends to confirm that there was no reason to anticipate that a later re-sale would be for a substantially lesser price.

30 In those circumstances, the Court should conclude that, if the second $225,000.00 is not part of a deposit, provision for its payment would be a penalty and not enforceable. On that basis, the significance of the second difference from the case of Luu disappears.

31 Returning to the first possible point of distinction between Luu and the present case, in my opinion the statement of principle in the last sentence of par.[24] of the judgment in Luu is correct; so that the name which the parties have chosen to give to a payment is not determinative of whether or not it is a deposit. It is necessary also to look at the character of the payment and/or the obligation to make it. The first point of distinction between Luu and the present case relates only to the name the parties have chosen to give to the payment; and in my opinion the nature of the obligation to make the payment is more important in determining its character than the name chosen by the parties; although I do accept that in some cases the name could be relevant, particularly where a deposit is payable by instalments.

32 On that approach, in my opinion the obligation to make the second payment of $225,000.00 is not an obligation to pay a deposit or part of a deposit. There never would be a time when this second $225,000.00 (as such) would be paid so as to show that the purchaser is in earnest in committing himself to pay the rest. On the contrary, the only time when Special Condition 14 obliges the purchaser to pay this sum is when the purchaser has demonstrated that he is not in earnest, and indeed the termination of the contract means that he would not be able to complete the contract. The obligation to pay the second $225,000.00 is inconsistent with the characteristics of a deposit. In my opinion, this would equally be so whichever version of the front page was operative.

33 I do not think cases concerning payment of deposits by instalments suggest to the contrary of this. In those circumstances, there will in the normal course of performance of the contract come a time when money is paid and counts as showing the purchaser is in earnest in committing itself to pay the rest. It does not tell against this analysis that the obligation to pay may be accelerated in the event of default. Nor do I think that an unconditional promise to pay an amount on default can itself count as a deposit: that is the very sort of promise that will normally amount to a promise to pay a penalty, unless the amount in question is a genuine pre-estimate of damages.

34 Accordingly, in my opinion the alteration concerning the deposit did not affect the meaning or effect of the contract, so that a contract did come into existence. The vendors were entitled to forfeit the $225,000.00 paid on exchange; but they were not entitled to be paid the second $225,000.00, because it was a penalty.

CONCLUSION

35 It follows that the appeal should be allowed, to give effect to that analysis.

36 It is unnecessary to decide whether the primary judge was in error in not allowing the amendment. However, without going into my reasons for this, I would express my view that it was not shown that the primary judge’s exercise of discretion miscarried.

37 In my opinion, although the appeal was not totally successful, the respect in which it was not successful did not involve any severable issues that significantly added to the costs; and in my opinion the purchaser should pay the vendors’ costs of the appeal.

38 As regards the costs below, the vendors have failed on the proceedings they commenced, and the purchaser has failed on his cross-claim. In my opinion it would not be helpful to order that the vendors pay the costs of their claim and the purchaser pay the costs of the cross-claim, because it would be impossible to distinguish between these costs. In my opinion, the vendors as instigators of litigation in which they failed should pay more of the costs than the purchaser, especially where it is by no means certain that the purchaser would have claimed to recover $225,000.00 if the vendors had not brought the proceedings. In my opinion, the appropriate order is that the vendors pay one-half of the purchaser’s costs of the proceedings below.

39 My decision would mean that the vendors are entitled to the first $225,000.00, and to any interest that has accrued on it. I do not think the Court need make a declaration to that effect, and indeed no such declaration is sought either in the claim or cross-claim. I would propose the following orders:

1. Appeal allowed.
2. Orders of the primary judge set aside, and in lieu thereof:
(a) judgment for the purchaser on the vendors’ claim.
(b) judgment for the vendors on the purchaser’s cross-claim.
(c) subject to any previous orders, vendors to pay one-half the purchaser’s costs of the proceedings below.
3. Purchaser to pay the vendors’ costs of the appeal, and to have a certificate under the Suitors’ Fund Act if otherwise eligible.

40 SANTOW JA: I agree with Hodgson JA.

41 BASTEN JA: I agree with Hodgson JA.

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