J&Z Holding (Aust) Pty Ltd v Vitti Pty Ltd

J&Z Holding (Aust) Pty Ltd (the appellant) and Vitti Pty Ltd (the respondent) were parties to a contract for the sale of land. The dispute concerned the characterisation of a sum of $1.5 million paid by the appellant to the respondent under the contract. The appellant sought the repayment of this sum, alleging default by the respondent. The matter came before the Court of Appeal of the Supreme Court of Victoria.

The central legal issue before the Court was whether the $1.5 million payment should be construed as a "conventional deposit" that was repayable upon the vendor's default and recoverable in a claim for restitution, or as an option fee that, once paid, became the absolute property of the grantor (the respondent). This characterisation was critical to determining whether the appellant was entitled to its return.

The Court of Appeal considered the terms of the contract, acknowledging that it was poorly drafted. However, applying established principles of contractual construction, the Court determined that the payment was intended to be an option fee, not a deposit. The Court reasoned that the language used in the contract, particularly the provisions relating to the payment becoming "non-refundable" and the absence of any express condition for its return upon the vendor's default, indicated that the parties intended the sum to be an irrevocable payment for the grant of an option to purchase the land. The Court affirmed that where a contract clearly provides for a payment to be an option fee, it is not subject to the same rules as a conventional deposit, and its repayment is not automatically triggered by a vendor's breach.

The appeal was dismissed, with costs awarded to the respondent.