Senavale v Nolan

[2000] NSWSC 619

Reported Decision: (2000) NSW ConvR 55-948

New South Wales

Supreme Court

CITATION:	SENAVALE v NOLAN [2000] NSWSC 619
CURRENT JURISDICTION:	Equity Division
FILE NUMBER(S):	SC 5038/1998
HEARING DATE(S):	11/04/2000, 12/04/2000
JUDGMENT DATE:	6 July 2000
PARTIES :	SENAVALE PTY LTD v KAY FLORENCE NOLAN AND HELEN FLORENCE NOLAN
JUDGMENT OF:	Master Macready at 1

COUNSEL :	Mr P. O'Loughlin with Mr H Woods (P) Mr J.M. Roper (D)
SOLICITORS:	Clinch Neville Long (P) Willis & Bowring (D)
CATCHWORDS:	Contract - Implication of terms. Held in the circumstances the suggested terms would not be implied. - Conveyancing - Contract rescinded by vendor. Whether notice to complete required completion by a time or date. On its construction held it required completion by a time. Whether sufficient time allowed to make time of the essence. Having regard to estoppel by convention sufficient time allowed. - Conveyancing - Statutory protection of purchasers. Held that in the circumstances no order should be made under s 55(2A) of the Conveyancing Act.
CASES CITED:	Codelfa Construction Pty Ltd v State Rail Authority of Nas Howship Holdings Pty Ltd v Leslie (1996) 41NSWLR 452 Capper v Thorpe (1998) 72 ALJR 716. Lester v Garland (1808) 15 Ves 248, 33 ER 748, Dodds v Walker (1981) 2 All Er 609 Carr - Keys v Avenus (1983) NSW Conv R 55-069 Missian Corporation Ltd v Telecom Auckland Ltd (1994) 2 NZLR 357. Karangahape Road International Village Ltd v Holloway 1989 1 NZLR 83; Lorne v Evans (1989) 1 Qd R 295) Pacleyn Pty Ltd v GP Harris Real Estate Pty Ltd (1987) 4 BPR 9267. Con-Stan Industries of Australia Pty Ltd v Norwich Winterhur Insurance (Australia) Ltd (1986) 160 CLR 226 at 244; Commonwealth v Verwayen (1990) 170 CLR 394 Associated Food v Baxter (1999) NSWSC 236. Mearns v Parras Holdings Pty Ltd (1994) NSW Conv R 55-705 at p 60,029 Carpenter v McGrath (1996) 40 NSWLR 39 Eighth SRJ Pty Limited v Merity Young J 25 March 1997 Bridges v McPhail 3 BPR 97189 Jampco Pty Ltd v Cameron (No 2) (1986) NSW Conv R 55-275 Gogard Pty Limited v Satnag Pty Ltd (1999) NSWSC 1283
DECISION:	Paragraph 58

- 1 -

IN THE SUPREME COURT
OF NEW SOUTH WALES
SYDNEY REGISTRY

EQUITY DIVISION

Thursday, 6 July 2000.

5038 of 1998 SENAVALE PTY LIMITED v KAY FLORENCE NOLAN & ANOR

JUDGMENT

1   MASTER: These are proceedings brought by a vendor in respect of the non completion of an agreement for sale of a unit to the defendants. 2   The contract for sale which was the 1996 Form of Contract was entered into on 5 December 1997. The vendor was the plaintiff its solicitors being Clinch Neville Long and the agent was Charles Stuart. The property, the subject of the sale, was unit 83 Hereford Court, 51 Hereford Street, Glebe. Although the contract contained provisions for purchasing of car spaces the unit was purchased without a car space. The price for the unit was $211,000 with a 5% percent deposit amounting to $10,550. The purchasers under the contract were the two defendants. The second defendant is the mother of the first defendant. In the provisions on the front page of the contract the area for setting out the purchasers’ solicitor shows the second defendant’s name, Helen Nolan and the address, 10/146 Alice Street, Newtown, NSW 2042. This was in fact the residential address of the second defendant. She was admitted as a solicitor although at the relevant times she had a restricted practising certificate and thus had to be employed by a solicitor with a full practising certificate. The matter is of some importance in the case because a substantial amount of the correspondence at the relevant times was addressed to Aitken, McLachlan & Thorpe a firm of solicitors by whom Mrs Nolan was employed. 3   The relevant special conditions in the contract included Special Condition 1(a) which provided that the contract was conditional upon registration of the strata plan. It provided that if the plan was not registered within six months from the date of the contract either party would have the right, after that six month period, but prior to registration, by notice in writing, to rescind pursuant to clause 19 of the contract. There was nothing in clause 1 which indicated an obligation on the vendor to register the plan once it became available from the Council. On the face of the conditions the vendor had up until the end of the six months within which to register the plan. 4   Completion was dealt with in special condition 2. Relevantly Special Condition 2(a) and (b) are as follows:-

“(a) Completion of this contract shall take place -
(i) on or before 28 February 1998 or
(ii) within fourteen (14) days from the receipt of notification from the Vendor or its solicitor that the Strata Plan has been registered, (whichever is the later) (hereinafter referred to as “the intended completion date”).
(b) If completion of this contract does not take place on or before the intended completion date then without prejudice to any other remedy which may be available to the parties, either party shall at any time thereafter be at liberty to serve on the other a Notice in writing requiring the other to complete this contract within fourteen (14) days of the date of such service; for the purpose of this contract such notice shall be deemed both in law and in equity sufficient to make time of the essence of this contract.”

5   It is important to note that the date in clause 2(a)(i) of 28 February 1998 was substituted for the original date in the clause which was 23 December 1997. I will refer to this aspect of the evidence later as it reflects negotiations prior to exchange for an extension of the period. 6   Service is dealt with in the ordinary case in this contract under clause 20.6. One of the sub-clauses, namely, 20.65 was modified in the present contract. The clause as modified was as follows:-

“A document under or relating to this contract is -
20.6.1 signed by a party if it is signed by the party or the party’s solicitor;
20.6.2 served it is served by the party or the party’s solicitor;
20.6.3 served if it is served on the party’s solicitor, even if the party had died or any of them has died;
20.6.4 served if it is served in any manner provided in s170 of the Conveyancing Act 1919;
20.6.5 served on a party if the document is sent by facsimile transmission to the fax number stated in this contract for that party’s solicitor and in any such case is deemed to be served when the transmission has been completed except where -
(a) The sender’s machine indicates a malfunction in transmission or the recipient immediately notifies the sender of an incomplete transmission in which case the facsimile transmission is deemed to not have been given or made, or
(b) The time of the dispatch is not before 5.00 p.m. (17.00 hours) local time on a business day in which case the document is deemed to have been served at the commencement of business on the next business day.”
20.6.6 served at the earliest time it is served, if it is served more than once.”

7   At this stage I will not deal with the whole of the history of the matter but will record the essential elements. The strata plan was actually lodged for registration on 23 February 1998 and registered on 26 February. On 27 February notices to the defendants advising of registration were sent which notices the second defendant says she received on Tuesday 3 March 1998. On 9 March 1998 the purchasers purported to terminate the contract which notice was not accepted. On 19 March 1998 a notice to complete was served which apparently was received by the second defendant on 21 or 23 March 1998. The notice called for completion by 3pm on Monday 6 April 1998. There was no completion and on that day at 5 minutes past 5.00 pm the plaintiff purported to terminate because of the failure to complete. 8   In due course the unit was resold under a contract of 13 August 1998 for $210,000 in respect of which purchase price $10,000 was allocated to a car space. The contract was completed on 15 September 1998. 9   The issues have been defined by pleadings and the relevant issues appear to be as follows:-

1. Whether the contract contained an implied term that it was subject to the defendants obtaining finance.

2. Whether the contract contained an implied term that the plaintiff would register the strata plan without delay.

3. Whether notice of registration of the strata plan was properly served.

4. Whether the notice to complete was properly served.

5. If the notice to complete was not properly served, are the defendants estopped from denying the validity of service.

6. Is it unconscionable of the defendants to rely on any failure by the plaintiff properly to serve the notice to complete.

7. If otherwise successful, the quantum of the plaintiff’s damages.

10   In this regard the plaintiff claims the following:-

Loss on resale 11,000.00
Rates and levies 904.03
Legal costs on sale 1,500.00
Finance application fees 1,150.00
Interest on the balance of purchase money
from 13 March 1998 to date of completion
of the sale on resale $9,940.12

8. Whether the plaintiff has failed to mitigate its loss.

9. Whether the defendants are entitled to the return of the deposit pursuant to s 55(2A) of the Conveyance Act (NSW) 1919 or under the law relating to relief against forfeiture.

11   I turn to each of these issues in turn.

1. Whether the contract contained an implied term that it was subject to the defendants obtaining finance.

12 This claim is raised in paragraph 15 of the cross claim and the particulars indicate that the implied term arose from conversations between the second defendant and Mr Furlonger, who was employed by the plaintiff’s agents and a solicitor acting for the plaintiff. It was said that the necessary finance was to be raised by effecting a simultaneous settlement of the sale of a property owned by second defendant being a property at 3/43 Bland Street, Ashfield and the purchase of the subject property. 13 The question of the simultaneous settlement was first raised by the second defendant with Mr Furlonger on 15 November 1997. Mr Furlonger advised that the strata plan would be ready for registration in early January 1998 and the second defendant advised that she would need to sell an existing property. Contracts were submitted on 18 November 1997 and between then and 15 December 1997 the second defendant discussed with Mr Finlayson an employee of the plaintiff’s solicitors the proposal for using funds from the sale for the purchase. She asked for the proposed date of 23 December 1997 to be replaced with a date towards the end of February 1998. This was consented to and contracts were exchanged with the date being shown as 28 February 1998. After exchange of contracts on 5 December 1997 there were a number of discussions that the second defendant had with the agent and the solicitors in early January 1998 when she enquired as to when the strata plan would be registered. At that stage no information was provided to her and on 22 January 1998 the second defendant exchanged contracts on the sale of the Ashfield property with settlement to be effected on 28 February 1998. 14 Towards the end of January and early February the second defendant sought an early occupation for her daughter to live in the unit. By this time she was being advised that the strata plan would not be likely to be registered until April or May 1998. The second defendant received consistent responses that she was not going to be given early occupation or allowed access to the unit to resell the same which the second defendant now contemplated doing. As I have mentioned the strata plan was registered on 26 February 1998. On 22 February 1998 the second defendant settled the sale of her Ashfield property and then used the proceeds of that sale to assist in the purchase of a property at Kings Cross. 15 The authority dealing with implied terms in these and in similar circumstances is that of the High Court in Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337. At page 346 His Honour Mr Justice Mason, as he then was, said the following:-

“For obvious reasons the courts are slow to imply a term. In many cases, what the parties have actually agreed upon represents the totality of their willingness to agree; each may be prepared to take his chance in relation to an eventuality for which no provision is made. The more detailed and comprehensive the contract the less ground there is for supposing that the parties have failed to address their minds to the question at issue. And then there is the difficulty of identifying with any degree of certainty the term which the parties would have settled upon had they considered the question.
Accordingly, the courts have been at pains to emphasize that it is not enough that it is reasonable to imply a term; it must be necessary to do so to give business efficacy to the contract. So in Heimann v. The Commonwealth 50 (1938) 38 S.R. (N.S.W.) 691, at p. 695 Jordan C.J., citing Bell v. Lever Brothers Ltd. 51 [1932] A.C. 161, at p. 226, stressed that in order to justify the importation of an implied term it is "not sufficient that it would be reasonable to imply the term. ... It must be clearly necessary". To the same effect are the comments of Bowen L.J. in The Moorcock 52 (1889) 14 P.D. 64, at p. 68; Lord Esher M.R. in Hamlyn & Co. v. Wood & Co. 53 [1891] 2 Q.B. 488, at pp. 491-492; Lord Wilberforce in Irwin 54 [1977] A.C., at p. 256; Scrutton L.J. in Reigate v. Union Manufacturing Co. (Ramsbottom) 55 [1918] 1 K.B. 592, at pp. 605-606.
The basis on which the courts act in implying a term was expressed by MacKinnon L.J. in Shirlaw v. Southern Foundries (1926) Ltd. 56 [1939] 2 K.B. 206, at p. 227 in terms that have been universally accepted: "Prima facie that which in any contract is left to be implied and need not be expressed is something so obvious that it goes without saying ... "

The conditions necessary to ground the implication of a term were summarized by the majority in B.P. Refinery (Westernport) Pty. Ltd. v. Hastings Shire Council 57 (1977) 52 A.L.J.R. 20, at p. 26: "(1) it must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it; (3) it must be so obvious that `it goes without saying'; (4) it must be capable of clear expression; (5) it must not contradict any express term of the contract."

16   In order to set the background to see whether a term might be implied I mention the important conversations with Mr Finlayson prior to exchange. There is little difference between the parties on those conversations. According to Mr Finlayson he had a call from the second defendant to the following effect:-

“Would it be possible for there to be a delayed settlement for unit 83, Hereford Court to the end of February. I am relying on the sale of a property at Ashfield to purchase this unit at Hereford Court. I do have, however, sufficient funds at this stage to cover the deposit and stamp duty in relation to the purchase.”

17   Mr Finlayson indicated he would get instructions which he did and he rang the second defendant back and said:-

“I’ve got instructions to agree to a completion date of 28 February or within 14 days of notification of registration of the strata plan, whichever is the later.”

18   The contract was thus amended and exchanged. 19   There were many courses open to the second defendant at the time she was considering exchanging. She could have attempted to negotiate for a clause making the purchase conditional upon her sale. She could have sought no amendment to the contract and hoped to arrange her finances accordingly. It is no doubt common for parties to either negotiate themselves in to a position of safety in respect of simultaneous sales and purchases or to take appropriate risks realising that these may involve extra costs for financing if things do not occur according to plan. There is nothing in the circumstances of this matter which would lead me to imply the terms suggested. It is certainly not so obvious that it goes without saying nor it is necessary to give business efficacy to the contract.

2. Whether the contract contained an implied term that the plaintiff would register the strata plan without delay.

20   Prior to exchange of contracts the only information given, this being without the authority of his employers or the vendor, was by Mr Furlonger who said prior to the discussions about the change to the contract completion date:-

“I am told by the Vendor it will be ready for registration early January. However, he doesn’t want us to tell people when it will be ready. I really should not have told you that.”

21   It was this that prompted the amendment to the contract which was sought by the second defendant. It is apparent from the evidence in the case that there are often quite sound reasons why a vendor would not immediately wish to register a strata plan. Registration involves liabilities for levies and early occupation of some units once the strata plan is registered. Importantly the contract itself was explicit in giving a time period within which the plan was to be registered. There is nothing in the surrounding circumstances which would lead me to imply a term of this nature. To do so would only have regard to the interests of one particular purchaser but not to the interests of the vendor in general and thus it could hardly go without saying. Accordingly, I decline to imply such a term.

3. Whether notice of registration of the strata plan was properly served.

22   On 27 February three facsimiles were sent to Mess Aitken McLachlan and Thorpe. Two of them related to unit 22 and the third related to unit 83 the one which the defendants were purchasing. It gave notice that the plan had been registered and that accordingly the due date for completion would be 13 March 1998. Leaving aside to whom the notices were addressed it is apparent on the evidence from her affidavit that the second defendant received the third notice on 3 March 1988. 23   The intended completion date is referred to in paragraph 2(a) of the Special Conditions and is dependent upon a receipt of notification from the vendor or its solicitor that the strata plan has been registered. Even on the second defendant’s own affidavit its receipt was on 3 March 1998 so the correct settlement intended completion date would have been 17 March 1998. As no notice to complete was issued prior to that date it would seem that appropriate notice had been given. The statement in the notice that the completion date would be 13 March 1998 is not necessary for its efficacy. For the issue of the notice to complete the vendor only needs to prove that the purchaser is in default of its liability to complete. This has occurred. 24   In any event it is clear that the notice of 27 February 1998 was faxed to Aitken McLachlan and Thorpe on 27 February 1998. Given what I say later it may well also have been sufficient service but in the circumstances it is irrelevant.

4. Whether the notice to complete was properly served.

25 The notice to complete was dated 19 March 1998 and was addressed to the defendants and their solicitors Aitken McLachlan and Thorpe. On the face of it it was served by fax with a covering letter on 19 March 1998. The notice required settlement in respect of which it made time of the essence by 3pm on Monday 6 April 1998 and appointed the vendor’s solicitor’s office as the place for completion. The only questions that are raised in respect of the notice to complete are the matters dealing with the notice of registration of the strata plan and service as I have previously indicated. The notice appears to have been faxed on 19 March. The second defendant was absent from Aitken McLachlan and Thorpe on that and the subsequent day. She says in her first affidavit that she was handed the notice by the receptionist on 21 March 1998. In a later affidavit she changed that date to 23 March she having noticed that the 21st was a Saturday. I am satisfied with her explanation for the change in her evidence. She immediately responded denying the efficacy of the notice as a result of which a further notice once again dated 19 March 1998 was sent to the second defendant at the address specified in the contract. It was the same as the previous one and did not of course give an appropriate period of notice. The matter falls to be determined in respect of the earlier notice that was forwarded to Aitken McLachlan and Thorpe. As the notice was received on 23rd by the second defendant this is service on that day. See cases such as Howship Holdings Pty Ltd v Leslie (1996) 41NSWLR 452 and Capper v Thorpe (1998) 72 ALJR 716. 26 In calculating the period of days “within” which something has to be done, the first day is excluded and the person has until the end of the final day. See Lester v Garland (1808) 15 Ves 248, 33 ER 748, Dodds v Walker (1981) 2 All Er 609 Carr - Keys v Avenus (1983) NSW Conv R 55-069 and Missian Corporation Ltd v Telecom Auckland Ltd (1994) 2 NZLR 357. Taking service to be on 23 March one thus excludes 23 March and the 14 days required by special condition 2(b). Accordingly, sufficient time was allowed to make time of the essence for 6 April. 27 However, the notice required completion by 3.00 pm on the 6th and, accordingly, I would have thought that this would be premature as time in respect of this calculation does not expire until the end of the 6th. It is possible for a notice to complete to make time of the essence for a particular time of day (see Karangahape Road International Village Ltd v Holloway 1989 1 NZLR 83 and Lorne v Evans (1989) 1 Qd R 295) although the usual rule is that a notice to complete makes time of the essence for a day. See Pacleyn Pty Ltd v GP Harris Real Estate Pty Ltd (1987) 4 BPR 9267. 28 The substantive part of the notice was as follows:-

1. The Vendor is ready and willing to transfer to you the property situated at Unit 83 “Hereford Court”, 51 Hereford Street, Glebe being the whole of the land comprised in Certificate of Title Folio Identifier 83/SP56640 (formerly being Lot 83 in an unregistered Strata Plan being part of the land in Certificate of Title Folio Identifier 1/8710211) in accordance with Contract for Sale of Land dated 5 December 1997 (the “Contract”).
2. You are required to complete the purchase and to pay the balance of the purchase monies to the Vendor or its agent on or before 3.00 pm on Monday 6 April 1998 and in this respect time is of the essence of the Contract.
3. The Vendor appoints 3.00 pm on Monday 6 April 1988 at the offices of Clinch Neville Long, Lawyers, Level 18, 201 Kent Street, Sydney as the time and place for completion.
4. Unless you complete within the time specified in this Notice, the Vendor will be entitled to terminate the Contract.”

29   Given the particularity of the notice I would have thought that the time was essential and was not merely a matter of convenience. Thus insufficient time was allowed if the notice was served on 23 March 1998.

5. If the notice to complete was not properly served, are the defendants estopped from denying the validity of service.

30 When the contract was first submitted by the vendor’s solicitors it was submitted to Helen Nolan at her home address. Thereafter correspondence between the solicitors was between Aitken McLachlan and Thorpe and Clinch Neville Long. This correspondence commenced on 28 January 1998 and continued until 11 March 1998. Thereafter the letters of the 19 March being the notices to complete were served. Subsequent to this event the correspondence between the parties once again was between the same firms of solicitors. The claim was put first on the basis of common law estoppel and it was suggested that the course of correspondence amounted to a representation of fact which was relied upon by Mr Finlayson. He has given evidence to say that it was his practise to reply to a firm of solicitors where he had received correspondence from that firm on behalf of a person or organisation. This would be a natural reaction of a solicitor and, indeed, to query the solicitor’s instructions would be most unusual. The case is also put on the basis of conventional estoppel. In Con-Stan Industries of Australia Pty Ltd v Norwich Winterhur Insurance (Australia) Ltd (1986) 160 CLR 226 the High Court at 244:-

“Estoppel by convention is a form of estoppel founded not a representation of fact made by a representor and acted on by a representee to his detriment, but on the conduct of relations between the parties on the basis of an agreed or assumed state of facts, which both parties will be estopped from denying.”

31 There was debate as to whether or not reliance was necessary. This reference to reliance probably diverts attention from the true nature of the basis of estoppel by convention. In the Commonwealth v Verwayen (1990) 170 CLR 394 Deane J in his identification of the conceptual foundation of estoppel by conduct said at p 444:-

“3. Since an estoppel will not arise unless the party claiming the benefit of it has adopted the assumption as the basis of action or inaction and thereby placed himself in a position of significant disadvantage if departure from the assumption be permitted, the resolution of an issue of estoppel by conduct will involve an examination of the relevant belief, actions and position of that party.”

32   What is really necessary to determine is whether the vendor’s solicitor adopted the assumption as the basis of action and there by placed himself in a position of significant disadvantage. The assumed fact was that the parties could correspond, for the purposes of the contract, between solicitors. 33   Of importance in deciding whether there was such an assumption the following seems to be relevant:-

1. The addressing of the totality of the correspondence between solicitors after the initial submission of the contract.

2. Mr Finlayson’s evidence of his practise of replying to solicitors’ correspondence direct to the solicitors concerned.

3. That Mrs Nolan spent her working hours at the offices of the solicitor and correspondence, particularly faxes, would be more timely and as convenient for her at that place.

4. That formal contractual documents such as the notice of registration of the strata plan were sent to the solicitors and no complaint was made about sending the notice to that address.

5. That there was correspondence between solicitors about an important contractual notice (the purchasers’ purported termination) without complaint.

6. There was no cross examination of Mr Neville who drew the notices or Mr Finlayson on this point.

7. The sending of the notice to complete was a serious step n the transaction.

34 In these circumstances, I am satisfied that I can infer that there was an assumption by the vendor’s solicitors of the assumed fact that I have identified and the significant disadvantage was the vendor’s solicitor’s reliance on that fact for the purpose of serving the notice to complete. 35 There was reference in argument to Associated Food Technology v Baxter (1999) NSWSC 236. I do not read that case as a requirement for “reliance”. In paragraph 16 of the judgment, Austin J seems to be merely referring to the absence of material facts necessary to prove the assumption and the disadvantage suffered. I note His Honour is of the view that such an estoppel may arise out of past contractual conduct rather than anything occurring before the relevant contract is made. 36 In these circumstances the first proper service of the notice to complete would have been on the 19th. Such service gives an appropriate amount of time as 14 days required by special condition 2(b) expired well before 6 April. 37 One matter that has to be determined is whether or not notice of recession can be given after the time appointed for settlement and before the end of the day appointed. In the facts as I have found them there was service of the notice on 19 March. Fourteen days expired well before 6 April and, accordingly, given that I have construed the notice to be one making time of the essence for 3.00 pm on the 6th notice of rescission after that time but on the 6th was appropriate. Even if this is not correct there are some authorities, for example, Santow J in Mearns v Parras Holdings Pty Ltd (1994) NSW Conv R 55-705 at p 60,029 which suggest there is little point waiting if the defendant is not going to complete. The second defendant had given a notice of termination on 9 March relying upon grounds which were not advanced in this case. The vendor did not accept that termination and required completion. No transfer was submitted for execution and a letter from the vendor’s solicitor pointing this out on 3 April was ignored. In these circumstances it would seem pointless for the vendor to wait until the 7th to give the notice. In any event notice was given immediately after what I would infer were normal office hours.

6. Is it unconscionable of the defendants to rely on any failure by the plaintiff properly to serve the notice to complete.

38   This was said in submissions to merely being another way of putting the estoppel argument. The matter has been dealt with above.

7. If otherwise successful, the quantum of the plaintiff’s damages.

39 The evidence before me shows that the property was resold by the vendor under a contract dated 13 August 1998 to Christine Glenda Watson and Leona Jean Goldsworthy. The purchase price was $210,000 apportioned as to the sum of $200,000 for the purchase of the unit and as to the remaining $10,000 for the grant of an exclusive use car park. This apportionment of the price is consistent with the marketing of the units. Accordingly, the loss on resale is $11,000 although the purchaser is to be credited with the forfeited deposit of $10,550. The deposit was invested and there may need to be some additional adjustment in this regard to take account of the interest on that deposit. 40 As a result of the loss of the sale the vendor has also incurred further rates and levies in respect of the property and the amount of these attributable to the default are $904.03. 41 A claim for legal costs of the sale to Watson and Goldsworthy includes two elements. The was first the costs incurred for the vendor in selling of $790. Costs on resale clearly would be recoverable as damages as there is evidence before me that the vendor has paid already his costs on the sale in respect of the sale to the plaintiff. Those costs were $600. Given the absence of cross examination on the likely extent of costs if the first sale had gone ahead, I conclude that the loss suffered is $790. The other component of the amount claimed is the sum of $800 which was paid pursuant to an arrangement which was available to all purchasers (including the defendants who did not utilise it) that the vendor would contribute to the purchaser’s solicitor’s costs if they were from a panel selected by the vendor. The contract provided that the vendor would pay that to the solicitors which they did and, accordingly, it would seem that this is recoverable damages. The amount of damages therefore under this head would be $1,590. 42 The other inducement which was offered to purchasers on a standard basis and in which in the instant case was not taken up by the defendants but was taken up by the purchasers on resale was the payment of the finance application fees. I am satisfied the evidence shows that these were paid by the plaintiff in the sum of $1,150 and although it was suggested in cross examination that there may have been some refund of the amount this was not accepted and, accordingly, it would seem that it is an allowable head of damage. 43 The remaining area is the question of interest. 44 There is a claim for interest from the time of the due date for completion up until the resale of the property. The present case is one where the plaintiff is suing for damages at common law. The contract provided for interest up to completion which would normally be construed as up to termination. In Carpenter v McGrath (1996) 40 NSWLR 39 the court held, in respect of a provision similar to the present one, that following the rescission of a contract by the vendor a claim could not be made for interest pursuant to that contractual clause. So far as interest after the date of termination is concerned a number of cases suggest that interest is not payable in these circumstances. In particular in Eighth SRJ Pty Limited v Merity Young J 25 March 1997 His Honour declined to allow such recovery on the basis that to allow a vendor to keep the land and have compensation for loss of its bargain and also to give it compensation for what it might have made out of the purchase is over compensating the vendor. A similar effect is the decision of Needham J in Bridges v McPhail 3 BPR 97189 in a situation where a vendor has a mortgage. In the circumstances of this case there is no claim that the vendor to the knowledge of the purchasers was using borrowed funds. 45 It was made clear that the interest is claimed under s 94 of the Supreme Court Act. This action is a claim for damages at common law for breach. 46 In Jampco Pty Ltd v Cameron (No 2) (1986) NSW Conv R 55-275 Young J held that in these circumstances the interest would be calculated on the balance of the net proceeds of sale up until the resale and, on the balance of the damages to which the plaintiff is entitled, from the date of resale at the court rate. He also held that it was necessary to see whether there should be any set-off allowed against that sum for interest because of the possession of the vendor or the amount that could have been earned by the plaintiff in re-letting the property pending a resale. He went on to say:-

“There are three ways in which this question can be approached. First it can be said that there is a duty on a vendor reselling similar to that on a mortgagee so that if a vendor is in possession pending a resale, it must use its best endeavours to get the best price on a resale and also is fully accountable for the use it makes of the property in the meantime. Secondly, there is the ordinary duty of a person claiming damages to mitigate their damages. Thirdly, there was the equitable principle referred to in Leggot v Metropolitan Railway Co (1870) LR 5 Ch 716, that equity only imposes a set-off on the vendor in these circumstances where it is fair to do so.
Whatever may be the position where the claim is under the contract for deficiency on a resale, as to which see later, it seems clear to me that when assessing common law damages, I am only concerned with principles of mitigation of damage. In the instant case, I am not convinced that any reasonable action taken by the vendor would have mitigated its damages. The onus of proving this is, of course, upon the defendants, see e.g. Garmac Grain Co v Faure & Fairclough (1968) AC1130 at p 1140.”

47 In the present case there was no evidence of any rent that could be achieved and, in the context of the resale of a unit in a block of new units, it would seem inappropriate to let the unit as this may have an effect on its price on resale. 48 The matter of interest was considered by Young J on the basis of a s 94 claim and not as a result of a contractual claim for interest. This did not appear to be considered by the majority in Carpenter in McGrath. In these circumstances I am bound to follow Young J and I will allow interest at court rates between termination and the date of completion of the contract for resale.

8. Whether the plaintiff has failed to mitigate its loss.

49   Evidence was given by the agent in charge of the resale of the unit as to the advertising programme involved and the sale of the unit. It seems to be consistent with the normal programme for sale of units and indeed was not challenged by the defendants who have the onus of proof in respect of the failure to mitigate loss. According to the second defendant there was an offer for sale to Leon and Evelyn Pepinglo of $200,000 plus $10,000 for a car parking space which was made to the vendor on 2 May. That offer was rejected by the vendor and it is worth noting that the price was somewhat less than that for which the defendants in the present proceedings had agreed to purchase the property. Towards early July Mr and Mrs Bladlock made an offer of $205,000 plus $10,000 for a car space but withdrew when they were unable to obtain finance. At the beginning of July the ultimate purchasers looked at the unit and made an offer of $200,000 for the unit plus $10,000 for the car space which the vendor accepted. 50   There was some cross examination of Miss Savage to suggest that the entry in her diary recording the offer of $215,000 from Mrs Bladlock was inconsistent with other entries she had made where she would indicate whether or not the car space or a lockup garage was included. Although there was some inconsistency I was generally impressed with the evidence of Miss Savage and I am prepared to accept that what she set out in her affidavit evidence was correct. 51   Although the unit was ultimately sold for the price which was offered by Mr and Mrs Pepinglo in May it would seem to me no blame can be attached to the vendor for failing to accept that offer particularly bearing in mind that the higher price obtained from the present defendants. No doubt as time went by it became appropriate to accept a price at that level having regard to the available offers that were made. In my view there is no substance in the allegation that the plaintiff failed to mitigate its loss.

9. Whether the defendants are entitled to the return of the deposit pursuant to s 55(2A) of the Conveyance Act (NSW) 1919 or under the law relating to relief against forfeiture.

52 Section 55 is in the following terms:-

“Right of purchaser to recover deposit etc

(1) In every case where specific performance of a contract would not be enforced against the purchaser by the Court by reason of a defect in the vendor's title, but the purchaser is not entitled to rescind the contract, the purchaser shall nevertheless be entitled to recover his or her deposit and any instalments of purchase money he or she has paid, and to be relieved from all liability under the contract whether at law or in equity, unless the contract discloses such defect and contains a stipulation precluding the purchaser from objecting thereto.

(2) If such undisclosed defect is one which is known or ought to have been known to the vendor at the date of the contract the purchaser shall in addition be entitled to recover his or her expenses of investigating the title.

(2A) In every case where the court refuses to grant specific performance of a contract, or in any proceeding for the return of a deposit, the court may, if it thinks fit, order the repayment of any deposit with or without interest thereon.

(3) On the application of the purchaser the Court may order payment under this section and declare and enforce a lien in respect thereof on the property the subject of the contract.

(4) This section applies only to contracts made after the commencement of this Act and shall have effect notwithstanding any stipulation to the contrary.

(5) This section applies to land under the provisions of the Real Property Act 1900.”

53 The law in relation to the section is conveniently detailed in the decision of Santow J in Gogard Pty Limited v Satnag Pty Limited (1999) NSWSC 1283 (23 December 1999)

[334] Subs(2A) of s55 of the Conveyancing Act 1919 is in much wider terms. According to the terms of the subsection the court may, if it thinks fit, order the repayment of any deposit with or without interest in every case where specific performance is not granted or in any proceeding for the return of a deposit. This Court may order return of the deposit notwithstanding the conclusion made above that this would have been a case in which a court could have ordered specific performance of the contract as against the purchaser. In the present case, the Plaintiff seeks return of the deposit in the further amended summons filed in court on 1 September 1999: see Huber v Conroy (1982) 1 NSWLR 143 per Holland J at 149,151.
[335] The subsection gives this Court a wide discretion to grant the order sought if it is so minded. The subsection can operate even where the contract for sale provides for the retention of a deposit where the purchaser is in breach of an essential term of the contract or any notice issued under it, as does the contract in the present case (see cl9 of the contract [PX5 6]). As I wrote in Terry v Permanent Trustee Australia Ltd (1995) 6 BPR 14,091 at 14,105:
“This provision has been liberally interpreted. It is not necessary that the court find inequitable conduct on the part of the vendor. Rather, in the exercise of its broad discretion, the court should look at whether in all the circumstances it could be said that it is unjust an inequitable to permit the vendor to retain the deposit forfeited on termination”.
[336] The onus lies on the purchaser to show that it is unjust and inequitable for the vendor to retain the deposit: Clarke v Dilberovic (1982) NSW ConvR 55-083, at 56, 491.

[337] In A A Jones & Son Pty Ltd v Weeden (1964) 82 WN(NSW)
326 Hardie J made an order for the return of a deposit under s55(2A) in circumstances where, although the Plaintiff had not established that a material and irremediable defect in title existed, the court was still unwilling to force the title on an unwilling purchaser. His Honour said of s55(2A):
“The language of the subsection,...., is appropriate to confer a wide discretion in the court to order a refund of the deposit. It is clearly available in cases in which the vendor's contractual right to forfeit the deposit is otherwise completely unassailable”: at 335
[338] His Honour in that case reached the conclusion that return of the deposit was appropriate on the basis that that the defects in title could only be proved or rectified in a “lengthy equity suit, and accordingly that specific performance would not have been ordered against the purchaser”: at 336.
[339] A similar approach was taken in Wilson v Kingsgate Mining Industries [1973] 2 NSWLR 713, in which Wootten J decided that an order should be made for the return of the deposit on the basis that it was inequitable, in all the circumstances of the case, that the vendor should retain the deposit as against a willing and able purchaser. In that case the Plaintiff purchaser had failed in its application for specific performance of the contract for sale of the property. Wootten J referred to the need to take into account the reason for a deposit to be paid at all under the contract:
“The purpose of a deposit is that, in addition to being a part payment, it is also an earnest to bind the bargain so entered into, and creates by the fear of its forfeiture, a motive in the payer to perform the rest of the contract...
It is no doubt important that the court should not adopt an attitude in ordering the return of deposits under s55(2A) which would weaken the proper function of a deposit in providing a sanction for purchasers treating the making and completion of a contract with due seriousness and good faith. On the other hand there seems every reason to exercise the discretion in favour of a purchaser who was willing and anxious to complete, but lost his opportunity through the temporary inadvertence of those he had properly employed to act for him.”: p735
[340] The effect of subs(2A) on the vendors right to forfeiture of the deposit was further explained by Street CJ in Lucas & Tait (Investments) Pty Ltd v Victoria Securities Ltd [1973] 2 NSWLR 268 at 272-273:
“The section was designed to provide relief to a purchaser against an unjust and inequitable consequence of forfeiture of a deposit. It is clear enough that at law a vendor's right to forfeit a deposit to himself in the event of a purchaser's default bears no necessary relation to the damages actually suffered by a vendor. At law a forfeited deposit could result in a vendor making a profit which in justice and equity he ought not to be permitted to enjoy at the purchaser's expense. In a complementary sense, an order for the return of the deposit does not necessarily affect the vendor's right to sue a defaulting purchaser at law and recover against him such damages as the vendor can prove. The jurisdiction under s55(2A) does not give to a court an overall discretionary supervision of monetary adjustments between parties to a contract under which a deposit was paid but which had been terminated. A vendor who forfeits a deposit in strict enforcement of his legal rights is not to be deprived of it under s55(2A) unless it is unjust and inequitable to permit him to retain it”.
[341] The question to ask, then, in relation to s55(2A) is whether the court is satisfied that there are special or exceptional circumstances where it would be unjust or inequitable for the vendor to retain the deposit: Terry v Permanent Trustee Australia Ltd (1995) 6 BPR 14,091; Mearns v Parras Holdings Pty Ltd (1994) NSW ConvR 60,025 per Santow J at 60,033; also see Lucas & Tait (Investments) Pty Ltd v Victoria Securities Ltd [1973] 2 NSWLR 268, Clurstock Pty Ltd v Timanu Pty Ltd (1988) NSW Conv R57,826, Pratt v Hawkins (1991) 32 NSWLR 319 (Young J).
[342] From the authorities one is able to ascertain that the court looks to matters such as “the conduct of the parties, especially the applicant, the circumstances which brought about the termination and forfeiture, and the amounts at stake”: Terry v Permanent Trustee Australia Ltd at 14,105. The court considers matters connected with the contract as well as the conscionability of the conduct of the parties after contracts are exchanged: see Pratt v Hawkins (1991) 32 NSWLR 319 at 324.
[343] For example, in Mayer v Vitale, a case in similar circumstances to the present litigation, Kearney J wrote:
“This was a case of a purchaser refusing to complete by deliberate reliance on grounds which I have held to be invalid. In all the circumstances it does not seem to me that it is unconscionable on the part of the Defendants to exercise heir right of forfeiture of the deposit having regard to the circumstances referred to in McLaren v Lucas & Tait Pty Ltd [1973] 2 NSWLR 268 and other relevant authorities. In my opinion the Plaintiffs' claim for return of the deposit should not be granted”: at 9172

54   In considering this claim it is worth noting that the second defendant is a solicitor who had had some experience with conveyancing and had, indeed, purchased several properties herself. One is thus not dealing with a individual who for some reason is not aware of market forces or has not been appropriately advised by her solicitor. 55   The circumstances surrounding the entering into the contract in its existing terms has been set out by me earlier in this judgment and I will not repeat what I there said. It was, of course, perfectly open to the purchasers to endeavour to negotiate for some better arrangement or, alternatively, not proceed with the purchase. This is very much a matter where purchasers (and in the case of the first defendant on the advice of her mother, the second defendant) have proceeded with the purchase and have taken risks. I have during the course of the judgment mentioned the other sales with which the second defendant was involved. She gave evidence that she had a line of credit of some $550,000 which enabled her to buy and sell different properties as she wished provided she did not exceed the total amount of the line of credit. By early February second defendant was agitating to try and find out when the strata plan might be registered. At that stage she had a conversation with Mr Furlonger of the agents when he indicated to her on 6 February that he suggested the vendor might leave it for a while and register around April. That produced a response which is set out by Mr Furlonger in his affidavit in the following terms:-

“The second defendant then said to me, “That’s a bit worrying. I have arranged for a simultaneous settlement of Glebe purchase and Ashfield sale for late February early March. As you know, I am also selling my Newtown property to purchase at Kings Cross, so I hope I can juggle things based on your advice.” (Helen Nolan had listed her Newtown property for sale with Charles & Stuart on 21 January 1998.) “I can probably use the Ashfield money for Kings Cross and settle that one early in March and then the Newtown property should be sold by at least April and I can transfer that mortgage to Glebe.” I said “That sounds as though it will work out, but it’s very complicated.” The second defendant said, “Yes, perhaps I’ll just on-sell Glebe as purchaser and not be bothered with it at all. I feel I am being mucked around too much by the vendor. Why can’t he tell us the status of the strata plan.?” I said “Well, the market on studio apartments is not as good as we anticipated and he’s waiting to get more sales there before he registers the strata plan. As I said before, the vendor expects to be able to settle Glebe late April, early May.”

56 It is to be remembered that the contract in the present case was entered into on 5 December 1997. These developments in respect of the sale of Ashfield and the purchase at Kings Cross appear to have occurred after that exchange. It seems perfectly clear that the second defendant has taken these steps well knowing her contractual obligations under the contract with which I am concerned. 57 In all these circumstances I cannot see that there are any special or exceptional circumstances where it would be unjust or inequitable for the vendor to retain the deposit. There does not seem to have been any matters concerning the conscionability of the conduct of the vendor after the contracts were exchanged. The vendor, for good reasons, and these were proper commercial reasons, refused to allow the purchasers into occupation or allow them to on sell the unit through its existing agents. Both of these matters on the evidence before me were quite against the vendor’s commercial interests. He had drawn the contract which the purchasers accepted which preserved his position in this regard. 58 It seems to me that the case is one where the second defendant knew of the situation she was contracting for and entered into the contract in full knowledge of the risks involved. In these circumstances I cannot see that there is any reason why I should exercise my powers under s 55(2A) on the general law in this regard to relieve the purchasers of the consequences of the forfeiture of the deposit. 59 I direct the parties to bring in short minutes.

Last Modified: 09/26/2000