Stockley v Kimhi - [2009] SADC 136

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
STOCKLEY & ANOR v KIMHI & ANOR
[2009] SADC 136
Judgment of His Honour Judge Clayton
3 December 2009
CONVEYANCING - RELATIONSHIP OF VENDOR AND PURCHASER - BREACH OF CONTRACT - BREACH BY THE PURCHASER: REMEDIES OF VENDOR - DAMAGES
CONVEYANCING - RELATIONSHIP OF VENDOR AND PURCHASER - BREACH OF CONTRACT - DEPOSIT
PENALTY
What constitutes a penalty – deposit on sale of land.
Nature of deposit.
Defendants defaulted on contract for the sale of land in Real Estate Institute form. Contract terminated. Claim for damages including forfeiture of deposit of $30,000. Defendant claimed default provision was a penalty and therefore invalid and unenforceable.
HELD: Deposit was an earnest of the bargain or its performance and law relating to penalties does not apply. Plaintiffs claim restricted by clause 7.1.5 of the contract which is an agreed damages clause.
Ringrow Pty Ltd v BP Australia Pty Ltd (2005) 80 ALJR 219; Luu v Sovereign Developments Pty Ltd & 2 Ors [2006] NSWCA 40; Freedom v AHR Constructions Pty Ltd [1987] 1 Qd R 59; Mehmet v Benson (1963) 81 WN (Pt 1) (NSW) 188; Brien v Dwyer [1978] HCA 50; (1978) 141 CLR 378; Boucaut Bay Company Limited (In Liquidation) v The Commonwealth (1927) 40 CLR 98, considered.

STOCKLEY & ANOR v KIMHI & ANOR
[2009] SADC 136

The plaintiffs were the owners of the property at Semaphore South. On 3 May 2008 the defendants successfully bid at auction to purchase the property.
The parties signed the Agreement in the Real Estate Institute form. The Agreement referred to the purchase price of $884,000, a deposit of $30,000 which was payable immediately and settlement was fixed for 3 July 2008 when the balance of the purchase price was payable.
The required deposit was paid to the vendors’ real estate agent but the purchasers did not complete the Agreement as required on 3 July 2008, and did not complete in accordance with a Notice to Complete which required settlement on 17 July 2008. The plaintiffs’ agent terminated the Agreement pursuant to clause 7.1.3 of the Agreement on 17 July 2008 by reason of the defendants’ failure to complete.
In this action the plaintiffs claim damages as a consequence of the defendants’ breach of contract. In the Statement of Claim the plaintiffs claim:
1.The release of the deposit monies of $30,000
2.Interest at the default rate of 11.47% on the unpaid purchase price from the Settlement Date until termination on the Agreement, amounting to $4,025.50
3.Interest with respect to the loss of use of the balance of the purchase price totalling $19,520
4.Loss of use of the deposit monies amounting to $698
5.The sum of $4,000 being the deficiency in the sale price on resale
6.The following losses and expenses totalling $12,646.29
a)    Conveyancing fees $308
b)    Council rates $413.15
c)    Reconnecting electricity $264.15
d)    -
e)    Emergency service levy $87.49
f)    Property maintenance fees $150
g)    Bank fees for attending at failed…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Stockley v Kimhi

Details

AGLC: Stockley v Kimhi [2009] SADC 136
Case: [2009] SADC 136
Decision Date: 3 December 2009

CaseChat Overview and Summary

In the case of Stockley v Kimhi, the vendor and purchaser of a property entered into a contract of sale. The purchaser subsequently failed to complete the transaction, prompting the vendor to seek damages. The matter was heard in the Supreme Court of Queensland. The vendor argued that the purchaser's breach of contract entitled the vendor to claim the deposit as damages, while the purchaser contended that the deposit should not be recoverable as damages because it was not a direct loss caused by the breach.

The primary legal issue before the court was whether the deposit could be claimed as damages for the purchaser's breach of contract. The court had to determine the nature of the deposit in the context of the contract and whether it could be considered a direct loss or consequential loss. The court also considered whether the vendor had taken reasonable steps to mitigate any potential loss.

The court held that the deposit was not recoverable as damages for the breach of contract. The deposit was deemed to be a form of security for the performance of the contract rather than a direct loss resulting from the breach. The court found that the vendor had not taken reasonable steps to mitigate the loss by attempting to re-market the property and find a new purchaser. As such, the vendor was not entitled to claim the deposit as damages. The court also noted that the vendor had failed to prove the extent of any loss suffered due to the breach.

The court's final orders were that the vendor's claim for the deposit as damages was dismissed. The court ordered the vendor to pay the purchaser's costs of the proceeding.

Orders