Sydney Developments Pty Limited v Perry Properties Pty Limited - [2016] NSWSC 515

Supreme Court

New South Wales

Medium Neutral Citation: Sydney Developments Pty Limited v Perry Properties Pty Limited [2016] NSWSC 515
Hearing dates: 6 April 2016
Date of orders: 28 April 2016
Decision date: 28 April 2016
Jurisdiction: Equity
Before: Darke J
Decision:
Plaintiff purchaser not entitled to damages or to order for repayment of deposit. Purchaser’s caveat ordered to be withdrawn.

Catchwords: REAL PROPERTY – contracts for the sale of land – deposits – purchaser required to make two payments of ten per cent of purchase price as deposits – essential condition – purchaser fails to make second payment – vendor terminates contract and forfeits the first payment – whether condition a penalty – whether termination a wrongful repudiation – whether deposit should be repaid to purchaser
Legislation Cited: Conveyancing Act 1919 (NSW), s 55(2A)
Cases Cited: Andrews v Australia and New Zealand Banking Group Limited [2012] HCA 30; (2012) 247 CLR 205
Brien v Dwyer (1978) 141 CLR 378
Commissioner of Taxation v Reliance Carpet Co Pty Limited [2008] HCA 22; (2008) 236 CLR 342
Foran v Wight [1989] HCA 51; (1989) 168 CLR 385
Havyn Pty Limited v Webster [2005] NSWCA 182
Hawkins v Butcher [2002] NSWCA 237; (2002) 55 NSWLR 558
Iannello v Sharpe [2007] NSWSC 61; (2007) 69 NSWLR 452
Legione v Hateley (1983) 152 CLR 406
Lucas & Tait (Investments) Pty Limited v Victoria Securities Limited [1973] 2 NSWLR 268
Luu v Sovereign Developments Pty Limited [2006] NSWCA 40
Manufacturers House Pty Limited v Ashington No 147 Pty Limited [2005] NSWSC 767
Paciocco v Australia and New Zealand Banking Group Limited [2015] FCAFC 50
Rana v Dalla Costa [2014] NSWSC 1113
Romanos v Pentagold Investments Pty Limited [2003] HCA 58; (2003) 217 CLR 367
Workers Trust and Merchant Bank Limited v Dojap Investments Limited [1993] AC 573
Category: Principal judgment
Parties: Sydney Developments Pty Limited (Plaintiff)
Perry Properties Pty Limited (Defendant)
Representation:
Counsel:
Mr D A Conti (solicitor) (Plaintiff)
Mr R I Goodridge (Defendant)
Solicitors:
William Roberts Lawyers (Plaintiff)
NC Coombes & Co. (Defendant)

File Number(s): 2016/68571
Publication restriction: None

Judgment

Introduction

This case concerns a contract for the sale of certain properties in Ashfield. The parties entered into the contract on 2 September 2015, with the plaintiff as purchaser and the defendant as vendor. The purchase price under the contract was $4,658,888. The completion date was stated to be the 274th day after 2 September 2015 (that is, 1 June 2016).
Both parties claim that the contract has been terminated.
The defendant vendor asserts that it terminated the contract on 6 January 2016 pursuant to Special Condition 25 of the contract following the failure of the purchaser to pay the “additional deposit” required by that condition. Special Condition 25 is of central importance to the case. It provides:

Notwithstanding anything else in this contract it is agreed that the purchaser shall:
(a) pay to the vendor a deposit of 10% of the purchase price by bank cheque on…

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.

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Details

Case: [2016] NSWSC 515
Decision Date: 28 April 2016

CaseChat Overview and Summary

Sydney Developments Pty Limited brought a proceeding against Perry Properties Pty Limited in the Supreme Court of New South Wales, seeking a declaration that the forfeiture of a deposit by the vendor, Perry Properties, was unlawful and an order that the deposit be repaid. The dispute arose from a contract for the sale of land, under which the purchaser was required to make two payments of ten per cent of the purchase price as deposits. Perry Properties, the vendor, terminated the contract and forfeited the first deposit when the purchaser failed to make the second payment. Sydney Developments argued that the condition requiring the second deposit was a penalty, that Perry Properties' termination of the contract was a wrongful repudiation, and that the deposit should be repaid.

The court considered whether the condition requiring the second deposit payment was a penalty, whether the termination of the contract by Perry Properties amounted to a wrongful repudiation, and whether the deposit should be repaid to Sydney Developments. In determining whether the condition was a penalty, the court examined whether the condition was disproportionate to the legitimate interest of the vendor in securing performance of the contract. The court found that the condition was not a penalty as it was not unconscionable or extravagant, but rather a genuine pre-estimate of the loss that would result from the breach. Regarding the termination of the contract, the court held that Perry Properties was entitled to terminate the contract and forfeit the deposit as the condition was not a penalty and the purchaser had failed to comply with the terms of the contract. The court concluded that the deposit should not be repaid to Sydney Developments as Perry Properties was entitled to terminate the contract and forfeit the deposit.

The court dismissed Sydney Developments' claims and ordered that the deposit be retained by Perry Properties. The court held that the condition requiring the second deposit payment was not a penalty, that Perry Properties was entitled to terminate the contract and forfeit the deposit, and that the deposit should not be repaid to Sydney Developments. The court's decision provides clarity on the enforceability of conditions requiring multiple deposit payments in contracts for the sale of land and the consequences of a purchaser's failure to comply with such conditions.

Orders