Thompson & Thompson v Anderson & Payne - [2016] SADC 107

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
THOMPSON & THOMPSON v ANDERSON & PAYNE
[2016] SADC 107
Judgment of Her Honour Judge McIntyre
29 August 2016
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - CONSIDERATION
On 5 December 2015 the respondents paid a deposit of $1000 to the applicants to secure a wedding venue for a date in February 2017. On 15 December 2015 the respondents cancelled the booking. The applicants refused to return the deposit saying that it was "non-refundable". Following a hearing in the minor civil division of the Magistrates' Court the respondents were ordered to pay the applicants the sum of $1000 plus a filing fee of $138.
HELD:
Application for minor civil review allowed. On analysis of the magistrate's decision, a contract existed between the parties. In the circumstances, the deposit constituted a penalty. It would be unconscionable for the applicants to retain the full deposit amount. The magistrate's judgment is set aside. Judgment for the respondents in the sum of $938.
Magistrates Court Act 1991 s38(6), (7), referred to.
Howe v Smith (1884) 27 Ch D 89, 91, 93, 95; Howe v Smith (1884) 27 Ch D 89; NLS Pty Ltd v Hughes (1966) 120 CLR 583; Commissioner of Taxation v Reliance Carpet Co.Pty Ltd. (2008) 236 CLR 342; Stockloser v Johnson [1954] 1 QB 476; Smyth v Jessep [1956] VLR 230; Re Hoobin Deceased; Perpetual Executors and Trustees Association of Australia Ltd v Hoobin [1957] VR 341; Coates v Sarich [1964] WAR 2; ; Deputy Commissioner of Taxation v Advanced Communications Technologies (Aust) Pty Ltd [2003] VSC 487; Fiorelli Properties Pty Ltd v Professional Fencemakers Pty Ltd (2011) 34 VR 257; Ringrow Pty Ltd v B.P. Australia (2005) 224 CLR 656, considered.

THOMPSON & THOMPSON v ANDERSON & PAYNE
[2016] SADC 107
Introduction

This is an application under section 38 of the Magistrates Court Act 1991 (SA) (“MCA”) to review a minor civil decision made on 10 June 2016 in the Magistrates’ Court.
The matter before the learned Magistrate was for the refund of a deposit paid to hire a wedding venue by the respondents, Mr Anderson and Ms Payne, to the applicants, Mr & Mrs Thompson. In an ex tempore decision the learned Magistrate found in favour of the respondents and ordered that the applicants pay the respondents the sum of $1,000 plus a filing fee of $138.
The applicants issued this application to review that decision by application to the District Court dated 30 June 2016.
Background
Mr Anderson and Ms Payne are engaged to be married. On 4 December 2015, following some email correspondence, they inspected Brooklyn Farm as a possible venue for their wedding. Brooklyn Farm is a venue operated by the defendants, Mr and Mrs Thompson.
At the inspection the Thompsons provided Mr Anderson and Ms Payne with a brochure which, amongst other things, included the fee structure, terms, conditions and payment terms for hire of the venue. That document included the words: “booking is secured upon payment of deposit = $1000. Deposit is non-refundable”. The brochure included a form entitled, “Acceptance of Terms”, which was to be completed by prospective hirers of the venue.
It is common ground that Mr Anderson and Ms Payne did not sign the acceptance of terms but they did pay an amount of one thousand dollars by way of electronic funds transfer to the Thompsons on or about 5 December 2015. Email correspondence confirms that this payment was made as a deposit to secure a booking at the venue on 25 February 2017. The Thompsons received the deposit and issued a receipt.
On 15 February 2016 Mr Anderson contacted the Thompsons by telephone to advise that he and Ms Payne had decided not to proceed with the booking. On 17 February 2016 Mr Anderson sent an email to the Thompsons seeking a return of the deposit. He was informed that the deposit was non-refundable. Mr Anderson and Ms Payne attempted to negotiate a resolution of this matter but the Thompsons maintained that they were entitled to retain the whole of the deposit. Accordingly, Mr Anderson and Ms Payne issued proceedings in the minor civil review jurisdiction of the Magistrates’ Court. Following a hearing on 10 June 2016 Ms Payne and Mr Anderson received judgment in their favour for the full amount of the deposit together with the filing fee.
Application for review
Mr and Mrs Thompson filed an application for review in this court on 30 June 2016 seeking that the judgment be set aside and contending that the learned Magistrate ought to have found that:
There existed a contract made on or about 5 December 2015 between the respondents and the applicants for the use and occupation of the applicant’s premises known as Brooklyn Farm at Myponga Beach;
There was a term of that contract that the deposit payable by the respondents in accordance with that contract and paid by them was non-refundable.
The nature of the application.
Section 38(6) of the MCA provides that the District Court may, on the application of a party dissatisfied with a judgment given in a minor civil action, review the matter. The decision of the District Court on such review is final and not subject to appeal.
The procedural rules applicable to a review are set out in section 38(7) of the MCA. The District Court may inform itself as it thinks fit and is not bound by the rules of evidence. In hearing and determining the review the court must act with equity, good conscience and the substantial merits of the case without regard to technicalities and legal forms.
The factual basis of this matter is not contentious. Neither party sought to adduce any additional evidence than that presented before the Magistrate. The matter proceeded before me as a legal argument.
The decision - 10 June 2016
The Reasons for Decision were delivered ex tempore. In those circumstances they should not be subject to an overly critical analysis. However, the findings of the Learned Magistrate on the issues of whether there was a contract between the parties and, if there was, what the terms of that contract were, are not made clear.
His Honour set out the arguments by both parties as to the existence or otherwise of a contract and as to its terms and effect before concluding as follows:
In this matter, I find for the plaintiffs. What happened is a regrettable occurrence, but I am of the view that equity or fairness dictates that there was not a binding contract, which provided for a non-refundable deposit.
Later he said:
The defendants, in my view, were not put out at all. Yes, they were upset, and I can understand why, but, whilst they were inconvenienced, I think that the best thing is for both parties to put what happened down to experience. Make it clear in the future that the deposit is non-refundable; spell it out; say those words, and have a contract signed to that effect.
Consequently, I am satisfied, on the balance of probabilities, that there was no contract providing that the deposit was non-refundable.
It is not clear to me whether the finding was that there was no contract between the parties or alternatively whether the finding was that there was a contract but that there was no term providing for a non-refundable deposit.
In those circumstances it is appropriate to reconsider the matter in light of the evidence presented at the Magistrates’ Court hearing and the matters put to me in the course of the review hearing.
Discussion
It is uncontentious that the Thompsons handed Ms Payne and Mr Anderson a copy of their brochure on 4 December 2015. It is not clear that Mr Anderson or Ms Payne properly read that document but plainly they received it and must have had regard to it in order to make the electronic funds transfer to the Thompsons. That is because the relevant banking details were set out in the brochure. The brochure provided that a deposit of $1,000 was required in order to secure the venue. The deposit was said to be non-refundable. The wording was unambiguous and set out in underlined capitals just above the banking details.
The day after the brochure was provided to Mr Anderson and Ms Payne they paid the sum of $1,000 to the Thompsons by way of electronic funds transfer to the bank account nominated on the brochure. It is my view that this transfer constituted payment of the deposit and acceptance of the terms and conditions set out in the brochure notwithstanding that Mr Anderson and Ms Payne did not sign the portion of the brochure entitled “Acceptance of Terms”. The contract was in written and verbal form. The written aspect comprised the brochure entitled, “Brooklyn Farm” and an exchange of emails on 5 December 2015 relating to the deposit. The verbal aspect comprised the discussion at Brooklyn Farm on 4 December 2015.
Mr and Mrs Thompson issued a receipt for the amount of the deposit on 5 December 2015. The receipt indicated that the total contract price was $3,800.00 and that the deposit was in part payment of that amount. The balance outstanding was $3,300.00 including a refundable bond of $500. The booking was for the period 24 February to 27 February 2017.
Mr Johnson and Ms Payne repudiated the agreement some 10 days after entering into it. This was a unilateral decision in which Mr and Mrs Thompson played no part. In those circumstances the Thompsons assert that they were entitled to retain the deposit.
In any contract a deposit constitutes an earnest to bind the bargain, and acts as a guarantee of due performance of the contract.[1] Generally, in the absence of an express contractual stipulation to the contrary, the recipient of the deposit is entitled to retain it where the payer defaults in the due performance of the contract.[2] However, there is authority for the proposition that restitution may be awarded if the recipient of the deposit has acted unconscionably in purporting to forfeit what is in effect a penalty.[3]
[1] NLS Pty Ltd v Hughes (1966) 120 CLR 583 & Howe v Smith (1884) 27 Ch D 89
[2] Howe v Smith (1884) 27 Ch D 89, 91, 93, 95 (Cotton LJ) 104-105 (Fry LJ); Commissioner of Taxation v Reliance Carpet Co. Pty Ltd. (2008) 236 CLR 342
[3] Stockloser v Johnson [1954] 1 QB 476
Whether a deposit can be characterised as a penalty has been the subject of conflicting decisions in Australia.[4] The question is far from settled. The deposit in this matter was nearly one-third of the total contract price and, in my view is substantially disproportionate to the likely expense, time and loss sustained by the Thompsons. Accordingly it ought properly to be characterised as a penalty. [5]
[4] Smyth v Jessep [1956] VLR 230; Re Hoobin Deceased; Perpetual Executors and Trustees Association of Australia Ltd v Hoobin [1957] VR 341; Coates v Sarich [1964] WAR 2; Deputy Commissioner of Taxation v Advanced Communications Technologies (Aust) Pty Ltd [2003] VSC 487; Fiorelli Properties Pty Ltd. v Professional Fencemakers Pty Ltd. (2011) 34 VR 257
[5] Ringrow Pty Ltd v B.P. Australia (2005) 224 CLR 656
Having determined that the deposit is a penalty I now consider whether it is unconscionable for the Thompsons to retain the whole of the deposit. It is difficult to quantify the loss sustained by the Thompsons by reason of the cancellation of a booking in general terms and in this case specifically. It is likely that they have suffered a loss in terms of their wasted time dealing with this booking; showing the premises, reading and responding to emails, telephone calls and receipting their payment. This process would need to be repeated in order to relet the venue. As against this, the booking lasted only 10 days. Further, at the time of withdrawal in December 2015 there was in excess of 12 months to the date of the actual booking in February 2017. Whilst it is not unreasonable for there to be an element of profit to the Thompsons given that this was a commercial transaction, the profit should not be in all the circumstances excessive.
Doing the best I can with the limited information available I consider that an appropriate allowance would be for the Thompsons to retain 20% of the deposit in the sum of $200 and for the balance to be returned to Mr Anderson and Ms Payne.
In those circumstances I set aside the judgment of the learned Magistrate dated 10 June 2016 and I substitute in its place judgment for the respondents in the sum of $800 plus a filing fee of $138, leading to a total judgment sum of $938.