These proceedings arise out of the sale of an apartment situated at Lot 1 The Walk 228-234 Pacific Highway, Hornsby ("the Property") off the plan.
On 25 September 2013, the plaintiff Mr Amritjit Singh ("Mr Singh") (as purchaser) entered into a Contract for the Sale of Land ("the Contract") with the first defendant The Walk Pty Limited ("WPL") (as vendor). The second defendant, CBMH Group Pty Limited trading as Harvie Real Estate Group ("Harvie") was the vendor's agent on the sale.
WPL issued a notice, on 9 October 2014, sent to Mr Singh and also to Mr Singh's solicitor, Mr Jack Singh, that the Contract was terminated for non-payment by Mr Singh of the balance of the deposit due under the Contract and advising also that the portion of the deposit which had been paid had been forfeited to WPL.
Mr Singh appears for himself and Mr L. Gor of Counsel appears for WPL and Harv.
The Contract contains the following relevant clauses in addition to providing for a purchase price of $515,000 and a deposit of 10% (i.e. $51,500) - see Exh A (the court book) page 20:
1.
"2 Deposit and other payments before completion
2.1 The purchaser must pay the deposit to the depositholder as stakeholder.
2.2 Normally, the purchaser must pay the deposit on the making of this contract, and this time is essential.
2.3 If this contract requires the purchaser to pay any of the deposit by a later time, that time is also essential.
2.4 The purchaser can pay any of the deposit only by unconditionally giving cash (up to $2,000) or a cheque to the depositholder or to the vendor, vendor's agent or vendor's solicitor for sending to the depositholder.
2.5 If any of the deposit is not paid on time or a cheque for any of the deposit is not honoured on presentation, the vendor can terminate. This right to terminate is lost as soon as the deposit is paid in full."
1.
"9 Purchaser's default
If the purchaser does not comply with this contract (or a notice under or relating to it) in an essential respect, the vendor can terminate by serving a notice. After the termination a vendor can -
9.1 keep or recover the deposit (to a maximum of 10% of the price);
9.2 hold any other money paid by the purchaser under this contract as security for anything recoverable under this clause-
9.2.1 for 12 months after the termination; or
9.2.2 if the vendor commences proceedings under this clause within 12 months, until those proceedings are concluded; and
9.3 sue the purchaser either -
9.3.1 where the vendor has resold the property under a contract made within 12 months after the termination, to recover -
• the deficiency on resale (with credit for any of the deposit kept or recovered and after allowance for any capital gains tax or goods and services tax payable on anything recorded under this clause); and
• the reasonable costs and expenses arising out of the purchaser's non-compliance with this contract or the notice and of resale and any attempted resale; or
9.3.2 to recover damages for breach of contract."
1. Special condition 78:
"Deposit by Instalments
(a) Notwithstanding clause 2.2, the Purchaser shall pay the total deposit of $51,500 as specified on the front page of the contract in the amounts and upon the dates as follows:
(i) $25,750- upon the date of this contract;
(ii) $25,750- on or prior to 4pm, 25 January 2014 [4 months from date of exchange]
(b) The purchaser acknowledges that the payment of the instalment deposit at the time set out in paragraph (a) is time of the essence and failure to comply with this requirement will be a fundamental breach of this contract entitling the vendor to terminate the contract forthwith, re-list the property for sale and sue the purchaser for damages incurred by the vendor."
Special condition 37 also deals with the deposit but it is not relevant to this dispute and neither Mr Singh nor WPL places any reliance on it.
In accordance with special condition 78(a)(i), Mr Singh paid the first instalment of $25,750 to the second defendant on execution of the Contract. Mr Singh did not however comply with special condition 78(a)(ii) because he failed to pay the second instalment of $25,750 on the due date, i.e. 25 January 2014.
On 20 February 2014, Mr Singh's solicitor sought and obtained from WPL's solicitors an extension of time for payment by Mr Singh until 28 February 2014. Mr Singh then paid $11,000 to WPL on 21 February 2014, and then his solicitor again sought and received an extension from WPL's solicitors for an extension of time to pay the balance until 5.00pm 25 March 2014 (time being expressed to be of the essence). Mr Singh did not make any further payment on or before 5.00pm on 25 March 2014 and, on 26 March, WPL gave Mr Singh until 27 March 2014 to pay the balance.
On 7 April 2014, Mr Singh sought a further extension of time from WPL (through Harvie) but did not receive a response.
On 14 April, Mr Singh paid $11,000 to WPL. There remained at that point $3,650 owing for the deposit. Mr Singh sought yet a further extension of time to pay the balance and, on 28 May 2014, WPL's solicitor wrote to Mr Singh's solicitor informing him that WPL agreed to a further final extension of time to pay the balance of the deposit by 18 June 2014 and that, in the absence of payment by this date, WPL would terminate the Contract. Mr Singh took no further action to pay the balance of the deposit as required by 18 June 2014, notwithstanding a call from Mr Harvie on 16 June reminding him that payment was due on 18 June.
WPL asserts that Mr Harvie informed Mr Singh on 4 September 2014 that Mr Singh needed to pay the balance immediately and that, failing this, WPL may terminate. Mr Singh sought a further extension of one week on that date, according to Mr Harvie, which was not agreed to by Mr Harvie, but, in any event, Mr Singh did not pay within the week and had still not paid by 9 October, which was the date of termination.
As I have mentioned, on 9 October, WPL, by its solicitor, sent to Mr Singh's solicitor a notice of termination in accordance with clause 2.5 of the Contract as a result of Mr Singh's breach of clause 2.3 of the Contract.
On 2 February 2014, following application for interlocutory relief sought by Mr Singh, orders were made in relation to the further conduct of this matter. There was included in the orders a requirement that Mr Singh pay the balance of $3,650 to the solicitors for WPL but on the basis that it was "without prejudice to the parties' rights". The amount was paid. The matter was given expedition and was stood over for hearing until today.
Mr Singh made two main submissions. The first was that the Contract had not been validly terminated and remains on foot. Mr Singh seeks specific performance of the Contract. The second was in the alternative, if the Court holds that the Contract was validly rescinded, then he seeks relief from forfeiture of the deposit paid.
I need to deal with the question of credit of the witnesses. Mr Singh was not in my opinion a credible witness and I would not accept anything said by him that was not corroborated by other evidence. I say that for the following reasons at least:
1. He was forced to admit that some parts of his affidavit were false.
2. His first affidavit omitted all emails and letters from WPL or its agents which on their face were inconvenient to the plaintiff's case and yet he, as I said, had said that he was endeavouring to inform the Court of all matters relevant to the Contract and its termination.
3. He sought in cross examination to assert conversations with Mr Harvie about which he had not given evidence in his affidavits, notwithstanding his acceptance in cross examination that when he made his affidavits he had intended to include all that he could remember in relation to the conversations. His constant assertions in cross examination of reliance on Mr Harvie's assurance that his part payment was "fine" seemed designed to deal with the inconsistent picture which emerged from the correspondence between WPL and his solicitor.
4. The evidence he himself tendered (see Exh A and B) establishes that as at June to October, and that is prior to 9 October, he did have sufficient funds in his account, by a small margin, to pay the $3,650 which remained unpaid, which was inconsistent with his evidence that he did not have the funds.
5. He stated in his first affidavit he was short of funds but then he denied that he told Mr Harvie that. In cross examination he initially sought to resist the proposition that he was short of funds but then admitted that he had been.
6. He admitted that he had seen correspondence addressed to his solicitors and then said he had not done so but later admitted that he had.
7. He sought in a most unconvincing way to endeavour to assert that he had attended Mr Harvie's office on 9 October to pay the $3,650, not knowing that the Contract had been terminated by WPL on that day. When he was cross examined out of that position, he tried to assert that he had intended to pay the money on 9 October, quite independently of learning of termination. If he did persist with this assertion, I am unable to accept that evidence; it is entirely inconsistent with his first affidavit (see paragraphs 16, 18). In particular at paragraph 16 he described the fact that he had been given a further extension to pay until 18 June and in 17 he said:
"I did not make any further payments and no one was chasing me for the small outstanding amount so I assumed all was well in that department and that the contract for sale would proceed once the development was completed. I heard nothing further until 9 October 2014 when my solicitor received a notice of termination."
So far as the other key witness in the case, who was Mr Harvie, I have no reason to doubt the veracity of his recollection and nothing was put in cross examination to detract from his evidence.
Mr Singh submitted that Mr Harvie is a person who is connected with WPL and has an interest in any commission. There were matters which were not put by Mr Singh to Mr Harvie. I am not able to accept that Mr Harvie is not a witness of truth and I accept his evidence wherever it is in conflict with Mr Singh. I should say, however, that the difference between Mr Harvie's version and the plaintiff's is quite limited and in some cases quite inconsequential.
One difference, for example, is in relation to whether or not on 4 September Mr Harvie did say that money had to be paid immediately. Although Mr Singh in his affidavit had said that Mr Harvie had said to him "pay as soon as possible", in cross examination he accepted that he had at least been told that it had to be paid. In any event, as I say, I accept Mr Harvie's evidence as to the conversations which were held with Mr Singh.
Mr Singh does not dispute that he did not pay the full amount of the deposit within the time provided for in the Contract or within the time extended by agreement of WPL. I have referred to Mr Singh's assumption that "all was well in that department". Mr Singh's assumption was not well founded and he ignored the following matters:
1. That he was originally required to have paid the remaining 50 per cent of the deposit on 25 January 2014.
2. That he had sought and obtained several extensions.
3. In respect of the outstanding balance of $3,650 he was, by the letter of 28 May 2014, given until June 18th to pay it. That letter sent to Mr Singh's solicitor made it clear that WPL regarded Mr Singh as in breach of Contract and that 18 June would be the final extension granted, and it said:
"If your client has not paid the balance of the deposit by 18 June 2014 we are instructed to terminate the contract."
1. Mr Singh did seek, on Mr Harvie's evidence, further extensions on September 4 saying that he would pay it in the next week (see Mr Harvie's affidavit paragraph 11) but irrespective of the fact that Mr Harvie did not agree to that extension, the fact is that Mr Singh did not pay the money even then and, indeed, not only did not pay it within the week, by which time on Mr Harvie's evidence he indicated he would pay it, but even within four weeks of that date.
Payment of a deposit in the purchase of a property is an essential requirement: see Brien v Dwyer (1978) 141 CLR 378 pp 385, 393, 397-398, 403 and 407. In Romanos v Pentagold Investments [2003] HCA 58, the plurality Gleeson CJ, McHugh, Gummow, Hayne and Heydon JJ said:
"[20] In Brien, Jacobs J described a deposit as:
"an assurance to the vendor, a security to him pending completion. He can take his property off the market and not concern himself with other offers in case the sale should go off, with the comfort at least that the deposit is there for his security."
This reasoning is no less applicable to contracts providing for the payment of a deposit in particular instalments at times each stated to be essential. That is the present case. Further, Brien is authority for the proposition that once there has arisen an entitlement to rescind for failure to pay the deposit, that entitlement may be exercised without the necessity that the purchaser first be given notice requiring payment to be made at a reasonable time."
Special condition 78(b) also makes clear that failure to comply with the requirements regarding the instalment deposits results in a fundamental breach of the Contract entitling the vendor to terminate. Whilst Mr Singh did not comply with s 78(a), WPL elected to keep the Contract on foot. On 28 May 2014 WPL provided Mr Singh with written notice of a further reasonable time, as I have said, warning him about the consequences if he did not pay.
As the Court in Romanos makes clear, there is no duty on a vendor to warn the purchaser of consequences of failure to pay the deposit but in any event Mr Singh was in fact warned.
Mr Singh in his closing submissions handed up a document (which I marked as MFI 2) and contended that WPL would make a large profit by keeping the property and the deposit. There is no evidence in support of that proposition but in any event I do not think it is relevant to the issue which the Court is called upon to resolve in this case.
Mr Singh also submitted that the amount withheld by him was small. That may be so but that does not detract from the fact of his failure to pay the deposit, as required by the Contract. The deposit was to be paid in accordance with the terms of the Contract except to the extent adjusted by agreement of the vendor. Substantial compliance is not relevant in this matter- what is required is the payment in full of the deposit specified in the Contract.
In my view WPL did not, by its conduct, remove the essentiality of time for the payment on the adjusted dates of the balance of the deposit. Mr Gor drew attention to an alternative argument should the Court not accept that based upon cases such as Carr v JA Berriman Pty Ltd (1953) 89 CLR 327 at pp 348-349 and Ogle v Comboyuro Investments Pty Ltd (1976) 136 CLR 444 at pp 458-459 and submits that if the essentiality was removed by any such conduct, then it was re-established by that letter. As I say, I do not think it is necessary to examine that but I would accept that if it were necessary for essentiality to be re-established then it was re-established by the letter of 18 June 2014.
Another point made by Mr Singh is that the vendor, that is WPL, did not rescind as quickly as it might have. I fail to see how this assists Mr Singh at all.
I am not satisfied that there is any estoppel, if that is indeed what Mr Singh is seeking to assert, by reason of anything done by WPL. It seems to me that WPL gave extensive indulgences to Mr Singh in relation to the payment of the deposit and that he failed to take up the opportunity that had been given by those indulgences. In my view WPL was entitled to terminate the Contract, as it did by notice of termination on 9 October 2014.
I now deal with the question of relief from forfeiture. The total deposit in this case was 10 per cent of the purchase price. It has long been accepted that 10 per cent is a reasonable deposit and hence not treated as a penalty: see Mehmet v Benson (1963) 81 WN Pt 1 (NSW) 188 at p 191; Lexane Pty Ltd v Highfern Pty Ltd [1985] 1 Qd R 446; Havyn Pty Ltd v Webster (2005) 12 BPR 22,837 at [131]-[137] and Santow JA's conclusion at [137] that:
"there is no jurisdiction in common law or in equity to relieve against the forfeiture of a reasonable deposit (such as the customary 10%)"
Both Romanos and Havyn draw attention to the statutory provision, that is s 55(2A) of the Conveyancing Act 1919 (NSW) which is in the following terms:
"(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."
Mr Gor raised the point that for s 55(2A) to be relied on by a party it needs to be specifically raised before the hearing. Mr Singh did not raise s 55(2A). However, having regard to the fact that he is unrepresented, I think it is appropriate to nevertheless have regard to that section and to consider if it assists him.
The application of that section was fully considered by the Court of Appeal in Nassif v Caminer [2009] NSWCA 45. The propositions to be drawn from Havyn are reiterated in the judgment of Macfarlan JA and reference is made to that reiteration in Sackville JA's judgment (with whom Basten JA agreed). Both Macfarlan and Sackville JJA draw attention to what was said in Romanos at [27] that the evidence in Romanos was insufficient to show that it would be unjust or inequitable to allow the vendor to retain the deposit, and Sackville JA saw the reasoning in Romanos as emphasising the significance of Santow JA's observation that:
"a Court will not lightly be moved to order the return of a deposit paid as an earnest of performance, and forfeited in accordance with the express terms of the contract when performance does not occur"
Further, as Macfarlan JA pointed out, the further proposition drawn from Havyn is that a forfeited deposit should not be characterised "as a windfall to the vendor, merely because it is forfeited" see paragraph [64].
Mr Singh made no submissions on this topic.
The discretion it seems clear from these cases is not fettered by principles of common law or equity, and also in this regard see Tanwar Enterprises Pty Ltd v Cauchi (2003) 217 CLR 315, but there is in my view nothing in the facts of this case to lead to the conclusion that it would be unjust or inequitable to permit the 10 per cent deposit to be retained by the vendor following the purchaser's default. On the contrary the vendor gave Mr Singh considerable indulgence in relation to his defaults and fair warning of the risk that he ran by failing to pay by 18 June 2014 what he had originally promised to pay by 24 January 2014. From 18 June 2014 to 9 October 2014 involved another extensive period in which Mr Singh, if he had wished, could have paid the outstanding balance.
Therefore, in my view the plaintiff's summons should be dismissed with an order that the plaintiff pay the defendant's costs of the proceedings. Mr Gor made it clear in the course of submissions that WPL does not seek to recover the $3,650 as a deposit which was paid to the solicitors Colin Biggers & Paisley by order of this Court. Accordingly, Mr Singh on the face of the matter is entitled to the return of that money. Mr Gor, however, flagged the possibility that should his client be successful in the proceedings and obtain a costs order against Mr Singh that he would make an application that the money otherwise to be available to be returned to Mr Singh be paid towards the defendant's costs.
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Decision last updated: 24 March 2015