Blanco v Wan

Summary of salient evidence

1. Mr Blanco is the executor of the estate of his late mother, Leonarda Blanco. Her name remained recorded as the registered proprietor of the property at the time the contract for sale was entered into.
2. On about 30 October 2018, Mr Blanco engaged Mr Wardy of Bresic Whitney as selling agent. The property was listed for auction on Saturday 8 December 2018 at 1:30pm.
3. Ms Wan, in the company of her mother, inspected the property at least once, perhaps twice, before the auction date. On 5 December 2018 Mr Wardy sent an email to Ms Wan which provided information about the forthcoming auction, and a link to the form of contract. Ms Wan gave evidence to the effect that she did not read the contract or send it to her solicitors (Norris Allen) prior to the signing of the contract.
4. Ms Wan decided not to go to the auction at the property on 8 December 2018. Mr Wardy noticed that she was not present. He gave evidence that she had "indicated a lot of interest in the property" so he telephoned her at about 1:21pm to see whether she would be coming. According to Mr Wardy, Ms Wan said she was busy and could not physically make it to the auction. It appears that Ms Wan was in her home in Thornleigh at that time. In any event, it seems clear that arrangements were made between Mr Wardy and Ms Wan for her to bid at the auction on the telephone. These arrangements entailed the giving of certain details, including a copy of Ms Wan's driver's licence (sent, it seems, by text message to Mr Wardy), and the provision of an authority to the agent. At 1:32pm Ms Wan sent an email to Mr Wardy in the following terms: I give you authority to bid at the auction on my behalf for the above mentioned prooerty [sic] on the 5% deposit and six month settlement.
5. It appears that the auction commenced a short time later. Ms Wan was on the telephone to a colleague of Mr Wardy's (Mr Bader). Ms Wan says that she could not hear what was being said. She also says that she initially declined the requests of Mr Wardy's colleague to put in an opening bid, but ultimately did so. It is likely that this was, as Mr Wardy deposed, a bid of $1,980,000, made after a vendor's bid of $1,950,000. Ms Wan's bid was below the reserve price (of $2.1 million), and there were no other bids. The auction stalled. However, it seems that Mr Wardy continued to discuss a sale with one of the registered bidders who was present, and also Ms Wan.
6. According to Mr Wardy, Ms Wan made an offer of $2 million but would not go higher, and said "why would I bid against myself" and also said "I am out". In cross-examination, Ms Wan could not recall $2 million being mentioned but she gave evidence that she did say "well, why would I bid against myself" and also "that's it, I'm out". It is likely in my view that Ms Wan did make a bid of $2 million then, when pressed, maintained that she would go no higher. It seems that the telephone call to Ms Wan was thereupon brought to an end.
7. The property was passed in. However, Mr Wardy continued discussions with the bidder at the property. These discussions apparently went on for some time and after a while an offer of $2,050,000 was made.
8. Mr Wardy gave evidence that at about 3:00pm he received a telephone call from Ms Wan. There is no doubt that Ms Wan made such a call to Mr Wardy during that afternoon, although the respective accounts of the conversation differ. Mr Wardy deposed to the following effect: We took the registered bidder inside and we were waiting for his son to arrive, after having a discussion over the phone with his son they decided to place a bid at $2,050,000. Which at the time the owner was planning to exchange at that price. Whilst we were waiting I receive a call from Li Wan at around 3pm, and she said 'have you signed the contract yet' I said 'no we are currently waiting for the buyers relative to come as it will go in his name' she then said 'what price are you current at' I said '$2,050,000' she said 'I would like to place a bid at $2,055,000' so I said to the other buyer 'bidder on the phone has placed a bid at $2,055,000 are you in or are you out' he then replied '$2,060,000' then I told Li 'other bidder has just bid to $2,060,000' which she responded 'I bid $2,065,000' so I told the other bidder 'she has now bid to $2,065,000 what would you like to do' he said 'I would need to wait for my son to come before we decided to go any further' I told Li I will call her back once the bidders relative comes. Once the relative of the bidder came he said 'go to $2,070,000' which then I called and told Li and she said 'they can have it' then I hanged up and the bidder we were dealing with has realised they have stretched their budget over their original budget of $2,050,000. So I called Li back and said 'Li the buyer we have had retracted their bid given they have gone over their budget and would you be interested to discuss further' she replied 'yes, ok' I replied 'would you like to come to Tunstall to discuss' she said 'I don't mind' so I said 'look let me come to you to discuss' she replied 'ok, I'll text you my address'. I made my way to her home at 26 Handley Avenue, Thornleigh. I arrived at the property around 4.45pm. Li took me on a tour of the property prior to us discussing Tunstall Avenue. After about 20 minutes of being there, we decided to go inside the house and discuss the Tunstall property further.
9. Ms Wan gave evidence to the effect that she called only to find out the price at which the property had been sold. She deposed: About an hour after the auction, I called Roger Wardy to get the sold price more to assess the market. He said he was in negotiation and was waiting for the other buyer to bring in a deposit cheque. Then all of a sudden, he asked for my permission to come to my house to discuss with me. I rejected his request. The agent turned up at my house uninvited fifty minutes later by using the address on my driver's licence. I was not prepared to see him, nor was I impressed. I reiterated I had no intention to buy and explained that I had to sell before I could finance the new purchase, given the then market, I was not going to be able to afford it. Above all, my solicitor had not checked the contract. I tried to end our conversation a couple of times without success. (These paragraphs were specifically responded to by Mr Wardy in paragraphs 6 to 8 of his affidavit.)
10. It seemed to be accepted by Ms Wan at the hearing that she sent a text message to Mr Wardy containing her address details. She suggested, however, that this was not sent to him when he was still at the Kingsford property, but rather when he was at Pymble, having gone there on the basis of the address disclosed on Ms Wan's driver's licence. Mr Wardy did not accept that version of events.
11. Ms Wan and Mr Wardy are also at odds about much of what occurred at Ms Wan's Thornleigh home that afternoon. It will be necessary to return to some of the details of that evidence later in these reasons. It does seem clear, however, that Mr Wardy was at the property for a considerable period, about two hours at least, and during that time Mr Wardy handled negotiations between Mr Blanco and Ms Wan about the terms of a contract for sale.
12. This process evidently involved the making of amendments to the form of contract in relation to the time for settlement and the payment of the deposit. New Additional Conditions 58 and 59, which concern the deposit, were handwritten and apparently initialled by Ms Wan.
13. Mr Wardy provided a detailed account of what occurred whilst he was at Ms Wan's property (see paragraphs 20 to 24 of his affidavit). This account was not really challenged in cross-examination although Ms Wan suggested (at Transcript 37 and 38) that at one point a conclusion was reached that she should not be buying the property. Mr Wardy rejected that suggestion.
14. Ms Wan deposed, in essence, that against her wishes Mr Wardy persisted in pressing her towards the purchase, told her (jokingly) that he was not going to leave until she signed the contract and, being exhausted, she eventually gave in and signed the contract without being given the opportunity to read it (see paragraph 9 of her affidavit). She says that she thought she would think about it over the weekend and possibly cancel the contract "under cooling-off" on the Monday.
15. There is no doubt that before the end of their meeting Ms Wan gave Mr Wardy a cheque, made out to the Bresic Whitney trust account, in the sum of $80,000. Mr Wardy deposed that when Ms Wan gave him the cheque she told him she would make an electronic funds transfer on Monday, and asked that Mr Wardy hold off on banking the cheque.
16. Mr Wardy gave evidence that after the meeting with Ms Wan he met with Mr Blanco and an exchange of contracts occurred that night. I interpose that as the contract was made on the same day as the property was offered for sale by public auction and passed in, there was no cooling-off period (see s 66T(c) of the Conveyancing Act 1919 (NSW)). The contract contained a statement about the cooling-off period as required by s 66X of the Conveyancing Act.
17. The contract for sale is dated 8 December 2018. It employed the standard Law Society/Real Estate Institute standard form (2018 edition) supplemented by a number of Additional Conditions. As already noted, the price was stated to be $2,055,000 with a deposit of $205,500. However, further provision for the deposit was made in Additional Condition 58, one of the handwritten terms negotiated when Mr Wardy was at Ms Wan's property. Additional Condition 58 provides (ignoring words and figures that have been crossed out): 58. The purchaser acknowledges that the deposit in this matter is 10% and the vendor will accept payment of that 10% by a $80,000 installment [sic] payable on exchange and the further balance on or before settlement. The purchaser acknowledge [sic] in the event that the purchaser defaults under this contract, the purchaser will forfeit the full 10% deposit and the unpaid balance shall become payable immediately upon default to the vendor.
18. The purchaser's solicitor noted on the front page of the contract was Norris Allen Solicitors. Ms Wan had previously retained Mr Norris on property transactions. Ms Wan spoke to Mr Norris on Monday 10 December 2018 and presumably retained him on that occasion. She says that she told Mr Norris that she had done "something really stupid" and "made a mistake" and wanted to get out of the contract.
19. There is no dispute that the sum of $80,000 was placed into the agent's trust account and, further, that those funds remain held in that account, together with a small amount of interest. The evidence is unclear as to exactly how the funds were paid (whether by presentation of the cheque or by direct transfer) or when the funds were received. A letter sent by Mr Wardy to Mr Blanco on 10 December 2018 suggests that the deposit may have been paid by then, but in the witness box Mr Wardy clearly stated that the funds went into the trust account "later that week". Mr Wardy said that he had a conversation with Ms Wan on 10 December 2018 about the payment of the deposit. He denied that the conversation concerned Ms Wan wanting to pull out of the contract. Ms Wan gave evidence that on that occasion she told Mr Wardy that she wanted to get out of the contract and did not want to pay the deposit, and that he replied that she could not get out of the contract, and had to pay the deposit or she would be sued.
20. Ms Wan also gave evidence to the effect that she obtained advice from Mr Norris and another solicitor, Mr Rowlandson about getting out of the contract. She said that Mr Norris was doubtful about whether she could get out of the contract and wanted to see a full copy of the contract. I note in this context that on 13 December 2018 Mr Wardy sent Ms Wan a copy of the contract following a request by her. Ms Wan gave evidence that at least Mr Rowlandson told her that she could not get out of the contract, and further told her that in any event she would have to pay the deposit. It seems likely that the deposit funds were received into the trust account after that advice was given, probably late in the week of 10 December 2018.
21. On 19 December 2018 Norris Allen sent an email to Mr Blanco, advising that they were acting for the purchaser in relation to the contract, and stating that they looked forward to receiving a PEXA invitation. Norris Allen sent requisitions to Mr Blanco on 21 December 2018.
22. On 9 January 2019 Ms Wan sent an email to Mr Wardy in the following terms: Happy New Year. Is there any chance that we rent the house and pay them rent till settlement. It might make it easier to request longer settlement if needed later down the track. If yes, what is the weekly rent. I look forward to hearing from you.
23. The date for completion of the contract was governed by Additional Condition 57 which provided that completion was to take place on or before the latest of six months from the date of the contract or seven days after the vendor informs the purchaser in writing that the vendor is registered by transmission as the proprietor. That notification was given by email on 7 May 2019. Accordingly, the date for completion was six months from the date of the contract, namely, 8 June 2019.
24. On 15 January 2019 Norris Allen sent a letter to Mr Wardy in the following terms: We refer to the above matter and advise that Contracts were exchanged on 8 December 2018 at the sale price of $2,055,000.00. Completion is due to take place pursuant to Special Condition 57 of the Contract. We note your letter dated 10 December 2018 confirming the total amount received from the purchaser by way of deposit. Please invest the deposit and contact both parties directly to obtain their tax file numbers. If the deposit is not invested, please advise the clients directly. We will keep you informed and advise you once arrangements are made for settlement.
25. The documents in evidence show that thereafter steps were taken towards a settlement of the contract. For instance, a Foreign Resident Capital Gains Tax Withholding Certificate was provided by Mr Blanco on 8 May 2019, and answers to the requisitions were provided on 23 May 2019. By late May the parties appear to have been working towards a settlement to occur on the PEXA platform on 11 June 2019. It appears that on about 5 June 2019 Mr Blanco booked a settlement for 2:30pm on 11 June 2019 on the PEXA platform. Mr Blanco gave evidence that Norris Allen was invited to attend the settlement but they did not take up the invitation.
26. A Notice to Complete was served by Mr Blanco on Ms Wan and Norris Allen on 14 June 2019. The notice was in the following terms: 1. That JOSEPH MAXWELL BLANCO (hereinafter referred to as "the Vendor") having agreed to sell to you the premises known as 7A TUNSTALL AVENUE KINGSFORD NSW 2032 hereafter referred to as "the Property" pursuant to CONTRACT DATED 8 DECEMBER 2018 hereafter referred to as "the Contract" is ready and willing to transfer the Property to you. 2. Time under the Contract for completion has passed. 3. You are required to complete the purchase and to pay the balance of the purchase moneys and other moneys payable pursuant to the Contract on or before 12.00pm on Monday the 1st day of July 2019 and in this respect time is of the essence. 4. JOSEPH MAXWELL BLANCO appoints 12.00pm on Monday the 1st day of July 2019 through PEXA as the time and place for completion. 5. Unless you complete within the time specified in this notice JOSEPH MAXWELL BLANCO will be entitled to terminate the contract and rely upon his rights pursuant to the Contract.
27. On 17 June 2019 Norris Allen sent an email to Mr Blanco disputing the validity of the Notice to Complete "both as to form and substance". No grounds for the asserted invalidity were identified in the email and there is no evidence that any grounds have been asserted since that time. Ms Wan did not seek to attack the validity of the Notice to Complete and it seems to me to have been properly issued in accordance with cl 15 and Additional Condition 33 of the contract. The Notice to Complete was thus effective to make completion of the contract by 1 July 2019 an essential obligation.
28. Norris Allen and Ms Wan sought to negotiate an extension of the time for completion, and a deed was prepared by Mr Blanco to that effect, but the negotiations did not result in any concluded agreement.
29. Mr Blanco deposed that on 1 July 2019 Norris Allen did not take up the PEXA invitation to settle on that day and settlement did not occur. Mr Blanco further deposed that he was ready, willing and able to settle at that time. There was no challenge to that evidence. It is clear, from Ms Wan's evidence, that she was unable to settle the contract at that time.
30. On 2 July 2019 Mr Blanco served a Notice of Termination in the following terms: 1. By Contract for sale of land of property known as 7A Tunstall Ave Kingsford and dated 8 December 2019 Joseph Maxwell Blanco as Vendor agreed to sell the property to Li Wan as Purchaser, (the Contract). 2. By Special Condition 57 time for completion amongst other matters was agreed as 6 months after the date of the contract. 3. Time for completion has passed and the Purchaser has not completed the Contract. 4. By Notice to Complete addressed to the Purchaser and the Purchaser's Solicitor dated 14 June 2019, completion was required to be before 12.00pm Monday 1 July 2019 through PEXA and time for completion was made of the essence, (Notice to Complete). 5. Time for completion pursuant to the Notice to Complete has passed and the Purchaser has not accepted the invitation to join the PEXA workspace for completion and the Purchaser has not completed pursuant to the Notice to Complete. 6. The Purchaser is now in default of the contract pursuant to Clause 9 of the Contract. 7. The Vendor hereby now terminates the contract pursuant to Clause 9 of the contract. 8. The Vendor shall pursue his rights under the contract forthwith.
31. Clause 9 of the contract, referred to in the Notice of Termination, is in the following terms: 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 the 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 capital gains tax or goods and services tax payable on anything recovered 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.
32. I did not understand Ms Wan to contend that the plaintiff's termination of the contract was ineffective. She made no submissions to the effect that she had not breached the contract in an essential respect by failing to complete by 1 July 2019. Rather, her defence rested on the contentions that the contract should be set aside so as to be not enforceable against her, or that at least an order should be made for the return of the deposit. Those contentions were essentially based upon the circumstances in which the contract was entered into on 8 December 2018. It is convenient to deal with those circumstances now.

The circumstances in which the contract was made

1. The accounts given by Mr Wardy and Ms Wan as to the events of 8 December 2018 differ in numerous, and important, respects. Of particular importance are the accounts of what occurred at Ms Wan's Thornleigh home prior to her signing the contract and providing the cheque for $80,000. As noted earlier, Mr Wardy's detailed account of what occurred at Ms Wan's property on that day was largely unchallenged in cross-examination. Neither did Ms Wan seek to challenge the evidence given in cross-examination by Mr Wardy to the effect that pretty much all the time was taken up with discussion about terms and conditions, and that there was much going back and forth (via Mr Wardy) between Ms Wan and Mr Blanco. Aside from the lack of challenge, Mr Wardy's account of the course of the discussions appears plausible, and I note that the handwritten amendments to the form of contract amount to objective evidence that is consistent with Mr Wardy's account.
2. Mr Wardy appeared to give his evidence in a clear and forthright manner. I think that his evidence should be generally accepted as honestly given to the best of his recollection, and as essentially accurate and reliable. On the other hand, I am unable to accept Ms Wan's account of what occurred as accurate or reliable. She deposed that when she telephoned Mr Wardy "about an hour after the auction" she rejected his request for permission to come to her house to further discuss the matter, but Mr Wardy later arrived at her house uninvited. In the course of her cross-examination of Mr Wardy, however, she apparently accepted that she had sent him a text message containing her address details (albeit not whilst Mr Wardy was still at the Kingsford property). In addition, Ms Wan's testimony about being overborne or worn-down by pressure from Mr Wardy is difficult to accept in the circumstances. Ms Wan is a qualified accountant who has worked as one for many years; she also has some experience of the buying and selling of properties. Moreover, there is evidence to suggest an ability to undertake negotiations in relation to a property purchase. The evidence suggests, for example, that when Ms Wan had earlier been pressed to increase her offer above $2 million she had rebuffed the suggestion by saying "why would I bid against myself?". She was also able to say "that is it, I am out". Ms Wan also gave evidence that she had "refused" to put in an opening bid at the auction.
3. I have little doubt that Mr Wardy, as the selling agent, would have been doing his best to encourage Ms Wan to agree to proceed to a purchase. I would have little doubt that he was persistent in that regard. However, I am not prepared to accept that Ms Wan was at any time overborne or worn-down by him such that she was unable to adequately look after her own interests in the negotiations that were taking place. In particular, I do not accept that Ms Wan ultimately signed the contract (and provided the $80,000 cheque) because she "gave in" to Mr Wardy, or because she "simply could not think or talk" or was exhausted.
4. In this regard it is noteworthy that Ms Wan succeeded in not only negotiating a delayed settlement period, but also succeeded in negotiating a special condition in relation to the deposit that required payment of only $80,000 on exchange of contracts. That sum is less than 4% of the agreed purchase price.
5. I have not overlooked Ms Wan's evidence to the effect that she had not read the contract (which was available to her via the email sent by Mr Wardy on 5 December 2018), or obtained advice from a solicitor about it, before she signed. Ms Wan does not suggest that any particular terms were unexpected or unusual, or operated against her in a harsh manner, although she does complain that she was not aware that there was no cooling-off period. Even if that is true, there is no evidence that Mr Blanco or any agent of his represented that there was a cooling-off period, and there is no evidence that Ms Wan made any enquiry about the existence of a cooling-off period. It is likely in my view that if this was a matter of importance to her, she would have raised it prior to signing.
6. Ms Wan also complains that Mr Wardy made false statements to her, including about being able to sell her property for her so that she could settle the purchase of the Kingsford property. No evidence of any such statements was adduced by Ms Wan in a proper admissible form. Mr Wardy gave evidence in cross-examination about what he said concerning the selling of Ms Wan's property. I generally accept Mr Wardy's evidence about that matter. It was not established that any false statements were made, or that anything said by Mr Wardy was of a misleading character.

Should the contract for sale be set aside?

1. Section 7(1) of the Contracts Review Act 1980 (NSW) ("the Act") provides: 7(1) Where the Court finds a contract or a provision of a contract to have been unjust in the circumstances relating to the contract at the time it was made, the Court may, if it considers it just to do so, and for the purpose of avoiding as far as practicable an unjust consequence or result, do any one or more of the following: (a) it may decide to refuse to enforce any or all of the provisions of the contract, (b) it may make an order declaring the contract void, in whole or in part, (c) it may make an order varying, in whole or in part, any provision of the contract, (d) it may, in relation to a land instrument, make an order for or with respect to requiring the execution of an instrument that: (i) varies, or has the effect of varying, the provisions of the land instrument, or (ii) terminates or otherwise affects, or has the effect of terminating or otherwise affecting, the operation or effect of the land instrument.
2. The term "unjust" is defined in s 4 of the Act to include "unconscionable, harsh or oppressive".
3. By s 9(1) of the Act, it is provided that in determining whether a contract or a provision of a contract is unjust, the Court shall have regard to the public interest and to all the circumstances of the case. By s 9(2) of the Act, the Court is required to have regard to various particular matters to the extent that they are relevant.
4. The manner in which the statute is to be applied may be illustrated by reference to two decisions of the Court of Appeal.
5. First, in West v AGC (Advances) Ltd (1986) 5 NSWLR 610 McHugh JA (with whom Hope JA agreed) stated at 620: Under s 7(1) a contract may be unjust in the circumstances existing when it was made because of the way it operates in relation to the claimant or because of the way in which it was made or both. Thus a contractual provision may be unjust simply because it imposes an unreasonable burden on the claimant when it was not reasonably necessary for the protection of the legitimate interests of the party seeking to enforce the provision: cf s 9(2)(d). In other cases the contract may not be unjust per se but may be unjust because in the circumstances the claimant did not have the capacity or opportunity to make an informed or real choice as to whether he should enter into the contract: cf s 9(2)(a), 9(2)(e), 9(2)(f), 9(2)(g), 9(2)(i), 9(2)(j). More often, it will be a combination of the operation of the contract and the manner in which it was made that renders the contract or one of its provisions unjust in the circumstances. Thus a contract may be unjust under the Act because its terms, consequences or effects are unjust. This is substantive injustice. Or a contract may be unjust because of the unfairness of the methods used to make it. This is procedural injustice. Most unjust contracts will be the product of both procedural and substantive injustice.
6. Secondly, in Provident Capital Ltd v Papa (2013) 84 NSWLR 231; [2013] NSWCA 36 Allsop P stated at [7]: The broad evaluation of unjustness under the Contracts Review Act 1980, s 4, s 7 and s 9 involves the normative evaluation of the totality of relevant circumstances. Inevitably minds may differ as to conclusions about such questions. Also, it is often not fruitful to compare other cases with the particular circumstances at hand, lest one be deflected from an appropriate overall assessment by focus on particular aspects relevant to any such comparison. Central to the normative evaluation is the recognition that there is a need for the protection of some people in some circumstances, who are not able fully to protect their own interests against factors that may cause injustice. That vulnerability may come from one or more of many circumstances, such as lack of education or of intelligence, from gullibility, from the predation of fraud and greed, and also sometimes from loyalty and love. The characterisation of a contract as unjust and the sheeting home to the other contracting party of the consequences of its unjustness may be a difficult evaluative exercise. At its heart, however, is the recognition of the inadequacy of one party to protect her or his interests in the circumstances….
7. I have considered the circumstances that pertained to the contract when it was entered into on 8 December 2018, and I have had regard to the public interest and the matters required to be considered in accordance with s 9 of the Act. Having done so, I am not satisfied that the contract for sale was relevantly unjust at the time it was made.
8. In my opinion, neither the contract as a whole, nor any particular provisions of the contract, should be regarded as unjust. In reaching that conclusion I have considered the manner in which the contract was made, the substantive terms of the contract, and the manner in which the contract would operate (including the absence of a cooling-off period).
9. I do not think that the contract ought be regarded as one that operates in relation to Ms Wan in an unconscionable, harsh or oppressive manner. In my view, Ms Wan freely entered into the contract with an adequate appreciation of its main terms including as to price, deposit and time for completion. Those terms were all the subject of negotiation. If Ms Wan did not understand that there was no cooling-off period, that was not the fault of Mr Blanco or any of his agents.
10. I do not think that there was any unfairness to Ms Wan in the way in which the contract was ultimately negotiated and signed. She was in a position to protect her own interests, and her ability in this regard was not overborne or worn-down by any undue pressure from Mr Wardy. There was no material inequality of bargaining power as between Mr Blanco and Ms Wan.
11. It does appear that Ms Wan had second thoughts about the purchase, and I accept that she sought legal advice from solicitors about getting out of the contract. In that regard, it is noteworthy that in her own evidence Ms Wan said that she told Mr Norris that she had done "something really stupid" and made a "mistake". Those statements are suggestive of a problem of her own making rather than one brought about by any conduct on the part of Mr Blanco or his agents. It should be noted that at no stage did Mr Norris write to Mr Blanco to suggest that the contract for sale was in some way an unjust contract.
12. For the above reasons, Ms Wan's claim that the contract should be set aside must be rejected. My findings in relation to that claim also lead to the conclusion that no sufficient basis has been shown to warrant an order for the return of any deposit paid by Ms Wan.

Termination of the contract for sale

1. The evidence is clear that Ms Wan failed to complete the contract by 1 July 2019. By reason of the service of the Notice to Complete on 14 June 2019, completion by 1 July 2019 was an essential obligation. Accordingly, Ms Wan's failure to complete by that date amounted to a failure to comply with the contract in an essential respect within the meaning of cl 9 of the contract. Mr Blanco thus had a right to terminate the contract by notice, and such notice was given on 2 July 2019. In my opinion the Notice of Termination was effective to terminate the contract. A declaration to that effect should be made.
2. I turn now to consider Mr Blanco's various claims for monetary relief against Ms Wan.

Mr Blanco's claim to recover the deposit

1. Clause 9 of the contract operates where the vendor has terminated the contract due to the failure of the purchaser to comply with the contract in an essential respect. Clause 9.1 provides that in these circumstances the vendor can keep or recover the deposit to a maximum of 10% of the price.
2. Mr Blanco invokes cl 9.1 to claim an amount of $205,500, which is 10% of the purchase price. That amount consists of the sum of $80,000 that was paid by Ms Wan in the week following the exchange of contracts, and the sum of $125,500 which has not been paid by Ms Wan.
3. Clause 9 provides for the keeping or recovery of "the deposit". On the front page of the contract the amount of $205,500 was inserted next to "deposit". The notion of the deposit is further dealt with in Additional Condition 58 which provides: 58. The purchaser acknowledges that the deposit in this matter is 10% and the vendor will accept payment of that 10% by a $80,000 installment [sic] payable on exchange and the further balance on or before settlement. The purchaser acknowledge [sic] in the event that the purchaser defaults under this contract, the purchaser will forfeit the full 10% deposit and the unpaid balance shall become payable immediately upon default to the vendor.
4. It can be seen that the parties have thereby described the deposit as "10%", which may be understood as $205,500, being 10% of the purchase price of $2,055,000. On that basis, Mr Blanco seeks to keep or recover the sum of $205,500.
5. Subject to one qualification, Mr Blanco would clearly have that entitlement. It is well-established that the vendor under a contract for the sale of land is generally entitled to forfeit a reasonable deposit (of no more than 10% of the price) upon termination for the purchaser's breach. This general proposition is underpinned by an acceptance that the principles concerning penalties and forfeitures do not apply to such stipulations in contracts for the sale of land (see Havyn Pty Ltd v Webster (2005) 12 BPR 22,837; [2005] NSWCA 182 at [131]-[137]; Luu v Sovereign Developments Pty Ltd (2006) 12 BPR 23,629; [2006] NSWCA 40 at [24]-[27]; Iannello v Sharpe (2007) 69 NSWLR 452; [2007] NSWCA 61 at [31]; Commissioner of Taxation v Reliance Carpet Co. Pty Ltd (2008) 236 CLR 342; [2008] HCA 22 at [25]-[26]; Andrews v Australia and New Zealand Banking Group Ltd (2012) 247 CLR 205; [2012] HCA 30 at [43]).
6. The qualification to which I have referred is that this exception to the principles of penalties and forfeitures applies only in respect of payments that truly have the character of a deposit. As stated by Bryson JA (with whom Handley and McColl JJA agreed) in Luu v Sovereign Developments Pty Ltd (supra) at [24]: The exception from the law relating to penalties relates and relates only to deposits, that is, to payments which truly have the character of earnest money paid on or in relation to entering into the Contract, and although provisions of contracts almost always establish what the deposit is, it is not open to parties to avoid the operation of penalties law by designating a payment or an obligation as a deposit if it does not otherwise have that character.
7. That statement of principle was expressly adopted by Hodgson JA (with whom Santow and Basten JJA agreed) in Iannello v Sharpe (supra) at [31], where his Honour continued: …so that the name which the parties have chosen to give to a payment is not determinative of whether or not it is a deposit. It is necessary also to look at the character of the payment and/or the obligation to make it. The first point of distinction between Luu and the present case relates only to the name the parties have chosen to give to the payment; and in my opinion the nature of the obligation to make the payment is more important in determining its character than the name chosen by the parties; although I do accept that in some cases the name could be relevant, particularly where a deposit is payable by instalments.
8. It is thus relevant to consider whether payments that are claimed to be recoverable as the deposit or part of the deposit truly bear the character of a deposit.
9. The nature of a deposit has been variously described (see, for example, Brien v Dwyer (1978) 141 CLR 378 at 385-6, 392, 398, 401 and 406). It was stated by the High Court in Commissioner of Taxation v Reliance Carpet Co. Pty Ltd (supra) at [22] and [25]-[26] that a deposit in the conveyancing context has several aspects, including that a deposit is provided as an earnest to bind the bargain, and is provided as a form of security for the performance by the purchaser of its obligations under the contract (see also Luu v Sovereign Developments Pty Ltd (supra) at [24] and Iannello v Sharpe (supra) at [31]).
10. There can be no doubt that the $80,000, which was required by Additional Condition 58 to be paid on exchange of contracts and was in fact paid within a few days of exchange, is in the nature of a deposit. However, the position is somewhat different in respect of the "further balance" of $125,500. Additional Condition 58 provided that such amount was payable "on or before settlement", unless the purchaser "defaults under this contract", in which case the full 10% deposit is forfeited and the "unpaid balance" becomes payable to the vendor immediately. In my opinion the reference to "settlement" in Additional Condition 58 should be read as the date upon which settlement of the contract actually occurs.
11. Accordingly, if the contract was performed in accordance with its terms, the "further balance" would not have to be paid before the actual settlement of the contract. In this regard, the position is similar to that found in Cole v Raykir Holdings Pty Ltd [2019] NSWSC 1017 at [83] where the view was expressed (obiter) that a so-called Balance Deposit required to be paid "on or prior to completion" could not be characterised as an earnest of performance and hence was not a payment truly in the nature of a deposit (see also Kazacos v Shuangling International Development Pty Ltd (2016) 18 BPR 36,353; [2016] NSWSC 1504 at [37]-[38] per White J (as his Honour then was)). The only circumstance in which the "further balance" is otherwise required to be paid is upon the "default" of the purchaser within the meaning of Additional Condition 58.
12. The meaning of "default" within Additional Condition 58 is not entirely clear. However, the language of the condition seems to indicate an intention that "default" gives rise not only to an obligation to immediately pay any "unpaid balance", but also to a forfeiture of "the full 10% deposit". To my mind, that suggests that "default" for the purposes of Additional Condition 58 entails at least a breach by the purchaser that would entitle the vendor to terminate the contract.
13. So viewed, Additional Condition 58 bears some similarity to Special Condition 14 which was the subject of Iannello v Sharpe (supra). Special Condition 14 provided that if the purchaser defaulted in the performance of an essential obligation the balance of a 10% deposit became immediately due and payable and the whole of the deposit was forfeited to the vendor pursuant to cl 9 of the contract.
14. In that case, Hodgson JA concluded (at [32]) that the obligation to make the second payment was not an obligation to pay a deposit or part of a deposit. His Honour continued: There never would be a time when this second $225,000 (as such) would be paid so as to show that the purchaser is in earnest in committing himself to pay the rest. On the contrary, the only time when Special Condition 14 obliges the purchaser to pay this sum is when the purchaser has demonstrated that he is not in earnest, and indeed the termination of the contract means that he would not be able to complete the contract. The obligation to pay the second $225,000 is inconsistent with the characteristics of a deposit.
15. Similarly, it can be said in the present case that the obligation to pay the "further balance" of $125,500 never arises in circumstances where the payment is required to show that Ms Wan is in earnest in respect of her performance of obligations under the contract.
16. The contract in the present case can be said to entail the payment of the deposit by two instalments, and it is clear that second or later instalments of a deposit may well be regarded as truly in the nature of deposits (see Romanos v Pentagold Investments Pty Ltd (2003) 217 CLR 367; [2003] HCA 58 at [20]). However, the contract here is not a contract that requires the second instalment to be paid at a time when it could be regarded as an earnest of performance (unlike the contract in Cloud Top Pty Ltd v Toma Services Pty Ltd [2008] NSWSC 568, discussed in Kazacos v Shuangling International Development Pty Ltd (supra) at [40]-[44]). The obligation to pay the "further balance" only ever arises before settlement if the purchaser is in "default" within the meaning of Additional Condition 58.
17. It would have been open to Ms Wan to pay the "further balance" of $125,500 prior to completion, in which case different considerations would have arisen. However, as matters have actually turned out, no such payment was made. The amount is said to be payable as a result of Ms Wan's failure to complete the contract, or upon the termination of the contract for such breach. In these circumstances, and applying the principles discussed above, it is my view that the "further balance" claimed to be recoverable as part of the deposit does not truly bear the character of a deposit. That is so even though the parties have chosen, by their contractual language, to describe the "further balance" as part of a deposit.
18. No such difficulty attends the recovery of the $80,000 that was paid by Ms Wan shortly after exchange. That amount plainly bears the character of a deposit. In my opinion it is recoverable as "the deposit" pursuant to cl 9.1 of the contract. The small amount of interest earned on the deposit is also recoverable by Mr Blanco. Additional Condition 59 provides that all interest earned on [the] deposit is payable to the vendor.
19. In my opinion, the "further balance" does not fall within the notion of "the deposit" for the purposes of cl 9.1. I think that cl 9.1 should be read as confined to the keeping or recovering of amounts that are truly in the nature of a deposit. Accordingly, any entitlement to recover the "further balance" must instead be found within Additional Condition 58.

Mr Blanco's claim to recover the further amount of $125,500

1. It will be recalled that Additional Condition 58 provides that in the event the purchaser defaults under the contract, the purchaser will forfeit the full 10% deposit and the unpaid balance (if any) becomes immediately payable. I have already expressed the view that "default" for the purposes of Additional Condition 58 entails at least a breach by the purchaser that would entitle the vendor to terminate the contract. That occurred when Ms Wan failed to complete the contract by 1 July 2019. As "default" triggers forfeiture of "the full 10% deposit", it seems that the notion also requires a termination on the basis of the default. It would make no sense for the there to be such a forfeiture if the contract remained on foot. Here, the contract was terminated by Mr Blanco on 2 July 2019. It therefore seems clear that "default" has occurred within the meaning of Additional Condition 58. The condition would then operate in accordance with its terms to effect a forfeiture of "the full 10% deposit" and make any unpaid balance of such immediately payable. The amount of $125,500 forms part of what is described as "the full 10% deposit", and can be regarded as the unpaid balance of such. On these grounds, Mr Blanco seeks to recover the further amount of $125,500 pursuant to Additional Condition 58.
2. As the amount of $125,500 does not truly bear the character of a deposit, an issue arises as to whether enforcement of Additional Condition 58 to recover the sum is precluded by the principles concerning penalties and forfeitures.
3. For the reasons which follow, it is my opinion that to the extent that it would permit Mr Blanco to recover (or forfeit) the further amount of $125,500, Additional Condition 58 is penal in nature and thus unenforceable. As I have said, Additional Condition 58 allows such recovery, in addition to the deposit of $80,000, where Mr Blanco terminates the contract for Ms Wan's breach. In my opinion, Additional Condition 58 operates in those circumstances to impose an additional detriment upon Ms Wan that is extravagant, exorbitant, or out of all proportion to the interest sought to be protected, namely, Mr Blanco's interest in the due performance and ultimate completion of the contract (see Paciocco v Australia and New Zealand Banking Group Ltd (2016) 258 CLR 525; [2016] HCA 28 at [29], [34] and [54] per Keifel J, with whom French CJ agreed; and at [270] per Keane J).
4. Stipulations in contracts for the sale of land, similar in their operation to Additional Condition 58, have been held to be unenforceable as penalties. In Luu v Sovereign Developments Ltd (supra) the Court of Appeal held that Special Condition 5 was a penalty. Special Condition 5 provided: In the event that the Purchaser pays less than ten percent (10%) of the purchase price as deposit then if the Purchaser commits a default hereunder the whole of the 10% deposit shall become due and payable notwithstanding that this Contract is not completed. This clause shall not merge on completion and the Vendor shall be entitled to sue for recovery of so much of the 10% deposit that remains outstanding as a debt due by the Purchaser to the Vendor.
5. The purchaser had in fact paid $65,000 as a deposit, consistently with a statement to that effect on the front page of the contract. The price was $6,810,000. The vendor relied upon Special Condition 5 to claim $616,000, being the difference between 10% of $6,810,000 and $65,000.
6. Bryson JA, who gave the leading judgment, stated at [34]: The references in special condition 5 to the deposit in the context of the obligation to pay up to 10% of the purchase price on default are confusing elements which do not, in my judgment, affect the essential character of the obligation as an additional payment which the purchaser must make if the purchaser is in any way in default. Where the additional payment was not made and, as in this case, the contract has been terminated and the vendor sues for it as a debt, its character as a penalty, quite unrelated to any damage or loss incurred by the vendor, is in my opinion quite clear. If an attempt is made to consider it as a pre-estimate of damage, it is obvious that it is a grossly excessive amount in relation to some of the defaults upon which it may become payable, such as late delivery of the draft transfer, while for others, such as delay in completion or failure to complete by an essential time, the lack of any relation between a percentage of the purchase price and a pre-estimate of damage for breach demonstrates, to my mind, the absence of any justification. (See also at [31].)
7. In Iannello v Sharpe (supra) the Court of Appeal held that Special Condition 14 was a penalty. Special Condition 14 provided: Notwithstanding anything else herein contained, the Vendor shall accept, on exchange of this Agreement, payment of $225,000.00 being part of the deposit. The parties expressly agree that if the Purchaser defaults in the observance or performance of any obligation hereunder which is or has become essential the balance of the deposit, namely $225,000.00, shall become immediately due and payable and the Purchaser shall forfeit the whole of the sum of $450,000.00 pursuant to Clause 9 hereof to the Vendor.
8. In that case, the purchaser paid a deposit of $225,000 on exchange against a purchase price of $4.5 million. The vendors, after terminating for the purchaser's failure to complete in accordance with a Notice to Complete, sought to recover a further $225,000 pursuant to Special Condition 14. The leading judgment was given by Hodgson JA. His Honour held (at [32]) that the obligation to pay the second $225,000 was not an obligation to pay a deposit or part of a deposit, as there would never be a time when such amount "would be paid so as to show that the purchaser was in earnest in committing himself to pay the rest." In relation to the question of penalty, Hodgson JA stated (at [29]): …and in my opinion, accepting that the obligation to pay the second $225,000 would only arise in circumstances where the vendors have lost their bargain, nevertheless it cannot be considered a pre-estimate of damages. The first $225,000, which was undoubtedly a deposit, would be greatly in excess of expenses that could be lost in connection with the terminated contract; and there is no evidence to suggest that the loss of the bargain would involve other loss, for example because of some problem in effecting a re-sale for a similar price. In fact, it appears that the re-sale was for a higher price; and although this is not directly relevant, it tends to confirm that there was no reason to anticipate that a later re-sale would be for a substantially lesser price. His Honour added (at [33]) that an unconditional promise to pay an amount on default is "the very sort of promise that will normally amount to a promise to pay a penalty, unless the amount in question is a genuine pre-estimate of damages."
9. These cases are similar to the present case in that the contract provided for payment by the purchaser, upon the purchaser's default, of a further sum, described in the contract as part of the deposit but regarded by the Court as not in the nature of a deposit. In each case, the Court concluded that the stipulation could not be regarded as a genuine pre-estimate of damage for breach, and was thus penal.
10. The reasoning in the decisions of Luu v Sovereign Developments Ltd (supra) and Iannello v Sharpe (supra) remains relevant although at least since Paciocco v Australia and New Zealand Banking Group Ltd (supra), where the true scope of the so-called Dunlop "tests" was discussed (see, for example, at [30]-[41], [149], [152] and [268]), the relevant enquiry requires an assessment of the impugned stipulation in the light of the interests sought to be protected by it. (I note that in Simcevski v Dixon (No 2) [2017] VSC 531 at [31], Riordan J considered that the force of those authorities was not affected by the decision in Paciocco v Australia and New Zealand Banking Group Ltd (supra)).
11. As I have said, Additional Condition 58 can be regarded as a stipulation designed to protect the vendor's interest in the due performance and ultimate completion of the contract. Where the purchaser defaults and the vendor terminates the contract as a result, the vendor is likely to suffer losses in the nature of wasted costs and additional costs of a resale. The vendor does not receive the full purchase price, but is left with the property. The vendor faces a risk that the property might not be able to be resold for as high a price. Against these matters, the vendor is entitled to recover the $80,000 that was paid as a true deposit.
12. In this situation, ought the payment of an additional $125,500 be regarded as extravagant, exorbitant or out of all proportion to the interest sought to be protected by Additional Condition 58? In my opinion it should. The sum of $80,000 seems to me to be more than adequate to cover the likely wasted costs and additional costs of a resale, and would go some way towards the risk of not being able to resell at as a high a price. There is no evidence to suggest that when the contract was entered into a loss on resale was considered likely. It is known, of course, that Mr Blanco was in fact able to resell the property within 12 months for a price that was $45,000 higher than the price under his contract with Ms Wan, and this tends to indicate that there was no reason to anticipate that a later sale would be at a substantially lower price (see Iannello v Sharpe (supra) at [29]). It should also be borne in mind that the parties could have bargained for payment of a true deposit of more than $80,000 to provide further security against the risk of loss arising from a failure of the purchaser to perform. In these circumstances, I think that a requirement for Ms Wan to pay an additional $125,500 is extravagant and out of all proportion to the interest of Mr Blanco sought to be protected by Additional Condition 58.
13. I do not accept the submissions of Mr Blanco to the contrary. I note in that regard that it was submitted that having regard to the traditional and accepted role of a deposit of 10% of the purchase price in contracts for the sale of land, it cannot be said that payment of an agreed sum in or up to that amount is out of all proportion to the damage likely to be suffered by Mr Blanco as a result of Ms Wan's default. The answer to that submission is that an obligation to pay such an amount may well be out of all proportion so as to be regarded as penal in nature and, if that is so, the principles concerning penalties will apply unless the amount is regarded as truly in the nature of a deposit. That was not the case here. The "further balance" did not truly bear the character of a deposit.
14. It follows from the above that Mr Blanco is not entitled to recover the further amount of $125,500.

Claim in respect of the Notice to Complete

1. The final amount claimed by Mr Blanco is the sum of $330 in respect of the Notice to Complete issued by Mr Blanco on 14 June 2019. That amount is clearly payable pursuant to Additional Condition 33 of the contract. Mr Blanco had an accrued right to payment of that amount at the time the contract was terminated.

Conclusion

1. A declaration will be made that Mr Blanco validly terminated the contract on 2 July 2019. Declarations and orders will also be made to the effect that, pursuant to cl 9 and Additional Condition 59 of the contract, Mr Blanco is entitled to recover the deposit monies of $80,000, together with any interest earned on those monies. Mr Blanco is also entitled to recover the sum of $330 from Ms Wan pursuant to Additional Condition 33 of the contract. Judgment will be entered accordingly. Costs should follow the event. Accordingly, the Court will order that Ms Wan pay Mr Blanco's costs of the proceedings.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 24 March 2021