First Plaintiff v Defendant

PROPERTY LAW - Sale of Land Act 1962 (Vic) ss 32, 32C and 32K(1), (2) and (4) - Whether section 32 statement contained false information or failed to provide required information - Whether vendor required to disclose the details of a lease in section 32 statement - Krawkowski v Eurolynx Properties Ltd (1992) ATPR 41-168; Vouzas v Bleake House Pty Ltd [2013] VSC 534 referred to - Whether purchasers entitled to rescind contract of sale - Fifty-Eighth Highwire Pty Ltd v Cohen [1996] VicRp 57; [1996] 2 VR 64 referred to - Whether vendor acted honestly and reasonably - Whether purchasers in substantially as good a position as if disclosure obligations had been complied with - Finding that purchasers entitled to rescind - Property Law Act 1958 (Vic) s 49(2) - Whether purchasers entitled to return of deposit - Simcevski v Dixon (No 2) [2017] 53 VR 357 referred to - Finding that purchasers entitled to return of deposit.

1 This proceeding concerns the fallout from a failed land sale transaction in 2017. Denistoun Park ('property') is a racehorse breeding and training facility on seven acres on the Mornington Peninsula, about halfway between Mount Martha and Balnarring. The unique nature of the property is illustrated by the observations of a valuer made in October 2017, as follows:

The property comprises a 28.68 hectare allotment which has been extensively developed and highly improved as an equine training and pre‑training facility. Significant infrastructure is understood to have been constructed post 2002. The property is located within an established rural and high quality lifestyle precinct at Tuerong on the Mornington Peninsula.

The region incorporates a variety of land uses, including grazing, wineries and equine activities. The subject property has been highly developed to suit the very specific and particular needs of a very limited purchaser profile which in this case constitutes horse racing stables and trainers. The property is somewhat unique due to the level and nature of development.

There is generally a broad market position and acceptance for properties developed with equine related improvements within this general vicinity, however there are few comparable type properties with similar horse training facilities. The catchment of potential purchasers with the financial capacity to support the investment is likely to be restricted.

2 The first plaintiff, Miss Lucrezia Chatham, is an animal nutritionist. In 2017, she and her then partner, Mr Steve Cunningham, a racehorse trainer (together, 'purchasers') were looking for a property on the Mornington Peninsula from which to operate their businesses in tandem. At the time, Mr Cunningham trained approximately 55 to 60 racehorses and was (and still is) based in Wangaratta. Miss Chatham and Mr Cunningham are both directors and shareholders of the second plaintiff, Crestevia Lodge Pty Ltd ('Crestevia'), the entity nominated by the purchasers to purchase the property.

3 The defendant, Coral Park Pre‑Training & Breaking Pty Ltd ('vendor') is the registered proprietor of the property. The vendor is controlled by Mr Jason Warren, a horse trainer, whose business, Jason Warren Racing Stables ('JWRS'), also operates from the property.

4 In March 2017, the purchasers learned that the property was on the market. Following inspections of the property and discussions with Ms Vicky Sayers, a real estate agent employed by the Flinders office of RT Edgar Pty Ltd ('RT Edgar'), the purchasers decided that the property would meet their needs, and on 31 May 2017 made an offer to purchase the property for $4.1 million, with a ten per cent deposit. Negotiations between the purchasers and the vendor reached the stage that the vendor's solicitor provided a draft contract of sale to the purchasers, but at the last minute, the vendor accepted another offer.

5 The purchasers' disappointment did not last long, however, as the other sale fell through, and negotiations between the purchasers and the vendor continued through another real estate agent, Colliers.[1] On 6 June 2017, the purchasers made an offer to purchase the property for $4.5 million. Once again, however, the sale did not proceed, as the vendor accepted another offer, which also fell through.

6 Negotiations commenced again in mid‑August 2017, this time once again through Ms Sayers of RT Edgar. By this time, the purchasers were represented by a solicitor, Ms Louise Luke of By the Bay Legal & Conveyancing ('BTB'), and the vendor was represented by a new firm of solicitors, Robert Beckwith Solicitors ('RBS').

7 In the week prior to Miss Chatham signing the contract of sale on Saturday, 19 August 2017, the focus of the negotiations between the parties was the price to be paid for the property, with the parties ultimately agreeing upon a price of $5.05 million, with a deposit of five per cent of the purchase price being payable upon the execution of the contract of sale, and the balance of the purchase price payable within sixty days. Further, the parties were concerned to ensure that the property be purchased as a 'going concern', so that GST would not be payable on the purchase price. To that end, the purchasers understood that Mr Trevor Andrews and Ms Amy McDonald ('licensees'), who occupied parts of the property with their horses, would continue to occupy some stables and accommodation after settlement. The question of whether the ongoing occupancy of the property was limited to the licensees, or also included JWRS, which occupied the bulk of the stables on the property, is a key issue in dispute between the parties.

8 On the afternoon before the parties reached agreement on the price to be paid for the property, being 17 August 2017, RBS sent a draft contract of sale to the purchasers by email. The draft contract of sale had parts of its text obscured by a large 'DRAFT' watermark. Miss Chatham gave evidence that she only viewed the draft contract of sale on her smartphone, as she had no power at home to operate her computer. She forwarded a copy to her solicitor, Ms Luke of BTB, asking her to advise upon the draft contract of sale, but unbeknown to Miss Chatham at the time, Ms Luke was away from her office. In any event, she received no advice on the terms of the draft contract of sale prior to signing the contract of sale on behalf of the purchasers, and handing over a bank cheque for $252,500.00 to Ms Katie Taplin of RT Edgar on the morning of Saturday 19 August 2017 at her parents' home in Mount Martha. The funds for the deposit were sourced from Miss Chatham's father, Mr Ron Chatham. She did not receive any legal advice prior to attending the offices of the vendor's solicitors to re‑sign the contract of sale on 21 August 2017 at the request of the vendor's solicitors, as the reference to 'Crestevia' as the proposed purchaser in the contract of sale inaccurately described the proposed purchaser. The vendor signed the contract of sale on 23 August 2017.

9 The settlement date prescribed by the contract of sale was 19 October 2017. However, as it turned out, the purchasers were overly optimistic regarding their ability to raise finance to complete the purchase of the property, in part at least because of delays in obtaining a bank valuation for the property. The vendor agreed to refrain from issuing a rescission notice until 30 November 2017, in exchange for the purchasers' agreement to pay a further deposit of $252,500.00, and to release the deposit to the vendor pursuant to s 27 of the Sale of Land Act 1962 (Vic) ('Sale of Land Act'). The additional deposit, which was funded by another investor, was paid on 19 October 2017.

10 However, the purchasers were still having difficulties raising finance, and the vendor issued a rescission notice on 30 November 2017. The purchasers obtained an offer from NWC Finance Letter of Offer Pty Ltd ('NWC') to provide bridging finance on 21 November 2017, which involved the payment of interest at an onerous rate, and the payment of substantial establishment and 'administration' fees once the offer was accepted. The issue of whether the amount of funding available to the purchasers was sufficient to enable the purchasers to complete the purchase of the property is also a key issue in dispute between the parties.

11 Settlement was tentatively scheduled for 14 December 2017. Two days prior to the anticipated settlement date, on 12 December 2017, Miss Chatham, along with Mr Ron Chatham, and her brother, Mr Bryce Chatham, conducted an inspection of the property. Ms Taplin of RT Edgar was also in attendance. The property was fully occupied by JWRS's horses, staff and equipment, and there were no signs of any preparations having been made by JWRS to vacate the property. During the course of the inspection, Ms Taplin made enquiries of JWRS's manager, who confirmed that JWRS did not plan to leave the property for at least another fortnight.

12 Miss Chatham immediately contacted Ms Luke of BTB, who wrote to RBS seeking confirmation of the cheque payment information for settlement, and confirmation that JWRS would vacate the property prior to settlement. RBS replied almost immediately, stating that the contract of sale expressly provided that the property was subject to a monthly tenancy in favour of JWRS. BTB replied contending that it was clearly in the contemplation of the parties that the purchasers would be provided with vacant possession of the property at settlement, and offered to postpone the settlement date in order to provide JWRS with sufficient time to vacate the property.

13 On 13 December 2017, there was a further exchange of correspondence between the solicitors for the parties in an attempt to resolve the impasse. However, the vendor refused to extend the period of time for settlement to a date when JWRS could feasibly vacate the property, and the purchasers refused to settle without vacant possession of the property being provided upon settlement.

14 On 13 December 2017, the purchasers purported to terminate the contract of sale on the basis that the section 32 statement[2] accompanying the contract of sale was deficient, in that neither the section 32 statement or the contract of sale specified the terms of the lease to JWRS. In response, the vendor's solicitor denied that the section 32 statement was defective, and said that, given that the fourteen day period for remedying the default specified by the rescission notice served on 30 November 2017 would expire on 14 December 2017, the contract of sale would be at an end in the event the purchasers failed to complete the purchase of the property, and the deposit monies already paid (totalling $505,000.00) would be forfeited to the vendor. Subsequent negotiations between the parties later in December and during the early months of 2018 failed to resolve the dispute.

15 The reasons for the impasse were understandable on both sides of the transaction. Moving racehorse training operations is an expensive and logistically challenging exercise, particularly given that Mr Cunningham was planning to relocate his horses and staff some 300 kilometres in the middle of the racing season, and the purchasers were concerned that if JWRS refused to leave the property reasonably promptly, they would not be able to generate sufficient income to meet the onerous demands of their financiers. On the other side of the transaction, the vendor must have been concerned about whether the sale would proceed, given that settlement had been postponed twice owing to the difficulties the purchasers had raising finance to complete the purchase of the property, and after sales to at least two other purchasers earlier in 2017 had fallen through. No doubt Mr Warren did not want to go to the trouble and expense of moving the operations of JWRS elsewhere, only to have the sale of the property fall through yet again. The question in the proceeding is where the responsibility for the failed transaction should lie: should the purchasers permanently forfeit the deposit, or should the vendor be forced to disgorge the deposit?[3]

16 The allegations in the proceeding and the defences relied upon by the vendor are discussed in more detail in the following section of these reasons. A more detailed chronology of relevant events, as derived from the contemporaneous documents and the evidence of the witnesses, follows on after that However, the issues in the proceeding can be summarised as follows:

(1) What was the proper construction of Special Condition 22 of the contract of sale? In particular, should Special Condition 22 be construed as providing that the purchasers, at settlement, would take the title of the property subject to leases in favour of the licensees alone, or also subject to a month to month tenancy with JWRS?

(2) If the contract of sale, properly construed, required the purchasers to take the property subject to a lease to JWRS, have the purchasers established that it was the common intention of the parties that the vendor would provide vacant possession of the property at settlement, such that the purchasers would be entitled to the remedy of rectification?

(3) If either or both of the questions above are resolved in favour of the purchasers, was the purchasers' loss caused by the refusal of the vendor to provide vacant possession on the proposed date of settlement, or their inability to raise sufficient funds to complete the purchase of the property?

17 The above issues arise out of what might be described as the purchasers' contractual claims. The purchasers also claim relief for misleading and deceptive conduct under the Australian Consumer Law ('ACL'), which requires the resolution of the following issues:

(1) Did the vendor, through its agent, falsely represent to the purchasers that upon settlement of the purchase of the property, the vendor would provide vacant possession of the property?

(2) If yes to (1), did the purchasers rely upon any misrepresentation in entering into the contract of sale and paying the deposit?

(3) If yes to (1) and (2), was the cause of the purchasers' loss, being the forfeiture of the deposit, the misleading and deceptive conduct of the vendor, or was their loss caused by their own inability to complete the purchase of the property owing to a lack of funding?

18 Further, the same facts give rise to the following issues:

(1) Did the failure of the vendors to provide full particulars of the lease of the property to JWRS give the purchasers the right to rescind the contract of sale? Resolution of this issue requires consideration of two questions: first, did s 32 of the Sale of Land Act require the vendor to provide particulars of the terms of the lease to the purchasers prior to their entry into the contract of sale, and second, if adequate particulars had not been provided, whether the vendor ought to be excused by reason of s 32K(4) of the Sale of Land Act?

(2) If yes to (1), was it necessary, in order to recover their deposit, for the purchasers to establish that they were ready, willing and able to complete their obligations under the contract of sale?

(3) Alternatively, regardless of the answers to (1) and (2), should an order be made under s 49(2) of the Property Law Act 1958 (Vic) ('Property Law Act') for the return of the deposit to the purchasers?

19 The resolution of the above issues requires analysis of the authorities concerning the proper construction of ss 32, 32C and 32K of the Sale of Land Act, and s 49(2) of the Property Law Act. In the case of the latter provision, which confers upon the Court a discretion to order that a deposit which would otherwise be forfeited to the vendor be returned to the purchaser, it is necessary to consider the authorities concerning the principles governing the exercise of that discretion.

20 The evidence adduced at trial was relevant to the purchasers' contractual claims, the question of whether the vendor is liable to the purchasers for misleading and deceptive conduct, and the purchasers' ability to rely upon s 32K of the Sale of Land Act and/or s 49 of the Property Law Act, although questions of causation loom larger in the purchasers' contractual claims and their misleading and deceptive conduct claim. However, the relief claimed is identical: the purchasers seek the return of the deposit of $505,000.00, plus interest and costs.

21 In my view, in summary, the purchasers were entitled to rescind the contract of sale pursuant to s32K(2) of the Sale of Land Act. Alternatively, this would be an appropriate occasion for the Court to make an order pursuant to s49(2) of the Property Law Act. My reasons follow.

22 This proceeding was issued on 6 June 2018. In their statement of claim (as amended on 1 October 2019 and again on 24 February 2020) the purchasers alleged, in summary, as follows:

(a) during the course of the negotiations, the vendor was represented by Ms Fraser‑Smith from February to March 2017 (when she was with RT Edgar), and June to August 2017 (when she was with Colliers), and by Ms Sayers of RT Edgar from March to June 2017, and in August 2017;

(b) Miss Chatham first contacted Ms Sayers to discuss the possibility of purchasing the property in March 2017, telling Ms Sayers that she wanted to purchase the property so that her business partner, Mr Cunningham, could relocate his horse training business from Wangaratta, and Crestevia would manage the rehabilitation needs of Mr Cunningham's horses. As such, the purchasers required vacant possession of the property at settlement;

(c) Ms Sayers represented and warranted in March 2017, and again on 16 and 18 August 2017, that upon settlement the licensees would remain on the property, and the vendor would provide immediate vacant possession;

(d) on 19 August 2017, Ms Katie Taplin of RT Edgar represented to Miss Chatham that the vendor would provide vacant possession at settlement;

(e) Ms Sayers and Ms Taplin, as agents of the vendor, knew or ought to have known that the purchasers would rely upon the representations and warranties, and would be induced by them to enter into an agreement to purchase the property;

(f) in reliance upon the representations and warranties, Miss Chatham signed the contract of sale on 19 August 2017, and an amended version of the contract of sale on 21 August 2017;

(g) the representations and warranties referred to above were incorporated into the terms of the contract of sale, and/or were a collateral agreement;

(h) special condition 22 of the contract of sale provided that upon settlement the purchasers were entitled to vacant possession, subject to the licensees' occupation of the property, and the property was not purchased subject to any lease to JWRS;

(i) alternatively, if upon the true construction of special condition 22 of the contract of sale, the purchasers were not entitled to vacant possession of the property, then special condition 22 did not embody the true agreement between the parties, and ought to be rectified;

(j) in breach of s 32(2) of the Sale of Land Act, the section 32 statement contained false information, or failed to supply all of the information required by that provision, in that it did not fully disclose the encumbrances over the property;

(k) between the delivery of the rescission notice on 30 November 2017 and the expiry of the rescission notice on 14 December 2017, the purchasers obtained finance and sought to settle the purchase of the property;

(l) on 12 December 2017, following an inspection of the property, the purchasers sought confirmation that JWRS would no longer be on the property at settlement;

(m) also on 12 December 2017, the purchasers sought the withdrawal of the rescission notice and the postponement of the settlement date until vacant possession could be provided;

(n) on the same day, the vendor asserted that the contract of sale stated that the property was subject to a monthly tenancy in favour of JWRS, and the vendor was not required to give vacant possession of the property at settlement, and refused to withdraw the rescission notice;

(o) by refusing to provide vacant possession of the property and/or withdraw the rescission notice, the vendor evinced an intention not to be bound by the contract of sale and repudiated the contract of sale, with such repudiation having been accepted by the purchasers on or about 13 December 2017;

(p) alternatively, by reason of the vendor's breach of section 32 of the Sale of Land Act, the purchasers were entitled to rescind the contract of sale, and to demand the return of the deposits paid to the vendors;

(q) by reason of the representations and warranties made on behalf of the vendor, the purchasers are entitled to the return of the deposit pursuant to s 49(2) of the Property Law Act, or alternatively, damages pursuant to s 236 of the Australian Consumer Law; and

(r) the purchasers were, at all material times, ready, willing and able to complete the purchase of the property.

23 At trial, the purchasers no longer pressed their initial claim for specific performance of the contract of sale, and confined their claim to damages. On 8 October 2019, the purchasers filed further and better particulars of loss and damage, which was said to include two deposits of $252,500.00 and various sundry expenses. However, no evidence was adduced at trial in support of the sundry expenses claimed in the particulars of loss and damage. At trial, the purchasers sought only the return of the deposit.

24 In its further amended defence filed on 25 February 2020, the vendor stated as follows:

(a) at all relevant times the property was occupied as follows:

(i) JWRS as to the whole of the property under a month to month tenancy;

(ii) Ms McDonald on a month to month sub-tenancy from JWRS of part of the property consisting of a dwelling and eight stables; and

(iii) Mr Andrews on a month to month sub-tenancy from JWRS of part of the property consisting of sixteen stables, an office and additional stables on an 'as required basis';

(b) the vendor's instructions to Ms Sayer were that JWRS would remain on the property on a month to month basis, as it would take time for JWRS to vacate the property and relocate its operations;

(c) if Ms Sayers made the representations and warranties alleged in the amended statement of claim, Ms Sayers acted outside the scope of her agency as an employee of RT Edgar;

(d) the contract of sale contained an express term that the contract of sale is the sole repository of the agreement between the parties;

(e) the contract of sale contained an express acknowledgement on the part of the purchasers that the property is currently tenanted on a month to month basis by JWRS, along with the licensees;

(f) the collateral agreement alleged by the purchasers (referred to at paragraph 22(g) above), insofar as it purports to include the alleged oral representations and warranties, was not in writing as required by s 53(1)(a) of the Property Law Act and s 126 of the Instruments Act 1958 (Vic), and is therefore unenforceable;

(g) the true agreement between the parties was set out in the contract of sale, and thus the purchasers are not entitled to rectification of Special Condition 22 of the contract of sale;

(h) the vendor provided details of the encumbrances upon the property in the section 32 statement and the contract of sale delivered with the section 32 statement;

(i) the vendor admitted that BTB had requested settlement arrangements be put in place for 14 December 2017. However, the vendor stated as follows:

1. The Plaintiffs at no time provided the Defendant with evidence that the Plaintiffs were in a position to complete settlement on 14 December 2017;
2. The Plaintiffs at no time provided the Defendant with evidence that the Plaintiffs had obtained alternative finance that would have meant that the Plaintiffs could have completed settlement on 14 December 2017;

1. On 6 December 2017 by email from By the Bay Legal & Conveyancing to Roberts Beckwith Partners the Plaintiffs requested an extension of the rescission date by requesting a further indulgence of time;

1. On 6 December by email from Roberts Beckwith Partners to By the Bay Legal & Conveyancing the Defendant refused to grant any indulgence of time and advised that the timeframe set out in the rescission notice stood.

(j) it was not a condition of the sale of the property that the vendor provide vacant possession to the purchasers at settlement, and the vendor was not obliged to withdraw the rescission notice;

(k) by BTB Legal's letter of 13 December 2017, the purchasers evinced an intention to no longer be bound by the contract of sale. The purchasers were not ready, willing and able to settle the purchase of the property because they had not yet obtained finance to complete the purchase, and as such were prevented from rescinding the contract of sale;

(l) the vendor did not supply false information to the purchasers, and/or did not fail to supply all information required to be supplied under s 32(2) of the Sale of Land Act;

(m) alternatively, the vendor ought fairly be excused for any contravention of s 32 of the Sale of Land Act pursuant section 32K(4) of the Sale of Land Act, as it had acted honestly and reasonably, and the purchasers are in substantially as good a position as if all of the relevant provisions of section 32 of the Sale of Land Act had been complied with;

(n) as the purchasers had not remedied the default specified in the rescission notice, the contract of sale came to an end, and pursuant to General Condition 28.4 of the contract of sale, the amount of the deposit up to ten per cent of the sale price was forfeited to the vendor; and

(o) the purchaser's claim was an apportionable claim against Ms Sayers, Ms Taplin, and RT Edgar ('real estate agents') under s 87CB of the Competition and Consumer Act 2010 (Cth).

25 As noted above, the vendor in its defence pleaded that the purchasers' claim against it was an apportionable claim, such that any award of damages in favour of the purchasers should be reduced to reflect claims they may have against the real estate agents. On 29 March 2019, the vendor filed a third party notice against the real estate agents, claiming that if the real estate agents had represented or warranted to the purchasers that the property would be provided with vacant possession at settlement, the agents had breached the terms of their retainer, were negligent, and/or had misrepresented the true position to the vendor. In their defence to the third party notice filed on 13 May 2019, Ms Sayers and Ms Taplin;

(a) denied representing to the purchasers in March 2017 that JWRS would provide immediate vacant possession of the property upon settlement;

(b) admitted that on 16 August 2017, Ms Sayers told Miss Chatham that JWRS would vacate the property at settlement, saying further that on 16 August 2017, Mr Warren told her that JWRS would vacate the property at settlement;

(c) denied that Ms Taplin made any representation or gave any warranty to Miss Chatham on the day that she signed the contract of sale;

(d) said that on 19 August 2017, prior to Miss Chatham signing the contract of sale, Ms Taplin referred Miss Chatham (and her father and brother) to Special Condition 22 of the contract of sale; and

(e) denied that any conduct on their part which was likely to mislead or deceive.

26 The third party proceeding was resolved at or shortly after a judicial mediation held on 22 October 2019, on terms which required Ms Sayers and Ms Taplin to give evidence at trial on behalf of the vendor, and for the vendor to make a substantial contribution to the legal costs incurred by the real estate agents in the proceeding. While the vendor's defence to the effect that the purchasers' claim was an apportionable claim remained as part of the vendor's pleaded case, this submission was not actively pressed at trial. Given the evidence ultimately adduced at trial, this was a claim which could not have been responsibly pressed.

27 The contract of sale was prepared by RBS, and was forwarded by RBS to Miss Chatham in draft form on 17 August 2017, agreement on price not being reached until 18 August 2017. After agreement upon the price of the property was reached, Ms Sayers sent Ms Taplin an email with a 'clean' copy of the contract of sale. There was one minor change to the draft contract of sale in the final version of the contract of sale: the reference to the rental being paid by one of the licensees, Mr Andrews, in Special Condition 22.2(d) was changed from $1,650.00 per month to $650.00 per month. It was never suggested that this change was material.

28 Special Condition 22 is, for present purposes, the critical clause in the contract of sale. Special Condition 22 provides as follows:

22.1 The purchaser acknowledges and accepts that the property is currently tenanted on a "month to month" basis by Jason Warren Racing Stables Pty Ltd. No written tenancy agreement or lease is available.

22.2 The purchaser acknowledges and accepts that parts of the property are sub-let by Jason Warren Racing Stables Pty Ltd on month to month tenancies ("the subtenancies"), the details of which are:

22.2(a) A dwelling to Amy McDonald (also known as Amy Homer) at a current rental of $400.00 per week;

22.2(b) 8 Stables to Amy McDonald (also known as Amy Homer) at current rental of $10.00 per day per stable

22.2(c) 16 stables of Trevor Andrews at a current rental of $9.00 per day per stable;

22.2(d) Office to Trevor Andrews at a current rental of $650.00 per month; and

22.2(e) Additional stables on an "required basis" to Trevor Andrews at a rental of $9.00 per day per stable.

22.3 If any of the current sub-tenants vacate the property prior to or at settlement, the Purchaser will accept the property with vacant possession of those sub-tenancies and not subject to lease. The Purchasers will make no claim against the Vendor, nor take any action or make any demands for or require compensation in the event that any or all of the sub-tenants vacate the property prior to or at settlement.

22.4 The Purchaser acknowledges that no written agreement or Lease is available with respect to any of the sub-tenancies.

22.5 The Purchaser must provide any or all (as the case may be) of the sub-tenants with at least sixty days' notice, in writing, of its requirement for determination of the sub-tenancies and vacant possession to be provided of any parts of the property which are sub-let.

29 Special Condition 22 is also referred to in the section of the contract of sale headed "Particulars of Sale". Under the heading "Lease" (general condition 1.1), the following appears:

At settlement the purchaser is certified to vacant possession of the property under the words "subject to lease" appear in this box in which case refer to general condition 1.1

30 Adjacent to this paragraph is a text box including the following words in bold type:

Subject to lease - refer to Special Condition 22.

31 The paragraph under the heading 'Lease' also includes the following:

'If "subject to lease" then particulars of the lease are:

32 As can be seen from the above, Special Condition 22.1 refers to a monthly tenancy of the property in favour of JWRS. However, Special Condition 22.1 does not refer to the rental payable by JWRS. This is in contrast with the particulars provided with respect to the sub‑tenancies of the licensees in Special Condition 22.2. The terms of Special Condition 22.3 can be understood in the context of the purchasers' desire to acquire the property as a going concern: while the purchasers were bound to accept the property subject to the sub‑tenancies of the licensees, the purchasers also accepted the risk of the licensees vacating the property before settlement, thus potentially exposing them to the liability to pay GST on the purchase price.

33 General Condition 1.1 of the contract of sale provides as follows:

1. ENCUMBRANCES

1.1 The purchaser buys the property subject to:

(a) any encumbrance shown in the section 32 statement other than mortgages or caveats; and

(b) any reservations in the crown grant; and

(c) any lease referred to in the particulars of sale.

34 General Condition 13.5 of the contract of sale provides as follows:

If the particulars of sale specify that the supply made under this contract is a 'going concern':

...

(c) the vendor warrants that the vendor will carry on the going concern until the date of the supply.

35 General Condition 16.1 of the contract of sale provides that:

36 General Condition 21 of the contract of sale provides as follows:

21. Due Diligence

The purchaser acknowledges that no warranties or representations have been made by the vendor to the purchaser as to the following issues and that it has had the opportunity to undertake a full due diligence investigation in relation to the property and land including, but not limited to each and any one or more of the following:

a. the title to the land including all encumbrances;

1. the accuracy of the extent and identity of the land, its boundaries, extensions and encroachments;

1. that the land includes improvements, chattels, fixtures or fittings on the land;

1. ownership of any improvements, chattels, fixtures or fittings on the land;
2. the occupation of any part of the land by any person including leases, licences and other rights of occupancy including periodic site occupancies in relation to the land or any part;
3. the value, condition and/or state of repair of the land;
4. the present and future economic feasibility, viability and economic return from the land;
5. the suitability of the land for any particular use or purpose;
6. the zoning of the land;
7. the availability of any utilities of the land;
8. compliance with any environmental laws;

1. the existence of any claim under any or all Acts and Regulations (whether Commonwealth or State) with respect to the land;

1. any other matter relating to the land a prudent purchaser would investigate prior to committing to purchase of the land;
2. this contract is the sole repository of the agreement between the parties;
3. there are no terms, conditions, representations or warranties relating to the sale of the land and property including any information or materials provided to the purchaser by the vendor which have been relied upon by the purchaser in entering into this Contract except those included in this Contract;
4. it shall not be entitled to make any claim against the vendor in respect of any alleged shortfall in income, deficiency in documentation or any other claim which may be made either by the purchaser after the day of sale against the vendor in relation to any occupation of the land arising whether or not disclosed by the vendor to the purchaser;
5. it enters into this contract in reliance solely on its own opinion, estimation, examination, inspection, inquiry, valuation and perusal and not on any materials given or made available to it or statement, warranty, condition or representation whatsoever made or alleged to be made to the purchaser or any person acting on the purchaser's behalf by the vendor or any person acting on the vendor's behalf and consequently is not entitled to make any requisition or claim any compensation in respect of the issues identified in this Special Condition;
6. it accepts the land and property in its present condition and state of repair and otherwise on an "as is where is" basis;
7. it cannot terminate this Contract, delay settlement, deduct or retain any amount from the price or delay the payment of the price or make any objection or claim any compensation by reason of any matter referred to in this Special Condition.

37 Special Condition 3 of the contract of sale provides as follows:

3. Whole Agreement

(a) the Purchaser acknowledges that the Vendor's Agent (if any) has acted only as the Agent of the Vendor and no information representation or warranty of the Vendor or its Agent was made with the intention or knowledge that it would be relied upon and that no such information representation or warranty has in fact been relied upon and it is further agreed that this Contract of Sale and the original Vendor's Statement (a copy of which is included in this Contract of Sale) are the sole and full repository of the agreement between the Vendor, its Agent, and the Purchaser;

(b) it is hereby agreed between the parties hereto that there are no conditions, warranties or other terms affecting the sale other than those embodied herein and the Purchaser shall not be entitled to rely on any representations made by the Vendor or its agents except such as are made concerning this Contract.

38 Special Condition 4 of the contract of sale provides as follows:

4. Severability

In the event of any part of this Contract being or becoming void or unenforceable or being illegal then that part shall be severed from this Contract to the extent that all other parts shall not be or become void or unenforceable or illegal but shall remain in full force and effect and shall be unaffected by such severance.

39 The purchasers called for four witnesses: Miss Chatham, Mr Cunningham, Miss Chatham's brother, Mr Bryce Chatham, and her father, Mr Ronald (Ron) Chatham. The vendor called Ms Vicki Sayers and Ms Katie Taplin of RT Edgar. The principal of both the vendor and JWRS, Mr Jason Warren, did not give evidence, despite being present in Court throughout the course of the trial. The parties relied upon a number of documents in an agreed court book, which was augmented during the course of the trial. There was only one significant document where there was a dispute as to its authenticity: an email said to have been sent from Miss Chatham to Ms Sayers on 28 March 2017, which was relied upon by the purchasers to support their allegation that as early as March 2017 the vendor represented to the purchasers that it would provide vacant possession of the property at settlement. Ms Sayers disputes receiving this email.

40 Prior to turning to the detailed chronology of events, the following section provides a 'thumbnail sketch' of the witnesses and their roles in the transaction.

41 As noted above, Miss Chatham is a director of Crestevia, and signed the contract of sale on 19 August 2017. At the relevant time, she also owned a residential property in Leggatt Crescent, Mt Martha ('Leggatt Crescent property'). She is an animal nutritionist by profession. She was closely involved in the negotiations between the purchasers and the vendors prior to the execution of the contract of sale. While she made the Leggatt Crescent property available as security for the purposes of obtaining finance to complete the purchase of the property, she seems to have less involvement in the process of obtaining finance than Mr Cunningham.

42 Mr Cunningham is a horse trainer, and at the relevant time, was Miss Chatham's partner, and a director of Crestevia. Mr Cunningham was also involved in the negotiation of the purchase of the property, and took the lead role in obtaining finance for the settlement of the purchase.

43 Mr Cunningham lives and works in Wangaratta. In 2017, he wanted to shift his horse training business to the Mornington Peninsula for business and personal reasons. At the time, he had about fifty horses in training with various owners, and some brood mares. He had just purchased a stallion, and was beginning to get involved in horse breeding. He had a total of approximately seventy horses. His business also employed four full‑time staff, all of whom were prepared to relocate prior to the purchase of the property falling through.

44 Mr Ron Chatham is Miss Chatham's father. He is a retired businessman, having sold his packaging and thermoforming business and factories in 2010. He is financially comfortable, having assets of a 'few million dollars', including cash, shares, property, and superannuation. He provided the purchasers with the funds for the first deposit of $252,500.00.

45 Mr Bryce Chatham is Miss Chatham's brother. His occupation is unclear, but at the relevant time he owned a property in Kilsyth which he made available to secure finance to settle the purchase of the property. The purchasers planned to engage him as the on‑site property and maintenance manager once they moved onto the property.

46 Ms Vicki Sayers has been a licensed real estate agent since 2013, but had worked in real estate for many years prior to that. She was involved in negotiating the sale of the property on behalf of the vendor in March 2017 and again in August 2017. She also was involved in trying to achieve a resolution of the dispute between the vendor and the purchasers in December 2017.

47 Ms Taplin has worked in real estate as an office manager and as an agent's representative. In August 2017, she was Ms Sayers' personal assistant, helping her in 'non‑dollar productive activities', such as putting out advertising boards, attending photograph sessions, and taking names and telephone numbers at inspections. Ms Taplin's role did not involve providing advice, negotiating terms, or closing deals.

48 Credit did not loom large in this case. There was only one matter of significance which would cause me to doubt the credibility of the purchasers: the putting into evidence of an email of doubtful provenance (see the discussion at paragraph 204 below). However, there were relatively few factual disputes between the parties, and many of the communications and negotiations between the key players in the transaction were recorded in emails and text messages. While to some extent the evidence of the purchasers was slightly coloured by what might be described as hindsight bias, they gave their evidence in a frank and fulsome manner, with any lapses in memory or confusion about dates explicable by the lapse in time between the relevant events and the time of the trial, and the fact that the negotiations and transactions took place over an extended time frame. Their evidence was generally, if not completely, consistent with the contemporaneous documents, and any doubts I have regarding the provenance of an individual document does not cause me to reject the entirety of the evidence they gave at trial.

49 As for the other witnesses called by the purchasers, Mr Bryce Chatham and Mr Ron Chatham, despite adopting outlines of evidence which lent support to Miss Chatham's version of events as to what occurred at the meeting with Mr Taplin on 19 August 2017, they freely admitted at trial that they had no real recollection of what transpired in the course of that meeting. That said, I have no real cause to doubt the veracity of the limited evidence of relevance they were able to give.

50 Ms Sayers gave extensive evidence at trial. While she gave evidence on behalf of the vendor in accordance with an agreement with the vendor which resolved the third party proceedings, I do not consider that she was a partisan witness. She had quite a good recollection of the relevant events given the lapse of time between the negotiations in early to mid‑2017 and the trial, and freely admitted when she did not recall a date, a conversation, or an event. She was an impressive witness, and to the extent there is any conflict between her evidence and that of Miss Chatham or Mr Cunningham (and the areas of conflict are quite limited), I prefer Ms Sayer's evidence. This is not to suggest that either of Miss Chatham or Mr Cunningham gave deliberately false evidence but again, in some respects, their evidence was coloured to some extent by 'hindsight bias'.

51 Similarly, I did not consider Ms Taplin to be a partisan witness. Her recollection of her involvement in the transaction was limited, but I accept her evidence that she would not have strayed from the limits of her role and authority in her dealings with the purchasers.

52 The purchasers submitted that I should draw a Jones v Dunkel[4] inference from the unexplained failure of the vendor to call its principal, Mr Jason Warren, to give evidence. Matters upon which one could expect Mr Warren to give evidence include, but are not limited to, the following matters:

(a) his discussions with Ms Sayers, and possibly Mr Cunningham prior to 19 August 2017 regarding whether JWRS would depart the property prior to or at settlement;

(b) what arrangements (if any) JWRS had made to depart from the property prior to settlement, and, if he had made any such arrangements, why those arrangements did not proceed;

(c) if he had intended that JWRS would vacate the property at settlement, what caused him to change his mind; and

(d) possibly, what concessions he was prepared to make to salvage the transaction after the purchasers' inspection of the property on 12 December 2017.

53 Given Mr Warren's pivotal role in the transaction and his presence in Court throughout the trial, and given the fact that, in its defence, the vendor denied that any of the representations were made, contrary to the evidence of Ms Sayers, I am prepared to draw an inference that Mr Warren's evidence on the above matters would not have assisted the vendor's case. However, in doing so, I am mindful not to deploy such an inference in a manner which would fill any gaps in the evidence relevant to the issues in the proceeding.

54 However, I am not so minded to draw such an inference from the failure of the purchasers to call Ms Luke of BTB to give evidence. I accept the purchasers' submissions to the effect that they were not on notice of the vendor's contention that Ms Luke's inclusion of a rental amount for JWRS in the draft statement of adjustments prepared on 5 December 2020 and sent to RBS on 11 December 2017 amounted to an admission on the part of the purchasers that JWRS would continue to occupy the property after settlement, such that the purchasers would have been aware of the necessity to call Ms Luke to give evidence as to why she included this information in the draft statement of adjustments. It is apparent from the documents in evidence that she did so on the basis of the information provided to her by RBS.

55 The following chronology of events is derived from the documents in the court book and the oral evidence of the witnesses. The (relatively few) occasions where the evidence is in dispute are noted.

56 Miss Chatham first saw the property advertised on the realestate.com.au website while searching for a property to accommodate the purchasers' businesses. The purchasers needed acreage, at least forty stables, sheds for Miss Chatham's animal nutrition business, training tracks, paddocks for brood mares and foals, and a pool for rehabilitation.

57 On 16 and 17 March 2017, there was an email exchange between Miss Chatham and Ms Fraser‑Smith of RT Edgar regarding the features of the property, including the tenancy of Mr Andrews, and the indicative price of the property.

58 The purchasers first inspected the property on or about 27 March 2017. According to Miss Chatham, one of the attractions of the property was that they could move Mr Cunningham's horses in straight away, because it would be difficult to train horses in Wangaratta more than three hours away. The property also had accommodation available for those of Mr Cunningham's staff who would be relocating from Wangaratta. She had done some due diligence to confirm with the local council that it would be possible to reinstate veterinary certification to enable the use of the property to rehabilitate horses and dogs.

59 Miss Chatham said that Ms Sayers of RT Edgar and Mr Andrews were present during the purchasers' first inspection in March 2017. Miss Chatham gave evidence that Ms Sayers asked the purchasers what they wanted to do with the property, and the purchasers told her that the horses would need to move on when the purchasers took over the property. Ms Sayers' evidence as to the discussions she had with Miss Chatham at that time was consistent with Miss Chatham's evidence. Miss Chatham also gave evidence that she was present at a meeting between Mr Cunningham where they discussed the possibility of JWRS leasing part or all of the property after settlement.

60 After the first inspection, Miss Chatham spoke with Ms Sayers, telling her that the purchasers needed to take over the property as a going concern in order to secure an exemption from paying GST on the purchase price. Her father's accountant had advised her that there needed to be a lease of the property in place in order for the purchasers to claim a GST exemption. Ms Sayers told her that Mr Andrews was willing to stay on, and was interested in taking on some more stables. She told Ms Sayers that the purchasers would be happy for Mr Andrews to stay on, but was concerned that he was being investigated for cobalt doping.

61 On 27 and 28 March 2017, there was an exchange of emails between Miss Chatham and Ms Sayers regarding the property, including the following:

(a) information regarding the rent payable by Mr Andrews;

(b) Ms Sayers said that the vendor would be interested in a lease back arrangement for approximately $20,000.00 per month; and

(c) the facilities and utilities available at the property.

62 Miss Chatham said that she wanted to make sure the property was sold with vacant possession (save for Mr Andrews, and later, Ms Amy McDonald). Ms Sayers told her that there was someone interested in leasing the property at $20,000.00 per calendar month, but the purchasers were not interested in leasing out the property, as they needed the main stables and the machinery shed for their operations. Ms Sayers told her that she had spoken to Mr Warren and he was going to leave the property. Mr Andrews would stay, but it would be the purchasers' responsibility to prepare a licence agreement with him.

63 Included in the court book was an email from Miss Chatham to Ms Sayers on 28 March 2017 at 11.06 am, which stated as follows:

Hi, Vicki,

Thank you for the confirmation regarding the $20,000 a month. Thank you for confirming via phone call today that he will be departing prior to settlement as per agreed, sounds terrific where he has a place to move to.

Obviously same with Trevor as if he is formally charged by the stewards for the Colbat [sic] testing investigation with a hearing coming up very soon, then by law he isn't allowed on any registered racing properties til his licence is returned.

Thanks

Lucrezia

Sent from my iPhone

64 Curiously, the court book also included another email sent by Miss Chatham to Ms Sayers from her iPhone at 11.06 am, which stated as follows:

Hi Vicki,

With Jason wanting Vendor lease what does the $20k per month cover ie; how many stables, which accommodation, office, use of pool etc....

Is there a written lease in place with Trevor?

You had some costing options can you please send them through.

Also can you please verify the works in regards to the accommodation repairs that were mentioned and the additional things that were put in that can view certificate of qualification to do these things. Plumbing, electric etc...

Kind regards

Lucrezia

Sent from my iPhone

Hi Lucrezia,

The lease options that I have available were options if someone wanted to own the property, live in the main residence and maintain the property and prorate the power costs. In the event, that the current owner leased back then he would be responsible for maintenance eg. Fences etc and all power and running cots.

The $20k approx.. per month would be for the entire property. See attached options which exclude main house and middle paddocks.

As mentioned Trevor is there on a month to month basis not a lease.

It is my understanding that a certificate of compliance is only required for plumbing and electrical works on construction not maintenance.

66 Ms Sayers denies receiving the email reproduced at paragraph 63 above, and there is no reply to that email in the court book. Prior to the trial, the solicitors for the vendor served a Notice to Produce seeking an electronic copy of the email chain of which this email formed a part, but nothing was ever produced by the purchasers. Further, Ms Sayers denied Miss Chatham had told her in March 2017 that the purchasers would need vacant possession of the property. Rather, what was being discussed was the lease of part or all of the property back to JWRS, as the purchasers did not need all of the accommodation on the property. Various rental options were put forward by the vendor, and were open to all prospective buyers, including an option for the purchasers to take possession prior to settlement.

67 There was no written record of any further communications after the exchange above until 12 May 2017, when Ms Sayers sent Mr Cunningham a text message asking him to submit an offer for her to discuss with Mr Warren. However, Mr Cunningham gave evidence that he had discussions with Ms Sayers over the course of some months, during which Ms Sayers put forward a number of scenarios for the use of the property that she believed the vendor would accept. It appears that there was a further inspection of the property by one or both of the purchasers on or about 26 May 2017, and a meeting between Mr Warren and Mr Cunningham during the course of the inspection, during which there was a discussion of a lease back option. During this period, other potential buyers also made offers to purchase the property.

68 On 31 May 2017, Mr Warren sent Ms Sayers a text message regarding another potential purchaser, as follows:

I've had a think about it I will take 4.8 with 12 months rent free or 5 with vacant possession otherwise I am happy to stay here.

69 Also on 31 May 2017, the purchasers made a formal offer to purchase the property for $4.1 million with a lease or licence agreement in place in favour of the vendor. This offer was subsequently revised (on 6 June 2017) to $4.5 million, with the vendor to have a confidential subsidised rental for six months after settlement. The covering letter sent by Miss Chatham, but signed off by Mr Cunningham, stated as follows:

Good afternoon Holly & Vicki,

Please find attached reviewed (sic) offer.

In regards to the lease/license agreement with Jason I would like to sit down to nut out the last small nooks & crannies with Jason and are available from 1pm this Friday onwards, all day Saturday and up till 3pm Sunday. So please let me know a time that Jason would like to meet.

I sincerely understand how hard sudden moves can be especially with young children etc. so am only to [sic] happy to discuss the ongoing with Jason his need for staying in his current accommodation.

I look forward to working with you all to finally put together this sale.

One important thing in the meantime could you email through to Lucrezia (lucrezia.chatham@yahoo.com.au) a full section 32 as well as all the supporting documents for the 'going concern' which includes the depreciation schedule of all the equipment so that Accountant etc can review.

with regards

Steven Cunningham

70 However, on or about 7 June 2017 the vendor entered into an unconditional contract of sale with another purchaser for $5.0 million, which once again fell through shortly afterwards.

71 Miss Chatham gave evidence that she dealt with another real estate agent (Ms Fraser‑Smith of Colliers) in June and July 2017. The vendor sought an unconditional offer of $5.0 million, on the basis that JWRS would vacate the property immediately, the licensees would stay, and Mr Cunningham would move his horses onto the property and pay $20,000.00 per month until settlement. These terms were recorded in a draft contract of sale prepared by Melville Lawyers and sent to Miss Chatham on 29 June 2017. In the covering email attaching the draft contract of sale, Ms Fraser‑Smith stated as follows:

Hi Lucrezia,

Contract of sale and section 32 attached.

The special conditions need to be drafted by your solicitor and encompass the following:

The vendor will allow the purchaser to take possession of the property from the day the deposit has cleared into the bank account under a formal Licence Agreement (the cost of the licence agreement will be bourne (sic) by the purchaser). However, the stable rental from the breaker in the rear stable block will continue to be paid to the vendor up until settlement. In addition to this the purchaser must supply to the vendor a certificate for public liability insurance for a sum not less than 10m.

In return the purchaser may occupy the property free of charge for the period up until settlement.

The list of equipment will be sold separately and in addition to the purchase price.

Can you look at all of this and come back to me with your confirmation/suggestions.

72 Miss Chatham replied later that day, as follows:

Hi Lisa,

Straight off the bat, the contract needs to be redone because it says plus GST which is not correct.

It should be sold as a going concern.

This needs to be rectified ASAP for Louise our lawyer to get the other things done.

Thanks,

Lucrezia.

73 Following a further exchange of emails between Miss Chatham and Ms Fraser‑Smith regarding amendments to the contract of sale, on 10 July 2017 Miss Chatham sent Ms Fraser‑Smith an email, as follows:

Good morning Lisa.

Can you please check the special conditions wording.

Please find below wording of the special conditions:

1. The vendor will allow the purchaser to take possession of the property with no rent charged until settlement date from the (nominate a day perhaps two days after payment of deposit) under a formal Licence Agreement. The purchaser will be liable for the vendor's cost of preparing the licence agreement fixed at ??? (Lisa can find this out prior from vendors solicitor).

2. The purchaser will remain liable for payment of rates as of the date of settlement, not date of possession.

3. The purchasers acknowledge that the stable rental for $9000/mth which includes the 16 stable rear block plus the attached office and including use of facilities plus outgoings from the breaker, as well as trainer Amy who has the managers house at $1733/mth and 5 stables $2479/mth including use of facilities plus outgoings will continue to be paid to the vendor up until settlement. Then new licence agreements will be signed up with Purchaser and Licencee. (sic)

4. Prior to taking possession under the licence agreement, the purchaser agrees to supply the vendor with a certificate for building insurance and public liability insurance for a sum not less than 10m.

6. The vendor agrees that the caveat lodged on the property will be either withdrawn prior to settlement or a withdrawal of caveat will be provided at settlement, and until which time such withdrawal is provided, the purchaser will be at liberty not to settle with the vendor under the contract, and will not incur any penalties by reason of the vendors delay.

74 On 14 July 2017, both Miss Chatham and Mr Cunningham signed a copy of the contract of sale, with a price of $5.0 million, with a $10,000.00 non‑refundable deposit, the balance of the $500,000.00 deposit being payable by 25 July 2017, with the purchasers to pay $9,000.00 per month by way of rental, and subject to the ongoing tenancy of Ms McDonald. However, this offer was not accepted by the vendor.

75 Miss Chatham gave evidence that further negotiations for the purchase of the property took place in August 2017, at first with Ms Fraser‑Smith and then with Ms Sayers. By this stage, there was no longer a proposal on foot for Mr Cunningham to move his horses onto the property prior to settlement.

76 Most of the discussions between Miss Chatham and Ms Sayers took place by text message or email, as there were some communication difficulties caused by Ms Sayers' daughter having surgery after a skiing accident. Mr Warren came back at the last moment wanting $5.1 million. The price ultimately agreed was $5.05 million. She understood that JWRS was still going to be leaving the property at settlement, with Mr Andrews and Ms McDonald staying on the property to meet the going concern requirement. Miss Chatham gave evidence that Ms Sayers told her this on several occasions, including during the course of a telephone conversation on 18 August 2017 while she was volunteering at the local bowls club and Ms Sayers was travelling to the snowfields. A draft contract prepared by RBS was emailed to her, but she could only read it on her phone, and there was a big 'draft' watermark over the document. She glanced at Special Condition 22 and took note that Mr Andrews and Ms McDonald would remain, and noted how much rent they would be paying. She told Ms Sayers that she could not print out the contract of sale, and arrangements were made for Ms Taplin to deliver a hard copy to her on 19 August 2017.

77 The communications between Ms Sayers and Mr Cunningham on 16 and 17 August 2017, which were largely by text message, were quite fraught, with Mr Cunningham threatening to walk away from the transaction on a number of occasions.

78 Mr Cunningham gave evidence that he saw the contract of sale both before and after it was signed. He is sure that he would have read it had it been emailed to him. The term 'subject to lease' did not ring any alarm bells, because he always understood that JWRS would vacate the property by settlement, as he had been told so by Ms Sayers. Further, Mr Warren asked him whether he wanted to purchase some farm implements from him: there was no reason why he would have offered to sell equipment if JWRS was going to remain on the property. This offer was made about four to six weeks after the contract of sale was signed.

79 Ms Sayers gave evidence that she did not recall telling Mr Cunningham that JWRS would be vacating the property at settlement, but she does not deny it, as that was consistent with her instructions from the vendor. On 17 August 2017, prior to agreement being reached upon price, Ms Sayers sent the following email to Sandrah Scott of BTB:

Hi Sandrah

The buyer has requested the contract read, going concern, hence keeping Trevor & Amy. They sought advice that if vendor does not stay and they were told this is fine if the sub leases are transferred to the new purchasers.

Regards Vicki

80 Ms Sayers said that the purchasers' advice that it would be okay if the vendor did not remain on the property after settlement (presumably for the purpose of the GST exemption) did not come from her, the purchasers had that advice from elsewhere. She asked RBS to send the section 32 statement directly to Miss Chatham.

81 There was also evidence of correspondence between Ms Sayers and Mr Warren during this period. On 10 August 2017, Ms Sayers sent Mr Warren a text message saying that Mr Cunningham had provided an offer the previous evening and had a bank cheque ready. However, on 15 August 2017, Mr Warren told her that he wanted all communications regarding negotiations with potential purchasers and contractual matters to go through his solicitors, RBS, which Ms Sayers found inconvenient. Ms Sayers did not receive a signed authority for RT Edgar to sell the property until 16 August 2017, and the purchasers, Mr Cunningham in particular, were getting impatient with the delay.

82 The sale authority signed by the vendor on 16 August 2017 provided an estimated selling price of $5.0 to $5.2 million, and stated, among other things:

The property is being sold with vacant possession subject to a tenancy as to part.

The words "as to part" were a handwritten addition to the typed sale authority.

83 Also on 16 August 2017, there was an exchange of text messages between Ms Sayers and Mr Warren, including the following exchange, commencing with Mr Warren:

I will take 5.1 from Steve for the sake of completion otherwise I will sit and wait. I think there is still enough interest in the property from other parties to achieve more than that.

Do you have preference for lease arrangements with Steve. Are you ok with 5% deposit & preferred settlement date? I have left voice messages for SA buyer & emailed his sister in law who looked over previous contracts.

If Steve is happy to keep Trevor on as a tenant that is good. I'm happy to leave the property with vacant possession ... 5% deposit is fine on signing I can do 60 days settlement ... there is no room for him to start moving anything in before settlement though ...

They have agreed to a decision tomorrow. Happy with Trevor as a tenant, happy with 60 days but can do sooner if you would prefer. $5,000,000 with $250,000 on signing & understand no moving anything in before settlement. Cheers, Vicki.

84 On 16, 17, and 18 August 2017, Ms Sayers exchanged text messages with Miss Chatham, largely concerning the price to be paid for the property. At 1.00 pm on 16 August 2017, Ms Sayers sent the following text message to Miss Chatham:

Hi Lucrezia

Steve said he is out at $5m. Jason has said because he offered $5.2m previously[5] he doesn't want to accept this. However Jason will sell today to you at $5.1 m 5% deposit 60 days and keeping Trevor on. He is prepared to give you first option. What are your thoughts?

Regards Vicki

85 She also exchanged text messages with Mr Cunningham to the effect that she could not accept any offer the purchasers made until the vendor had provided them with a signed section 32 statement. The vendor was waiting upon advice from an accountant prior to finalising the section 32 statement, which was ultimately completed on the afternoon of Thursday, 17 August 2017.

86 On Friday, 18 August 2017, Ms Sayers received the section 32 statement signed by the vendor and the draft contract of sale from RBS, along with a letter seeking to renegotiate the commission payable to RT Edgar.[6] This was the first occasion upon which Special Condition 22 had been brought to her attention. She made arrangements for her personal assistant, Ms Taplin, to take a hard copy of the contract of sale to Miss Chatham for signing, as she would be away at the ski fields that weekend. She instructed Ms Taplin to draw Special Condition 22 to the purchasers' attention. By that time, she had no authority to negotiate terms: they had already been agreed. All that Ms Taplin was instructed to do was to show Miss Chatham where to sign and initial the contract of sale, and to point out Special Condition 22 to Miss Chatham, as requested by BTB.

(a) most of the communications between her and the purchasers were about price and the size of the deposit, but she is certain that she told them that the vendor would provide vacant possession at settlement. She was not sure whether that was in a telephone conversation or via text message, but that communication occurred prior to the provision of the section 32 statement to the purchasers on 17 August 2017;

(b) she did not discuss the contents of the section 32 statement with the purchasers. The only change in Special Condition 22 between the draft and the final versions of the contract of sale was the rental to be paid by Mr Andrews: a reduction from $1,650.00 per calendar month to $650.00 per month, which she thought should be pointed out to the purchasers;

(c) she did not recall telling Mr Cunningham that JWRS would not be on the property at settlement. She did recall having a conversation with Mr Warren as to whether he could vacate the property within sixty days, given the size of JWRS's operation. She also recalled having a discussion with Mr Warren where he told her that he was looking at a property that he was going to buy, and

(d) most of her discussions with the purchasers on Friday, 18 August 2017 were concerned with the logistics of getting the contract of sale signed, but she knew by that time that the purchasers were planning to move onto the property after settlement, and she believed that she had informed Mr Warren of the purchasers' intention in that regard.

88 Miss Chatham gave evidence that Ms Sayers told her to get the deposit ready, and she visited the bank on Friday, 18 August 2017 with her father, as the funds for the deposit were coming from a trust fund controlled by him. Also on Friday, 18 August 2017, Ms Sayers sent her an email asking her to complete the draft contract of sale with an offer of $5.05 million.

89 Miss Chatham gave evidence that she emailed a copy of the draft contract of sale to Ms Luke at BTB, but Ms Luke was away. She did not hear back from Ms Luke until after the contract was signed, when Ms Luke verified the particulars of title, and confirmed that the licensees would remain on the property after settlement.

90 As for what occurred when Miss Chatham signed the contract of sale in Ms Taplin's presence on 19 August 2017, Miss Chatham said that her father and brother were present in the kitchen of her parents' home in Mt Martha when she signed the contract of sale. She said Ms Taplin commented on the view from her parents' home. Miss Chatham said she double checked with Ms Taplin about the sale proceeding as the sale of a going concern, and verified that the licensees would stay, and JWRS would leave. Ms Taplin said to her, 'Yes, in fact he will most likely be off the property even before settlement.' They then joked with her father about RT Edgar providing the purchasers with a case of champagne at settlement.

91 Ms Taplin's evidence regarding what occurred at the meeting on 19 August 2017 is in conflict with Miss Chatham's evidence. She gave evidence that the purpose of the meeting at Mr Ron Chatham's house on Saturday, 19 August 2017 was to have the contract of sale signed by Miss Chatham: that was not her usual job, but Ms Sayers was away. To that end, Ms Sayers forwarded her some correspondence from RBS, but she could not recall what Ms Sayers told her to do.

92 Ms Taplin gave evidence that she recalled the meeting on 19 August 2017 'to a degree'. The meeting took place in the kitchen, which had a view, at the island bench. Miss Chatham and Mr Ron Chatham were there, while Mr Bryce Chatham came in part of the way through. She provided copies of the contract of sale to both Miss Chatham and Mr Ron Chatham, which they both flicked through. She would have pointed out Special Condition 22 to them, as that is what she later told Ms Sayers in an email she had done. She does not recall providing an explanation of Special Condition 22, because she would not have done that: that would be providing legal advice, which she is not permitted to provide.

93 Ms Taplin gave evidence that at the time of the meeting, she would not have known that JWRS was going to vacate the property at settlement, so she would not have said anything to that effect to Miss Chatham. She has gone back through her emails and text messages, and there is nothing to suggest that she had 'stepped out of her lane'.

94 Ms Taplin did not recall Miss Chatham asking any questions about the terms of the contract of sale, or any other matter, and if any had been asked, she would have called Ms Sayers. She believed that the meeting went for about half an hour, and she felt a little challenged by Mr Ron Chatham's dry humour. She tried to call Ms Sayers after the meeting, but when she could not reach her, she sent Ms Sayers the following email:

Yes she was really excited - her brother and dad were there (they are part of the joint venture), her Dad was cheeky and a little more challenging. I didn't need to add anything for clause 22 - I just need to point it out to them - it states that there isn't any written leases and that they are verbal but require 60 days notice if they wish to terminate any of them.

Her Dad's request was that we attend their opening party later this year - but we need to provide a case of champagne as a settlement gift...... he was joking but also semi serious. Her brother needs to sell his property in Kyneton?? and wanted to know if you can recommend anyone?

I have the cheque and contract. I will be at Roberts Beckwith at 9am Monday to deliver it and then will go and do some of the drops that we had printed.

Lara is going to 218 BDR on Monday to start copy. I have put a keysafe there.

95 Neither of Mr Ron Chatham or Mr Bryce Chatham had any real recollection of what occurred at this meeting, despite having adopted an outline of evidence which supported Miss Chatham's version of events.

96 After Miss Chatham signed the contract of sale on 19 August 2017, there was some consternation on her part by reason of the vendor's delay in signing the contract of sale. Given the history of the dealings between the parties, the purchasers were concerned that the vendor would renege on the agreement. Their frustration was evident in the following email from Miss Chatham to Ms Sayers on Tuesday, 22 August 2017:

Hi Vicki

I again apologise with being so blunt. But I have spent last 48hrs putting non‑refundable deposits on numerous things for the move that we had to lock in during the strict time frame.

I understand the history and everyone's emotions. But in the end it was agreed to have been done 9am Monday and yes as soon as Katie notified me I came straight down to rectify anything, not once but twice.

Thanks

Lucrezia

Sent from my iPhone

97 The contract of sale was signed by the vendor on the following day.

98 A few days after the contract of sale was signed by the vendor, on 26 August 2017, Ms Sayers sent Miss Chatham a text message as follows:

Good Morning! Congratulations! Steve sent me some dates and times to go through for Denistoun. Can you please let me know who we will be showing through and what needs to be done - do you need access to certain parts of the property. Ie - valuer, insurer, measurements etc. I am speaking with Jason today.

Access to track, all stables, managers house, accommodation above tie up stalls, pool area, office, sheds. Don't need to access to Jason & Bel's place. Bringing through Maintenance manager and security who needs to do some measurements for sheds, stables and cameras etc..., our Greensman to work out what equipment need for track, our insurer, my father who is a [sic] investor and our marketing manager.

Kate the finance valuer will be independent (sic) on a different date. Not much can do about that one I do apologise.

100 Miss Chatham gave evidence about her inspection of the property on or about 27 August 2017: she inspected the property with her brother, because he was going to be living and working on the property, and he was looking at doing some building and repair work. She also brought a marketing consultant to inspect the property. Prior to settlement, the purchasers also had to organise a valuation, apply for finance, and obtain approvals from the owners of the horses for the transfer of the horses trained by Mr Cunningham from Wangaratta to the property.

101 Mr Bryce Chatham gave evidence that when he inspected the property in August 2017, he was mostly concerned with planning things such as signage, purchasing tools and the like.

102 Sometime in August 2017, Ms Luke prepared a license agreement between Crestevia and Mr Andrews, which included terms which were consistent with Special Conditions 22.2 and 22.5 of the contract of sale. However, it appears that this agreement was never executed.

103 On 8 September 2017, a manager employed by JWRS, Mr Sam Davies, wrote to Ms Sayers as follows:

Hi Vicki,

As discussed with Jason quite a while ago. There is a list of equipment for sale that is useful when running the property. Can you please let us know if your buyers are interested in all or any of the following:

Kubota L4 400 with front end loader (200)

attachments include harrow, slasher, mulcher and grader blade $17,000

Stihl whipper snipper x 2, blowers x 2, chainsaws x 2 $ 2,000

Ride on mower with attachments $ 9,000

Pegasus Float 2012 (3 horse) $12,000

2009 Home Treadmill (brand new belt) $35,000

Hilux farm ute (registered with VicRoads $ 5,000

Weigh Machine (horse scales) $ 1,200

All in good working order and regularly serviced.

Available separately or a bulk price can be negotiated.

104 On 15 September 2017, Ms Sayers replied as follows:

Hi Sam,

Steve is interested but would like to inspect. He hasn't been able to confirm a day he is available but thinks he should be able to organise for early next week. Are you ok if he emails you to arrange a time with you to view the equipment and then you can both negotiate between yourselves?

Regards, Vicki.

105 Mr Cunningham gave evidence that he received this email from Ms Sayers, but he did not pursue the matter further as he did not need the equipment, and it was not being offered cheaply.

106 Mr Cunningham said that both of the licensees called him after the contract of sale was signed, and he told them that they could stay on for the time being, but he could not guarantee their right to occupy the property in the long term. About a month before settlement, Ms Sayers told him that Mr Warren had already found somewhere to go.

107 Within a month or so of the execution of the contract of sale, it became apparent to the purchasers that settlement within sixty days was too ambitious, given the time required to arrange for valuers to inspect the property for the purpose of obtaining finance to complete the purchase. On 27 September 2017, Ms Luke wrote a letter to RBS, as follows:

We refer to the above matter.

We are instructed by our client that our clients proposed lender's (NAB) funding requirements have proven more onerous than anticipated. Further, the Bank has indicated that it is not able to complete a property valuation (and loan approval condition) for up to 30 days. The type and size of the property has meant that suitably qualified valuers are required and as such are not readily available: contributing to the delay in booking the valuation and also in the time needed to obtain the written report following same.

Accordingly, we are instructed to advise that our client believes that it will not be in a position to settle on the due date and seeks and (sic) extension of time to the settlement date.

We are instructed that had our client been familiar with the Bank's processes or aware of the likely time needed it would not have entered into a 60 day contract in the circumstances, being now aware that 90 or 120 days should have been contemplated.

Our client further seeks your clients' further agreement to no penalty being charged in the circumstances. Our client is more than willing to enter into a Variation of Contract to extend the settlement date to 30 November 2017.

We await your further advices.

We also await your further advices as to your clients GST position - as it relates to the opportunity to obtain the "going concern" status, as requested previously.

108 On 27 September 2017, Ms Luke of BTB sent a further email to RBS as follows:

Good afternoon, Julie,

Further to my fax letter of earlier today ... I have been requested by [the purchasers] to make a request/offer to lease (or take licence) of the property from the current contract settlement date of 19 October 2017 until settlement is [completed] and at a mutually agreed lease/licence fee in replacement of any penalty interest that your client is otherwise at liberty to charge.

Would you please present this offer to your client and I await your reply in due course.

109 This correspondence was met with a demand by RBS that the deposit paid be released to the vendor. It is not necessary to go into detail regarding this correspondence here, but it culminated in the agreement between the parties, recorded in a letter from RBS to BTB on 13 October 2017, to the effect that an additional deposit of $252,500.00 would be paid, the deposits would be released to the vendor, and the vendor would refrain from issuing a rescission notice until 30 November 2017. Mr Cunningham gave evidence that the funds for the second deposit, which was paid on 19 October 2017, came from another investor, a Mr Edwards, who had committed to provide $400,000.00 for the purchase of the property.

110 In the meantime, on 2 October 2017, Ms McDonald wrote to Miss Chatham as follows:

Hello Lucrezia,

I hope all is well.

I wanted to touch base as I have been left in the corner a little, not really knowing what is happening in terms of living arrangements or anything. All I know is settlement is on the 19th of the month.

Currently we use 4 big boxes and have 2 horses spelling in the center [sic] of the track. I am also utilizing one of the boxes in the small white barn as a feed room. JWR charges us $7 per horse per day.

We would need a minimum of 4 big boxes for up to 8 horses plus a feed room for our lockable stuff.

As far as living goes my husband, son and myself are living in the house opposite the main residence. We pay $400 per week for this. Due to not having any idea when or even if we are to vacate I don't actually have any alternatives at the minute. I think it would take me a maximum of 4 weeks to get myself sorted to find alternative housing if that was at all workable? I've been looking around for something to buy but unfortunately there has not been much about just yet.

I hope that all makes sense. If you are able to let me know ASAP what is happening re housing that would be fantastic. The horses can be easily sorted out its just our little family I am worried about....

Kind regards,

Amy

111 On 8 October 2017, Miss Chatham replied as follows:

Good morning Amy,

Thank you for your email. I do apologise in delay to responding but it has been quite a hectic couple of weeks.

Sorry to hear that you feel with JWR that you have been left in a corner.

As you can imagine what with JWR organising their purchase of new property, as well as coming into busy season, it does make it all the more difficult and stressful for both Bel and Jason. So I am positive that such a lovely couple are doing their best to keep everyone informed.

In regards to your information, from your email dated 2 Oct 2017 sent at 8:25pm, my understanding is that you are using 4 big boxes in main stable complex and putting 2 horses per a box??? Paying $7 per a horse per a day? You aren't using any of the facilities as you take them to, is it Cranbourne? I've been told, aside from additional stable as tack/feed room.

If you can let me know if that's correct via email, as there seems to be a small discrepancy then in the legal figures and information that has been passed over. I am sure we can easily iron it all out once we receive our reply email as I can hand this over to our lawyer.

Should you need to contact me in the meantime via mobile its ...

Have a wonderful Sunday with the family.

Warmest regards

Lucrezia

112 Miss Chatham gave evidence that BTB prepared the licence agreements for the licensees. She never had any discussions with Ms Luke regarding her preparing a lease or licence agreement with JWRS, because Mr Warren had told her that JWRS would be vacating the property.

113 It appears that, at least up until mid‑October 2017, Mr Warren was, consistent with the email exchange between Miss Chatham and Ms McDonald and the other evidence referred to above, trying to locate alternative accommodation for his family and the business of JWRS. The vendor discovered an undated and unsigned document headed 'Greendale Rental Agreement' for JWRS to lease stabling barns and day yards at a property in Mornington, with other training facilities to be shared with other tenants. The term of the lease was for a six month period from 16 October 2017, for $1,650.00 per week. The property to be leased did not include any residential accommodation.

114 Meanwhile, the purchasers had engaged a finance broker ('broker') to source the funding to settle the purchase of the property. The broker contracted NWC on or before 17 October 2017, stressing the urgency of the purchasers' request. At that time, the purchasers were still waiting on a valuation being obtained in support of the purchasers' application for finance from the National Australia Bank Ltd ('NAB'), which was ultimately provided to NAB on 20 October 2017.

115 On 20 November 2017, the broker wrote to NWC, as follows:

Hi Joe,

Thanks for looking into this again for me. Please see below figures and valuations attached. We have requested $5.574m from NAB being 60% of commercial valuation and 80% of residential. At this stage there is still no letter of offer from NAB as they are still perusing the information. Minimum loan term 1 month, possibly 3 months, however what is the maximum loan term?

Settlement 30th November, at this stage no extension available.

Security offered:

$5,050,000 355 Balnarring Road, Tuerong VIC (new purchase)

$600,000 17 Urana Street, Kilsyth VIC (unencumbered)

$380,000 19 Justiana Place, Surry Downs, SA (unencumbered)

$2,200,000 11-13 Leggatt Crescent, Mount Martha (mortgage to ANZ)

Total security = $8,230,000

Funds required

$5,050,000 Denistoun Park purchase price

+ $282,000 stamp duty etc

+ $1,170,000 payout ANZ loan - Mount Martha

- $505,000 deposit paid

- $480,000 cash available[7]

= $5,517,000 total funds required + costs

At this stage I'm after a firm indication of whether the loan is achieveable (sic) and at what parameters, including costs and therefore how much shortfall the clients will need to come up with. Can you please advise timing also? How quickly can this be turned around?

Also will this a second mortgage? ANZ's current turnabout times to release the Mount Martha title have that being ready on 29th November if first mortgage required.

116 The purchasers sought bridging finance from NWC because an application with the NAB for $5,574,000.00 was unlikely to be approved prior to the settlement date.

117 On 21 November 2017, NWC made an indicative offer with a facility limit of $5.4 million, with first registered mortgages over the properties referred to in the broker's email ('NWC offer'). After deduction of establishment fees and one month's pre-paid interest, the amount available to the purchasers would be $5,051,300.00. Accordingly, if NWC was the only source of funds available to the purchasers, the amount advanced by NWC would be insufficient to complete the purchase of the property and pay out the amount owed by Miss Chatham to the ANZ Bank and secured by the Leggatt Crescent property ('ANZ loan'). The amount ultimately required to settle was $4,683,574.12, and the balance of the ANZ loan was approximately $1,167,000. Assuming that no GST was payable on the purchase of the property, the purchasers faced a shortfall of approximately $770,000.00. There is evidence that another party (presumably, Mr Edwards) was going to be providing $147,500.00 at settlement, but that would only reduce the shortfall to approximately $622,000.00. If Mr Edwards' contribution formed part of the cash of $480,000.00 referred to in the broker's letter, and that sum was in fact available to the purchasers at settlement, there would still remain a shortfall of $290,000.00. If Mr Edwards' contribution was in addition to the cash amount of $480,000.00, there would still be a shortfall of approximately $130,000.00.

118 The latter sum is consistent with an email from the broker to NWC on 9 October 2017, where the broker said:

Hi Joe,

Thanks for this - can you take the resi any higher to get it up to at least $5,479,500? Clients can come up with the shortfall for the interest provision and costs but will struggle with the $130k shortfall in loan amount.

119 While Mr Cunningham gave evidence that he believed the purchasers had sufficient funds to complete the purchase of the property, his belief is not corroborated by the documents in evidence. Further, while Mr Ron Chatham gave evidence that he had access to 'a few million dollars' in assets, he was somewhat non‑committal as to whether he would make a further contribution to the purchase price of the property if requested by the purchasers to do so. While he said he had faith in the purchasers, he said he would investigate the matter like any other business opportunity. Documents produced during the course of the trial established that Miss Chatham's parents owned an unencumbered property at Mount Martha, valued by the local council as having a capital improved value of $1,560,000.00, interests in a superannuation fund with a value of approximately $2.312 million as at 30 June 2017, and a company with cash and shares valued at $108,043.00 as at 30 June 2013. There was no evidence as to how quickly their non‑property assets could be converted into cash in the event Miss Chatham's parents could be persuaded to make a further contribution to the purchase of the property.

120 This was the context in which BTB sent RBS the following letter on 23 November 2017 (omitting formal parts):

With much regret our clients have instructed us today that their current broker has been unable to secure funding to enable settlement to proceed on 30th November 2017. Our clients are most disappointed that they have invested their time and efforts with their mortgage broker, in good faith, to try and get the finances in place.

We note that our client has today made approaches with another mortgage broker with a view to approaching alternate lending institutions. Naturally those inquiries will take time to pursue; the possibility exists that funding can be sourced however it will not be possible before 30th November to have any kind of definitive answer.

As you know our clients were severely disadvantaged by the bank's delays in not getting the valuation completed in a timely manner. Had my clients had any inkling that the NAB would refuse their application they would have made efforts to look elsewhere many weeks ago. Our client have not appreciated the extent and enormity in putting together a financial arrangement as has been required.

Our client is 'invested' in this contract and wants to proceed with the purchase of the property; shown by their willingness with the additional deposit payment (and release) of and the acceptance of penalty interest to keep the contract moving forward.

Our clients continuing wish [and ultimate intention] is to be able to be in a position to purchase the property from your client; and we assume, your clients is desirous of selling the property rather than having to put it back on the market (noting that several prior purchase options have fallen through).

Our client wishes to propose to your client:

* The contact terms be amended to allow for the following:

* For our client to take a lease/occupation of the whole of the property under at a monthly rental of $15,000 +GST for a period of up to 12 months (ceasing on completion of settlement). Exact terms to be discussed & agreed further.

* The current contract settlement date be extended for 12 months with the ability to settle on or before the expiration of that 12 months extension (ie as soon as they have funding arranged).

* The deposit now paid be continue to be held as deposit against the current contract.

* Penalty interest [claimed or claimable] to 30 November be waived.

My client's instructions are that they intend to continue to work on their financing options and would wish to settle as soon as practicable after securing an unconditional loan offer. Actually being on the property and trading will greatly enhance and speed up the outcome.

We are instructed that part of the initial sales negotiations included the possibility of your client remaining on the property with a lease back and the amount offered is based primarily on your client's initial proposal.

We would assume that the maintaining the commercial viability of the sale would be in your client's interests also. Nevertheless our client fully understands the risk now present should your client not be willing to enter into meaningful discussions.

If your client is prepared to enter into further discussions please let us known and we would suggest a 'round table' to do so.

121 On 27 November 2017, Ms Luke emailed Ms Scott as follows:

Further to my letter dated 23 November I am now instructed to increase the amount offered in payment for a lease/license to $20,000 per month; on the understanding that any lease/license would only be for so long as would be necessary for the purchasers to get their lending arrangements in order and that any such lease/licence would give them full 'control' of the [purchasers] to run and operate the intended business on the property.

122 There was no written response to these offers, but on 30 November 2017, RBS served the rescission notice, which provided the purchasers with fourteen days to settle the purchase of the property. Also, on 30 November 2017, BTB wrote to RBS as follows:

Good morning Sandrah,

I confirm receipt of Notice of Rescission and note the date for rectification will be 14 December 2017, after which date the contract will be at an end.

I note that in order to prepare adjustments I require from you the rental information for the tenancies on the property. I have requested this information earlier and await same.

So that my clients can be in a position to be ready willing and able please provide this rental information urgently by return so that adjustments can be made ready at such time as my clients are able to schedule a settlement booking with you.

I am not able to independently obtain or verify the rental information and are reliant on you and your client making this information available. Please provide by return email.

We confirm your advice that your client has still been unable to obtain finance to proceed, and therefore fail to understand the reasoning for an urgent request for lease details in readiness for settlement.

In any event we have provided the lease details below, which are current as at today's date. Obviously, these details will need to be updated if and when your client arranges settlement.

Amy McDonald - $1,575.75 plus GST per calendar month paid to today's date.

Trevor Andrews - $5,030.00 plus GST per calendar month paid to 12 December 2017.

Jason Warren Racing Stables Pty Ltd $4,000.00 plus GST per calendar month paid to today's date.

124 Ms Luke of BTB used the information in the email from RBS of 30 November 2017 to prepare a draft statement of adjustments, which she sent to the purchasers on 5 December 2017. In the covering email, Ms Luke said as follows:

Hi Steve and Lucrezia

I am not sure how best to work out the "shortfall" for settlement .. but I have worked the figures based on a settlement date of 14 December ..

If you see the attached DRAFT PROPOSED statement of adjustments you will see that $4,647,297.85 will be need to complete settlement with the vendor (subject to submission, confirmation and approval by the vendor)

Working off the amounts noted in the NWC loan offer (attached) .. this shows that $5,081,300 will be available .. I am not sure if this amount takes into account the refinance amount the ANZ loan as this is not disclosed. If the additional fees for the application fee and the cost of the funds fee are deducted then the balance available from NWC should be $4,963,300.00 (subject to confirmation) which should cover what you need to pay at settlement to the vendor .. and to cover other costs which I have estimated on the DRAFT PROPOSED statement of account - titles office registration fees, stamp duty, my fees, title insurance premium etc...

I am not able to give amounts with any certainty until I am advised by the lender of the net loan balance (after they confirm all fees to be deducted from the advance of $5,400,000.00)

I hope this helps get an understand of what amounts will be required in order to complete settlement with the vendor.

125 Miss Chatham gave evidence that when she saw the draft statement of adjustments prepared by BTB, she thought the reference to the rental of $4,000.00 payable by JWRS was relevant only to the calculation of the sum to be paid by the purchasers at settlement.

126 On 6 December 2017, the purchasers made a formal application for finance from NWC, in accordance with the NWC offer referred to in paragraph 117 above. The application referred to an expected settlement date of 25 January 2018, and the exit strategy as being "refinance with Latrobe Finance. Application submitted". Documents produced by Latrobe Financial Services Pty Ltd ('Latrobe Finance') pursuant to a subpoena showed that the purchasers had in fact applied for funding from Latrobe Finance on or about 28 November 2017.

127 When questioned about the contents of the purchasers' application to NWC, Mr Cunningham said he believed the 'expected settlement date' of 25 January 2018 was the date at which he expected the bridging finance from NWC to be refinanced with a loan from Latrobe Finance. Notwithstanding the requirement in the NWC letter of offer that NWC take a first registered mortgage over the Leggatt Crescent property, he believed that the funds available of $5,081,300 was exclusive of the funds required to pay out the ANZ loan, and as such, the purchasers had sufficient funds to purchase the property. He agreed that there had been no discussions with ANZ about it taking a second registered mortgage over the Leggatt Crescent property.

128 Also on 6 December 2017, BTB wrote to RBS, as follows:

My clients are getting desperate to keep this deal alive and have no wish to see the contract end .. given the specialty type of property and the value it simply is not a quick process with any lender for all the necessary due diligence to be completed. As you know my clients have changed broker .. and the current broker is making headway ...

My clients implore your client to give them a further indulgence of time and, at a minimum, extend the time to rectify the current breach of contract.

Whilst your client may see a financial benefit in having the deposit already having to put the property back on the market may not result in a quick re‑sale. Your clients previous difficulties in getting a sale are known and my client remain, in good faith, willing to purchase and are the best option at the present time to ensure that a sale can proceed.

With respect to your client's needs, it would seem incumbent to keep the contract on foot for the time being.

Please obtain your clients instructions and revert to me as soon as possible. Should your client be willing to extend the time under the rescission notice then kindly provide us with an amended notice at your earliest convenience.

Our client has instructed that the time frame as set out in the Rescission Notice stands and no further indulgence of time will be granted.

130 Mr Cunningham forwarded Ms Luke's email of 5 December 2017 through to Mr Joe Morello of NWC on 9 December 2017, stating as follows:

Hi Joe,

Can you please have a look at the figures from Louise and give me your thoughts.

There is some confusion as to what funds will be available for settlement!

I asked you when we spoke if the 5.4m was available for settlement, and you said that is correct, I hope I was correct in assuming that was after [the Leggatt Crescent property] was refinanced as there will be a shortfall at settlement if that is not the case.

131 On 11 December 2017, Ms Petrolo of NWC replied as follows:

Hi Steve,

Please note that I expect the SA property val quote today and will email it to you once at hand.

In regards to the below email you sent Joe, please be advised the net amount after costs is $5,081.300 was per the offer. If you require additional funds to meet any shortfall then you may need to put up further security.

132 Also on 11 December 2017, BTB wrote to RBS to confirm the settlement arrangements for 14 December 2017 at 2.00 pm. She sent a copy of the statement of adjustments which was substantially similar to the version she sent through to the purchasers on 5 December 2017, showing rent payable by JWRS of $4,400.00 for the month of December 2017. She stated as follows:

I have purchase funding through multiple sources and would appreciate cheque directions as soon as possible.

I have one payment of $147,500.00 being made by a third party and would like to confirm that this can be made payable to National Australia Bank on a/c Coral Park Pre‑Training and Breaking Pty Ltd.

133 There was no evidence as to what were the 'multiple sources' of purchase funding referred to in this letter.

134 On 12 December 2017, the purchasers' new broker sent Latrobe Finance an email with information concerning the purchasers and the guarantors, the valuation report, and the securities offered to support an application for a loan of $5,788,000.00, repayable over two years with monthly repayments of $45,821.00. The information provided to Latrobe Finance included a spreadsheet prepared by the broker, as follows:

135 This email also attached a letter from the purchasers' accountant dated 8 December 2017, which confirmed that the purchasers had a taxable income of over $1.0 million, and stated that 'I am not aware of any factors which may affect the Borrower's ability to make the repayments which may cause substantial hardship to the Borrower to make repayments.'

136 Neither of the purchasers were able to shed any light as to how the calculations in this spreadsheet were made, or the sources of information for the spreadsheet. In particular, there was no evidence as to whether the sum against the line 'Additional cash' represented actual cash in the hands of the purchasers, or rather the shortfall in the funds required to purchase the property. It is apparent from the spreadsheet and the offers ultimately made by Latrobe Finance that in addition to the properties offered to NWC for security purposes, Mr Cunningham was offering a property owned by him in Wangaratta as security for the loan to finance the purchase of the property, which would need to be refinanced.

137 Also on 12 December 2017, Miss Chatham attended the final inspection of the property with Ms Taplin, her father and her brother. Mr Bryce Chatham gave evidence that he joined the inspection party for practical reasons: he wanted to obtain the security codes and find out where the power boxes were located, and so on. They were only allowed 45 minutes for the inspection, and were denied access to some of the buildings on the property. Miss Chatham gave evidence that the group walked down the laneway in the main stables, and observed that it did not look like anyone had started packing yet. Ms Taplin said "that's okay, Jason has got a really good crew, I'm sure they'd be able to move pretty fast - when is your first lot of horses due?" Miss Chatham told her that a truck had been organised for settlement day, with the horses to arrive on the day after settlement. Ms Taplin then went to the office to find out what was going on, returning to tell her that "they don't need to move, they still have another thirty days."

138 Mr Cunningham gave evidence that when Miss Chatham called him during the course of the inspection on 12 December 2017 to tell him that JWRS would not be moving for a couple of months, it was a shock to him. He was packing up and sorting out his horses at the time, and had booked another truck for the move. He was told that the rental was $4,000.00 per month for the whole property, which he said was ridiculous. In those circumstances, he believed that the purchasers should not draw down funds from NWC, because they would not be able to service the debt, and would be risking the securities put up by the investors. The purchasers were also concerned that if JWRS did not move out, they may have difficulties getting JWRS off the property, such that it would not be possible for the purchasers to operate their businesses from the property and meet their financial commitments to their lenders.

139 Miss Chatham immediately contacted Ms Luke, following which there was a rapid exchange of correspondence between the solicitors.

140 At 1:41 pm on 12 December 2017, BTB wrote to RBS as follows:

We refer to the above matter and confirm that the purchaser has called for settlement arrangements to be made for 14th December, in response to the Notice of Rescission served.

We note that to date your client has not yet been able to book its bank in readiness. We note that cheque information is required soon in order to ensure timely arrangements are made.

Following the purchasers inspection today it appears apparent that your client is not in a position provide vacant possession of the property on Thursday (the contract at special condition 22.5 contemplating only that the sub-tenants remain on the property at settlement).

The contract has been made on the understanding that the primary business on the property (operated by Jason Warren, being connected to both the vendor entity and the primary business entity) would vacate in order that the purchaser can immediately take possession of the property and commence business operations themselves.

It is not in contemplation of the parties in entering into the contract that your clients' primary [tenancy] business remain operating at settlement.

If your client is not ready willing and able to give such vacant possession on Thursday then the purchaser will not be compelled to tender for settlement. Please advise by return that your client's primary tenant will vacate the property by 14th December, failing which the Rescission Notice will not be effective to end the contract and the purchaser will not be compelled to settle until such as vacant possession (as to your clients' primary tenant's business) has vacated all parts of the property that is contemplated for the benefit of the purchaser to enter into possession and operate the purchaser's business.

141 In response, RBS sent a letter to BTB, as follows:

We refer to your letter dated 12 December, 2017, received by fax this afternoon.

The Contract of Sale is clear, wherein it states that the property is "Subject to Lease" and Special Condition 22.1 states "The Purchaser acknowledges and accepts that the property is currently tenanted on a "month to month" basis by Jason Warren Racing Stables Pty Ltd".

Our client is not required to give vacant possession of the property at settlement.

Our client has, at no time, made any representation to your client with respect to vacant possession being provided at settlement. Our client is not responsible for any misunderstanding on the part of your client.

The Rescission Notice stands and is effective.

We will let you know as soon as we have booked settlement with our lender and will provide cheque directions to you as soon as they are available.

142 During the course of 12 and 13 December 2017, Mr Cunningham continued to correspond with NWC regarding the funding to be provided at settlement. The contents of this correspondence indicated that Mr Cunningham was more concerned about whether NWC would be providing funding in time for settlement, rather than the amount of funding that NWC would be providing. Mr Cunningham gave evidence to the effect that he believed that the amount to be advanced by NWC of $5,051,300.00 was the net amount available to the purchasers after the refinancing of the Leggatt Crescent property. Miss Chatham gave evidence that there was a delay in obtaining finance, but denied that the purchasers were unable to obtain adequate finance.

143 Miss Chatham confirmed that BTB advised the purchasers that they were entitled to terminate the contract of sale. On 13 December 2017, Ms Luke sent the purchasers an email, as follows:

I confirm that I have spoken with a Barrister and provided the documentation for some preliminary advice.

There may be issues claiming the vendor is required to give vacant possession and this has not been negotiated on the terms of the contract prior to signing.

However section 32 requires full disclosure of the leases applicable and this has not been done fully .. as no lease or term information has been given for Jason Warren Stables Pty Ltd.

I confirm that I will now write to the vendor on the basis that they are in breach of section 32 of the sale of Land Act that you withdraw from the contract and all deposit monies are to be repaid ... this may put the vendor in a mood to negotiate!!

I will put forth a proposition that you would be prepared to go to maintain the contract and settle provided that the tenant vacates and that a full and complete inspection of the property is carried out.

144 The advice given by Ms Luke to the purchasers was also confirmed by the contents of an email sent by Ms Luke to them on 16 February 2018, in the period when the parties were corresponding in an attempt to salvage the transaction, as follows:

As discussed (and as previously advised) .. the decision to claim 'termination' was made on the basis that do to so (sic) would 'save' the deposit .. as opposed to allowing the rescission to run its course, whereupon the deposit would be lost to the vendor without recourse. Upon the barrister's advice that that (sic) there was an 'arguable' case that the section 32 was defective on the basis that full and proper disclosure had not been made regarding the tenancy of Jason Warren Stables Pty Ltd .. a claim for termination of the contract on that basis was made. As advised it was always going to be a matter of having to put your case in favour of termination (as part of any litigation processes that proved necessary) and should it not be possible to re‑negotiate with the vendor to [eventually] purchase the property.

145 On 13 December 2017, RBS wrote to BTB as follows:

We refer to your various correspondence received by fax and email on 12 December 2017.

We iterate the contents of our letter to you dated 12 December 2017.

The sub-tenants are not parties to the Contract and their "understanding" of anyone's intentions is irrelevant.

If it had not been contemplated that Jason Warren Racing Stables Pty Ltd would remain on the property at settlement, Special Condition 22.1 need not have been included in the Contract of Sale.

In reference to the Statement of Adjustments , the following amendments are required:

...

We await amended Statement of Adjustments, by return, at which time cheque directions will be provided.

The reference in your email that "it would seem that little action has been taken in order for the vendor to be in a position to settle at all" is perplexing. Given that this is the third occasion on which settlement has been rescheduled due to your client's continual default, our client's Banker was required to submit further paperwork before settlement could be rescheduled. Our client is allowed reasonable time to co-ordinate settlement once the Purchaser has stated it is in a position to settle. Settlement has been booked with our clients' lender on 14 December 2017 at 3:00pm at the National Australia Bank, Level 1, 500 Bourke Street, Melbourne.

Again, time is of the essence.

146 Also on 13 December 2017, Ms Luke sent RBS an email with a further draft statement of adjustments, which made no reference to rental amounts payable by either JWRS or the licensees (having been previously informed that the vendor had collected rent up to and including the date of settlement).

147 Further, on 13 December 2017, Ms Sayers sent Ms Luke a list of the rental options for the property that Mr Warren had provided to her earlier in 2017.

148 Later on 13 December 2017, BTB sent the following letter to RBS:[8]

We refer to the above matter.

Upon a review of the Section 32 Statement it is apparent that your client is in breach of the Section 32 of the Sale of Land Act and has not provided full disclosure of all leases on the property; specifically the terms of the tenancy to Jason Warren Stables Pty Ltd are not fully disclosed as required by Section 32C of the Act.

Accordingly the purchase (and/or her Nominee) hereby exercise their rights to end the contract under section 32K of the Sale of Land.

Please instruct your client to immediately return all deposit monies paid. The purchaser (and/or her Nominee reserve all right to take proceeding to recover the deposit paid if not refunded immediately).

The purchaser (and/or her Nominee) hereby reserves any and all rights under the contract notwithstanding the enclosed notice that the contract is at an end.

We refer to your letter dated 13 December, 2017, received by email at 1.59pm today.

Your purported right to terminate the Contract is not accepted.

Failure to settle tomorrow, at the scheduled time, will result in our client exercising its rights under the Rescission Notice.

We understand your client has arranged to transport horses to the property on Friday, 15 December, 2017. Our client has instructed that your client may place its horses in spelling paddocks at the property if settlement takes place, as scheduled, tomorrow.

Further, we are instructed that Jason Warren Racing Stables Pty Ltd will vacate the property by 31 December, 2017.

150 On 13 December 2017, Ms Luke sent the following email to RBS:

Hi Julie

Should it be accepted that Jason Warren Racing is to remain upon the property at settlement (and nothing is to be inferred of our clients' consent or otherwise to this point) - my clients need to know the time frame under which the tenant will be able to vacate the property. My clients' clear desire is to settle and get onto the property ... however they do need some clarity as to when this tenant will vacate so that my clients' business can be brought onto the property in full operational state.

Please advise further by return.

You have not mentioned that this Jason Warren Racing rental has been invoiced to tomorrow's date. Please confirm.

Your client should advise the tenant (Jason Warren Racing) that the lease amount will be immediately increased to the true commercial value at settlement.

Also - regarding amendment of adjustments -

I confirm amount owing to Council $6,186.60.

There is no time to obtain a new land tax certificate if an update is no longer available unless your client can prove payment has been made against the land tax certificate provided then $7,927.36 will need to be collected.

I will send adjustments shortly by separate email once I have amended same.

I note the change of time to settlement.

151 Later that afternoon, RBS sent the following email to BTB:

We refer to our letter emailed to you at 3:26 pm this afternoon and reiterate the contents thereof.

Your client accepted title on the 19 October 2017 and does not have the right to terminate the Contract.

As a gesture of goodwill, Jason Warren Racing Stables Pty Ltd will endeavour to move its stabled horses by next Friday, 22nd December 2017 and we are awaiting further instructions in that regard which we expect to receive tomorrow morning.

We refer to the above matter.

Our clients have exercised their rights under Section 32 of the Sale of Land Act to terminate the contract in light of your clients defective vendor's statement and lack of proper disclosure. The vendor's obligations must be strictly followed and it has failed to do so.

In light of the exercise of our clients rights (which are validly exercised) the Notice of Rescission is of no effect. Your acceptance or not of our clients termination is immaterial.

We note that our client is not currently making any preparations to move horses to the property.

If this matter is to move to settlement it must do so on the following basis:

1. Settlement will not proceed tomorrow.

1. Jason Warren Racing Stables Pty Ltd vacate the property entirely (Whether by 31 December or otherwise to be advised and confirmed.
2. The purchaser must be able to conduct a full and complete inspection of the property (as this was not able to be completed on the arranged date) in a state of vacant possession (save as to the sub‑tenants).
3. The purchase price to be paid will be set only at the contract purchase price - no penalties, vendors' foreseeable losses, legal costs, settlement re‑scheduled costs or any other additional payment will be paid to the vendor.
4. the earliest settlement will be contemplated will be 11th January or 7 days after Jason Warren Racing Stables Pty Ltd has vacated the property (which is the later).

If the vendor is not prepared to move towards settlement on the above basis the purchaser's termination remains and the vendor must return the deposit to our client forthwith.

The purchaser's rights to recover deposit monies paid are fully reserved.

153 On 14 December 2017, RBS sent the following letter to BTB:

We refer to email correspondence passing between our respective offices on 13 December 2017 and, in particular, your email sent to us at 5.32 pm on 13 December 2017.

We, again, refute your purported right to terminate the Contract.

In any case, even if your assertion that the lease details were required to be included in the Vendor's Statement were correct, which we refute, you are referred to Section 32K(2) of the Sale of Land Act, which only permits the purchaser to rescind the contract at any time before they accept title. Further, the Contract clearly states that it is subject to the leases and the purchaser has acknowledged that it aware of those leases. Therefore, Section 32K(4)(a) & (b) would apply if your assertion was correct.

We confirm that your client accepted titled upon signing the Section 27 Statement on 19 October 2017.

Failure to settle this matter today will result in termination of the Contract in accordance with the Rescission Notice served on 30 November, 2017.

Again, time shall remain the essence.

154 Also on 14 December 2017, BTB sent the following letter to RBS:

We refer to the above matter and to your email letter of even date.

My clients instructions remain firm. Your acceptance or not of our clients termination is immaterial.

The section 32 is defective in relation to your clients disclosure obligations. Our clients have exercised their rights under Section 32 of the Sale of Land Act to terminate the contract in light of your clients defective vendor's statement and lack of proper disclosure. The vendor's obligations must be strictly followed and it has failed to do so.

In light of the exercise of our clients rights (which are validly exercised) the Notice of Rescission is of no effect.

The purchaser intends to take immediate action to recover the deposit monies paid. Your client is hereby put on notice that legal proceedings will be commenced without further notice.

We reiterate that for there to be any change of mind of the purchasers position it will be on the following basis:

1. Jason Warren Racing Stables Pty Ltd vacate the property entirely (whether by 31 December or otherwise to be advised and confirmed.
2. The purchaser be allowed to conduct a full and complete inspection of the property after Jason Warren Racing Stables Pty Ltd has fully vacated the property including the removal all horse (the only horses to remain on the property to be

The purchase price to be paid will be set only at the contract purchase price - no penalties, vendors' foreseeable losses, legal costs, settlement re‑scheduled costs or any other additional payment will be paid to the vendor.

The earliest settlement will be (sic) contemplated will be 11th January or 7 days after Jason Warren Racing Stables Pty Ltd has vacated the property (whichever is the later).

155 Later on 14 December 2017, RBS sent the following letter to BTB:

We refer to our letter to you dated 14 December 2017, sent by email at 11.39 am and to your letter dated 14 December 2017 emailed to us at 12.11 pm today.

We maintain our client's position as stated in our previous correspondence. The Contract of Sale is now at an end pursuant to the Rescission Notice issued on 30 November 2017 and deposit monies have been forfeited to the Vendor in accordance with that Notice.

Our client reserves its rights to sue for damages for breach of contract.

We are instructed that any proceedings issued against our client will be vigorously defended and orders for costs sought against your client.

As the Contract is at an end, your client no longer has a cavetable (sic) interest in the property and according to the Caveat lodged on behalf of your client must be immediately removed.

156 Ms Sayers tried to salvage the transaction by putting forward various proposals, but the purchasers were unable to accept any of these proposals, which included a suggestion that Mr Cunningham could put his horses in the paddocks prior to JWRS vacating the property. In the purchasers' view, that proposal was unrealistic, as Victorian Racing Council rules require a trainer to be physically present with the horses on-site, and it is not possible or safe to train race horses from paddocks. There would also be nowhere for Mr Cunningham's staff to live. Further, the offices of RBS were closed over the pending Christmas/New Year break. The preferable option for the purchasers was to postpone settlement for 21 days, during which period JWRS could vacate the property.

157 Following the settlement date, on 15 December 2017, Latrobe Finance made the first of a series of indicative offers, with each offer referable to a particular security, as summarised in the following table:

158 Accordingly, the total sum to be advanced by Latrobe Finance was $5,740,000.00. However, approximately $1,500,000.00 would be required to refinance the Leggatt Crescent property and Mr Cunningham's property in Wangaratta, leaving the purchasers $4,240,000.00. Even if $200,000.00 in cash was available to the purchasers, as suggested in the correspondence between the broker and Latrobe Finance, there would still be a shortfall of funds of approximately $240,000.00.

159 After referring to the general principles concerning the construction of contracts, the purchasers referred to the principles governing construction of lease agreements, and submitted as follows (omitting citations):

In order to establish a complete and enforceable agreement in respect of a lease, there must therefore be certainty as to its essential terms, including the parties to it, the identity of the leased premises, the duration of the term and the rent to be paid. On basic principles, there can be no agreement that a property was purchased subject to a lease unless the purchase has agreed to purchase the property pursuant to the essential terms of such a lease. A reasonable business person would not understand there to be agreement if those essential terms had not been agreed to in the sense that they were disclosed, and the purchaser agreed to purchase the property subject to a lease which provided for the tenant to pay the stipulated amount, have the lease of identified parts of the property, and with the stipulated term. The alternative would be incomplete, uncertain and uncommercial.

160 The purchasers submitted that their preferred construction of Special Condition 22 (that is, that the property was sold subject only to the ongoing occupation of the licensees), is supported by the following matters:

(a) the failure to include the essential terms of the asserted lease to JWRS (duration, the price, and the part of the property occupied by JWRS) renders that part of the contract of sale incomplete and void;

(b) this is to be contrasted with those parts of Special Condition 22 dealing with the licensees, which recorded the number of stables occupied by the licensees, the requirement that the purchasers would accept the property subject to the ongoing occupation of the licensees, and requiring the purchasers to accept vacant possession without recourse to the vendor in the event that the licensees vacate the property prior to settlement;

(c) only the purchasers' preferred construction of the contract of sale results in a binding and complete contract;

(d) if the purchasers' preferred interpretation of the contract of sale is wrong, the contract of sale must be incomplete in the absence of any binding agreement to purchase the property subject to the lease to JWRS; and

(e) the purchasers submitted as follows:

additionally, a reasonable business person in the position of the parties, knowing that Jason Warren was the controlling mind of both [the vendor] and [JWRS], would not have understood [Special Condition 22] to mean the property was purchased subject to that lease unless the other essential terms of that lease were included in [Special Condition 22], which they were not.

161 Accordingly, the omission of the essential terms of the lease to JWRS in the contract of sale leads to the conclusion that the common intention of the parties, objectively determined, was that the property was to be sold subject only to the ongoing agreements with the licensees. The language of Special Condition 22 is consistent with this proposition: Special Condition 22.1 is expressed in the present tense, while Special Condition 22.3 is expressed in the future tense. Further, while Special Condition 22.3 specifies the consequences of the licensees not being on the property at settlement, no such provision is made for JWRS. Further, Special Condition 22.3 provides that if the licensees vacate the property prior to settlement, the purchasers must accept vacant possession of those sub-tenancies and "not subject to lease". Special Condition 22.5, which provides the notice period for the sub‑tenancies, but not JWRS, also supports the purchasers' contention that the property was not sold subject to a lease to JWRS.

162 Further, the purchasers submitted that there was real doubt as to whether the tenancy of JWRS was really a lease, rather than a licence, given that the vendor adduced no evidence of the existence of a lease.[10]

163 The purchasers submitted that the background knowledge of the parties and the surrounding facts and circumstances were consistent with the contract of sale conferring vacant possession of the property at settlement, subject to the sub‑tenancies. In particular:

(a) the parties knew the purchasers were purchasing the property for a horse training and breeding operation;

(b) the parties knew that Mr Cunningham had 55 to 70 horses;

(c) the parties knew that the maintenance of the sub-tenancies would satisfy the going concern requirement;

(d) if the sub‑tenancies were to continue there would be sufficient room at the property for the stabling of Mr Cunningham's horses; and

(e) the rental of $4,000.00 per month was clearly uncommercial, in comparison with the figures of $20,000.00 and $24,820.00 discussed in March and May 2017.

164 The purchasers submitted that by contending that the vendor was not going to provide vacant possession at settlement, and that JWRS was entitled to remain on the property, the vendor proceeded on an erroneous construction of the contract of sale. The purchasers submitted as follows:

Where a promisor adopts an erroneous construction of the contract a repudiation may occur, provided that the requirement of seriousness is satisfied, if the promisor acts on the construction by breaching one or more terms, or evinces an intention to perform only in accordance with his or her construction.

This is the case whether the promisor acts upon the erroneous construction of the contract, or evinces an intention to act on the erroneous construction, thereby giving rise to an anticipatory breach.

Importantly, if the promisor evinces an intention to perform in accordance with an erroneous construction the promisor may be found to have refused to perform in accordance with the contract, even though not actually intending to repudiate. This reflects the objective nature of the repudiation concept.

165 Accordingly, the vendor's denial that JWRS was required to vacate the property by settlement was an anticipatory breach which amounted to a repudiation of the contract of sale, which was accepted by the purchasers on 13 December 2017, as was the vendor's refusal to withdraw the rescission notice of 30 December 2017.

166 As for the question as to whether the reference to the rental payable by JWRS in the draft statement of adjustments sent by BTB to RBS on 11 December 2017 amounted to an admission on the part of the purchasers that JWRS would continue to occupy the property after settlement, the purchasers submitted that Ms Luke was relying upon the information provided by RBS, and in any event, that error was corrected in the final version prepared by Ms Luke for the anticipated settlement on 14 December 2017.

167 As for the question of whether, contrary to the submissions of the vendor, the purchasers were ready, willing and able to complete the purchase of the property, the purchasers submitted as follows (omitting citations):

Where a promisee seeks to rely on a wrongful termination as a repudiation, the question may arise whether the promisee is required to show that it was ready and willing to perform. If the wrongful termination occurs prior to the arrival of the time for the performance of his or her own obligations as a basis for discharge, there is no obligation to prove a present readiness and willingness to perform, but there is a requirement that the promisee be in a position to proceed to performance at the time when performance falls due.

168 The purchasers submitted that, in cases of termination for anticipatory breach, a purchaser does not have to show that it had finance in place: it just has to show that it was not incapacitated from performing its obligations under the contract. In any event, the purchasers were not saying that they could not afford the property, but rather that they needed vacant possession of the property in order to make the transaction work for them financially.

169 In relation to the purchasers' claims with respect to their preferred construction of Special Condition 22 of the contract of sale, the vendor submitted, in summary, as follows:

(a) as the purchasers do not assert that there is any ambiguity in the contract of sale or any need for any constructional choice, evidence of the surrounding inconsistencies is inadmissible with respect to the question of the proper construction of the contract of sale;

(b) the term to the effect that 'upon settlement the [purchasers were] entitled to vacant possession subject to the licensees' occupation of the property' is not discernible from the language of Special Condition 22, and is inconsistent with General Condition 13.5(c), which provides that:

The vendor warrants that the vendor will carry on the going concern until the date of supply.

(c) the purchasers' submission that the contract of sale is void as to part or in whole by reason of the alleged deficiencies in the description of the lease to JWRS should be rejected, as the contract of sale defines the leased area as 'the property', the term of the lease is 'month to month', and Ms Luke of BTB later admitted (in the statement of adjustments she prepared in December 2017) that the relevant period commenced on the first day of the month, and that the rental payable by JWRS was $4,000.00 per month;

(d) in any event, the authorities relied upon by the purchasers to assert that the contract of sale (or part of it) was void for uncertainty concern disputes between lessors and lessees, and do not support the proposition that third parties (such as the purchasers) have standing to avoid a lease. Accordingly, upon settlement, the purchasers would take title subject to any interest of any tenant in possession of the property;

(e) Special Condition 22 does not contemplate or permit a situation where the lead tenant (JWRS) vacates the property but the licensees remain, no doubt to preserve the transaction as a sale of a going concern; and

(f) the alleged 'collateral contract' is unenforceable by reason of the Statute of Frauds,[11] as it is not in writing, and there had been no part performance by the parties.

170 The purchasers submitted that, if their submissions as to their preferred construction of the contract of sale is not accepted, the purchasers are entitled to relief in equity for rectification of a contract of sale to reflect the true intentions of the parties. The purchasers submitted that it would be unconscientious for the vendor to enforce a contractual term inconsistently with what the vendor knows to be the common intention of the parties at the time of their entry into the contract of sale.

171 The purchasers relied upon the decision of the High Court in Simic v New South Wales Land and Housing Corporation,[12] accepting that there must be 'clear and convincing proof' of the asserted common intention.

172 The purchasers referred to the following statement of McLelland AJA in Commissioner of Stamp Duties (NSW) v Carlenka Pty Ltd:[13]

In general, the remedy of rectification of an instrument is available where it is established by clear and convincing proof that at the time of execution of the instrument the relevant party or parties as the case may be had an actual intention ... as to the effect which the instrument would have which was the inconsistent with the effect which the instrument as executed did have in some clearly identified way.[14]

173 The purchasers submitted that the requirement that the existence of a common intention must be proved to a high standard does not mean that high standard cannot be met, observing that the civil standard of proof still applies, even if there is a conflict in the evidence. The purchasers submitted that an 'entire agreement' clause, such as that contained in General Condition 21(n) of the contract of sale, does not preclude the purchasers obtaining relief by way of rectification. The purchasers submitted as follows:

If, which the plaintiffs do not accept, the contract did provide that the property was purchased subject to a lease with Jason Warren Racing, they rely on the substantially the [sic] same matters set out in the claim for misleading and deceptive conduct. To summarise:

(a) It was the intention and understanding of the parties in August 2017 prior to signing the contract that Jason Warren Racing would vacate prior to settlement;

(b) Purchasing the property subject to the tenancy with Jason Warren Racing was not discussed or negotiated prior to signing the contract in August 2017;

(c) Witnesses for all parties said everybody knew or understood the property was purchased subject only to the tenancies of Mr Andrew and Ms McDonald.

(d) Special condition 22 does not provide for the purchase of the property subject to a lease with Jason Warren Racing;

(e) If the property was purchased subject to a lease with Jason Warren Racing, it was void for incompleteness, alternatively the rate of rent and lack of specification of the property leased made the agreement uncommercial;

In light of the submissions summarised above, the plaintiffs are entitled to rectification of special condition 22 to delete special condition 22.1.

174 In response, the vendor submitted that the alleged 'true agreement' of the parties is not established on the evidence. In particular, the vendor relied upon the conduct of the conveyancing solicitors of the parties, submitting as follows:

(a) after the contract was signed and when preparing to settle the sale at the then forecast settlement date of 30 November 2017, the conveyancing lawyers dealt with each other on the basis that the property was subject to the leases, including the head lese, and that the rent for those leases would be adjusted at settlement; and

(b) the property was sold as a going concern. If the property was sold as alleged - with vacant possession by the head lessor subject to the licensees' occupation of the property - then it would not have been a going concern. This would have defeated the objective intention of the parties, which was to retain the head lease so as to satisfy the going concern requirements. The conveyancing lawyers for the parties can be presumed to know the law, including ATO rulings applicable to sale of land as a going concern. They would not have advised or authorised the vendor and purchaser to enter into the alleged 'true agreement' if by doing so the parties' objective intention was defeated.

175 While the purchasers' opening submissions focussed upon whether the representation that the vendor would provide vacant possession (save for the licensees) of the property at settlement were in fact made, I will not canvass these submissions extensively in these reasons, given that I accept the evidence of Ms Sayers at trial to the effect that, acting on the instructions of Mr Warren, on 16 and 18 August 2017 she told the purchasers that JWRS would be vacating the property prior to settlement ('representations'). Instead, the main issues focussed upon by the parties were whether the purchasers were induced into entering the contract of sale in reliance upon the representations, and, if so, whether their failure to settle was caused by the vendor's conduct in failing to provide vacant possession, as opposed to their inability to raise sufficient finance to complete the purchase of the property, or, put another way, they were not ready, willing and able to perform their obligations under the contract of sale.

176 The purchasers submitted that the representations were capable of inducing error, and the evidence established that the purchasers would not have signed the contract of sale had they known that the vendor would not provide vacant possession (save for the licensees) at settlement.

177 The purchasers relied upon the following facts and circumstances in support of the proposition that the representations were likely to, and, in fact did mislead the purchasers:

(a) during the course of the discussions between the purchasers and Ms Sayers in March 2017 various options for the occupation of the property were discussed, but the purchasers told Ms Sayers that Mr Cunningham wanted to move his horse training operations onto the property. None of the alternative leasing options were discussed between the parties in August 2017;

(b) in May 2017, Mr Warren told Ms Sayers that the vendor would sell the property for $4.8 million with twelve months free rent for JWRS, or for $5.0 million with vacant possession. While this exchange was made in the context of the vendor's negotiations with another potential purchaser, the vendor clearly contemplated selling the property with vacant possession if the purchaser was to pay $5.0 million or more (which the purchasers ultimately agreed to pay);

(c) in June and July 2017, the vendor agreed to a term in a draft contract of sale which provided for the purchasers to take possession of the property after payment of the deposit;

(d) the sale authority provided by the vendor to RT Edgar on 16 August 2017 recorded that the property was for sale with vacant possession and subject to tenancy as to part, along with an estimated selling price of $5.0 to $5.2 million, which was consistent with the licensees remaining on the property after settlement, but JWRS vacating the property prior to settlement;

(e) Ms Sayers' evidence was that it was Mr Warren who had suggested that the property could be sold with vacant possession;

(f) the exchange of text messages between Ms Sayers and Mr Warren on 16 August 2017, where Mr Warren said:

If Steve is happy to keep Trevor on as a tenant that is good Im (sic) happy to leave the property with vacant possession ... 5% is fine on signing I can do 60 days settlement ... there is no room for him to start moving anything in before settlement though ...

(g) given that the contract of sale only contained the essential terms of the leases to the licensees, the purchasers were led to believe that JWRS would not be on the property at settlement; and

(h) there was simply no discussion in the days before the execution of the contract of sale about the purchasers leasing the property back to JWRS after settlement because that option was not in the contemplation of the parties;

(i) the evidence establishes that all parties, including the vendor, believed that the property was being sold subject to the leases with the licensees;

(j) the conclusion above is bolstered by the fact that in September 2017, JWRS offered to sell Mr Cunningham some horse training equipment on the property;

(k) no adverse inference as to what the purchasers understood the true position to be should be drawn from the failure of the purchasers to call Ms Luke of BTB to give evidence. The vendor relied upon a draft statement of adjustments showing an allowance being made for rent payable by JWRS both before and after settlement as an admission on the part of Ms Luke that the property was subject to a lease to JWRS. The purchasers submitted that this was an error on the part of Ms Luke, which was subsequently corrected, and the purchasers' failure to call Ms Luke was explicable on the basis that the vendor had not signalled taking this point prior to trial;

(l) however, an adverse inference should be drawn from the vendor not calling Mr Warren to give evidence. In particular, by reason of the terms of s 4 of the ACL, given that the representation concerned a future matter, the failure of Mr Warren to give evidence means that the representation will be taken to have been made without reasonable grounds; and

(m) the exclusion clause in the contract of sale does not absolve the vendor from liability for misleading and deceptive conduct, particularly in circumstances where the purchasers contend that they would not have entered into the contract of sale but for the representation.

178 In relation to the question of reliance, the purchasers submitted as follows (citations omitted):

The purchasers would not have signed the contract if they had known Jason Warren Racing Stables Pty Ltd would be on the property at settlement.

The testimony of the plaintiffs' witnesses in respect of that is further substantiated by the size of the horse training and breeding operation which was 50 - 70 horses, the four staff it employed, and the cost of finance that necessitated their immediate move to the property. It was the uncontroverted evidence of the plaintiffs' witnesses that they were packing up and moving the horse training and breeding operation near Wangaratta on 12 December 2017 when they were told they would not have vacant possession by Jason Warren Racing.

There were only 68 stables on the property and Jason Warren Racing occupied 42 of them, while the other tenants occupied the remainder. Jason Warren Racing's refusal to vacate therefore meant the business case for Crestevia purchasing the property could not work. The business could not operate there, and Crestevia could not afford it, particularly if Jason Warren Racing was only paying rent of $4,000 per month. Those matters substantiate the plaintiffs' evidence that they would not have purchased the property without vacant possession save for Mr Andrews and Ms McDonald.

179 In response to the vendor's contention that the critical issue to the purchasers was that the property be sold as a going concern, not that they have vacant possession at settlement, given the discussions which took place prior to August 2017, the purchasers submitted that all the purchasers had to show that that they were misled by, and that they relied upon the representations: they were not required to establish that something had changed between the time they made an offer on 6 June 2017 and the date Miss Chatham signed the contract of sale on 19 August 2017. That the property was going to be sold as a going concern was an issue, but it was not the only issue. The purchasers needed to ensure that they could fund the purchase of the property, and they could not do so if they were not going to be taking possession of the property and would only be getting $4000.00 per month in return.

180 Finally, the purchasers submitted that the advice provided by Ms Luke as to the purchasers as to their entitlement to terminate the contract of sale and the potential consequences of doing so is not relevant to the question of whether the purchasers were misled by and relied upon the representations.

181 The vendor submitted, in relation to the purchasers' misleading and deceptive conduct claim, in summary, as follows:

(a) the representations said to have been made by Ms Sayers in March 2017 and Ms Taplin on the day the contract of sale was signed by Miss Chatham were not made;

(b) insofar as the representations were made, those representations were made in the following context:

(a) as part of negotiations;

(b) before the purchaser had made her final offer to purchase the property;

(c) on the express proviso that the purchaser's offer must be to purchase the property as a going concern;

(d) to achieve the purchaser's proviso, the purchaser's offer would be made on the basis of a written contract of sale and vendor's statement;

(e) for that purpose, the vendor's solicitor would prepare a draft contract of sale and vendor's statement for review by the purchaser's solicitor; and

(f) upon the review by each parties' solicitor, the purchaser would make an offer to purchase on the basis of the draft contract of sale and vendor's statement.

(c) the evidence does not establish that the purchasers relied upon the representations when executing the contract of sale: their primary concern was to purchase the property as a "going concern" in order to avoid the payment of GST; and

(d) further, the purchasers' solicitor proceeded as if the purchasers had purchased the property subject to the lease to JWRS, as shown by the draft statement of adjustments prepared by Ms Luke of BTB.

182 The vendor submitted that the reliability of the purchasers' asserted reliance upon the representations needs to be determined by reference to objective factors, in particular, the attitude and conduct of the purchasers on or about the time the representations were made. The purchasers were always going to say they relied upon the representations, and honestly believe that they did.

183 Alternatively, the vendor submitted that the purchasers had not suffered any loss by reason of their reliance upon any representation. Referring to the decision of the Court of Appeal in Hay Property Consultants Pty Ltd v Victorian Securities Corporation Limited,[15] the vendor submitted that:

If the misrepresentation initiates a train of events, including the entry into a certain transaction, that of itself does not create a legally causal relationship between the loss caused and the misrepresentation. The representor is not an indemnifier for all losses to which the representee is exposed along the path which the representee travels in consequence of the representation. To determine a causal relationship, it is necessary to look more closely at the breach and what flowed from it.

184 The vendor submitted that the documents in evidence, along with the evidence of Mr Cunningham, confirmed that the purchasers could not complete the purchase of the property within the period provided for by the rescission notice served on 30 November. The NWC letter of offer made available $5,081,300.00 at settlement. However, this was insufficient to complete the purchase of the property and discharge the mortgage over the Leggatt Crescent property, as only $3,914,000.00 would be available to the purchasers after the discharge of this mortgage, leaving a shortfall of over $1.0 million. While Mr Ron Chatham gave evidence that he had considerable financial resources, and gave evidence that he would 'consider' whether to make further funds available, but it was certainly not clear that he could or would make those funds available at short notice. In those circumstances, the letter from BTB to RBS of 13 December 2017, in which the purchasers purported to rescind the contract of sale, was merely a means of avoiding the consequences of failing to settle the following day, being the forfeiture of the deposit. The vendor submitted as follows:

It follows that the alleged representations (if made, and if relied upon) were not the cause of the plaintiffs' loss. The cause of the loss was Miss Chatham's folly in making an offer to purchase the property that she did not then have the financial capacity to purchase, and would never achieve.

185 The vendor relied upon what it said were six critical documents which were said to undermine the purchasers' contention that they relied upon the representations, such that the cause of their loss was the failure of the vendor to provide vacant possession at settlement, as follows:

(a) the purchasers' letter of offer of 6 June 2017, which demonstrates the critical issue to the purchasers was their ability to purchase the property as a "going concern", thus avoiding liability to GST, and, to that end, the purchasers were prepared to contemplate JWRS remaining on the property after settlement. There was no evidence which established that there was any change of position on the part of the purchasers between 6 June 2017 and 23 August 2017;

(b) the email from Ms Taplin to Ms Sayers on 19 August 2017, sent after Miss Chatham signed the contract of sale, is the only contemporaneous record of what happened during the course of the meeting at Miss Chatham's parents' home. The email recorded that Ms Taplin pointed out Special Condition 22 to Miss Chatham, and no reference was made to vacant possession being provided at settlement;

(c) by executing the contract of sale, the purchasers expressly acknowledged the monthly tenancy to JWRS, which met the purchasers' requirement that the property be purchased as a going concern;

(d) the NWC offer, which provided for a facility limit of $5.4 million. Given that the terms of the NWC offer provided for NWC to obtain a first ranking mortgage over the Leggatt Crescent property, the purchasers were not ready, willing and able to complete the purchase of the property at the time they purported to rescind the contract of sale;

(e) the statement of adjustments sent by BTB to RBS on 11 December 2017, which referred to rent payable by JWRS of $4,000.00 for 1 December 2017 to 31 December 2017, amounted to an acknowledgement by the purchasers' agent that JWRS would remain on the property after settlement; and

(f) the email advice from BTB to the purchasers on 13 December 2017, where Ms Luke states "There may be issues claiming the vendor is required to give vacant possession and this has not been negotiated on the terms of the contract", contradicts the purchasers' contention that it was understood by all parties that JWRS would vacate the property at settlement. Rather, this advice demonstrates that the purchasers' purported termination of the contract of sale was a tactical decision taken once it became clear to them that they were unable to complete the purchase of the property on 14 December 2017.

Section 32 of the Sale of Land Act

186 The purchasers submitted that, by failing to include the essential terms of the lease to JWRS in the contract of sale (in particular, the rental payments) the vendor breached s 32 of the Sale of Land Act, and as such, was entitled to rescind the contract of sale pursuant to s 32K of the Sale of Land Act.

187 Section 32 of the Sale of Land Act provides as follows:

Statement of matters affecting land being sold

(1) A vendor under a contract for the sale of land must give to a purchaser, before the purchaser signs the contract, a statement signed by the vendor that contains the matters and attaches the documents specified in this Division.

(2) For the purposes of subsection (1), a vendor may sign the statement to be given to a purchaser under this section by electronic signature.

188 Section 32C of the Sale of Land Act provides as follows:

A section 32 statement must contain the following matters in relation to the use of the land -

(a) a description of any easement, covenant or other similar restriction affecting the land (whether registered or unregistered) and particulars of any existing failure to comply with the terms of that easement, covenant or restriction;

189 Section 32K of the Sale of Land Act provides as follows:

Supply of false information or failure to supply information in section 32 statement or failure to supply section 32 statement may result in rescission

(1) This section applies if a vendor -

(a) supplies false information to a purchaser in a section 32 statement or in any certificates, notices, policies or other documents attached to a section 32 statement for the purposes of complying with the requirements of this Division; or

(b) fails to supply all the information required to be supplied to a purchaser, either in a section 32 statement or attached to the section 32 statement, as required by this Division; or

(c) fails to give a purchaser a section 32 statement signed by the vendor before the purchaser signs the contract for the sale of land.

(2) The purchaser may rescind any contract for the sale of land which has been entered into on the basis of information contained in the section 32 statement or attached to the section 32 statement at any time before the purchaser accepts title and becomes entitled to possession or to the receipt of rents and profits.

(3) The purchaser may rescind any contract for the sale of land where the vendor fails to give the purchaser a section 32 statement before the purchaser signs the contract at any time before the purchaser accepts title and becomes entitled to possession or to the receipt of rents and profits.

(4) Despite subsection (2) and (3), the purchaser may not rescind a contract for the sale of land if the court is satisfied that -

(a) the vendor has acted honestly and reasonably and ought fairly to be excused for the contravention; and

(b) the purchaser is substantially in as good a position as if all the relevant provisions of this Division had been complied with.

190 The purchasers observed that their claim under s 32 of the Sale of Land Act arises only if, contrary to their submissions regarding the proper construction of the contract of sale, the property was sold subject to a lease with JWRS. The purchasers referred to the decision of Macaulay J in Vouzas v Bleake House Pty Ltd,[16] where his Honour held that a lease was 'a similar restriction affecting the land' which required disclosure in the Section 32 statement. While the purchasers had, by reason of the terms of s 27 of the Sale of Land Act, been deemed to have accepted title, the purchasers had not become entitled to possession of the property or to the receipt of rents and profits.

191 The purchasers submitted that the vendor had not acted honestly, given Ms Sayer's evidence that Mr Warren told her the vendor was happy to provide vacant possession, and the vendor subsequently resiled from that position. Further, the s 32 statement failed to disclose that JWRS claimed to be liable to pay $4,000.00 per month in rent. For the same reasons, it could not be said that the vendor acted reasonably. The purchasers submitted as follows (citation omitted):

Additionally, a vendor is likely to be found to have acted reasonably for the purposes of s 32K(4), where a section 32 statement has been prepared containing all the leases a property is sold subject to, and the essential terms of those leases being the amount of rent payable, the term of the lease and the identity of the part of the property or facilities leased.

The purchaser was not in as good a position as if all the relevant provisions of section 32 had been complied with. The purchaser's ability to finance itself was premised on its immediate possession of the property with only Mr Andrews and Ms McDonald as tenants.

The purchaser's ability to operate its horse training and breeding operation was also premised on the ability to move the entire operation onto the property at settlement. It was the middle of racing season, and the operation employed four staff members. It was not possible for the business to operate between two bases at Wangaratta and the property.

Additionally, the rent payable by Jason Warren Racing, unilaterally demanded by the vendor and never agreed to by the purchaser, was at $4,000 significantly less than a commercial rate of between $20,000 and $24,820 per month.

193 Finally, the purchasers submitted that while they may have been slow in obtaining finance, they did obtain an extension of the settlement date, while the vendor seeks to retain the deposit in circumstances where Mr Warren knew that the purchasers intended to move onto the property, but the vendor refused to provide vacant possession at settlement.

(a) even if it is assumed that s 32 of the Sale of Land Act requires the disclosure of leases in a s 32 statement (which is not settled), the lease to JWRS was in fact disclosed to the purchasers;

(b) given the purchasers' concern to purchase the property as a going concern, the material issue was the fact of the existence of the lease, not the rental payable pursuant to the lease to JWRS; and

(c) the vendor submitted as follows:

Thus, there was sufficient disclosure for the purpose of s 32C(a) of the [Sale of Land Act], having regard to the intent of these particular parties and this particular lease.

In the alternative, and if there was insufficient disclosure, then all of the elements of the excuse provision at s 32K(4) of the [Sale of Land Act] are clearly invoked. Specifically:

(a) the vendor has acted honestly and reasonably and ought fairly to be excused for the contravention; and

(b) the purchaser is substantially in as good a position as if all the relevant provisions of this Division had been complied with.

Indeed it is difficult to see how the plaintiffs can contend otherwise, when their own solicitor adjusted for the head lease in anticipation of settlement.

Section 49 of the Property Law Act

195 Finally, in the event that the purchasers are unable to obtain relief through their contractual claims, their misleading and deceptive conduct claims, or their claims pursuant to s 32K of the Sale of Land Act, the purchasers seek the return of the deposit pursuant to s 49(2) of the Property Law Act.

196 Section 49 of the Property Law Act provides as follows:

Applications to the Court by vendor and purchaser

(1) A vendor or purchaser of any interest in land, or their representatives respectively, may apply to the Court, in respect of any requisitions or objections, or any claim for compensation, or any other question arising out of or connected with the contract (not being a question affecting the existence or validity of the contract), and the Court may make such order upon the application as to the Court may appear just, and may order how and by whom all or any of the costs of and incident to the application are to be borne and paid.

(2) Where the Court refuses to grant specific performance of a contract, or in any action for the return of a deposit, the Court may, if it thinks fit, order the repayment of any deposit.

(3) This section shall apply to a contract for the sale or exchange of any interest in land.

197 The purchasers referred to the summary of the principles with respect to the Court's discretion under s 49(2) of the Property Law Act contained in the decision of Riordan J in Simcevski v Dixon (No 2) ('Simcevski').[17]

198 The purchasers submitted that this was an appropriate occasion for the exercise of the Court's discretion under s 49(2) of the Property Law Act, on the grounds that:

(a) the purchasers paid $505,000.00 in deposits;

(b) the vendor refused to provide vacant possession at settlement, despite having never discussed that possibility with the purchasers, and knowing that the purchasers intended to move on to the property after settlement; and

(c) the purchasers submitted as follows:

... the [vendor] has not proved that it has suffered any detriment. The [purchasers] on the other hand have lost their deposit, and the opportunity to purchase the property, and the opportunities the property itself presented to their business.

199 In response, the vendor submitted as follows (omitting citations):

....return of the deposit under s49(2) of the [Property Law Act] is discretionary, but exercised judicially on a just and equitable basis. The Court must consider the critical function of the deposit and the vendor's contractual right to claim forfeiture. Where the deposit is otherwise lawfully rescinded, refund under s49(2) is the exception rather than the rule. The plaintiffs' claim for return of the deposit is grounded upon "the representations and warranties". If the plaintiffs' claim based upon the representations and warranties fails, then there is no cogent reason to exercise the discretion under s49(2) of the [Property Law Act].

200 Prior to considering whether the purchasers have made out their claims in this proceeding, or any of them, I make the following factual findings:

(a) the purchasers have established that on 16 and 18 August 2017 the vendor, through its agent, Ms Sayers, made representations to the purchasers that the vendor would provide vacant possession (save for the licensees) at settlement, and that those representations were made on the instructions of the vendor;

(b) the purchasers have not established that the vendor made representations to that effect in March 2017 and at the meeting between Miss Chatham and Ms Taplin on 19 August 2017;

(c) I accept that the purchasers relied upon the representations made on 16 and 18 August 2017 when entering into the contract of sale on 19 August 2017; and

(d) I am not satisfied that, as at 13 December 2017, the purchasers had sufficient funds to complete the purchase of the property on the following day.

201 In relation to (a) above, Ms Sayers accepts that she sent the text message referred to in paragraph 84 above to Miss Chatham on 16 August 2017, and that message was to the effect that JWRS would vacate the property at settlement. She agreed that she had a telephone call with Miss Chatham on 18 August 2017, where she told her that JWRS would be leaving the property by settlement. Ms Sayers does not recall having a telephone conversation with Mr Cunningham to that effect on or about 16 August 2017, but there is no reason to doubt Mr Cunningham's evidence in that regard. Ms Sayers confirmed that she made those representations based upon her discussions with Mr Warren, which is consistent with the contemporaneous records of the parties' communications in evidence.

202 However, there is a basis for doubting the assertion that the vendor made such a representation in March 2017. Between 15 March 2017 (when Miss Chatham first made contact with Ms Fraser-Smith) and 31 May 2017, when the purchasers made their first formal offer to purchase the property, a range of rental options were discussed. There were further rental options discussed in June and July 2017, including, in July 2017, the option of the purchasers taking possession prior to settlement.

203 Further, I agree there is a real reason to doubt the authenticity of the email of 28 March 2017. First, Ms Sayers denies ever receiving this email. Further, I note that this email was said to have been sent from Miss Chatham's iPhone at 11.06am, which is the same time that Miss Chatham sent another email to Ms Sayers asking about whether the vendor contemplated JWRS remaining upon the property after settlement, sub‑letting to Mr Andrews. Based upon the contents of the two emails, it is inherently unlikely that those two emails were sent within a minute of each other.

204 Further, in relation to the representation said to have been made on 19 August 2017 by Ms Taplin, I accept Ms Taplin's evidence that this was not the type of discussion she would have had with a purchaser given her role with RT Edgar. Neither Mr Bryce Chatham or Mr Ron Chatham had any reliable recollection of what occurred during this meeting, and the only contemporaneous record, being Ms Taplin's email to Ms Sayers shortly after the meeting, makes no mention of her telling Miss Chatham that JWRS would leave the property at settlement.

205 However, not a great deal turns on my finding that neither of the above representations were made, save that it did cause me to approach the evidence given by the purchasers on controversial matters with some degree of caution. However, the representations which were made were made by Ms Sayers, who had apparent and actual authority to make the representations, and the representations were made in the days prior to Miss Chatham signing the contract of sale, such that I accept that they significantly influenced the purchasers to enter into the contract of sale, or at least the contract of sale containing the terms that it contained.

206 I agree that it was important to the purchasers that the property be purchased as a going concern. However, the purchasers' advice was that this could be achieved by the licensees remaining on the property after settlement. That was consistent with Special Condition 22.3 of the contract of sale, which in effect released the vendor from any claims by the purchasers should the licensees vacate the property prior to settlement. Accordingly, the purchasers, not the vendor, bore the risk of the transaction being subject to GST. It seems to me that such a clause would not have been necessary if JWRS were to remain on the property at settlement.

207 However, the fact that the purchasers were concerned to ensure that the property was transferred to them as a going concern does not preclude a finding that the purchasers were led into error, and relied upon, the representations when they entered into the contract of sale. That the purchasers were induced to enter into the contract of sale by reason of the representations was established by the direct evidence of the purchasers, and also by the matters relied upon by the purchasers in their submissions and referred to in paragraphs 177 and 178 of these reasons. While I accept that their evidence to the effect that the question of whether vacant possession would be provided was an overwhelming consideration in their minds at the relevant time was perhaps a little overstated, I accept that the question of the use to which the property could or would be put after settlement was a material, indeed significant consideration, given the nature of the property and the purchasers' plans to operate their businesses from the property.

208 Further, I accept that, at least up until approximately mid‑October 2017 at the earliest, the understanding of the purchasers that JWRS would vacate the property at or prior to settlement, as conveyed to them by Ms Sayers, was shared by the vendor. First, Mr Warren's instructions to Ms Sayers in August 2017 were that he was prepared to provide vacant possession (save for the licensees) at settlement, and he was confident that JWRS could relocate its business within sixty days. All of the evidence which post‑dated the execution of the contract of sale was consistent with JWRS preparing to vacate the property, including:

(a) the preparation of a licence agreement between Crestevia and Mr Andrews, which would not have been necessary if JWRS was going to remain the head tenant on the property;

(b) the offer by JWRS in September 2017 to sell equipment to Mr Cunningham for use on the property;

(c) the correspondence between Ms McDonald and Miss Chatham in early October 2017;

(d) the existence of a draft agreement for JWRS to lease part of a property in Mornington from 16 October 2017; and

(e) the genuine shock of the purchasers during the course of the inspection of the property on 12 December 2017.

209 Further, I can infer from the failure of the vendor to call Mr Warren to give evidence that his evidence would not have assisted the vendor to deny that, at the time of the execution of the contract of sale, the common understanding of the parties was that JWRS would be vacating the property at settlement. The failure to call Mr Warren to give evidence also means that one can only speculate upon the possible reasons for his apparent change of heart, so I shall not venture to do so.

210 Finally, I accept that, as at 13 December 2017, the date upon which they purported to rescind the contract of sale, the purchasers probably did not have sufficient funds to complete the purchase of the property, although I doubt the shortfall was as large as contended for by the vendor, and I accept there was a reasonable possibility that the purchasers would be able to come up with the necessary funds within a relatively short period of time after the scheduled settlement date of 14 December 2017. The evidence suggests that the only finance available to the purchasers as at 13 December 2017, when they purported to terminate the contract of sale, was the sum of $5,081,300.00 from NWC, plus the sum of $147,500.00 available from an investor, Mr Edwards. Based upon the funds payable to the vendor to settlement, and various fees and charges, the shortfall of funds required to complete the purchase was approximately $620,000.00, or $240,000.00 if the purchasers did indeed have $480,000.00 in cash at their disposal, as represented by the broker to NWC on 20 November 2017. However, there was no independent evidence that the purchasers did indeed have access to cash of that amount.

211 Further, I do not accept that Mr Cunningham's belief that the amount to be advanced by NWC was net of the amount required to refinance the Leggatt Crescent property. That is not to say that Mr Cunningham did not actually hold that belief, but that belief cannot be reconciled with the terms of the NWC offer, which provided that the offer was contingent on NWC holding a first registered mortgage over the Leggatt Crescent property. Mr Cunningham agreed that there were no discussions with the ANZ Bank about postponing its interest in the Leggatt Crescent property in favour of NWC, and it takes no particular understanding of commercial matters to conclude that it would be unlikely to do so. Nothing in the solicitors' correspondence regarding the arrangements for settlement indicated that the ANZ Bank would be present at settlement to provide a discharge of its mortgage over the Leggatt Crescent property.

212 The authorities provide that, when the question of whether a party is ready, willing and able to fulfil their obligations under a contract is put in issue in a proceeding, the parties in the position of the purchasers in this proceeding bear the onus of proof in this regard. [18] In my view, the purchasers have not satisfied that onus. In particular, the evidence of Mr Cunningham to the effect that he believed that they had the funds available to complete the purchase, and the evidence of Mr Ron Chatham to the effect that he is a man of means (which he undoubtedly is), and would 'investigate the matter' if asked to invest further funds into the purchase of the property, does not discharge the onus upon the purchasers to prove that, at the time they purported to rescind the contract of sale on 13 December 2017, they were in a position to fulfil their obligations under the contract at the time due, being the following afternoon.

213 I accept that there was more funding available for the purchase of the property from Latrobe Finance than was available from NWC. However, formal letters of offer were not made by Latrobe Finance with respect to all of the properties put up as security for the proposed loan from Latrobe Finance until 8 January 2018, more than three weeks after the scheduled settlement date. Further, in the absence of any evidence that the purchasers had access to cash of more than $200,000.00, then there would still be a shortfall at settlement, even if the vendor could have been persuaded to extend the date for settlement. It may well be that Mr Ron Chatham could have been persuaded to advance further funds to make up the shortfall, and he would have had the time and the wherewithal to do so, but based upon his evidence at trial, that is not a foregone conclusion.

214 Accordingly, it appears that the purchasers may well have been able to find sufficient funds to settle in the weeks after the scheduled settlement date of 14 December 2017. However, it was not put by the purchasers that further negotiations may have resulted in an extension of time, or that the vendor acted unreasonably or unconscionably in refusing to agree to an extension of time. On the evidence, I could not find that an extension of time would have been available to the purchasers. The contract of sale provided that time was of the essence, and that term was reinforced in the correspondence from RBS in the context of the vendor's agreement to refrain from issuing a rescission notice after the expiry of the date for settlement in the contract of sale. The purchasers' request for a further extension of time made on 6 December 2017 was flatly refused. While the correspondence between the parties' solicitors suggests that a further contract of sale might be open to negotiation, one could not conclude that the parties would have been able to come to terms after the purchasers were in a position to complete the purchase of the property given the impasse that had been reached: indeed, the later negotiations bore no fruit. This is not a matter on which I can draw inferences from the vendor's failure to call Mr Warren to give evidence, as drawing such an inference would amount to impermissible gap filling.

215 Finally, for completeness, in June 2019, Notices to Admit were served by the vendor and the real estate agents. On 27 June 2019, the solicitors for the vendor sought admission by the purchasers of the following facts:

(a) on 17 August 2017 at 4.42 pm, Ms Scott of RBS sent an email to the purchasers and Ms Sayers attaching a draft contract of sale which included special condition 22; and

(b) on 19 August 2017, prior to Miss Chatham signing the contract of sale, Ms Taplin referred Miss Chatham and Messrs Ron and Bryce Chatham to special condition 22 of the contract of sale.

216 The Notice to Admit annexed a copy of page 9 of the contract of sale, and the email sent by Ms Taplin to Ms Sayers of 19 August 2017.

217 The purchasers disputed each of the facts, and each of the documents referred to in the vendor's Notice to Admit.

218 On 24 June 2019, the solicitors for the real estate agents sent a Notice to Admit to the solicitors to the vendor in exactly the same terms as that served upon the purchasers by the vendor.

219 The vendor disputed the fact that Ms Taplin referred Miss Chatham and Messrs Ron and Bryce Chatham to special condition 22 of the contract of sale.

220 Given the settlement of the third party proceeding between the vendor and the real estate agents, the Notice to Admit served by the real estate agents is of no consequence. As for the Notice to Admit served upon the purchasers, I accept that RBS sent the purchasers and Ms Sayers a copy of the draft contract of sale: at trial neither of the purchasers disputed that. However, the Notice to Admit annexed a clean copy of page 9 of the Contract of Sale: the version actually sent to the purchasers carried a large 'DRAFT' watermark. Further, given my acceptance of Ms Taplin's evidence, I accept that Ms Taplin did refer Miss Chatham at least to special condition 22 of the contract of sale. However, the forensic or cost consequences of this dispute are not significant.

221 The parties made detailed submissions with respect to the proper construction of Special Condition 22 of the contract of sale, the question of whether the jurisdiction of the Court to order rectification is enlivened, and if so, whether it should be exercised, and whether the purchasers were entitled to rescind the contract of sale by reason of the vendor's assertion that it was not required to provide vacant possession of the property at settlement. Those submissions were very helpful, but I do not propose to deal with them at length in these reasons. These reasons are prolix enough, and their delivery has been sufficiently delayed, to avoid dealing with each and every point taken by the parties.

222 In summary, my conclusions on the purchasers' contractual claims are as follows:

(a) while the purchasers' submissions with respect to the proper construction of Special Condition 22 of the contract of sale are not without merit, ultimately, I consider the purchasers' preferred construction of the contract of sale is inconsistent with the language of Special Condition 22.1 of the contract of sale;

(b) while I accept that it was the common understanding of the parties at the time the contract of sale was executed that JWRS would vacate the property at settlement, I am not satisfied that it is sufficiently clear on the evidence that it was the common intention of the parties that JWRS would be obliged to vacate the property at settlement, such as to enliven the Court's jurisdiction to rectify the contract of sale in the manner contended for by the purchasers;

(c) however, I consider that Special Condition 22.1 of the contract of sale is incomplete and uncertain, by reason of the absence of any information concerning the rental paid and to be paid by JWRS;

(d) I also consider that Special Condition 22.1 was not so essential to the bargain between the parties such as to preclude Special Condition 22.1 from being severed from the contract of sale;

(e) as such, the purchasers were entitled to treat the vendor's refusal to provide vacant possession at settlement as an anticipatory breach of the contract of sale; and

(f) however, as the purchasers were not, at the time they purported to rescind the contract of sale, ready willing and able to perform their obligations under the contract of sale at the time specified for performance, they were not entitled to rescind the contract of sale and recover their deposit.

223 The vendor's submissions with respect to the question of whether Special Condition 22.1 is void for uncertainty relied upon its contention that the authorities relied upon the purchasers were concerned with disputes between parties to leases, not disputes of the current kind. However, in a leading decision on the question of the severability of uncertain terms from a written contract, Brew v Whitlock (No 2),[19] the Full Court of this Court was concerned with precisely that situation, that is, a dispute between a vendor and a purchaser as to whether a term of a contract which obliged the purchaser to grant a lease to a third party was sufficiently certain to be effective to bind the purchaser. The Full Court found that the relevant term, which failed to specify the date of commencement, the duration of the lease, and the amount of the rent was incomplete and uncertain. The Court devoted considerably more attention to the question of whether the relevant term was severable.

... where parties in purporting to make a contract leave some part incomplete and uncertain, and that part, though independent in point of form, meaning and operation, is of such substance and materiality in the whole bargain that it cannot be severed from the rest, then, although the parties may have thought that they had made a contract, they have made none at all; ...[20]

225 The approach of the Full Court has been accepted as correct in numerous subsequent authorities, save in one key respect: the statement of the Full Court to the effect that it is not permissible to resort to extrinsic evidence to determine the materiality of the relevant term to the transaction as a whole is considered to be inconsistent with the modern approach to the construction of contracts.[21]

226 I agree that in the absence of any reference to any rental payable by JWRS, Special Condition 22.1 of the contract of sale is uncertain, and thus is void. However, based upon the evidence of the negotiations between the parties, and the evidence of the surrounding circumstances, I do not consider that Special Condition 22.1 of the contract of sale was so fundamental to the bargain between the parties that it could not be severed from the contract of sale, given the common understanding of the parties that JWRS would vacate the property at settlement, and the fact that JWRS had in fact taken preparatory steps to do so.

(a) Mr Warren had informed Ms Sayers that he was prepared to give vacant possession of the property for a higher price, and would accept a lower price if JWRS were to stay. While this communication was made in the context of negotiations with another potential buyer, that evidence confirms the other evidence to the effect that all options were up for negotiation, provided that the financial terms could be agreed;

(b) the evidence is that the parties understood (correctly or otherwise) that the requirement that the property could be sold as a going concern could be satisfied by the licensees remaining on the property;

(c) no lease or licence agreement was ever prepared for JWRS; and

(d) the contract of sale was complete and commercially effective without Special Condition 22.1.

228 Accordingly, the vendor's refusal to provide vacant possession at settlement amounted to an anticipatory breach of the contract of sale, as, in the absence of Special Condition 22.1, the contract of sale provided for the purchasers to take possession at settlement subject only to the sub‑tenancies of the licensees. However, the purchasers were not entitled to rescind the contract and claim damages for breach, in circumstances where the evidence did not establish that they would have been ready, willing and able to complete the purchase of the property on the appointed date for settlement. Further, for completeness, while I accept that there was a reasonable likelihood that the purchasers would have been able to complete the purchase in the weeks after the settlement date, I cannot be satisfied that the vendor would have granted an extension of time: indeed, all of the evidence points to the contrary.

229 The legal principles governing the question of whether a party is entitled to rescind a contract and claim damages for breach of contract are well settled, as follows:

(a) a party is only entitled to rescind for anticipatory breach must themselves be willing to perform their obligations under the contract, properly construed;[22]

(b) where a defendant raises in its pleading the question of whether the plaintiff was ready, willing or able to perform the contract, the burden of proof rests with the plaintiff;[23] and

(c) the question of whether a party in the position of the purchasers in this proceeding was ready willing and able to perform its obligations under the contract of sale is fundamental to the establishment of the cause of action, and is not merely concerned with the assessment of damages.[24]

230 While I agree with the submissions advanced on behalf of the purchasers that, in cases of anticipatory breach, the burden upon a party in the position of the purchasers is not so onerous, in that they would only have to prove a likelihood that they would be able to perform their obligations on the date for performance, and that they were not incapacitated from doing so, the practical consequence of any lessening of the burden upon the purchasers is limited in the current case. Here, the purchasers purported to rescind the contract the day prior to the day that performance was due, and there was no compelling evidence to support a finding that between the day the purchasers made their application for finance to NWC (12 December 2017) and the scheduled settlement date of 14 December 2017, the purchasers had any other source of funds other than the $147,500.00 due from an investor.

231 Accordingly, the purchasers' claim to recover the deposit for the vendor's breach of contract fails.

232 As I have found that Special Condition 22.1 of the contract of sale is severable, but that the rest of the terms in the contract remained in force, it is strictly speaking not necessary for me to deal with the question of whether the purchasers were entitled to the remedy of rectification. However, for completeness, I will do so, briefly.

233 The principles with respect to the remedy of rectification are succinctly summarised in the recent discussion of the Court of Appeal in Queensfield Pty Ltd v Gordon Finance Pty Ltd,[25] as follows (citations omitted):

The purpose of rectification is to correct the written instrument so that it conforms to the true agreement between the parties, which the instrument mistakenly fails to express. Gageler, Nettle and Gordon JJ explained in Simic v New South Wales Land and Housing Corporation:

For relief by rectification, it must be demonstrated that, at the time of the execution of the written instrument sought to be rectified, there was an 'agreement' between the parties in the sense that the parties had a 'common intention', and that the written instrument was to conform to that agreement. Critically, it must also be demonstrated that the written instrument does not reflect the 'agreement' because of a common mistake. Unless those elements are established, the 'hypothesis arising from execution of the written instrument, namely, that it is the true agreement of the parties' cannot be displaced.

The issue may be approached by asking - what was the actual or true common intention of the parties? There is no requirement for communication of that common intention by express statement, but it must at least be the parties' actual intentions, viewed objectively from their words or actions, and must be correspondingly held by each party.

Displacing the presumption that the executed agreement reflects the true agreement of the parties requires 'convincing proof'. Anything less would subvert the objective theory of the interpretation of contracts. One aspect of that proof is that the divergence between the common intention of the parties and the terms of their written agreement must be clearly identified.[26]

234 I am not satisfied that, notwithstanding my finding that there was common understanding between the parties that JWRS would vacate the property at settlement, I can go so far as to find that there was a common intention that JWRS would vacate the property at settlement. As discussed elsewhere in these reasons, in the absence of Mr Warren's evidence, I am not in a position to draw any conclusions as to the state of mind of the vendor's principal at the time of the execution of the contract of sale. More significantly though, I am not able to be satisfied that the inclusion of Special Condition 22.1 in the contract of sale was a mistake. The contract of sale was drawn up by solicitors in the days prior to its execution. The inclusion of Special Condition 22.1 may have been for a particular purpose unconnected with the parties' understanding of the true state of affairs (say, for the purpose of bolstering the transaction's character as being the sale of a going concern), but I could not be satisfied the inclusion was a mistake.

235 The principles relevant to this aspect of the purchasers' claims were summarised by McHugh J in the decision of Butcher v Lachlan Elder Realty Pty Ltd,__[27] as follows (omitting citations):

The question whether conduct is misleading or deceptive or is likely to mislead or deceive is a question of fact. In determining whether a contravention of s 52 has occurred, the task of the court is to examine the relevant course of conduct as a whole. It is determined by reference to the alleged conduct in the light of the relevant surrounding facts and circumstances. It is an objective question that the court must determine for itself. It invites error to look at isolated parts of the corporation's conduct. The effect of any relevant statements or actions or any silence or inaction occurring in the context of a single course of conduct must be deduced from the whole course of conduct. Thus, where the alleged contravention of s 52 relates primarily to a document, the effect of the document must be examined in the context of the evidence as a whole. The court is not confined to examining the document in isolation. It must have regard to all the conduct of the corporation in relation to the document including the preparation and distribution of the document and any statement, action, silence or inaction in connection with the document.[28]

236 There was no dispute between the parties as to the principles applicable to the purchasers' claim that they were induced to enter into the contract of sale by reason of the vendor's alleged misleading and deceptive conduct, and as a consequence suffered loss, but rather, their application to the facts. Based upon the evidence of Ms Sayers, the veracity and reliability of which was not in issue, the issues with respect to this aspect of the purchasers' claims are as follows:

(a) as the representation was a representation as to a future matter, was it reasonable for the vendor to make that representation;

(b) was the representation of such a character that it was liable to lead the purchasers into error;

(c) whether the effect of the representation that JWRS would vacate the property at settlement was negated or overcome by the reference to the month to month tenancy of JWRS in Special Condition 22.1 of the contract of sale, and/or the 'entire agreement' clause in the contract of sale;

(d) did the representation induce, or at least materially contribute to inducing, the purchasers to enter into the contract of sale; and

(e) did the purchasers suffer loss by reason of the vendor resiling from the representation?

237 In relation to (a) above, I agree that, given the representation that JWRS would vacate the property at settlement was a representation as to a future matter, by reason of s 4 of the ACL, the onus of proving the reasonableness of the representation shifts to the vendor. As I discuss further later in these reasons in connection with the question of whether the vendor had established that it acted honestly and reasonably for the purpose of s 32K(4) of the Sale of Land Act, the unexplained failure of the vendor to call Mr Warren to give evidence means that the Court is unenlightened as to what Mr Warren intended at the time of the execution of the contract of sale, and whether he always intended for JWRS to reserve the right to remain on the property at settlement, or whether he simply had a change of heart. Accordingly, in the absence of any evidence from Mr Warren, the vendor has not discharged the onus upon it to establish that the representation was reasonable.

238 In relation to (b) above, the evidence establishes that the purchasers subjectively believed, as it turns out, erroneously, that the vendor would provide vacant possession at settlement, save for the licensees. I do not doubt their evidence in that regard, and that evidence was consistent with Ms Sayers' evidence, and most of the contemporaneous communications were consistent with the representations having been made, and understood by the purchasers. Of course, the test in an objective test, but the nature of the representations, the identity of the person who made the representations, and the context in which the representations being made all point to the representation being of a character which was liable to lead a reasonable person in the position of the purchasers into error, and, as a matter of fact, the representations did lead the purchasers into error.

239 As for (c) above, I do not consider that the reference to the tenancy of JWRS in Special Condition 22.1 of the contract of sale was effective to negate the effect of the representations upon the purchasers. I accept that the presence of this clause in the contract of sale did not ring any alarm bells for the purchasers, understandably so given what they had been told by Ms Sayers. First, the purchasers understood that JWRS was currently occupying the property, and would continue to do so until settlement. Secondly, the description and treatment of JWRS in Special Condition 22.1 is quite different to the manner in which the licensees were referred: there was considerably more detail in Special Condition 22 regarding the sub‑tenancies of the licensees, the rental amounts and the notice periods imposed upon the purchasers should they wish to terminate the sub‑tenancies. I also agree with the purchasers' submissions to the effect that boilerplate contractual disclaimers do not necessarily exclude liability for misleading and deceptive conduct, particularly where the representations have induced a party to enter into the contract concerned.

240 In relation to (d) above, the principles applicable to proceedings where it is alleged that a party has been induced by a misrepresentation to enter into a contract are concisely stated in the reasons of Wilson J in Gould v Vagellas,[29] as follows:

1. Notwithstanding that a representation is both false and fraudulent, if the representee does not rely upon it he has no case.
2. If a material representation is made which is calculated to induce the representee to enter into a contract and that person in fact enters into the contract there arises a fair inference of fact that he was induced to do so by the representation.
3. The inference may be rebutted, for example, by showing that the representee, before he entered into the contract, either was possessed of actual knowledge of the true facts and knew them to be true or alternatively made it plain that whether he knew the true facts or not he did not rely on the representation.
4. The representation need not be the sole inducement. It is sufficient so long as it plays some part even if only a minor part in contributing to the formation of the contract.[30]

241 I accept the purchasers' contention that they relied upon the representations when entering into the contract of sale incorporating Special Condition 22.1. I accept that the purchasers were also particularly concerned to ensure that the property was purchased as a going concern. The vendor submitted that the purchasers would not have walked away from the negotiations by reason of JWRS continuing to occupy the property for a period of time after settlement. That may well be the case.

242 However, while I accept that it would be possible that the purchasers would enter a contract of sale with the vendor even if JWRS was planning to remain on the property, I agree that the purchasers would not have entered into the contract of sale, which (setting aside for the moment my findings that Special Condition 22.1 was severable by reason of its uncertainty) provided for JWRS to remain on the property for an unspecified rental, which turned out to be an uncommercial rental. The evidence establishes that, while the preferred option for the purchasers was for the purchasers to take possession of the property at settlement, or even beforehand, given that the reason for the acquisition of the property was for the purchasers to operate their businesses from the property, the purchasers were at least open to a lease back option, even if only for a short time. Purchasing the property on the basis that the vendor would remain on the property for a period of time after settlement represented perhaps the least risky option, as far as claiming a GST exemption was concerned, notwithstanding their advice that the ongoing occupation of the licensees was sufficient to satisfy the going concern requirement.

243 However, I am satisfied that the purchasers would not have entered into a contract of sale which provided for an ongoing lease to JWRS for the sum of $4,000.00 per month. Given the rental options discussed between the parties over the course of March to July 2017, and the offers made by the purchasers in November 2017 to take a lease of the property for $15,000.00 to $20,000.00 per month, a lease to JWRS the whole of the property for $4,000.00 per month, in circumstances where the licensees were paying a total of $6,605.75 to JWRS per month for parts of the property, was clearly uncommercial. While it is not necessary for present purposes for me to determine what would have been the market rental of the property, it was clearly well in excess of $4,000.00 per month. In circumstances where the purchasers were borrowing sums of $5 million or more, and noting that the repayments of the proposed loan from Latrobe Finance were in excess of $45,000.00 per month, I accept that they would not agree to ongoing occupation of the property by JWRS on such generous terms, and there was never any discussion between the parties to that effect.

244 Accordingly, the purchasers have established that they relied upon the representations when entering into the contract of sale.

245 However, I accept that, given my finding that the purchasers were not ready willing and able to complete the purchase of the property on the due date for settlement, the misleading and deceptive conduct of the vendor, which I accept the purchasers relied upon, and were entitled to rely upon, was not the operative cause of the purchasers' loss, being the loss of the deposit. I accept the vendor's submission to the effect that 'the representor is not an indemnifier for all losses to which the representee is exposed along the path which the representee travels in consequence of the representation'.[31]

246 To illustrate this point, it is illustrative to consider the counter‑factual, that is, what would have occurred if, on 12 December 2017, the purchasers' funding for settlement was in place, and they discovered that JWRS was still on the property with no apparent steps having been taken by JWRS to vacate the property? I accept that there may still have been a dispute, the purchasers may well have been reluctant to settle without vacant possession, and the purchasers would have been entitled to rescind the contract of sale, but, had they proceeded to settle and sue for any damage suffered by them as a result of the vendor's misleading and deceptive conduct, what would their true losses have been? The purchasers would have taken title to the property (which, as should be remembered, they were very keen to acquire for both commercial and personal reasons), and presumably would have immediately given JWRS one months' notice to vacate the property. They would have suffered some loss, no doubt, by not having the use of the property for that period, and perhaps some wasted expenditure associated with not being able to move onto the property immediately after settlement. But losses of such character and magnitude would pale into insignificance compared with the losses the purchasers actually claim in this proceeding, being the value of the deposit.

247 Accordingly, the purchasers are not entitled to relief pursuant to s 236 of the ACL.

The Sale of Land Act claim

248 As noted above, s 32C of the Sale of Land Act requires a statement provided to a potential purchaser pursuant to s 32 of the Sale of Land Act include 'a description of any easement, covenant or other similar restriction affecting the land (whether registered or unregistered). Section 32K(2) of the Sale of Land Act, which applies if a vendor fails to supply all of the information required to be supplied to a purchaser by reason of the relevant provisions of the Sale of Land Act, enables a purchaser to rescind a contract of sale at any time before the purchaser accepts title and becomes entitled to possession or to the receipt of rents and profits. However, s 32K(4) provides that the purchaser is not entitled to rescind a contract of sale if the Court is satisfied that:

(a) the vendor has acted honestly and reasonably and ought fairly be excused for the contravention; and

(b) the purchaser is substantially in as good a position as if all of its disclosure obligations had been complied with.

249 The issues concerning this aspect of the purchasers' claim are:

(a) whether the vendor was required by s 32C of the Sale of Land Act to disclose details of any lease to which the property was subject;

(b) whether any description of any lease must include all of the particulars of the lease, in particular, the rental payable under a lease; and

(c) if yes to both (a) and (b), should the vendor be excused from providing information regarding the rental payable by JWRS by reason of s 32K(4) of the Sale of Land Act?

250 The leading Victorian authority concerning the question of whether a purchaser is entitled to rescind a contract of sale by reason of the vendor's failure to give adequate disclosure in a s 32 statement is the decision of the Court of Appeal in Fifty-Eighth Highwire Pty Ltd v Cohen.[32] In that case, the vendor failed to disclose the existence of a combined drain underneath the property which served the property and two adjoining properties in a s 32 statement. The Court dismissed an appeal from the decision of the primary judge that the vendor had contravened s 32 of the Sale of Land Act, and ought not be excused under the predecessor provision to s 32K(4). There was evidence before the primary judge that the purchasers would not have agreed to purchase the property on the terms that they did had they known of the combined drain, and conflicting evidence as to whether the existence of the combined drain reduced the value of the property. The vendor conceded that it had breached s 32 of the Sale of Land Act: the issue before the Court of Appeal was whether the vendor ought to be excused from the consequences of the contravention.

251 In his judgment, Brooking JA tentatively expressed the view that the expression (in what is now s 32K(2) 'The purchaser may rescind any contract for the sale of land which has been entered into on the basis of information contained in the s 32 statement ... ' did no more than identify the contract concerned, as opposed to imposing a requirement for the purchaser to establish a causal connection between the inadequate disclosure and the purchaser's entry into the contract.[33] Charles and Callaway JJA agreed, saying however that any inducement by or reliance upon the relevant lack of disclosure on the part of the purchaser may well be relevant to the question of whether the purchaser is 'substantially in as good a position as if all the relevant provisions of [s 32] had been complied with.[34] Brooking JA, commenting upon what he described as 'this fourth requirement', said that this requirement was met 'if it is shown that any prejudice to the position of the purchaser resulting from the contravention is in the circumstances insubstantial'.[35] Further, his Honour observed, and Charles and Callaway JJA agreed, that while the question of whether the fourth requirement has been met must be determined objectively, any special needs or intentions of the particular purchaser may well be relevant to the determination of that question.[36]

252 Relevant to the current application is the discussion by Kirby P in Timanu Pty Ltd v Clurstock Pty Ltd[37] regarding the purpose of the enactment of the equivalent disclosure provisions in New South Wales, as follows:

But the purpose of the legislation is clear enough. It is to bring forward and to provide at the time of the making of the contract for the sale of land, certain prescribed information contained in prescribed documents. That information is thereupon to be deemed to be incorporated into the contract. It is to provide the terms, conditions and warranties upon which the vendor sells G and the purchaser buys the subject land. The plain object of the legislation is to reduce disputes concerning the representations about the land which are made by the vendor to the purchaser, to facilitate a proper judgment about the bargain at the time of the signing of the contract and to provide, at that time, a clear indication of the terms, conditions and warranties upon which the parties agree to contract. Effectively, the new procedure shifts the obligation from the purchaser to the vendor, so that the latter has to supply, rather than the former to discover, certain basic information about the subject land. The provision is clearly a remedial one with a reformatory object.[38]

253 The consumer protection objectives of the legislation, therefore, suggest that the disclosure obligations upon vendors imposed by the Sale of Land Act ought to be construed beneficially in favour of a purchaser.

254 The position in Victoria as to whether a vendor is required to disclose the details of a lease in a s 32 statement is a little unsettled. In Krawkowski v Eurolynx Properties Ltd,[39] O'Bryan J held that a vendor was not required to disclose the existence of a collateral agreement with respect to a lease which provided for the tenant to have a rent‑free period and for the owner of the property to fund substantial refurbishments. However, in Vouzas v Bleake House Pty Ltd,[40] Macaulay J doubted the correctness of this finding, stating as follows (citations omitted):

Is a lease relevantly similar to an easement or covenant? Easements and covenants both impose restrictions on a land owner's use of the land. Broadly speaking, an easement confers a right, upon another, to use the land owner's land in a particular way or to prevent that land owner using his or her land in a particular way. Similarly, a covenant imposed on land limits or controls the way that the owner or occupier of it may use the land. In both cases, the right or limitation 'runs with the land' in the sense that it binds the successor in title to the land without the need for privity of contract between that successor and the beneficiary of the easement or covenant.

A lease may be regarded as having similar characteristics in the manner in which it 'affects the land'. That is, over its duration, a lease restricts the lessor's use of the land by conferring a right of occupancy on the lessee with a corresponding limitation on the lessor's right of occupancy. Also the leasehold is an interest (and corresponding restriction) that runs with the land irrespective of any privity of contract between the succeeding land owner and the tenant.

For these reasons, it appears to me, with respect, that the doubts expressed by Nettle J in the IGA case are well founded. That is particularly so if it is correct to give s 32(2)(b) a wide rather than narrow construction.[41]

255 The vendor did not press a submission to the effect that I should follow the decision of O'Bryan J in Krawkowski v Eurolynx.[42] I decline to do so, for the reasons expressed in the extract above from Vouzas v Bleake House Pty Ltd.[43]

256 The question remains whether the contract of sale was defective by failing to provide details of the monthly rental payable by JWRS.

257 The vendor submitted that when constructing the provisions concerning the statutory requirements for s 32 statements, the Court:

... should be careful not, by any extravagant interpretation of the legislation, to place such a burden on vendors and their solicitors and agents as to make impractical the day to day business of conveyancing.[44]

258 The information provided in Special Condition 22.1 of the contract of sale regarding the lease to JWRS is to be contrasted with the information provided regarding the sub‑tenancies of the licensees in Special Conditions 22.2 and 22.3. The following particulars are provided with respect to the licenses:

(a) the parts of the property in the possession of the licensees;

(b) the rental payable by the licensees for those parts of the property; and

(c) the notice period required to be given by the purchasers to the licensees to vacate the property.

259 While the lease to JWRS is with respect to the property as a whole, and the notice period can be inferred from the description of the lease as being a month to month tenancy, Special Condition 22.1 does not specify the rental payable by JWRS. In my view, that is a critical omission, particularly in circumstances where there was said to be no written lease in existence. One does not need to rely upon authority to reach the conclusion that an essential term of a lease is the rental to be paid by the tenant, but in any event, that much is clear from the authorities relied upon by the purchasers to support their claim that the contract of sale was silent as to an essential term of the lease. That those authorities concern disputes between landlords and tenants as to what constitutes an essential term of a contract for lease, rather than a dispute between the landlord and a third party, as is the case here, does not alter the position that the rental payable by a tenant for a property offered for sale would generally be considered to be something which should be disclosed by a vendor prior to the execution of a contract of sale. In any event, the Full Court of this Court in Brew v Whitlock (No 2),[45] as discussed in paragraph 224 of these reasons, held, without a great deal of analysis, that a term of a contract of sale which obliged the purchaser to grant a lease to a third party, but did not disclose, among other things, the rental payable by the proposed tenant, was void for uncertainty, as it omitted the essential terms of the lease.

260 Further, the submission on the part of the vendor to the effect that the Court should be cautious to subject solicitors and real estate agents involved in conveyancing transactions to onerous disclosure requirements carries less weight in circumstances such as those in the current case, where it apparently imposed no particular burden upon RBS to provide the relevant particulars of the sub‑tenancies. In any event, there is a balance to be struck between overburdening vendors on the one hand and the consumer protection objectives of the Sale of Land Act on the other.

261 Accordingly, in my view, the vendor was required to disclose the rental payable by JWRS to the purchasers prior to their entry into the contract of sale. Two questions remain: whether the vendor should be excused from the consequences of its non‑compliance with the disclosure requirements of the Sale of Land Act pursuant to s 32K(4) of the Sale of Land Act, and whether my findings concerning the inability of the purchasers to raise sufficient funds to complete the purchase of the property is relevant to the question of whether the purchasers were entitled to rescind the contract of sale.

262 At the time that the purchasers gave notice that they had rescinded the contract of sale, they were entitled to do so, as they had not yet become entitled to possession of the property or entitled to the receipt of rents and profits. The authorities make it clear that where a vendor has failed to comply with the disclosure provisions of the Sale of Land Act, the onus is upon the vendor to establish that they ought to be excused from the consequences of their non‑compliance by reason of s 32K(4) of the Sale of Land Act.[46]

263 In my view, the vendor has not established that it has acted honestly and reasonably, and that the purchasers were not substantially in good as a position as they would have been in had the vendor's disclosure obligations been complied with.

264 The vendor has adduced no evidence to discharge the onus upon it to establish that it acted honestly and reasonably. The evidence of Ms Sayers and Ms Taplin does not assist the vendor on this question. I have already found that the vendor, through Ms Sayers, represented in the period leading up to the execution of the contract of sale that it would provide vacant possession at settlement. The reference to JWRS in Special Condition 22.1, without any rental figure attributed to that tenancy, was not inconsistent with that representation.

265 In the absence of any explanation on the part of Mr Warren, there are two plausible scenarios as to what was in his mind when he gave Ms Sayers the instructions he gave on 16 August 2017. First, while he said that JWRS would provide vacant possession at settlement, he either did not intend that would occur, or at least he intentionally reserved the right to alter his position. Alternatively, he may have intended for JWRS to vacate the property, but changed his mind at an unknown time, without informing the purchasers, in circumstances where the evidence indicated that he knew that the purchasers were planning to move their businesses onto the property at or shortly after settlement. Neither scenario establishes honesty or reasonableness on the part of the vendor. I should qualify this statement by saying that this does not amount to a positive finding that Mr Warren, on behalf of the vendor, acted dishonestly, but rather, that the vendor has failed to establish, as required by s 32K(4), that it acted honestly and reasonably.

266 Further, I cannot be satisfied that the purchasers were not in substantially as good a position as they would have been had the vendor disclosed the rental payable by JWRS under the monthly tenancy. Mr Cunningham gave evidence that the reference to the monthly tenancy of JWRS in the draft contract of sale did not raise any alarm bells, because he had been told by Ms Sayers that JWRS would be vacating the property at settlement. I accept that evidence. However, in the context of the negotiations which had taken place in the months past regarding various rental options, the inclusion of a rental figure of $4,000.00 may well have rung alarm bells, noting that I have already found that the purchasers would not have entered into a contract of sale subject to an ongoing tenancy of the whole of the property to JWRS for the sum of $4,000.00 per month, because it would not have been economically viable for them to do so.

267 Accordingly, the vendor has not established that the purchasers were no worse off than if the rental of $4,000.00 per month was included in the contract of sale. Indeed, I am prepared to go so far as to find that the purchasers were in fact worse off. First, the inclusion of the rental figure in Special Condition 22.1 may have alerted them to the possibility that the contract of sale contemplated JWRS remaining on the property after settlement. Secondly, if the purchasers were alerted to that possibility, they may have sought to either request amendments to the contract of sale to ensure that vacant possession would be provided at settlement, or to ensure that JWRS paid a more commercial rental for any ongoing occupation of the property. And thirdly, I accept the purchasers' evidence that having vacant possession of the property at settlement was as important to them as the requirement that the property be purchased as a going concern.

268 Unlike the position with respect to the purchasers' contractual claims, and their misleading and deceptive conduct claims, I do not consider that the purchasers' inability to complete the purchase of the property owing to a lack of funding is of any particular relevance to the purchasers' right to obtain relief under s 32K of the Sale of Land Act. I was not directed to, and could not locate, any authority to the contrary. The primary focus of the inquiry under this provision is the quality of the pre‑contractual disclosure and the conduct of the vendor, not the conduct of the parties pursuant to the contract of sale.

269 The purchasers' ability to complete the purchase might be relevant to the question of whether the vendor 'ought fairly be excused' from the consequences of non‑compliance on the basis that the purchaser was seeking to evade the consequences of a likely default on technical grounds, but the requirements of s 32K(4) are cumulative, they are not alternatives.[47] In order to reach that point, the vendor must have established that it acted honestly and reasonably, and in the current case, I am not satisfied that it has done so. In any event, the purchasers' inability to complete the purchase of the property only became apparent in the days leading up to the scheduled settlement date: at no time prior to the issue of the NWC offer could it have conclusively been said that the purchasers were not ready, willing and able to complete the purchase of the property. There is nothing in the language of s 32K which requires a purchaser seeking relief under s 32K(2) of the Sale of Land Act to establish anything more than the fact that the vendor has not complied with its disclosure obligations under the Sale of Land Act.

270 For completeness, I do not consider that section 32K confers any residual discretion upon the Court to relieve a vendor of the consequences of any material non‑disclosure. The references to 'may' in ss 32K(2) and (3) confer a discretion upon a purchaser to rescind a contract of sale for non‑compliance, not upon the Court to excuse a vendor from non‑compliance. In McHutchison v Asli,[48] Digby J was urged by a vendor to excuse her from her non‑compliance with s 32 of the Sale of Land Act on the basis of her view that the purchasers in question were looking for any reason to terminate the contract of sale, and the purchasers' inability to obtain finance was the real reason behind their purported rescission of the contract of sale. The vendor submitted that this pointed towards the exercise of the Court's discretion to enforce the contract of sale. Digby J upheld the purchasers' right to rescind the contract of sale, on the basis that the vendor had not affirmatively satisfied him that the vendor had acted honestly and reasonably, such that it was not necessary for him to make any findings regarding the asserted disentitling conduct raised by the vendor. However, his Honour made no finding one way or another as to whether such a discretion was available to be exercised. However, in the absence of any authority to the contrary, and having regard to the language of the relevant provision, I think the better view is that no such discretion is available to the Court in determining whether a vendor should be excused from compliance under s 32K(4): the vendor must satisfy the Court with respect to each of the requirements established by that provision.

271 Accordingly, the purchasers were entitled to rescind the contract of sale on 13 December 2017 pursuant to s32K(2) of the Sale of Land Act, and, consequentially, and order that the vendor repay the deposit to them.

Claim under s 49 of the Property Law Act

272 Section 49(2) of the Property Law Act provides a discretionary remedy in appropriate cases, for purchasers not otherwise entitled at law to recover their deposit. In the current case, if I am wrong about the purchasers' entitlement to relief under s 32K(2) of the Sale of Land Act, and where I have found that the purchasers' failure to establish that they could complete the purchase of the property was the operative cause of the purchasers' loss, not the vendor's repudiation of the contract of sale or its misleading and deceptive conduct, it is necessary to consider whether I should, in the exercise of my discretion under s 49(2) of the Property Law Act, order the vendor to return the deposit, on the basis that it would be unjust and inequitable for the vendor to retain the deposit.

273 A convenient summary of the principles with respect to the Court's discretion under s 49(2) of the Property Law Act is to be found in the decision of Riordan J in Simcevski,[49] as follows:

The discretion under s 49(2) of the Victorian Act is broad; but it must be exercised judicially and conditioned by what is just and equitable in the circumstances of the case.

It is not a precondition to the exercise of the discretion that exceptional circumstances be established; but the exercise of the discretion must be conditioned by the recognition of the critical function of the deposit.

Accordingly, where:

(a) the purchaser is in default; and

(b) the vendor is contractually entitled to forfeit the deposit;

the Court will have regard to the purpose of the deposit being in earnest of performance.

In this context, it 'requires some exceptional circumstances to justify a departure from the agreed terms'. In my opinion, any difference between this approach and a requirement that the purchaser must establish 'grounds in support of an application to repay the deposit ... sufficient to warrant a departure from holding the purchaser to its obligations under the contract to be more apparent than real.

In addition to the rights under the contract, matters that may be taken into account, in determining whether the exercise of the discretion is just and equitable in the circumstances, include the following:

(a) Whether the amount of the deposit can be regarded as mutually fair and proportioned security for due performance by the purchaser.

(b) Whether the cause of the termination was the result of any of the following:

(i) The conduct of the vendor; although requirement for strict compliance with the terms of the contract is not, of itself, a basis for exercising the discretion.

(ii) The conduct or neglect of the purchaser.

(iii) The ordinary risks in conveyancing transactions.

(iv) External factors, such as another statute or other rights, have intervened in some way in the land or its use, particularly in between signing the contract and the date for settlement.

(c) Whether, as a consequence of the termination, the vendor will suffer damage; or whether the vendor can be adequately compensated. However, the fact that the vendor may make a profit, even a substantial profit, on the resale or otherwise is not, of itself, a basis for exercising the discretion. [50]

274 It was not suggested by the vendor that this was not a proceeding to which s 49(2) of the Property Law Act applies, nor could such a contention be responsibly advanced. While the purchasers no longer press their claim for specific performance, there can be no doubt that the current proceeding is 'an action for the recovery of a deposit'.

275 The summary of the relevant principles in Simcevski[51] extracted above followed a comprehensive survey by his Honour of the authorities concerning the remedy available to defaulting purchasers under s 49(2) of the Property Law Act, and its equivalents in New South Wales and the United Kingdom.[52] Riordan J observed that, over the years, there have been different (or at least differently expressed) approaches to the application of s 49(2) of the Property Law Act in each of these jurisdictions. In particular, in Victoria and the United Kingdom, it has been said that, in order for a defaulting purchaser to recover a deposit, it is necessary for the purchaser to establish that there were special or exceptional circumstances,[53] while such a requirement was expressly disclaimed by the New South Wales Court of Appeal in Havyn Pty Ltd v Webster.[54] Rather, the focus of the authorities in New South Wales was whether it was unjust or inequitable for a vendor to retain the deposit, notwithstanding its contractual right to do so.

276 However, his Honour observed, referring to the decisions of Midill (97PL) Ltd v Park Lane Estates Ltd,[55] and in Havyn Pty Ltd v Webster:[56]

I do not consider that there is now any real difference between the approach to the subsection in [the United Kingdom and New South Wales] and Victoria.[57]

277 In Midill (97PL) Ltd v Park Lane Estates Ltd,[58] Carnwath LJ expressed some doubts regarding the breadth of the test expressed by Buckley LJ in Universal Corporation v Five Ways Properties Ltd[59] to the effect that 'repayment must be ordered in any circumstances which make this the fairest course between two parties'. His Lordship stated as follows (citations omitted):[60]

... Buckley LJ's comments, though of course entitled to great respect, are not binding on us, for the reasons given by Arden LJ. Furthermore, they need to be read in the context of the case before him. He was concerned principally to rebut the very narrow line taken by [the trial judge], which required some 'trickiness' or the like by the vendor. Similarly, Megarry J's observations on the width of the discretion, whatever their precise intention, must be read as a response to the vendor's argument that the section only applied where there had been 'unconscionable' conduct.

The critical point, on which Arden LJ echoed Lord Nicholls, is that the deposit is 'an earnest for the performance of the contract', which can be retained by the seller if the buyer defaults, without any necessary regard to the question of actual loss or its amount. That principle, as the Privy Council made clear, is not 'overruled' by section 59(2). There needs to be 'something more'; or, as other judges have said, something special or exceptional to justify overriding the ordinary contractual expectations of the parties.[61]

278 The leading authority in New South Wales was and remains the decision of the Court of Appeal in Havyn Pty Ltd v Webster.[62]

279 Santow JA, writing for the Court, also cast doubt on the breadth of the statement of Buckley LJ in Universal Corporation v Five Ways Properties Pty Ltd,[63] stating as follows:

For these reasons given, I do not consider that there is anything controversial in the submission of the vendor that the grounds in support of an application to repay the deposit must be sufficient to warrant a departure from holding the purchaser to its obligations under the contract. Indeed, this goes to the 'justice and equity' of the case, drawing on the observations of Street CJ in Eq in Lucas & Tait. That conclusion must be correct, if the notions of justice and equity conditioning the discretion are to have some meaning drawn from the purpose of a deposit and the circumstances in which it is forfeited. The purchaser must therefore do more than merely show that the deposit has been forfeited, and that it will thus result in a 'windfall' to the vendor as will usually be the case. The Court should not take an approach to ordering the return of deposits under s 55(2A) which weakens the proper function of a deposit in providing a sanction so that purchasers treat the making and completing of contracts with due seriousness: Wilson v Kingsgate Mining Industries [1973] 2 NSWLR 713 at 735, Fraser v L O'Malley & Sons Pty Ltd [1975] 2 BPR 9133 at 9139-40. In so saying, I am not to be understood as putting a gloss upon the plain words of s 55(2A), but merely highlighting the critical importance of a judge exercising the wide discretion according to its plainly beneficial purpose to consider 'justice' and 'fairness' in their proper context.[64]

(a) Section 55(2A) confers upon the Court a statutory jurisdiction to return forfeited deposits which was not previously available either at common law or in equity. Therefore, it would be wrong to seek to confine the jurisdiction conferred by the words of the statute by analogy with the jurisdiction of common law and equity to relive against penalties or forfeiture.

(b) Notwithstanding this, it is important for a Court in considering the scope of the discretion conferred by s 55(2A) to bear in mind that a deposit is an earnest of performance. That fact forms part of the context in which the discretion fails to be exercised, and means 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.

(c) That context is significant when considering the justice and equity of the case, and whether the Court 'sees fit' to order the deposit to be returned. It does not involve putting a gloss on the words of the statute requiring the applicant to show 'special circumstances' (or satisfy any like test) before a deposit will be returned.

(d) In particular, this principle mandates against characterising a forfeited deposit as a windfall to the vendor, merely because it is forfeited.

(e) In considering an application under s 55(2A), it will often be material for the Court to consider a number of factors, including (though not exhaustively) the nature of a deposit, the terms of the contract providing for its forfeiture and the circumstances in which the deposit was forfeited.

(f) Considering the circumstances of this case, the factors enumerated above and the relative unreasonableness of the conduct of the vendor compared to the purchaser following the former's misrepresentation, it is appropriate for the deposit to be returned, although for different reasons than those adopted by the trial judge.[65]

281 Curiously, the number of published decisions in New South Wales concerning applications under the New South Wales equivalent of s 49(2) of the Property Law Act in the past few decades significantly exceeds the number of Victorian decisions. The discrepancy may reflect differences in the features of the property market in the two jurisdictions, or perhaps in Victoria potential applicants are dissuaded by the frequent reference in the authorities for the requirement for a defaulting purchaser to establish 'special' or 'exceptional' circumstances to obtain an order for the return of a deposit.

282 However, having reviewed the New South Wales authorities referred to by Riordan J in Simcevski,[66] and decisions of the New South Wales Supreme Court published since his Honour published his reasons in Simcevski,[67] I agree with his Honour that there is no real material difference between the approach in the two jurisdictions. While the decisions in New South Wales do not use the language of 'special' or 'exceptional' circumstances, it is clear from the discussions in and the outcome of those applications that making an order for the return of a deposit is an exception rather than the rule, and the conduct of the vendors against whom such orders are made is generally worthy of sufficient opprobrium such as to justify disentitling them of their contractual rights to retain the deposit. Significantly for the purposes of the present application, misleading conduct on the part of a vendor which induces a purchaser who cannot or will not complete the purchase of a property is conduct which has on a number of occasions moved a court to exercise its discretion in favour of a defaulting purchaser.

283 The following paragraphs provide an illustration of the types of circumstances which would attract relief for a defaulting purchaser under s 49(2) of the Property Law Act and its equivalent in New South Wales, as well as illustrating the types of cases where the courts have refused such relief.

284 In Havyn Pty Ltd v Webster,[68] the New South Wales Court of Appeal upheld a decision to order that a deposit be returned to a purchaser who had been misled by a real estate agent's sales brochure about the size of the property. The purchaser, who intended to redevelop the property, had relied upon the representation in determining its bidding price. The purchaser discovered the error after obtaining the vendor's consent to an extension of time to settle the purchase of the property. Settlement did not occur on the proposed settlement date because the purchaser had insufficient funds to complete the purchase. Negotiations broke down after the purchaser refused to release the vendor from any claims with respect to the alleged misrepresentation in exchange for an extension of time to settle.

285 While the Court of Appeal disagreed with the primary judge regarding the relevant principles governing the exercise of the Court's discretion to order the return of the deposit (in particular, the primary judge's characterisation of the forfeit of the deposit as amounting to a 'windfall' justifying its return), the Court refused to set aside the order for the return of the deposit, on the basis that while the purchaser was short of funds on the proposed settlement date, it was not far short, the purchase price exceeded the actual value of the property, and the vendor acted unreasonably in demanding a release from any claim for misleading and deceptive conduct in exchange for an extension of time, in circumstances where the Court found there had in fact been misleading and deceptive conduct on the part of the vendor.

286 The decision in Havyn Pty Ltd v Webster,[69] followed the decision in Hasanovic v Polisfenu,[70] where the Court ordered the return of a deposit in circumstances where the purchasers failed to settle because their solicitors failed to organise finance in time. The purchasers had entered into possession of the land and had expended considerable sums on improvements which increased the value of the property.

287 In Butcher v Harkins,[71] Austin J held that a purchaser was entitled to the return of a deposit where the vendor had failed to disclose material information concerning the property, being that the boundary of the freehold portion of the property bisected a swimming pool located on the property, which was of particular importance to the purchaser's plans concerning the property.

288 In PC Developments Pty Ltd v Revell,[72] the New South Wales Court of Appeal ordered that a purchaser who failed to complete a purchase by reason of, among other things, a lack of funding, recover the deposit paid to the vendor on the grounds that the vendor had benefited from improvements carried out by the purchaser after the signing of the contract of sale, and had resold the land at a higher price.

289 In Kylsilver Pty Ltd v One Australia Pty Ltd,[73] where the purchasers, who were property developers on‑selling residential blocks to 'deposit challenged' customers, were led to believe that the vendor would provide rebates for on‑sold blocks at settlement, Hamilton J ordered the return of the deposit once the purchasers refused to settle by reason of the vendor's refusal to commit to paying the rebates, noting that the purchasers had the funds to settle, and the vendor retained its rights to sue for damages for breach of contract.

290 In Statewide Developments Pty Ltd v Higgins,[74] the New South Wales Court of Appeal upheld a decision to make an order for the return of a deposit where the purchaser failed to complete the purchase on the settlement date. The purchaser, who had purchased a unit in a multi-unit residential development 'off the plan', had been misled by the vendor's agent to believe that the unit would have 180 degree views of Homebush Bay, when in fact those views were obstructed by a dividing wall not shown on a scale model of the development. The Court rejected the contention that the effect of the misrepresentation was negated by a clause in the contract of sale whereby the purchaser had warranted that he had not relied upon any representation of the vendor or its agents. The Court accepted that it would be unjust or inequitable for the vendor to retain the deposit in circumstances where the vendor's own conduct had 'undermined matters that had induced the Purchaser to enter into the Contract', and had failed to establish it had suffered any loss by reason of the purchaser's failure to complete the purchase.

291 In Chambers v Borness,[75] a purchaser under a contract of sale had taken possession of a property as a licensee and undertaken certain works, but then failed to complete the purchase after numerous extensions of time. Pembroke J ordered that the deposits be returned, stating as follows:

I accept that those sums all represent monies to which the vendor is or was contractually entitled. But the consequence of not giving relief pursuant to s 55(2A) of the Conveyancing Act would, in my view, be to bring about a result that is so economically lopsided that the exercise of the Court's discretion is justified in the circumstances. I think the totality of the circumstances that I have outlined render it unjust or inequitable for the vendor to retain the deposit. The disparity between the respective financial outcomes for the plaintiff and the defendant is too great. The operation of the contract is such that, if given full effect, and without allowing the plaintiff to recover the deposit, the outcome for the plaintiff would, in my view, be unjust in the circumstances. The essence of the reasoning of Needham J in Hasanovic was that the benefits and claims which the vendor had received, or to which it was contractually entitled, were such that if, in addition, the deposit were retained by the vendor, the outcome to the purchaser would be unjust or unequitable. That same reasoning is, in my view, applicable to the particular facts of this case.

292 In 5 Ridge Pty Limited v Tryname Pty Ltd,[76] Pembroke J ordered the return of a deposit paid by a defaulting purchaser in circumstances where the vendor had misled the purchaser on a matter which was material to the purchaser's decision to enter the contract, being the vendor's reassurance that the main tenant of the property was financially sound, and would exercise its option to renew a lease. Pembroke J observed that:

Misrepresentation by a vendor has often been held to be relevant to the exercise of the statutory discretion pursuant to s 55(2A).[77]

293 In Stokes v Toyne,[78] the Court was concerned with an unusual transaction, in that it was between a vendor who sought the assistance of the purchaser, a building contractor, to subdivide and develop her property. The transaction was negotiated and implemented in part over a number of years, with progress impeded by frequent changes of heart on the part of the vendor, difficulties experienced by the purchasers in obtaining finance, and inclement weather, which prevented the purchaser carrying out necessary works in a timely fashion.

294 Rees J ordered that the deposit be returned to the purchaser, stating as follows:

Mr Stokes has sustained substantial losses as a result of his attempt to complete the contracts of sale. He has spent some $35,000 on building costs and council fees; he has spent time working on the site which he could otherwise have spent working for his company; he has spent some $100,000 on finance costs and is now committed to a home loan at a higher interest than he enjoyed before. All of these losses may be ones which a developer could be expected to bear, having gambled and lost. But in this case it seems to me that it was only when Mr Stokes appeared to have finally overcome the multitude of hurdles in his path - many of which were there at Ms Toyne's request - that Ms Toyne exercised her right to terminate. Overall, I consider that it would be unjust in all of the circumstances for Ms Toyne to retain the benefits of the work done by Mr Stokes and also the deposit. Mr Stokes will hardly be a winner in all of this: it will simply reduce his losses.[79]

295 Finally, the only recent Victorian example I could locate where the Court found that the circumstances were such as to warrant relief under s 49(2) of the Property Law Act is the case of Lockwood v PSP Investments Pty Ltd.[80] Judd J held that the purchaser of units in a development was entitled to four apartment units and eight car parks in a development was entitled to rescind the contracts of sale by reason of the terms of s 9AC(2) of the Sale of Land Act, because the vendor altered the plan of subdivision in such a way as to sever the entitlements of the unit owners to exclusive car parks. His Honour observed that s 49(2) enlivens the Court's jurisdiction to grant relief to defaulting purchasers, and went on to say as follows:

If called upon to exercise the discretion under s 49(2), I would, in the circumstances of this case, order the return of the deposits paid under the apartment contracts. For the reasons given above, I am of the opinion that all eight contracts ought to be considered as a single transaction, or at least four transactions for the purchase of an apartment lot and a car park. The value of that transaction to the plaintiff was undermined by factors beyond his control. The vendor was unable to deliver the car parks. There was no suggestion that the plaintiff was not ready and willing to complete the purchase of all lots.

It was the defendant's conduct in requesting an amendment to the Plan of Subdivision that denied to the plaintiff the benefit of four contracts for the purchase of car park lots which, in my view, formed the part of a package of rights acquired by the plaintiff in a development scheme. Those events were detrimental to the plaintiff's interests. The defendant, in effect, disabled itself from completing those contracts. Such an analysis, based on the substantive effect of the amendment on the plaintiff's position, is not inhibited by the defendant's contention that when determining the material effect on a lot, for the purpose of s 9AC(2) of the Sale of Land Act, each apartment lot and contract should be considered without regard to the car park lots.

296 The decision in Lockwood v PSP Investments Pty Ltd[81] is somewhat of an outlier in Victoria, where applications for the return of a deposit under s 49(2) of the Property Law Act have been largely unsuccessful. The leading 'modern' authority is the decision of Gillard J in Poort v Development Underwriting (Victoria) Pty Ltd[82] ('Poort'), where his Honour held that, where the purchaser is in default and the contract of sale provides for the forfeiture of the deposit, exceptional circumstances must exist to justify the exercise of the statutory discretion, and the purchaser must show that an innocent vendor would not be injured by the exercise of its discretion. His Honour also held that, in addition to the terms of the contract of sale, the relevant considerations included the conduct of the parties, the nature and size of the property, the subsequent history of the property, and '...whether the amount of the deposit can be regarded as a mutually fair and proportioned security for due performance by the purchaser.'[83]

297 In Poort,[84] the defaulting purchaser under an instalment contract argued that the vendor had previously not complained about late payments prior to terminating the contract. However, his Honour found that the purchaser had acted in a high handed manner in its dealings with the vendor, and the vendor had suffered loss as a consequence of the purchaser's failure to complete the purchase, such that there were no exceptional circumstances which would justify an order that the instalments paid to date be returned to the vendor.

298 Subsequent Victorian authorities have adopted the language of Gillard J in Poort,[85] and have dismissed applications for the return of deposits on the basis that the defaulting purchaser had not established exceptional circumstances: see Buckley v Drk,[86] Mahred Nominees Pty Ltd v Tulloch,[87] Bantink v Boss Properties Pty Ltd,[88] Maniaty v Fenedisto Pty Ltd;[89]

299 In Aussie Invest Corporation v Pulcesia,[90] Dodds‑Streeton J rejected an application for the return of a deposit in circumstances where the vendor's solicitor failed to pass on a critical document to the purchaser's financier, who was waiting in their office for that document before releasing funds to settle the purchase of the property. Her Honour found that:

The vendor was neither responsible for the purchaser's breach nor otherwise guilty of unconscionable conduct.[91]

300 In Putt v Perfect Builders Pty Ltd,[92] Williams J refused an application for the return of a deposit in circumstances where the contract of sale required the purchaser to apply promptly for finance from a specified lender. The purchasers' solicitor raised a number of issues with the contract of sale. Their application for finance, for an amount of $1,000.00 greater than the sum specified by the contract of sale, was rejected. Her Honour was not satisfied that the purchasers had provided sufficient evidence of their dealings with their financier, and had not shown that the vendor would not be adversely affected by the return of the deposit.

301 In Simcevski,[93] Riordan J refused the purchaser's application for the return of the deposit, saying as follows (citations omitted):

In this case, I am not satisfied that exceptional circumstances exist such that I should order that the deposit be repaid for the following reasons:

(a) The deposit 'can be regarded as a mutually fair and reasonably proportioned security for due performance by the purchaser'.

(b) The Purchaser signed a contract that was unconditional as to finance and that provided for the forfeiture of the deposit on breach.

(c) The risk of the pollution to the land was known at the time of entry into the contract, and was acknowledged by the Purchaser in a special condition of the contract.

(d) The Purchaser has failed to establish that a right to conduct the subterranean investigations was a part of the contract on its true construction.

(e) The Vendor did not breach any obligation of good faith imposed on him in refusing to permit the subterranean investigations.

(f) It was reasonable for the Vendor to assert his right to refuse the subterranean investigations in the circumstances referred to in Simcevski v Dixon [No 1]; and, in fact, the Vendor made a reasonable offer to permit the subterranean investigations on additional terms.

(g) I am not satisfied that the failure to permit the subterranean investigations substantially impaired any chance the Purchaser had to settle the purchase in any event.

(h) The Purchaser has not adequately explained:

(i) his inactivity in taking steps to obtain finance for the purchase between 21 January 2016 and 23 February 2016; or

(ii) why the Purchaser did not take steps to obtain his own valuation of the property earlier in 2016, knowing that the settlement date was approaching and that a valuation would be necessary to obtain finance.

(i) The 'windfall', notwithstanding its size, is not of itself a sufficient reason to exercise the discretion, particularly in this case with the extensive time delay between the settlement date under the contract currently in issue and the resale date.

In my opinion, in this case the Purchaser made unreasonable demands of the Vendor to interfere with his property rights without contractual justification and was consequently unable to settle the purchase of the property as finance had not been obtained. There are no exceptional circumstances within the meaning given to that expression by the authorities that would justify ordering repayment of the deposit.[94]

302 Cases in New South Wales where applications by a defaulting purchaser for the return of a deposit have been unsuccessful are also numerous.

303 A leading authority, Lucas & Tait (Investments) Pty Ltd v Victoria Securities Ltd,[95] is one of them. In that case, Street CJ in Equity adopted what he described as the 'liberal approach' to the statutory jurisdiction conferred upon the Court to order the return of the deposit. A purchaser sought to avoid a contract of sale on the basis that the vendor had not disclosed that the local planning authority had adopted a policy which, if applied to the subject property, would impede the purchasers' plans for the property. However, in the circumstances of the case before his Honour, the hardship that the purchaser would suffer, if compelled to complete the contract, was not such that warranted the Court exercising its discretion in his favour, given that the information concerned was in the public domain, or could be ascertained by further enquiries.

304 Another leading authority in New South Wales was the decision of Young CJ in Equity in Mulkearns v Chandos Developments Pty Ltd (No 4).[96] His Honour observed that

... ordinarily where the vendor has not been guilty of unconscionable conduct and the purchaser is a developer or a person in commerce well aware of his obligations under a contract, the purchaser is not entitled to return of the deposit, even if the property has had a marked increase in value.[97]

305 In his reasons, his Honour referred to his previous decision in Eighth SRJ Pty Ltd v Merity,[98] where he stated:

... the matters which seem to affect the Court when considering the exercise of the discretion included as the strongest factors: (a) has the vendor received a windfall; (b) was non‑completion a fault of the purchaser or a matter over which it had little control; (c) was the purchaser's use of the property thwarted by some factor outside the purchaser's control; (d) was there any misstatement in the vendor's camp which affected the purchaser's decision?[99]

306 In the case before him, his Honour considered that it was not unjust or unconscionable for the vendor to retain the deposit, in circumstances where the vendor had suffered loss by reason of the purchaser's default.

307 In Nassif v Caminer,[100] a majority of the Court of Appeal refused to order the return of a deposit, on the basis that the purchaser had forfeited a deposit of five per cent, not the usual ten per cent, because the purchaser wrongly invoked an arbitral procedure under the contract of sale, and the evidence did not establish that the purchaser was induced to enter the contract by any misleading or deceptive conduct on the part of the vendor.

308 In Rushcutters Bay Developments Pty Ltd v Dragon Asset Investment Pty Ltd (No 2),[101] a vendor terminated a contract for failure to pay instalments of a deposit. Darke J refused to make an order for the return of the instalments already paid, on the basis that the purchaser had not shown that the vendor had made any false or misleading statements concerning the value of the property, the purchaser had the benefit of legal advice, the vendor had shown flexibility in its dealings with the purchasers, and the defaults which led to the termination of the contract were the product of its own financial position.

309 In Dasreef Developments Pty Ltd v Velkovski,[102] Emmett AJA refused to order the return of a deposit forfeited as a result of the purchaser's failure to raise finance to complete the purchase. While his Honour recognised the hardship the forfeiture of the deposit would cause the purchaser, and that the vendor suffered no loss from the repudiation of the contract of sale, the failure of the purchaser to keep the vendor informed of the efforts he was making to raise finance, or to furnish evidence of the funding options available to the purchaser, meant that it was not unjust and inequitable for the vendor to retain the deposit.

310 In Fu Tian Fortune Pty Ltd v Park Cho Pty Ltd,[103] Darke J rejected an application for the return of a deposit, stating as follows:

Conveyancing Act, s 55(2A) provides no avenue of relief to the plaintiffs because no special or exceptional circumstances are made out to warrant the exercise of this statutory jurisdiction. It would not be unjust or inequitable for the vendor to retain the deposit. All the grounds the plaintiffs/purchasers advanced to suggest unconscionable conduct, injustice, or inequity on the part of the vendor have failed. No alleged misrepresentations about the sale are made out. The purchaser obtained legal lease, or at least the kind of lease estate for which the purchaser contracted. The vendor's agent did not misrepresent the quality of the tenancy at the Belmont property. The vendor adequately responded to requisition 3 and was not in breach of contract such as might prevent the vendor from issuing a Notice to Complete or Notice of Termination.

311 In Botany Bay Apartments Pty Ltd v Badalato,[104] a purchaser refused to pay the balance of the deposit payable under a contract of sale for a property 'off the plan', and sought the return of a deposit already paid, on the grounds that the vendor's agent misrepresented the size of the apartment to be constructed.

312 Davies J found that the evidence did not establish that any such misrepresentation had been made, and any misunderstanding of the purchaser concerning the size of the properties was corrected by the end of the statutory cooling off period. His Honour found that, in the absence of a misrepresentation or some other unconscionable conduct on the part of the vendor, there was no basis for the purchaser to be relieved of his obligation to pay the balance of the deposit.

313 In Wang v Polaris Holdings Rosebery Pty Ltd,[105] a decision delivered shortly after the trial in this proceeding, Darke J refused to order the return of a deposit paid pursuant to a contract of sale of a lot in an unregistered plan of subdivision, on the basis that any misunderstanding on the purchaser's part as to the size of the relevant lot was not brought about by the conduct of the vendor.

314 Finally, in Smogurzewski v AIT Investment Group Pty Ltd,[106] in a decision also delivered while judgment in this proceeding was reserved, Darke J held that a purchaser of a lot in a strata development was not entitled to rescind a contract by reason of the carpark being annexed to the unit being marked with a 'disabled parking' sign, or to the return of the deposit, there having been no false or misleading representations made by the vendor.

315 From my review of the authorities, the following matters appear to be relevant to the exercise of the Court's discretion to order the return of a deposit paid by a defaulting purchaser (in addition to the matters summarised by Riordan J in Simcevski_[107]_):

(a) the order is the exception rather than the rule;

(b) it would be rare for the Court to be moved to exercising its discretion to order the return of a deposit in the absence of some disentitling conduct on the part of the vendor, such as misleading or deceptive conduct, unconscionable conduct, or, possibly, a peremptory or unduly harsh enforcement of the vendor's contractual rights;

(c) in cases where misleading and deceptive conduct is alleged and proved, a court is more inclined to order a return of the deposit if that conduct induces the purchaser to enter into a contract it would not otherwise have entered, or if that conduct concealed a material defect in the bargain entered into by the purchaser;

(d) while the fact that the forfeit of the deposit would cause hardship to a defaulting purchaser is not particularly relevant to the exercise of the discretion, given the risk faced by every purchaser of land of losing their deposit if they do not complete the purchase, the financial consequences of the failed transaction are relevant, particularly where the consequences might be considered to be 'lopsided';

(e) given the nature of the remedy, it is permissible to impose conditions upon the return of the deposit which may ameliorate the 'all or nothing' nature of the remedy under s 49(2) of the Property Law Act;[108] and

(f) the conduct of the purchaser and the reason or reasons why the purchaser was unable to complete the purchase are relevant to the exercise of the discretion. However, given that the enactment of s 49(2) of the Property Law Act and its equivalents presuppose a default on the part of a purchaser (such that they have no contractual or equitable remedies available to them to recover a deposit), the inability of a purchaser to complete the contract does not preclude that purchaser from obtaining an order for the return of a deposit, if the circumstances of the case otherwise warrant such an order.

316 Turning first to the application of the principles enumerated in Simcevski[109]to the current case:

(a) there is no reason to consider a deposit of ten per cent of the purchase price should not be considered to be a mutually fair and proportionate security for performance by the purchaser, particularly given the purchaser's requests for an extension of time;

(b) if I am wrong about the question of whether the purchasers were entitled to rescind the contract of sale by reason of s 32K of the Sale of Land Act, the operative cause of the termination was the purchasers' inability to obtain finance; and

(c) there is no evidence of any loss on the part of the vendor (save for costs thrown away, which I can infer have been incurred), but no evidence of any windfall either.

317 The matters outlined above, the relative equality of bargaining power between the vendor and the purchaser, the significance of a deposit as an 'earnest' for performance, and my findings regarding the inability of the purchasers to complete the purchase of the property on the scheduled date for settlement tell against there being an order for the return of the deposit. However, one significant matter which shifts the pendulum the other way is the misleading and deceptive conduct of the vendor in representing to the purchasers that it would provide vacant possession at settlement, and then resiling from that representation without informing the purchasers, leaving them to discover the true position themselves only two days before the scheduled settlement date.

318 In my view, this would be an appropriate occasion for the exercise of the Court's discretion to return the deposit, based upon the misleading and deceptive conduct of the vendor, which induced the purchasers to enter into the contract of sale containing the terms that it did. By representing to the purchasers that JWRS would vacate the property at settlement, and subsequently resiling from that representation, the vendor materially altered the quality of the bargain that the purchasers were induced to believe they had struck when entering into the contract of sale.

319 As discussed earlier in these reasons, I accept, for present purposes, the vendor's submission that if the purchasers had been told that JWRS proposed to occupy the property after settlement, they would not necessarily have walked away from the negotiations. However, assessing the evidence of the dealings between the parties as a whole, I consider that, if the purchasers were appraised of the true position (that JWRS was not necessarily going to vacate the property after settlement, but reserved its rights to assert that it was entitled to remain on the property at settlement), the negotiations would have taken a different course. In particular, I accept, given the purchase price payable by the purchasers, the use to which the purchasers wished to put the property (that is, to occupy the property, and operate their businesses from the property), and the substantial financial commitments the purchasers envisaged entering into at the time they entered into the contract of sale, the purchasers would not have agreed to anything other than a fixed term lease for a rental at, or approximating, a market rental, and otherwise would have insisted on having vacant possession of the property at settlement.

320 The vendor chose not to call Mr Warren to give evidence to explain when, and the reasons why the vendor resiled from the representations made by its agent prior to the execution of the contract of sale. The vendor may have had sound reasons for doing so, such as an increasing concern on the part of the vendor regarding the purchasers' ability to complete the purchase of the property, but the vendor has provided no assistance in that regard. Further, despite the regular communications between the solicitors for the parties in the lead up to the scheduled settlement date, nothing was said by the vendor or RBS to disabuse the purchasers from their understanding that the vendor would provide vacant possession (save for the licensees) at settlement. There is ample authority to the effect that it may be misleading or deceptive conduct not to correct a representation which was accurate when it was made, but is no longer accurate.[110]

321 In such circumstances, in my view, it would not be just and equitable for the vendor to retain the deposit. There is no evidence that the vendor has suffered any loss by reason of the failure of the transaction. No claim has been made in this proceeding for damages said to have been suffered by the purchasers' failure to complete the purchase, although it was open for the vendor to do so, even if only by way of set‑off in the event that the purchasers' claims were successful (as they have been, at least in part). Of course, it would still be open for the vendor to make such a claim, although no doubt any such claim would be at risk of being stayed in accordance with the principles in Port of Melbourne Authority Ltd v Anshun.[111]

322 For completeness, should it be considered that, contrary to the views expressed in these reasons, and by Riordan J in Simcevski,[112] that there is a material difference in the approach adopted in New South Wales and Victoria, I do consider that in circumstances where a vendor has made a representation to a purchaser that it would provide vacant possession at settlement, which was a material factor in inducing the purchasers to enter into a contract at the price that they did, and then resiled from that representation without informing the purchasers, those circumstances can reasonably be considered to be special or exceptional circumstances. Further, the nature of the property and the purpose of the transaction, which was known by the vendor, is relevant to my view that there are special and exceptional circumstances. The property is a valuable and distinctive property, peculiarly suited to the business of Mr Cunningham in particular. It was not in dispute that the relocation of race horse training operations is a costly and logistically challenging operation. The issue of who would occupy part or all of the property over what time period and on what terms was clearly a critical issue in the negotiations between the parties: indeed, there were numerous options regarding that issue discussed between the parties over the course of a number of months. The failure of the vendor to inform the purchasers that it was going to rely upon what I have found to be an uncertain and severable terms of the contract of sale was, at best, unreasonable.

323 Further, it appears to be accepted by the authorities that the 'all or nothing' effect of an order under s 49(2) can be ameliorated by imposing conditions on the making of the order. As I have found that the vendor breached s 32 of the Sale of Land Act, it is, strictly speaking, not necessary for me to consider whether there is an appropriate occasion for the imposition of such a condition. However, for completeness, and if I am wrong about the question of whether the purchasers were entitled to rescind the contract of sale pursuant to s 32K(2) of the Sale of Land Act, I would have made the orders for the return of the deposit under s 49(2) of the Property Law Act subject to a condition that the purchasers pay the vendor's costs thrown away by reason of the failure of the purchasers to settle the purchase of the property on 14 December 2017, being the legal costs incurred by the vendor between the date of the execution of the contract of sale on 19 August 2017 up to and including the scheduled settlement date of 14 December 2017.

324 I appreciate that the exercise of the discretion in favour of the purchasers has the effect of excusing them from the consequences of having insufficient funds to complete the purchase of the property at settlement. However, the availability of such a remedy under s 49(2) of the Property Law Act, as observed in the authorities, expressly contemplates such a remedy to be available to a defaulting purchaser, if the circumstances warrant the discretion being exercised.

325 I request that the parties confer as to the appropriate form of orders to give effect to these reasons, and whether a further hearing is required to determine the questions of interests and costs, and inform the Court as to the results of that conferral.

[1] During the course of the parties' negotiations, there appears to have been a dispute between RT Edgar, Colliers, and the vendor concerning which agency had the authority to sell the property after Ms Lisa Fraser-Smith, who also dealt with the purchasers on behalf of the vendor, left RT Edgar to work at Colliers. Nothing turns on this dispute for the purposes of the present proceeding.

[2] Containing the information required by Part II, Division 2 of the Sale of Land Act.

[3] While the vendor asserts that it was entitled to rescind the contract of sale and retain the deposit, the vendor has not made a claim for any losses occasioned by the termination of the contract of sale.

[4] [1959] HCA 8; (1959) 101 CLR 298.

[5] An exchange of text messages between Mr Warren and Ms Sayers suggests that Mr Warren believed that the purchasers were behind another offer made to him via a buyers' agent. Little turns on that matter for the purposes of resolving the issues in this proceeding.

[6] This request caused some consternation on Ms Sayers' part, but the dispute between the vendor and RT Edgar is not material to the issues in this proceeding.

[7] There was no other evidence to support the reference to $480,000.00 cash being available to the purchasers.

[8] This letter was headed 'Without Prejudice', but it is obvious from its contents that it was not a communication directed at resolving a dispute.