18 Another factor which in my opinion is important to the exercise of a discretion under s 55(2A) is the extent to which the defendants' conduct fell short of the thing that the deposit was intended to secure - in this case, completion of the sale of the Glenhaven property. To take an extreme example, if the defendants had been in a position to complete the sale on the 16 April and if they had made that clear to the plaintiff before that date and the plaintiffs had nonetheless terminated the contract, those facts would point strongly in favour of the court exercising its discretion under s 55(2A). In that case, if the plaintiffs had not terminated, they would essentially have got what they had bargained for; and that is something that they would have known at the time that they terminated. In those circumstances, it seems to me that it would be unjust to permit the vendor to keep the deposit. In some cases, it may be obvious what would have happened if the vendor had not terminated. In other cases, it may be necessary for the court to engage in a hypothetical analysis. There is nothing new in the court having to engage in an analysis of that type; and in my opinion the result of that analysis will be important to the exercise of the discretion because it will provide an answer to how far short of the purchaser's promise the purchaser's conduct fell.
19 The plaintiffs suggested that another matter that was relevant was the fact that they had already given the defendants significant indulgences by agreeing to a settlement period of 120 days and by the service of a defective notice making time of the essence. I do not agree with this submission. The important question is how far short of what the defendants promised to do under the contract their conduct fell. The fact that the plaintiffs agreed to a long period of settlement was not an indulgence by the plaintiffs. It is what the parties had agreed to under the contract. In some circumstances, indulgences given to a purchaser after the time for settlement has passed but before a notice to complete is served may be relevant to the exercise of the discretion under s 55(2A). But, here, the contract contemplated that time would not run until a valid notice was served; and that did not happen until 31 March 2010. Indeed, the previous notice was withdrawn. To place much weight on the first notice would be to give it an effect which it did not have. Moreover, the length of time between the first notice and the second one was short. For these reasons, I do not think much weight can be placed on the fact that an earlier albeit a defective notice was given.
20 Applying these principles, I do not think that I should order that the deposit be returned in this case. As I have said, although it is likely that the plaintiff's will make a profit on the resale, that is not certain. Moreover, the profit, if there is one, will be small. The amount of $25,000 is 2 per cent of the original purchase price. In addition, the likelihood is that the plaintiffs have incurred additional costs in relation to the sale which will reduce that profit. It is true that, absent an order under s 55(2A), they will also be entitled to keep the deposit. But as the Court of Appeal said in Havyn Pty Ltd v Webster [2005] NSWCA 182 at [173] per Santow JA (with whom Tobias JA and Brownie AJA agreed), "this principle [that is, the principle that a deposit is paid as an earnest for performance] mandates against characterising a forfeited deposit as a windfall to the vendor, merely because it is forfeited".
21 More importantly, what the plaintiffs ultimately bargained for was a certain settlement by 15 April. If settlement had only been delayed a few days and if the plaintiffs had known that that was the position, then, for the reasons I have given, I think that that would provide a reason for exercising the discretion under s 55(2A) in the defendants' favour. However, as things turned out, settlement would have been far from certain if the plaintiffs had not terminated the contract. The correspondence following termination appears to establish that the defendants would not have been able to settle on 20 April and, moreover, were not in a position to indicate with any certainty when they might have been able to settle. What the deposit was paid to secure and what the defendants could ultimately deliver were substantially different. The fact that the defendants still wanted to proceed with settlement does not alter that fact.