Kirk & Anor v Ashdown & Anor [1998] QCA 77

Similarly, the use of the word "forfeiture" in Special Condition cl. 9 is, in our opinion, consistent with the material portion of Standard Condition cl. 13 when it is given its ordinary literal meaning, which is in turn compatible with the legal nature of a deposit.

The essential flaw in the appellants' argument is that it treated their entitlement (and corresponding obligation) to pay the deposit by two instalments on different dates, only one of which had been reached when the contract was terminated, as the sole, or at least paramount, contractual provision relating to payment of the deposit. However, that provision was concerned with the situation when the appellants were not in breach and the contract had not been terminated. Once the first instalment of the deposit was not paid in accordance with the contract and the respondents used that breach to terminate the contract, as they were entitled to do, the entire deposit "[had] not been paid" and became payable, and "recoverable" in this action.

We agree that the appeal should be dismissed with costs to be taxed.

By a written contract (ex. 1) dated 5 September 1994, the plaintiffs, who are the respondents to this appeal, agreed to sell, and the defendants, who are the appellants, agreed to buy, a house on land at Hendra. The purchase price, for what appears to be an imposing residence on a substantial area of land, was $2.6 million. The contract, which is in the standard form (first edition) adopted by the Real Estate Institute and approved by the Law Society for residential land and residential units and houses, consists of printed Standard Conditions of Sale accompanied by certain typed Special Conditions.

The claim in the action by the plaintiffs, for which at trial judgment went in their favour, is to recover the amount of the unpaid deposit under the contract. What is entitled the "Items Schedule" to the contract contains in item O a direction to "See clause (3)". Clause 3, headed Deposit, is as follows:

3.1 The deposit shall be paid by the Purchaser to the Stakeholder forthwith upon the formation of the contract.

(a) fails to pay the deposit as provided in sub-clause 3.1:

(b) pays the deposit by cheque which is post-dated; or

(c) pays the deposit by cheque which is not duly honoured on presentation;

then, immediately thereupon the Purchaser shall be in substantial breach of the contract and the Vendor may:

(i) affirm the contract and exercise the rights expressed in sub-clause 13.2; or

(ii) terminate the contract and exercise the rights expressed in sub-clause 13.3.

3.3 The rights and powers conferred by sub-clause 3.2 are in addition to any other rights which may be conferred upon the Vendor at law or in equity.

3.4 The deposit shall be retained by the Stakeholder until completion or earlier termination of the contract whereupon the Stakeholder shall pay the deposit to the person entitled thereto."

Clause 13, to which reference is made in cl.3 of the Standard Conditions, is in the following terms:

(a) fails to pay the balance of the purchase price as provided in clause 4; or

(b) fails to comply with any of the terms or conditions of the contract;

13.2 If the Vendor affirms the contract pursuant to sub-clause 3.2 or sub-clause 13.1, the Vendor may:

(a) sue the Purchaser either for damages for breach or for specific performance and damages in addition to or in lieu thereof; and

(b) recover from the Purchaser as a liquidated debt the deposit or any part of it which the Purchaser has failed to pay;

and shall pay the deposit or any part of it recovered as aforesaid to the Stakeholder.

13.3 If the Vendor terminates the contract pursuant to sub-clause 3.2 or sub-clause 13.1:

(a) the Vendor may elect to declare the deposit (or as much thereof as shall have been paid) forfeited and/or sue the Purchaser for breach; or

(b) the Vendor may elect to declare the deposit (or so much thereof as shall have been paid) forfeited and/ or resell the Property as owner and if the resale is completed within two years from the date of termination any deficiency and any expense arising from such resale shall be recoverable by the Vendor from the Purchaser as liquidated damages;

and in either case the Vendor may recover from the Purchaser as a liquidated debt the deposit or any part of it which has not been paid by the Purchaser.

13.4 The rights and powers conferred upon the vendor by this clause 13 are in addition to any other right or power which may be conferred upon the Vendor at law or in equity."

In addition to those provision in the printed Standard Conditions, the matter of the deposit is referred to in cl.3 of the Special Conditions of Contract. It is as follows:

"3. This contract is subject to a split deposit as follows:

(1) $50,000 to be paid 180 days from the signing of this contract.

(2) $200,000 to be paid 360 days from the signing of this contract.

Should the deposit not be paid in accordance with this schedule this contract shall be at an end. All deposit monies are to be paid directly to the vendor and are non-refundable."

At the foot of the page of those Special Conditions, which are typed into a space evidently left blank for that purpose in the printed form of contract, is a further printed provision "Note 12 Stakeholder's Acknowledgement" followed by a space for a signature. Opposite it are the words:

"The stakeholder named in the Items Schedule acknowledges having received the deposit specified in Item O of that Schedule and agrees to hold it as stakeholder for the parties as provided in this Contract".

The stakeholder named in the Items Schedule was identified in Item G as Raine & Horne, Clayfield; but the acknowledgment was not signed, obviously for the reason that, by the terms of Special condition cl.3, the deposit had not been received, but was to be paid in two instalments at the dates specified, which were some time after execution of the contract. That clause also provides expressly for the deposit monies to be paid directly to the vendor.

The only other contractual provision that mentions the deposit is cl.9 of the Special Conditions in Annexure 1, which is as follows:

"9. This contract is conditional upon the purchaser obtaining a Town Planning search thirty days prior to settlement. Should the purchaser not be satisfied with the result of the Town Planning search then this contract shall be at an end and all deposit monies shall be forfeited to the vendor without deduction."

At the trial there were issues of fact, some of which may have related to cl.9 or the search referred to in that clause. If so, his Honour resolved them in favour of the plaintiffs, and they were not pursued on appeal. Clause 9 is set out in these reasons only because of the language in which it refers to the deposit, on which some reliance was placed in this Court.

The litigation results from the plaintiff purchasers' failure to pay the first instalment of $50,000 of the "split" deposit on 5 March 1995, which in accordance with Special condition 3 was payable 180 days from the signing of the contract. By letter (ex. 3) dated 6 March 1995, the plaintiffs' solicitors advised that the contract was at an end. Ground 1(a) of the notice of appeal is that, because of the provisions of s.61(3) of the Property Law Act 1974, the learned trial judge ought to have regarded that sum as payable only on 6 March 1995 because 5 March was a Sunday. The point may also be implicit in para. 1 of the appellant's written outline of submissions. However, Mr Jensen of counsel who appeared on the appeal said that we should pay attention not to those written outlines but only to his oral submissions on appeal. In those submissions no reliance was placed on ground 1(a). That appears to mean that it has been abandoned. However, for what it is worth and without having heard the matter argued, I add that reliance on s.61(3) of the Act appears to be misconceived for the reasons submitted by the plaintiffs; namely, that it operates only to postpone the date for completion of the contract, which was not due on that date. Special condition 3 specified the date, not for completion, but for payment of the first instalment of $50,000 of the deposit of $250,000.

Since, under the contract, time was of the essence, it thereupon fell to the plaintiffs as vendors to elect to treat non-payment of that $50,000 as a breach entitling them to rescind (meaning terminate) the contract. That course was open to them in the exercise of their right to do so variously conferred under the general law, or under the contractual power in that behalf invested by cl.3.2 or cl. 13.1(b)(ii) of the Standard Conditions, or cl.3 of the Special Conditions. The letter ex. 3 simply says that the contract "is at an end" without identifying which in particular of those bases for termination was being relied on. Even if they had specified one rather than another, it would probably still have been open to them at the trial to rely on that other or others: cf. Shepherd v. Felt & Textiles of Australia Ltd. (1931) 45 C.L.R. 359. But in any event, this represents another of the points raised in the notice of appeal that was not pursued in submissions before the Court.

What was urged on appeal was the perhaps distantly related submission that the effect of non-payment of the $50,000 deposit instalment was to terminate the contract automatically, without need for action on the part of either party, so depriving the plaintiffs of any right or power to invoke the provisions of cl.3.2 or cl.13.1 of the Standard Conditions or cl.3 of the Special Conditions. The submission to that effect was founded on the language of that clause in providing, as it does, that, should the deposit not be paid in accordance with its specifications, "this contract shall be at an end". As such, the submission is directly opposed to Suttor v. Gundowda Pty. Ltd. [1950] HCA 35; (1950) 81 C.L.R. 418, 441, and the numerous authorities in which that decision has subsequently been followed and applied. "Where the event in question", said their Honours in their reasons for judgment in that case:

"... is one which cannot occur without default on the part of one party to the contract, the position is clear. The provision is then construed as making the contract not void but voidable; only the party who is not in default can avoid it, and he may please himself whether he does so or not."

The present instance falls directly within that principle. Non-payment of the $50,000 part deposit was an event that could not occur without default on the part of the defendants; consequently only the plaintiffs were entitled to take advantage of it. It is true that in Suttor v. Gundowda Pty. Ltd. the particular condition in question expressed the contract to be "cancelled" on the happening of the event specified, but the same result has been reached where, as here, it was provided that the contract was to be "at an end". See Gange v. Sullivan [1966] HCA 55; (1966) 116 C.L.R. 418; Havenbar Pty. Ltd. v. Butterfield (1974) 133 C.L.R. 449. It is also true that in all three cases, the High Court spoke of the contract becoming "voidable"; but the reasons in Perri v. Coolangatta Investments Pty. Ltd. (1982) 149 C.L.R. 537 make it plain that the meaning and effect of such contractual conditions depends ultimately on the language in which those provisions are expressed. Here cl. 3 speaks of the contract being "at an end". There is no reason to assume that what was meant by it was that an election made in reliance on it had the effect of avoiding the contract ab initio.

This reduces the issue to what is pretty well the only, or at least the main, point in the defendant purchasers' submissions on appeal. It is that the provisions of Special condition 3 are an exhaustive statement of the rights exercisable by the plaintiffs under the contract. If the deposit or part deposit was not paid in accordance with that clause, the contract was to be at an end. The deposit moneys would then be "non-refundable", which is said to presuppose that they had been paid, which as events turned out was in fact not the case. The plaintiffs were, it was submitted, in consequence not entitled to recover those sums.

The submission to that effect is rested in part upon the structure and terms of the contract, and in part upon assumptions about the legal character of a deposit as explained in the decided cases on the subject. As regards the first of these considerations, emphasis was placed on the provision in cl.2 of the printed Standard Conditions that "where there is any conflict between the Standard Conditions and this Contract, this Contract prevails"; and also on the interpretative presumption, as it is said to be, that typed provisions prevail over printed portions of a contract.

Whatever weight may be ascribed to cl.2 or the presumption, their common starting point is the presence of an inconsistency or, as cl.2 expresses it, a "conflict" between different provisions or parts of the contract. Here no such conflict or inconsistency is discoverable. Special condition 3 says that if the deposit is not paid in accordance with its terms the contract is to be at an end, meaning that it is determinable by the plaintiff vendors. So far, it says nothing about the status of the deposit if the contract is determined. That matter is left to the final sentence of Special condition cl.3, which provides simply that "all deposit moneys ... are non-refundable". It is difficult to read that provision as referring only to deposit moneys already paid because the final sentence is specifically addressed to the consequences of non-payment of all of those moneys. Consequently, unless the expression "non-refundable" were to be confined to the sum of $50,000 payable at 180 days from contract, the last sentence of cl.3 could and would have no operation at all. Yet the clause deals indiscriminately with both that sum and the balance of $200,000 payable at 360 days as being, for the purposes of the latter half of the clause, "deposit moneys" and as "non-refundable". It follows that the expression "non-refundable" in that context cannot be narrowly interpreted to mean only moneys paid but not repayable. Indeed, the expression "non-refundable" may very well have been used deliberately in order to exclude the interpretation that might more readily have been adopted if the word "repayable" had been used instead.

By contrast, the word "forfeiture" is used in Special condition cl. 9, which makes the contract conditional on the purchaser obtaining a town planning search 30 days before settlement. If the purchaser is not satisfied with that search, the contract is to be at an end and all deposit moneys are to be "forfeited" to the vendor. The word "forfeited" might perhaps be thought to assume that the deposit moneys had been paid in full (which may be why "forfeiture" was not the word used in Special condition cl.3); but, in any event, settlement was fixed by the contract to take place 24 months after contract date, which was well beyond the dates in Special condition 3 prescribed for payment of deposit moneys, and so at a time when, if the contract was still on foot, those moneys would already have been paid. Special condition 9 is, however, unusual in the respect that it provides for the contract coming to an end if the purchaser is not satisfied with the search, and it makes the deposit liable to forfeiture in that event. The purchasers would therefore stand to lose their deposit if they expressed themselves to be dissatisfied with the town planning search. What that is capable of suggesting is that the deposit in this contract was in every sense intended to afford a powerful inducement to the defendant purchasers to complete the contract.

Quite apart from, but in addition to, these considerations, it is not possible to identify any material conflict or inconsistency between the printed Standard Conditions and the typed Special Conditions of this contract. Special condition 3 prescribes when the deposit moneys are to be paid, adding that if not so paid the contract is to be at an end and these moneys are not to be refundable. Specifying future dates for payment of the deposit is plainly inconsistent or in conflict with Standard condition 3.1 providing for payment of the deposit to the stakeholder on formation of the contract, as also is the provision in cl.3.4 that the stakeholder is to retain the deposit until completion or earlier termination of the contract. Under Special condition 3, the deposit moneys were to be paid directly to the vendors. There is, however, no inconsistency or conflict between Special condition cl. 3 and Standard condition cl.13. By cl.13(1)(b)(ii) the vendor was authorised to terminate the contract if the purchaser "fails to comply with any of the terms or conditions of the contract ...". Clause 13.3 goes on to provide that, if the contract is so terminated, the vendor may either (a) sue for breach, or (b) elect to declare the deposit, "or so much thereof as shall have been paid", forfeited, and to resell and recover as liquidated damages any expense arising from resale. Furthermore, by the same provisions (Standard condition 13.3) the vendor is in the case of either (a) or (b) entitled to recover "as a liquidated debt the deposit or any part of it which has not been paid by the purchaser".

Clause 13.3(b) is evidently designed to take advantage of the decision in Cooper v. Ungar [1958] HCA 9; (1958) 100 C.L.R. 510, 514, which, as was pointed out in the reasons given there, enables the vendor to sue upon the contract or a term of it for liquidated damages and not for unliquidated damages as for a wrongful repudiation of it. Speaking of that part of the comparable clause (cl. 14) considered in that case, their Honours said that "the cause of action under such a provision as the last part of cl.14 is for the balance of money the title to which is reserved by the contract". In the present case, the same conclusion follows under cl.13.3. The plaintiff vendors are entitled to recover from the purchaser as a liquidated debt "the deposit or any part of it which has not been paid by the purchaser".

It is, in my opinion, neither necessary, nor possible according to the natural meaning of the words, to accept the submission that those words in cl.13.3 are to be read as if they said "recover ... the deposit or any part of it which [is due but] has not been paid by the purchaser". The words in the form in which they stand are quite unambiguous and in need of no expansion or interpolation to make them efficacious or comprehensible. Indeed, as Byrne J. noticed in the court below, there is a perceptible change of sense and language between the expression "deposit or any part of it which the purchaser has failed to pay" in cl. 13.2(b) of the Standard Conditions, and that of the subject clause 13.3 immediately following it, which refers to the "deposit or any part of it which has not been paid by the purchaser". The former may be considered as requiring a default, in the form of a "failure" to pay the deposit or a part of it that was due, while the latter simply identifies what "has not been paid". There is, according to the plain words of cl.13(3) of the Standard Conditions, no basis for distinguishing between the sum of $50,000 already payable when the contract was determined, and the sum of $200,000 which had not yet accrued due and payable at the time of that determination. Both sums were amounts which had "not been paid by the purchaser"; and both were, adopting the language of Cooper v. Ungar, sums the title to which had been reserved to the vendors by the contract. Clause 13.3 uses the expression "liquidated debt" which, as Byrne J. pointed out below, verges on tautology. Liquidated "sum" is no doubt what was meant; but, in any event and irrespective of what it is called, the amount is, on the authority of Cooper v. Ungar, recoverable under the contract as liquidated damages in the form of a money sum.

There is therefore no conflict or inconsistency between the provisions of Standard condition cl. 13.3 prescribing the consequences of termination of the contract, and those of Special condition 3, providing that the contract shall be at an end and that all deposit moneys are to be "non-refundable". The two contractual provisions are not only consistent and capable of standing together but may fairly be considered as mutually supplementary. For all these reasons, there is no basis for supposing that Special condition 3 was designed to be exhaustive or in some way to "cover the field" of non-payment of the deposit moneys to the exclusion of the detailed provisions of Standard condition 13.3. Indeed, in at least two instances (cll.2 and 8) where it was intended to displace provisions of the Standard Conditions, the Special Conditions expressly so provide.

It remains to refer briefly to the position under the general law. A deposit is considered an "earnest" of the bargain or its performance (Brien v. Dwyer [1978] HCA 50; (1978) 141 C.L.R. 378, 385) that is designed to demonstrate the sincerity of the contracting party who is to pay it. For that reason, it is ordinarily beyond the reach of equitable relief against penalties or forfeiture, at least if it is not excessive or unconscionable in amount, of which in Queensland the equivalent of 10% of the purchase moneys is ordinarily considered the upper limit: Freedom v. A.H.R. Constructions Pty. Ltd. [1987] 1 Qd.R. 59. Since the purchase price was $2.6 million, the deposit required under the contract was in this instance less than 10% of that total. The fact that it was payable post-contractually in two amounts, rather than by a single sum on signing the contract, is uncommon in practice but certainly not unknown. It has been held to have the consequence of leaving the vendor with the right to recover the unpaid balance after terminating the contract. See Bot v. Ristevski [1981] VicRp 13; [1981] V.R. 120; Pendergrast v. Chapman [1988] 2 N.Z.L.R. 177, both of which were referred to with approval by this Court in Cleargate Pty. Ltd. v. Pacific Commerce Finance Limited (App. No. 186 of 1993. May 10, 1994 unrep.). The defendants' complaint that this involves an acceleration, without any express contractual provision in that behalf, of the date for payment of the second deposit instalment of $200,000 is not sustainable in the face of the provisions of cl.13.3 and the decision in Cooper v. Ungar [1958] HCA 9; (1958) 100 C.L.R. 510. Far from suggesting that the express provisions of the contract or the Special Conditions were intended to displace this state of affairs, those provisions tend on the contrary to confirm it.

Questions of fact decided at the trial were not pursued on the appeal. It follows from what has been said that there is no reason for interfering with the judgment below. The decision of the trial judge to award interest on the amount of the unpaid deposit from 6 March 1995, when under Standard condition cl.13.3 it became payable, was challenged; but it involved the exercise of a broad discretion, which is not shown to have been erroneous.