(6) An indemnity is to be construed strictly and , in case of ambiguity, the contra proferentem rule is to be applied, that is, the clause is to be construed according to its natural and ordinary meaning, read in the light of the contract as a whole and construing the clause contra proferentem in case of ambiguity: Darlington Futures Ltd v Delco Australia Pty Ltd (1986) 161 CLR 500 per curiam at 510; Albert SC v Vanderloos ( 1992) 77 LGRA 309 per curiam at 312; Pendal Nominees Pty Ltd v Lednez Industries (Australia) Ltd (1996) 40 NSWLR 282 per Cohen J at 289.
5 In Citicorp Australia Ltd v Hendry supra the indemnifier was held not liable because the sum claimed was said never to have become due and payable, being irrecoverable as a penalty, and because it went beyond any loss actually suffered by the party to be indemnified. The plaintiff accepts the correctness of the principles stated by Clarke J in that case. But they say that in this case what the plaintiff was entitled to against the first defendant as the principal obligee (otherwise than by reason of the Court's discretionary decision to order the return of the deposit under s 55(2A)) was to retain the deposit and equally to retain any windfall profit which arose from a resale of the lots at a higher price. If the plaintiff does not receive both these benefits in the circumstances, then it has suffered a loss which it is entitled to recover.
6 At this stage it is necessary to turn to the precise terms of the obligation undertaken in this case. An examination of them shows the following. The directors by Special Condition 23.3 promised to indemnify the vendor against "all losses, costs, expenses, damages or other moneys which … may become due and payable by the purchaser to the vendor …". By Special Condition 16, if the contract is terminated and the purchaser fails to pay the balance of the deposit to the vendor, "the vendor shall be entitled to recover it from the purchaser as liquidated damages". In other words, the purchaser's liability is to have the balance of the deposit recovered against it as liquidated damages in proceedings brought by the vendor for that purpose. In this case the vendor has in fact sued the purchaser (the first defendant) for the relevant sums as liquidated damages but, far from them being found to be recoverable, the Court has found the vendor not entitled to recover the same and has entered judgment for the first defendant on that claim. In those circumstances, so far as the balance deposits totalling $73,000 odd are concerned, they cannot be characterised as moneys falling within the promise of the second and third defendants, ie, to indemnify the plaintiff against losses, damages etc due and payable to it as liquidated damages which it is entitled to recover. The $6,000 which was in fact paid cannot be found to fall within the promise, as those moneys cannot be characterised as moneys which became due and payable and have not been paid. They have in fact been paid. They are not brought within the promise by the fact that the Court has ordered their repayment. There are various other bases upon which the claim is put but it seems to me that in these circumstances it cannot succeed.
7 One interesting question which may fall for decision on another occasion is whether or not, if payable under the promise, the moneys could be ordered, albeit payable by the second and third defendants who were not the purchasers, to be repaid pursuant to s 55(2A). The section provides for an order for the repayment of a deposit without specifying by whom it was paid. It may well be arguable that if moneys that were paid were able to be characterised as a payment of the deposit, albeit the payment was not made by the purchaser but by someone else, an order for their repayment would be within the jurisdiction conferred by s 55(2A), which proceeds by giving power to order the repayment of a deposit without specifying or limiting the person who may be ordered to repay it. A countervailing argument may be that, in the context of an indemnity clause such as this, the payment if ordered would be by way of damages not by way of debt (De Santo v Munduna Investments Limited (In Liquidation) (1981) 12 ATR 517; but cf the passage cited from Sunbird Plaza Pty Ltd v Maloney supra), so could not be characterised as payment of the deposits. But that is matter for another day.
8 For the reasons set out above there should be judgment for the second and third defendants on the claim made against them by the plaintiff. It seems to me that it should follow that the plaintiff should be ordered to pay the second and third defendants' costs of that claim. If there is any argument to be put to the contrary the question may be raised before me in due course.
…oOo…