Mammadova v Rose

CASES CITED : Luong Dinh Luu v Sovereign Developments Pty Limited [2006] NSWCA 40; (2006) 12 BPR 23,629

PARTIES : Plaintiff: Gulnara Mammadova Defendant: Nina Rose

COUNSEL : Plaintiff: P Menadue Defendant: In person

SOLICITORS : Plaintiff: Brennan Tipple Partners Defendant: n/a

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

2010/88085 Gulnara Mammadova v Nina Rose JUDGMENT 1 HIS HONOUR: This is a vendor and purchaser summons which concerns the release of the deposit. 2 On 22 September 2009 the plaintiff as vendor entered into a contract with the first defendant as purchaser for the sale of a unit at 1/14-16 Jessie Street, Westmead. The purchase price was $312,000. The contract provided for completion after 42 days. The contract on its front page specified a ten per cent deposit of $31,200. However, there were special conditions concerning that matter. 3 A separate clause provided that notwithstanding any other provision of the contract, $800 of the deposit would be payable on the day on which the contract was made and the balance of the deposit of ten per cent would be payable on or before the tenth business day after the date on which the contract was made. The contract was subject to a cooling-off period which was extended to 7 October 2009. 4 A further clause provided that: " The Vendor agrees to accept the deposit of $15,600 in lieu of the 10% deposit only whilst the purchaser continues to perform his [sic] obligations pursuant to the Contract for Sale. Immediately upon any default by the purchaser the balance of the 10% deposit will become due and payable and any deposit forfeited pursuant to clause 9 hereof shall be a 10% deposit. "

5 The first defendant's evidence is that she sought finance through a finance broker, Mr George Achi, who referred her to a solicitor, Mr Raymond Mawad. According to the defendant the broker told her that she would need to pay him $8,000 in cash and he promised that he could guarantee obtaining a home loan for her. She explained to him that she was a pensioner. He told her that he would take care of everything. According to the defendant, she was told by her broker that once she found a property, she should contact Mr Mawad, the solicitor. 6 Having found the property in Westmead she contacted Mr Mawad. She signed the contract on 22 September 2009 before Mr Mawad. She says that she received no explanation about the contract at that time. According to the defendant on 6 October 2009, that is, the day before the expiry of the cooling-off period, she was told by her broker that her loan had been approved. On that day, she went to the offices of L J Hooker, the real estate agents, and proceeded to pay the balance of the deposit of $14,800. Thus, she paid the five per cent deposit of $15,600. That deposit is held by the second defendant, L J Hooker. 7 To pay the balance of the deposit, the first defendant took out a personal loan. She paid the deposit under the impression that she had loan approval. According to the defendant on 16 October she received a letter from Mr Mawad confirming that her loan had been approved. 8 The time for settlement was extended by agreement to 24 November 2009. 9 On 17 November 2009, according to the first defendant, she received a letter informing her that her finance had not been approved. This was the first indication that she did not have loan approval to complete the purchase. 10 On 18 November 2009, the first defendant's solicitor advised the plaintiff's solicitor that the defendant could not settle on the following Tuesday because BankWest had decided to withdraw its loan approval. 11 On 25 November 2009, the plaintiff's solicitor served a notice to complete. It required that the purchase be completed at the offices of Gadens at 2.30pm on Monday, 14 December 2009. The notice stated that if the plaintiff failed to comply with it, the vendor would forfeit the deposit, terminate the contract, and either sue the plaintiff for breach of contract or re-sell the property and recover the deficiency, if any, arising on re-sale and all expenses of re-sale as liquidated damages. That notice was effective to make time for completion essential. 12 The contract included a term that the parties agreed that a period of 14 days for a notice to complete would be a proper and reasonable time. The notice to complete allowed more than that. I see no reason to doubt its efficacy. 13 The plaintiff was unable to complete the contract on 14 December 2009. She was unable to arrange further finance. No one attended for the defendant on settlement on 14 December 2009. The plaintiff was ready, willing and able to complete and attended on settlement for that purpose. 14 As the first defendant did not complete the contract, on 15 December 2009 the vendor served a notice of termination. She sought to recover the deposit from the agent. The first defendant did not consent to the agent's releasing the deposit. 15 On 11 February 2010 the plaintiff re-sold the property for $302,500. That was $9,500 less than the sale price to the plaintiff. 16 These proceedings were commenced on 10 April 2010. By her summons, the plaintiff sought in substance a declaration that she had validly terminated the contract for sale, an order that the first defendant authorise the second defendant as stakeholder to release the deposit of $15,600, and also orders that the first defendant pay to the plaintiff amounts of $31,200, $9,500 being the deficiency on re-sale, and $1,327.70 being the first defendant's costs and expenses of re-sale. 17 The plaintiff presses only the claim for a declaration that she has validly terminated the contract and orders that she is entitled to receive the deposit of $15,600 held by the real estate agent, the second defendant, as stakeholder, and any interest that has accrued on that sum. 18 The plaintiff does not press a claim that the first defendant pay a further five per cent as a deposit. Nor does she claim the sum of $9,500 being the deficiency on re-sale if it is found that she is entitled to the deposit of $15,600. 19 So far as the claim for deficiency is concerned it is clear that the plaintiff would have to allow the moneys to which she is entitled as a deposit against any claim for damages. The plaintiff's claim in the summons that the first defendant pay the remaining five per cent of the deposit might have faced difficulties (see Luong Dinh Luu v Sovereign Developments Pty Limited [2006] NSWCA 40; (2006) 12 BPR 23,629). It is unnecessary to pursue that question as that claim is not pressed. 20 The first defendant's position, if the facts are as she deposes to, excites sympathy. If the facts are as she deposes to, she was induced to pay the deposit and to enter into the contract with the plaintiff on the assurance that her broker had obtained loan approval, which assurance, according to her, was confirmed by her solicitor. But the fact that she received those assurances from her solicitor and broker which were not honoured, is no answer to the vendor's claim for breach of contract. The vendor has no responsibility for the asserted failure of the first defendant's finance broker and solicitor. 21 The vendor was entitled to her contractual remedies if the first defendant failed to honour her contractual obligations. Why the first defendant was unable to honour her contractual obligations does not affect the vendor's remedies. The first defendant would not be entitled to relief against forfeiture of the deposit under s 55(2A) of the Conveyancing Act 1919 (NSW). There is nothing inequitable in the vendor retaining the five per cent deposit. Indeed, it is quite likely that having regard to the deficiency on re-sale, the costs of re-sale and the delay in the vendor's obtaining the sale price, that the vendor will be out of pocket even after she retains the deposit. Be that as it may, deposits form an important earnest to ensure contractual performance. 22 The failure of the first defendant to be able to raise the finance necessary to complete the purchase and the reasons for that failure provide no reason why the vendor should not be able to enforce her contractual right to the deposit following her termination of the contract. There is no basis to challenge the validity of that termination. 23 For these reasons, the plaintiff is entitled to the relief which is now sought and I will hear counsel as to precise orders that should be made. 24 I make the following declarations and orders:

1. Declare that the contract for sale of the land made between the plaintiff as vendor and the first defendant as purchaser on 22 September 2009 in respect of the whole of the land comprised in Folio Identifier 1/SP19567 has been validity terminated by the plaintiff.

2. Declare that the plaintiff is entitled to forfeiture of the deposit of $15,600 together with any interest thereon.

3. Order that the second defendant pay to the plaintiff the deposit of $15,600 in the hands of the second defendant and any interest accrued thereon.

4. Order that the summons be otherwise be dismissed save as to costs.

[Parties addressed on costs.] 25 I should add that the first defendant submits that the plaintiff ought to have sued her solicitor and her broker rather than suing her. The plaintiff would have had no cause of action against the first defendant's solicitor or broker. Any cause of action that might be available against those persons is the first defendant's and not the plaintiff's. There is no reason that costs should not follow the event. Properly advised, the first defendant ought not to have defended the claim that the deposit held by the real estate agent should be released to the vendor. The plaintiff has been put to the unnecessary costs of these proceedings. 26 The first defendant says that she has no money with which to pay costs. That is not a relevant consideration as to whether a costs order should be made. 27 I order that the first defendant pay the plaintiff's costs of the proceedings.

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