102 (6) I now must consider whether the plaintiffs should have relief against forfeiture of the deposit under s 55(2A) of the Conveyancing Act 1919 the text of which I have already set out.
103 As I have said, the present sub-section derives from s 49(2) of the English Law of Property Act 1925. The English provision was thoroughly considered by Megarry J in Schindler v Pigault (1975) 30 P & CR 328 at 336-7. His Lordship noted that the provision had been seldom used in England (the NSW experience is quite different).
104 I have read the cases referred to by Megarry J in Schindler and cases decided in NSW on the sub-section. Many of these are cases where both parties acknowledged that the contract was at an end. However, of those cases where specific performance was claimed, only Pratt v Hawkins (1991) 32 NSWLR 319 raises the matter. In that case, a decree for specific performance had been made by consent on the vendor's suit. The decree was later rescinded by consent. At that point the vendor said, "I rescind" and so I ordered that the deposit be forfeited subject to the purchaser making an application under the sub-section within a limited time.
105 This case is clearly one where I have refused specific performance, and accordingly, the statutory jurisdiction exists. However, consistent with the line of cases which have been decided under this sub-section is the principle that whilst the Court has an unfettered discretion, it must pay strong attention to the fact that the purpose of giving a deposit is to give security to the vendor and that for the purchaser to get an order under this section, there must be circumstances where it would be unjust or inequitable for the vendor to retain the deposit; see particularly Lucas & Tait (Investments) Pty Ltd v Victoria Securities Ltd [1973] 2 NSWLR 268.
106 The cases show that despite this general inclination it would be improper to lay down any guidelines which limited the statutory unfettered discretion, but that the matter depends on the assessment of the justice of the case.
107 In Eighth SRJ Pty Ltd v Merity (1997) 7 BPR 15,189 at 15,202, I made the point that the discretion to be exercised is that of a collegiate court and not one at the whim of an individual judge. I then said that, looking at the cases up to the date of that decision, 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 personally 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?
108 Mr Sweeney has no quarrel with these guidelines, pointing out that if they were the sole criteria, his client must succeed as, apart from it appearing (falsely) at first blush that the vendor has received a windfall, his client is favoured by the obvious answers to the other three questions.
109 Professor Butt in his Standard Contract for Sale of Land in NSW 2nd ed (LBC, Sydney, 1998) para 9.124 says that there are four classes of case of special interest and covers much the same ground as did Eighth SRJ. He deals with windfalls at 9.130 and following. At 9.131 he says:
"It is clear that the mere fact that the vendor will reap the windfall of a forfeited deposit is not, of itself, a sufficient ground for ordering the deposit to be repaid under s 55(2A). This is so even where the market is rising, allowing the vendor not only to retain the deposit but also to resell it at an increased price. To justify a refund of the deposit, there must be additional circumstances: for example, where the vendor takes advantage of the purchaser's inadvertent breach, the purchaser being in fact ready to complete."
110 Mr Sweeney submits that the whole sanctity of the deposit system, a system which provides an incentive for purchasers to keep to their contract, would be defeated if courts took too liberal a view as to when the deposit should be returned.
111 He further said that there was a regrettable division of opinion in this Division of the Court as to the standard to be applied when assessing applications under the subsection. He put, respectfully, that Palmer J and myself applied too low a test and that the judgments of Windeyer J more appropriately carried out the legislature's intention.
112 Mr Sweeney illustrated his submission by pointing to the decision of Windeyer J in Tanwar Enterprises Pty Ltd v Cauchi (2002) NSW Conv R 55-994 upheld in the High Court (2003) 77 ALJR 1853, that in a contract with time of the essence between people in commerce, despite the purchaser being only one day late tendering settlement principally because of a failure of a proposed mortgagee, no case had been made out for return of the deposit.
113 Mr Sweeney relied on some remarks of McHugh J in the special leave application in Tanwar, heard on 13 September 2003 but, with respect, I do not find anything in that transcript to assist in the instant case.
114 Mr Sweeney contrasts this approach with some of my decisions and that of Palmer J in Webster v Havyn Pty Ltd [2004] NSWSC 227.
115 It is very difficult to compare cases because the facts and circumstances are so different. This is especially so when hardship needs to be taken into account. I agree that consistency of approach is to be sought after. I deny that this has not been the case in the past, though whether this is so or not is of no real benefit to anybody in the instant case.
116 I would agree that a substantial factor in these cases is the purpose of the deposit. In Terry v Permanent Trustee Australia Ltd (1995) 6 BPR 14,091, Santow J pointed out that if courts were to restore deposits to purchasers just because there was a rising market, the basic purpose of the deposit would be lost in all such cases. I said much the same thing in Clurstock Pty Ltd v Timanu Pty Ltd (1988) NSW Conv R 55-419. This case went on appeal, see Timanu Pty Ltd v Clurstock (1988) 15 NSWLR 338, but the Court was not of one mind as to s 55(2A), a matter which in any case was virtually abandoned on the appeal. Kirby P and Hope JA reaffirmed what Kirby P had said in Wight v Foran (1987) 11 NSWLR 470 (see p 343), McHugh JA noting he was unconvinced by this. See also on this point One Spencer St Pty Ltd v Maryland International Pty Ltd [2005] NSWSC 275.
117 In Romanos v Pentagold Investments Pty Ltd (2003) 77 ALJR 1882, a case heard at the same time as Tanwar, the High Court reiterated the importance of a deposit as security for the due performance of a contract and reversed Windeyer J's decision that the deposit ought to be refunded to a purchaser under the sub-section. Again, the purchasers were developers and the contract failed through no fault of the vendors.
118 The cases nearest factually to the present that I have been able to find are Hasanovic v Polistena (1982) NSW Conv R 55-078 and P C Developments Pty Ltd v Revell (1991) 22 NSWLR 615.
119 In Hasanovic, the purchasers contracted to buy a market garden and pursuant to the contract took possession and grew crops. They were unable to complete the transaction owing to a lack of finance, the proposed mortgagee having withdrawn an offer of finance close to the expiry of the notice to complete. The vendor terminated and the purchasers left on 17 October 1980. Needham J said that the purchasers' work on the property had increased its value and it would be unjust to allow the vendor not only to retain the benefits of the plaintiffs' expenditure and labour and to obtain an occupation fee and payment of rates but also to retain the deposit as well. It should be noted in that case, that the situation was such that the whole blame for non-completion could not be laid at the feet of the purchasers personally.
120 In PC Developments Pty Ltd v Revell (1991) 22 NSWLR 615 a large block of industrial land with a factory on it was sold, and, after contract but before completion, the purchaser, with the vendor's approval, did considerable demolition work. The contract was later terminated for the purchaser's default and the vendor purported to forfeit the deposit.
121 The Court of Appeal consisted of Mahoney, Clarke and Meagher JJA. Mahoney JA at 636, with whom, Meagher JA agreed held that it was appropriate in those circumstances to order a refund of the deposit. Clarke JA dissented. Of course, I am not saying that just because the Court of Appeal took that approach in Revell's case that I should make a similar order in the present case. However, it is a benchmark against which one can test one's decision.
122 The most recent relevant decision of the Court of Appeal on the sub-section is Harkins v Butcher (2002) 55 NSWLR 558, where Handley JA considered and analysed most of the relevant authorities at 572-4.
123 Mr Gray for the plaintiffs says that the cases indicate that one must look at the whole of the circumstances and all aspects of the transaction. This is certainly the correct mode of approach. He then says that if the contract had been performed, the vendor would have received $2.5 million. However, as things worked out, in September 2003 the vendor still retained the property now worth, he says, $3.42 million plus the deposit plus $300,000 occupation fee.
124 Mr Sweeney accepts the proposition that the Court must look at the total picture when considering whether or not to make an order for the return of a deposit. However, he analyses that total picture in quite a different way. He says that it is dominated by a man who gambled on keeping the vendor at bay for as long as it suited him, who commenced an unsuccessful suit for specific performance, who was held to be in breach of contract and who then delayed in making his claim for return of deposit. Such a man cannot realistically claim that it is just and equitable that he regain his deposit.
125 Very little is to be gained by discussing other cases. The discretion is unfettered. One must not say that something is unjust just because one subjectively feels that that might be the case, yet on the other hand Needham J in Hasanovic did not spell out why he considered that particular situation to be unjust.
126 The cases say that one must focus on the position of the purchaser, yet on the other hand one must remember the purpose of a deposit and must remember too that the present case is not one where there was any real fault in non-completion on any person's part other than the purchaser. As appears from my 2003 judgment, the purchaser took a technical point against the vendor, it gambled that that would buy time or perhaps win the case, it lost that gamble and lost a large amount of money. Equity courts have to be very careful not to encourage purchasers to take unmeritorious technical points thinking that they can still recover their deposit.
127 Another matter that it is relevant to take into account is the fact that there was an offer of settlement for $350,000. However, it does not seem to me that that matter is of great weight. The primary focus is on the contractual rights, particularly the legal rights vested in the vendor. The Court must ask whether reliance on those legal rights would be unjust or unconscionable. The fact that an offer to settle may have been made which might have given the purchaser a sum equivalent to the deposit or thereabouts is of peripheral value on this analysis. Alternatively, if the focus is on the purchaser, again one asks in view of the degree of fault and other circumstances connected with the contract, whether it is just and equitable that the purchaser get back the deposit.
128 To my mind, the offer is of marginal significance. If it has any significance at all it tends toward allowing the return of the deposit in addition to the refund of the instalments because the $250,000 deposit in itself was less than the offer. In any event, this is not a matter of great weight.
129 What is of greater importance is that the vendor may have suffered damage through the purchaser's breach of the contract. The authorities seem clear that an order for return of deposit under s 55(2A) does not affect the right of a vendor to sue at law for damages for breach of contract; see eg Harkins v Butcher (2002) 55 NSWLR 558 at 574.
130 However, although the property has appreciated in value, the vendor would have suffered some damage by the purchaser's breach, such as wasted legal fees or the like which would not ordinarily be recoverable in an action for damages at law where the property had increased in value since the contract was made.
131 In Reasons - Set 2, I directed my mind to whether in view of my decision that a considerable sum was due to the purchaser by way of refund of the occupation fee, it is still appropriate to order return of the deposit. As I noted earlier in these reasons, one motive for withdrawing those reasons was that I considered that this matter would have to be reassessed in light of the mathematical error.
132 The matter to be considered is whether, looking at all relevant circumstances, it is just and equitable for the purchasers to receive back $263,600 being part of the occupation fee and also the deposit of $250,000.
133 Mr Gray puts that there is no jurisdiction under s 55(2A) of the Conveyancing Act to order part of the deposit to be returned: it is all or nothing.
134 There is little authority on the point. Vaisey J in James Macara Ltd v Barclay [1944] 2 All ER 31 at 32 made this point. His decision went on appeal [1945] KB 148, but the Court of Appeal at 156 expressly did not consider the point. The same point was made by Walton J in Universal Corp v Five Ways Properties Ltd [1978] 3 All ER 1131 at 1137, but although this decision was reversed on appeal [1979] 1 All ER 552, the point was not considered.
135 In Clarke v Dilberovic (1982) NSW Conv R 55-083, Rath J actually ordered return of part only of the deposit under the section.
136 Furthermore, judges have made orders under the section returning the deposit only if the purchaser has undertaken to recompense the vendor for its damage suffered by the purchaser's breach of contract and to have those damages set off against the deposit; Poort v Development Underwriting (Victoria) Pty Ltd [1976] VR 779 at 785 (affirmed without comment on this point [1977] VR 454).
137 In Bernard v Weingarth (1997) 8 BPR 15,651 at 15,656, MH McLelland CJ in Eq said that whilst the sub-section does not in terms authorise the return of part of a deposit, the approach in Poort may bring about that practical result in some cases.
138 The same view was taken by Bryson J in Lucantonio v Ciofuli (2003) 11 BPR 21,181 at 21,183.
139 Accordingly, I accept that, apart from taking undertakings as to damages from the plaintiffs, I must proceed on the basis of return of the entire deposit or none at all. Indeed, Mr Sweeney would be content to accept that position.