Patmore & Anor v Hamilton [2014] VSC 275

2 In this matter I dismiss the plaintiffs' claim made by Further Amended Statement of Claim of 27 November 2013. I shall enter judgment for the defendant, as claimed in the defendant's Amended Defence and Counterclaim dated 27 November 2013, subject to the final form of orders. These may, in turn, be the subject of some discussion.

3 Judgment will be in respect of the $65,000 deposit claimed, as well as interest on that sum from 3 May 2013 at the rate of 2 per cent per annum, plus the applicable penalty interest rate under the Penalty Interest Rates Act 1983 (Vic). I shall require clarification from the defendant in relation to what is sought in respect of the amended statement of claim and counterclaim at paragraph 34, at page 20 of the Court Book (CB). I shall return to the detail of that claim.

4 In relation to interest in respect of damages, I also require clarification as to what is sought.

5 Additionally, clarification is required by the defendant's regarding the claim for a declaration that the purported charge constituted by Item 8.3 of the s 32 Statement provided by the plaintiffs to the defendant is void and unenforceable.

6 I shall make an order pursuant to s 90(3) of the Transfer of Land Act 1958 (Vic) that the plaintiffs forthwith do all things necessary to remove Caveat Number AK51595T from the Certificate of Title Volume 10650, Folio 388, including filing a withdrawal of caveat.

7 This proceeding involves the plaintiffs' claim, as vendors, for damages in relation to a rescinded contract for the sale of land. The defendant purchaser claims for return of deposit, interest, damages and related relief in relation to that failed transaction.

8 The plaintiffs were vendors, and the defendant was a purchaser, of a property known as 12 Oakview Boulevard, Narre Warren North ('the property'). Under a Contract of Sale dated 15 December 2012, the defendant agreed to purchase the property for $657,000.

9 The defendant paid the plaintiffs a deposit of $65,000. The subject contract contained pro forma General Conditions, which are expressed on their face to be the Standard Form prescribed by the Real Estate Agents (Contracts) Regulations 2008 (Vic). The defendant, in his submissions, described the contract as being one derived from the REIV pro forma.

The relevant General Conditions were in the following terms -

24.1 The vendor carries the risk of loss or damage to the property until settlement.

24.2 The vendor must deliver the property to the purchaser at settlement in the same condition it was in on the day of sale, except for fair wear and tear.

24.3 The purchaser must not delay settlement because one or more of the goods is not in the condition required by general condition 24.2, but may claim compensation from the vendor after settlement.

24.4 The purchaser may nominate an amount not exceeding $5,000 to be held by a stakeholder to be appointed by the parties if the property is not in the condition required by general condition 24.2 at settlement.

24.5 The nominated amount may be deducted from the amount due to the vendor at settlement and paid to the stakeholder, but only if the purchaser also pays an amount equal to the nominated amount to the stakeholder.

24.6 The stakeholder must pay the amounts referred to in general condition 24.5 in accordance with the determination of the dispute, including any order for payment of the costs of the resolution of the dispute.

A party who breaches this contract must pay to the other party on demand:

(a) compensation for any reasonably foreseeable loss to the other party resulting from the breach; and

(b) any interest due under this contract as a result of the breach.

Interest at a rate of 2% per annum plus the rate for the time being fixed by section 2 of the Penalty Interest Rates Act 1983 is payable on any money owing under the contract during the period of default, without affecting any other rights of the offended party.

27.1 A party is not entitled to exercise any rights arising from the other party's default, other than the right to receive interest and the right to sue for money owing, until the other party is given and fails to comply with a written default notice.

27.2 The default notice must:

(b) state that it is the offended party's intention to exercise the rights arising from the default unless, within 14 days of the notice being given -

(ii) the reasonable costs incurred as a result of the default and any interest payable are paid.

28.1 All unpaid money under the contract becomes immediately payable to the vendor if the default has been made by the purchaser and is not remedied and the costs and interest are not paid.

28.2 The contract immediately ends if:

(a) the default notice also states that unless the default is remedied and the reasonable costs and interest are paid, the contract will be ended in accordance with this general condition; and

(b) the default is not remedied and the reasonable costs and interest are not paid by the end of the period of the default notice.

28.3 If the contract ends by a default notice given by the purchaser:

(a) the purchaser must be repaid any money paid under the contract and be paid any interest and reasonable costs payable under the contract; and

(b) all those amounts are a charge on the land until payment; and

(c) the purchaser may also recover any loss otherwise recoverable.

28.4 If the contract ends by a default notice given by the vendor:

(a) the deposit up to 10% of the price is forfeited to the vendor as the vendor's absolute property, whether the deposit has been paid or not; and

(b) the vendor is entitled to possession of the property; and

(c) in addition to any other remedy, the vendor may within one year of the contract ending either:

(i) retain the property and sue for damages for breach of contract; or

(ii) resell the property in any manner and recover any deficiency in the price on the resale and any resulting expenses by way of liquidated damages; and

(d) the vendor may retain any part of the price paid until the vendor's damages have been determined and may apply that money towards those damages; and

(e) any determination of the vendor's damages must take into account the amount forfeited to the vendor.

28.5 The ending of the contract does not affect the rights of the offended party as a consequence of the default.

10 On 28 March 2013, the defendant purchaser inspected the subject premises and discovered water damage. As a result, by agreement, settlement of the sale was extended from 2 April 2013 to 16 April 2013. On a second inspection of the property on 12 April 2013, the defendant noted that water damage remained, including water damage to the master bedroom not noticed at the inspection on 28 March 2013.

11 There does not appear to be any dispute between the parties that in March 2013, after the date of sale, water probably entered the premises through the roof and damaged parts of the laundry and the master bedroom. The defendant's evidence was that he discovered water damage to the laundry during the inspection which he undertook on 28 March 2013 but did not inspect other parts of the premises at that time. In his statement, the defendant makes it clear that, on the occasion of the second inspection on 12 April 2013, he also observed water damage in the master bedroom.

12 On 12 April 2013, an organisation known as Stokes Building Services inspected the subject premises and provided a quotation to the defendant for the repairs to both the laundry and the master bedroom in the sum of $2,640.

13 By letter dated 12 April 2013,[1] the defendant's solicitors notified the plaintiffs' conveyancer that there was water damage to the door jambs, skirting and architraves in the laundry and water damage to the master bedroom that had not been rectified. The same letter from the purchaser's solicitors enclosed the quotation of 12 April 2013 from Stokes Building Services.

14 The communication of 12 April 2013 also informed the plaintiffs' conveyancer that the sum of $2,640 was to be retained out of the settlement sum. On the same day, Lisa Davies & Associates - the plaintiffs' conveyancer, which was apparently owned by Goodman Group Lawyers, the plaintiffs' solicitors - replied to the defendant's solicitors, saying that no moneys were to be held back at settlement.[2] They demanded that the balance due to the plaintiffs, inclusive of the proposed retention sum, be handed over at settlement. Settlement was scheduled to occur on 16 April 2013.

15 The plaintiffs' conveyancer's letter of 15 April 2013 also unequivocally asserted that the damage caused by the leakage and water ingress, which had been identified by the defendant, had been attended to. However, Counsel for the plaintiffs has conceded that, in fact, as at 16 April 2013, the relevant repairs had not been effected by the plaintiffs.

16 On the evidence, it appears that the plaintiffs arranged via their insurers for repair work to architraves, door jambs and skirtings in the laundry to be completed by an organisation known as Unique Building Services Pty Ltd. Nonetheless, the damage to the property from water ingress had not been remedied by the date of settlement.

17 I note that the works undertaken by the plaintiffs to repair the relevant damage are reflected in a Tax Invoice,[3] which shows that the costs of repairing the damage, excluding the sum probably required to repair the master bedroom, was a sum in excess of $2,640, which was proposed by the defendant to be withheld at settlement. The quote was in fact for $3,056, a fact of significance to which I shall return.

18 Accordingly, I find that, as at the planned settlement date, the property was not in the same condition as at the date of sale. Therefore, for reasons I will come to presently, the defendant was entitled to rely on General Condition 24.4 of the Contract of Sale.

19 In general terms, General Conditions 24.4 and 24.5 contemplate that the parties will appoint a stakeholder for the retention of a nominated amount up to $5,000, which sum is intended to address a change in the condition of the property between the date of sale and the date of settlement.

20 On the morning of 16 April 2013, prior to the proposed settlement on that day, the defendant's solicitors wrote to the plaintiffs' conveyancer in terms which included the following:

Accordingly, our client exercises his rights pursuant to General Condition 24. At settlement a cheque in the sum of $2,640 representing the reasonable repair costs made payable to your client will be produced for citing and retention. This cheque will be forward to an agreed stakeholder to be held in trust pending the proper completion of the works and resolution of the dispute. We nominate the selling agent, Eview Real Estate & Partners as stakeholder.

Please let us have confirmation that you are similarly happy for the selling agent to act in this capacity.

We hold in our trust account our client's remittance in the sum of $2,640 in accordance with General Condition 24.5. We undertake to immediately forward these funds to the stakeholder, once appointed

In our view your client's refusal to effect settlement with the retention being proposed in accordance with the terms of general condition 24 of the contract represents a clear breach on the part of the vendor and evinces an intention on the part of the vendor to no longer be bound by the contract.

Our client reserves all his rights in this regards.[4]

21 I accept the defendant's submission that, in the circumstances, the plaintiffs were subject to a duty to cooperate in nominating a stakeholder but failed to do so. Such a duty arises by clear implication from the language of 24.4 in relation to the obligation upon the parties to effectuate the appointment of a stakeholder. Here the obligation on the vendors to co-operate in the appointment of a stakeholder is also implied in law.

22 Contrary to their obligations I find that the plaintiffs took the position that the defendant was not entitled to act in accordance with the provisions of General Condition 24, and prevented the requisite steps from operating as intended.

23 Prior to settlement, by letter dated 16 April 2013,[5] the plaintiffs' conveyancer communicated the following to the defendant's solicitors:

As advised, we have been instructed by our client that all of the damage that was caused by the leakage has been fixed. When your client attended the property he was advised that our client was still in the process of fixing the damage yet he still had a building inspector attend the property.

Our client has instructed that the property is in the same state as at the date of sale pursuant to General Condition 24.4 of the Contract of Sale and does not agree to any funds being held back from settlement.

If your client does not provide the cheques previously requested by our office, he will be in breach of the terms of the Contract pursuant to General Condition 24.3 of the Contract of Sale and our client will seek penalties directly from your client as a consequence.

24 Accordingly, there was no agreement forthcoming from the vendor plaintiffs in relation to the proposed mode of settlement put forward by the defendant. Furthermore, there was expressly no agreement to the agent proposed by the defendant as stakeholder. On the contrary, as evidenced by the above passage, the plaintiffs' position was that it demanded that the balance of the contract sum be paid at settlement.

25 The evidence establishes that the defendant had separately provided funds to his solicitors in the nominated amount to be withheld, namely $2,640.[6]

26 At settlement on 16 April 2013, in accordance with General Condition 24.5, the nominated amount was deducted from the balance due to the plaintiffs under the contract, and both amounts were constituted by separate cheques made out to the plaintiffs. The cheque for the balance less the nominated amount was presented to the plaintiffs' representative as settlement. Additionally, a copy of the trust account receipt for the additional sum of $2,640 was shown to the plaintiffs' representative.

27 In my view, it was established that had the plaintiffs not refused to co-operate in that regard, the sum withheld at settlement and the additional equal amount paid by the defendant in relation to the sum withheld would have been paid by the defendant to the agent as stakeholder at, or as soon as practicable after settlement.

28 However, the plaintiffs refused to settle on the basis proposed by the defendant.

29 On 17 April 2013, the plaintiffs served a Default Notice on the defendant under the Contract of Sale.[7]

30 On the evidence, I accept that the plaintiffs proceeded on the mistaken assumption that the defendant did not tender a separate cheque for the nominated sum at settlement. This was so notwithstanding that, at trial, Ms Burns - a paralegal who attended the settlement for the plaintiffs - gave evidence that a Bank Cheque in the sum of $2,640 was amongst the cheques presented and tendered at settlement on 16 April 2013. The cheques that Ms Burns confirmed were put forward and tendered at the time of settlement are copied at CB 111. The only cheque not sighted by Ms Burns was the cheque in the sum of $847.08 made out to Telford Story & Associates.

31 In the afternoon of 16 April 2013, the plaintiffs' conveyancer sent a facsimile communication to the defendant's solicitors stating:

We remind your office that your client's only right is to sue our client after settlement in relation to the items your client claims are not in the same condition as at the day of sale which we note our client denies. Furthermore your office has provided no evidence whatsoever to support your client's claim.

Should settlement not occur by 4 p.m. today your client will be in breach of the contract pursuant to Special Condition 24.3 of the Contract of Sale and we are instructed by our client to issue a default notice without further warning.[8]

32 I return to the General Conditions of the Contract of Sale. General Condition 24 of the Contract of Sale provides in 24.1 that the vendor carries the risk of loss or damage to the property until settlement. In Clause 24.2 the Contract provides that the vendor must deliver the property to the purchaser at settlement in the same condition it was on the day of sale, except for fair wear and tear.

33 Clause 24.3 provides that the purchaser must not delay settlement on the basis that one or more of the goods is not in the condition required by General Condition 24.2, and further provides for the purchaser to claim compensation from the vendor in respect of goods which are in such condition.

34 During the course of argument at trial, Counsel for the plaintiffs clarified that the plaintiffs did not rely upon the application or operation of Clause 24.3 of the General Conditions in this case.

35 Clause 24.4 provides that the purchaser may nominate an amount, not exceeding $5,000, to be held by a stakeholder, to be appointed by the parties, if the property is not in the condition required by General Condition 24.2 at settlement.

36 Clause 24.5 provides that the nominated amount may be deducted from the amount due to the vendor at settlement and paid to the stakeholder, but only if the purchaser also pays an amount equal to the nominated amount to the stakeholder.

37 Clause 24.6 provides that the stakeholder must pay the amounts referred to in General Condition 24.5 in accordance with the determination of the dispute, including any order for payment of the costs of the resolution of the dispute.

38 In my view, General Conditions 24.4 and 24.5 provide an agreed solution and scenario if, in non-compliance with General Condition 24.2, the property is not in the same condition at settlement as it was at the date of sale. It is also to be noted that Clause 24.2 expressly excepts a change of condition if such change is in the nature of "fair wear and tear". In those circumstances, in summary, the purchaser may nominate an amount, not exceeding $5000, to be held by a stakeholder to be appointed by the parties pending the resolution of any dispute about the claim that at settlement the property was not in the condition required by Clause 24.2.

39 These provisions result in the parties having security for their respective entitlements and claims up to $5,000, and upon ultimate determination of the disputes, a clear recovery mechanism.

40 Clause 24.2, however, provides for an exception in respect of "fair wear and tear" to the property occurring between date of sale and the date of settlement under the Contract of Sale. Clause 24.2 does not apply in circumstances where there is fair wear and tear.

41 The plaintiffs submit that this is a case where the relevant damage has been caused by fair wear and tear, as permitted under Clause 24.2. The defendant submits that fair wear and tear, properly interpreted in the context of this Contract and the General Conditions under consideration, does not mean damage caused by an event such as a flood or by an accident. The defendant argues that, in this Contract, the phrase "fair wear and tear" means the wearing out of the premises by friction and by ordinary forces of nature over time.

42 Amongst the cases cited in relation to how the words "fair wear and tear" in Clause 24.2 should be interpreted was the decision of Osborn J in JSM Management Pty Ltd v QBE Insurance (Australia) Ltd.[9] In the judgment, his Honour referred to the Oxford English Dictionary definition of the phrase "wear and tear", and referred also to the Macquarie Dictionary definition of that phrase. His Honour stated:

1. In turn the Oxford English Dictionary describes the meaning of the phrase 'wear and tear' as

wearing or damage due to ordinary usage; deterioration in the condition of a thing through constant use or service.

1. The Macquarie Dictionary describes the meaning of the phrase as 'diminution, decay, damage, or injury sustained by ordinary use'.
2. Black's Law Dictionary also gives the primary meaning of the phrase as 'deterioration caused by ordinary use'.
3. In my opinion, the ordinary meaning of the phrase 'wear and tear' is that given as its primary meaning by both the Oxford English Dictionary and the Macquarie Dictionary, namely damage due to or sustained during ordinary usage.
4. This is because the word 'wear' is coupled with the word 'tear'. The concept unifying both words is damage caused by ordinary, as against extraordinary, events. 'Wear' is concerned with the result of usage taking place in respect of a thing. 'Tear' is concerned with the impact of ordinary natural causes such as weather upon a thing.
5. The understanding of the phrase in the context of leases was elucidated by Scott LJ in Taylor v Webb:

The phrase 'wear and tear' is a very old English idiom and the clause 'fair' (or 'reasonable') 'wear and tear excepted', has been common in leases and tenancy agreements for two or three centuries. It is, like many idiomatic expressions, complex in meaning; it implicitly refers to both cause and effect, and in each aspect it covers two classes of disrepair, (a) that brought about by the normal or ordinary operation of natural causes, such as wind and weather, in contradistinction to abnormal or extraordinary events in nature such as lightning, hurricane, flood or earthquake; and (b) that brought about by the tenant, and other persons present in or on the premises with the consent of the tenant, either unintentionally or as a normal incident of a tenant's occupation, in the course of the 'fair' (or 'reasonable') use of the premises for any of the purposes for which they were let ...

1. The judgment goes on to further discuss the meaning of 'fair' in the phrase 'fair wear and tear' when used in the context of a lease. The view of the legal consequences of a conventional fair wear and tear clause in a lease articulated in Taylor v Webb was subsequently overruled in Regis Property Company Ltd and Dudley. Nevertheless, the passage I have quoted expresses the fundamental notions of wear and tear ...

43 In my view, on the facts of this case, the flooding damage was not in the nature of "fair wear and tear" as intended by the phrase fair wear and tear in Clause 24.2 of the subject contract.

44 Here, according to the evidence, the damage was due to an extraordinary event, namely flooding as a result of the failure of roof tiles, or perhaps the dislodgment of a roof tile or tiles. I consider that the natural meaning of the words, "fair wear and tear", does not encompass either damage in the nature of, or damage caused by an extraordinary event of the type which the evidence establishes probably occurred in this case. In my view here neither the failure nor the dislodgment of a tile or tiles nor the resultant flooding and consequent damage to the interior of the property resulted from ordinary use or service.

45 Pursuant to General Condition 24.4, the purchaser may nominate an amount not exceeding $5,000 to be held by the stakeholder. Clause 24.4 does not reflect an agreed intention that the nominated sum proposed to be withheld is the subject of any limitation beyond the agreed cap of $5,000, although its nomination under Clause 24.4 must relate to the purchaser asserting that the property is not in the condition required by general condition 24.2 at settlement.

46 Clause 24.4 requires no justification or substantiation of the amount nominated by the purchaser. The purchaser may nominate, in my view, any sum up to $5,000 without substantiating the sum withheld. The fixing of a modest amount by way of an agreed cap is, it would appear, the only intended prescription applying to the sum of the amount to be withheld.

47 There may be exceptional circumstances in which it is established that there is something capricious or lacking in bona fides in relation to the amount nominated to be withheld. In such circumstances, it may be, in a different case, that the amount proposed to be withheld was not authorised by Clause 24.4. This is not such a case.

48 The plaintiffs argue that Clause 24.4 should carry the implication that the amount nominated thereunder by the purchaser must have a proper and reasonable basis. In my view, there is no warrant in this contract to imply any term of the type contended for by the plaintiffs in relation to Clause 24.4. I am not convinced that it is in any way necessary to imply the sorts of terms that the plaintiffs contend for so as to give business efficacy to this contract, or that the contract is not effective without such implication or that the implied term contended for by the plaintiffs goes without saying. Accordingly, as is well established by BP Refineries Western Pty Ltd v Shire of Hastings,[10] the plaintiffs' suggested implied term is not, in the circumstances, justified.

49 Further and in any event, I find that the amount that the defendant proposed to withhold by notice to the vendor before settlement, and ultimately withheld under Clause 24.4 of the contract, was a manifestly reasonable sum. The amount of $2,640 was reasonable taking into account the evidence as to the cost of the repair work associated with the water ingress, which constituted the relevant change in the condition of the property between the date of sale and the settlement date. This is demonstrated by the cost of those works reflected in the Tax Invoice at CB 357 in the sum of approximately $3,056, not including the cost of repairing the water damage to the master bedroom.

50 Furthermore, given the proper interpretation and operation of the relevant General Conditions of the Contract to which I have referred, the plaintiffs' reliance on General Condition 24.3 at the time of settlement was misconceived. The plaintiffs' letter of 16 April 2013[11] asserted a misconceived position pursuant to Clause 24.3 of the Contract and on the basis of that misconception also stated that, if settlement was not effected by 4pm on 16 April 2013, the plaintiffs would serve a Notice of Default under the Contract.

51 The plaintiffs did in fact serve a Notice of Default under Clause 27 of the Contract of Sale on 17 April 2013. By letter dated 18 April 2013,[12] the plaintiffs' solicitors also argued that General Condition 24.3 applied, and demanded that the defendant settle the subject purchase and thereafter seek compensation "post settlement". For the reasons I have given, the legal position adopted in the plaintiffs by letter of 18 April 2013 was unmaintainable and contractually impermissible.

52 The plaintiffs did not co-operate with the defendant's proposal pursuant to Clause 24, as they were obliged to do. In these circumstances, in my view, the rights and procedures provided for in Clause 24.4, 24.5 and 24.6 remained effective and available to the defendant. This is because the plaintiffs' breach in refusing to jointly appoint a stakeholder, as contemplated by clause 24.4, did not prevent the purchaser availing himself of the agreed Clause 24.4, 24.5 and 24.6 procedures to the extent he could do so. Those procedures are not rendered unworkable by the vendors' breach in refusing to co-operate so as to facilitate the appointment of a stakeholder upon the purchaser nominating an amount to be withheld at settlement under Clause 24.4.

53 It would be unworkable and contrary to the clear intent of Clause 24.4 if the vendors' breach of those provisions prevented the purchaser from exercising his right to withhold payment of the nominated amount pursuant to Clauses 24.4 and 24.5.

54 In circumstances where a vendor fails to fulfil its part of the bargain by co-operating to appoint a stakeholder under Clause 24.4, and the purchaser has done all the purchaser is required to do under Clause 24.4 and Clause 24.5, and also attempts to settle the purchase according to the terms of the Contract of Sale, the purchaser cannot be held in breach.

55 Conversely, if the vendors fail to comply with their requirements under Clause 24.4 and also then refuse to settle on the basis that the purchaser has deducted a nominated amount up to $5,000 under Clauses 24.4 and 24.5, the vendors will be in substantial breach of the Contract of Sale, entitling the purchaser to issue a notice of default under Clause 27 and bring the contract to an end if such default is not remedied within the period specified in the default notice.

56 Further, in such circumstances, a vendor, who has wrongfully failed to co-operate in the appointment of a stakeholder, is not able to prevent the purchaser from relying on Clause 24.4, given that the vendor has prevented the purchaser from doing so.

57 In this case, the plaintiffs did not nominate or agree to a stakeholder to accept the sum proposed to be withheld at settlement by the defendant. The plaintiffs did not accept the agent proposed by the defendant as stakeholder, and they went further and rejected the defendant's right to invoke the process contemplated by Clauses 24.4, 24.5 and 24.6. Thereby, the plaintiffs also prevented the payment of the withheld amount and a further equal sum to a stakeholder appointed by the parties. In these circumstances, the defendant did all he could reasonably do to properly exercise his rights under Clause 24.4 and 24.5.

58 I also accept that it is highly probable on the evidence that, if the plaintiffs had not served a Notice of Default on the day after the failed settlement and unequivocally maintained that they would not settle unless the withheld sum of $2,640 was paid to the plaintiffs at settlement, the two sums of $2,640 that were proffered by the defendant at settlement would both have been paid to the proposed agent as stakeholder to be held until the determination of the dispute, as contemplated by Clause 24.

59 Further, I consider that, properly construed, neither Clause 24.4 or Clause 24.5 of the Contract of Sale requires the purchaser to pay the nominated amount, or the amount equal to the nominated amount, to the stakeholder prior to settlement.

60 In my view, the defendant's nomination of an amount to be withheld, and a proposed stakeholder, by letter dated 16 April 2013,[13] as well as the defendant's tender and separate payment of the sums of $2,640, substantially satisfied the requirements of Clause 24.4.

61 In these circumstances, the plaintiffs were in breach of the Contract of Sale by their conduct in wrongfully seeking to rely on Clause 24.3, in failing to act in accordance with Clause 24.4, in failing to accept the tender of the moneys at settlement on 16 April 2013 and in failing to complete at settlement.

62 It follows from the above findings that the defendant made a lawful tender pursuant to the general conditions of Clauses 24.4 and 24.5. In relation to Clause 24.5, I note that the defendant paid the sum of $2,640 to his solicitors to be paid to a stakeholder. The defendant also tendered a bank cheque for a further $2,640 at settlement on 16 April 2013, and undertook to immediately forward the trust account remittance of $2,640, in accordance with General Condition 24.5, to the stakeholder, once appointed.

63 On 17 April 2013, the defendant served a Default Notice, pursuant to General Condition 27 of the Contract of Sale and giving the usual 14 days, as required by the Contract, to remedy the plaintiffs' breach. The breach specified and relied on by the defendant was that the vendors failed to settle in response to the purchaser's tender of the balance of the contract price.[14]

64 The evidence is that the defendant's Default Notice expired without the plaintiffs' breach being remedied, with the result that:

a) the Contract of Sale was lawfully rescinded under General Condition 28.2;

b) the defendant was entitled to an immediate refund of the deposit, with interest thereon, under General Condition 28.3(a), as provided for by the Contract of Sale;

c) the defendant was entitled to compensation under the General Conditions Clauses 25 and 28.3(c) in the sum of $65,000.00 together with interest thereon in the sum of $8,468.69 and for costs and disbursements on the conveyance in the sum $3,595.00 together with interest thereon in the sum of $328.96.

65 Finally, I note that, in their submissions at trial, the plaintiffs' identified three critical propositions, one of which they said must be established for them to succeed in this matter. Those propositions were: firstly, that the water ingress damage was in the nature of fair wear and tear or was, as I understood Mr Harrison's submission, so inextricably connected to, or resulting from, fair wear and tear as to form part of the same physical phenomena. Secondly, that the sum of $2,640 tendered was not reasonable in the circumstances. Thirdly, that the defendant effected no tender at settlement as required by the Contract of Sale.

66 For the above reasons, I reject each of the plaintiffs' three critical propositions.

(2) The Plaintiffs pay to the Defendant the sum of $65,000.00 together with interest thereon in the sum of $8,468.69.

(3) The Plaintiffs pay to the Defendant the sum of $3,595.00 together with interest thereon in the sum of $328.96.

(4) Pursuant to section 90(3) of the Transfer of Land Act 1958 the Plaintiffs forthwith do all things necessary to remove Caveat Number AK518595T from Certificate of Title Volume 10650 Folio 388, including forthwith executing and filing a withdrawal of the caveat with Land Registry.

(5) The Plaintiffs pay to the Defendant the Defendant's costs of the proceeding, including reserved costs, on a standard basis until 25 February 2014 and on an indemnity basis from and including 26 February 2014, such costs to be assessed by the Costs Court in default of agreement.

(6) The Defendant by his solicitors be at liberty to immediately draw on the sum of $130,000.00 and interest accrued thereon held in the Defendant's solicitor's trust account by way of payment pursuant to Orders 2 and 3 hereof and, upon agreement as to or assessment of the quantum of costs to be paid to the Defendant, to forthwith draw on the said sum in payment of costs.

(7) In so far as the sum of $130,000.00 and interest accrued thereon held in the Defendant's solicitor's trust account is not exhausted by the deduction of the aforesaid payments (including costs) the Defendant by his solicitors shall after such deductions (including costs) pay any balance in the account to the Plaintiffs' solicitors on the record.

[1] Exhibit "KLP-9" to the affidavit of Kerryn Leeanne Petrie, sworn 22 April 2014.

[6] Petrie Statement [21], [22] and [26].

[9] (2011) VSC 339, in particular at [21] to [32].