Plaintiff v Defendant

PROPERTY - Contract for the sale of land - Failure to settle - Default of purchaser - Whether deposit ought be returned under s 49(2) of the Property Law Act 1958 (Vic) - Principles to be applied in exercising discretion under s 49(2) - Poort v Development Underwriting (Victoria) Pty Ltd [1976] VicRp 83; [1976] VR 779; Havyn Pty Ltd v Webster [2005] NSWCA 182; (2005) 12 BPR 22,837; Midill (97PL) Ltd v Park Lane Estates Ltd [2008] EWCA Civ 1227; [2009] 1 WLR 2460 considered.

5 Ridge Pty Ltd v Tryname Pty Ltd [2017] NSWSC 371

Andrews v Australia and New Zealand Banking Group Ltd [2012] HCA 30; (2012) 247 CLR 205

Aussie Invest Corporation v Pulcesia Pty Ltd [2005] VSC 362; (2005) 13 VR 168

Bath and North East Somerset District Council v Mowlem PLC [2015] 1 WLR 785

Bantick v Boss Properties Pty Ltd (2000) V Conv R 54-629

Bidaisee v Sampath (Unreported, Judicial Committee of the Privy Council, Lords Goff of Chieveley, Mustill, Slynn of Hadley, Nicholls of Birkenhead, Steyn, 3 April 1995)

Birch v Joy [1852] EngR 382; (1852) HL Cas 565; 10 ER 222

Bot v Ristevski [1981] VicRp 13; [1981] VR 120

Buckley v Drk (Unreported, Supreme Court of Victoria, Teague J, 30 April 1993)

Butcher v Lachlan Elder Realty Pty Ltd [2004] HCA 60; (2004) 218 CLR 592

Centrepoint Custodians Pty Ltd v Lidgerwod Investments Pty Ltd [1990] VicRp 36; [1990] VR 411

Charles Hunt Ltd v Palmer [1931] 2 Ch 287

Cole v Rose [1978] 3 All ER 1121

Dimsdale Developments (South East) Ltd v De Haan (1983) 47 P & CR 1

Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd [1914] UKHL 1; [1915] AC 79

Environmental Systems Pty Ltd v Peerless Holdings Pty Ltd [2008] VSCA 26; (2008) 19 VR 358

Esso Australia Ltd v Australian Petroleum Agents' & Distributors' Association [1999] 3 VR 642

Harkins v Butcher [2002] NSWCA 237; (2002) 55 NSWLR 558

Havyn Pty Ltd v Webster [2005] NSWCA 182; (2005) 12 BPR 22,837

James Macara Ltd v Barclay [1944] 2 All ER 31

Jones v Mallet (Unreported, Supreme Court of Victoria, Adams J)

Iannello v Sharpe [2007] NSWCA 61; (2007) 69 NSWLR 452

Kadissi v Jankovic [1987] VicRp 20; [1987] VR 255

Kazacos v Shuangling International Development Pty Ltd (2016) 18 BPR 36,353

Lockwood v PSP Investments Pty Ltd [2013] VSC 10

Lucas & Tait (Investments) Pty Ltd v Victoria Securities Ltd [1973] 2 NSWLR 268

Luu v Sovereign Developments Pty Ltd [2006] NSWCA 40; (2006) 12 BPR 23,629

Mahred Nominees Pty Ltd v Tulloch (1991) V Conv R 54-421

Mallet v Jones [1959] VicRp 21; [1959] VR 122

Maniaty v Fenedisto Pty Ltd [2004] VSC 177

McDonald v Dennys Lascelles Ltd [1933] HCA 25; (1933) 48 CLR 457

Melbourne Linh Son Buddhist Society Inc v Gippsreal Ltd [2017] VSCA 161

Midill (97PL) Ltd v Park Lane Estates Ltd [2008] EWCA Civ 1227; [2009] 1 WLR 2460

Mulkearns v Chandos Developments Pty Ltd [No 4] [2005] NSWSC 511

O'Dea v Allstates Leasing System (WA) Pty Ltd [1983] HCA 3; (1983) 152 CLR 359

Omar v El-Wakil [2008] EWHC 350; [2002] 2 P & CR 36

Paciocco v Australia & New Zealand Banking Group Ltd (2016) 258 CLR 525

Poort v Development Underwriting (Victoria) Pty Ltd [1976] VicRp 83; [1976] VR 779

Poort v Development Underwriting (Victoria) Pty Ltd [No 2] [1977] VR 455

Portbury Developments Co Pty Ltd v Ottedin Investments Pty Ltd [2014] VSC 57

Putt v Perfect Builders Pty Ltd [2013] VSC 442

Re Hoobin [1957] VicRp 49; [1957] VR 341

Re Scott and Alvaraez's Contract [1895] 2 Ch 603

Romanos v Pentagold Investments Pty Ltd [2003] HCA 58; (2003) 217 CLR 367

Rushcutters Bay Developments Pty Ltd v Dragon Asset Investment Pty Ltd [No 2] [2017] NSWSC 866

Schindler v Pigault (1975) 30 P & CR 328

Simcevski v Dixon [No 1] [2017] VSC 197

Sydney Developments Pty Limited v Perry Properties Pty Limited [2016] NSWSC 515; (2016) 18 BPR 35,905

Tennaro Ltd v Majorarch Ltd [2003] EWHC 2601

Universal Corporation v Five Ways Properties Ltd [1978] 3 All ER 1131

Universal Corporation v Five Ways Properties Ltd [1979] 1 All ER 552

Workers Trust and Merchant Bank Ltd v Dojap Investments Ltd [1993] AC 573

Yammouni v Condidorio [1959] VicRp 70; [1959] VR 479

Zenith Engineering Pty Ltd v Queensland Crane and Machinery Pty Ltd [2000] QCA 221; [2001] 2 Qd R 114

Zsadony v Pizer [1955] VicLawRp 78; [1955] VLR 496

1 On 19 April 2017, in Simcevski v Dixon [No 1],[1] I determined that the defendant ('the Vendor') was entitled to terminate a contract for the sale of land dated 14 August 2015 ('the contract') because the plaintiff ('the Purchaser') had failed to settle. I rejected the Purchaser's contention that the Vendor was not entitled to terminate the contract because the Vendor had prevented him from obtaining finance by refusing to permit him to carry out certain investigations of the subject property before settlement.

2 In these circumstances, the Purchaser has claimed that he is nonetheless entitled to return of the deposit under s 49(2) of the Property Law Act 1958; and the Vendor has counterclaimed for 5% of the purchase price, which is payable under the terms of the contract in addition to the 5% deposit. These issues remained unresolved in my earlier reasons. After the delivery of those reasons, the parties provided additional written submissions.[2]

3 It is appropriate that I deal first with the Vendor's counterclaim before turning to the question of the application for return of the deposit under s 49(2) of the Property Law Act 1958.[3]

4 The Vendor contends that he is entitled to a further payment of $175,000.00 as only 5% of the 10% 'deposit' was paid by the Purchaser. Ten percent of the purchase price was $350,000.00. However, the particulars of sale record that the deposit is agreed to be '$175,000.00 payable within 14 days of signing of which $20,000.00 shall be paid on signing' - all of which was paid.

5 The Vendor relies upon cl 28.4 of the contract in support of his claim for the further $175,000.00. That clause appears in the contract as follows:

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

(a) the deposit up to 10% of the price is forfeited 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.

6 The first four words of cl 28.4(a) of the contract were struck through by hand.

7 The Vendor concedes that the relevant clause is only enlivened on breach of the contract.

(a) It is appropriate to have regard to the deleted words in the clause.[4] In circumstances where the contract reflected a commercial bargain, struck between represented parties, cl 28.4(a) is prima facie valid and enforceable.

(b) It is relevant that the traditional deposit of 10% is referred to, but that in this case, it was reduced to a 5% deposit with potential recovery on the remaining 5% on breach, on account of the longer than usual settlement date being eight months in the future.

(c) The onus is on the Purchaser to establish that the further 5% is, in fact, truly a penalty and therefore unenforceable and that, collectively, the particulars of sale and cl 28 provide for a forfeiture of 10% of the purchase price - a reasonable sum.

9 The Vendor relies upon the recent decision of the High Court in Paciocco v Australia & New Zealand Banking Group Ltd,[5] and on the following passage in the judgment of Kiefel J where her Honour refers to the words 'extravagant and unconscionable' in particular:

As explained below, it is these words that, by their extreme nature, identify the penal character of a penalty. The question which may be identified as arising from this aspect of the decision in Dunlop,[6] which is appropriate to a case of this kind, is whether a provision for the payment of a sum of money on default is out of all proportion to the interests of the party which it is the purpose of the provision to protect. This interest may be of a business or financial nature.[7]

10 The Vendor submits that the present case is one where 'it was difficult if not impossible to predict the loss that the Vendor would suffer in the event the Purchaser failed to settle the purchase on the due date', relying on the fourth 'test' of Lord Dunedin in Dunlop.[8] Based on the factual matrix, on the execution of the contract of:

(d) the anticipated closure of the Vendor's business by the date of settlement;

(f) the loss of the use of the money to be paid for the purchase until resale, leading to the Vendor having to borrow $300,000 as a result of the failure to settle;

the sum specified was reasonable and not extravagant or unconscionable sum. He submits that it is not enough for the sum not to be proportionate; rather, it must be 'out of all proportion'.[9]

11 The Purchaser relies on the decision of Bryson JA in Luu v Sovereign Developments Pty Ltd[10] and submits that the Purchaser's obligation to make a further payment of $175,000 is a penalty and is therefore unenforceable.

12 Bryson JA held that 'the lack of any relation between a percentage of the purchase price and a pre-estimate of damage for breach' demonstrated the absence of any justifiable pre-estimate of damage.[11]

13 The Purchaser submits that, as in Luu v Sovereign Developments Pty Ltd, the operation of condition 28.4(a) 'lacks any connection with damages at all'.[12]

14 The primary submission of the Purchaser is that where part of the sum referred to in cl 28.4(a) is unpaid and not the deposit, cl 28.4 constitutes a penalty as the payment in cl 28.4(a) is not paid in earnest for the performance of the contract.[13] Such a situation is to be distinguished from an action seeking to recover an unpaid deposit or part deposit after the acceptance by the vendor of a repudiation by the purchaser.[14] It is to be distinguished again from a deposit to be paid in instalments.[15]

15 The position of a deposit in the law of penalties is anomalous. In Workers Trust and Merchant Bank Ltd v Dojap Investments Ltd,[16] Lord Browne-Wilkinson speaking for the Privy Council, after referring to the rule against penalties, observed:

One exception to this general rule is the provision for the payment of the deposit by the purchaser on a contract for the sale of land. Ancient law has established that the forfeiture of such a deposit (customarily 10 per cent. of the contract price) does not fall within the general rule and can be validly forfeited even though the amount of the deposit bears no reference to the anticipated loss to the vendor flowing from the breach of contract.

This exception is anomalous ... The special treatment afforded to such a deposit derives from the ancient custom of providing an earnest for the performance of a contract in the form of giving either some physical token of earnest (such as a ring) or earnest money. ... in the event of completion of the contract the deposit is applicable towards payment of the purchase price; in the event of the purchaser's failure to complete in accordance with the terms of the contract, the deposit is forfeit, equity having no power to relieve against such forfeiture.[17]

16 As observed by White J in Kazacos v Shuangling International Development Pty Ltd,[18] nothing said by the High Court in Andrews v Australia and New Zealand Banking Group Ltd[19] casts doubt on the understanding of the position of a deposit paid in earnest of performance where the sum of the deposit is not an unreasonable amount.

17 In Paciocco v Australian & New Zealand Banking Group Ltd,[20] the appellants had credit card accounts with the bank. They challenged a late payment fees charged by the bank. The trial judge found in favour of the plaintiffs, but the Full Court of the Federal Court of Australia overturned that conclusion, and a majority of the High Court held that the appellants had failed to establish that the late payment fees were penalties.

18 The High Court majority's reasoning was recently summarised by the Victorian Court of Appeal in Melbourne Linh Son Buddhist Society Inc v Gippsreal Ltd as follows:

Paciocco involved the question whether fees charged by a bank to a customer for payments which were late, and thus in breach of the relevant loan contract, were penalties. The High Court held that a contractual term will not be a penalty if it protects the legitimate commercial interests of the non-defaulting party under the contract. Relatedly, the Court held that, in determining whether a sum payable is out of all proportion to the likely loss to be suffered as a result of a breach of contract, a court is not limited to considering only such loss as is recoverable as damages for that breach. Rather, a court is entitled to take into account detriment to other commercial interests which the non-defaulting party has legitimately sought to protect. This is because the question to be decided is whether a provision for the payment of a sum of money on default is out of all proportion to the legitimate commercial interests of the party which it is the purpose of the provision to protect.

In Paciocco, Kiefel J (with whom French CJ agreed) held that it may be inferred from the policy of the law of penalties - which is to render unenforceable contractual terms whose purpose is to punish the defaulting party - that a sum stipulated for payment on default is a penalty if it bears no relation to the possible damage to or interest of the innocent party.

In Paciocco, Gageler J stated that the ultimate question of whether a contractual stipulation imposing a detriment on a party in the event of non-observance of another stipulation is a penalty is reflected in a 'very useful' formulation of principle by Wilson J in O'Dea v Allstates Leasing System (WA) Pty Ltd. That formulation was as follows: Is the stipulation 'a genuine pre-estimate of the [innocent party's] probable or possible interest in the due performance of the principal obligation' or a penalty inserted 'merely to secure the enjoyment of a collateral object'? ...

In Paciocco, Keane J said that the terms 'extravagant' and 'unconscionable' in proposition 4(a) in Dunlop function as pointers towards the punitive purpose which imbues the challenged provision with the character of a punishment. He went on to say that the question to be addressed in order to distinguish a penalty from a provision protective of a legitimate interest is 'whether the sum or remedy stipulated as a consequence of a breach of contract is exorbitant or unconscionable when regard is had to the innocent party's interest in the performance of the contract'.[21]

19 The following New South Wales cases have considered the interaction between the payment of further 'deposits' and the law of penalties.

20 In Luu v Sovereign Developments Pty Ltd,[22] the New South Wales Court of Appeal considered the relationship between contractual penalties and deposits. The relevant facts were as follows:

(a) The contract provided for a deposit of approximately 1% of the purchase price.

(b) Special condition 5 provided that, in the event that the purchaser paid less than a 10% deposit, then if the purchaser committed a default, the whole of the 10% deposit became due and payable.

(c) After a number of variations and extensions, the purchaser failed to complete the purchase and the vendor terminated the contract.

(d) The vendor sued for recovery of 10% of the varied contract price, minus the portion of the deposit already paid.

(e) The Court of Appeal found the obligation under special condition 5 to be unenforceable as a penalty.

21 After referring to the authorities and analysing the contract, Bryson JA held that a party could not avoid the law of penalties by designating a payment, as a deposit, if it is does not 'have the character of earnest money paid'.[23] His Honour observed as follows:

The references in Special Condition 5 to the deposit in the context of the obligation to pay up to 10% of the purchase price on default are confusing elements which do not, in my judgment, affect the essential character of the obligation as an additional payment which the purchaser must make if the purchaser is in any way in default. Where the additional payment was not made and, as in this case, the Contract has been terminated and the vendor sues for it as a debt, its character as a penalty, quite unrelated to any damage or loss incurred by the vendor, is in my opinion quite clear.[24]

22 Bryson JA further held that, given the various possible breaches and their consequently varying costs,

the lack of any relation between a percentage of the purchase price and a pre-estimate of damage for breach demonstrates, to my mind, the absence of any justification.[25]

23 With respect to the nature of the obligation under special condition 5, he noted that it 'operates quite differently to a provision requiring payment of damages or liquidated damages' because it is not a liquidated damages clause. He observed:

[Its effect] lacks any connection with damages at all, and falls to be tested as a penalty without resort to the dichotomy in Lord Dunedin's [second category between a penalty and liquidated damages]. Penalties are not encountered exclusively in appositions with liquidated damages.[26]

24 In Iannello v Sharpe,[27] the New South Wales Court of Appeal applied Luu v Sovereign Developments Pty Ltd.[28] The relevant facts were as follows:

(a) The contract for the sale of land that provided for a deposit of $225,000 which was stated to be 5 per cent of the price, unless otherwise stated and paid in accordance with Special Condition 14.[29]

(b) Special condition 14 provided that $225,000 was 'part of the deposit' and, on the purchaser's default 'the balance of the deposit, namely $225,000.00, shall become immediately due and payable and the Purchaser shall forfeit the whole of the sum of $450,000.00 ... to the Vendor'.[30]

9 Purchaser's default

If the purchaser does not comply with this contract (or a notice under or relating to it) in an essential respect, the vendor can terminate by serving a notice. After the termination the vendor can:

9.1 keep or recover the deposit (to a maximum of 10 per cent of the price);

9.2 hold any other money paid by the purchaser under this contract as security for anything recoverable under this clause -

9.2.1 for 12 months after the termination; or

9.2.2 if the vendor commences proceedings under this clause within 12 months, until those proceedings are concluded; and

9.3 sue the purchaser either -

9.3.1 where the vendor has resold the property under a contract made within 12 months after the termination, to recover -

• the deficiency on resale (with credit for any of the deposit kept or recovered and after allowance for any capital gains tax or goods and services tax payable on anything recovered under this clause); and
• the reasonable costs and expenses arising out of the purchaser's non-compliance with this contract or the notice and of resale and any attempted resale; or

9.3.2 to recover damages for breach of contract.

...

26 After referring to Luu v Sovereign Developments Pty Ltd,[31] Hodgson JA (with whom Santow and Basten JJA agreed) held the further sum of $225,000 was not a deposit because:

(a) The fact that the parties chose to call it a deposit could be relevant; but was not determinative.[32]

(b) The further sum was only payable on termination of the contract and therefore was not a payment 'in earnest in committing himself to pay the rest'.[33]

(c) An unconditional promise to pay an amount on default cannot 'count as a deposit: that is the very sort of promise that will normally amount to a promise to pay a penalty, unless the amount in question is a genuine pre-estimate of damages'.[34]

27 Accordingly, the additional sum claimed was a penalty, and the vendors were not entitled to recover it.[35]

28 In Kazacos v Shuangling International Developments Pty Ltd,[36] the relevant facts were as follows:

(b) The deposit was set at $1,700,000, but special condition 52.1 of the contract provided that one half of the deposit was payable on the making of the contract, with the remainder due on the earlier of the Completion Date (defined as 12 months after the contract was made) or the date the contract was actually completed.

(c) Completion did not occur on Completion Date and, in consideration of a number of extensions, the price was increased.

(d) The purchaser was unable to complete on any of the extended settlement dates.

(e) Three months after Completion Date, the vendors terminated the contract and later sold the land to a third party for a higher price again.

(f) The vendors sued the purchaser for the balance of the deposit.

29 White J concluded that the obligation to pay 'the balance of the deposit' was a penalty for the following reasons:

(a) Whether a payment is properly characterised as a deposit is not determined by its description in the contract.

(b) The essential character of a deposit is that it is an earnest for the performance of the contract.[37]

(c) The further deposit would not be payable on the completion date unless the purchaser failed to complete.[38]

30 The relevant circumstances of this case are as follows:

(a) The obligation to pay a further sum of 5% of the purchase price does not even purport to be by way of a deposit - with the words in cl 28.4, being 'the deposit up to', having been deleted.

(b) The further sum of 5% was only payable '[i]f the contract ends by a default notice given by the vendor'.

31 In my opinion, the obligation in cl 28.4 to pay further sum of 5% of the price is void as a penalty for the following reasons:

(a) In the circumstances set out in [30] above, each of the cases referred to in [15]-[29] above are authority for the proposition that the obligation to pay the further sum is void as a penalty.

(b) I do not consider that the force of these authorities are affected by the High Court's decision in Paciocco.[39] In my opinion, the circumstances of this case lead to the position, described by the Court of Appeal, in Melbourne Linh Son Buddhist Society Inc v Gippsreal Ltd, as:

[t]he irresistible inference that arises from [the] evidence and the inherent circumstances of the ... transaction is that the [payment is to be made] in order to punish the [breaching party] for the inconvenience its conduct caused to the [innocent party] ... rather than to protect any legitimate commercial interest of the [innocent party] arising from a breach ... by the [breaching party].[40]

(c) The anomalous position of deposits in the law of penalties (as described above) protects them, in most circumstances, from invalidity despite the fact that usually a deposit is not a liquidated damages clause, which is the 'contrasting concept' to a penalty.[41] The significant difference between the provisions with respect to deposits and liquidated damages is as follows:

(i) As in this case, on the purchaser's breach, a vendor is not limited to recovering the amount of the deposit; but may recover any deficiency on resale (after taking into account the forfeited deposit). Accordingly, the vendor can forfeit the deposit as a minimum sum even if, as in this case, it makes a profit on the resale.

(ii) Liquidated damages 'is a sum fixed by the parties to a contract as a genuine pre-estimate of damage in the event of breach'.[42] As is explained in McGregor on Damages:

In most cases where the plaintiff has recovered his liquidated damages the stipulated sum has been greater than the actual, or at least the provable, damage. However, just as this cannot diminish his damages, so he cannot increase them by ignoring the liquidated damages clause in the rare case where the actual damage is demonstrably greater than the stipulated sum, a situation most likely to arise where one sum is stipulated to be paid on a number of varying, yet uncertain breaches, and the most serious breach is the one which occurs.[43]

I should not be taken as saying that simply because cl 28.4 is not a liquidated damages clause, it is a penalty, because '[p]enalties are not encountered exclusively in appositions with liquidated damages'.[44] As the law of penalties looks to the substance and not the form of the transaction,[45] it may apply to collateral obligations other than liquidated damages clauses.[46] However, the distinguishing feature of cl 28.4 is that it imposes an obligation to pay, but does not limit the Vendor's right to claim damages to the extent that they exceed that payment.

32 Accordingly, I find that, in the present circumstances, cl 28.4(a) of the contract, imposes an unenforceable penalty; and I will give judgment for the Purchaser on the Vendor's counterclaim.

33 Left unanswered in Simcevski v Dixon [No 1][47] was an issue between the parties which was expressed by agreement as a question in the following terms:

If the purchaser was not entitled to make the investigations, is the purchaser entitled to an order under s 49(2) of the Property Law Act 1958 that the vendor repay the deposit?

34 It is now necessary to determine whether the Purchaser is entitled to an order for the return of his deposit pursuant to s 49(2) of the Property Law Act 1958 which provides:

Where the Court refuses to grant specific performance of a contract, or in any action for the return of a deposit, the Court may, if it thinks fit, order the repayment of any deposit.

35 The Purchaser submitted that the Court should exercise its statutory discretion to grant relief against forfeiture of the deposit to the Vendor.

36 The Purchaser relies on the decision of Gillard J in Poort v Development Underwriting (Victoria) Pty Ltd[48] and submits that the Court should exercise its discretion and order that the deposit be repaid to the Purchaser.

37 The Purchaser submitted that exceptional circumstances exist in the present case for various reasons which can be summarised as follows:

(a) The Purchaser had proposed to build a multi-storey development with a basement below ground level on the site, in circumstances where the site had previously been used as a petrol station and therefore had an associated risk that the soil may be contaminated.

(b) The Vendor sought to sell the property assigning all risks pertaining to the contamination of the soil to the Purchaser; and the Purchaser expected that he would be entitled to make his 'own investigations and enquiries as to any Contamination'.

(c) Upon being asked to permit the investigation by boreholes, which the Purchaser did not intend to undertake until being required to do so for the valuation that was to be provided for financing, the vendor sought to change the agreement to require a further instalment of the purchase price.

(d) The Vendor ultimately undertook the same investigations as those proposed by the Purchaser shortly after the contract was terminated; and there is no evidence that carrying out the investigation caused any structural or other loss or damage.

(e) The Vendors suffered no loss from the Purchaser's failure to settle; but instead made a windfall gain of $1,100,000 when the property was sold in October 2016 for $4,600,000.

38 The Vendor notes that he acted in accordance with the terms of the contract and the contract was validly terminated after the Purchaser's breach. The ordinary contractual right is for the Vendor to retain the deposit in the circumstances and it is for the Purchaser to show that it is unjust and inequitable for the Vendor to retain the deposit.

39 The Vendor submits that the deposit is only 5% of the purchase price, and is a reasonable sum.

40 The Vendor relies upon the various purposes of the payment of a deposit being:

(a) a security for the due performance of the contract;

(d) it creates, by fear of forfeiture, a motive in the payer to perform the rest of the contract; and

(e) damages to compensate the vendor in the event the contract is lost.

41 He agrees that exceptional circumstances are necessary for the Court to exercise its discretion under s 49(2) of the Property Law Act 1958, but submits that there are no such exceptional circumstances in this case. It is submitted that the Purchaser is an experienced developer, aware of the need to comply with the terms of the contract, and had about seven months to arrange finance, with a smaller than normal deposit paid.

42 The Vendor submits that he was not responsible for the Purchaser's failure to settle, and neither has he acted unconscionably - particularly in circumstances where the Vendor made an offer to permit the relevant investigations and extend the time for settlement to occur on terms that he submits were reasonable and appropriate. The rejection of that reasonable offer by the Purchaser does not make the Vendor's conduct unconscionable.

43 The Vendor further submits that a mere increase in value in the property will not constitute exceptional circumstances.[49]

44 Finally, the Vendor submits that the contract was unconditional as to finance, and the Purchaser has merely taken a commercial risk in signing such a contract without being sure that he had finance in advance, and that the foreseeable risk eventuated.

45 In response to the various matters identified by the Purchaser as making out exceptional circumstances, that Vendor contends that none of those matters individually or taken together would justify the exercise of the Court's discretion under s 49(2). He contends that some of those matters are irrelevant, and some are not of sufficient weight to satisfy the test.

46 A deposit is regarded as security for the due performance of the contract by the purchaser and historically the use of the word deposit implied that the sum was to forfeitable on breach of the purchaser.[50]

47 In the Review of the Property Law Act 1958, the Victorian Law Reform Commission, observed that:

Section 49(2) is directed to a problem that arose at equity. There were situations in which equity would not grant a seller specific performance of a contract due to a valid objection by the purchaser to the seller's title, but could not require the seller to return the deposit. Under section 49(2), the court can provide relief to a purchase in these situations or in any action for the return of a deposit.[51]

48 Section 49(2) in the Property Law Act 1958 ('the Victorian Act') drew from the Property Law Act 1925 (UK) ('the UK Act').[52] The equivalent New South Wales legislation, s 55(2A) of the Conveyancing Act 1919 (NSW) ('the NSW Act'), has similar parentage.[53] Each of these Acts contains substantially the same form of words granting a discretion to the Court.

49 For the purposes of determining the principles to be applied in the exercise of the discretion under s 49(2) of the Victorian Act, it is necessary to compare the different approaches that have developed to the equivalent subsections in the United Kingdom and New South Wales.

50 The narrow construction of the subsection is that the discretion would only respond to the perceived unfairness where equity refused the vendor specific performance because the purchaser had a valid objection to title.[54]

51 The narrow construction was so applied in Charles Hunt Ltd v Palmer, shortly after the enactment of the UK Act.[55] In that case, the facts were as follows:

(a) The particulars of sale of a premises, consisting of shops, described the land as 'Valuable business premises'.

(b) The purchaser bought the land at auction; but later learned that leases, under which the properties were held, were subject to covenants prohibiting any trade other than ladies' outfitter, fancy draper or manufacturer of ladies clothing being carried out on the premises.

Clauson J held that the description was misleading and refused to order specific performance. His Honour concluded without detailed analysis that the deposit should be returned under s 49(2) of the UK Act.[56]

52 Similarly, in the UK case of James Macara Ltd v Barclay,[57] the facts were as follows:

(a) After entering into a contract of sale of a property, the vendor received notice that the property was to be requisitioned for war purposes before settlement.

(b) After the vendor notified of the requisition, the purchaser rescinded the contract and sought return of the deposit under the subsection.

Vaisey J ordered that the deposit be returned because the vendor would not have been granted an order for specific performance of the contract, given his conduct.[58] On the construction of the subsection, Vaisey J said:

In my judgment the primary purpose of the provision was to remove the difficulty which had stood in the way of a purchaser who, though in a position successfully to resist specific performance in equity, was at law precluded from recovering his deposit.[59]

53 On appeal in James Macara Ltd v Barclay,[60] the Court held that the deposit could be recovered by the purchaser as the contract was rescindable at law for the reason that the vendors did not have vacant possession at the time for completion of the contract. The Court found it unnecessary to express an opinion about the breadth of the subsection stating:

That concludes the matter, for, whatever be the true construction of s. 49, sub-s. 2, of the Law of Property Act, 1925 - a matter on which we express no opinion - the jurisdiction of the court under that section cannot in the circumstances of this particular case be invoked to negative the legal right of the purchaser.[61]

54 In the Victorian case of Zsadony v Pizer,[62] Dean J rejected the narrow construction of s 49(2_)_ of the Victorian Act. The facts of the case were as follows:

(a) The vendor had purchased a house in 1949 not knowing that it had been declared unfit for human habitation by the Housing Commission in 1945.

(b) In 1951, the vendor, as vendor, and the purchasers, as purchasers, entered into a terms contract of sale (the first contract); and the purchasers paid the deposit of £300 and entered into possession but no transfer was executed.

(c) In 1953, the purchasers, now as vendors, entered into a terms contract of sale (the second contract) with a third party, who entered into possession.

(d) About a month after the third party took possession, the purchasers and the vendor became aware, for the first time, that the house had been declared unfit for human habitation; as a result of the third party discovering the fact.

(e) The purchasers sued for rescission of its contract with the vendor; and sought recovery of the deposit.

55 Dean J found that, as a result of their delay in seeking rescission, the purchasers were not entitled to rescind the first contract because they had accepted the title and were not able to restore the property free of the rights of the third party. However, his Honour found that the vendor was entitled to rescind based on the purchaser's default.[63]

56 After finding that the purchasers were not entitled to rescind, Dean J considered whether he should exercise his discretion under s 49(2). His Honour adopted a broader view of the subsection stating:

So far there are not any judicial limitations upon the exercise of this discretion, such as have overtaken other statutory enactments conferring a discretion. But, like any other discretion, it must be exercised upon relevant considerations having regard to the purposes for which it was conferred.

... The sub-section is quite general in terms and should not be given a restricted operation. In my opinion it gives the Court a discretion in every case where a purchase seeks to recover money paid by way of deposit under a contract of sale, a discretion which cannot be destroyed by the exercise by the vendor of his right to forfeit the deposit.[64]

57 After referring to Vaisey J's observations of the primary purpose of the subsection,[65] his Honour said:

I am not disposed to place upon the operation of the provision limitations not contained therein. I see no reason why it should not apply in every case where a purchaser claims the return of the deposit, whether or not the vendor could obtain specific performance. ... I can see no reason why the purchaser should get back the deposit where the vendor cannot obtain specific performance, but not recover it where the vendor rescinds the contract.[66]

58 Although he adopted a broader view, Dean J stated that 'the claim for the return of the deposit is not sufficiently established by relying on the vendor's lawful rescission';[67] and concluded that the discretion should not be exercised for the following reasons:

(a) The Housing Commission orders had not been enforced and it was not the policy of the Commission to enforce such orders.

(b) The purchasers' possession had not been disturbed and they had resold the property and thereby accepted title.

(c) The purchasers had delayed in bringing the proceedings.

(d) The purchasers had not offered to release the third party from its contract and had used the Housing Commission order as an excuse for not paying any further purchase price instalments.[68]

59 In the Victorian case of Re Hoobin,[69] O'Bryan J rejected the broad construction. The relevant facts were as follows:

(a) The vendor rescinded a terms contract of sale of hotel premises, which had provided for a purchase price of £60,500; and resold the hotel for £55,000.

(b) The purchasers, who had paid a deposit of £15,000 (which O'Bryan J found was not a penalty), sought recovery of £5,919, being the balance of the deposit after allowing for the shortfall on resale.

60 His Honour followed Vaisey J's construction in James Macara Ltd v Barclay,[70] observing that:

With great respect for the views expressed by Dean J, I would myself have thought that the context in s 49(2) and the fact that the section does not expressly give jurisdiction to order the return of part of a deposit support the narrower view of the section favoured by the text books and suggested by Vaisey J in James Macara Ltd v Barclay ... .[71]

61 Even on the broad interpretation of the discretion, O'Bryan J would not have exercised it because the purchaser's default was due to their inability to sell another property; and that was a known risk at the time of entering into the contract.[72]

62 In the Victorian case of Yammouni v Condidorio,[73] Monahan J accepted the broad interpretation in Zsadony v Pizer.[74] The relevant facts were as follows:

(a) In answers to requisitions on title, the vendors failed to disclose that the land was reserved for a main road although in substance they knew that it was.

(b) Each party purported to terminate the contract.

His Honour followed[75] the construction given to the section by the trial judge in Jones v Mallet[76] at first instance (later appealed, and discussed in the next paragraph) and rejected the narrow interpretation. His Honour ordered that the deposit be repaid, but he observed that he would not have ordered specific performance had the vendor sought it.

63 In the Victorian case of Mallet v Jones,[77] the purchasers sued the vendor in deceit for fraudulent representations which induced them to purchase the land. They had affirmed the contract after learning the truth about the condition of the land, but the vendor terminated the contract after default by the purchasers. The trial judge ordered the return of the deposit under s 49(2) before determining the quantum of damages in the deceit claim.

64 The Full Court was critical of this approach,[78] holding that the trial judge ought to have identified the rights at law of each party, before considering the question of s 49(2) of the Victorian Act. However, relevantly, the majority, Dean and Smith JJ, observed that it was possible that the words 'in any action for the return of a deposit' were inserted for the avoidance of doubt about returning a deposit where the common law already granted such a right, but held that:

... unless that view of their purpose is accepted [the words] cannot, it would seem, be limited to cases where the purchaser already had a right of action at law to recover his deposit.[79]

65 Their Honours had contrasted this view with the idea that the section was simply designed to counteract the harshness of decisions based on the narrow construction in cases such as Re Scott and Alvarez's Contract[80] and the question of whether the Court could order part of the deposit be returned. They stated:

We do not find it necessary to determine the proper construction of the section in these respects. In any event the matter is in the Court's discretion which, in most cases where the vendor had rescinded by reason of the purchaser's default, would probably not order the return of the deposit.[81]

[Purchasers] with knowledge of the falsity of the representations elected to affirm the contract. Thereby they were bound to perform it. They subsequently made default in performance whereby the vendor rescinded in accordance with the terms of contract. The respective rights of the parties in such an event are governed by the express terms of their agreement and it would require some exceptional circumstances to justify a departure from the agreed terms. There are no special circumstances here sufficient for this purpose.[82]

67 In general concurrence, Lowe J rejected the narrow construction and noted that 'the language seems to suggest that the Court is being given some power which it had not theretofore had'.[83]

68 In the New South Wales case of Lucas & Tait (Investments) Pty Ltd v Victoria Securities Ltd,[84] the relevant facts were as follows:

(a) The purchaser had bought land in the City of Sydney which was subject to a policy and practice adopted by the council of imposing rigorous conditions on development applications before development was approved.

(b) The purchaser was unaware of the detail of that policy or practice at the time of entering into the contract.

(c) The purchaser sought a declaration from the Court that the Court would refuse specific performance.

Street CJ in Eq refused the declaration and held that he would have ordered specific performance as the state of the evidence was not such that equity would act to protect the purchaser by refusing such a claim. This, however, did not mean that s 55(2A) of the NSW Act was inapplicable.

69 Street CJ in Eq surveyed the unreported decisions of the courts in New South Wales on the NSW Act and noted the difference of opinion in Victoria, observing that the position was then settled in Mallet v Jones.[85] Having accepted that the subsection conferred a broad discretion, he considered that the discretion 'was designed to provide relief to a purchase against an unjust and inequitable consequence of forfeiture of a deposit',[86] and would be exercised if it was 'just and equitable to deny to the vendor the enjoyment of a forfeited deposit'.[87] His Honour nevertheless refused to order that the deposit be returned because the practice of the council, of which the purchaser was unaware, did not of itself justify the purchaser in seeking repayment of the deposit from the vendor, holding that '[i]t is not unjust and inequitable for this vendor to insist upon the due performance of the contract and, in default thereof, to forfeit the deposit'.[88]

70 In the UK case of Schindler v Pigault,[89] the relevant facts were as follows:

(a) The sub-purchaser was unable to get access to the property, due to difficulties in the office the vendor's agent, until the day after the last day for completion, under the vendor's notice to complete.

(b) When the vendor refused to complete on that later day, the sub-purchaser withdrew and the purchaser was unable to complete.

(c) The purchaser sought rescission or return of the deposit.

Megarry J in the Chancery Division would have awarded the return of a deposit having regard to the facts of the case as a whole, but actually ordered rescission of the contract on request of the purchaser,[90] so it was unnecessary to consider s 49(2) of the UK Act further. Nonetheless, his Honour adopted the broad construction of the subsection observing:

[I]t appears, as one might expect, that the jurisdiction is discretionary, and that it is to be exercised where justice requires it,[91] but that it will not be exercised so as to deprive a purchaser of a deposit which he is legally entitled to recover.

...

I do not think that what is appropriate in relation to any alleged equity of restitution provides any reliable touchstone for the exercise of the statutory jurisdiction conferred by s 49(2). That jurisdiction is, I think, exercisable on wider grounds than that, including a general consideration of the conduct of the parties (and especially the applicant), the gravity of the matters in question and the amounts at stake ... its discretionary character ... makes it at least akin to equitable relief against forfeiture. A purchaser who does not claim rescission, or is unable to establish a sufficient case for it, may nevertheless recover his deposit by suing for its return and making out a proper case under the subsection.[92]

71 In the leading Victorian case of Poort,[93] the relevant facts were as follows:

(a) The purchaser was to pay the purchase price by:

(iii) the residue on the 18th month from the date of agreement.

(b) The purchaser paid the first five instalments late, but then stopped paying.

(c) The vendor gave notice after two further payments became due that the default must be remedied or the contract would be rescinded.

(d) The purchaser sought a declaration that the notice was null and void and that the contract remained on foot.

Gillard J held that the vendor's notice not only relied upon the terms of the contract to bring about the end of the contract, but that it constituted an acceptance of the purchaser's repudiation. His Honour then turned to the question of whether to order the return of the deposit paid.

72 His Honour adopted the approach of Dean and Smith JJ of the Full Court of the Supreme Court of Victoria in Mallet v Jones,[94] which he described as 'where a purchaser is in default and the contract provides for forfeiture of the deposit the court would require exceptional circumstances to justify departure from the agreed terms'.[95] His Honour identified that relevant considerations included, not only the terms of the contract, but also:

(b) whether the vendor can be adequately compensated, particularly having regard to:

(c) whether the amount of the deposit can be regarded as mutually fair and proportioned security for due performance by the purchaser.[96]

73 His Honour added that the subsection required the Court 'to be satisfied by a defaulting purchaser that an innocent vendor would not be injured by the exercise of its discretion'.[97]

74 His Honour was of the opinion that the purchaser had taken a high-handed attitude and that he had attempted to use his failure to pay, to renegotiate the terms of the instalments. He found there were no exceptional circumstances and refused to order that the deposit be repaid.[98]

75 The Full Court did not disturb Gillard J's conclusion on appeal but did not expressly adopt his reasons stating only as follows:

We can find nothing in the facts to suggest that the learned Judge's decision not to order a refund of the deposit was wrong. We uphold that decision and reject [the relevant] ground.[99]

76 In the UK Case of Cole v Rose,[100] in obiter, Mervyn Davies QC, sitting as a deputy judge of the High Court referred to Megarry J's observations in Schindler v Pigault[101] and observed

it seems that one can contemplate an order under s 49(2) only if there are some special circumstances in the particular matter, being circumstances that suggest that it is perhaps unfair or inequitable that the purchaser should lose his deposit.[102]

77 In the UK case of Universal Corporation v Five Ways Properties Ltd,[103] the Court of Appeal of England and Wales allowed an appeal against the order of the trial judge striking out a writ and statement of claim seeking return of a deposit under s 49(2) of the UK Act. In the opinion of Buckley LJ, the trial judge had construed the section too narrowly by asking himself, '... when can it be just and equitable to deprive the vendor of the whole of the moneys to which he is at law entitled?',[104] and subsequently considering that it would only be appropriate to make an order under s 49(2) where 'the vendor's conduct has been open to criticism in some way ... having some mark of equitable disfavour'.[105] Buckley LJ approved Megarry J in Schindler v Pigault[106] and took his use of the word 'justice' in a wide sense to indicate that 'repayment must be ordered in any circumstances which make this the fairest course between the two parties.'[107] Eveleigh LJ did not agree, holding that the question of the construction of the section was not plain and obvious, and that it was not appropriate to have struck out the claim where the point on construction was arguable.[108]

78 In the UK case of Dimsdale Developments (South East) Ltd v De Haan,[109] Godfrey QC, sitting as a deputy judge of the High Court, citing Universal Corporation v Five Ways Properties Ltd[110] stated that s 49(2) of the UK Act 'is expressed in general and unambiguous terms which are apt to confer a discretion on the court exercisable in any action for the return of a deposit'.[111] The judge found that the vendor had been entitled to terminate; but, on the question of the return of the deposit, held that it was appropriate to return the deposit because the vendors had made a substantial profit on the resale (subject to deduction for the extra expense incurred by the vendors flowing from the purchasers' breach).

79 In the Victorian case of Kadissi v Jankovic,[112] Crockett J found that the purchasers were not entitled to avoid the contract on the basis of building defects because there had been no fraudulent concealment or misrepresentation by the vendor. Crockett J did not deal with the issue of the return of the deposit under s 49(2) of the Victorian Act but commented that 'the better view in Victoria would appear to be that a wide view of the construction of the section should be adopted'.[113]

80 In the Victorian case of Buckley v Drk,[114] Teague J rejected the purchasers' claims for return of the deposit on the basis that they were entitled to rescind the contract on the basis that the fences did not align with the title boundaries of the property. On the alternative claim under s 49(2) of the Victorian Act, his Honour identified the dispute between the Victorian authorities, but observed that '[t]he broader view appears to have won support, if not conclusive endorsement'.[115] Both parties accepted that appropriate test was set out by Gillard J in Poort[116] which he said was 'that to justify the exercise of the discretion, a defaulting purchaser must show exceptional circumstances and that an innocent vendor would not be injured by the exercise of the discretion'.[117] The judge refused to order the return of the deposit under s 49(2) because he was not satisfied that there were exceptional circumstances.

81 Although overlooked in some of the later decisions, the decision of the Privy Council in Bidaisee v Sampath,[118] considered s 7(2) of the Conveyancing and Law of Property Ordinance of Trinidad and Tobago, which was in similar terms as the Victorian, NSW and UK Acts. The vendor terminated a contract to sell his half share in agricultural land for $2 million, after the purchaser failed to complete; and the vendor sold to a third party for $2.5 million. The purchasers claim for specific performance was dismissed but on the alternative claim under the presently relevant section, Lord Nicholls of Birkenhead, speaking for the Board, noted:

Under this subsection, which corresponds to section 49(2) of the (English) Law of Property Act 1925, the court has a wide discretion. Here, the gain afforded to the [vendor] by retention of the deposit is more than offset by the amount of interest, some $250,000, he would have received had the sale been completed in March 1979. Even so, and having regard to the price of the resale to the [third party purchaser], he did not suffer a loss. This, of itself and without more, is not a sufficient reason for the court to exercise its discretion in favour of a defaulting buyer. The traditional deposit paid by a buyer when he enters into a contract is an earnest for the performance of the contract, and can be retained by the seller if the buyer defaults. Equity did not regard this as a penalty against which it granted relief. Section 49(2) has never been understood as intended to overrule this principle, and it should not be so interpreted or applied.

So the search is for something more. In the present case the money spent by the [purchaser] on work done in connection with the land does not qualify under this head, for the lack of evidence of the effect of such expenditure on the value of the land. Nor does the [vendor's] profit on reselling at a higher price to the [third party purchaser]. In the first place, against the uplift of $500,000 in the price must be set the loss of interest already mentioned. Secondly, and more generally, their Lordships simply do not know the reason for the higher price. This may have been due to movements in land prices generally. Once again, their Lordships are being asked to speculate. This is not a proper basis on which the court should exercise its discretion.[119]

82 In the Victorian case of Mahred Nominees Pty Ltd v Tulloch,[120] Byrne J accepted the parties' submissions that exceptional circumstances must apply to exercise the discretion under the section. His Honour refused to exercise the discretion because the vendor had lawfully terminated the contract on the purchaser's inability to pay the remainder of the deposit due and there were no exceptional circumstances.

83 In the Victorian case of Bantick v Boss Properties Pty Ltd,[121] the purchaser refused to complete on the basis of what was alleged to be a breach of an essential term by the vendor; and the vendor purported to accept the purchaser's repudiation. The purchaser sued for the return of his deposit and succeeded given the breach of the vendor was held to be of an essential term, and so was entitled to the return of the deposit. In the result, the purchaser's alternative claim under s 49(2) became moot. Nonetheless, W Gillard J observed that the subsection 'was designed to provide relief to a defaulting party to recover the deposit forfeited in circumstances where it would be fair and equitable to do so' and referred to the decisions of Mallet v Jones[122] and the decision of O Gillard J in Poort.[123] However, his Honour said that, but for finding the breach of an essential term, he would have refused to exercise the discretion because, on that assumption, 'there would be no exceptional circumstances to ignore the terms of the contract'.[124]

84 In the UK case of Omar v El-Wakil,[125] two contracts were in issue. The first contract was to sell the purchaser's business interests to a company controlled by the vendor for £110,000. The second contract was to sell the vendor's land to the purchaser, with a deposit for the same sum. The parties treated payment under the business contract as the deposit paid under the land contract. When the land contract was not completed, the purchaser sued for the return of the deposit. The trial judge refused to order it returned because he considered that no deposit had been paid. Their Honours disagreed with this analysis, holding that a deposit had been paid, but did not order a payment for the return of the deposit because the purchaser was unable to claim return of the deposit when both parties had been in default.

85 After reviewing the English authorities, Arden LJ (with whom Pill LJ and Phillips MR agreed) said:

The starting point must be that although s 49(2) is expressed in open-textured terms leaving it to the courts to determine the organising principles, the court must bear in mind that the payment in question was a 'deposit', that is an earnest for performance and that accordingly there should not be relief simply because [completion of the] contract never took place. ... The context here is of a conveyancing transaction. It is common knowledge that if a purchaser pays a deposit, he is likely to forfeit it if he does not fulfil the contract. ... It is important that there should be certainty attaching to the consequences of paying a deposit.[126]

86 Accordingly, her Honour said that she 'would start from the position that the deposit should not normally be ordered to be repaid'; and that 'in a situation where a purchaser could not himself perform, the circumstances which make it appropriate for the court to exercise its discretion under s 49(2) in his favour must be exceptional'.[127]

87 In Romanos v Pentagold Investments Pty Ltd,[128] the NSW Act was applied to return the deposit at first instance. The vendor had terminated the contract when the balance of deposit was not paid on the development consent being granted. The trial judge refused the purchaser's claim for specific performance and relief against forfeiture; but ordered that the deposit be repaid without giving specific reasons.[129] The Court of Appeal allowed an appeal and ordered specific performance. The High Court reversed the Court of Appeal on the ground that the contract did not require notice be given before termination and that relief against forfeiture was not made out, and set aside the order for the repayment of the deposit. The plurality stated:

Windeyer J erred in the exercise of his discretion under s 55(2A) of the Conveyancing Act in ordering the return of the deposit where evidence was insufficient to show that it would be unjust or inequitable to allow the vendors to retain the total sum of $50,000 paid as deposits under the contracts for sale. There should be a declaration that that sum of $50,000 is forfeited to the appellants.[130]

Their Honours adopted, without discussion, the language of the approach of Street CJ in Eq in Lucas & Tait.[131]

88 In the Victorian case of Maniaty v Fenedisto Pty Ltd,[132] the purchaser took possession of the subject land before settlement. The vendor purported to terminate on the basis that the purchaser had refused to pay interest on the conveyance in equity from the date of occupation until the date of settlement.[133] Byrne J accepted that the vendor was entitled to terminate and refused relief against forfeiture of the deposit on the basis that the vendor had been put to trouble and expenses by the conduct of the purchaser being that:

(a) the vendor no longer had a new unit to sell; and

(b) the purchaser had refused to agree to the vendor letting the unit for many months.[134]

89 In Tennaro Ltd v Majorarch Ltd,[135] Neuberger J considered a purchaser's claims for the return of deposits after purporting to terminate three contracts for long-term leases of flats, and alternatively, under s 49(2) of the UK Act. Neuberger J found that the purchaser had not been entitled to terminate; but ordered the return of two of the three deposits paid subject to the assessment of the vendor's damages.

90 In considering the claims under the subsection, his Honour commented on the decision of Mr Gerald Godfrey QC in Dimsdale[136] in the following terms:

As I understand it, he considered that the fact that the Seller had sold the property at a substantially higher price that it would have received under the contract with the defaulting Buyer, was the crucial factor which justified the return of the deposit. However, it is right to add that he made deductions from the deposit, in favour of the Seller, in relation to expenditure wasted by the Seller under the abortive contract.[137]

91 His Honour substantially based his decisions on the values of the flats as follows:

(a) Refusing an order for return of the deposit on the first flat because, between the date of contract and trial, its value had fallen from £4,400,000 to £3,600,000.

(b) Subject to the assessment of the vendor's damages, ordering the return of the deposits for the other two, in respect of which:

(i) the contract price for one had been £841,259; and a third party had offered, after termination, to pay £1,100,000; and

(ii) the purchaser offered, after termination, to continue with the purchase of the other at the contract price.[138]

92 In Aussie Invest Corporation v Pulcesia Pty Ltd,[139] Dodds-Streeton J considered an application for return of the deposit after the vendor had terminated for the purchaser's failure to complete. The purchaser's financier had been asked to leave the vendor's solicitors officers at 6:00 pm on the last day for settlement, in circumstances where the financier was waiting for approval of the purchaser's board of directors. The approval came through shortly thereafter.

93 Dodds-Streeton J held that, although the discretion conferred by s 49(2) was

unfettered, the exercise of the discretion is 'the exception rather than the rule' and would not be justified merely because the vendor will obtain a windfall.[140]

94 Her Honour refused the application on the basis that:

(a) the vendor 'was neither responsible for the purchaser's breach nor otherwise guilty of unconscionable conduct'; and

(b) the purchaser, a developer, had not 'established exceptional circumstances or any other ground' which warranted a favourable exercise of the discretion.[141]

95 In the New South Wales case of Harkins v Butcher,[142] the purchasers who bought a property relying on an incorrect survey report and diagram, proffered by the real estate agent, failed to recover damages for innocent misrepresentation or misleading and deceptive conduct.[143] However, the Court of Appeal ordered the return of the deposit under s 55(2A) of the NSW Act.

96 The purchasers claimed damages for fraud relying on a misrepresentation in a diagram, which showed the swimming pool on the land wholly within the freehold estate, when in fact the boundary bisected the pool. The trial judge found the misrepresentation to be innocent, rather than fraudulent. The purchasers did not rescind the contract, but affirmed. They then failed to pay the balance of the deposit on time, and so the vendors terminated. The trial judge dismissed the claims for damages for fraud and breach of s 52 of the Trade Practices Act 1974 (Cth) against the vendors and the vendor's real estate agents, but ordered that the deposit be repaid. The vendor appealed the finding of misrepresentation and the order that the deposit be repaid. The appeal against those conclusions was dismissed.[144]

97 The vendor submitted that, as the vendor had a right to damages for breach after the purchaser had affirmed the contract, the judge erred in ordering that the deposit be repaid.[145] Handley JA (with whom Beazley and Hodgson JJA agreed) concluded that the election to affirm and the existence of a claim for damages was not a bar to the exercise of the discretion under s 55(2A) of the NSW Act and dismissed the appeal against the trial judge's decision that the deposit be repaid. In particular, his Honour noted the following:

(a) The trial judge had observed that 'it would be extremely harsh on the purchasers, given my findings as to the importance to them of the proposal to relocate the swimming pool to hold that they have forfeited the deposit'.[146]

(b) The vendor had resold the property for $10,000 more than the purchase price and 'did not suffer a capital loss'.[147]

(c) If the vendor retained the 10% deposit 'he would enjoy a substantial windfall'.[148]

98 In the course of his Honour's analysis, he referred to the requirement for exceptional circumstances, in Poort,[149] as being 'out of step with the views of the Court of Appeal in Universal Corporation v Five Ways Properties Ltd, the views of Dean J in Zsadony v Pizer and the settled approach in this State'.[150] He did not identify the 'settled approach' in New South Wales; but I infer that it was a reference to either or both of the tests espoused:

(a) by Buckley LJ in Universal Corporation v Five Ways Properties being 'where the justice of case requires ... in a wide sense indicating that repayment must be ordered in any circumstances which make it the fairest course between the two parties';[151] and

(b) by Street CJ in Eq in Lucas & Tait, being 'where it was just and equitable to deny the vendor the enjoyment of a forfeited deposit'.[152]

99 In Havyn Pty Ltd v Webster,[153] the New South Wales Court of Appeal approved the conclusion of the trial judge to order the return of a deposit under s 55(2A) of the NSW Act, but for different reasons than those given by him. In circumstances superficially similar to Harkins v Butcher,[154] the sales brochure of the vendor's real estate agent contained an error. The purchaser failed to complete, being unable to secure finance; and the vendor terminated the contract. The purchaser claimed repayment of the deposit and damages for misrepresentation at common law and under s 42 of the Fair Trading Act 1987 (NSW). The trial judge found that there was no misrepresentation; but ordered that the deposit be repaid.

100 The Court of Appeal overturned the finding on misrepresentation, but upheld the order returning the deposit on different grounds.[155]

101 Relevantly, with respect to the test to be applied under s 55(2A) of the NSW Act, Santow JA expressed doubts[156] about the breadth of the dictum of Buckley LJ in Universal Corporation v Five Ways Properties Ltd (concerning 'justice of the case').[157] His Honour engaged in a far-ranging review of the New South Wales, English and Victorian authorities on the relevant subsection, and relevantly observed that

the concept of exceptional or special circumstances is [not] irrelevant to the proper understanding of the boundaries of the discretion ... a proper approach to the exercise of the discretion must appreciate the legal context of the established nature of a 'deposit' as an earnest of performance. It is the relevance of that context to the exercise of the statutory discretion which is denoted by the concept of special or exceptional circumstances.[158]

For these reasons, I do not consider that there is anything controversial in the submission of the vendor that the grounds in support of an application to repay the deposit must be sufficient to warrant a departure from holding the purchaser to its obligations under the contract. Indeed, this goes to the 'justice and equity' of the case, drawing on the observations of Street CJ in Eq in Lucas & Tait. That conclusion must be correct, if the notions of justice and equity conditioning the discretion are to have some meaning drawn from the purpose of a deposit and the circumstances in which it is forfeited. The purchaser must therefore do more than merely show that the deposit has been forfeited, and that it will thus result in a 'windfall' to the vendor as will usually be the case. The court should not take an approach to ordering the return of deposits under s 55(2A) which weakens the proper function of a deposit in providing a sanction so that purchasers treat the making and completing of contracts with due seriousness. In so saying, I am not to be understood as putting a gloss upon the plain words of s 55(2A), but merely highlighting the critical importance of a judge exercising the discretion according to its plainly beneficial purpose to consider 'justice' and 'fairness' in their proper context.[159]

102 His Honour finally summarised his conclusions as follows:

(a) Section 55(2A) confers upon the court a statutory jurisdiction to return forfeited deposits which was not previously available either at common law or in equity. Therefore, it would be wrong to seek to confine the jurisdiction conferred by the words of the statute by analogy with the jurisdiction of common law and equity to relieve against penalties or forfeiture.

(b) Notwithstanding this, it is important for a court in considering the scope of the discretion conferred by s 55(2A) to bear in mind that a deposit is an earnest of performance. That fact forms part of the context in which the discretion falls to be exercised, and means that a court will not lightly be moved to order the return of a deposit paid as an earnest of performance, and forfeited in accordance with the express terms of the contract when performance does not occur.

(c) That context is significant when considering the justice and equity of the case, and whether the court 'sees fit' to order the deposit to be returned. It does not involve putting a gloss on the words of the statute requiring the applicant to show 'special circumstances' (or satisfy any like test) before a deposit will be returned.

(d) In particular, this principle mandates against characterising a forfeited deposit as a windfall to the vendor, merely because it is forfeited.

(e) In considering an application under s 55(2A), it will often be material for the court to consider a number of factors, including (though not exhaustively) the nature of a deposit, the terms of the contract providing for its forfeiture and the circumstances in which the deposit was forfeited.[160]

103 In the NSW case of Mulkearns v Chandos Developments Pty Ltd [No 4],[161] the purchasers went into occupation before settlement. They expended money on refurbishments, but were unable to settle. The vendor then terminated the contract. The purchasers sought specific performance, but that was refused (enlivening the first limb of s 55(2A) of the NSW Act).

104 In rejecting the application under the subsection, Young CJ in Eq identified the following principles:

(a) The return of the deposit is the exception rather than the rule.

(b) The mere fact that the vendor now has a property worth much more than when the contract was terminated is not of itself sufficient reason to return the deposit.

(c) Great weight is to be given to the basal purpose of deposits under contracts for the sale of land.[162]

105 Midill (97PL) Ltd v Park Lane Estates Ltd appears to be the most recent considered decision of the subsection in the United Kingdom.[163] The relevant facts were as follows:

(a) The purchaser and the vendor entered into a contract of sale of a property for a purchase price of £4,000,000.

(b) The purchaser paid a deposit (in two instalments) of £1,200,000.

(c) After the purchaser failed to pay the balance on the settlement date the vendor rescinded; and resold the property for £4,300,000.

(d) The trial judge declined to exercise his discretion to order the return of the deposit; and the Court of Appeal dismissed the appeal.

106 Carnwath LJ (Maurice Kay LJ and Keene LJ agreeing) doubted the decision in Dimsdale,[164] stating that the trial judge was entitled to find that it was not enough that the vendor sold at a higher price.[165] He considered that the Court ought to follow the reasoning of Arden LJ in Omar v El-Wakil.[166] Carnwath LJ made the following observations:

Buckley LJ's comments, though of course entitled to great respect, are not binding on us, for the reasons given by Arden LJ. Furthermore, they need to be read in the context of the case before him. He was concerned principally to rebut the very narrow line taken by [the trial judge], which required some 'trickiness' or the like by the vendor. Similarly, Megarry J's observations[167] on the width of the discretion, whatever their precise intention, must be read as a response to the vendor's argument that the section only applied where there had been 'unconscionable' conduct.

The critical point, on which Arden LJ echoed Lord Nicholls, is that the deposit is 'an earnest for the performance of the contract', which can be retained by the seller if the buyer defaults, without any necessary regard to the question of actual loss or its amount. That principle, as the Privy Council made clear, is not 'overruled' by section 49(2). There needs to be 'something more'; or, as other judges have said, something special or exceptional to justify overriding the ordinary contractual expectations of the parties. [168]

107 In the Victorian case of Lockwood v PSP Investments Pty Ltd,[169] the purchaser bought apartments off the plan before registration of the plan of subdivision. There were separate contracts for four apartments and four car parks. The vendor then changed the proposed subdivision and the car parks were lost. The purchaser rescinded the contract and sought the return of their deposit under s 9AC of the Sale of Land Act 1962. Judd J ordered the return of the deposit under that section. His Honour said that he would also have granted the return of deposit under s 49(2) as the vendor had changed the plans on the purchasers, satisfying the requirement of exceptional circumstances had there been no right to the return of a deposit under s 9AC of the Sale of Land Act 1962.[170]

108 Most recently in Victoria, in Putt v Perfect Builders Pty Ltd,[171] Williams J dismissed a claim by the purchasers for return of a deposit under the terms of the contract on the basis that they were entitled to terminate under a 'subject to finance clause' after they were unable to obtain finance.

109 Turning to the alternative claim under s 49(2) of the Victorian Act, Williams J observed:

The discretion under s 49(2) allows the Court to do justice between the parties. Gillard J in [Poort] held that exceptional circumstances must be shown to justify such an outcome where the contract provides for the forfeiture of the deposit and the purchaser must establish that an innocent party would not be hurt by the exercise of the discretion.[172]

Her Honour found that there was no evidence of exceptional circumstances or that the innocent vendor would not be hurt by the exercise of the discretion.

110 In the New South Wales case of Sydney Developments Pty Limited v Perry Properties Pty Limited,[173] Darke J dismissed a claim by the purchaser for return of a deposit after finding that the vendor was entitled to terminate for failing to pay the second of two equal instalments of a 20% deposit in accordance with the contract. The purchaser submitted that it would be unjust and inequitable to permit the vendor to retain the first deposit because the vendor acted harshly and unfairly in rejecting the purchaser's requests for an extension of the time. Darke J adopted the principles set out by Santow JA in Havyn Pty Limited v Webster[174] and noted that:

(a) although the vendor had required strict compliance with the contractual terms, it was entitled to do so; and

(b) the purchaser was a developer, who had not been obliged to spend money in preparation of the development.

Accordingly, 'taking into account the nature of the payment as an earnest of performance and the important role that such payments play in transactions of this kind',[175] he rejected the application.

111 In the New South Wales case of 5 Ridge Pty Ltd v Tryname Pty Ltd,[176] Pembroke J considered an application under s 55(2A) of the NSW Act in the following circumstances:

(a) The purchaser entered into a contract of sale with respect to a commercial property after representations by the vendor 'that absent the exercise of the relevant retail options, the deposit would not only not be released to the defendant, but that the contract would not be required to be completed'.[177]

(b) After a critical tenant did not exercise its option to extend the lease, the vendor purported to terminate the contract of sale for non-completion.

His Honour found that the purchaser was entitled to repayment of the deposit because of the misrepresentation. He considered that the discretion was broad and it could be exercised to order the return of the deposit to a purchaser in circumstances where the contract of sale has been terminated for the purchaser's repudiation.[178]

112 In the most recent case in New South Wales of Rushcutters Bay Developments Pty Ltd v Dragon Asset Investment Pty Ltd [No 2],[179] Darke J considered an application under s 55(2A) of the NSW Act in the following circumstances:

(a) The contract of sale related to four lots on a strata plan for $16 million with a deposit of $1.6 million.

(b) By variations to the contract there were extensions to the settlement date and it was agreed that the sale would proceed in two stages A deposit of $2,637,500, for the second stage, was payable in three instalments. The first instalment of $325,000 was paid; but the vendor terminated for non-payment of the second and third instalments.

(c) The vendor sued for the balance of the deposit and the purchaser resisted on various grounds including s 55(2A) of the NSW Act.

113 His Honour found that under the terms of the contract the vendor was restricted to recovering a deposit of 10% of the purchase price.[180] With respect to the claim under s 55(2A) of the NSW Act, he rejected the purchaser's contention that the vendor's conduct had been misleading;[181] and, although it was likely that the vendor would end up better off than if the purchaser had completed, in all the circumstances he did not consider it was unjust or inequitable for the vendor to recover up to a deposit of 10% of the purchase price.

114 His Honour did say that '[d]ifferent considerations would have arisen had the contract allowed the vendor to keep or recover the whole of the stipulated deposit, being an amount approaching 21% of the price'.[182]

115 With respect to the principles to be applied, his Honour adopted the approach taken by Santow in Havyn v Webster.[183] He also observed that it was not necessary to demonstrate special or exceptional circumstances;[184] citing the statement from Santow JA that 'it is not a precondition to the jurisdiction of the court to make orders under s 55A(2A) for the applicant to establish special circumstances'.[185]

116 The above review of the authorities in Victoria, New South Wales and the United Kingdom reveals that, over the years, there have been different approaches adopted to the application of the subsection. However, as the relevant principles to be applied, in exercising the discretion in the United Kingdom and New South Wales, are currently as espoused by Carnwath LJ in Midill (97PL) Ltd v Park Lane Estates Ltd[186] and Santow JA in Havyn Pty Limited v Webster,[187] I do not consider that there is now any real difference between the approach to the subsection in those jurisdictions and Victoria.

117 In my opinion, I consider that the following principles can be distilled.

118 The discretion under s 49(2) of the Victorian Act is broad; but it must be exercised judicially and conditioned by what is just and equitable in the circumstances of the case.

119 It is not a precondition to the exercise of the discretion that exceptional circumstances be established; but the exercise of the discretion must be conditioned by the recognition of the critical function of the deposit.

(b) the vendor is contractually entitled to forfeit the deposit;

the Court will have regard to the purpose of the deposit being in earnest of performance. In this context, it 'requires some exceptional circumstances to justify a departure from the agreed terms'.[188] In my opinion, any difference between this approach and a requirement that the purchaser must establish 'grounds in support of an application to repay the deposit ... sufficient to warrant a departure from holding the purchaser to its obligations under the contract'[189] to be more apparent than real.[190]

121 In addition to the rights under the contract, matters that may be taken into account, in determining whether the exercise of the discretion is just and equitable in the circumstances, include the following:

(a) Whether the amount of the deposit can be regarded as mutually fair and proportioned security for due performance by the purchaser.[191]

(b) Whether the cause of the termination was the result of any of the following:

(i) The conduct of the vendor;[192] although requirement for strict compliance with the terms of the contract is not, of itself, a basis for exercising the discretion.[193]

(ii) The conduct or neglect of the purchaser.[194]

(iii) The ordinary risks in conveyancing transactions.[195]

(iv) External factors, such as another statute or other rights, have intervened in some way in the land or its use, particularly in between signing the contract and the date for settlement.[196]

(c) Whether, as a consequence of the termination, the vendor will suffer damage; or whether the vendor can be adequately compensated.[197] However, the fact that the vendor may make a profit, even a substantial profit, on the resale or otherwise is not, of itself, a basis for exercising the discretion.[198]

122 In this case, I am not satisfied that exceptional circumstances exist such that I should order that the deposit be repaid for the following reasons:

(a) The deposit 'can be regarded as a mutually fair and reasonably proportioned security for due performance by the purchaser'.

(b) The Purchaser signed a contract that was unconditional as to finance and that provided for the forfeiture of the deposit on breach.

(c) The risk of the pollution to the land was known at the time of entry into the contract, and was acknowledged by the Purchaser in a special condition of the contract.

(d) The Purchaser has failed to establish that a right to conduct the subterranean investigations was a part of the contract on its true construction.

(e) The Vendor did not breach any obligation of good faith imposed on him in refusing to permit the subterranean investigations.

(f) It was reasonable for the Vendor to assert his right to refuse the subterranean investigations in the circumstances referred to in Simcevski v Dixon [No 1]; and, in fact, the Vendor made a reasonable offer to permit the subterranean investigations on additional terms.[199]

(g) I am not satisfied that the failure to permit the subterranean investigations substantially impaired any chance the Purchaser had to settle the purchase in any event.[200]

(i) his inactivity in taking steps to obtain finance for the purchase between 21 January 2016 and 23 February 2016; or

(ii) why the Purchaser did not take steps to obtain his own valuation of the property earlier in 2016, knowing that the settlement date was approaching and that a valuation would be necessary to obtain finance.[201]

(i) The 'windfall', notwithstanding its size, is not of itself a sufficient reason to exercise the discretion, particularly in this case with the extensive time delay between the settlement date under the contract currently in issue and the resale date.[202]

123 In my opinion, in this case the Purchaser made unreasonable demands of the Vendor to interfere with his property rights without contractual justification and was consequently unable to settle the purchase of the property as finance had not been obtained. There are no exceptional circumstances within the meaning given to that expression by the authorities that would justify ordering repayment of the deposit.

124 Accordingly, I will not order that the deposit be repaid.

125 In the result, both parties have failed to obtain the orders that they sought. I will give judgment for the Purchaser on the Vendor's counterclaim and judgment for the Vendor on the Purchaser's claim.

[1] [2017] VSC 197, which should be read together with these reasons.

[2] Dated 24 April 2017 (Purchaser's further submissions) and 2 May 2017 (Vendor's further submissions).

[3] See Mallet v Jones [1959] VicRp 21; [1959] VR 122, 126.

[4] Centrepoint Custodians Pty Ltd v Lidgerwod Investments Pty Ltd [1990] VicRp 36; [1990] VR 411, 422; and Esso Australia Ltd v Australian Petroleum Agents' & Distributors' Association [1999] 3 VR 642, 647.

[5] (2016) 258 CLR 525 ('Paciocco').

[6] Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd [1914] UKHL 1; [1915] AC 79.

[7] Paciocco (2016) 258 CLR 525, 547 [29].

[10] [2006] NSWCA 40; (2006) 12 BPR 23,629 (Handley and McColl JJA agreeing).

[13] Unlike in Portbury Developments Co Pty Ltd v Ottedin Investments Pty Ltd [2014] VSC 57 [155], where Garde J adverted to the potential of this argument.

[14] Bot v Ristevski [1981] VicRp 13; [1981] VR 120.

[15] See, eg, Romanos v Pentagold Investments Pty Ltd [2003] HCA 58; (2003) 217 CLR 367, 371 [5], 374 [20].

[16] [1993] AC 573.

[18] (2016) 18 BPR 36,353, 36,360 [29].

[19] [2012] HCA 30; (2012) 247 CLR 205.

[20] (2016) 258 CLR 525.

[21] [2017] VSCA 161 [171]-[174] (citations omitted).

[22] [2006] NSWCA 40; (2006) 12 BPR 23,629 (Handley, McColl and Bryson JJA).

[23] Luu v Sovereign Developments Pty Ltd [2006] NSWCA 40; (2006) 12 BPR 23,629, 23,634 [24].

[26] Ibid 23,636-7 [31]. Lord Dunedin's second category is 'The essence of a penalty is a payment of money stipulated as in terrorem of the offending party; the essence of liquidated damages is a genuine covenanted pre-estimate of damage': Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd [1914] UKHL 1; [1915] AC 79, 86.

[27] [2007] NSWCA 61; (2007) 69 NSWLR 452.

[28] [2006] NSWCA 40; (2006) 12 BPR 23,629.

[29] Iannello v Sharpe [2007] NSWCA 61; (2007) 69 NSWLR 452, 453 [6].

[31] [2006] NSWCA 40; (2006) 12 BPR 23,629.

[32] Iannello v Sharpe [2007] NSWCA 61; (2007) 69 NSWLR 452, 461 [31].

[36] (2016) 18 BPR 36,353.

[39] (2016) 258 CLR 525.

[40] [2017] VSCA 161 [198] (Kyrou JA and Cameron AJA).

[41] Paciocco (2016) 258 CLR 525, 550 [43] (Kiefel J).

[42] Environmental Systems Pty Ltd v Peerless Holdings Pty Ltd [2008] VSCA 26; (2008) 19 VR 358, 385 [79] (Nettle JA, Ashley and Dodds-Streeton JJA agreeing).

[43] Harvey McGregor, McGregor on Damages (Sweet & Maxwell, 19th ed, 2014) 15-023. The author's comment that 'the rare case where the actual damage is demonstrably greater than the stipulated sum' would not appear to be applicable in building cases. See for example Bath and North East Somerset District Council v Mowlem PLC [2015] 1 WLR 785, 793 [14] (Mance LJ with whom Brooke LJ and Park J agreed).

[44] Luu v Sovereign Developments Pty Ltd [2006] NSWCA 40; (2006) 12 BPR 23,629, 23,636-7 [31]; referred to at [23] above.

[45] Andrews v ANZ Banking Group Ltd [2012] HCA 30; (2012) 247 CLR 205, 216 [10] (French CJ, Gummow, Crennan, Kiefel and Bell JJ).

[46] See, eg, O'Dea v Allstates Leasing System (WA) Pty Ltd [1983] HCA 3; (1983) 152 CLR 359; Zenith Engineering Pty Ltd v Queensland Crane and Machinery Pty Ltd [2000] QCA 221; [2001] 2 Qd R 114.

[47] [2017] VSC 197.

[48] [1976] VicRp 83; [1976] VR 779 ('Poort').

[49] Citing Mulkearns v Chandos Developments Pty Ltd [No 4] [2005] NSWSC 511 [141].

[50] Poort [1976] VR 780, 785 (Gillard J).

[51] Victorian Law Reform Commission, Review of the Property Law Act 1958, Report No 20 (2010) 43 [3.90] (citation omitted); see Re Scott and Alvarez's Contract [1895] 2 Ch 603.

[52] Mallet v Jones [1959] VicRp 21; [1959] VR 122, 133.

[53] Havyn Pty Ltd v Webster [2005] NSWCA 182; (2006) 12 BPR 22,837, 22,867 [137].

[54] See Re Scott and Alvaraez's Contract [1895] 2 Ch 603.

[55] [1931] 2 Ch 287.

[57] [1944] 2 All ER 31.

[60] [1945] 1 KB 148 (Uthwatt J, with whom Scott and du Parcq LJJ agreed).

[62] [1955] VicLawRp 78; [1955] VLR 496.

[65] See above at [52].

[66] [1955] VLR 469, 504.

[69] [1957] VicRp 49; [1957] VR 341.

[70] [1944] 2 All ER 31.

[71] In re Hoobin [1957] VicRp 49; [1957] VR 341, 350.

[72] [1957] VicRp 49; [1957] VR 341, 350-1.

[73] [1959] VicRp 70; [1959] VR 479.

[74] [1955] VLR 469.

[75] Yammouni v Condidorio [1959] VicRp 70; [1959] VR 479, 492.

[77] [1959] VicRp 21; [1959] VR 122.

[80] [1895] 2 Ch 603.

[81] [1959] VicRp 21; [1959] VR 122, 134.

[84] [1973] 2 NSWLR 268 ('Lucas & Tait').

[85] [1959] VicRp 21; [1959] VR 122.

[86] Lucas & Tait [1973] 2 NSWLR 268, 272.

[89] (1975) 30 P & CR 328.

[90] Cf McDonald v Dennys Lascelles Ltd [1933] HCA 25; (1933) 48 CLR 457.

[91] Emphasis added. See the discussion of this passage in Universal Corporation v Five Ways Properties Ltd [1979] 1 All ER 552 below at [77].

[92] (1975) 30 P & CR 328, 336.

[93] [1976] VicRp 83; [1976] VR 779.

[94] [1959] VicRp 21; [1959] VR 122.

[95] Poort [1976] VicRp 83; [1976] VR 779, 786.

[99] Poort v Development Underwriting (Victoria) Pty Ltd [No 2] [1977] VR 455, 462.

[100] [1978] 3 All ER 1121.

[101] (1975) 30 P & CR 328, 336-7.

[102] Cole v Rose [1978] 3 All ER 1121, 1130.

[103] [1979] 1 All ER 552 (Buckley and Eveleigh LJJ).

[105] Ibid 555, citing Universal Corporation v Five Ways Properties Ltd [1978] 3 All ER 1131, 1137.

[106] (1975) 30 P & CR 328.

[107] Universal Corporation v Five Ways Properties Ltd [1979] 1 All ER 552, 555.

[109] (1983) 47 P & CR 1 ('Dimsdale').

[110] [1979] 1 All ER 552.

[111] Dimsdale (1983) 47 P & CR 1, 11.

[112] [1987] VicRp 20; [1987] VR 255.

[114] (Unreported, Supreme Court of Victoria, Teague J, 30 April 1993).

[116] [1976] VicRp 83; [1976] VR 779.

[117] (Unreported, Supreme Court of Victoria, Teague J, 30 April 1993) 12.

[118] (Unreported, Judicial Committee of the Privy Council, Lords Goff of Chieveley, Mustill, Slynn of Hadley, Nicholls of Birkenhead, Steyn, 3 April 1995) 7.

[119] Ibid (citation omitted) (emphasis added).

[120] (1991) V Conv R 54-421, 65,010.

[121] (2000) V Conv R 54-629, 64,517.

[122] [1959] VicRp 21; [1959] VR 122.

[123] [1976] VR 780.

[124] (2000) V Conv R 54-629, 64,517.

[125] [2008] EWHC 350; [2002] 2 P & CR 36.

[127] Ibid 46 [36]-[37] (emphasis added).

[128] [2003] HCA 58; (2003) 217 CLR 367.

[129] Kirby J, concurring with the majority, inferred that the trial judge had ordered the return because there was an enhanced value to the properties now that the development consent was granted, and that the losses to the vendors from the short delay in notice and payment had been small. Ibid 378-9 [37].

[130] Ibid 376 [27] (Gleeson CJ, McHugh, Gummow, Hayne and Heydon JJ) (emphasis added).

[131] See the passages quoted from Lucas & Tait [1973] 2 NSWLR 268, 272-3 at [69] above.

[132] Maniaty v Fenedisto Pty Ltd [2004] VSC 177 [34].

[133] According to the rule in Birch v Joy [1852] EngR 382; (1852) HL Cas 565; 10 ER 222.

[134] [2004] VSC 177 [34].

[135] [2003] EWHC 2601.

[136] (1983) 47 P & CR 1.

[137] Tennaro Ltd v Majorarch Ltd [2003] EWHC 2601 [89].

[138] But see the analysis of this decision in Midill (97PL) Ltd v Park Lane Estates Ltd [2008] EWCA Civ 1227; [2009] 1 WLR 2460, 2475-6 [53].

[139] [2005] VSC 362; (2005) 13 VR 168.

[142] [2002] NSWCA 237; (2002) 55 NSWLR 558 (Handley JA, Beazley JA and Hodgson JA).

[143] These conclusions were upheld by the High Court in Butcher v Lachlan Elder Realty Pty Ltd [2004] HCA 60; (2004) 218 CLR 592.

[144] However, a separate appeal concerning s 52 of the Trade Practices Act 1974 continued to the High Court: see Butcher v Lachlan Elder Real Estate Pty Ltd [2004] HCA 60; (2004) 218 CLR 592.

[145] [2002] NSWCA 237; (2002) 55 NSWLR 558, 571 [63].

[149] [1976] VicRp 83; [1976] VR 779.

[150] Harkins v Butcher [2002] NSWCA 237; (2002) 55 NSWLR 558, 573-4 [77].

[151] [1979] 1 All ER 552, 555, quoted in Harkins v Butcher [2002] NSWCA 237; (2002) 55 NSWLR 558, 573 [73].

[152] [1973] 2 NSWLR 268, 273, quoted in Harkins v Butcher [2002] NSWCA 237; (2002) 55 NSWLR 558, 574 [80].

[153] [2005] NSWCA 182; (2005) 12 BPR 22,837.

[154] [2002] NSWCA 237; (2005) 55 NSWLR 558.

[155] [2005] NSWCA 182; (2005) 12 BPR 22,837, 22,853-4 [90]-[96].

[156] Ibid 22,868 [141]-[142], 22,869 [144], 22,870 [149].

[157] [1979] 1 All ER 552, 555, see [77] above.

[158] Havyn Pty Ltd v Webster [2005] NSWCA 182; (2005) 12 BPR 22,837, 22,870 [150].

[159] Ibid 22,871-2 [155] (citations omitted).

[161] [2005] NSWSC 511 (handed down one week after Havyn Pty Ltd v Webster [2005] NSWCA 182; (2005) 12 BPR 22,837, but it is clear that his Honour was not aware of the that decision given what he said at [122]).

[163] [2008] EWCA Civ 1227; [2009] 1 WLR 2460.

[164] (1983) 47 P & CR 1; see [78] above.

[165] Midill (97PL) Ltd v Park Lane Estates Ltd [2008] EWCA Civ 1227; [2009] 1 WLR 2460, 2476 [54].

[166] [2008] EWHC 350; [2002] 2 P & CR 36.

[167] A reference to his Honour's observations in Schindler v Pigault (1975) 30 P & CR 328, 336; see [70] above.

[168] [2008] EWCA Civ 1227; [2009] 1 WLR 2460, 2475 [51]-[52]. I note that 'something more' is used by the Privy Council in Bidaisee v Sampath (Unreported, Judicial Committee of the Privy Council, Lords Goff of Chieveley, Mustill, Slynn of Hadley, Nicholls of Birkenhead, Steyn, 3 April 1995), 'special' is used by Mervyn Davies QC in Cole v Rose [1978] 3 All ER 1121, see the passage quoted at [76] above, and 'exceptional' is used by Arden LJ in Omar v El-Wakil [2002] EWCA Civ 1090; [2002] 2 P & CR 3, see the passage quoted at [86] above.

[169] [2013] VSC 10.

[171] [2013] VSC 442.

[172] Ibid [27] (citations omitted).

[173] [2016] NSWSC 515; (2016) 18 BPR 35,905.

[174] [2005] NSWCA 182; (2005) 12 BPR 22,837.

[175] [2016] NSWSC 515; (2016) 18 BPR 35,905, 35,916 [56].

[176] [2017] NSWSC 371.

[178] Ibid [58]-[59] adopting the statement of Mahoney J in Nelson v McDonald (Unreported, Supreme Court of New South Wales, 27 November 1972).

[179] [2017] NSWSC 866.

[183] [2005] NSWCA 182; (2006) 12 BPR 22,837.

[184] Rushcutters Bay Developments Pty Ltd v Dragon Asset Investment Pty Ltd [No 2] [2017] NSWSC 866 [70]-[71].

[185] Havyn Pty Ltd v Webster [2005] NSWCA 182; (2006) 12 BPR 22,837, 22,870 [149].

[186] [2008] EWCA Civ 1227; [2009] 1 WLR 2460.

[187] [2005] NSWCA 182; (2005) 12 BPR 22,837.

[188] Mallett v Jones [1959] VicRp 21; [1959] VR 122, 135.

[189] Havyn Pty Ltd v Webster [2005] NSWCA 182; (2006) 12 BPR 22,837, 22,871 [155]

[191] See, eg, Poort [1976] VR 780; Omar v El-Wakil [2008] EWHC 350; [2002] 2 P & CR 36; Rushcutters Bay Developments Pty Ltd v Dragon Asset Investment Pty Ltd [No 2] [2017] NSWSC 866.

[192] See, eg, James Macara Ltd v Barclay [1944] 2 All ER 31; Yammouni v Condidorio [1959] VicRp 70; [1959] VR 479; Kadissi v Jankovic [1987] VicRp 20; [1987] VR 255; Romanos v Pentagold Investments Pty Ltd [2003] HCA 58; (2003) 217 CLR 367; Harkins v Butcher [2002] NSWCA 237; (2002) 55 NSWLR 558; Havyn Pty Ltd v Webster [2005] NSWCA 182; (2005) 12 BPR 22,837; Mulkearns v Chandos Developments Pty Ltd [No 4] [2005] NSWSC 511; Lookwood v PSP Investments Pty Ltd [2013] VSC 10; 5 Ridge Pty Ltd v Tryname Pty Ltd [2017] NSWSC 371.

[193] See, eg, Aussie Invest Corporation v Pulcesia Pty Ltd (2013) 13 VR 168; Sydney Developments Pty Limited v Perry Properties Pty Limited [2016] NSWSC 515; (2016) 18 BPR 35,905.

[194] See, eg, Zsadony v Pizer [1955] VLR 469; Mallett v Jones [1959] VicRp 21; [1959] VR 122; Lucas & Tait [1973] 2 NSWLR 268; Poort [1977] VR 455; Buckley v Drk (Unreported, Supreme Court of Victoria, Teague J, 30 April 1993); Mahred Nominees Pty Ltd v Tulloch (1991) V Conv R 54-421; Bantick v Boss Properties Pty Ltd (2000) V Conv R 54-629, 64,517; Omar v El-Wakil [2008] EWHC 350; [2002] 2 P & CR 36; Maniaty v Fenedisto Pty Ltd [2004] VSC 177; Aussie Invest Corporation v Pulcesia Pty Ltd (2013) 13 VR 168; Putt v Perfect Builders Pty Ltd [2013] VSC 442.

[195] See, eg, Re Hoobin [1957] VicRp 49; [1957] VR 341; Kadissi v Jankovic [1987] VicRp 20; [1987] VR 255; Buckley v Drk (Unreported, Supreme Court of Victoria, Teague J, 30 April 1993); Poort [1976] VicRp 83; [1976] VR 779; Romanos v Pentagold Investments Pty Ltd [2003] HCA 58; (2003) 217 CLR 367; Mulkearns v Chandos Developments Pty Ltd [No 4] [2005] NSWSC 511.

[196] See, eg, Charles Hunt Ltd v Palmer [1931] 2 Ch 287; James Macara Ltd v Barclay [1944] 2 All ER 31; Zsadony v Pizer [1955] VLR 469; Lockwood v PSP Investments Pty Ltd [2013] VSC 10.

[197] See, eg, Poort [1976] VicRp 83; [1976] VR 779, 786; Maniaty v Fenedisto Pty Ltd [2004] VSC 177.

[198] See, eg, Omar v El-Wakil [2002] EWCA Civ 1090; [2002] 2 P & CR 3; Midill (97PL) Ltd v Park Lane Estates Ltd [2008] EWCA Civ 1227; [2009] 1 WLR 2460; Mulkearns v Chandos Developments Pty Ltd [No 4] [2005] NSWSC 511; cf Dimsdale (1983) 47 P & CR 1.

[199] Simcevski v Dixon [No 1] [2017] VSC 197 [27], [36].