Plaintiff v Defendants

2 The contract included a subject to finance clause which stipulated that finance was to be obtained by 10 April 2020. Settlement was due to occur on 12 June 2020. The defendants were unable to obtain finance by 10 April 2020 and were granted an extension of time to do so until 20 April 2020. An additional extension of the finance approval date to 4 May 2020 was sought by the defendants but was not granted. On 28 April 2020 the defendants' solicitors sent a letter to the plaintiff's solicitors stating that the contract was terminated, and indicating the defendants' intention to lodge a caveat on the title to the property should the $10,000 advanced as part of the deposit not be refunded by 5 May 2020.[3] On 4 May 2020 the plaintiff's solicitors served a default notice on the defendants, citing the defendants' failure to pay the balance of the deposit as the relevant default and giving the first defendant 14 days in which to remedy the default.[4] In correspondence dated 19 and 20 May 2020, the plaintiff subsequently purported to accept the defendants' repudiation of the contract of sale.

3 The plaintiff seeks an order pursuant to s 49(1) of the Property Law Act 1958 (Vic) ('PLA') that the $10,000 deposit moneys paid by the defendants be forfeited to the plaintiff and that the remaining balance of $158,000 be paid. Further or alternatively, the plaintiff seeks a declaration that the contract of sale was validly terminated by reason of a material breach of the contract on the part of the first defendant.

4 The plaintiff's summons, as amended on the first day of the trial, seeks a determination of the following questions:

(a) whether the contract was terminated by the email dated 28 April 2020 from Happy Conveyancing on behalf of the first defendant to the plaintiff's solicitors and, if it was not, whether the plaintiff is estopped from treating that email as being out of time for the purpose of ending the contract;

(b) if the answer to question (a) is no, whether the default notice dated 4 May 2020 served by the plaintiff on the first defendant and his solicitors, having not been complied with, terminated the contract; and

(c) if the answer to (b) is no, whether the emails dated 19 and 20 May 2020 from the plaintiff's solicitors to the first defendant's solicitors alleging acceptance of the first defendant's repudiation of the contract terminated the contract.[5]

5 For the reasons which follow, questions (a) and (b) are to be answered in the negative. Question (c) is answered in the affirmative. Consequently, the contract of sale having become unconditional by 20 May 2020, the plaintiff is entitled to retain the $10,000 deposit paid and to recover the balance of the deposit of $158,000 as a debt.

6 The plaintiff's claim is made pursuant to s 49(1) PLA, which provides:

A vendor or purchaser of any interest in land, or their representatives respectively, may apply to the Court, in respect of any requisitions or objections, or any claim for compensation, or any other question arising out of or connected with the contract (not being a question affecting the existence or validity of the contract), and the Court may make such order upon the application as to the Court may appear just, and may order how and by whom all or any of the costs of and incident to the application are to be borne and paid.

7 The proceeding was commenced by originating motion filed on 25 June 2020. Mr Campbell, who appeared for the defendants, made an application on the first day of the trial for the proceeding to proceed as if commenced by writ. He did so on the basis of evidence alleging that the first defendant entered into the contract of sale in reliance upon an actionable misrepresentation.[6] The first defendant deposed in an affidavit filed on 31 July 2020 that, at the time of signing the contract of sale, he informed the real estate agent that he would be seeking finance from three different lenders and was told by the agent that it was irrelevant which lender was listed on the contract, as this would not affect the operation of the finance clause.[7] I rejected the defendants' application. No satisfactory explanation was provided for the delay in making the application. To permit the application after the trial had commenced would have resulted in significant further delay in the hearing and determination of the plaintiff's claim.[8]

8 The first issue in dispute is whether the contract of sale was validly terminated pursuant to general condition 14 of the contract by way of the email dated 28 April 2020. The defendants submit that, on the basis of correspondence with the plaintiff's solicitors, the first defendant believed that the finance approval date would not be strictly enforced and therefore did not rescind the contract within two clear business days of the approval date pursuant to general condition 14.2.[9] The plaintiff submits that the email dated 28 April 2020 sent by Happy Conveyancing, on behalf of the first defendant, to the plaintiff's solicitors was ineffective to validly terminate the contract pursuant to general condition 14.2 because the necessary preconditions outlined in the sub-clause had not been satisfied.

14.1 If the particulars of sale specify that this contract is subject to a loan being approved, this contract is subject to the lender approving the loan on the security of the property by the approval date or any later date allowed by the vendor.

14.2 The purchaser may end the contract if the loan is not approved by the approval date, but only if the purchaser:

(b) did everything reasonably required to obtain approval of the loan; and

(c) serves written notice ending the contract on the vendor within 2 clear business days after the approval date or any later date allowed by the vendor; and

(d) is not in default under any other condition of this contract when the notice is given.

14.3 All money must be immediately refunded to the purchaser if the contract is ended.

Special condition 31 and general condition 16 made time of the essence.

10 The plaintiff submits that the first defendant did not do 'everything reasonably required to obtain approval of the loan', and did not 'immediately' apply for a loan as required by general condition 14. Further, the plaintiff submits that the defendants' notice of termination was given outside of the stipulated two day time period for bringing the contract to an end in the event that finance was not obtained by the approval date.

11 It is unnecessary to determine whether the defendants 'immediately' applied for finance and did 'everything reasonably required' to obtain the loan because the notice of termination was given out of time. General condition 14.2 required that notice to terminate the contract be given within two clear business days after the approval date or any later date allowed by the vendor. There was no express agreement between the parties to extend the loan approval date beyond 20 April 2020. The notice of termination was served six days outside of the required period for the service of such a notice. Mr Campbell conceded that, absent a finding that the plaintiff was estopped from treating the 28 April 2020 email as being out of time, there was non-compliance with the requisite time period specified under general condition 14.2(c).[10] Unless the defendants' estoppel claim is upheld, the email of 28 April 2020 did not terminate the contract.

12 Further, the defendants' failure to apply to the lender specified in the finance clause of the contract rendered the contract unconditional as to finance. Handwritten notations in the contract of sale nominated HSBC as the 'Lender', for a loan amount of $1,500,000 with a finance approval date of 10 April 2020.[11] The defendants did not apply to HSBC for a loan. Mr Campbell conceded that absent the plaintiff being estopped from treating the 28 April 2020 email as being out of time, the defendants did not have a right of termination under general condition 14.2:

the operation and the benefit of the loan approval provisions of the contract, and or condition 14 require two things and those two things are rather strictly construed and that is that the purchaser makes an application for finance to the nominated lender, in this case HSBC by the approved date for the amount that the loan is provided for, in this case $1.5 million ... If that is not done, then there is no entitlement that the purchaser has to rely upon the provisions of the loan approval ... [u]nder general condition 14.[12]

...

unless there was compliance with the twin obligations, namely, apply to HSBC and for the amount of the loan, then you don't get to rely upon the loan approval provisions and you lose the benefit.[13]

13 Counsel's concession regarding the requirement for strict compliance with general condition 14.2 is consistent with authority. Putt v Perfect Builders Pty Ltd ('Putt')[14] involved loan approval provisions identical to general condition 14.2. Putt involved an application by a purchaser for finance for an amount $1,000 greater than the sum nominated in the contract.[15] Williams J concluded that the purchasers had not fulfilled the obligation under general condition 14.2(b) to do everything reasonably required to obtain the loan approval such that they had a right to terminate the contract.[16] In Kurnnan v Pivovarova ('Kurnnan'),[17] Barr J stated:

Because the defendants did not (at any stage) apply for finance to AMP [the nominated lender], they had no right (at any stage) to rescind the contract under cl 24(c). The legal effect of the defendants' failure to apply to AMP for a loan was that the contract ceased to be conditional as to finance. In my view, the plaintiff was correct in treating the contract as remaining on foot.[18]

In failing to apply to HSBC for a loan the defendants did not comply with the obligation under general condition 14.2(b) to do everything reasonably required to obtain the approval of the loan. Unless the plaintiff is estopped from treating the email of 28 April 2020 as being out of time, the defendants were not entitled to terminate the contract of sale.

Is the plaintiff estopped from treating Happy Conveyancing's email of 28 April 2020 as being out of time for ending the contract?

14 The defendants submitted that the plaintiff is estopped from denying that the contract of sale was validly terminated by the email of 28 April 2020. They submit that the plaintiff engendered a belief by the first defendant that an extension of the finance approval date would be possible, and the first defendant relied upon that assumption to his detriment.[19]

15 Following the 20 April 2020 deadline for the approval of finance there were negotiations between the parties regarding an extension of time for the purchasers to obtain finance. The defendants conceded in their outline of submissions filed on 21 January 2021 that 'there was no express agreement to grant a further extension' beyond the 20 April 2020 date. However, the defendants submitted that 'communications between the parties around 20 April 2020 gave rise to a legitimate expectation on the part of the defendants that the plaintiff would not insist on its strict legal rights to treat the contract as unconditional without first giving the purchasers a reasonable opportunity to exercise rights' under general condition 14.2.[20] The plaintiff submits that he did not consent to extend the approval date for finance beyond 20 April 2020.[21]

16 The contract of sale was signed on 26 March 2020, with finance to be obtained by 10 April 2020. On 9 April 2020 Happy Conveyancing, on behalf of the first defendant, sent an email to the plaintiff's solicitors advising that the purchasers had been unable to obtain finance by the approval date of 10 April 2020 and seeking an extension until 1 May 2020. The plaintiff's solicitors responded granting a shorter extension of time until 20 April 2020. On 20 April 2020, Happy Conveyancing sent a further email requesting an extension of the finance approval date to 27 April 2020. The plaintiff's solicitors responded seeking evidence of the first defendant's progress in the finance application. [22] On 21 April 2020 the plaintiff's solicitors requested a letter from the bank detailing 'the steps undertaken so far to obtain finance approval, where the finance approval is at, if there is anything outstanding and when realistically it is expected to be obtained'.[23] Happy Conveyancing forwarded an email from One1Zero Finance which indicated that there was a delay in seeking finance and that a decision from ME Bank was pending. On 23 April 2020, the plaintiff's solicitors responded that the material provided was insufficient and made a further request for a letter from the bank. On 24 April 2020 the first defendant emailed the plaintiff's solicitors and informed them that a decision would likely be reached the following Monday.

17 On 27 April 2020 Happy Conveyancing forwarded an email from One1Zero Finance referring to ongoing delays in the finance approval process. Happy Conveyancing sought an extension of the finance approval date to 4 May 2020. A further email was sent to the plaintiff's solicitors on 28 April 2020 attaching a sale of real estate nomination form signed by the second to fourth defendants, along with letters from ME Bank addressed to the second to fourth defendants declining their loan applications. This email stated that the contract had been brought to an end and requested that the $10,000 deposit moneys paid be refunded.[24]

18 Counsel for the defendants submitted that in requesting evidence of the defendants' attempts to secure finance, rather than an rejecting outright their request for an extension of the finance approval date, the plaintiff engendered a belief on the part of the defendants that such an extension could be granted.[25] Correspondence continued between the parties beyond the 22 April 2020 deadline in which the first defendant was entitled to terminate the contract pursuant to general condition 14.2 (ie within two clear business days of the finance approval date).[26]

19 This evidence falls well short of establishing the defendants' estoppel claim. A representation must be clear before it can found an estoppel, and the party acting in reliance on the representation must be in a position of material disadvantage if the departure from the representation is permitted.[27] The high point of the first defendant's evidence was that he believed that negotiations were ongoing after 20 April 2020 and that an extension of the finance approval date might be possible.[28] The communications tendered in evidence do not amount to a clear representation on the part of the plaintiff that the finance date would be extended. These communications fall well short of a clear and unequivocal representation of the type that would sustain an estoppel.

20 A further consideration is the unsatisfactory state of the evidence regarding the date on which the defendants and their mortgage broker were advised of the rejections of their various loan applications. Evidence was tendered which suggested that the second to fourth defendants had already been advised by letters dated 21 April 2021 that ME Bank had rejected their loan applications. On 22 April 2020, the defendants' finance broker informed the plaintiff's solicitors that the loan applications were still under consideration and that an outcome was expected by 4 May 2020.[29] Counsel for the defendants submitted that the first defendant was unaware of the rejection of the loan applications until 28 April 2020 and could provide no explanation as to why, if the broker had already been informed of the rejections, this information had not been passed on.[30] Neither the mortgage broker nor the second to fourth defendants were called to give evidence in this proceeding. No satisfactory explanation was provided for this failure. I infer that, had they been called to give evidence, their evidence would not have assisted the defendants' case.

21 The plaintiff is not estopped from treating Happy Conveyancing's email of 28 April 2020 as being out of time and ineffective to bring the contract to an end. However, if I am wrong in reaching this conclusion, it does not follow that the 28 April 2020 email would have been effective to terminate the contract. The requirement under cl 14.2(b) that the purchaser do everything reasonably required to obtain approval for a loan is a discrete obligation. The defendants did not comply with this obligation. Even if the plaintiff is estopped from treating the email of 28 April 2020 as being out of time, the defendants did not comply with the obligation under cl 14.2(b). As such, if the email of 28 April 2020 is deemed to have been within time, it was not effective to terminate the contract.

22 The second issue in dispute is the status of the default notice dated 4 May 2020 served by the plaintiff on the first defendant and his solicitors. The defendants contend that the default notice was defective because it failed to replicate the wording required by general condition 28.2 of the contract.[31] The plaintiff contends that the default notice was valid because it complied with general condition 27 of the contract and the plaintiff's entitlement to the deposit accrued under general condition 28.1.

23 The relevant default notice provisions of the contract are as follows:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

24 The plaintiff's purported default notice of 4 May 2020 stated that the purchasers were in default of the contract of sale and identified the particulars of the default as follows: '[t]he Purchaser failed to pay the balance of the deposit by the Due Date or at all'.[32] The default notice further specified that 'the Vendor intend[ed] to exercise his rights unless the default [was] remedied within 14 days of the service of this notice'.[33] The default notice did not refer to general condition 28 of the contract of sale.

25 General condition 28.1 mandates that 'all unpaid money' under the contract 'becomes immediately payable to the vendor if the default has been made by the purchaser and is not remedied and the costs and interest are not paid'. Under general condition 28.2, the contract 'immediately ends' if the 'default notice also states that unless the default is remedied and the reasonable costs and interest are paid, the contract will be ended in accordance with this general condition' (emphasis added). General condition 28.4(a) specifies that 'if the contract ends by a default notice' the deposit of up to 10 per cent of the purchase price is 'forfeited to the vendor as the vendor's absolute property, whether the deposit has been paid or not'.

26 The plaintiff's notice of default satisfied the requirements of general condition 27.1 in that it specified the particulars of the default and the plaintiff's intention to exercise rights arising from the default unless it was remedied within 14 days. However, the default notice failed to include the additional matters referred to in general condition 28.2 because it did not refer back to this sub-clause of the contract. Mr Percy, who appeared for the plaintiff, submitted that the default notice complied with general condition 27 and therefore the plaintiff's entitlement to the deposit arose under general condition 28.1, without a need to satisfy the wording of general condition 28.2.[34]

27 The provisions of the contract must be read in the context of the contract as a whole. General condition 27 is to be construed in light of the specific requirements of general condition 28. General conditions 28.1 and 28.4 both prescribe the consequences of a default by a purchaser. However, general condition 28.4(a) deals specifically with the forfeiture of a deposit in circumstances where the vendor issued a valid default notice that is not complied with. General condition 28.2 prescribes the contents of a default notice, non-compliance with which results in termination of the contract under general condition 28.4. Compliance with general condition 28.2 is a condition precedent to termination of a contract for failure to comply with a default notice.

28 The present case is analogous to Nund v McWaters ('Nund'),[35] a judgment of the Full Court of the Victorian Supreme Court. Condition 5(1) of the contract in Nund required that a default notice specify the default and state the vendor's intention to enforce his rights and remedies unless, within a period of not less than 14 days, the default was made good and proper legal costs were paid. Condition 5(2) outlined the consequences if the default notice also stated that unless the default was remedied and the costs were paid, the contract would be terminated pursuant to this sub-clause.[36] Condition 5(2) required the parties seeking to terminate the contract to specify in the default notice itself that, unless the default was remedied, the contract would be rescinded pursuant to condition 5(2) of the contract of sale. The relevant notice in Nund failed to refer to the proper sub-clause and was therefore ineffective to rescind the contract.[37] Brooking J (Starke and Murphy JJ agreeing) stated:

The notice did not fulfil the requirement of condition 5(2) that it state that the contract would be rescinded pursuant to sub-cl. (2). It is unnecessary to consider whether the ill-advised use of the words 'it is the intention of the said Robert Thomas McWaters to rescind the said contract of sale' instead of the words 'the contract will be rescinded' is itself enough to make the notice bad; I rest my judgment on the failure of the notice to state that the rescission would be pursuant to the sub-clause.

Since the notice did not answer the requirements of condition 5(2), it was not effective to rescind the contract pursuant to that provision and the vendor fails in his claim to have rescinded for breach of the purchasers' obligation to pay the balance of the price on 26 September 1976, an obligation in respect of which time was of the essence according to the contract.[38]

29 The default notice dated 4 May 2020 was defective by reason of non-compliance with general condition 28.2 and did not terminate the contract of sale.

30 The third question to be determined is whether the emails of 19 and/or 20 May 2020 from the plaintiff's solicitors to the defendant's solicitors constituted acceptance of repudiation of the contract of sale which brought the contract to an end. Relevantly, the emails of 19 and 20 May 2020 stated:

Dear Ms Kitchen,

We refer to our correspondence and default notice dated 4 May 2020.

As your client's default has not been remedied within the 14 days stipulated on the notice, the contract deposit (including the unpaid balance) is forfeited to our client and the contract is terminated.

All of our client's rights are expressly reserved.

Yours faithfully,

Luke Faba[39]

Dear Ms Kitchen,

We refer to your letter dated 20 May 2020.

We have already set out in previous correspondence how the contract became unconditional and we do not wish to repeat ourselves.

We disagree that our client's default notice is invalid. However, if the default notice is invalid (which is denied) your client's previous conduct, the act of lodging the caveat on the grounds set out in the caveat, and your letter each constitute a repudiation of the contract which is accepted by our client and the contract is (if not previously) terminated.

We have been instructed to issue an application pursuant to section 89A of the Transfer of Land Act.

Yours faithfully,

Luke Faba[40]

31 As at 28 April 2020 the first defendant had manifested an intention not to be bound by the terms of the contract by conducting himself in a manner inconsistent with the contract remaining on foot. The first defendant issued a purported notice of termination on 28 April 2020. Although this notice was ineffective to terminate the contract, it nonetheless manifested a clear intention on the part of the defendants not to proceed with the contract of sale. Further, the first defendant requested the return of the $10,000 deposit moneys advanced to the plaintiff and foreshadowed his intention to lodge a caveat over the property. The caveat was subsequently lodged on 20 May 2020.[41] Mr Campbell conceded that the caveat was lodged on the assumption that the contract was no longer on foot.[42] Viewed together, this conduct amounted to repudiation of the contract of sale which could be accepted by the plaintiff as bringing the contract to an end.

32 Mr Campbell submitted that the emails of 19 and 20 May 2020 cannot constitute an acceptance of the defendants' repudiation by the plaintiff because the emails relied upon the plaintiff's defective default notice of 4 May 2020.[43] I reject this submission. The plaintiff was entitled to reserve his rights to assert the validity of the default notice. In the event that the default notice was invalid, as I have concluded, the email of 20 May 2020 clearly stated the plaintiff's intention to accept the defendants' repudiation as bringing the contract to an end.[44]

33 The present case is analogous to Nund, which Mr Percy relied upon as authority for the proposition that a purchaser's failure to pay purchase moneys constitutes repudiatory conduct which may be accepted by a vendor as bringing the contract to an end, notwithstanding the service of an invalid default notice.[45] In Nund the vendor failed to specify in a default notice that, unless the default was remedied, the contract would be rescinded pursuant to condition 5(2) of the contract of sale.[46] The vendor argued in the alternative that if the rescission notice was found to be invalid, as it was, then the contract was brought to an end by the vendor's acceptance of the purchasers' repudiation. In Nund, the vendor served the purchasers with an initial letter requesting payment of the deposit after the purchasers failed to pay the outstanding sum by the due date. The Court held that the vendor's initial letter did not indicate an election by the vendor not to rescind for non-payment by the due date, and did not cause time to cease to be of the essence. Citing Tropical Traders Ltd v Goonan,[47] Brooking J stated that:

a vendor becoming entitled to rescind for non-payment of purchase money upon the stipulated date for payment who does no more than give the purchaser the opportunity to pay within a limited time thereafter is not thereby electing not to rescind for non-payment on the due date.[48]

34 The vendor subsequently sent a second letter expressing an intention to rescind the contract unless the purchasers paid the deposit within 14 days of the service of the notice. The deposit remained outstanding and the vendor served a further notice rescinding the contract upon the expiration of the 14 day period. The vendor argued that the purchasers had repudiated the contract due to their failure to pay the balance of the purchase moneys, and the vendor was therefore entitled to accept their repudiation and discharge the contract with the vendor's final notice. The rescission notice did not identify repudiation as the reason for the termination of the contract, but instead referred back to the vendor's earlier notice which was found to be ineffective.[49] Citing Shepherd v Felt and Textiles,[50] Brooking J determined that:

a contracting party who, after he has become entitled to refuse performance of his contractual obligations, gives a wrong reason for his refusal, does not thereby deprive himself of a justification which in fact existed, whether he was aware of it or not.[51]

The Court ultimately held that, as the vendor elected to bring the contract to an end on the basis of the purchasers' repudiation, it was not necessary for the vendor's notice to have satisfied the requirements of condition 5. Therefore, the vendor had successfully discharged the contract with the final rescission notice. [52]

35 In the present case, the defendants manifested a clear intention to no longer be bound by the terms of the contract and the plaintiff was entitled to accept their repudiation of the contract of sale. The contract was terminated by the vendor's acceptance of the purchaser's repudiation on 20 May 2020.

36 Having determined that the contract came to an end by virtue of the plaintiff's acceptance of the defendants' repudiation of the contract of sale, it is necessary to consider the appropriate relief under s 49(1) PLA. The plaintiff contends that s 49(1) PLA is a source of power to require the defendants to pay the balance of the outstanding deposit moneys, being $158,000, and to permit the plaintiff to retain the $10,000 already paid.

37 Alternatively, if the Court declined to make an order that the defendants pay the balance of the deposit, the plaintiff seeks a declaration that the contract of sale has been terminated. Mr Percy foreshadowed that if a declaration in these terms was granted, the plaintiff would pursue a claim for relief in the Magistrates' Court.[53]

38 In Bot v Ristevski ('Bot'),[54] Brooking J held that a vendor's entitlement to recover a deposit was treated as an entitlement to the funds as a debt where the contract was terminated by the vendor's acceptance of repudiation. Bot involved the sale of a property with an initial deposit to be paid on the signing of the sale note and the remainder of the deposit to be paid within seven days thereafter, with the balance of the purchase moneys due at a later time. The purchasers repudiated the contract and this repudiation was accepted by the vendors as discharging the contract. The vendors then brought an action seeking to recover the unpaid balance of the deposit from the purchasers and retain the funds already paid.[55] Brooking J held that a vendor who discharges a contract for the sale of land by accepting a purchaser's repudiation of the contract may recover from the purchaser a deposit that should have been paid before the contract was discharged. His Honour determined that the right of action for debt arose in consequence of the purchasers' failure to pay the balance of the deposit within seven days of the sale note, and the right to recover the balance was not conditional upon the subsequent completion of the contract.[56]

39 Relevantly, Brooking J approached the question of whether the vendor was entitled to retain the deposit moneys already advanced by the purchaser, and to be paid the outstanding balance of the deposit, by reference to whether the funds were due and payable such that the vendor obtained an unconditional right to the funds:

I prefer to approach the problem by asking whether an unconditional right to recover and retain the deposit arose before the contract was discharged. If such a right did arise, it will survive the determination of the contract, and if the money has been paid before discharge the purchaser will not get it back, while if the money has not been paid before discharge the purchaser will be compelled to pay it. Whether the vendor obtained an unconditional right to recover and retain the deposit will depend upon whether the discharge of the contract will give rise to a total failure of the consideration for payment of the deposit. If it will, then the consequence of discharge will be that the vendor cannot recover the deposit, if unpaid, or retain it, if paid. Either there was an unconditional right to recover and retain the deposit or there was not.[57]

Principle and authority have combined to lead me to the conclusion that Horridge, J. was right after all in ruling that a vendor who discharges the contract in consequence of the purchaser's repudiation of it can recover a deposit that should have been paid before the contract was discharged and that I should not follow Lyon v Magnet Nominees Pty Ltd, [1978] VicRp 63; [1978] VR 673. (The plaintiff's claim in Dewar v Mintoft, [1912] UKLawRpKQB 36; [1912] 2 K.B. 373 appears to have been framed as one for damages; the action should have been for debt, not damages.) The claim by the present plaintiffs for payment of the balance of the deposit succeeds.[58]

41 Carter on Contract[59] cites Bot as authority for the proposition that a deposit is recoverable as a liquidated sum due for payment prior to termination and is recoverable on the basis of an accrued right. However, if a deposit was not due and payable at the time of termination, it will only be recoverable in an action for damages and will not be recoverable as a liquidated sum.[60]

42 In Owenlaw Mortgage Managers Ltd v Baird,[61] Hansen J cited Bot in support of a vendor's right to retain deposit moneys or obtain an unpaid deposit following a purchaser's repudiation. This case similarly involved a vendor-purchaser contract rescinded by the vendor upon acceptance of the purchaser's repudiation. Hansen J stated:

As to the claim for the unpaid deposit, the relevant law as to the vendor's right of recovery is stated in Bot v Ristevski. There it was held, clarifying the position in this State, that a vendor who discharged a contract of sale of real estate by accepting the purchaser's repudiation of the contract, can recover from the purchaser a deposit that should have been paid before the contract was discharged. The right to recover the deposit had accrued prior to rescission, and enured [sic] thereafter. The claim lay in debt. At the same time a vendor such as the plaintiff may have a claim for damages otherwise suffered, in which case the unpaid deposit may be included as part of an overall claim; see Berry v Mahony; Socratous v Koo.[62]

43 In Primus Telecommunications Pty Ltd v CCP Australian Airships Ltd,[63] Habersberger J cited Bot when discussing the purpose of deposits in contracts for the sale of land:[64]

In Bot v Ristevski[65], Brooking J stated that:

'a deposit wears two aspects: if the purchase is carried out, it goes against the purchase money, but its primary purpose is that it is a guarantee that the purchaser means business ...'[66]

In NLS Pty Ltd v Hughes[67], Barwick CJ referred to the deposit in that case as 'an earnest of performance which, on default, may be retained and credited against the damage suffered.'[68]

44 Bot is authority for the proposition that, provided the deposit was due and payable as at 20 May 2020, the plaintiff, having terminated the contract by acceptance of the defendants' repudiation, was entitled to retain that part of the deposit already paid and recover the balance as a debt.

45 The plaintiff submitted that, as the first defendant did not comply with the requirement under cl 14.2(b) to do everything reasonably required to obtain loan approval, and did not give notice terminating the contract within two clear business days of the approval date pursuant to general condition 14.2(c), the contract became unconditional on or after 22 April 2020.[69] In Kurnnan and Putt, contracts of sale were held to have become unconditional in circumstances where a purchaser did not have a valid right of termination by reason of failure to comply with contractual provisions which correspond with cl 14.2(b) of the contract of sale in the present proceedings.[70] Kurnnan and Putt support a finding that as a consequence of the defendants' failure to comply with cl 14.2(b) and (c), the contract became unconditional on 22 April 2020. Consequently, the deposit was due and payable on 20 May 2020 when the plaintiff accepted the defendants' repudiation of the contract. The plaintiff was therefore entitled to retain the $10,000 part payment of the deposit and recover the balance as a debt.

46 The plaintiff resold the property for a sale price of $20,000 less than the contract price that had been agreed upon with the first defendant in the contract of 26 March 2020. Mr Percy did not accept that the plaintiff's loss was limited to $20,000 and submitted that the plaintiff also incurred various costs and expenses associated with efforts to re-sell the property.[71] No evidence of the plaintiff's loss was tendered in this proceeding. If the defendants are ordered to pay the balance of the deposit of $158,000, there is potential for the plaintiff to receive a financial windfall. I do not consider that this constitutes a proper basis for refusing to make an order requiring the defendants to pay the plaintiff the balance of the unpaid deposit.

47 The power to grant relief under s 49(1) PLA is not constrained by contractual principles of the assessment of damages and mitigation, nor it is appropriate to assess an application made under s 49(1) PLA as a claim for damages.[72] In defending an application for the repayment of a deposit pursuant to s 49(2) PLA, purchasers must do more than establish that forfeiture of the deposit would result in a financial 'windfall' to the vendor, as will usually be the case.[73] In Aussie Invest Corp v Pulcesia Pty Ltd,[74] Dodds-Streeton J held that although the discretion conferred by s 49(2) was 'unfettered, its exercise is "the exception rather than the rule" and will not be justified merely because the vendor will obtain a windfall'.[75] In Simcevski v Dixon (No 2),[76] Riordan J held that the discretion under s 49(2) to order the return of a deposit was conditioned by recognition of the critical function of a deposit being an earnest for contractual performance. That function imposed a burden upon the purchaser to establish grounds to depart from holding the purchaser to its contractual bargain.[77] Although made in the context of consideration of the discretion under s 49(2) PLA, these considerations also inform the exercise of the discretion under s 49(1). The defendants have failed to establish grounds which justify a departure from holding them to their contractual bargain.

48 The plaintiff is entitled to retain the $10,000 deposit sum already paid by the defendants and to recover the remaining $158,000 deposit moneys as a debt. The plaintiff's claim for declaratory relief falls away as it is premised on the Court declining to make an order for repayment of the balance of the deposit.

49 The Court will make orders in the following terms:

1. The $10,000 deposit moneys paid by the defendants to the plaintiff is forfeited to the plaintiff.

2. The defendants are ordered to pay the remaining $158,000 balance of the deposit to the plaintiff.

50 I shall provide the parties with an opportunity to make submissions in respect of the costs of the proceeding and whether the plaintiff is entitled to interest on the sum of $158,000, and if so, in what amount.

[1] Affidavit of Abhishek Nannegari, affirmed 12 February 2021, [2]-[3].

[2] See Transcript of Proceedings, T 123 L 16-21 (3 March 2021).

[3] Exhibit MWP-6 to the Affidavit of Marcus Wilmot Pearl, sworn 23 June 2020.

[4] Exhibit MWP-7 to the Affidavit of Marcus Wilmot Pearl, sworn 23 June 2020.

[5] Plaintiff, 'Summons', 23 June 2020, [2]; Plaintiff, 'Originating Motion Between Parties', 23 June 2020, [2]; Transcript of Proceedings, T 52 L 12-21, T 54 L 21-4 (2 March 2021); T 99 L 20-2 (3 March 2021).

[6] Transcript of Proceedings, T 22 L 4-20 (2 March 2021).

[7] Affidavit of Abhishek Nannegari, affirmed 31 July 2020, [12]; Transcript of Proceedings, T 22 L 21-30, T 23 L 1-4 (2 March 2021).

[8] Transcript of Proceedings, T 23 L 27-8, T 24 L 4-5 (2 March 2021).

[9] Defendants, '1st-4th Defendants' Outline of Submissions', 21 January 2021, [5].

[10] Transcript of Proceedings, T 68 L 16-29 (2 March 2021).

[11] Exhibit MWP-2 to the Affidavit of Marcus Wilmot Pearl, sworn 23 June 2020.

[12] Transcript of Proceedings, T 3 L 25-31, T 4 L 1-4 (2 March 2021).

[13] Transcript of Proceedings, T 4 L 12-15 (2 March 2021).

[14] [2013] VSC 442 ('Putt').

[17] [2012] NTSC 48 ('Kurnnan').

[19] Defendants, '1st-4th Defendants' Outline of Submissions', 21 January 2021, [5].

[21] Plaintiff, 'Outline of Submissions', 25 September 2020, [13].

[22] Exhibit MWP-3 to the Affidavit of Marcus Wilmot Pearl, sworn 23 June 2020.

[25] Transcript of Proceedings, T 111 L 11-21 (3 March 2021).

[26] Exhibit AN-2 to the Affidavit of Abhishek Nannegari, affirmed 31 July 2020; Transcript of Proceedings, T 112, L 12-14 (3 March 2021).

[27] Legione v Hateley [1983] HCA 11; (1983) 152 CLR 406, 436-7 (Mason and Deane JJ); see also Aussie Invest Corp Pty Ltd v Pulcesia Pty Ltd [2005] VSC 362; (2005) 13 VR 168.

[28] Transcript of Proceedings, T 86 L 27-31, T 87 L 1-4, T 88 L 19-21, T 88 L 28-31, T 89 L 1-5 (2 March 2021).

[29] Exhibit AN-2 to the Affidavit of Abhishek Nannegari, affirmed 31 July 2020.

[30] Transcript of Proceedings, T 114 L 5-11 (3 March 2021).

[31] Transcript of Proceedings, T 122 L 4-10 (3 March 2021).

[32] Exhibit MWP-7 to the Affidavit of Marcus Wilmot Pearl, sworn 23 June 2020.

[34] Transcript of Proceedings, T 158 L 26-31, T 159 L 1-4 (3 March 2021).

[35] [1982] VicRp 60; [1982] VR 575 ('Nund').

[39] Exhibit AN-7 to the Affidavit of Abhishek Nannegari, affirmed 31 July 2020.

[40] Exhibit AN-9 to the Affidavit of Abhishek Nannegari, affirmed 31 July 2020.

[41] Exhibit AN-10 to the Affidavit of Abhishek Nannegari, affirmed 31 July 2020.

[42] Transcript of Proceedings, T 142 L 7-15 (3 March 2021).

[43] Transcript of Proceedings, T 137 L 18-28 (3 March 2021).

[44] Exhibit AN-9 to the Affidavit of Abhishek Nannegari, affirmed 31 July 2020.

[45] Transcript of Proceedings, T 51 L 2-8 (2 March 2021).

[47] [1964] HCA 20; (1964) 111 CLR 41, 60-1.

[50] Shepherd v Felt and Textiles of Australia Ltd (1931) 45 CLR 359, 378.

[53] Transcript of Proceedings, T 170 L 30-1, T 171 L 1-4 (3 March 2021).

[54] [1981] VicRp 13; [1981] VR 120 ('Bot').

[59] J W Carter, Carter on Contract (LexisNexis Australia, December 2016) [43-350].

[61] [2007] VSC 521.

[63] [2003] VSC 120.

[67] [1966] HCA 63; (1966) 120 CLR 583.

[69] See Plaintiff, 'Plaintiff's Outline of Submissions in Reply Pursuant to Order 4 of the Orders of Judicial Registrar Keith Dated 16 February 2021', 24 February 2021, [8]. The purchaser's right to rescind the contract by 4.00pm on 22 April 2020 pursuant to general condition 14.2 was also noted in Defendants, '1st-4th Defendants' Outline of Submissions', 21 January 2021, [7].

[70] Kurnnan (n 17) 29; Putt (n 14) [16], [25].

[71] Transcript of Proceedings, T 173 L 5-18 (3 March 2020).

[72] Wollert Epping Developments Pty Ltd v Batten (2019) 60 VR 92, 102 [34]-[35].

[73] See, eg, Havyn Pty Ltd v Webster [2005] NSWCA 182; (2005) 12 BPR 22,837, 22,871-2 [155], cited in Simcevski v Dixon (No 2) (2017) 53 VR 357 in the context of Riordan J's exposition of the law concerning the discretion under s 49(2) PLA.

[74] [2005] VSC 362; (2005) 13 VR 168.

[75] Ibid 208 [322], cited in Simcevski v Dixon (No 2) (2017) 53 VR 357, 383 [93].

[76] (2017) 53 VR 357.