Supreme Court New South Wales

• Medium Neutral Citation: Stephen Wayne Velik v Noreen Steingold [2012] NSWSC 860
• Hearing dates: 16, 17 & 18 November 2011
• Decision date: 31 July 2012
• Jurisdiction: Equity Division
• Before: Slattery J

Decision

Vendor has validly terminated the contract. No order made for return of the deposit. Parties invited to put submissions on costs issues.

• Catchwords: VENDOR AND PURCHASER - Contract for Sale of Land - conditional on subdivision - vendor serves notice said to be notice of registration of subdivision - contract requires completion required 14 days offer notice - completion does not take place - vendor issues Notice to Complete - settlement does not take place within time allowed by Notice to Complete - vendor terminates contract - whether notice of registration of subdivision complies with contract - whether Notice to Complete allows sufficient time for completion - whether vendor disabled from giving Notice to Complete by reason of vendor's breach of contract - whether contract otherwise terminable for breach by the purchasers, even if Notice to Complete invalid -whether deposit should be returned.
• Legislation Cited: Conveyancing Act 1919 (NSW), s 55(2A); Law of Property Act, 1925 (UK)
• Cases Cited: Bernard v Weingarth (1997) 8 BPR 15,651, Buchanan v Dunstan [2007] NSWSC 248; Clarke v Dilberovic (1982) NSW ConvR 55-083; Doyle v Howey (1990) 6 BPR 13,401; Forster v Jododex Australia Pty Limited (1972) 127 CLR 421; Gogard Pty Limited v Satnaq Pty Limited (1999) 9 BPR 17,171; Havyn Pty Ltd v Webster (2005) 12 BPR 22,837; Lactos Fresh Pty Ltd v Finishing Services Pty Ltd (No. 2) [2006] FCA 748; Luna Park (NSW) Ltd v Tramways Advertising Pty Ltd (1938) 61 CLR 286; Lucantonio v Ciofuli (2003) 11 BPR 21,181; Mason v State of New South Wales (1959) 102 CLR 108; Mayer v Vitale (1981) 2 BPR 9162; Schindler v Pigault (1975) 30 P& Cr 328; Poort v Development Underwriting (Victoria) Pty Ltd [1976] VR 779; Senavale v Nolan (2000) NSW ConvR 55-948; Shaddick v Dunsford Investment Pty Ltd (1990) 5 BPR 11,322; Sindel v Georgiou (1984) 154 CLR 661; Smilie Pty Limited v Bruce (1998) 8 BPR 15,893; Wilson v Kingsgate Mining Industries Pty Limited [1973] 2 NSWLR 713
• Texts Cited: K.E. Lindgren, Time in the performance of contracts: especially for the sale of land, (1982), 2nd ed, Butterworths
• Category: Principal judgment
• Parties: First Plaintiff- Stephen Wayne Velik; Second Plaintiff- Laura Allison Velik; Defendant- Noreen Steingold
• Representation: First & Second Plaintiff- R. Scruby; Defendant- D.D. Knoll AM; First & Second Plaintiff- Stephen Velik, SV Law; Defendant- Steven Lewis, Slater & Gordon
• File Number(s): 2010/96975
• Publication restriction: No

Judgment

1 On 4 December 2009 the plaintiffs, Stephen and Laura Velik, exchanged contracts for $1.26 million to buy land in Flinders Avenue, St Ives from Mrs Noreen Steingold. The Veliks paid the vendor's agent a deposit of $126,000. Mrs Steingold claims she terminated this contract on 15 March 2010 and is entitled to the deposit plus interest. Mr and Mrs Velik contest her claim and say they are entitled to its return.

2 These reasons conclude that Mr and Mrs Velik's contentions fail and the deposit will not be returned to them. That conclusion requires analysis of the parties' dealings from mid-February to mid-March 2010 and their contract for the sale of land.

Two Neighbours make and terminate a Contract

3 Mr and Mrs Velik began living in early 2009 in a house on land Mrs Steingold owned in Flinders Avenue, St Ives ("the Flinders Avenue property"). They paid rent to Mrs Steingold, who lived on another house on the property with her husband. The Veliks and Mrs Steingold had been quite neighbourly to one another until about December 2009. Mr Velik and Mr Steingold are both solicitors.

4 The Veliks liked the house. Mrs Steingold and her husband wanted to sell it to them. But a sale could not be completed without the Flinders Avenue property being subdivided from the rest of Mrs Steingold's land ("the residual property"). The contracts exchanged on 4 December provided for subdivision of the Flinders Avenue property from the residual property, before completion. On exchange Mr Velik's firm S.V. Legal acted for the purchasers and ERA Legal acted for the vendor. The vendor's agent who received the deposit was McGrath Realty of Lindfield.

5 The contract provided that completion would occur on the later of 49 days after the date of exchange of contracts or 14 days after the vendor, Mrs Steingold, served a Registration Notice (of the subdivision) on the Veliks: Special Condition 34.

6 The 49 day period expired on 23 January 2010 without completion having occurred. Thereafter Mrs Steingold could set a date for completion by serving a special condition 34 Registration Notice.

7 Mrs Steingold served a form of Registration Notice on the Veliks between 9 and 12 February 2010. But this service provoked controversy. Her solicitors emailed the solicitors for the plaintiffs on 9 February 2010 purporting to serve the Special Condition 34 Registration Notice. But the next day, 10 February, the purchasers objected saying that the vendor's 9 February notice did not provide proper title particulars or a plan of subdivision sufficient for the Veliks to give to their proposed mortgagee. On 13 February 2010 Mrs Steingold emailed these additional details to the Veliks.

8 The Veliks maintained that Mrs Steingold had not served a Special Condition 34 Registration Notice in conformity with the contract. On 13 February Mr Velik said that the Registration Notice and the required information should have been provided together and not just by email. Nevertheless he indicated the purchaser's were prepared to treat 26 February (being 14 days after 12 February) as the contract's completion date. On 15 February Mrs Steingold's solicitor acknowledged that settlement would occur on 26 February but did not enter the debate as to whether or not the Registration Notice had been validly served. That issue was left sleeping. But it was revived later when the parties' dealings subsequently reached a stalemate.

9 The agreed completion date, Friday 26 February approached. Just beforehand on Wednesday 24 February, the Velik's solicitor communicated that the purchasers would be unable to settle by the agreed date, but he foreshadowed nevertheless that they could so do by 5 March, the Friday one week after the agreed completion date.

10 Mrs Steingold responded to this proposal after the agreed date of Friday 26 February had passed. She issued a Notice to Compete at 12.25pm on Monday, 1 March, requiring the purchasers to complete by 3.00pm on the following Monday fortnight, Monday 15 March. The Veliks say that this Notice to Complete provided less notice than the 14 days that Special Condition 52.1 of the contact allowed and was otherwise not reasonable notice. Non-compliance with the Notice to Complete is the basis for Mrs Steingold's claim that she later validly terminated the contract. So whether the period allowed by the Notice to Complete is legally sufficient is the next issue between the parties.

11 The Veliks did not complete on Friday, 5 March as they had foreshadowed they could. But the vendor's Notice to Compete had, in any event, set a different timetable. The parties now directed their mutual energies to arranging settlement on the afternoon of Friday, 12 March 2012, within the period allowed by the Notice to Complete.

12 The planned settlement on 12 March itself turned into a legal stand off. Neither side would compromise on a disagreement about how much was to be paid at settlement. The Veliks said certain disputed moneys, amounting to less than $5,000, should be paid under contract, clause 7 to Mrs Steingold's agent as a stakeholder pending determination of the dispute under the contract's arbitral mechanism about the actual amount quantum payable on settlement.

13 Mrs Steingold refused to do this. She wanted the disputed money paid to her at settlement. There were other related issues. In a $1,260,000 purchase of a residence in St Ives, $5,000 is a relatively small sum. But a previously cordial relationship between the parties had by then so deteriorated that neither side was prepared to compromise on this issue. The settlement could not proceed. The Veliks say that the settlement failed because Mrs Steingold breached contract, clause 7 by refusing to allow the moneys to be paid on settlement to her agent. She in turn disputes this and says the Veliks were not ready, willing and able to settle that afternoon in any event and repudiated the contract by refusing to pay her the full contract price. This presents the next group of issues for determination.

14 Theoretically settlement could have occurred within the Notice to Complete period at any time before 3.00pm on Monday, 15 March. But little was done to explore the possibility of a settlement after the weekend. Shortly after 3.00pm on 15 March, Mrs Steingold's solicitors served a Notice of Termination.

15 The Veliks denied that Mrs Steingold's 15 March Notice of Termination was valid. They claimed that Mrs Steingold was then in breach of contract, had based the Notice of Termination on an invalid Notice to Complete and had refused to settle in conformity with the contract.

16 Matters soon escalated. On 27 March Mrs Steingold gave notice evicting the Velik family from the property. On 4 April the Veliks accepted Mrs Steingold's Notice of Termination as a repudiation of the contract. They vacated the property by 9 April.

17 The principal issues in the proceedings are: whether Mrs Steingold was entitled to terminate the contract by her notice at 3.18pm on 15 March 2010; and, what are the parties' respective entitlements to the $126,000 deposit and any interest earned on it. Resolution of the first of those principal issues depends upon the three other issues that arose from the parties' dealings: (1) whether by 12 February Mrs Steingold had served a valid Registration Notice on the Veliks setting a completion date 14 days later; (2) whether Mrs Steingold's Notice to Complete gave less than the required contractual period; and (3) whether each of Mrs Steingold and the Veliks were ready, willing and able to complete the contract on 15 March or were in breach justifying termination. These issues provide the structure for this judgment.

18 Despite the disagreements between these former neighbours these proceedings were conducted with careful attention to detail by Mr Scruby for the Veliks and Mr Knoll for Mrs Steingold. Their careful submissions assisted the Court through the legal issues the parties directed at one another.

19 It is self evident from the course of events described here that by no later than mid-February 2010 Mr and Mrs Velik and Mr and Mrs Steingold had poor personal relationships. Why that had come to be so is not a necessary part of the Court's inquiry. All that can be observed is that both parties, despite their professional backgrounds, exhibited little flexibility in their mutual dealings between mid-February and mid-March 2010. A little more about the background is now useful.

Background

20 The first and second plaintiffs are husband and wife. In early 2008 they decided to move with their three children from a residence in the northern Sydney suburb, East Lindfield, to St Ives. They completed the sale of their East Lindfield home on 19 May 2008 and took a lease back for six months while they looked for a house to purchase in St Ives. They found the Flinders Avenue property. The family moved there as tenants in January 2009.

21 Mr and Mrs Velik's aim was either to purchase or to build a home in St Ives. A purchase in east St Ives reasonably near to the senior school campus of Masada College was one of their several preferences for the kind of property they wanted.

22 They only found a limited number of properties satisfying all their needs: the Flinders Avenue property and another in Carcoola Road, St Ives. Although the Flinders Avenue property satisfied most of their preferences the asking price was then well above the $1.25 million that they wished to pay for a house in the area.

23 Mr and Mrs Velik elected to purchase the Carcoola Road property and exchanged contracts for it in late November 2008. They completed this contract on 22 July 2009. The plaintiffs planned to knock down a weatherboard house standing on the Carcoola Road property, after obtaining development approval for a new home. But by September 2009, with children in upper high school, the plaintiffs decided that demolishing the mostly weatherboard home at the Carcoola Road property and building a new house was too ambitious a project for them.

24 Since leaving East Lindfield the Velik family had continued to rent the Flinders Avenue property. In mid November the plaintiffs exchanged contracts to sell the Carcoola Road property. The sale completed on 3 December 2009. After paying out their mortgage of some $744,242.70 over the Carcoola Road property the Veliks had the benefit of the deposit from the sale of the Carcoola Road property of $92,000, plus the net amount payable to the vendor on settlement of $84,031.44. The plaintiffs intended to use this money, totalling $176,031.44, as the deposit on the purchase on another house.

25 When the plaintiffs left East Lindfield their lease of the Flinders Avenue property was under a residential tenancy agreement from Mrs Steingold ("tenancy agreement"), which commenced on 16 January 2009. Mrs Steingold and her husband Mr Colin Steingold resided in a house on the residual property, adjoining the Flinders Avenue property. At that stage the two unsubdivided properties and homes had the same title.

26 The tenancy agreement was for a period of 12 months terminating on 15 January 2010 at a rent of $1,100 per week plus GST (if applicable). The tenants were responsible for electricity, gas, and water usage charges in respect of the Flinders Avenue property. The agreement provided for a rental bond of 4 weeks rent and for holding over after 16 January 2010. In fact the agreement continued until 9 April 2010 and was terminated just after the defendant terminated the sale contract. Both plaintiffs and their children lived at the Flinders Avenue property throughout the term of the tenancy agreement.

27 The plaintiffs developed a strong interest in purchasing the Flinders Avenue property from the time they first saw it, when they were looking at properties in the St Ives area. But Mrs Steingold's early asking price of $1.5 million deterred the Veliks as it was above what they were prepared to pay. After the Veliks' purchase of the Carcoola Road property, Mr and Mrs Steingold still had the Flinders Avenue property on the market, initially without an agent and then later employing the services of an agent.

28 The experience of living in the Flinders Avenue property for 9 months further attracted the plaintiffs to it. The Veliks resumed negotiations with Mr Steingold. The asking price dropped from $1.5 million to about $1.3 million.

29 The Flinders Avenue property was offered for sale by auction in November 2009 but was passed in. The plaintiffs did not bid at the auction. The deposit and other proceeds of the sale of the Carcoola Road property had not yet become available to them, and would not until early December 2009. In November 2009 they were not in a financial position to bid.

30 Just before settlement of the Carcoola Road property on 2 December 2009, Mr Velik and Mr Steingold had a conversation in which they reached a verbal consensus that the Flinders Avenue property might be sold for $1.26 million, provided contracts were exchanged by the end of that week, namely Friday, 4 December 2009. I accept Mr Velik's evidence that in his conversation with Mr Steingold on 2 December 2009 Mr Steingold made clear that only minor non-controversial drafting changes would be permitted to the draft contract which Mrs Steingold had already issued. I find Mr Steingold said he (on behalf of his wife) would consider changes "only if they are minor. I'm not prepared to make any fundamental changes to the contract at this stage". He said this to ensure that exchange of contracts took place that Friday. Mr Velik says, and I also accept, that because of the attitude that Mr Steingold expressed to him he did not turn his mind to proposed amendments to the sale contract to address its disadvantages from his perspective. I accept that because he did not turn his mind to these various matters that he did not take up the opportunity to attempt to re-negotiate any of them. The disadvantages Mr Velik saw are dealt with later in these reasons.

31 Contracts were exchanged on Friday, 4 December 2009. A ten per cent deposit of $126,000 was paid to the vendor's agent on exchange, with a balance payable on settlement of $1,134,000. The terms of the contract are set out in the later sections of these reasons, to which the terms are relevant.

The Foundation of a Valid Notice to Complete - a valid Registration Notice

32 Mrs Steingold served her Notice to Complete on the plaintiffs on 1 March 2010, requiring completion by 3.00pm on 15 March 2010. The plaintiffs contend that when she did the pre-conditions for completion did not previously exist, as Mrs Steingold had not served a valid Registration Notice under contract, clause 61. The plaintiffs' contention was that if the defendant had not done what was required to enable completion to take place, she was not in a position to serve a Notice to Complete.

33 The legal basis for the plaintiffs' argument is well founded. A party cannot serve a Notice to Complete where the party has not fulfilled a necessary pre-condition on its part to requiring completion to take place. But the issue is whether the defendant here had met this pre-condition for requiring completion to take place.

34 Contract, clauses 34 and 61 govern the parties' obligations in the settling of a date for completion. Special Condition 34 provides:-

"Completion Date

The completion date shall be the later of the following dates:-

(a)29 days after the date of exchange of this contract; or

(b)14 days after the Vendor serves the Purchaser with the Registration Notice of the Proposed Subdivision."

35 Contract, clause 61 defines somewhat tautologously the "Registration Notice" that must be served:-

"Registration Notice means a notice served by the Vendor that the plan of subdivision is registered."

36 Contract, clause 20.6 defines how documents may be "served" under the contract:-

"20.6A document under or relating to this contract is-

20.6.1signed by a party if it is signed by the party or the party's solicitor (apart from a direction under clause 4.3);

20.6.2served if it is served by the party or the party's solicitor;

20.6.3served if it is served on the party's solicitor, even if the party has died or any of them has died;

20.6.4served if it served in any manner provided in s 170 of the Conveyancing Act 1919;

20.6.5served if it sent by fax to the party's solicitor, unless it is not received;

20.6.6served on a person if it (or a copy of it) comes into the possession of the person; and

20.6.7served at the earliest time it is served, if it is served more than once."

37 Mrs Steingold gave a Registration Notice on 9 February 2010 that she claimed was clause 34 compliant. The Veliks said it was non-compliant. But the vendor counters with a contention that the Veliks accepted what was served as compliant with clause 34 and cannot now depart from that position. The relevant course of events shows that the vendor's contentions are correct on this issue.

The Registration Notice

38 What Mrs Steingold claims was a clause 61 compliant Registration Notice was served on the plaintiffs in stages. The first indication to the plaintiffs that the subdivision had been registered as the contract contemplated was on 9 February 2010. ERA Legal wrote to SV Law that day stating:-

"Pursuant to the provisions of special condition 34 of the Contract entered into between Steingold and Velik in relation to the sale of the 21 Flinders Avenue, St. Ives, the Vendor hereby gives you notice that registration of the subdivision has taken place. A copy of the registration notice will be forwarded to you shortly."

39 Neither the Registration Notice nor the new title particulars were enclosed with this 9 February 2010 letter. But the vendor nominated 23 February 2010 as the date for settlement, namely 14 days from that time.

40 ERA Legal sent the Department of Lands planned Registration Notice to Mr Velik by email at SV Law the next day, 10 February 2010 at 2.50pm. The notice contained a deposited plan number. But it did not identify the new title particulars for the property. That omission was not remedied until Friday, 12 February 2010, when the ERA Legal forwarded the new title particulars to SV Law, together with a copy of what was claimed to be the registered plan of subdivision.

41 Mr Velik immediately protested the slow and allegedly non-compliant provision of this information. On Saturday, 13 February 2010 he emailed ERA Legal criticizing the delay in providing title particulars and pointing out that the notice and the provision of particulars "should properly have occurred simultaneously".

42 In my view, Mr Velik's contention in his email of 13 February 2010 was correct. A valid Registration Notice "Registration Notice" under contract, clause 61 required the plaintiffs to provide the information the defendant had from the Registrar General, including information about the title particulars. A contractual purpose of the 14 day period in clause 34 was to allow the purchaser sufficient time to inform incoming mortgagees of the new title particulars in order to allow finance to be raised. That could not be done without full title particulars. The vendor's notification on 9 February of the proposed settlement on 23 February 2010 capable of meeting this contractual purpose and was not a Registration Notice served in accordance with clause 61 of the contract.

43 Mr Velik had also taken issue with service by email rather than service as required by the contract. Mr Velik was also correct about this in my view.

44 But Mr Velik took a conciliatory position in relation to those issues. He said of both those matters in his email of 13 February 2010 the following:-

"...and even though those steps should property have occurred simultaneously, and also even though communication by e-mail does not amount to proper notification under the exchanged Contract for Sale in respect of the above sale, our clients are prepared, in good faith, to treat those steps taken together as giving rise to proper notification of the registered plan of subdivision for the purposes of special condition 34 of the said exchanged Contract for Sale, yesterday, 12 February 2010, so that the completion date for the purposes of the said exchanged Contract for Sale becomes 26 February 2010, and not 23 February 2010 as asserted in your said e-mails below of 9 February 2010 and 12 February 2010."

45 Mr Velik pointed out to ERA Legal that vendor notification of subdivision normally includes notification of the relevant plan of subdivision number, the new title particulars and a copy of the plan of subdivision for what Mr Velik described was "for obvious reasons". Then Mr Velik, sought confirmation of his legal views from ERA Legal in the following terms:-

"Could you please now confirm that your client accepts that on a proper legal view, as well as on proper non-legal grounds, that the Vendor has not given proper notification of the registered plan of subdivision for the purposes of special condition 34 of the said exchanged Contract for Sale prior to 12 February 2010."

46 ERA Legal did not engage with the legal issues Mr Velik had raised in paragraph 5. Ms Marrone, the paralegal at ERA Legal handling the matter replied bluntly on Monday, 15 February 2010 to Mr Velik "Stephen, Our client will agree for settlement to occur on 26 February 2010, Regards, Andrea Marrone". Both parties then treated the settlement date under the contract as 26 February 2010.

47 The Veliks sought to argue at the hearing that Mrs Steingold had not given a valid Registration Notice under contract, clause 61. But this argument fails, in my view for a different reason. But for SV Law's later conduct, this argument would have been persuasive. In my view the terms of the contract required one notice to be served title with particulars and containing the applicable registered plan. That did not happen.

48 But SV Law also indicated to the vendor's solicitors in the email of 13 February that the purchasers would treat the settlement date as 26 February. The vendor clearly acted on that indication by preparing for settlement that day. So did the purchasers. They provided an unstamped form of transfer to ERA Legal on 19 February and on 25 February made verbal and written requests to extend the agreed date for completion of 26 February 2010. SV Law did not in the 13 February 2010 letter make willingness to treat 26 February as the completion date conditional upon the defendants' acceptance of his view about the validity of the Registration Notice under the contract. Both parties then began to treat the contract settlement date as 26 February 2010. Mr Velik understood that the defendant was treating it that way.

49 I agree with the defendant's submission that the plaintiffs elected to nominate 26 February 2010 as the completion date and waived any claim that the notice they had been given was insufficient to trigger the fixing of a completion date under special condition 34(b). There was also an accord as to 26 February being the completion date: cf Senavale v Nolan (2000) NSW ConvR 55-948 at 57,506-7 [30] - [37].

Validity of the Notice to Complete - less than 14 days

50 The Veliks contend that the Notice to Complete allowed them less than 14 days for completion and was therefore invalid as the contract required at least that period of notice. Alternatively they contend that the Notice was invalid because it specified a time for completion which was unreasonable in the circumstances. The defendant contended that the Notice to Complete was given in accordance with the contract and was otherwise being reasonable.

51 The period allowed by the Notice to Complete is only the first of a number of issues that both parties raise about the termination. But it is convenient to deal with it first. Mrs Steingold says that even if the Notice to Complete was invalid for allowing insufficient time, there were grounds upon which the contract could be terminated other than the expiry of the Notice to Complete. The Veliks say that even on those other grounds Mrs Steingold could not terminate, because she was at breach. The validity of both the defendants' and the plaintiffs' contentions on these other matters depend upon the Court's construction of contract, clauses 37 and 55. Those issues arise because, for the reasons explained in this section, the Notice to Complete did not give sufficient time.

52 ERA Legal served the Notice on Mr Velik at SV Law on 1 March 2010 by facsimile at 12.25pm. The Notice declared that the vendor was ready, willing and able to complete the sale and stated "The purchasers are required to complete the Contract on or before 3.00pm on 15 March 2010 at the Legalink Settlement Rooms, Level 3, 175 Castlereagh Street, Sydney NSW 2000 or at such other place that the Vendor may nominate in writing and in this respect time is now of the essence of the Contract". The Notice warned the purchasers that unless they completed the contract for sale within the time specified the purchasers will be "breach of an essential term of the contract" and the vendor will be entitled to terminate.

53 The contract contained a provision, special condition 52.1, agreeing that fourteen days was a reasonable time for completion. Contract, clause 52.1 provided as follows:-

"52.Notice to Complete

52.1In the event that either party becomes entitled to serve a Notice to Complete on the other party making time of the essence of this Contract both parties agree that fourteen (14) days from the date the notice is served will be reasonable both at law and in equity for completion of this Contract pursuant to the Notice."

54 The Notice to Complete gave less than 14 clear days for completion. Clear days are required for calculating the time allowed for completion under a Notice to Complete, and such a calculation excludes the day on which the notice was served: Forster v Joddoex Australia Pty Limited (1972) 127 CLR 421 at 429-430, 440-446, 448-449 and 451-452; Senavale v Nolan (2000) NSW ConvR 55-948; [2000] NSWSC 619 at [26] and [27]; and Smilie Pty Limited v Bruce (1998) 8 BPR 15,893. To provide 14 clear days the Notice to Complete would have needed to expire no earlier than the end of Monday, 15 March.

55 Was the Notice valid having given less than 14 clear days notice? Contracts containing provisions such as special condition 52.1 have been construed to require the giving of no less than the formal notice period set out in such clauses: Shaddick v Dunsford Investment Pty Ltd (1990) 5 BPR 11,322 per Young J and Doyle v Howey (1990) 6 BPR 13,401, per Cohen J. In my view, the operation of special condition 52.1 required the Notice to give at least 14 clear days notice.

56 Even if that were not correct, the Notice would still be invalid if it was unreasonable in the circumstances: Sindel v Georgiou (1984) 154 CLR 661. Strong circumstances must be demonstrated to justify the giving of a Notice to Complete which allows less than 14 days for completion; and 13 days has been held to be unreasonable: Sindel v Georgiou (1984) 154 CLR 661 at 670.

57 This is not a case, in my view, where the circumstances in which the Notice to Complete were served would justify allowing less than 14 clear days for completion. Although Mr Velik did not ultimately take issue with the defendants' failure to serve a proper Registration Notice when he agreed to completion on 26 February 2010, the confused way the defendants served this Registration Notice, and the practical need for Mr Velik to make a decision about whether to accept the Notice as valid within its 14 day period, meant that contractual times were already running very tightly against Mr and Mrs Velik, who barely had sufficient time to take steps required under the contract. This situation does not incline the Court to assess a reasonable Notice to Complete to be compressed into a period under 14 clear days.

58 The defendant's answer to this conclusion is not persuasive. The vendor sought without success to distinguish the cases which require 14 clear days notice to be given in a notice to complete and also argues that it is contrary to the purpose of clause 20.6 and special condition 52.1 not to count 1 March 2010 as the commencing day for the 14 day period. But in my view nothing in those contractual provisions requires that result.

59 This leads to the last and the most complex group of issues raised between the parties.

The Claimed Settlement Adjustments - Vendor's or Purchaser's Breach?

Introduction to the Issues

60 At settlement on 15 March the Veliks claimed two deductions from the purchase price. Mrs Steingold contended it was not open to the Veliks to claim these two adjustments, and that consequently they were in breach of contract, warranting her terminating the contract by her Notice of Termination on 15 March 2010. The plaintiffs contended that: the defendant was in breach of the contract for refusing to accept the claimed adjustments and the Velik's proposed method for their resolution; and, that in consequence of that breach the defendant was unable to issue a Notice of Termination.

61 The adjustments related to the plaintiffs two claims for deductions against interest charged on outstanding purchase moneys at settlement. The first was a claim that rent paid under the tenancy agreement should be deducted from the interest paid. The second was that the plaintiff should not have to pay interest for the delay in settlement from Friday, 12 March 2010 to Monday, 15 March 2010. But the issues were more complex, as this section of these reasons explains, starting with the relevant contract provisions then dealing with the course of events between the parties.

The Contract Provisions

62 The issues depend upon the course of events between 1 and 15 March 2010 and the construction of three clauses in the contract, clauses 7, 37 and 55. Clause 7 deals with claims by the purchaser at settlement and provides:-

"7.Claims by purchaser

The purchaser can make a claim (including a claim under clause 6) before completion only by serving it with a statement of the amount claimed, and if the purchaser makes one or more claims before completion-

7.the vendor can rescind if in the case of claims that are not claims for delay-

7.1.1the total amount claimed exceeds 5% of the price;

7.1.2the vendor serves notice of intention to rescind; and

7.1.3the purchaser does not serve notice waiving the claims within 14 days after that service; and

7.2if the vendor does not rescind, the parties must complete and if this contract is completed-

7.2.1the lesser of the total amount claimed and 10% of the price must be paid out of the price to and held by the depositholder until the claims are finalised or lapse;

7.2.2the amount held is to be invested in accordance with clause 2.9;

7.2.3the claims must be finalised by an arbitrator appointed by the parties or, if an appointment is not made within 1 month of completion, by an arbitrator appointed by the President of the Law Society at the request of a party (in the latter case the parties are bound by the terms of the Conveyancing Arbitration Rules approved by the Law Society as at the date of the appointment);

7.2.4the purchaser is not entitled, in respect of the claims, to more than the total amount claimed and the costs of the purchaser;

7.2.5net interest on the amount held must be paid to the parties in the same proportion as the amount held; and

7.2.6if the parties do not appoint an arbitrator and neither party requests the President to appoint an arbitrator within 3 months after completion, the claims lapse."

63 Clause 37 limits the purchaser's rights and remedies under the contract and provides:-

"37.Limitations on Purchaser's Rights

37.1The Purchaser may not make a claim or requisition, delay completion, rescind or terminate in connection with anything done by the Vendor which is not prohibited under this contract other than any such things so done by the Vendor which constitutes, gives rise to, or is as a result of the Vendor's failure to be ready, willing and able to complete this Contract when required to do so under or pursuant to this Contract.

37.2Despite clause 37.1, the Purchaser may rescind if any of the following matters detrimentally affect the Property to a significant extent:

(a)there is a difference between documents or plans attached to this contract and those documents or plans as registered; or

(b)there is a difference between documents or plans attached to this contract and the documents or plans referred to in clause 32."

64 Settlement was delayed in this case. So the parties looked to clause 55 which provided for interest on the delayed receipt of purchase moneys in the following terms:-

"55.Liquidated Damages

55.1 In the event that completion of this Contract does not take place on the completion date, other than due to the Vendor's default, then in addition to the other rights accruing to the Vendor as a result hereof and for so long as the Venfor is ready, willing and able to complete this Contract, the Purchaser agrees that it will pay to the Vendor interest calculated at the rate of 10% per annum on the balance of purchase moneys outstanding calculated on a daily rate, such interest to be computed from the completion date until the actual date of completion of this Contract.

55.2 The parties acknowledge that the rate of interest referred to in clause 55.1 represents a genuine pre-estimate of the damages that the Vendor will suffer in the event that the Purchaser fails to complete this Contract on the completion date.

55.3 This clause is an essential condition of this Contract."

65 Both the Veliks and Mrs Steingold deployed these provisions in their arguments about settlement of the contract during the two weeks after Mrs Steingold's serving of the Notice to Complete on 1 March 2010.

66 Settlement did not occur by 3.00pm on the afternoon of 15 March 2010. By that afternoon both the Veliks and Mrs Steingold were contending that the other had repudiated the contract. In this section I find that Mrs Steingold was correct in her contention that the Veliks had repudiated the contract. This occurred when the Veliks refused to settle on Friday, 12 March 2010 and again on Monday 15 March 2010, except on terms that were inconsistent with the contract. Just how this occurred requires close examination of the events in which the parties were involved from 1 March 2010 to 15 March 2010. This conveniently falls into four periods: 1-5 March, 6-11 March, 12-14 March, and 15 March.

1- 5 March - Notice to Complete to the Second Appointment for Settlement

67 The Veliks did not receive approval for funding to purchase the Flinders Avenue property until 11 March 2010. This is why first settlement appointment of 16 February 2010 was vacated. Mr Velik rang Mr Steingold on 24 February and explained to him "because of a last minute additional requirement of our home loan lender raised with us yesterday, and clarified this morning, we will only likely be in a position to complete the sale of the property on Friday week, 5 March 2010".

68 Even at this early time, before the vacation of the first appointment for settlement on 26 March, the issues that were later to divide the parties had emerged. On 25 February Mr Velik confirmed by letter his request to the vendor to defer settlement. This letter confirmed the reasons for the deferral that Mr Velik had given Mr Steingold and invited the recalculation of settlement figures "as at 5 March 2010", the newly foreshadowed settlement date. The 25 February letter offered to "pay contract interest on the balance of the contract price for the week 26 February 2010 to 5 March 2010, to the extent that the interest exceeds the lease rental for that week". Mr Velik explained that the purchasers took this position because payment of both rent and contract interest to the vendor for the extended period after completion was due "would amount to double counting of [Mrs Steingold's] contract loss to the extent of the lease rental so payable" and was therefore to that extent said to be an "unenforceable penalty". Mr Velik persisted in this view throughout the next two weeks and right up to 3.00pm on 15 March. It was the first of their intractable legal contests about settlement.

69 Mr Velik was firm about this position. Leaving aside the question of penalty, the Veliks alleged double counting here of Mrs Steingold's loss, merely because Mrs Steingold received both rent and interest for delayed receipt of the purchase price. Mrs Steingold was entitled under the contract to interest at 10 per cent per annum on the balance of the purchase price outstanding: Contract, clause 55.1. This was the agreed compensation for delayed receipt of the balance of her money under the contract. Of course, had settlement occurred at the first appointed settlement, thereafter Mrs Steingold would have had her capital and would have also enjoyed the rental receipts from the property up to that settlement date. After settlement Mrs Steingold would have her capital but no rental receipts. Thus, Mr and Mrs Velik say any calculation of interest that does not also deduct the rent she receives during the delayed settlement period involves double counting of Mrs Steingold's loss due to settlement delay. But the contract does not provide for any deduction for rent received during the period of delayed settlement. Clause 55.1 provides for the recovery of interest without deduction. The question is whether this amounts to double counting and whether it is a penalty.

70 ERA Legal replied on 26 February: pointing to the purchasers' clause 55.1 obligation to pay interest without deduction for rent; declaring that the vendor was incurring interest charges of at least 8.5 per cent on the outstanding monies, and had "additional obligations to meet including insurance payments and other outgoings in relation to the property; and seeking confirmation that settlement would take place on 5 March 2010.

71 The vendor served the Notice to Complete on Monday, 1 March 2010, followed on 3 March by a draft settlement statement adjusted for settlement on 5 March and confirming settlement at 2.00pm on Friday, 5 March.

72 But later on 3 March SV Law sought on behalf of the purchasers to defer settlement, "due to our client's home loan finding", for a further week, to Friday, 12 March. Again SV Law offered to pay additional interest on the contract price for the period Saturday, 6 March to Friday 12 March. But the offer was structured on the same basis as before: the offer only extended to paying contract interest "that exceeds the lease rental for those periods". SV Law's letter regretted the inconvenience caused by this further delay to settlement. ERA Legal's reply took issue with the purchasers' contention that there should be any deduction from the interest paid to the vendor between 26 February and 12 March on account of the rent received during the same period. By 4 March the existence of an issue about deduction of two weeks' rent (namely a sum of $2,200) from the two weeks' interest was well appreciated on both sides. The purchasers kept paying the rent on time.

6-11 March 2010 - The Lead up to Settlement

73 The parties began preparing for a settlement on Friday, 12 March. On 10 March ERA Legal confirmed it had booked settlement rooms for 2.00pm on 12 March. But on 11 March SV Legal had to request deferral of settlement once again for Mr and Mrs Velik, "due to our client's home loan funding". SV Law's pessimistic prediction about settlement on 11 March (at 4.45pm) was that "[our client will]...now only likely be in a position to complete the above sale this coming week [commencing Monday, 15 March] or the following week [commencing Monday, 22 March]". SV Law's letter claimed that the actual future settlement date would only be precisely known "either tomorrow [12 March 2010] or in the first half of the coming week". In this letter SV Law restated the purchasers' by now familiar offer to pay further contract interest for an extended period after 12 March, but only "to the extent that contract interest exceeds the lease rental for the said period". This letter, like its predecessors, regretted the inconvenience being caused and reserved the purchasers' position on a number of matters and specifically on the validity of the notice to complete.

74 In reply late the next morning, 12 March, at 11.52am, ERA Law reaffirmed that Mrs Steingold was ready, willing and able to settle at 2.00pm that day, and warned of the necessity for the purchasers to settle by 3.00pm on Monday, 15 March, to avoid the risk of repudiating the contract.

75 In the face of the vendor's Notice to Complete, expiring on 15 March, the SV Law letter of 4.45pm 11 March was bold. But by the following day the purchasers had changed their approach.

12 March 2010 - the Third Appointment for Settlement

76 Friday, 12 March 2010 was an intense day of activity for both the vendor and for the purchasers. Settlement ultimately did not occur that day. But the circumstances in which it failed to take place led to the purchasers alleging: (1) that the vendor was not ready, willing and able to settle that day; and (2) that therefore the payment of Clause 55.1 contract interest should be permanently suspended from 12 March. The vendor contested both these matters. But this contest meant that the circumstances of the failed settlement on Friday, 12 March became as important as the failure in the settlement the following Monday, 15 March.

77 As soon as SV Law received the ERA Legal 11.52am email on Friday, 12 March the purchasers abandoned their request to defer settlement beyond that day, Mr Velik explains and I accept that the change of position was due to his by then having organised unconditional approval for funding to complete the purchase. The evidence discloses, and I accept, that the Veliks drew bank cheques that day for settlement. On 11 March the Veliks entered a funding agreement with Balpie Pty Limited sufficient to finance settlement. Aspects of the Veliks' contentions that they were ready, willing and able to settle that day were later put in issue.

78 Mr and Mrs Velik claimed to be able to source $1,050,000 from Balpie Pty Limited, which together with their $175,000 in savings (total $1,225,000) would be sufficient to meet ERA Legal's claimed 12 March settlement figure of $1,139,368.65. Stamp duty of $55,000 was still payable on the contract on 12 March, totalling outgoings for the Veliks of $1,194,368.65. I find they were in a position to meet those outgoings.

79 Mr Velik did not fully organise the bank cheques for settlement on 12 March until 1.30pm that very day. Nor did he communicate to the vendor his changed ability to settle that day, until 2.17pm. By then the originally appointed 12 March settlement time, which had been cancelled the previous day, had passed. It no doubt took Mr Velik at least 45 minutes to prepare and send his 2.17pm email to ERA Legal, after he obtained his bank cheques. SV Law's letter declared "our clients are now ready, willing and able to complete the above sale at 4.00pm today Friday, 12 March 2012 at your client's nominated completion location...". But the letter reaffirmed the purchaser's position that $2,200 of the, by then $4,349.59, interest adjustment was an unenforceable penalty, and said "our clients require that the said amount be retained from the deposit moneys held by your client's agent" pending engagement of the contract's clause 7.2 dispute resolution mechanism.

80 SV Law prepared a direction to the agent, which SV Law proposed to hand over at settlement, authorising the agent to account to the vendor for the deposit and 50 per cent of the accrued net interest on the deposit less the disputed $2,200.

81 But unrecognised by the purchasers the agent had in fact already released the deposit to the vendor. Contract, clause 53 authorised the vendor to receive the deposit in this way. This seems to have been overlooked by Mr Velik when preparing the direction to the agent on 12 March. The true situation did not become apparent to the purchasers until the parties gathered for a possible settlement on the afternoon of 15 March.

82 By email sent at 3.37pm on 12 March the vendor declined to settle that day, stating "given the late notice by your clients which was received at 2.11pm today, our Bank is not in a position to reconvene today to facilitate settlement". The difference between the vendor's 2.11pm and the purchasers 2.17pm record of sending this email appears to be associated with the calibration of the respective facsimile time functions. The difference is not material to the issues now to be decided. The 3.37pm ERA Law letter: complained of the purchasers' late notice; appointed 12.30pm on Monday, 15 March 2010 as the new settlement date; and claimed that the Contract's clause 55.1, 10 per cent interest rate was a genuine pre-estimate of the vendor's damages due to delayed settlement. Then Mrs Steingold made very clear that the following Monday she expected full payment as she had calculated it or she would regard the purchasers as repudiating the contract.

83 There was much contest about exactly what happened on the late afternoon of Friday, 12 March 2010. Mrs Steingold contested that Mr and Mrs Velik were ready, willing and able to settle late that afternoon. I find that they were ready, willing and able to settle. But they failed to give sufficient notice to Mrs Steingold that a change of position on their part was even in the wind. Their failure to give more notice than they did to Mrs Steingold meant that her decision to decline settlement that afternoon was entirely reasonable.

84 But two arguments developed between the parties about the events of this Friday afternoon. The vendor, Mrs Steingold, alleged that the Veliks were not ready, willing and able to settle because the funds in the Veliks' savings account were allegedly not available for settlement. On the other side the Veliks allege that Mrs Steingold was not ready, willing and able to settle because she used a false excuse to put off settlement that afternoon. I do not accept either of these contentions. The findings relevant to them appear below.

85 The Veliks' Readiness, Willingness and Ability to Settle on Friday, 12 March 2010. Mrs Steingold alleged that the Veliks were not ready, willing and able to settle on the afternoon of Friday, 12 March. I accept Mr Velik's evidence that he could draw on the funds available in the savings account that afternoon, even though he did not actually draw them down that afternoon. His reasons for not drawing the funds down was that he was waiting to receive confirmation from Mrs Steingold that she was prepared to proceed to a settlement that afternoon. He explains that, understandably in my view, he did not wish to draw down upon his savings account funds with the National Australia Bank until he was aware whether settlement was going to take place on the Friday afternoon or the following Monday morning. The amount to be drawn down in the form of a bank cheque would have differed from the Friday until the Monday. So he waited to see for which date Mrs Steingold was going to opt. Had Mrs Steingold opted for the settlement on the Friday afternoon I find that Mr Velik was in a position to settle that afternoon. He says, and I accept, that he could have gone to the National Australia Bank before 5pm and organised the drawing of the cheques from his savings account. The amount due to Mrs Steingold on 12 March would have been $89,368.65 (in addition to the cheque payments to McGrath Lindfield and the CBA). That figure would have been slightly higher the following Monday. I accept Mr Velik's evidence about this. The attack on his credibility as to his capacity to draw these funds down was not successful.

86 Mrs Steingold's Readiness, Willingness and Ability to Settle on Friday, 12 March 2010. The Veliks counter allege that Mrs Steingold herself was not ready, willing and able to settle on the afternoon of Friday, 12 March. Mid afternoon correspondence had SV Law reiterating to ERA Legal the need for an urgent response to SV Law's 2.17pm email. At about 3.30pm SV Law sent a facsimile marked "URGENT" to ERA Legal, referring back to SV Law's earlier 2.17pm facsimile and stating:-

"We urgently await hearing from you concerning your client's readiness, willingness and ability to complete the above sale at 4pm today Friday, 12 March 2010 at your client's nominated completion location of the legal link settlement rooms..."

87 The 3.30pm facsimile then continued that our clients are "remain ready, willing and able to complete the above sale at 4pm today".

88 SV Law's correspondence was taking a hopelessly optimistic view about arranging settlement. An email at 2.17pm, followed by another at 3.30pm, giving first notice of a 4pm settlement were in my view plainly unreasonable requests after the purchasers' had on the previous day themselves cancelled the appointed Friday settlement arrangements.

89 ERA Legal's relatively quick formal response in the circumstances was quite reasonable. ERA Legal's response was received at 3.37pm, the letter mentioned earlier in these reasons. The letter of response said in full:-

"1.Given the late notice by your clients which was received at 2.11pm today, our Bank is not in a position to reconvene today to facilitate settlement.

2.The Notice to Complete is valid and effective.

3.Your clients have given late notification on each of the three prior dates of its inability to settle on those dates.

4.Our client remains ready, able and willing to settle the matter at Legalink's settlement rooms, Level 3, 175 Castlereagh Street, Sydney at 12.30pm on Monday 15 March 2010.

5.Pursuant to clause 55 of the Contract, this clause provides that in the event that completion does not occur on the completion date (other than due to the Vendor's default) then in addition to the other rights accruing to the Vendor as a result thereof (and for so long as the Vendor is ready, willing and able to complete this Contract) the Purchaser agrees that it will pay to the Vendor interest calculated at the rate of the 10% per annum, such interest to be computed from the completion date until the actual date of completion of this Contract.

Clause 55 is an essential condition of the Contract and the parties acknowledge in the Contract that the rate of interest referred to in clause 55.1 represents a genuine pre-estimate of the damages that the Vendor will suffer in the event that the Purchaser fails to complete this Contract on the completion date.

6.We will now recalculate settlement figures for Monday, 15 March 2010. If your clients do not pay the full amount of the interest...[10 per cent on the full amount outstanding under clause 55] at settlement on Monday, 15 March 2010 then settlement will not occur and our client, will accept your client's wrongful repudiation of the contract."

90 Mr and Mrs Velik took issue with the vendor's statement that "our bank is not in a position to reconvene today to facilitate settlement". This statement was objectively reasonable and is supported by Mr Steingold's own evidence. I find that Mrs Steingold was not able readily to reorganise the Commonwealth Bank to facilitate a settlement that afternoon at 4pm. The vendors' statement through her lawyers that she was "not in a position to reconvene today to facilitate settlement" was not a false declaration. Nor is it a basis to infer that she was unwilling to settle that day. She was unable to settle on such short notice for reasons for which in my view were understandable.

91 Mr Velik adduced evidence that the CBA, Mrs Steingold's outgoing mortgagee, regularly attend to discharge mortgages at settlements at the Legal Link settlement rooms and the Espreon settlement rooms, at the rooms proposed to be used on 12 March. Mr Velik's experience was that it was possible to re-schedule with the CBA Sydney Metropolitan area residential conveyances within about 1 to 2 hours' notice without much pressing the CBA very hard. But I accept Mr Steingold's evidence to the contrary. Moreover, Mr Velik's evidence ignores the fact that CBA had apparently been told to down tools the previous day because of the purchasers' declared uncertainty about appointing any near settlement date. Given the stop-start history of this settlement it is not surprising that the CBA, not anxious to waste its time again, may have been slower than usual to respond. Mr Velik seeks to rely upon what happened on the afternoon of 15 March 2010 to show that Mrs Steingold was falsely using the CBA as an excuse for not settling on the Friday afternoon. The events of the 15 March 2010 are dealt with below. Nothing in those later events in my view assists the inference that the Veliks seek to draw about Mrs Steingold's willngness to settle on 12 March. If anything the events of the afternoon of 15 March show that there were practical limits on the CBA's capacity to continue to assist the viability of this settlement.

92 No settlement occurred at 4pm. Friday 12 March 2010 ended for the parties with Ms Marone, the conveyancing paralegal from ERA Legal forwarding a revised settlement adjustment sheet showing the contract balance still at $1,134,000 but after adjustments the amount due on a 15 March settlement was $1,040,774.10. She required on the cheques for the Monday to be paid to the agent, McGrath Lindifield, in the sum of $22,680 and to the Commonwealth Bank of Australia in the sum of $1,118,094.10, making a total of $1,140,774.10.

15 March 2010 - The Fourth Appointment for Settlement

93 Correspondence continued over the weekend. On Saturday 14 March SV Law sent a lengthy facsimile to ERA Legal protesting at statements made in ERA Legal's 12 March 2010 3.37pm letter. SV Law's 14 March letter was the first purchasers' communication to take issue with ERA Legal's contention that it was not "in a position to reconvene" on 12 March 2010 to "facilitate settlement". SV Law contended that Mrs Steingold was not ready, wiling and able to complete on the afternoon of 12 March for two reasons, as stated in paragraph 4 of this letter:-

"4.Respectfully, your client was not ready, willing and able to complete the said exchanged Contract for Sale throughout, amongst other things, ordinary banking hours on 12 March 2010, in turn due to your client:

(a)claiming in paragraph 1 of your said letter that your client's 'Bank' (presumably outgoing mortgagee, Commonwealth Bank of Australia) was not 'in a position to reconvene' on 12 March 2010 to 'facilitate settlement' - see further 1. above; and

(b)having committed a repudiatory breach of the said exchanged Contract for Sale by paragraph 6 of your said letter, and which repudiatory breach remains outstanding - see further 6. below."

94 The 14 March letter went on to contend that the purchasers were and Mrs Steingold was not, ready, willing and able to complete at 4pm on 12 March 2010. The letter then referred to Contract, clause 55 and pointed out that the agreement to pay interest in that clause applies only "so long as the vendor is ready, willing and able to complete" the contract. SV Law then contended that the claim for default interest during the period 13 March to 15 March (of $932.05) was an unlawful claim. SV Law said that paragraph 6 of the 3.37pm letter was a repudiatory breach of the contract because of its statement of intention to terminate the Contract when the vendor's were not entitled to do so because of: (a) an invalid Notice to Complete; (b) an invalid claim for default interest from 13 to 15 March 2010; (c) an unlawful disregarding of lease rental in the vendors' claim for default interest; and (d) an invalid interpretation of the withholding of moneys pursuant to sub-Contract, clause 7.2. The last of these item (d), was the first intimation of the coming contest about the operation of clause 7.2. This became a central feature of the parties' dealings the following Monday.

95 But the alleged repudiation was not accepted. SV Law reserved the Veliks' right to elect to terminate and said nothing about what was going to happen the following Monday. As it turned out the Veliks and Mrs Steingold both made further preparation for settlement on the Monday but that settlement fell over because of different interpretations of clause 7.2.

96 One other incidental issue should be mentioned at this point. SV Law advised that its Transfer form provides for Mrs Laura Velik, the second plaintiff, to be the transferee pursuant to Contract, sub-clause 4.3 and foreshadowed that a direction for the Transfer form would be given to the vendor on completion, as provided in sub-clause 4.3. This provision of the Contract allows a purchaser to serve a form of transfer in which the transferee is not identical to the purchaser, but only on condition that the purchaser gives the vendor a direction signed by the purchaser for that form of transfer. Notwithstanding some continued correspondence about this issue the form of direction prepared by the purchasers was in accordance with Contract, sub-clause 4.3 and was therefore not an impediment to the purchasers' settling.

97 By mid morning Monday, 15 March 2010 Mr and Mrs Velik had decided to commit to settlement that day. SV Law sent a facsimile (actually dated 14 March 2010) at 10.35am, declaring the purchasers' readiness, willingness and ability to complete the sale at the appointed time of 12.30pm. This letter set out the purchasers' requirements for settlement which were ultimately unacceptable to the vendor and stopped the settlement that afternoon. In the 10.35am 15 March letter the Veliks made the following requirements for settlement: -

(a)that $2,200 of the Special Condition 55 $5,281.64 interest adjustment in the settlement figures due to delayed settlement, be retained from the deposit monies held by the agent pursuant to sub-clause 7.2 whilst the dispute about whether or not this sum being an unenforceable penalty was resolved; and

(b)that the gross amount of the interest adjustment for delayed settlement for the period 13 to 15 March 2010, namely $932.05 also be retained from the deposit monies held by the agent pending determination of dispute as to whether or not Mrs Steingold was ready, willing and able to complete on the afternoon of 12 March 2010 by reason of its declarations in paragraphs 1 and 6 of ERA Legal's 12 March 3.37pm letter.

98 Completion was scheduled on 15 March for 12.30pm at the Legal Link settlement rooms. Mr Velik represented the purchasers at the settlement. Ms Andrea Marrone, a paralegal from ERA Legal represented the vendor. Mr Velik was slightly late for the settlement, arriving at about 12.43pm. But Ms Marrone and the representative from the Bank waited for him. Much of what happened at the settlement rooms between 12.43pm and about 1.30pm is not contentious. But there was some disagreements between Mr Velik and Ms Marrone about what was said between them about a possible reconvening of the settlement later after 1.30pm.

99 The uncontentious events of the settlement appointment may be shortly stated. Mr Velik and Ms Marrone were at the Legal Link settlement rooms for about 45 minutes. Mr Velik organised the stamping of the contract and departed for a short period to draw cheques at the National Australia Bank from his savings account. He paid stamp duty on the contract of $54,997.32. He showed to Ms Marrone bank cheques in the amount of $22,680 for the agent, $1,027,320 payable to the CBA and $90,774.10 also payable to the CBA. But he provided an order on the agent letter sought to instruct the agent to retain the amounts of $2,200 and $932.05 for the previously identified claims from the amounts the agent released to the vendor.

100 It was then that Ms Marrone pointed out Mr Velik's error about the release of the deposit. She said to him it was not possible to require the agent to retain an amount of $3,132.05 because the deposit had already been released. She asked him to remove that from the order on the agent letter.

101 In response Mr Velik said to Ms Marrone that he would settle instead upon an undertaking to give a cheque to the agent for the disputed amount of $3,132.05 within 7 days of completion. Ms Marrone sought further instructions from Mr Steingold after Mr Velik had pointed out to her the provisions of Contract, sub-clause 7.2.

102 But Mr Steingold did not agree to Mr Velik's proposal. He instructed Ms Marrone to leave the settlement if the purchasers did not pay the funds in full without the undertaking to reimburse the agent. The language of Ms Marrone and Mr Velik's recollection of this exchange is slightly different. But I accept the substance of what happened from Ms Marrone's account.

103 While Ms Marrone was getting instructions from Mr Steingold, Mr Velik had taken a short trip to the National Australia Bank to draw on his savings account. But the representative of the CBA could not wait and said that he needed to leave. Ms Marrone contacted Mr Velik's office, obtained his mobile phone number and warned him that the CBA representative was about to leave. Mr Velik arrived back shortly afterwards and just before the CBA representative left.

104 There is a dispute as to exactly what happened next but I accept Ms Marrone's version of events to the extent that it differs from Mr Velik's. I prefer her evidence because in my view she was less agitated that Mr Velik at this time, had no personal interest in what happened, and she gave a more reliable account of the afternoon's events. She says that after Mr Velik returned at about 1.30pm the conversation took place between them to the following effect:-

"Mr Velik:What are your instructions?

Ms Marrone:My instructions stand. The vendor disputes the claim. If the purchasers do not agree to release the full funds my instructions are to walk away.

Mr Velik:Why do you say the purchasers' claim is invalid?

Ms Marrone:I do not have instructions on why it is invalid. My only instructions are that the claim is invalid."

105 Ms Marrone says that Mr Velik became agitated at this point. I accept that he did. He asked her to call Mr Steingold. She did but Mr Steingold declined to speak to Mr Velik. Ms Marrone communicated that to Mr Velik. The CBA representative then threatened to leave. Ms Marrone recalls, and I accept, that Mr Velik and the CBA representative had a conversation in her presence to the following effect.

"Ms Marrone:Mr Velik will you be available to settle later this afternoon?

CBA representative:Yes, but not here. I will be available at Esperon and can settle between 2.30 and 3.00 but not later than 3.30"

106 Ms Marrone confirmed that a formal booking was not necessary at short notice at the Esperon rooms with the CBA representative.

107 The CBA representative enquired before he left what was expected to happen later that afternoon. The parties agreed that they would try and resolve their differences before 3.30pm. Ms Marrone gave the cheques, the order on the agent and the directions back to Mr Velik who wished to know more from Ms Marrone the basis on which the purchasers' claim was being disputed. He said to her "once I understand that I will reconsider the position but I don't think that your client has any legal or valid basis to reject the compensation claim". Ms Marrone left the matter on the basis that she would get instructions. Mr Velik clearly intimated to her that he would prefer to discuss the matter with her, not with Mr Steingold.

108 Ms Marrone returned to ERA Legal about 2.15pm and discussed the matter with Mr Steingold who was giving instructions on behalf of his wife at this time. Shortly after 2.30pm Ms Marrone conveyed to Mr Velik the vendor's position that the compensation claim was not valid because all interest moneys due under special condition 55.1 had to be paid on settlement as an essential term of the Contract. After explaining this to Mr Velik Ms Marrone said "do you need to have that in writing?" to which he replied "no, only if you want to". She then asked "do you need time to think about it or to get instructions?" Mr Velik replied, "I will call you back shortly". She says, and I accept, that Mr Velik did not call back. Mr Velik's recollection is that he advised her "I will shortly be going down to the Espreon settlement rooms and will await the attendance from someone from ERA Legal there to complete the sale in accordance with our client's lawful interest withholding claims". But I do not think this was said, although I do accept that Mr Velik went down to the Espreon rooms at about 3pm that day. If this had been said Ms Marrone is likely to have remembered it and to have conveyed it to Mr Steingold. She was an efficient conveyancing paralegal in my view. She did not pass this on because it did not happen.

109 When Mr Velik arrived at the Espreon settlement rooms shortly prior to 3.15pm on 15 March he had the same bank cheques that he had carried with him earlier in the day. But no-one from ERA Legal attended. I accept Mr Velik's evidence that the CBA representative was present at the Espreon settlement rooms. His final communications to Ms Marrone in person had been to the effect that were he to hand these cheques over on settlement he would only do so on terms of an undertaking that amounts of $2,200 and $932.05 be paid to the agent pending a clause 7.2 determination. The vendors' non-attendance at the Espreon settlement rooms clearly indicated that this continued to be a term unacceptable to the vendor.

110 Commencing at 3.16pm Mr Velik made a number of phone calls to the offices of ERA Legal, seeking to understand why no-one was attending at the settlement and trying to contact Ms Marrone. He rang at 3.16pm and at 3.20pm and shortly afterwards spoke to a Mr Simon Gallant, another solicitor at ERA Legal in the firm's litigation area. Mr Gallant made clear that there would be no attendance at the Espreon settlement rooms and that the vendor had just faxed a Notice of Termination of the Contract to SV Law's office and that the Contract had therefore already been terminated.

111 But Mr Velik had been busy before he left for the Espreon settlement rooms. He had dictated a letter which SV Law then faxed in his absence to ERA Legal at 3.13pm. Under the heading "Extremely Urgent" SV Law explained that Mr Velik had just found out that the deposit had been released and reaffirmed the claims totalling $3,102.05 under Contract, sub-clause 7.2 and then said:-

"Accordingly, as our client's vendor directed bank cheques have already been drawn by this morning your client should provide to our clients at completion of the above sale re-scheduled attempted to occur by 3pm today. A cheque made payable to your client's agent for the said amounts totalling $3,102.05"

112 The letter then pointed out that once those steps had been taken the vendor should attend the Espreon settlement rooms. In my view this is how possible attendance at the Espreon settlement rooms was communicated to the vendor. Not through Ms Marrone.

113 But at 3.18pm ERA Legal's letter of Termination came through. It referred to the non-settlement of the Contract within the time specified in the Notice to Complete and said:-

"Our client now relies on the Notice to Complete and accepts your clients' wrongful repudiation of the Contract. Accordingly the Contract is now at an end."

114 Mr Velik returned to his office. Further correspondence took place that afternoon. At approximately 6.15pm SV Law sent a lengthy letter to ERA Legal giving Mr Velik's account of the events of the day and asserting that ERA Legal's facsimile of 3.18pm that day was itself a repudiation of the Contract. The purchasers' reserved their rights in relation to that repudiation.

115 ERA Legal countered the following day. ERA Legal also sent a detailed letter to SV Law on 16 March, explaining ERA Legal's version of the previous day's events and seeking to answer the purchasers' contentions. These disputed factual matters have now been taken up in the Court's findings and it is not useful reproduce this correspondence. A few subsequent events though were of significance in defining the parties' final legal relationship.

Events After 15 March 2010

116 The failed settlement of 15 March led to the purchasers' departure from the Flinders Avenue property. On 26 March 2010 Mrs Steingold gave notice under the holding over clause in the Residential Tenancy Agreement and gave Mr and Mrs Velik 14 days to vacate the property, requiring vacant possession by Friday, 9 April 2010.

117 On 4 April 2010 the purchasers claimed in correspondence to accept certain alleged repudiatory breaches of Mrs Steingold and to terminate the Contract. To support that termination the purchasers again relied upon paragraph 6 of the 3.37pm 12 March 2010 letter and the vendor's refusal to complete the Contract on 15 March, communicated in various ways to the purchasers as it had been. Mr and Mrs Velik then demanded repayment of the deposit in consequence of their termination of the Contract and sought the return of the deposit by close of business on 16 April 2010.

118 On 6 April 2010 SV Law disputed the validity of Mrs Steingold's Notice to Quit under Residential Tenancy Act 1987, s 57 but foreshadowed that Mr and Mrs Velik and their family would in fact vacate the premises by 9 April 2010. The Velik family vacated by that date.

119 Mrs Steingold sought to re-sell the Flinders Avenue property. But on 21 May 2010 Mr and Mrs Velik lodged a caveat over the property in respect of their claimed interest in the deposit through a purchaser's lien. Mrs Steingold alleged that they had no caveatable interest. That dispute led to the commencement of these proceedings. The immediate caveat issue was resolved through interim orders withdrawing the caveat prior to settlement of the re-sale with the lodgement of the deposit into a joint account at the CBA to be operated by Mr and Mrs Velik and Mr and Mrs Steingold, pending the outcome of these proceedings. These proceedings are now concerned with the disposition of that deposit, together with interest. There was much other correspondence between the parties on various procedural issues between June 2010 and the hearing in November 2011. But none of that correspondence is of present relevance.

120 The parties had markedly different views of the legal effect of these events under the contract. For the reasons that follow though I generally prefer Mrs Steingold's submissions on the subject of the parties' respective rights to terminate the contract arising out of these events.

The parties' respective rights to termination

121 Each of Mr and Mrs Velik and Mrs Steingold alleged that the other had failed to complete the contract. As a result each purported to terminate it: Mrs Steingold on 15 March 2010 and the plaintiffs slightly later on 4 April 2010. They each contended that on these facts that their right to terminate arose because of the other party's failure or refusal to complete the contract in accordance with its terms. It is convenient to use Mrs Steingold's contentions, as the structure for analysis in this part of the Court's reasons.

122 Mrs Steingold's principal contention was that the Veliks had failed to complete because they had failed to comply with her 1 March 2010 notice to complete. But the Court has already found that the notice to complete gave the plaintiff insufficient time to be a valid notice to complete under the contract.

123 Mrs Steingold's alternative contentions are of two general kinds. First, she contends that she was entitled to terminate the contract on 15 March 2010: because the Veliks had persisted in making various impermissible claims under the contract, including claims that were excluded by special condition 37.1; and because, the Veliks were in breach of an essential promise under the contract, due to their refusal to pay interest in accordance with special condition 55, thereby demonstrating they were not ready, willing or able to complete. Secondly, Mrs Steingold contends that the plaintiffs were in fact not ready willing and able to complete the contract in accordance with its terms because of their delay in completion on each of the three dates, 26 February 2010, 5 March 2010, and 12 March 2010, and specifically because of the cancellation of the settlement at 2 pm on 12 March 2010.

124 Mr and Mrs Velik's contentions are the mirror image of Mrs Steingold's contentions on these issues. They say: that all their claims were permissible under the contract and are not excluded by special condition 37.1; and that the defendant is not entitled to the interest she claimed at settlement under special condition 55. The Veliks also say that it was Mrs Steingold who was not ready willing and able to settle on 12 March 2012. But the Court has found above that she was. It is useful now to deal with Mrs Steingold's alternative contentions.

125 The alleged impermissible settlement claims. Mrs Steingold first group of contentions was that the Veliks had made impermissible claims as a condition of settlement on 12 and 15 March 2010. Mrs Steingold contended that the Veliks' claims were impermissible for three reasons; (1) the claims were excluded by special condition 37.1; (2) the claims were made too late; and (3) the claims were not made in accordance with the contract because they fail to recognise that the deposit had already been released. Only Mrs Steingold's first contention here is persuasive. But that is enough for her to succeed on this central issue.

126 (1) The plaintiffs' settlement claims excluded by special condition 37.1. On 15 March 2010 the plaintiffs sought to deploy contract clause 7.2 (Claims by purchaser) to require that certain of the deposit moneys be retained by the agent after settlement, pending resolution of disputes about the plaintiff's two claims that some of the interest that Mrs Steingold sought at settlement was either, (i) a penalty, or (ii) not claimable because Mrs Steingold was not ready willing and able to settle on 12 March 2010. The Veliks also made the first of these, claim (i), at the attempted settlement on the afternoon of 12 March 2010. But Mrs Steingold says that special condition 37.1 excludes the plaintiffs' use of clause 7.2 in the present circumstances.

127 Mrs Steingold's submissions about the effect of special condition 37.1 are persuasive. Special condition 37.1 provides that "The purchaser may not make a claim... in connection with anything done by the vendor which is not prohibited under this contract..." This prohibition against claims is subject to an exception. But the reasoning just below demonstrates this is not an applicable exception.

128 The Veliks' clause 7.2 claim seeks deductions from Mrs Steingold's claim to receive interest at settlement calculated in accordance with special condition 55. Mrs Steingold's claim for additional interest at settlement is not only "not prohibited under this contract" but it is expressly authorised under special condition 55. Specifically I have found that there was an accord as to the special condition 34 "completion date" being 26 February 2010. And under special condition 55.1 interest runs after that date, unless there is relevant default by the vendor (not the case here). The defendant's claim for interest at completion was authorised by the contract.

129 The Veliks' clause 7.2 claim is caught by the special condition 37.1 prohibition, because it is a claim "in connection with" something done by Mrs Steingold (seeking special condition 55 interest) that is not contractually prohibited. Although the Velik's claim is one apparently permitted by clause 7.2, nevertheless special condition 37.1 is crafted and operates to prohibit it.

130 The Veliks sought to avoid this conclusion by arguing that their claims were "in connection with" something that Mrs Steingold was prohibited from doing, namely making completion conditional on the payment of a penalty, which was a sum to which she had no contractual entitlement. The matter is one of characterisation. The defendant's claim for special condition 55 interest was not prohibited under the contract. That is sufficient "connection" to attract special condition 37.1, whatever other "connections" are also possible.

131 Authority also supports this conclusion. The NSW Court of Appeal considered a similar provision in a contract for the sale of land in Nassif v Caminer (2009) 74 NSWLR 276, a special condition 49.3 apparently prohibiting a purchaser from making "any claim in relation to any matter relating to the lease [of the property being sold]". In Nassif the Court of Appeal concluded (per Macfarlan JA at [79] -[84] and per Sackville AJA at [80]) that a purchaser's claim that fell within the Nassif special condition 49.3 was not a claim pursuant to which the arbitral mechanism in clause 7 of the standard contract could be invoked.

132 The same result applies here. Once it is clear that the Veliks' claim falls within special condition 37.1, as it does, then the Veliks may not invoke the clause 7 mechanism to advance the claim. Their insistence on invoking this mechanism on 12 and 15 March was contrary to the prohibition in special condition 37, a prohibition which effectively authorised Mrs Steingold to request and to receive the full special condition 55 interest that she claimed at settlement without deduction. The Veliks persistence in seeking to invoke the clause 7 mechanism on 12 and 15 March 2010 is a basis to conclude, as I do, that on both days they showed they were unwilling to complete the contract in accordance with its terms: Perpetual Trustee Company Limited v Meriton Property Management Pty Limited (2006) 15 BPR 28,323 at [21], [26], and [40] per Basten JA (Mason P and McColl JA agreeing). This was a repudiation of the contract which Mrs Steingold was entitled to accept by her notice on 15 March 2010.

133 Mrs Steingold did not deploy clause 37.1 at the time of her moving to terminate the contract in the afternoon of 15 March 2010. Indeed she did not deploy it until shortly before the hearing, a matter which may have implications with respect to costs. But this does not now prevent her from relying upon it; as a party who has purported to avoid a contract upon an untenable ground is entitled to rely upon any valid ground which in fact then existed and has not been waived: Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd (1938) SR (NSW) 632 at 643.

134 The parties also put submissions about the proper construction of special condition 37.1 based upon the way that it was drafted and settled in negotiations on 3 December 2009. Even if this material could be taken into account on questions of construction of the contract, it was not particularly helpful and I have ignored it.

135 The exception to the special condition 37.1 prohibition against purchasers' claims does not apply in the present case and so does not assist the plaintiffs to neutralise its effect. The exception carves out of the subject prohibition against purchaser's claims, anything done by the vendor which "constitutes, gives rise to, or is the result of the vendor's failure to be ready, willing and able to complete this contract when required to do so...". But the vendor was ready willing and able to complete the contract at the appointed time of 2.00pm on Friday, 12 March 2010. The purchasers cancelled that settlement the previous day. The vendor's inability to settle later that same afternoon on very short notice does not demonstrate that the vendor was not ready willing and able to complete the contract that day. All that shows is that the vendors were understandably unable to respond to an unreasonably short restoration of Friday 12 March as the date for settlement. The Veliks' other allegations that might engage the exception, allegations of the vendor not being ready willing and able to complete because of her refusal to accede to the Veliks' requirements for settlement, are answered elsewhere in these reasons by the Court's conclusion that Mrs Steingold was justified in refusing to accede to the Veliks' settlement requirements.

136 (2) The plaintiffs' settlement claims are too late. Mrs Steingold argued further in the alternative, that the Veliks' claims for compensation, which were sought to be made the subject of the clause 7 arbitral mechanism, were too late. Mrs Steingold contended that to be valid the claims for compensation would need to have been made prior to her issuing a notice to complete on 1 March 2010. To support this contention Mrs Steingold relied upon authorities such as Abraham v Mallon (1975) 1 BPR 9157 at 9166-67 per Holland J and Mayer v Vitale (1981) 2 BPR 9162 at 9169 per Kearney J.

137 It is not necessary to decide this alternative contention. The court has already found that special condition 37.1 excludes use of the clause 7 arbitral mechanism. But there are some difficulties in accepting this alternative contention, in any event. First there is a conflict of authority: cases such as Edson v Sun Kuong Restaurant Pty Limited (1991) 5 BPR 11,452 at 11464 Hodgson J (as his Honour then was) suggest that a valid claim for compensation may be made after the issue of a notice to complete; although the contrary view was adopted by Santow J in Gogard Pty Limited v Satnaq Pty Limited (1999) 9 BPR 17,171 at 17,208 [286] - [288]. Secondly, even if Mr Steingold's contention were correct it is difficult to see why this would exclude the operation of the clause 7 arbitral mechanism: the question of the lateness or otherwise of the claim for compensation would be a matter itself to be determined within the clause 7 arbitration. Thirdly, it is difficult to see as a matter of logic, why the law should exclude purchasers' claims for compensation as "too late" merely because they post-date the notice to complete, such as those sought to be excluded in the present case, when the conduct the subject of the claims only arises after the issue of the notice to complete.

138 (3) The plaintiffs' settlement claims do not take into account the release of the deposit. The purchasers discovered only on 15 March, somewhat to their surprise, that the agent no longer held any deposit moneys. The deposit had been released to Mrs Steingold under special condition 53.1. Mr Velik adapted very quickly to this late discovery. He asked for an undertaking on settlement that Mrs Steingold refund the disputed amounts in question to the agent.

139 But was this permissible under the contract? Mrs Steingold says that the clause 7.2 mechanism cannot operate once the deposit has been released to the vendor. But, although it is now not strictly necessary to decide the question, I do not think she is right. Clause 7.2.1 provided that if, despite the purchasers' claim the contract is completed, then the purchasers can make a claim, which "must be paid out of the price to and held by the deposit holder until the claims are finalised or lapse ". It is common ground that at the time of settlement the deposit holder, the vendor's agent, did not continue to hold any of the original deposit moneys paid over on exchange of contracts. This was due to the prior operation of special condition 53.1, which provided "Notwithstanding the provisions of clauses 2 and 3 of this contract the purchaser agrees to release the deposit to the vendor."

140 In my view Mr Velik was right to insist on these funds being paid to the agent once the original deposit moneys had been released under special condition 53.1. Clause 7.2 simply authorises what is to happen on completion. It makes no assumptions as to what has happened to the 10% deposit paid upon exchange. It may indeed have been released to the vendor, as it was here. Ordinarily of course the deposit monies paid on exchange of contracts will not have been released, and the clause 7.2 claim will be made against those existing funds. But that may not always be the case. To found the operation of its arbitral process, clause 7.2 requires "if the contract is completed" that the lesser of the amount claimed and 10% of the purchase price "must be paid out of the price to" and "held by the deposit holder". The words "and held" do not mean "already held as monies previously deposited upon exchange". There is no necessary identity between the original deposit and the clause 7.2 monies. The word "held" simply means held when clause 7.2 operates. The funds so held may just as readily be funds that the purchaser pays direct to the agent, or requires the vendor by binding undertaking to pay on to the agent at completion. Once paid or required to be paid they are still "held" by the agent on completion.

141 Although the purchasers were right in interpreting clause 7.2 to permit them to require moneys to be paid to the agent on settlement, it ultimately does not assist them. This is because of the Court's finding that their whole claim was excluded by special condition 37.1.

142 The Veliks' refusal to pay interest. Mrs Steingold also alleged that the Veliks were in breach of an essential term of the contract for their refusal to pay interest, in accordance with special condition 55. Whether or not there was a valid notice to complete, special condition 55.3 made the payment of interest "an essential condition of this contract". She says that the Veliks' refusal to pay that interest entitled her to terminate on 15 March.

143 The Veliks argue that without a valid notice to complete that because clause 55.1 interest was only payable on the "actual date of completion of the contract", that the interest was not due, so any refusal to pay does not provide a basis for the defendant's termination.

144 But even if the Veliks' argument is accepted and the interest was not yet due, the interest had certainly accrued under clause 55.1 after the agreed 26 February 2010 clause 34 "completion date". On 12 and 15 March the Veliks made clear by their conduct that they refused and would refuse to pay that interest at any appointed date for settlement. By the operation of special condition 37.1 they were required to pay the interest to the vendor, and not to the agent under clause 7.2. Their conduct was a repudiation of an essential term of the contract which Mrs Steingold was able to accept and which entitled her to terminate the contract on 15 March: Luna Park (NSW) Ltd v Tramways Advertising Pty Ltd (1938) 61 CLR 286 especially at 303-4.

145 The further alternative allegation that the Veliks were not ready willing and able to complete on 26 February, 5 March and 12 March 2010. Mrs Steingold contended that the plaintiffs were not financially ready willing and able to complete on 26 February, 5 March and 12 March. The Veliks' inability to complete on the 26th February and 5 March was admitted. They sought to defer settlement from both these dates on the grounds of their financial incapacity. I am also prepared to infer that they were not financially ready to complete by 2 pm on 12 March, but only by some time later that afternoon. But it is difficult to see what flows from this. Even if Mrs Steingold's contentions about this are correct, no notice to complete had been issued in respect of any appointed completion dates before 15 March and the notice to complete expiring on 15 March was invalid. A purchaser's failure to be ready and able to complete in conformity with a valid notice to complete would be grounds for termination. But here there was either no notice or an invalid notice at these various times. This was not a ground for termination. This argument does not assist Mrs Steingold.'s case beyond what she has otherwise demonstrated, that the Veliks were not prepared to settle in accordance with the contract.

146 I should add in conclusion that Mrs Steingold argued that various parts of the Velik's claims were untenable. For example the Veliks' claim for $932.05 for the period between 12 and 15 March 2010 was said to be untenable because it was the Veliks not Mr Steingold who cancelled the settlement scheduled for 12 March 2010. The Court has found that the Veliks cancelled the settlement the previous day and it was not reasonable for the Veliks to then reinstate the settlement at late notice. This is less relevant in judging whether the Veliks claims were "untenable", than it is in assessing the scope of special condition 37.1. My findings foreclose any argument that clause 37.1 did not operate to wholly exclude the Veliks' claims. Were that not so it would have been the clause 7.2 arbitrator who would have had to decide the merits of this claim, which would have been allowed to proceed if it was "reasonably arguable": Nassif & Orsv Caminer [2009] NSWCA 45 at [47] per Macfarlan JA and at [77] per Sackville AJA.

147 There is a number of other contentions Mrs Steingold has made about untenable claims that do not need to be decided, because the Court has found that the Veliks' claims are excluded by special condition 37.1.

148 Consequences of these Findings. But for the operation of Conveyancing Act, s 55(2A), contract, clause 9.1 would entitle the vendor to retain the deposit and the Court would order it be released to the defendant, Mrs Steingold. The purchasers have not complied with the contract "in an essential respect" and the vendor has "terminated by serving a notice", within clause 9, so the vendor "can...keep or recover the deposit".

Conveyancing Act, s 55(2A) Claim

149 The Veliks claim that if Mrs Steingold is found entitled to terminate the contract, they should nevertheless have an order for the return of the deposit under Conveyancing Act, s 55(2A), a provision giving the Court a discretion to order the return of a deposit:-

"55.Right of purchaser to recover deposit etc

(1) In every case where specific performance of a contract would not be enforced against the purchaser by the Court by reason of a defect in the vendor's title, but the purchaser is not entitled to rescind the contract, the purchaser shall nevertheless be entitled to recover his or her deposit and any instalments of purchase money he or she has paid, and to be relieved from all liability under the contract whether at law or in equity, unless the contract discloses such defect and contains a stipulation precluding the purchaser from objecting thereto.

(2) If such undisclosed defect is one which is known or ought to have been known to the vendor at the date of the contract the purchaser shall in addition be entitled to recover his or her expenses of investigating the title.

(2A)In every case where the court refuses to grant specific performance of a contract, or in any proceeding for the return of a deposit, the court may, if it thinks fit, order the repayment of any deposit with or without interest thereon.

(3) On the application of the purchaser the Court may order payment under this section and declare and enforce a lien in respect thereof on the property the subject of the contract.

(4) This section applies only to contracts made after the commencement of this Act and shall have effect notwithstanding any stipulation to the contrary.

(5) This section applies to land under the provisions of the Real Property Act 1900."

150 Conveyancing Act, s 55(2A) confers on the Court a statutory jurisdiction to return forfeited deposits, a jurisdiction which was not previously available either at common law or in equity. The provision, modelled on the Law of Property Act, 1925 (UK), was added to the Conveyancing Act in 1930 Conveyancing (Amendment) Act No. 44 of 1930 and for the history of the provision: cf Schindler v Pigault (1975) 30 P& Cr 328, at 336-337 per McGarry V-C. Courts have resisted attempts to confine the jurisdiction the provision confers but have nevertheless offered a number of cautionary observations about its exercise. These observations are summarised by the Court of Appeal in Havyn Pty Ltd v Webster (2005) 12 BPR 22,837; [2005] NSWCA 182 at [173]:-

"[173] By way of summation, I would conclude 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.

(f)Considering the circumstances of this case, the factors enumerated above and the relative unreasonableness of the conduct of the vendor compared to the purchaser following the former's misrepresentation, it is appropriate for the deposit to be returned, although for different reasons than those adopted by the trial judge."

151 Bryson J also crisply summarised the effect of the provision in Lucantonio v Ciofuli (2003) 11 BPR 21,181; [2003] NSWSC 1058, at [81]:-

"[81] The purchasers claimed an order under s 55(2A) of the Conveyancing Act 1919 relieving them against forfeiture of the deposit. Applications under s 55(2A) come before the Equity Division frequently and counsel referred me to a number of decisions at first instance, not all of which need be cited in these reasons. As first enacted s 55 of the Conveyancing Act 1919 gave a purchaser an entitlement to recover his deposit and other relief where specific performance would not be enforced by reason of a defect in title which the contract did not disclose. Subsection (2A), added by amendment by Conveyancing (Amendment) Act No 44 of 1930, greatly expands the grounds on which a purchaser may recover his deposit. It is no longer necessary that there be a defect in the vendor's title, and it is not necessary that the purchaser have any legal or equitable entitlement to recover the deposit. Subsection (2A) confers on the Court, using the words "the Court may, if it thinks fit," a wide but not unlimited discretion to order repayment of a deposit. There must be some substantial ground or good reason, relevant to the parties' contractual relationship, for the Court to think fit to order repayment."

152 The Veliks' case is that even if the defendant is entitled to terminate the contract that the discretion should be exercised in their favour for two principal reasons:

(a)the only reason the transaction did not settle on 15 March 2010 was due to a technical conveyancing dispute about contract, clause 7 which required a small proportion of the settlement monies to be held by an agent, and

(b)the property has now been resold for $40,000 in excess of the contract price.

153 The defendant contends this is not an appropriate case to order the refund of the deposit under Conveyancing Act, s 55(2A). She submits:

(a)the plaintiffs, as purchasers, bear the onus of establishing that it is unjust and inequitable for the defendant, as vendor, to retain the deposit (Gogard Pty Limited v Satnaq Pty Limited (1999) 9 BPR 17,171 at 17,215 [336]), and there is nothing unconscionable here in the vendor forfeiting the deposit, when the purchasers have deliberately relied on invalid grounds (Mayer v Vitale (1981) 2 BPR 9162 at 9172 and Smilie Pty Limited v Bruce (1998) 8 BPR 15,893, affirmed (1998) 9 BPR 16,723);

(b)the purchasers have lost no investment in the land other than the deposit;

(c)far from acting unconscionably the defendants agreed to three deferments of completion at the plaintiffs' request; and

(d)no other relevant circumstances here attract the exercise of the discretion, such as a mistake or administrative error by employed conveyancers for the plaintiff (Wilson v Kingsgate Mining Industries Pty Limited [1973] 2 NSWLR 713 at 735); nor was there any misrepresentation or other misconduct on the part of the defendant (Havyn Pty Ltd v Webster (2005) 12 BPR 22,837), and no other demonstrated special circumstances.

154 Everything done by both sides in this case was deliberate. The only errors the parties' made were in their ultimate competing constructions of the contract. Both sides, in my view, legally qualified as they were, accepted the risk of being wrong about their or her interpretation of what, as this judgment shows, was not a simple legal puzzle.

155 There was no deliberate misconduct on the part of the defendant. The plaintiffs rightly in my view have not levelled any accusations of misconduct against her.

156 On what basis might the Court be persuaded to exercise its Conveyancing Act, s 55(2A) jurisdiction? The plaintiffs' first argument that this was a "technical conveyancing dispute" about a very small amount of money fails. Small in quantum though it was it was a dispute that was avoidable and was pushed, it seems to me right to the brink, at the plaintiffs' own risk. The plaintiffs could have paid the funds over to the defendants at settlement under protest and sought later to recover them in restitution, if they were successful either in arbitration or in court action: see for example Mason v State of New South Wales (1959) 102 CLR 108; Lactos Fresh Pty Ltd v Finishing Services Pty Ltd (No. 2) [2006] FCA 748 per Weinberg J.

157 The plaintiffs' second argument that the defendant has sold at a $40,000 profit, seems merely to be another way of putting an argument, often dismissed in claims for Conveyancing Act, s 55(2A) relief; that the forfeited deposit should be seen as a windfall: Havyn Pty Ltd v Webster (2005) 12 BPR 22,837 at [173].

158 During argument, the question was raised whether the jurisdiction provided by Conveyancing Act, s 55(2A) permitted the Court to order the partial repayment of the deposit. Authority about this question is mixed. In 1982 in Clarke v Dilberovic Rath J ordered the plaintiff vendor to refund part of the deposit: Clarke v Dilberovic (1982) NSW ConvR 55-083, at 56,495. In so ordering part refund, Rath J did not cite any earlier authority justifyihg such a course under Conveyancing Act, s 55(2A).

159 However, in an earlier judgment, Poort v Development Underwriting (Victoria) Pty Ltd [1976] VR 779, Gillard J of the Supreme Court of Victoria found with respect to the Victorian equivalent of s 55(2A) that "there is no power to order a part of the deposit to be repaid": at 785. Gillard J was there considering Property Law Act 1958 (Vic), s 49(2). But, noting the maxim 'he who seeks equity must do equity', opined at 785:-

"As a prerequisite of exercising its jurisdiction under s 49(2), the court would require to be satisfied by a defaulting purchaser that an innocent vendor would not be injured by the exercise of its discretion. The obvious method to achieve this objective would be for the purchaser to offer to pay any damages which the vendor had suffered by his default, and in due time, as a matter of practice, defaulting purchases, to induce the court to exercise its jurisdiction, would make such offer; the damages would be assessed and set off against any deposit payable to the purchaser. If this were done, then no difficulty would arise from the view that the court would be bound to order the return of the whole of the deposit. Doubtless the formal order would be for the return of the whole deposit, but it would be only granted on the terms set out above".

160 The judgment of Gillard J in Poort v Development Underwriting (Victoria) Pty Ltd has become the preferable judicial view of Conveyancing Act, s 55(2A) jurisdiction. This is confirmed in a series of cases, three of which deserve special mention Bernard v Weingarth (1997) 8 BPR 15,651, Lucantonio v Ciofuli (2003) 11 BPR 21,181 and Buchanan v Dunstan [2007] NSWSC 248. In the first, Bernard v Weingarth, McLelland CJ in Eq ordered the repayment of the deposit subject to an undertaking being given by the plaintiff purchasers to pay any damages to the defendant vendors. In so ordering, McLelland CJ in Eq noted:-

"although an order for the repayment of a deposit does not preclude a vendor from suing a defaulting purchaser for damages for the purchaser's breach, the fact that the vendor has suffered damages may often be a sufficient reason for refusing an order for repayment of a forfeited deposit, or for requiring an undertaking by the purchaser to pay such damages to the vendor as a condition of making of such an order. It is to be noted that s 55(2A) does not in terms authorise an order for the repayment of part of a deposit as opposed to the whole, but the provision of an undertaking of the kind last mentioned may nevertheless render an order for repayment of a deposit just and equitable, where without such an undertaking it would not be".

161 Similarly, in Lucantonio v Ciofuli, Bryson J, in not ordering the refund of the deposit, noted that "the power (under Conveyancing Act, s 55(2A)) may extend to ordering the return of a deposit as in Clarke v Dilberovic, although the better view is that repayment should be ordered on terms requiring an off-setting allowance for damages or money on account of damages": [88]. In Buchanan v Dunstan White J noted that "Rath J ordered the return of part of a deposit pursuant to s 55(2A)" but that "s 55(2A) does not in terms authorise this result, the same outcome may be achieved by ordering the return of the whole of the deposit on terms that the purchaser undertakes to recompense the vendor for its damages and to have those set off against the deposit": at [69].

162 If a part refund of the deposit is possible, for the same reasons stated earlier in this section, this is not a case where the Court should exercise its discretion to award such a part refund.

Conclusions and Orders

163 In the result the Court has found that the vendor Mrs Steingold validly terminated the contract on 15 March 2010. She is entitled under contract clause 9 to the return of the deposit, which is now held on an agreed basis between the parties. The Court has also declined to exercise its jurisdiction under Conveyancing Act, s 55(2A) to return the deposit to the purchasers.

164 Ordinarily costs would follow the event but an important ground on which the vendor succeeded, special condition 37.1 was only relied upon by an amendment shortly before trial. There may be some argument that Mrs Steingold should not recover all her costs because of the late amendment. There may be other arguments about special orders for costs. I direct the parties to file submissions about all issues of costs by 10 August 2012 and list the proceedings for short argument on costs at 9.30am a day the following week, by arrangement with my Associate.

165 I direct the parties to bring in short minutes of order to give effect to these reasons.

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Decision last updated: 31 July 2012