Supreme Court New South Wales

• Medium Neutral Citation: Signorelli v M G South Pty Ltd [2012] NSWSC 1606
• Hearing dates: 10 - 12 December 2012
• Decision date: 13 December 2012
• Jurisdiction: Common Law
• Before: Rein J

Decision

Judgment in favour of the defendants on the plaintiff's claim against them.

• Catchwords: CONVEYANCING - exchange of contracts - deposit - where real estate agent accepted a copy of a deposit bond pending provision of the original the next business day - agent did not breach his duty to the vendor; CONVEYANCING - breach of contract for sale and remedies - vendor's remedies - rescission or termination - entitlement to - where contract term required provision of a deposit bond - where purchaser provided a copy of a deposit bond which could not be called on for cash - where vendor agreed to extend time for provision of original deposit bond to next business day - vendor entitled to terminate immediately on failure to supply original deposit bond by close of the next business day; TORTS - negligence - damage - causation - where copy of a deposit bond accepted by real estate agent on exchange of contracts - where vendor was always entitled to terminate contract for purchaser's failure to produce deposit bond - agent's acceptance of the copy of deposit bond, failure to verify or obtain advice on its validity and failure to verify the purchaser's details in the contract not causative of loss - vendor's solicitor's failure to verify the validity of the deposit bond similarly not causative of loss; TORTS - negligence - damage - causation - where copy of a deposit bond accepted by real estate agent on exchange of contracts - where purchaser would not have produced the original deposit bond and would not have provided the balance of a 10% "deposit" - where authority exists to suggest that vendor may not have been entitled to balance of 10% of the purchase price - vendor's solicitor's failure to require payment of deposit by alternate means as required under contract not causative of loss
• Legislation Cited: Civil Liability Act 2002; Legal Profession Act 2004; Property Stock and Agents Act 2002
• Cases Cited: Brien v Dwyer (1978) 141 CLR 378; Goodrich Aerospace Pty Limited v Arsic [2006] NSWCA 187; Iannello v Sharpe [2007] NSWCA 61; 69 NSWLR 452; Josland v Mullaley Properties Pty Ltd (1993) 6 BPR 13,285; Luu v Sovereign Developments Pty Ltd [2006] NSWCA 40; Romanos v Pentagold Investments Pty Ltd [2003] HCA 58; (2003) 217 CLR 367; Shepherd v Felt & Textiles of Australia Ltd (1931) 45 CLR 359; Stone v Matich (1981) 2 BPR 9301; Wood Hall Ltd v Pipeline Authority [1979] HCA 21; (1979) 141 CLR 443
• Category: Principal judgment
• Parties: Paul John Signorelli (Plaintiff); M G South Pty Ltd (First defendant); P E Baltins & A L Matiussi & L Polito & R Tosolini t/as Willis & Bowring Solicitors (Second defendant)
• Representation: Counsel: J L Sharpe (Plaintiff); D McLure (First defendant); J Emmett (Second defendant); Solicitors: Costa & Associates (Plaintiff); Lander & Rogers (First defendant); Middletons (Second defendant)
• File Number(s): SC 2010/373492

ex tempore Judgment

1 The plaintiff, for whom Mr J Sharpe of counsel appears, owned a property in Blakehurst, New South Wales. The plaintiff arranged to sell the property at auction using as his real estate agent M G South Pty Ltd (which was trading as McGrath, St George and which I will refer to as McGrath) (the first defendant) and using as his solicitor Mr Lawrence Picone of Willis & Bowring ("Willis") (the second defendant). Mr Greg Tsaprazis was the relevant employee of McGrath. Mr D McLure of counsel, appears for McGrath and Mr J Emmett of counsel, for Willis.

2 Mr Picone prepared a contract for sale in the standard form with a provision for a 5 per cent deposit rather than a 10 per cent deposit. The auction was held on 25 July 2009 and one of the registered bidders was Mr Nathan Elali as agent for Mr John Nazloomian. The plaintiff set $2 M as his price and the property was passed in at the auction at $1.815 M.

3 After the property was passed in, Mr Tsaprazis discussed the sale of the property with Mr Elali and Mr Elali told Mr Tsaprazis that Mr Nazloomian would be prepared to pay $1.885 M but that the contract would need to be altered in several respects. Mr Tsaprazis discussed with the plaintiff the alterations to the contract sought by Mr Elali and communicated the offer of $1.885 M, which price the plaintiff was very reluctant to accept. Eventually, the plaintiff agreed to accept the price offered by Mr Nazloomian and some of the alterations proposed but not others.

4 One of the alterations was to change cl 13 requiring the deposit of 5 per cent to allow for a deposit bond to a value of $85,000 (see Ex 2D1 at p 35 - all page references in the balance of these reasons are to this exhibit unless otherwise specified). Mr Elali told Mr Tsaprazis that he did not have the original deposit bond with him, but he did have a copy of the bond, which he produced. That document is found at p 111. It is headed "Deposit Power Guarantee Confirmation Fax" and it has the name "Mr Nazloomian" as the purchaser, "Mr Signorelli", the plaintiff, as the vendor, the property details, the purchase price at $1.88 M (not $1.885 M) and the maximum amount of the guarantee as $85,000. It stated that it had been issued by Deposit Power for and on behalf of Vero Insurance Ltd, and the fax was addressed to the Commonwealth Bank of Australia. It has in the right-hand margin the following notation:

"This facsimile is to confirm approval of the Deposit Power Guarantee. The original Guarantee has been sent by mail. In the event of a claim, the original Guarantee must be provided to Vero Insurance Limited."

I shall refer to this document as "the copy of the deposit bond" as that is how it has been described in the pleading and in submissions.

5 Mr Tsaprazis' evidence is that Mr Elali undertook to provide to him the original deposit bond on Monday morning (that is, 27 July 2009), and in a subsequent conversation, on the same day, to Willis. There is a dispute about whether Mr Tsaprazis informed the plaintiff of the fact that what was produced by Mr Elali was not the original and of Mr Elali's promise to produce the original on Monday, a matter to which I shall return.

6 Mr Elali agreed to delete the terms which were unacceptable to the plaintiff and both Mr Elali and the plaintiff executed separately a counterpart of the contract for sale ("the Nazloomian Contract"). Mr Elali handled over the copy signed by him to Mr Tsaprazis and the plaintiff had given Mr Tsaprazis the copy signed by the plaintiff. Mr Tsaprazis says he regarded the contracts as exchanged and he rang Mr Elali to inform him that the plaintiff had executed the contract with the accepted amendments. The following morning a "Sold" notice was affixed to the advertising board located on the property.

7 There is no dispute that Mr Tsaprazis told the plaintiff that he would take the contract first thing on Monday morning to Mr Picone "so he can make sure everything's okay" (see T60.42-45). Mr Tsaprazis did attend at Mr Picone's office on Monday morning and handed over the two signed counterparts. There is no suggestion that there is any difference in content between the two counterparts.

8 There is some difference in the account of the conversation between Mr Tsaprazis and Mr Picone on the Monday morning, to which I shall return, but there is no question that Mr Picone was made aware that the document provided to Mr Tsaprazis by Mr Elali and handed over to Mr Picone with the contract was not a deposit bond and only a copy of the deposit bond. It is also clear that Mr Picone knew that to be effective as a deposit, the original bond was required and, further, that Mr Picone took on the obligation of chasing up the original deposit bond from the purchaser.

9 Mr Picone, on 27 July 2009, sent by fax a copy of various documents to the solicitors for the purchaser, Mr M Doueihi of MJD Legal, and arranged to send the original of the counterpart signed by the plaintiff to the purchaser's solicitor: p 116.

10 Mr Picone did not speak or write to the plaintiff about the absence of an original deposit bond until, on his evidence, a few days before 24 September 2009 and, on the plaintiff's evidence, until he received a letter dated 24 September 2009 from Mr Picone.

11 Whilst it might be arguable that contracts were not exchanged until the time that Mr Picone sent the copy signed by the plaintiff to the purchaser's solicitors, McGrath does not so assert. The plaintiff pleaded that contracts were exchanged on 25 July 2009, and both McGrath and Willis admitted that was the case. Mr McLure pointed to authority that supported the contention that exchange had occurred but, in the circumstances of the pleadings and Mr Sharpe's written submission that asserts that exchange took place on 25 July 2009, I do not think it is necessary to consider the correctness of that concession. On the basis on the pleadings, then, the contracts were exchanged on 25 July 2009.

12 Although what was provided at the time of the exchange was a copy of the bond, as I have indicated Mr Tsaprazis' evidence is that Mr Elali promised to provide the original deposit bond on the Monday, 27 July 2009. The original deposit bond was not provided on 27 July 2009 and the purchaser never did provide it to the plaintiff, through his solicitors or agent, despite numerous letters and calls by Mr Picone and his staff to the purchaser's solicitors - see pp 125 - 126, 143 - 145, 151 and 160 - and even after a notice to Mr Nazloomian by letter of 29 September 2009 demanding that the client pay the agreed deposit (at p 168, to which I shall return) and that if Mr Nazloomian did not do so, the contract would be terminated.

13 There is evidence also of attempts by Mr Picone and his staff to ascertain the status of the deposit bond. Mr Picone was able to ascertain that it had been issued and was current, but that the original was either lost or unavailable and the purchaser unwilling to obtain a replacement - see pp 146, 148 - 150, 152 - 154, 159 and 161.

14 Following the failure of the purchaser to meet the demand for provision of the deposit bond or deposit, the plaintiff, on the advice of Mr Picone, terminated the contract by letter of 12 October 2009. The purchaser's solicitor asserted that the termination was wrongful and amounted to repudiation, which repudiation was accepted - see pp 188 to 189. I should also note that MJD Legal, after receiving the letter of demand of 29 September 2009, sent a letter dated 1 October 2009 to Mr Picone in which they stated:

"The deposit bond is valid and not in breach of clause 2 of the contract, as you maintain. Any act on the part of the vendor to terminate the contract will be treated as repudiation by the vendor." (Page 172)

15 Following termination, McGrath contacted another bidder at the original auction and a contract for sale of the property was entered into on 18 November 2009 for $1.7 M with a Ms Raed Bachir ("the Bachir Contract"): see Ex A at p 71.

The pleadings and particulars

16 The particulars of negligence alleged against McGrath in the pleadings, taken from par 25 of the statement of claim, are as follows:

(1) exchanging contracts with a purchaser on behalf of the plaintiff as its selling agent when the deposit that was given was a copy of a deposit bond;

(2) failing to verify with Vero General Insurance that the copy of the deposit bond was valid, current and thereby enforceable before exchange;

(3) exchanging with a copy of a deposit bond before obtaining legal advice prior to exchange on the validity of such an exchange in circumstances where the first defendant was unaware of the validity of such an exchange;

(4) failing to ensure that the exchange was valid at law;

(5) failing to ensure that the purchaser had correctly provided its details on the front page of the contract; and

(6) failing to act in the plaintiff's interests post termination of the contract for sale in failing to re-list the property for sale on the open market.

17 The particulars of negligence alleged against Willis, taken from par 28 of the statement of claim, are as follows:

(1) failing to verify with Vero General Insurance that the copy of the deposit bond provided was valid, current and enforceable;

(2) failing to promptly request the original deposit bond from the purchaser;

(3) failing to require payment of the deposit by the purchaser by alternate means as required under the contract for sale;

(4) advising the plaintiff on their entitlement to terminate the contract with the purchaser when the second defendant ought to have known in the circumstances that the plaintiff had no such right;

(5) terminating the contract with the purchaser in circumstances where the plaintiff was not entitled; and

(6) failing to adhere to the requirements of the Legal Profession Act 2004 in that Willis:

(a) failed to provide the necessary costs documentation to the plaintiff; and

(b) failed to advise the plaintiff that it may not have been an expert in the field of property law and/or conveyancing.

18 Paragraphs 18-24 and 27 of the statement of claim plead to the following:

"18. Under Clause 2.7 of the Contract, where the Plaintiff required part of the deposit be provided by way of bond or guarantee, only if the balance, was requested by the Plaintiff and subsequently not paid by the purchaser, would [sic] the Plaintiff have been able to terminate the Contract.

19. The Second Defendant owed the Plaintiff a duty to provide correct legal advice on the Plaintiff's rights and obligations under the Contract for Sale.

20. The Second Defendant in the circumstances did not provide correct legal advice to the Plaintiff.

21. Following termination of the Contract, the Plaintiff located an alternate purchaser.

22. On 18 November 2009, the Plaintiff exchanged contracts for the sale of the Property for the sum of $1,700,000.00, being $180,000.00 less than the amount agreed to by the Plaintiff under the first Contract for sale.

23. The First and Second Defendants at all material times owed the Plaintiff a duty to act in good faith, with competence, skill and diligence and in accordance with law.

24. The First Defendant was negligent in the execution of its duty to the Plaintiff.

...

27. The Second Defendant was negligent in the execution of its duty to the Plaintiff."

19 At the conclusion of evidence I received written submissions from Mr Sharpe, Mr McLure and Mr Emmett. Both Mr McLure and Mr Emmett drew attention to the fact that Mr Sharpe's written submissions handed up yesterday did not address or refer to the particulars of negligence set out in par 25 against the first defendant and par 28 against the second defendant but, rather, advanced a case which has not been pleaded or particularised and which their clients did not come to court to meet.

20 I note that paragraph 13 of Mr Sharpe's written submissions asserts that "the plaintiff lost his right to terminate by reason of the claimed absence of the deposit bond" and then sets out details in subparagraphs (a) to (j). The matters in (d) and (i) could not support the loss of a right to terminate. The plaintiff's allegation that the defendants had lost the plaintiff a right to terminate the contract by reason of any matter, other than by a failure to demand the whole of the deposit, was never articulated in any pleading or particulars provided and none of (a) to (c), (e), (h) or (j) were mentioned in the course of opening.

21 The case which is advanced against Willis in the submissions received yesterday is a case that, by their actions between 27 July and September 2009, Willis:

(1) delayed in taking action in relation to the deposit bond;

(2) lulled the purchaser into believing that the form of the deposit bond provided on 25 July 2009 was not an issue; and

(3) produced a situation in which it would be unconscionable on the part of the plaintiff, as vendor, to terminate the contract for failure to provide the original deposit bond; and

(4) thereby lost the plaintiff the right to terminate the contract

22 At various times during the course of the hearing, Mr Sharpe has sought to demonstrate the relevance of questions asked in cross-examination, when objection was taken to them by the defendants' counsel, by referring to a case that was not identified by him in opening, nor in the pleaded case (including the particulars in pars 25 and 28). I rejected questions connected with the unpleaded case, save on some occasions where they were asserted to be relevant to credit and when I allowed them only on that limited basis. The claim advanced in the written submissions find no expression in what Mr Sharpe advanced to the Court as to the plaintiff's contentions during opening - see T10.23-29, T18-40, T34.37-45 and T35.1-8 - and see also T12 - T34, where there is apparent acceptance of the correctness of Mr Emmett's understanding of the case that the second defendant was required to meet as articulated at T12.6-11.

23 In response to the defendants' submissions that the case now advanced in Mr Sharpe's written submissions were not matters which had been pleaded or particularised, Mr Sharpe, whilst in the course of his oral submissions in reply, sought leave to re-open his case to tender a request and response to particulars in order, I thought, to seek to demonstrate that the case which he had advanced yesterday was particularised (see T285.44 to T286.24). The particulars provided in Ex C are somewhat opaque, but on no reading of them do they encompass the case articulated in par 13 of Mr Sharpe's written submissions that I have referred to earlier.

24 I should note that Mr McLure made an additional submission, which I accept, that to the extent that the submissions received yesterday were directed to McGrath, it is very difficult to discern what that case is. Mr Tsaprazis did not advise the plaintiff in respect of termination and he left it to Mr Picone to chase up the deposit bond that Mr Picone indicated he would. The plaintiff accepts that it was not Mr Tsaprazis' role to pursue the purchaser for the deposit bond (see T249.34-44) and that he was not relying on Mr Tsaprazis for legal advice (see T61).

25 Given that the case which the plaintiff seeks to advance has not been pleaded, and given that the case which has been pleaded has not been the subject of submissions, other than Mr Sharpe's statement yesterday in reply that the plaintiff relies on the evidence of Ms Margaret Colleen Hole in connection with cl 2.7 of the standard conditions in the contract for sale (see T287.43-46), there is considerable force in the defendants' proposition that the plaintiff's case ought be dismissed without the need for any further consideration.

26 I propose, notwithstanding the failure of Mr Sharpe to address in his submissions the pleaded case advanced by the plaintiff against the defendants, to deal with each of the matters contained in par 25, as against the first defendant, and in par 28, as against the second defendant. Before doing so, I will deal with the question of credibility of witnesses.

Credibility of witnesses

27 Mr Sharpe invited me to find that the lay witnesses called in the plaintiff's case, the plaintiff himself, Mr Steven Cesarano and Mr Grerardo Incollingo, were witnesses of truth whose evidence I should accept, and that I should believe them whenever their evidence was in conflict with Mr Tsaprazis or Mr Picone. In relation to Mr Tsaprazis, he submitted that:

"There is a complete failure to provide any documents at all concerning this sale, even though he was aware of the need for such notes within a short time of the termination of the contract."

28 I make the following observations about Mr Sharpe's submissions:

(1) I do not know to what "failure to produce documents" Mr Sharpe is referring. Mr Tsaprazis was not required to and did not make or produce notes after the contract was terminated and it was not put to him that he had failed to produce such documents, nor were they identified.

(2) I think there is much force in Mr McLure's submission that Mr Sharpe's submissions on credibility of witnesses is of no real assistance to the court. Mr McLure drew attention to what was said in Goodrich Aerospace Pty Limited v Arsic [2006] NSWCA 187 at [28] per Ipp JA (concurred in by Mason P and Tobias JA):

"It is not appropriate for a trial judge merely to set out the evidence adduced by one side, then the evidence adduced by another, and then assert that having seen and heard the witnesses he or she prefers or believes the evidence of the one and not the other. If that were to be the law, many cases could be resolved at the end of the evidence simply by the judge saying: 'I believe Mr X but not Mr Y and judgment follows accordingly.' That is not the way in which our legal system operates."

Mr McLure submitted that, given what has been reiterated in the Court of Appeal, there is a need for counsel to assist the Court by submissions dealing with conflicting evidence and the credibility of the witnesses giving such evidence. Mr Sharpe's submissions, he submitted, failed to offer any analysis at all of why I should prefer anyone's evidence to that of Mr Tsaprazis. I accept that submission. Further, the only matter to which reference was made by Mr Sharpe has no substance.

(3) Mr Sharpe's cross-examination failed to produce, in my mind, any doubt as to Mr Tsaprazis' credit or credibility. He was not shown to be unreliable nor was he forced to admit an error, or to have advanced improbable explanations on any matter. Not only that, in the conflict of evidence between Mr Tsaprazis and Mr Picone concerning what was said by Mr Tsaprazis to Mr Picone on the morning of 27 July 2009, it became clear during cross-examination of Mr Picone that Mr Picone was, notwithstanding the contents of his affidavit, not disputing that Mr Tsaprazis had told him that Mr Elali had promised to deliver the original deposit bond to Willis. That concession made Mr Picone's version of the conversation in his affidavit very unlikely, and even more so when coupled with Mr Picone's actions on 27 and 28 July 2009.

(4) Determining whether to accept Mr Tsaprazis or the plaintiff's version of events of what was said about the deposit bond is more difficult, but I accept Mr Tsaprazis's evidence that Mr Elali told him that he would provide the original deposit bond on Monday morning to Willis. I accept that Ms Joanne Brown's (Mr Picone's assistant) diary note of what Mr Tsaprazis said to her was accurate, rather than her recollection three years after the event, her recollection, she herself conceded, being based on the diary note - see T215.5-12 and T214.11-14.

(5) None of the disputed conversations between Mr Picone and the plaintiff and between the plaintiff and Mr Tsaprazis, appear to be relevant to the case advanced in the submissions on Wednesday, or to the point relating to cl 2.7 of the contract, nor do they appear to have much bearing on any of the matters particularised in pars 25 - except in one regard to which I shall return.

(6) Mr McLure made several points about why Mr Tsaprazis' evidence should be accepted, which I have taken into account. Firstly, Mr Tsaprazis' evidence that he told Mr Picone that Mr Elali had promised to deliver the original deposit bond was, as I say, not ultimately contradicted by Mr Picone, notwithstanding Mr Picone's affidavit (see T 177). Secondly, Mr Tsaprazis, in an email of 12 April 2010, sent to the plaintiff an account of the circumstances of the exchange (see p 84). It is an annexure to the plaintiff's affidavit of 21 March 2012:

"I exchanged the contracts with a faxed copy of a deposit bond on the promise that the original would be furnished to the vendor's solicitor the next business day (also agreed by you prior to exchange)."

The plaintiff, although annexing that email to his affidavit and in par 36 denying that he had been told that the deposit bond was a faxed copy of the bond, or agreed that exchange could take place "with a copy of the deposit bond", produced no letter or email from him disputing that assertion made some two years earlier than his affidavit.

(7) Mr McLure submitted that the case involved recollections of conversations which occurred more than three years ago; and, in relation to the disputed conversations, that they were not recorded or summarised, except for Ms Brown's note of her call to Mr Tsaprazis - with which I have already dealt. Mr McLure did not contend that any of the witnesses in the case should be viewed as dishonest or untruthful, but, rather, where there was conflict, as having been mistaken in their recollection. He did submit that Mr Cesarano's evidence that Mr Tsaprazis had said "the purchaser is ready to go, the purchaser has the deposit and the funds" ought not be accepted, given that his version was not supported by the plaintiff; that it was inconsistent with the facts and inconsistent with the change to the wording of cl 13, to which the plaintiff agreed. I accept that Mr Tsaprazis did not tell Mr Signorelli that the purchaser had the deposit and that he told the plaintiff that the purchaser had obtained a deposit bond.

29 I am left, in relation to the conflict of evidence between Mr Tsaprazis and the plaintiff as to whether Mr Tsaprazis did tell the plaintiff that what had been produced was a copy and not the original, between two competing versions by witnesses dealing with a matter where neither of them had made a diary note.

30 I indicated before that there was one respect in which the conflict of evidence might be significant. If I did not accept that Mr Tsaprazis told the plaintiff that Mr Elali had promised to provide the original deposit bond on Monday that might bear on the question of whether or not Mr Tsaprazis did in fact speak to Mr Elali and obtain the promise from him that he says he was given. If I had found Mr Tsaprazis to be an obviously unreliable witness whose evidence I would be cautious about accepting and that he had not told the plaintiff about the copy of the deposit bond, that might extend to the issue of whether or not Mr Elali in fact said the words that Mr Tsaprazis says were said to him. However, that is not the circumstance here.

31 Whether or not the plaintiff was told about the deposit bond does not seem to be directly related to any of the particularised matters. However, against the possibility that it is of some relevance, and since it has been argued, I think I should say that I think it is unlikely that Mr Tsaprazis would not tell his client about the fact that the copy had been provided, especially since they were agreed that Mr Tsaprazis would go to discuss the contract with Mr Picone on Monday morning to make sure everything was "okay" and given that, as I have indicated, Mr Tsaprazis did tell Mr Picone of what had occurred. I think one explanation for the difference in account is that the plaintiff was not informed by Mr Picone that the original had not been provided and was informed by letter of 3 August 2009 that the deposit bond had in fact been received. That would explain why the plaintiff assumed, understandably, that there was no issue about the absence of the original on 25 July 2009 and why, come late September, he would be surprised to learn that his solicitors had not been provided with the original.

32 I accept the evidence of Mr Tsaprazis that he did tell the plaintiff that Mr Elali had promised him that the original deposit bond would be produced. As Mr McLure says, I do not think this involves any necessity to find that the plaintiff has been deliberately untruthful about the evidence that he gave in relation to this, but the passage of time is a significant aspect and as I have said there is a reason why he may not have paid very much attention to the deposit bond once he understood that it had been supplied.

The claim against McGrath

33 I turn now to each of the particulars in par 25 of the statement of claim as against McGrath.

34 The first particular at par [16](1) above deals with exchanging contracts. Mr McLure submits that the particular, as framed, misstates the facts. The copy of the deposit bond was not the deposit required under the contract. The deposit was to be by way of deposit bond and inclusion of the fax of the deposit bond was pending the provision of the original deposit bond as promised by Mr Elali. Mr McLure submits that if the purchaser failed to produce the deposit bond the vendor was entitled to terminate. Mr McLure pointed out that no authority had been cited for the proposition that it was the duty of the agent to obtain a deposit of a particular quality at the time of the exchange and no expert evidence was adduced to establish that proposition.

35 I have some hesitation in accepting that an agent does not have an obligation to ensure that the deposit (or deposit bond) presented is on its face effective (see Brien v Dwyer (1978) 141 CLR 378 at 385 per Barwick CJ, although I should note that this passage was not adverted to by Mr Sharpe), but accepting delivery of a deposit bond the next business day is a different matter and, as Mr McLure says, there is no authority dealing with that and no expert evidence was adduced to support that contention.

36 Mr McLure submitted that s 5B and s 5C of the Civil Liability Act 2002 require the Court to consider whether the risk of harm was foreseeable and the probability that harm would occur if care was not taken. If the purchaser did not produce the deposit bond on the Monday as promised, the plaintiff was able to terminate the contract if so advised.;Brien v Dwyer and the subsequent case in the High Court of Romanos v Pentagold Investments Pty Ltd [2003] HCA 58; (2003) 217 CLR 367, in which Brien v Dwyer was applied, make that clear: in particular see Brien v Dwyer at 386 to 387 and 393 to 394 per Gibbs J, as his Honour then was, and at 402 to 403 per Jacobs J, and Romanos at [20] per Gleeson CJ and McHugh, Gummow, Hayne and Heydon JJ.

37 The last point leads to a fundamental problem with the plaintiff's case against the first defendant relevant to all of [16](1), (2) and (3). The plaintiff's case is based upon a contention that Mr Tsaprazis should not have accepted the copy of the bond and hence that the contracts should not have been exchanged. That case is quite inconsistent with the plaintiff's case against the second defendant, but more importantly the plaintiff cannot claim as against McGrath the deposit if it is asserted and accepted that the contract should never have been entered into. The deposit was only available if the contract was a valid contract entered into by the plaintiff. This same logic applies to the plaintiff's claim for the $188,000 differential between the Nazloomian Contract and the Bachir Contract. If the agent had advised the plaintiff, as the plaintiff contends he should have, that the contract with Nazloomian should not have been exchanged, then the $1.885 M payable under the Nazloomian Contract would not have been available to the plaintiff.

38 There are potentially two responses that might be made to the proposition that I have just articulated. The first is that by not advising the plaintiff on 25 July 2009 that the contracts should not be exchanged, the plaintiff lost the chance to sell to another bidder and the second is that Mr Tsaprazis should have obtained the deposit bond before exchange on 25 July 2009. So far as the first response is concerned, a claim based on loss of the under bidder was never particularised and not mentioned in the schedule of loss. No loss of a chance case was advanced on the pleadings. Secondly, the evidence of the plaintiff was that he would not have sold the property on 25 July 2009 to any one for less than $2 M other than by accepting Mr Nazloomian's offer and there is evidence that the other bidder, a Mr Passas, would not go beyond $1.8 M: see par 19 of Mr Tsaprazis' affidavit sworn 12 July 2012. Given the plaintiff's reluctance to accept even the $1.885 M, the most likely outcome was, if the exchange had not proceeded at that time, that the property would be presented again to market. The only evidence as to the market value of the property is found through the documents in the expression of Mr Tsaprazis' opinion as expressed to the plaintiff at the time of the auction. It does not support a market value in excess of the highest bid received at the auction when it was passed in and, as I have said, the next bidder indicated he would not go beyond $1.8 M.

39 So far as the second response is concerned, I accept Mr McLure's point that all the evidence points to the fact that the deposit bond was not available on 25 July 2009 and would not have been provided if Mr Tsaprazis had encouraged the plaintiff to insist on the original deposit bond being provided.

40 In my view, this head of particular, even had it been pressed, must fail.

41 Dealing now with the second particular at par [16](2) above in relation to the failure to verify the validity of copy of the deposit bond, Mr McLure submitted that Mr Tsaprazis had no need to call Vero, assuming that was possible to do so on the Saturday after the auction, to have them tell him what he already knew, which was that the original deposit bond would be required. The "copy" deposit bond was not valid, current and enforceable, and Mr Tsaprazis was not proceeding on the basis that it was. I accept that submission. Further, the same point that I have made about causation arises in respect of this particular as well. The plaintiff fails on this head of negligence.

42 Particular 3 at par [16](3) above deals with exchanging with a copy of the deposit bond without obtaining legal advice. As Mr McLure points out, this particular seems to assert that the exchange was invalid because a copy of the bond had been provided which is an erroneous view. It assumes that a contract is invalid because it is executory. He submitted there was no need to obtain legal advice on 25 July 2009. This point seems closely tied to [16](1) and [16](4) and it also suffers from the causation issue in any event.

43 Turning now to the fourth particular at [16](4), which is failing to ensure that the exchange was valid at law, Mr McLure submitted that on the parties signing the contract a binding agreement was formed. I have referred to the pleadings in this respect, and I have also indicated that whilst there may be scope for an argument about whether exchange requires the handing over to the other party of the signed contract, no such argument was advanced during the case and it is a contention quite inconsistent with the plaintiff's claim against Willis. The plaintiff accepted (see T60.42-46 and T61), as I have indicated, that it was agreed on the Saturday that advice would be sought on the Monday from Mr Picone about the contract. No submissions were advanced that the contract by exchange on 25 July 2009 (as pleaded in the statement of claim) was not valid at law. The plaintiff fails on this and the previous head of negligence.

44 The fifth particular at [16](5) relates to allegedly incorrect address details. Mr McLure submits that the plaintiff has not proven that the details on the front page of the contract were incorrect, and no explanation has been given as to how that failure caused the loss that the plaintiff claims or is linked to the failure of the purchaser to produce the original bond or perform under the contract. I accept Mr McLure's submissions and the plaintiff fails on this ground of particular as well.

45 Turning now to the sixth particular at [16](6), failing to relist the property after termination of the Nazloomian Contract, Mr McLure submitted that the evidence establishes that the property was not relisted on the open market because the plaintiff instructed Mr Tsaprazis not to do so. Mr McLure made reference in his submissions to the evidence in support of that contention, and there was no response to that submission. I accept Mr McLure's submission and the plaintiff fails on this ground as well.

46 In relation to the loss claimed, Mr McLure submitted that to establish an entitlement to the $188,000 claimed, the solicitor's costs and agent's commissions mentioned in the schedule of loss, the plaintiff would have to establish that through the negligence of Mr Tsaprazis the original contract was unenforceable or unable to be performed and but for his negligence it would have been performed. There is no evidence to support these elements and the purchaser's refusal to produce the original of the deposit bond suggest that the purchaser never had the capacity or intention to do so. This analysis, correct as it is, proceeds on the basis that the plaintiff's claim against the agent is that the contract should not have been entered into and, as I have noted, on that basis no differential between the Nazloomian and Bachir Contracts can be claimed.

47 Mr McLure also drew attention to the fact that the claim for solicitor's costs, agent's commission and auction fees had not been pleaded and that there was no evidence in support of these particular heads.

48 I should note that the statement of claim includes a claim under s 52 of the Property Stock and Agents Act 2002. This claim was never mentioned by Mr Sharpe and he did not respond to Mr McLure's submissions, and I take that claim to have been abandoned.

The claim against Willis

49 I shall now deal with the particulars of negligence alleged against Willis (see par [17] above), the first being the failure to verify with Vero General Insurance that the deposit bond was valid, current and enforceable. Mr Picone did seek to obtain the original of the deposit bond and he wrote to Vero and received a reply from Deposit Power, made contact with the Commonwealth Bank and checked online. As I have mentioned, it appears from the evidence that a deposit bond was issued by Vero. The difficulty was that the original was not produced by the purchaser to the vendor, either because it had been lost, which was one suggestion which had been made, or that it could not be obtained from "Emma", described as a mobile agent, the person to whom it was sent, or because the purchaser did not want it produced or replaced.

50 Again there is in relation to this a similar point to that made by Mr McLure, and that is that there is no question that what was provided by Mr Elali was not a valid, current enforceable deposit bond. What was required under the contract was a valid, current and enforceable bond. The document provided by Mr Elali on its face made it clear that it was unacceptable for the purposes of making any claim and Mr Picone was aware of that from the first morning that he saw the document.

51 The second particular (see [17](2) above) is failing to promptly request the original deposit bond from the purchaser. Mr Picone sought the original from the purchaser on 28 July 2009 (see p 125). The response from the purchaser's solicitor was "I will get on to it ASAP" (see p 126). Mr Picone requested the original again by letter to the purchaser's solicitors on 4 August 2009 (p 143), 20 August 2009 (p 144) and 26 August 2009 (p 145) as well as by call on 21 September 2009 (p 160). The delay between 4 August and 20 August and from 26 August to 21 September has not been satisfactorily explained but the first request for the bond was prompt. The plaintiff has failed to make out this head of claim. Even if it were accepted that there was an unreasonable delay, it does not appear that the delay of itself has caused or contributed to the failure of the purchaser to provide the original deposit bond.

52 Turning now to the third particular at [17](3) above, failing to require payment of the deposit by the purchaser by alternate means as required under the contract.

53 It is true that Willis did not recommend a demand for the 10 per cent but it is not at all clear to what this particular is directed. When viewed against paragraphs 18 - 23 in the pleading, which precede it, it appears that what is intended is an allegation that a demand for the deposit could not be made other than as a demand for the whole 10 per cent deposit and that to seek only the 5 per cent made the demand ineffective. Another possibility is that what is asserted is that Mr Picone should have recommended that the demand be for the full 10 per cent so as to procure the whole 10 per cent from the purchasers. I shall deal with both possibilities below but I should first comment on the report of Ms Hole, a solicitor of extensive experience, which report was tendered in evidence by the plaintiff.

54 There were objections to Ms Hole's report, including a general objection by the first defendant that Ms Hole had no expertise in estate agency matters and that the report could not be received as against the first defendant, which I accepted. Mr Emmett for the solicitor also objected to the report globally on the basis that it was not really dealing with expert evidence and was more in the nature of opinions about the legal issues in the case.

55 Ms Hole asserts in her last paragraph that the solicitor "contributed to the failure of the contract" but it is quite unclear how the conclusion is reached and what she is intending to convey by that comment. It is unclear whether she is asserting that a demand for provision of the deposit bond was invalid or whether the demand could and should have been made for 10 per cent.

56 There are a number of further difficulties with Ms Hole's report. The first is Ms Hole has made or been asked to make assumptions not established on the evidence. Secondly, her report does not set out or endeavour to set out matters of conveyancing practice but rather reads as her views on legal issues in the case. Thirdly, her report deals with issues that are not pleaded and therefore not relevant. Fourthly, her report assumes that the vendor was entitled to call for the balance of the deposit before the failure to provide the deposit bond in answer to the notice.

57 In relation to the nature of the demand, if Ms Hole is asserting that the demand for provision of the deposit bond was invalid, it is not made clear why she asserts that, and if she is asserting that the demand could and should have been for 10 per cent, it is not clear why she is asserting that the plaintiff is precluded by reason of the demand from claiming the balance, if otherwise available.

58 Further, Ms Hole's report makes no mention of the issue of whether the second part of cl 13 is or might be a penalty. There is authority in the case of Iannello v Sharpe [2007] NSWCA 61; 69 NSWLR 452, which suggests that clauses of this kind are in effect a penalty and the case of Luu v Sovereign Developments Pty Ltd [2006] NSWCA 40 suggests that there might have been a significant problem in obtaining the full 10 per cent.

59 I have not found Ms Hole's report to be of assistance in dealing with the issues in this case and I might also add Mr Sharpe's comment in reply yesterday that he was relying on Ms Hole's report was in a context where he had made no endeavour to explain how he relies on her report and how it fits within any one of the pleaded particulars or the new case he was seeking to advance entirely unhelpful and there was no analysis offered or explanation given as to what use I could make of the report in supporting the plaintiff's contentions, even in relation to [17](3), to which I assume the report was directed.

60 To the extent it is asserted that limiting the demand to a demand for the 5 per cent deposit bond was not permitted and made the demand ineffective, this seems to be closely allied with the particulars at [17](4) and [17](5) above, with which I deal later. If the demand for 5 per cent was not valid, then the demand for 10 per cent could not have been made either since under the terms of cl 13, default on the part of the purchaser was required before demand could be made for the balance of the deposit. If the demand for the 5 per cent was valid, then it is not clear why (absent any issue of penalty) it is said that the balance could not be sought. If the failure to provide the original deposit bond amounted to a breach of contract permitting termination without notice, the fact that notice was given ought not produce the consequence that the purchaser, having failed to meet the demand, would be excused from performance. No such contention was advanced by the purchaser and one advantage of giving a notice and hence giving the purchaser some time in which to provide the deposit bond is that there then could be no doubt about the entitlement to terminate the contract and no doubt then about the purchaser being in default. The response of the purchaser to the demand, which I have earlier set out, itself makes clear the purchaser's refusal to supply an original and effective bond and I agree with Mr Emmett's assertion that this of itself constituted a breach of the contract on which the plaintiff would have been entitled to have accepted as a basis for terminating the contract: see Shepherd v Felt & Textiles of Australia Ltd (1931) 45 CLR 359 at 378.

61 To the extent it is contended that the solicitor should have recommended calling for not only the original of the deposit bond but also the balance of 10 per cent, the difficulty is that it would not have produced the original of the deposit bond, and I infer on the balance of probabilities, having regard to the conduct of the purchaser, that the balance of the deposit would not have been provided either.

62 The fourth particular at [17](4) above is in advising the plaintiff of his entitlement to terminate the contract with the purchaser when the defendant ought to have known in the circumstances that the plaintiff had no right. The fifth particular at [17](5) above is terminating the contract with the purchaser in circumstances where the plaintiff was not entitled to do so. These particulars are predicated on the assumption that the plaintiff had no right to terminate the contract. The assumption is flawed, essentially for the reasons advanced by Mr Emmett, namely that the purchaser was obliged by cl 13 to provide a deposit bond and failed to do so notwithstanding a number of requests that he do so. As Brien v Dwyer makes plain, a deposit is "an earnest of performance by the purchaser if the vendor is willing to be bound". (See Brien v Dwyer at 385 per Barwick CJ, at 393 per Gibbs J and at 395 per Jacobs J.) The deposit is an essential condition or fundamental term of the contract. (See Brien v Dwyer at 401 per Jacobs J.) This contract did not require payment of the deposit bond in cash into an agent's account but rather required provision of a deposit bond. The obligation to provide a deposit bond required a deposit bond that could be called on and be converted into cash, not a document that made it clear that it was not itself the bond and could not be relied on to make a call for the $85,000 which the issuer undertook to pay. To be effective as a deposit, the deposit bond must be capable of being turned into cash: see Stone v Matich (1981) 2 BPR 9301, Josland v Mullaley Properties Pty Ltd (1993) 6 BPR 13,285-3,289 and Wood Hall Ltd v Pipeline Authority [1979] HCA 21; (1979) 141 CLR 443 at 457 dealing with bank guarantees. Provision of the copy of the deposit bond did not meet the contractual obligation imposed on the purchaser.

63 Insofar as cl 2.7 of the contract for sale is concerned, I accept that it precluded the vendor from relying on cl 2.2 to cl 2.5 in circumstances where the vendor had agreed to accept a deposit bond and an effective deposit bond had been produced. Normally, as explained in Brien v Dwyer, the vendor could terminate the contract immediately and without notice if the deposit was not paid or if, for example, the deposit was paid by cheque and the cheque was not honoured on presentation. The complication here was that the vendor himself or by his agent had agreed to extend the time for provision of the deposit bond to Monday 27 July 2009. The failure to supply the deposit bond by the close of business on the Monday would have entitled the vendor to terminate immediately. It is clear on the evidence that Mr Picone did not advise the plaintiff of that right but the plaintiff's case was not pleaded on the basis that termination should have been recommended and effected on that day. Mr Picone continued to press for the deposit bond and to seek details of the whereabouts of the original bond. It may well be that from his client's point of view he allowed the process to go on too long but that delay was not the basis of the claim either.

64 In my view there was no reason why the vendor could not terminate the contract for breach of an essential term. As I have indicated, whilst that right might have been open, without more, to require provision of the bond by letter was, even if not necessary, not an imprudent thing to do. The letter of demand requires the client to provide "the agreed deposit of $85,000". The "agreed deposit" could mean the deposit bond in the amount of $85,000 since that was what was agreed but it could also mean the vendor required the payment of the $85,000 in cash. Since no account was specified in which money was to be paid, I think the former is what was intended by the letter but given the response of the purchaser's solicitor, namely that "the deposit bond is valid and not in breach of condition 2" and there being no suggestion by the purchaser's solicitor that the notice was bad in form, either in the letter at p 172 sent on 1 October 2009 or in the subsequent letter of 4 November 2009 at p 188, nothing turns on this.

65 Mr Emmett, for good reason, opposed any attempt to introduce such claims into the case at the late stage claims of waiver, affirmation and unconscionability vis-à-vis the purchaser were introduced. Even if it were open to be argued, I do not accept that the plaintiff, through his solicitor, waived the requirement for the original deposit bond, and in my view Mr Picone did nothing to indicate waiver or affirm the contract in a way that precluded an assertion being made that the deposit bond should be provided. Nor can I accept the proposition, if it were able to be advanced, that the vendor's solicitor lulled the purchaser's solicitor into believing that the deposit bond was not required to be an original deposit bond and nor was it in the least "unconscionable" for the plaintiff to have, through Mr Picone, demanded production of the deposit bond (or deposit, for that matter).

66 The sixth particular at [17](6) above is failing to adhere to the requirements of the Legal Profession Act. This particular was never mentioned in opening or closing submissions by Mr Sharpe and there is no proof of any breach of the obligations. The second ground at [17](6)(b) has not been made out factually and could not be a separate particular of negligence, as the standard of care is an objective one.

67 In my view none of the particulars against Willis have been made out.

68 It follows that the plaintiff has not established that either of the defendants breached any duty of care owed to him.

69 The issue of proportionate liability as between the two defendants themselves and as between the two defendants, on the one hand, and Mr Nazloomian or Mr Elali, on the other, does not arise.

70 Nor does the issue of damages arise but I have already commented on the problem in the plaintiff's case against the first defendant insofar as the claim is made for loss of the deposit or the loss of the differential between the Nazloomian Contract and the Bachir Contract.

71 As far as the second defendant is concerned, the plaintiff cannot recover the "lost deposit" from the second defendant because it is not established that the second defendant caused its loss. Even if it were established that the second defendant had deprived the plaintiff of that right, the plaintiff would have to establish on the balance of probabilities that the right claimed to be lost was worth something, that is, that there was a prospect that action against Mr Nazloomian would have yielded a net gain to the plaintiff. The only evidence about Mr Nazloomian in the material before the Court suggests he did not have the money to pay for the deposit under the contract and had mortgages on his three properties and was not keen to progress the purchase in the form of the contract into which he had entered. To launch a claim against Mr Nazloomian for any amount would require very considerable caution and the evidence before the Court is that notwithstanding advice obtained from counsel on behalf of the plaintiff by Willis (see pp 210 to 217) that he had a good claim against Mr Nazloomian for $188,000 (the Nazloomian/Bachir differential), the plaintiff did not pursue that claim for reasons which have not been explained.

Conclusion

72 My conclusion is that the plaintiff's claim against both defendants fails and there should be should be judgment in favour of the first and second defendants on the plaintiff's claim against them.

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Decision last updated: 07 January 2013