Court of Appeal Supreme Court New South Wales

• Medium Neutral Citation: Stephen Wayne Velik v Noreen Steingold [2013] NSWCA 303
• Hearing dates: 29 July 2013
• Decision date: 13 September 2013
• Before: McColl JA [1]; Gleeson JA [2]; Sackville AJA [3].

Decision

1. Appeal allowed.

2. Set aside the orders made by the primary Judge on 4 September 2012 and 29 October 2012.

3. Direct the appellants (the Purchasers) to file within seven days short minutes of order consistent with these reasons for judgment.

4. Direct the appellants, if the short minutes of order are not agreed, to file within the time specified in Order 3, brief written submissions in support.

5. Direct the respondent (the Vendor), if she disputes the appellants' short minutes of order, to file within a further seven days her proposed short minutes of order, together with brief written submissions in support.

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

• Catchwords: CONTRACT - contract for the sale of land - validity of notice to complete - whether contract required fourteen clear days notice - whether any shorter period permissible; CONTRACT - whether purchasers repudiated the contract by failing to complete on an agreed date (where a valid notice to complete had not been served) - purchasers insisting on an erroneous interpretation of the contract as the basis of their refusal to complete on the agreed date - purchasers acting in good faith - failure of vendor to point out the precise error in the purchasers' interpretation
• Legislation Cited: Conveyancing Act 1919 s 55(2A)
• Cases Cited: Ajit v Sammy [1967] 1 AC 255; Associated Beauty Aids Pty Ltd v Federal Commissioner of Taxation [1965] HCA 20; 113 CLR 662; Carr v Keys-Arenas (1982) 2 BPR 9498; Doyle v Howey (1990) 6 BPR 13,401; DTR Nominees Pty Ltd v Mona Homes Pty Ltd [1978] HCA 12; 138 CLR 423; Forster v Jododex Australia Pty Limited [1972] HCA 61; 127 CLR 421; Killarney Investments Pty Ltd v Macedonian Community of Western Australia Inc [2007] WASCA 180; Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd [2007] HCA 61; 233 CLR 115; Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd [1989] HCA 23; 166 CLR 623; M & L Hazelton Pty Ltd v Woodfield (1982) 2 BPR 97,144; Perpetual Trustee Company Ltd v Meriton Property Management Pty Ltd [2006] NSWCA 75; 15 BPR 28,323; R & A Cab Co Pty Ltd v Kotzman [2008] VSCA 68; Ross T Smyth & Co Ltd v TD Bailey, Son & Co [1940] 3 All ER 60; Satellite Estate Pty Ltd v Jaquet (1968) 71 SR (NSW) 126; Shaddick v Dunsford Investment Pty Ltd (1990) 5 BPR 11,322; Shevill v The Builders Licensing Board [1982] HCA 47; 149 CLR 620; Sindel v Georgiou [1984] HCA 58; 154 CLR 661; Stickney v Keeble [1915] AC 386; [1914] All ER Rep 73; Terry v Merriview Pty Ltd [1983] 2 VR 548; Trawl Industries of Australia Pty Ltd v Effem Foods Pty Ltd (1992) 27 NSWLR 326; Zaccardi v Caunt [2008] NSWCA 202; 15 BPR 28,403
• Texts Cited: P Butt, The Standard Contract for Sale of Land in New South Wales (2nd ed, 1998)
• Category: Principal judgment
• Parties: Stephen Wayne Velik (First Appellant); Laura Allison Velik (Second Appellant); Noreen Steingold (Respondent)
• Representation: Counsel: S Balafoutis with DA Stretton (First and Second Appellants); M Einfeld QC with DD Knoll (Respondent); Solicitors: SV Law (First and Second Appellants); Slater & Gordon (Respondent)
• File Number(s): 2012/305131

Decision under appeal

• Citation: Stephen Wayne Velik v Noreen Steingold [2012] NSWSC 860
• Date of Decision: 2012-07-31 00:00:00
• Before: Slattery J
• File Number(s): 2010/96975

Judgment

1 McCOLL JA: I agree with Sackville AJA.

2 GLEESON JA: I agree with Sackville AJA.

3 SACKVILLE AJA: This case between a vendor and purchasers of a residential property, represents the triumph of obstinacy over common sense. Perhaps not entirely coincidentally, the husband of the vendor is a solicitor, as is one of the purchasers. The solicitors (respectively, Mr Steingold of ERA Legal and Mr Velik of SV Law) acted for the parties on the transaction.

4 The appellants ("the Purchasers") entered into a contract to purchase a residential property located at St Ives from the respondent ("the Vendor"). The purchase price under the contract of sale ("the Contract") was $1.26 million, of which the Purchasers paid the usual ten per cent ($126,000) as a deposit.

5 As completion of the sale approached, the parties, who had been neighbours, entered into a dispute as to whether amounts ultimately totalling $3,132.05 should be paid to a stakeholder pending determination of the competing claims to that sum (which represented a mere 0.25 per cent of the purchase price). The Vendor insisted that the Purchasers were bound to pay this sum on completion as interest due under the terms of the Contract. The Purchasers contended that they were entitled to invoke the arbitral mechanism provided in the Contract for the resolution of claims made by them and that, in the meantime, they were entitled to have the disputed sum paid to a stakeholder.

6 In consequence of the dispute, completion of the Contract did not take place on the date agreed between the parties. The Vendor and the Purchasers each purported to terminate the Contract by reason of the other's default or repudiation. The Vendor forfeited the deposit and, after some further disputation, resold the Property. The Purchasers instituted proceedings in the Equity Division of the Supreme Court seeking declaratory relief and an order for the return of the deposit paid by them. In the alternative, they sought an order for repayment of the deposit pursuant to the discretion conferred on the Court by s 55(2A) of the Conveyancing Act 1919 ("Conveyancing Act").

7 The primary Judge (Slattery J) concluded that the Vendor had validly terminated the Contract and forfeited the deposit. His Honour held that a notice to complete served by the Vendor was not effective to make time of the essence of the Contract, because it did not provide 14 clear days for completion as the Contract required. Nonetheless, his Honour held that Vendor was entitled to succeed on two bases:

• The Purchasers were not entitled to invoke the arbitral mechanism provided in the Contract for the resolution of claims. Their persistence in doing so showed that they were unwilling to complete the Contract in accordance with its terms. Thus they had repudiated the Contract and the Vendor was entitled to accept their repudiation and terminate the Contract.

• The Purchasers, by failing to pay the amounts due on completion, had breached an essential term of the Contract. The Vendor was entitled to accept that breach of a fundamental term or a repudiation and to terminate the Contract.

8 Slattery J also declined to exercise the discretion conferred by s 55(2A) of the Conveyancing Act to order the Vendor to return the deposit to the Purchasers. Accordingly, his Honour ordered that the balance of an account into which the deposit had been placed pending determination of these proceedings be paid to the Vendor.

9 The Purchasers have appealed to this Court. They contend that the primary Judge should not have held that they were in breach of an essential term of the Contract nor that they had repudiated the Contract. In the alternative, they submit that his Honour erred in the exercise of his discretion under s 55(2A) of the Conveyancing Act and should have ordered the Vendor to return the deposit.

10 The Vendor seeks to uphold the primary Judge's decision. By an amended Notice of Contention, the Vendor also challenges the primary Judge's holding that the notice to complete was not valid. If that challenge succeeds, it provides an independent basis for dismissing the Purchasers' appeal.

The Contract

11 The cover sheet of the Contract provided for the sale of the Property at a price of $1.26 million with a deposit to be paid of $126,000. The sale was expressed to be subject to existing tenancies. The "completion date" was as stated in Special Condition ("SC") 34. In the events which occurred, the completion date under SC 34 was 14 days after the Vendor served the Purchasers with a Registration Notice relating to the subdivision of land owned by the Vendor, part of which constituted the Property.

12 Clause 7 dealt with claims by the Purchasers as follows:

The purchaser can make a claim ... before completion only by serving it with a statement of the amount claimed, and if the purchaser makes one or more claims before completion -

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

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

7.1.2 the vendor serves notice of intention to rescind; and

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

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

7.2.1 the 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;

7.2.2 the amount held is to be invested ...

7.2.3 the claims must be finalised by an arbitrator

...

13 Clause 9 dealt with default by the Purchasers as follows:

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

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

...

9.3 sue the purchaser either -

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

the deficiency on resale (with credit for any of the deposit kept or recovered and after allowance for any capital gains tax or goods and services tax payable on anything recovered under this clause); and

the reasonable costs and expenses arising out of the purchaser's non-compliance with this contract or the notice and of resale and any attempted resale; or

9.3.2 recover damages for breach of contract.

14 Clause 15 of the Contract provided as follows:

The parties must complete by the completion date and, if they do not, a party can serve a notice to complete if that party is otherwise entitled to do so.

15 Clause 16.7 provided as follows:

On completion the purchaser must pay to the vendor, by cash (up to $2,000) or settlement cheque, the price (less any deposit paid) and any other amount payable by the purchaser under this contract (less any amount payable by the vendor to the purchaser under this contract).

16 Clause 21.2 relevantly provided as follows:

21.1 If the time for something to be done or to happen is not stated in these provisions it is a reasonable time.

...

21.6 Normally, the time by which something must be done is fixed but not essential.

"Normally" was defined in cl 1 of the Contract to mean "subject to any other provision of this contract".

17 The "Special Conditions" to the Contract included the following:

37 Limitations on Purchaser's Rights

37.1 The 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 [sic], 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.

...

43 Entire Agreement

43.1 The Purchaser acknowledges that it does not rely on any letter, document, correspondence or arrangement, whether oral or in writing made by the Vendor, the Vendor's Agent ... or any other person ... adding to or amending the terms, conditions, warranties and arrangements set out in this Contract.

...

52 Notice to Complete

52.1 In 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.

53 Release of Deposit

53.1 Notwithstanding the provisions of Clauses 2 and 3 of this Contract the Purchaser agrees to release the deposit to the Vendor.

...

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 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 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.

Course of Events

18 In 2009, the Purchasers began living in a house on land owned by the Vendor in St Ives. The Vendor lived with her husband in another house on the same land. The Purchasers paid rent to the Vendor.

19 On 4 December 2009, the Purchasers entered into the Contract to purchase the Property (on which was erected the house they were renting from the Vendor). The deposit was paid on exchange.

20 The Contract provided for the subdivision of the land owned by the Vendor. Although there was a dispute concerning the manner in which the Vendor served the Registration Notice, it is now common ground that the completion date under SC 34 of the Contract was 26 February 2010.

21 In a conversation on 24 February 2010, confirmed by a letter sent the following day, the Purchasers' solicitor advised the Vendor's solicitor that they would be unable to settle on 26 February 2010 "because of a last minute additional requirement of our clients' home loan lender". The letter said that the Purchasers "will only likely be in a position to complete ... on Friday week, 5 March 2010" and indicated that settlement figures should be recalculated as at that date.

22 The letter of 25 February 2010 acknowledged that under the Contract (presumably SC 55.1) the Purchasers were obliged to pay interest on the balance of the Contract price from 26 February 2010 to the new date of completion. However, the letter asserted that unless the Vendor gave credit for the rental paid by the Purchasers in respect of the same period, the payment of interest would amount to double counting and would therefore constitute an unenforceable penalty. This was the genesis of the dispute between the parties.

23 The Vendor's solicitor replied on 26 February 2010, confirming that settlement had been booked for 5 March 2010. The letter stated that the Vendor would serve a notice to complete pursuant to SC 52.1 of the Contract that day. In the letter, the Vendor's solicitor rejected the Purchasers' claim that payment of interest under the Contract would constitute a penalty, for these reasons:

Pursuant to the provisions of [SC] 55.1 of the Contract, your client is liable to pay interest at the rate of 10% pa on the balance of the purchase monies outstanding calculated on a daily rate for the period from the completion date to the actual date of completion. We will include this calculation in the amended settlement figures.

The fact that your client is also the tenant of the property and will be in possession of the property for an extra week does not in any way negate the obligation to pay interest under the Contract. The two matters are unrelated. For the record, our client is incurring interest on the balance of the purchase monies under the Contract to its own bank in excess of 8.5% pa. Further, our client has additional obligations to meet including insurance payments and other outgoings in relation to the property.

24 Despite what was said in the letter, the Vendor's solicitor did not serve a notice to complete until the following Monday, 1 March 2010. The notice to complete, which was served by fax at 12.25 pm on that day, required the Purchasers to complete on or before 3.00 pm on 15 March 2010. It will be seen that the notice did not allow 14 clear days from service until the time for completion.

25 On 3 March 2010, the Purchasers' solicitor advised that "[d]ue to our client's [sic] home loan funding" they were only likely to be in a position to settle on 12 March 2010. The letter stated that "as a gesture of good faith" the Purchasers would pay contractual interest on the balance of the purchase price for the extra week, to the extent that the interest exceeded the rental paid by them to the Vendor.

26 On 4 March 2010, the Vendor's solicitor informed the Purchasers' solicitor that settlement had been rescheduled for 2.00 pm on 12 March 2010 and that the settlement figures would be recalculated accordingly. The letter reiterated that the obligation to pay interest was entirely independent from and separate to the obligation to pay rent. Thus the Purchasers would be required to pay interest on completion for the period 26 February 2010 to 12 March 2010. In their reply the same day, the Purchasers made no admissions and reserved their rights.

27 On 10 March 2010, the Vendor's solicitor sent a settlement sheet to the Purchasers' solicitor. The amount payable to the Purchasers recorded in the settlement sheet included $4,349.59 in interest, calculated in accordance with SC 55.1 of the Contract.

28 On 11 March 2010, the Purchasers' solicitor advised that they were now unable to settle on 12 March 2010, but they expected to know the next day (Friday, 12 March 2010) or the following week when settlement could take place. The letter restated the Purchasers' position on the payment of interest. The letter also asserted, for the first time, that the Purchasers disputed the validity of the notice to complete. No reasons were given for this assertion.

29 The Vendor's solicitor replied at 11.51 am on 12 March 2010. The letter stated that the Vendor was ready, willing and able to settle on that same day and that she regarded the notice to complete as valid. The letter warned that if settlement did not take place by 3.00 pm on the following Monday, 15 March 2010, the Vendor would accept the Purchasers' wrongful repudiation of the Contract.

30 The Purchasers' solicitor replied by fax at 2.18 pm, advising that they were now ready, willing and able to settle at 4.00 pm that day (that is, Friday, 12 March 2010). The letter reiterated the claim that the notice to complete was invalid, but still gave no reasons for this assertion. The letter included the following:

[O]ur client's [sic] hereby make a claim pursuant to clause 7 of the [Contract] that your client is not entitled to $2,200.00 of the $4,349.59 interest adjustment in the said settlement figures, by reason of the said $2,200.00 being in the nature of an unenforceable penalty.

Accordingly, our client's require that the said amount of $2,200.00 be retained from the deposit monies held by your client's agent in respect of the above sale until the said claim is finalised or lapses, pursuant to sub-clause 7.2 of the [Contract].

Curiously enough, when this letter was written the Purchasers' solicitor was apparently unaware that the deposit had been released to the Vendor in accordance with SC 53 of the Contract, which permitted release of the deposit pending completion. This letter was the first time the Purchasers had referred in correspondence to cl 7.2 of the Contract.

31 The Purchasers' solicitor sent a follow-up fax at 3.28 pm seeking an urgent response from the Vendor.

32 A reply came from the Vendor's solicitor at 3.33 pm. The reply stated that:

• due to the late notice by the Purchasers, the Vendor's bank (CBA) was not in a position to reconvene that day to facilitate settlement;

• the notice to complete was valid;

• the Vendor was ready, willing and able to settle the Contract at 12.30 pm on 15 March 2010;

• SC 55.1 required the Purchasers to pay interest at the stipulated rate; and

• if the Purchasers did not pay the full amount on settlement including interest, the Vendor would accept the Purchasers' wrongful repudiation of the Contract.

33 At 6.11 pm on 12 March 2010, the Vendor sent a revised settlement sheet to the Purchasers' solicitor. The interest payable pursuant to SC 55.1 was recalculated at $5,281.64.

34 At 7.37 am on Monday, 15 March 2010, the Purchasers' solicitor sent an email to the Vendor's solicitor claiming that:

• the Vendor had not taken sufficient steps to ensure that the CBA could facilitate settlement on the previous Friday;

• the Vendor had not been ready, willing and able to complete on the Friday because of her failure to secure the CBA's participation in the settlement;

• the "rushed" purported notice to complete and the refusal to take account of the Purchasers' rental payments were "unlawful"; and

• the Vendor's stated intention to accept a repudiation if settlement did not take place was itself a "repudiatory breach".

35 In a second email, sent at about the same time, the Purchasers' solicitor confirmed that they were ready to settle at 12.30 pm that day (15 March 2010), subject to the following:

• they had made a claim pursuant to cl 7 of the Contract to the effect that $2,200.00 of the interest payable under the Contract was an "unenforceable penalty";

• they required the sum of $2,200.00 to be retained from the deposit and held by the agent until the claim was finalised, pursuant to cl 7.2 of the Contract;

• the Vendor was not entitled to interest of $932.05 for the period 13-15 March 2010, because the Vendor had not been ready, willing and able to complete on 12 March 2010;

• alternatively, of the sum of $932.05, $471.43 was an unenforceable penalty; and

• the Purchasers required the additional sum of $932.05 to be retained from the deposit in accordance with cl 7.2.

36 At 9.31 am, on 15 March 2010, the Vendor's solicitor replied to the Purchasers' email as follows:

1. The Commonwealth Bank was not able to attend settlement at 4:00pm on Friday 12 March 2010. This was due to the fact that settlement was set down for 12:30pm on that day as originally agreed with your clients but thereafter cancelled due your clients' notification to our office on Thursday 11 March 2010 that it needed one possibly two, extra weeks to settle. You then advised us at 2:11pm on Friday afternoon 12 March 2010 that your clients could somehow now settle at 4:00pm on that day. We then contacted our client's [sic] Bank who advised us that the bank requires 24 hours notification to book in a settlement and in any event could not possibly attend settlement at 4:00pm on that day. This was then conveyed to your office and a new time (being 12:30pm on Monday 15 March 2010) proposed. For the record this is the fourth time that we have now convened a settlement to settle this matter.

2. Our client disagrees with all of the other contentions raised in your abovementioned letters as clearly dealt with in previous correspondence to your firm.

3. Unless you unequivocally confirm by return letter to be received at this office by no later than 10:30am this morning that your clients are ready, able and willing to attend settlement at 12:30pm today at the stipulated address as set out in our letter of Friday 12 March 2010 and in accordance with the details provided in the attached settlement statement, our client will rely on her rights.

37 By a fax sent at 10.26 pm on 15 March 2010, the Purchasers' solicitor reiterated some matters in the earlier correspondence, but confirmed their willingness to settle at 12.30 pm that day.

38 Mr Velik represented the Purchasers at the scheduled settlement, which was to take place at the Legal Link settlement rooms. A paralegal, Ms Marrone, represented the Vendor. A representative of the CBA also attended.

39 The primary Judge made the following findings as to what occurred at the settlement:

99 ... Mr Velik and Ms Marrone were at the Legal Link settlement rooms for about 45 minutes. Mr Velik organised the stamping of the contracts and departed for a short period to draw cheques at the National Australia Bank from his savings account [apparently in relation to the settlement]. He paid stamp duty on the contract of $54,997.32. He showed to Ms Marrone bank cheques in the amount of $22,680.00 for the agent, $1,027,320.00 payable to the CBA and $90,774.10 also payable to the CBA. But he provided [a letter] to instruct the agent to retain the amounts of $2,200.00 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 [that] 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 ...

103 ... Mr Velik arrived back [at the settlement] just before the CBA representative left.

104 ... [A]fter Mr Velik returned at about 1.30 pm [a] conversation took place between [him and Ms Marrone] 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 ... Mr Velik became agitated at this point ... He asked [Ms Marrone] 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. ... 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 [sic] and can settle between 2.30 and 3.00 but not later than 3.30.

[The primary Judge in this quotation appears to have attributed Mr Velik's part of the conversation to Ms Marrone and to have regarded her question as directed to Mr Velik, rather than to 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 3.30 pm. 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 upon 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 2.15 pm and discussed the matter with Mr Steingold ... Shortly after 2.30 pm 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" ... Mr Velik did not call back.

109 When Mr Velik arrived at the Espreon settlement rooms shortly prior to 3.15 pm 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 ... [T]he CBA representative was present at the Espreon settlement rooms. [Mr Velik's] 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 $2,200.00 and $932.05 be paid to the agent pending a clause 7.2 determination. The vendor's non-attendance at the Espreon settlement rooms clearly indicated that this continued to be a term unacceptable to the vendor.

110 Commencing at 3.16 pm 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 3.16 pm and at 3.20 pm 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 3.13 pm. 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 [sic] 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 3.00 pm today [sic] A cheque made payable to your client's agent for the said amounts totalling $3,102.05 [sic].

112 The letter then pointed out that once those steps had been taken the vendor should attend the Espreon settlement rooms ...

113 But at 3.18 pm 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 6.15 pm 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 3.18 pm that day was itself a repudiation of the Contract. The purchasers' [sic] 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 ...

40 The primary Judge made the following findings as to subsequent events:

117 On 4 April 2010 the [P]urchasers claimed in correspondence to accept certain alleged repudiatory breaches of [the Vendor] and to terminate the Contract. To support that termination the [P]urchasers again relied upon paragraph 6 of the 3.37 pm 12 March 2010 letter and the [V]endor's refusal to complete the Contract on 15 March, communicated in various ways to the [P]urchasers as it had been . [The Purchasers] 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.

...

119 [The Vendor] sought to re-sell the [Property]. But on 21 May 2010 [the Purchasers] lodged a caveat over the property in respect of their claimed interest in the deposit through a purchaser's lien. [The Vendor] 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 re-settlement of the re-sale with the lodgement of the deposit into a joint account at the CBA to be operated by [the parties] pending the outcome of these proceedings ...

The Primary Judgment

41 The primary Judge, after disposing of some matters not now in issue, addressed the validity of the notice to complete given by the Vendor on 1 March 2010. His Honour gave these reasons for holding the notice to complete invalid:

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 ... 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 ... 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 ... 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 [Vendor's] failure to serve a proper Registration Notice when he agreed to completion on 26 February 2010, the confused way the [Vendor] 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 [the Purchasers], 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.

42 The primary Judge then considered the events leading to the Vendor's termination of the Contract. His Honour made several findings about the respective positions of the parties on 12 March 2010:

• the Purchasers were ready, willing and able to complete by 4.00 pm on that day, since by that time Mr Velik was able to access the requisite funds (at [85]);

• nonetheless, it was "entirely reasonable" for the Vendor to decline settlement on the afternoon of 12 March 2010, since the Purchasers had failed to give sufficient notice of their change of position in the course of the afternoon (at [83]); and

• the reason why the Vendor did not complete the Contract on 12 March 2010 was the difficulty in making revised arrangements with the CBA at short notice, not (as the Purchasers contended) her unwillingness to settle (at [91]).

43 The primary Judge's findings concerning the events on 15 March 2010 and thereafter have already been set out (at [34]-[39] above).

44 His Honour noted (at [123]) that the Vendor advanced two alternative contentions. First, she submitted that she was entitled to terminate the Contract on 15 March 2010 because the Purchasers had insisted on making impermissible claims under the Contract and also because they were in breach of an essential term by refusing to pay interest in accordance with SC 55.1. Secondly, the Vendor submitted that the Purchasers were not ready, willing and able to complete because they had failed to complete on four successive dates (26 February , 5 March, 12 March and 15 March 2010).

45 His Honour held (at [127]-[130]) that the claims advanced by the Purchasers were impermissible because SC 37 of the Contract prevented them relying on cl 7.2 to require the Vendor to set aside the disputed amount of interest. The Purchasers' claim to invoke cl 7.2 was caught by SC 37.1, since that provision prohibited a claim by the Purchasers in connection with anything done by the Vendor "which is not prohibited under this contract". Since the Vendor's claim for additional interest was expressly authorised by the Contract, SC 37.1 applied. In his Honour's view (at [132]), the Purchasers' persistence in seeking to invoke the cl 7.2 mechanism on both 12 and 15 March 2010 justified concluding that they were unwilling to complete the Contract in accordance with its terms. This constituted a repudiation of the Contract, which the Vendor was entitled to accept by her notice of 15 March 2010.

46 The primary Judge dealt separately with the Purchasers' refusal to pay interest. He noted (at [142]) that the Vendor claimed that the Purchasers were in breach of an essential term of the Contract "for their refusal to pay interest, in accordance with [SC 55.1]". The Purchasers argued that without a valid notice to complete no interest had fallen due under SC 55.1, since interest was payable only on the "actual date of completion" of the Contract. Thus a refusal to pay did not constitute a basis for the Vendor's termination of the Contract.

47 His Honour dealt with the competing contentions this way (at [144]):

But even if the [Purchasers'] 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 [Purchasers'] 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.

48 The primary Judge rejected (at [145]) the Vendor's second contention. Even if the Purchasers were unable to settle by 2.00 pm on 12 March 2010, in the absence of a valid notice to complete nothing flowed from their inability to settle. Only if the Purchasers were unable or unwilling to complete in conformity with a valid notice to complete would there be grounds for termination (in the absence of any other repudiatory conduct by the Purchasers).

49 It followed from the primary Judge's conclusion that the Purchasers had repudiated the Contract (at [148]) that, subject to the Purchasers' reliance on s 55(2A) of the Conveyancing Act, cl 9.1 of the Contract entitled the Vendor to retain the deposit.

50 His Honour was not persuaded that the discretion conferred by s 55(2A) of the Conveyancing Act should be exercised in favour of the Purchasers. The dispute was about a small sum of money, but it was "avoidable and was pushed ... right to the brink, at the [Purchasers'] own risk" (at [156]). For example, they could have paid over the disputed amount at settlement under protest and sought to recover it later. The fact that the Vendor resold at a profit of $40,000.00 was not a basis for ordering return of the deposit (at [157]).

51 For these reasons, the primary Judge made an order for the release to the Vendor of the amount held in the interest bearing account into which the deposit had been placed pending the outcome of the proceedings. It does not appear that a formal order was made dismissing the Further Amended Statement of Claim filed by the Purchasers, although such an order would seem to be required by his Honour's reasoning.

Reasoning

The Notice of Contention

52 It is convenient to address first the Vendor's Notice of Contention. The Vendor advanced two arguments:

(1) The primary Judge erred in concluding that the notice to complete did not conform to SC 52.1 of the Contract because it did not allow 14 clear days from the date of service for completion to take place. Mr Einfeld SC, who appeared with Mr Knoll for the Vendor, pointed out that, since the notice to complete was served at 12.25 pm on 1 March 2010 and required completion by 3.00 pm on 15 March 2010, it allowed 14 periods of 24 hours each for completion to take place. He submitted that the notice satisfied the requirement in SC 52.1 that it allow "14 days from the date the notice is served".

(2) Even if the primary Judge was correct to hold that the notice to complete did not satisfy SC 52.1, 13 clear days was a reasonable period in the circumstances and his Honour should have so found. It was implicit in the Vendor's second contention that his Honour was wrong to construe SC 52.1 as precluding a notice requiring completion within a period shorter than that specified in SC 52.1.

Validity of the Notice to Complete

53 SC 52.1 records the parties' agreement that:

fourteen (14) days from the date the notice is served will be reasonable both at law and equity for completion of the Contract pursuant to the Notice.

The question of whether the notice to complete served on 1 March 2010 complied with SC 52.1 depends on the proper construction of the expression "fourteen (14) days from the date the notice is served".

54 In Forster v Jododex Australia Pty Limited [1972] HCA 61; 127 CLR 421, the issue was whether an exploration licence granted for a term "from the date hereof" commenced at the beginning or the end of the specified date. Gibbs J formulated (at 440) the principle as follows:

Where a written instrument requires a period of time to be computed "from" a specified date, it depends on the true construction of the instrument whether the date specified is to be included in the period. Generally speaking, however, the day from which the period runs is excluded, although there is no rigid rule to that effect, and "from" is capable of having an inclusive effect in an appropriate context.

55 Gibbs J applied the "prima facie rule of construction" to conclude that the licence did not commence until the end of the day on which it was granted (at 441). Mason J took a similar approach (at 450), on the basis that the usual sense of the word "from" is that the interest created on a particular day commences at the end of that day. Walsh J relied (at 429-430) on different language in the grant, but his analysis is consistent with that of Gibbs and Mason JJ.

56 In Associated Beauty Aids Pty Ltd v Federal Commissioner of Taxation [1965] HCA 20; 113 CLR 662, an authority cited by Gibbs J in Forster v Jododex, Barwick CJ considered (at 668) that the general rule is that in computing a period of time from a particular date, the period will commence at the end of the day nominated. However, his Honour emphasised that there is "no universally operating rule to that effect". Owen J expressed a similar view (at 671), pointing out that the general rule is that the law disregards fractions of a day. See to the same effect Carr v Keys-Arenas (1982) 2 BPR 9498, at 9,500 (McLelland J); at 9,502 (Samuels JA).

57 It is of some importance in the present case that SC 52.1 refers to 14 days from the date of service. As Mr Einfeld accepted, the Vendor's case would have been stronger if SC 52.1 had used the word "time". Computing a period from the date of service rather than a particular time more readily invites the application of the general rule that the day on which the notice is served is excluded from the computation. This is reinforced in the present case by the provisions of the Contract that specify periods calculated by reference to the time at which a notice is given (see for example, SC 38, dealing with the time within which a right to rescind may be exercised).

58 Mr Einfeld pointed out that the Contract permitted service of the notice to complete by fax (as in fact occurred) and thus there could be no difficulty about calculating whether the notice allowed 14 periods of 24 hours each between the time of service and the specified time for completion of the Contract. In my opinion, this does not provide a basis for departing from the general principle stated in the authorities, the application of which is supported by the language of SC 52.1. The authorities such as Forster v Jododex do not rest the general principle of construction upon any difficulty that might arise in proving the precise time of service of a particular notice.

59 For these reasons, the primary Judge was correct to conclude that the notice to complete served by the Vendor on 1 March 2010 did not conform to the requirements of SC 52.1.

Was the Period of 14 Days a Contractual Minimum?

60 The primary Judge construed SC 52.1 to require the giving of no less than the formal notice period of 14 days set out in the Special Condition. He said that provisions such as SC 52.1 had been interpreted in this way in Shaddick v Dunsford Investments Pty Ltd (1990) 5 BPR 11,322 (Young J) and in Doyle v Howey (1990) 6 BPR 13,401 (Cohen J).

61 The provisions in each of the cases cited by the primary Judge were, however, different from those in the present case since they use the language of "deeming". In Shaddick, the special condition stated that a period of 14 days is "deemed to be and will at all times be accepted as being valid sufficient and reasonable period of notice". In Doyle v Howey, the special condition used the expression "deemed to be reasonable and sufficient notice". Cohen J also considered that this provision had to be read with a more comprehensive clause relating to completion of the contract that has no equivalent in the Contract in this case.

62 I agree with the observation of McLelland J in M & L Hazelton Pty Ltd v Woodfield (1982) 2 BPR 97144 at 9,559, that it is necessary in each case to have regard to the precise language used by the particular provision and that the temptation to adopt a "broad-brush" approach must be resisted. Even so, it is noticeable, as Campbell JA pointed out in Zaccardi v Caunt [2008] NSWCA 202; 15 BPR 28,403, at [83]-[85], that provisions having a "family resemblance" to each other have been given different interpretations.

63 SC 52.1 provides that if either party is entitled to serve a notice to complete making time of the essence, both parties agree that 14 days from the date of service will be reasonable both at law and in equity for the completion of the Contract pursuant to the notice. This language is by no means unequivocal, but it tends to suggest that SC 52.1 is intended to define the minimum period required for a notice to complete to make time of the essence.

64 This construction of SC 52.1 receives support from the contractual context. The opening words of SC 52.1 refer back to cl 15 ("[i]n the event that either party becomes entitled to serve a Notice to Complete"). The two provisions, read together, establish a procedure for making time of the essence under the Contract once the "completion date" has passed. The notice to complete contemplated by cl 15 is one that satisfies the requirements of SC 52.1, in that it allows 14 clear days for completion to take place.

65 Clause 21.1 of the Contract also suggests that SC 52.1 is intended to provide an exhaustive statement of what constitutes a reasonable period for a notice to complete under the Contract. Clause 21.1 says that if the time for something to be done or to happen is not stated in the Contract, it is a reasonable time. SC 52.1, when read with cl 15, does state a time for something to happen, namely the time at which completion is to take place in conformity with a notice to complete issued under the Contract. Thus, cl 21.1 does not permit a notice to complete to provide a "reasonable time" less than 14 days. While cl 21.1 does not expressly prohibit a notice to complete which specifies a period less than 14 clear days, the better view is that when cl 21.1 and SC 52.1 are read together, a valid notice to complete must allow 14 clear days for completion.

66 The notice to complete in this case allowed only 13 clear days for the Purchasers to complete the sale. Even if that period was otherwise reasonable, on the proper construction of SC 52.1, the notice to complete was invalid.

A Reasonable Period?

67 Since I have concluded that the notice to complete was invalid under the Contract, it is not necessary to consider whether the primary Judge was correct to find that, in any event, the period allowed by the notice to complete was not reasonable. Had it been necessary to do so, however, I would not have interfered with his Honour's finding.

68 The historical background to the principles governing whether a notice to complete allows a reasonable time is thoroughly canvassed by Campbell JA (with whom Allsop P and Barr J agreed) in Zaccardi v Caunt at [87]-[93]. In considering whether the time limited by a notice to complete is reasonable, the Court will consider all the circumstances of the case as they existed at the time the notice was given: Stickney v Keeble [1915] AC 386, at 419, per Lord Parker of Waddington; Sindel v Georgiou [1984] HCA 58; 154 CLR 661, at 669, per curiam. For a list of factors that have been taken into account in particular cases on the question of reasonableness, see P Butt, The Standard Contract for Sale of Land in New South Wales (2nd ed, 1998), at [15.26].

69 In Sindel v Georgiou, the High Court upheld a finding that a period of 13 days allowed by a vendor's notice to complete was insufficient. The Court acknowledged (at 670) that in Ajit v Sammy [1967] 1 AC 255, the Privy Council held that 6 days notice was sufficient in the particular circumstances of that case. Nonetheless, the High Court considered that:

strong circumstances must be shown to justify the giving of a notice to complete which allows less than fourteen days for completion.

The High Court also observed that the determination of what is a reasonable period is very much a matter of impression.

70 The primary Judge did not mis-state any of the relevant principles governing the reasonableness of the period allowed in a notice to complete. His Honour took into account the uncertainty concerning the manner in which the Vendor served the Registration Notice (relating to the sub-division of the land) and that contractual times were running tightly against the Purchasers. His Honour was entitled to take these matters into account.

71 It is true that in the letter of 25 February 2010, which was sent prior to service of the notice to complete, that the Purchasers said that they were "only likely" to be able to settle on 5 March 2010, four days after the service of the notice to complete. However, the Purchasers did not unequivocally state that there would be no further issues to be resolved with their lender prior to completion and further issues did in fact arise. Since the Purchasers had previously encountered difficulties that prevented them settling on the "completion date" of 26 February 2010, I do not think their statement in the letter of 25 February 2010 constituted "strong circumstances" justifying a notice specifying a period for completion shorter than 14 clear days.

72 For these reasons, had it been necessary to do so, I would not have disturbed the primary Judge's finding that the period for completion allowed by the notice to complete was not reasonable.

Breach of SC 55.1

73 The primary Judge appears to have found that the Purchasers committed an anticipatory breach of SC 55.1, although his Honour did not use that terminology. His Honour took the view that, since SC 55.1 is expressly made an essential term of the Contract by SC 55.3, the Purchasers' conduct constituted a "repudiation" of an essential term of the Contract. The Vendor was entitled to accept that repudiation, thereby terminating the Contract.

74 The Vendor's written submissions supported the primary Judge's findings. The Vendor contended that SC 55.1 is unambiguous and that the Purchasers' conduct on 12 and 15 March 2010 constituted an anticipatory breach of an essential term of the Contract.

75 The Purchasers submitted in response that both the primary Judge and the Vendor's submissions mischaracterised the Purchasers' conduct. They had never refused to pay the interest due under SC 55.1. On the contrary, so the Purchasers argued, Mr Velik had in his possession on both days bank cheques for the full amount due under the Contract, inclusive of interest calculated in accordance with SC 55.1. The Purchasers' intention on both 12 and 15 March 2010 was to pay the full amount due under the Contract, but only if the Vendor agreed to pay the amount in dispute to the agent as stakeholder, pursuant to cl 7.2 of the Contract. Thus, there was neither an actual breach of SC 55.1, nor an anticipatory breach of that provision.

76 In his oral submissions in this Court, Mr Einfeld argued that the Purchasers had breached SC 55.1, by which I understood him to mean an actual, as distinct from anticipatory breach. He submitted that the obligation to pay interest arose on 15 March 2010. When asked why that was so, given that SC 55.1 says nothing about the time at which interest was payable (as opposed to the manner in which interest was to be computed), Mr Einfeld said that SC 55.1 had to be read with cl 16.7. It was the latter clause that specified the obligations of the Purchasers on settlement. He submitted that the obligations imposed by cl 16.7, including the requirement to pay interest calculated in accordance with SC 55.1, had been enlivened by the parties' agreement to settle on 15 March 2010. Mr Einfeld pointed out that this argument had been put to the primary Judge, although his Honour apparently did not consider it necessary to address the argument.

77 The shift in the Vendor's position in this Court between the written submissions and the oral argument acknowledged that SC 55.1 does not expressly identify the time at which the Purchasers are obliged to pay interest to the Vendor computed in accordance with SC 55.1. SC 55.1 confers an additional "right" on the Vendor, if completion does not take place on the "completion date" (26 February 2010), provided the Vendor is willing and able to complete. The "right" conferred by SC 55.1 is the entitlement to an amount of interest calculated in the manner described by that provision - that is, by reference to the period between the completion date and the "actual date of completion".

78 The absence of any reference in SC 55.1 to a date for payment of interest is explicable by the terms of cl 16.7 of the Contract. It is that provision which obliges the Purchasers on completion to pay the price, plus any other amount payable by them under the Contract. Given the presence of cl 16.7 in the Contract, there is no need for SC 55.1 to deal separately with the time at which the Purchasers obligation to pay interest arises. Clause 16.7 requires the Purchasers to pay to the Vendor any amount payable by them under the Contract on completion. SC 55.1 states the formula by which the amount of interest payable by the Purchasers is to be ascertained.

79 On both 12 and 15 March 2010, the Purchasers were in a position to pay the full amount due under the Contract, inclusive of interest. More importantly for present purposes on 15 March 2010, they refused to pay any amount at the settlement unless the Vendor agreed to pay the disputed sum to the agent as a stakeholder, in accordance with cl 7.2.

80 If the Purchasers were correct in their reliance on cl 7.2, they were entitled to refuse to complete on 15 March 2010. On this hypothesis, the Vendor was refusing to comply with cl 7.2.1, which required the amount claimed by the Purchasers to be paid to a stakeholder. If, however, the Purchasers were incorrect (as the primary Judge held), their breach was not of SC 55.1 (there being no question as to quantum), but of cl 16.7. That follows from their refusal to pay both the purchase price and any other amount payable under the Contract, including interest calculated in accordance with SC 55.1. But the Purchasers' breach of cl 16.7, of itself, did not entitle the Vendor to terminate the Contract since the Vendor's notice to complete of 1 March 2010 was invalid. Accordingly, time was not yet of the essence of the Contract and, subject to the Vendor's argument concerning the Purchasers' repudiation of the Contract, their refusal to pay the amounts due under cl 16.7 on 12 and 15 March 2010 did not constitute a breach of an essential term of the Contract.

Repudiation of the Contract

Primary Judge's Reasoning

81 The primary Judge gave brief reasons for finding that the Purchasers' persistence in invoking the mechanism of cl 7.2 of the Contract when they were not entitled to do so showed that they were unwilling to complete the Contract in accordance with its terms and had therefore constituted repudiation of their obligations. His Honour cited in support of this finding the judgment of Basten JA (with whom Mason P and McColl JA agreed) in Perpetual Trustee Company Ltd v Meriton Property Management Pty Ltd [2006] NSWCA 75; 15 BPR 28,323, at [21], [26], [40].

82 It is not entirely clear what principle the primary Judge sought to derive from Perpetual Trustee v Meriton. However, the passages cited by his Honour suggests that he may have regarded the decision as authority for the proposition that a party who insists on an interpretation of a contract that turns out to be incorrect should be regarded as unwilling to perform the contract in accordance with its terms.

83 As Mr Balafoutis, who appeared with Mr Stretton for the Purchasers, submitted, if this was his Honour's view, it was not supported by Basten JA's reasoning. Perpetual Trustee v Meriton involved a contract for the sale of land, but the issue was not whether one party had repudiated the contract. The parties had completed the contract, but had set aside a fund sufficient to meet competing claims by the parties to interest. The resolution of the dispute turned on whether the purchaser, during a particular period, had been "unable or unwilling to complete the contract" within the meaning of the relevant provision in the contract.

84 Basten JA pointed out (at [55]) that the case did not turn on the general principles relating to repudiation, but on the construction of a particular contractual provision intended to impose a financial burden on the party responsible for delay in completing the contract. It follows that Perpetual Trustee v Meriton is of little assistance in deciding whether the Purchasers in the present case engaged in repudiatory conduct: see also Basten JA's observations at [52].

Principles

85 The principles relating to repudiation, insofar as relevant to this case, are not in dispute. In Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd [2007] HCA 61; 233 CLR 115, the plurality said (at [44]) that one way the term "repudiation" is used is to:

refer to conduct which evinces an unwillingness or an inability to render substantial performance of the contract. This is sometimes described as conduct of a party which evinces an intention no longer to be bound by the contract or to fulfil it only in a manner substantially inconsistent with the party's obligations [Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd [1989] HCA 23; 166 CLR 623 at 634 per Mason CJ]. It may be termed renunciation [Heyman v Darwins Ltd [1942] AC 356 at 397]. The test is whether the conduct of one party is such as to convey to a reasonable person, in the situation of the other party, renunciation either of the contract as a whole or of a fundamental obligation under it [Laurinda Pty Ltd v Capalaba, at 659 per Deane and Dawson JJ].

86 Koompahtoo Council v Sanpine, as the plurality noted (at [44]), was not concerned with issues that arise when the alleged repudiation takes the form of one party asserting an erroneous interpretation of a contractual provision. However, the authorities establish a number of principles relevant to such a case. A convenient statement of "some of the key principles" is to be found in the judgment of Ashley JA (with whom Kellam JJA, and Osborn AJA agreed) in R & A Cab Co Pty Ltd v Kotzman [2008] VSCA 68, at [44]-[49]. What follows is in part drawn on that statement:

• whether a party to a contract has acted in such a way as to evince an intention not to carry out the contract is a question of fact: Laurinda v Capalaba at 659;
• repudiation of a contract is a serious matter and is not to be lightly found or inferred: Shevill v The Builders Licensing Board [1982] HCA 47; 149 CLR 620, at 633, per Wilson J;
• the question of repudiation requires a consideration of all of the circumstances, including the conduct of the party claiming to have accepted the repudiation: Koompahtoo Council v Sanpine, at [60]; Cab Co Pty Ltd v Kotzman, at [48] and cases cited there;
• repudiation is not determined by inquiring into the subjective state of mind of the party in default, but by reference to conduct (verbal or otherwise) which conveys to the other party the defaulting party's intention not to perform the contract or to perform it only in a manner inconsistent with that party's obligations and in no other way: Laurinda v Capalaba at 647, per Brennan J;
• where one party to a contract persists in maintaining that it will only perform an obligation of essential importance in accordance with an untenable construction of that obligation, that conduct amounts to a repudiation of the contract: Satellite Estate Pty Ltd v Jaquet (1968) 71 SR (NSW) 126, 149 per Asprey JA (with whom Wallace P agreed);
• in some circumstances, an honest misapprehension as to the proper construction of the contract will not justify a claim of repudiation, especially if the defaulting party indicates that he or she may be open to correction: Ross T Smyth & Co Ltd v TD Bailey, Son & Co [1940] 3 All ER 60, at 72 per Lord Wright; Cab Co Pty Ltd v Kotzman, at [49]; and
• whether the party propounding an erroneous construction of the contract has put forward that construction in good faith is relevant to the question of whether he or she evinces an intention not to be bound by the contract: Satellite Estate Pty Ltd v Jaquet, at 149; Trawl Industries of Australia Pty Ltd v Effem Foods Pty Ltd (1992) 27 NSWLR 326, at 354 per Samuels JA.

87 The High Court considered the consequences of one party acting on a mistaken interpretation of a contract for the sale of land in DTR Nominees Pty Ltd v Mona Homes Pty Ltd [1978] HCA 12; 138 CLR 423. Four members of the Court (Stephen, Mason and Jacobs JJ; Aickin J agreeing) analysed the position as follows (at 432-433):

No doubt there are cases in which a party, by insisting on an incorrect interpretation of a contract, evinces an intention that he will not perform the contract according to its terms. But there are other cases in which a party, though asserting a wrong view of a contract because he believes it to be correct, is willing to perform the contract according to its tenor. He may be willing to recognize his heresy once the true doctrine is enunciated or he may be willing to accept an authoritative exposition of the correct interpretation. In either event an intention to repudiate the contract could not be attributed to him. As Pearson LJ observed in Sweet & Maxwell Ltd v Universal News Services Ltd [1964] 2 QB 699, at p 734:

In the last resort, if the parties cannot agree, the true construction will have to be determined by the court. A party should not too readily be found to have refused to perform the agreement by contentious observations in the course of discussions or arguments ...

In this case the [vendor] acted on its view of the contract without realizing that the [purchasers] were insisting upon a different view until such time as they purported to rescind. It was not a case in which any attempt was made to persuade the [vendor] of the error of its ways or indeed to give it any opportunity to reconsider its position in the light of an assertion of the correct interpretation. There is therefore no basis on which one can infer that the [vendor] was persisting in its interpretation willy nilly in the face of a clear enunciation of the true agreement.

... on the evidence this Court would not be justified in finding that the [vendor] acted otherwise than in accordance with a bona fide belief as to the correctness of the interpretation which it sought to place upon the contract. Consequently it is a case of a bona fide dispute as to the true construction of a contract expressed in terms which are by no means clear (see Asprey JA in Satellite Estate Pty Ltd v Jaquet (1968) 71 SR (NSW) 126, 149). In these circumstances the Court is not justified in drawing an inference that the [vendor] intended not to perform the contract according to its terms or that it repudiated the contract.

Application of Principles

88 Between 25 February 2010 and 15 March 2010, the Purchasers persisted in their contention that they were not required to pay interest under SC 55.1, to the extent that the amount of interest exceeded the rental payable by them in respect of the same period. At first, the Purchasers did not quantify the precise amount of interest said to constitute an unenforceable penalty. Nor did they say exactly what they would do if the Vendor did not agree with their interpretation. In the letters of 25 February, 3 March and 11 March 2010, the Purchasers stated their intention of paying interest, but only to the extent that the interest payable in respect of the period exceeded the rental payable in respect of the same period.

89 It was not until the fax sent at 2.18 pm on 12 March 2010 that the Purchasers invoked cl 7.2 of the Contract and quantified the amount in dispute. In that letter the Purchasers required the sum of $2,200.00 to be retained by the Vendor pursuant to cl 7.2, pending finalisation of their claim. They did not expressly state that they would not complete the Contract unless the Vendor agreed to their demand, although that may have been implicit given that the Vendor was insisting on the Purchasers paying the full amount of interest on completion.

90 The second email sent by the Purchasers early on 15 March 2010 repeated the claim that the Vendor was required under cl 7.2 to set aside $2,200.00 from the deposit moneys. The email added a claim that the amount to be set aside should be increased by $932.05 to take account of the additional interest charged by the Vendor by reason of the further delay in completion and the new claim by the Purchasers that the Vendor had not been ready, willing and able to complete on the afternoon of the previous Friday, 12 March 2010. Once again, the email did not state expressly that the Purchasers would not complete unless the Vendor agreed to set aside the amount in dispute in accordance with cl 7.2 of the Contract.

91 I have set out earlier the primary Judge's account of the communications and events that took place on Monday, 15 March 2010. His Honour's finding, which has not been challenged, was that after a number of attempts to resolve the issue on that day, Mr Velik's final communication to Ms Marrone, the Vendor's representative, was that the Purchasers would hand over the cheques if the Vendor agreed to set aside the disputed amount. This the Vendor refused to do.

92 If there were no other relevant circumstances, this finding, coupled with the undisputed holding that the Purchasers were not entitled to invoke cl 7.2 of the Contract, might suggest that they were prepared to complete the Contract only in a manner inconsistent with their obligations and in no other way. However, there are other circumstances that must be taken into account.

93 First, the primary Judge made no finding that the Purchasers acted otherwise than in the good faith belief that they were entitled to rely on cl 7.2 of the Contract. The Court was not taken to any evidence suggesting that Mr Velik did not honestly, albeit mistakenly, believe that the Purchasers had a genuine claim that the obligation to pay interest was unenforceable to the extent that it constituted a penalty. Nor were we taken to evidence suggesting that Mr Velik did not honestly believe that cl 7.2 applied to the Purchasers' claim and thus required the Vendor to follow the procedure outlined in that provision.

94 Secondly, the primary Judge held as a matter of law (at [126]-[135]) that the Purchasers' reliance on cl 7.2 was excluded by the plain language of SC 37.1 of the Contract. However, his Honour also found (at [133]) that the Vendor did not "deploy" SC 37.1 at the time she terminated the Contract and, indeed, did not do so until shortly before the trial.

95 The primary Judge held that the failure of the Vendor to rely on SC 37.1 at the time of termination of the Contract did not prevent her doing so at the hearing. No doubt that conclusion was correct, but the failure of the Vendor to communicate to the Purchasers the fatal barrier to their invocation of cl 7.2 is a significant factor in determining whether the Purchasers evinced an intention not to be bound by the Contract. At no time prior to the Vendor's acceptance of the Purchasers' "repudiation" did the Vendor state clearly the ground on which she primarily relied at the hearing to establish that the Purchasers were not entitled to rely on cl 7.2 of the Contract.

96 The third point is related. Mr Velik asked Ms Marrone at about 1.30 pm on 15 March 2010 why the Purchasers' claim was disputed. Mr Velik was clearly made aware by the previous correspondence that the Vendor considered that there was no relationship between the obligation to pay rent and the obligation under the Contract to pay interest. But he had never been told that the Vendor relied on SC 37.1 to exclude the operation of cl 7.2. Furthermore, Mr Velik told Ms Marrone that once he understood the Vendor's argument, he would be prepared to reconsider his own position. The inference is available that if the difficulty had been drawn to Mr Velik's attention, he would have reconsidered whether he was entitled to invoke cl 7.2, particularly given the likely consequences of the Purchasers refusing to complete the Contract.

97 Fourthly, the Purchasers were correct in their assertion that the notice to complete given on 1 March 2010 was invalid and that the Vendor was incorrect in insisting that the notice had been validly served in accordance with the Contract. The absence of any explanation by the Purchasers in the correspondence of the basis for their assertion does not alter the fact that completion on or before 15 March 2010 had not been made an essential term of the Contract. There was still time for the Purchasers to reconsider their position and to tender the full amount due, had the Vendor communicated the legal basis of her contention that cl 7.2 was not available to the Purchasers.

98 Fifthly, the Purchasers' position that the obligation to pay interest was, in part, an unenforceable penalty may not have been well-founded, but it was not wholly implausible. The general principle of equity was that a vendor was not entitled to both interest on the purchase price and the rent and profits derived from the land between the completion date under the contract and actual completion. However, the equitable principle gave way to a contractual provision having the contrary effect: Terry v Merriview Pty Ltd [1983] 2 VR 548, at 549-550, per Starke J (with whom Marks J agreed); at 551, per Crockett J. In Killarney Investments Pty Ltd v Macedonian Community of Western Australia Inc [2007] WASCA 180, EM Heenan AJA thought (at [88]), without finally deciding the point, that a vendor's contractual entitlement to interest on the purchase price might amount to an unenforceable penalty, if disproportionate to the loss actually sustained by the vendor. There is also authority suggesting that it is at least arguable that a party whose honest error is not in the interpretation of a contractual provision, but in the application of an equitable principle to the contract (such as a claim to a set-off), may rely on the error to show that he or she has not evinced an intention no longer to be bound by the contract: Cab Co Pty Ltd v Kotzman, at [50]-[51].

99 As the authorities make clear, all the circumstances of a case must be considered and, of course, each case will depend upon its own circumstances. The facts of DTR Nominees v Mona Homes, for example, were different from those of the present case, since the vendor's construction of the contract had never been disputed at the time the vendor acted in a manner said to constitute a repudiation of the contract. In the present case, by contrast, the Purchasers were aware from the time they first asserted their claim that the Vendor disputed their entitlement to withhold a portion of the interest payable under SC 55.1.

100 Nonetheless, the factors that I have identified lead to the conclusion that the Purchasers, despite their obstinacy, had not evinced an intention by 15 March 2010 no longer to be bound by the Contract or to insist on performing the Contract only in accordance with their erroneous interpretation, regardless of the true construction of the Contract or of the correct position at law and in equity.

101 The Purchasers' claim that the Vendor was not entitled to $932.05 in interest in respect of the period 13-15 March 2010, perhaps falls into a somewhat different category. This claim was based on Mr Velik's assertion early on 15 March 2010 that the Vendor had not taken sufficient steps to facilitate completion on the previous Friday. The assertion was robustly rebutted in the Vendor's email sent at 9.34 am on the Monday morning. Nonetheless, Mr Velik maintained his claim at the meeting with Ms Marrone that the sum of $932.05 should be subject to the regime set out in cl 7.2 of the Contract.

102 The Purchasers' claim that the Vendor was not ready, willing and able to settle on 12 March 2010 was implausible, once the Vendor provided a clear explanation of why completion could not have been rescheduled for later on the Friday afternoon. However, the amount involved in the Purchasers' additional claim was very small, taking account of the fact that over half of the claim ($471.43 of the claimed sum of $932.05) was covered by the Purchasers' contention that part of the interest due under SC 55.1 constituted an unenforceable penalty.

103 I did not understand the Vendor to submit that the Purchasers had evinced an intention not to be bound by the Contract solely by reason of their misplaced claim that the Vendor had not been in a position to complete the Contract on Friday 12 March 2010. Having regard to the fact that this issue arose only on the morning of 15 March 2010 and to the other matters to which I have referred, (including the absence of a valid notice to complete), I do not think that the Purchasers' claim to withhold an additional $471.43 over and above the amount said to be an unenforceable penalty justifies a finding that they did not intend to be bound by the terms of the Contract.

104 For these reasons, the primary Judge was in error in concluding that the Purchasers had repudiated the Contract on 15 March 2010 and that the Vendor was entitled to accept their repudiation and to terminate the Contract.

Return of Deposit

105 There was no dispute that if the Vendor was not entitled to terminate the Contract on 15 March 2010, the Purchasers were entitled to the return of their deposit. There is therefore no need to consider whether the primary Judge was correct, on the findings he made, to refuse to make an order in favour of the Purchasers under s 55(2A) of the Conveyancing Act for the return of the deposit.

106 Since that issue would have to be approached on the basis of different findings and holdings than those I have made, I do not think it appropriate to express a concluded view as to whether the primary Judge's discretion miscarried. It is enough to say that, on his Honour's findings, it would be difficult to conclude that his discretion had miscarried.

Orders

107 The appeal should be allowed. The orders made by the primary Judge on 4 September 2012 and 29 October 2012 should be set aside.

108 The Purchasers' Notice of Appeal seeks an order that the sum of money received by the Vendor from the interest bearing account in the joint names of the parties, pursuant to the orders made by the primary Judge on 4 September 2012, be paid to them, together with an unspecified amount of interest. The Purchasers should be directed to bring in Short Minutes of Order within seven days. If the Vendor disputes the proposed orders, she should file alternative Short Minutes of Order, together with brief submissions in support.

109 Unless there is some reason for different costs orders to be made, the Short Minutes of Order should incorporate the following orders:

1. The Vendor pay the Purchasers' costs of the appeal.

2. The Vendor pay the Purchasers' costs of the proceedings at first instance.

3. The Vendor, if otherwise qualified, have a certificate under the Suitors' Fund Act 1951.

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Decision last updated: 13 September 2013