Dursco Property Pty Ltd t/a Dursco Property Trust v Cecil

1. [1]

   The plaintiff, Dursco Property Pty Ltd trading as Dursco Property Trust (Dursco Property) purchased a property from the first and second defendants (the remaining defendants), Desmond Marcus Cecil and Donna Lee Hill respectively.

2. [2]

   A deposit of $280,000 was paid by Dursco Property to the third defendant, Stevan (Kyogle) Pty Ltd t/a Kyogle Real Estate.

3. [3]

   The contract was subject to a finance condition which was not satisfied.

4. [4]

   On 7 June 2024, Dursco Property commenced these proceedings seeking the return of the deposit, damages and costs.

5. [5]

   On 21 August 2024, the deposit was returned to Dursco Property. On 2 September 2024, Dursco Property filed a notice of discontinuance against the third defendant.

6. [6]

   Two issues remain in the proceedings. First, Dursco Property contends that the remaining defendants should pay it pre-judgment interest pursuant to s 100 of the Civil Procedure Act 2005 (NSW) (the Act). Second, that the remaining defendants pay Dursco Property’s costs of the proceedings and the third defendant’s costs. The remaining defendants oppose these orders.

7. [7]

   At the request of the parties, these issues have been determined on the papers, with each of the parties providing written submissions on 6 December 2024, 20 December 2024 and 31 January 2025.

An overview of the necessary facts

1. [8]

   In order to determine these two remaining issues, it is necessary to set out the relevant facts.

2. [9]

   By contract dated 15 September 2023, Dursco Property agreed to purchase land owned by the remaining defendants at Williams Road, Barkers Vale, NSW for the price of $2.8 million. The deposit payable pursuant to the contract was $280,000. Prior to the date of contract – in late August 2023 – the amount of the deposit was in fact paid by Dursco Property to the trust account of the third defendant to hold as stakeholder.

3. [10]

   The contract contained a subject to finance clause – special condition 20 – in the following terms:

4. [11]

   Dursco Property apparently commenced an application for finance with the Bank of Queensland by email on 31 August 2023, enclosing the sales advice from the real estate agent engaged in relation to the sale.

5. [12]

   On 12 October 2023, a copy of the contract for sale of land was emailed to the Bank of Queensland. On 25 October 2023, Dursco Property received a conditional letter of offer for finance from the Bank of Queensland. Dursco Property took the view that the conditional letter of offer was on terms that were not in accordance with special condition 20 of the contract, because, in particular, the offer was conditional upon:

6. [13]

   On that same day, Dursco Property instructed its legal representative to rescind the contract and seek a refund of the deposit. By email dated 25 October 2023, a notice of rescission was provided by Dursco Property to the remaining defendants’ legal representative. The email requested for the remaining defendants to authorise the agent to release the deposit monies held in trust less the amount of $440 (including GST) in accordance with special condition 20(e) of the contract.

7. [14]

   On 27 October 2023, Dursco Property’s legal representative caused a letter to be sent to the third defendant requesting a release of the deposit. On 22 November 2023, Dursco Property’s legal representative received an email from the third defendant advising that the deposit was not authorised by the remaining defendants’ to be released.

8. [15]

   On 23 November 2023, the remaining defendants’ legal representative sent an email to Dursco Property’s legal representative requesting all information in relation to the application for finance and the reason for finance not being approved. A reply was sent from Dursco Property’s legal representative dated 11 December 2023 purporting to provide the requested information. Once again, the letter requested the remaining defendants’ consent to the deposit being released and warned that if the remaining defendants did not comply, instructions would be sought to commence proceedings against the remaining defendants.

9. [16]

   Thereafter, there ensued further correspondence between the legal representatives for Dursco Property and the remaining defendants.

10. [17]

    On 18 January 2024, the legal representative for Dursco Property sent an email to the remaining defendants’ legal representative attaching copies of 28 pages of various emails between directors of Dursco Property and Bank of Queensland between 31 August and 28 September 2023.

11. [18]

    The 18 January 2024 communication again requested release of the deposit, such release to be provided by close of business on 22 January 2024, failing which the legal representatives for Dursco Property indicated that they were to commence proceedings.

12. [19]

    The remaining defendants’ legal representative responded to the 18 January 2024 communication by letter dated 23 January 2024. The letter appears to assume some significance in the position taken by the remaining defendants on the remaining issues, and so I set it out in full:

13. [20]

    On 14 February 2024, the legal representative for Dursco Property sent an email to the legal representative for the remaining defendants confirming that they were currently awaiting advice from counsel and their office would be in contact thereafter.

14. [21]

    The next communication appears to be from Dursco Property’s legal representative on 5 June 2024 which enclosed a signed and verified statement of claim which the legal representatives indicated they held instructions to file against the remaining defendants. The letter gave the remaining defendants a final opportunity to authorise the release of the deposit. The letter demanded the remaining defendants provide an express and unequivocal authority to the agent by 4pm on 7 June 2024, failing which the legal representatives for Dursco Property indicated that they held instructions to immediately file and serve the statement of claim. The letter did not provide any response to the matters raised in the letter from the remaining defendants’ legal representative dated 23 January 2024.

15. [22]

    On 7 June 2024, the remaining defendants’ legal representative responded. The response stated, among other things, that the time limits imposed in the 5 June 2024 letter were “unrealistic and unreasonable to say the least” and stated that once the remaining defendants’ instructions were obtained a response would be provided which it was anticipated would be within 14 days.

16. [23]

    On 7 June 2024, Dursco Property commenced the proceedings. The statement of claim sought return of the deposit, together with interest, damages against the remaining defendants and orders that the remaining defendants pay the costs of Dursco Property and the third defendant.

17. [24]

    On Thursday 5 July 2024, a submitting appearance was filed for the remaining defendants, which stated that the remaining defendants submit to the making of an order that the third defendant pay to the plaintiff the amount of the deposit, less $440, but do not consent to an order that they pay damages or costs. At the time, the legal representative for the remaining defendants was not instructed to submit to an order for damages and did not intend to do so. As such, the remaining defendants were permitted to file a defence to the statement of claim.

18. [25]

    The solicitor for the remaining defendants deposed to the fact that the first defendant and second defendant had previously been in a long term relationship, which had not long before broken down. He was instructed that the first defendant (aged 73) was also suffering health issues at the time and that both defendants instructed him that they had no wish to be involved in Supreme Court litigation, no matter how they viewed their prospects of success.

19. [26]

    By letter dated 25 July 2024, the legal representative for the remaining defendants wrote to the legal representatives for Dursco Property pointing out that the submitting appearance was not intended to submit to an order for damages, but rather simply to the return of the deposit, less the sum of $440 in accordance with the contract. The letter also stated that the appropriate order as to costs was that there be no order as to costs, and that if Dursco Property maintained a claim for damages and costs, the matter will require a hearing.

20. [27]

    By letter dated 5 August 2024, the legal representative for the remaining defendants wrote to the third defendant authorising the third defendant to account for the deposit (save for $440) to Dursco Property.

21. [28]

    A document headed “Amended Defence of First and Second Defendants” was filed on 5 August 2024 contending, amongst other things, that Dursco Property was not entitled to rescind because it had failed to comply with certain parts of special condition 20. The Defence also recognised that the remaining defendants had authorised the release of the deposit.

22. [29]

    On 21 August 2024, the deposit in the amount of $279,560 (being $280,000 minus $440 pursuant to special condition 20(e) of the contract) was paid by the third defendant to the trust account of Dursco Property’s legal representative.

23. [30]

    On 23 August 2024, an amended statement of claim was filed. The relief for return of the deposit and for damages was deleted and replaced by a new claim for relief:

24. [31]

    A notice of discontinuance in relation to the third defendant was filed on 2 September 2024.

25. [32]

    Directions were thereafter made by the Court for evidence and submissions to be filed in relation to the remaining issues and for these issues to be determined on the papers if appropriate.

Overview of the parties’ contentions

1. [33]

   Dursco Property seeks the following orders:

   1. (1)

      An order that the first and second defendants pay to the plaintiff pre-judgment interest at the rate prescribed by s 100 of the Act; and

   2. (2)

      Orders that the first and second defendants pay:

2. [34]

   The essence of the position advanced by Dursco Property is that pre-judgment interest should be paid, pursuant to s 100 of the Act, on the deposit from 27 October 2023 (being two days after the rescission of the contract) up until to 21 August 2024 (being the date on which the deposit was refunded). Reliance was placed on Falkner v Bourke (1990) 19 NSWLR 574 at 576 per Priestley JA for the proposition that plaintiffs who are awarded a monetary judgment will “almost invariably” be entitled to an award of interest.

3. [35]

   Further, on costs, the position advanced by Dursco Property is that in accordance with the principle in Re Minister for Immigration and Ethnic Affairs of the Commonwealth of Australia; Ex Parte Lai Qin (1997) 186 CLR 622; [1997] HCA 6 (Lai Qin) at 624–625 per McHugh J, the Court ought to make an order for costs even though there has been no hearing on the merits. In summary, Dursco Property submits that this is an appropriate case for costs to be awarded because the remaining defendants have both completely capitulated with Dursco Property achieving the relief it sought, and the remaining defendants have acted so unreasonably that the plaintiff ought to have its costs.

4. [36]

   The remaining defendants oppose the claim for interest and submit that the appropriate order is no order as to costs.

5. [37]

   In summary, the remaining defendants submit that the claim for interest presupposes a finding on the merits that has not been made, because the proceeding has been discontinued. In the alternative, the defendants submit that the interest claim has no basis because s 100 of the Act has no application where no judgment is given.

6. [38]

   On costs, the defendants submit that there should be no order as to costs as they have acted reasonably throughout the course of the litigation and returned the balance of the deposit as an alternative to a contested suit.

7. [39]

   Having regard to the arguments advanced by parties it is convenient to separately consider:

Determination of whether any interest is payable

1. [40]

   The claim for interest amounts to $19,069.87.

2. [41]

   This Court has a broad discretion to award pre-judgment interest: see Hungerfords v Walker (1989) 171 CLR 125; [1989] HCA 8 at 149 per Mason CJ and Wilson J; Halsbury’s Laws of Australia, 5 – Civil Procedure at [5.5.190].

3. [42]

   The submissions give rise to three issues which are considered in turn:

   1. (1)

      whether pre-judgment interest can be ordered where there is no judgment;

   2. (2)

      whether the proceedings are for the ‘recovery of a debt or damages’ within the meaning of s 100(2) of the Act; and

   3. (3)

      whether an award of interest should be ordered on the facts.

4. [43]

   On the first issue, a judgment is not required for pre-judgment interest to be ordered under s 100(2). On the plain wording of the Act, s 100(2) clearly states that such an order can be made even ‘without’ a ‘judgment being given’ by the Court. Further, this Court has consistently ordered pre-judgment interest without judgment being given in relation to the underlying claim for money: Nine Network Australia Pty Ltd v Birketu Pty Ltd [2016] NSWSC 694 at [18] and [21] per Hammerschlag J, see also Workers Compensation Nominal Insurer v Allmen Engineering Projects Pty Ltd [2019] NSWSC 1582 at [37] per Campbell J.

5. [44]

   On the second issue, in relation to an analogous Victorian provision, s 60 of the Supreme Court Act 1986 (Vic), the High Court held that the phrase “recovery of debt or damages” is a “composite expression” that “embraces any proceeding in which a claim for money is made”: Victorian WorkCover Authority v Esso Australia Ltd (2001) 207 CLR 520; [2001] HCA 53 (Esso) at [41] per Gleeson CJ, Gummow, Hayne and Callinan JJ.

6. [45]

   The claim for return of the deposit is clearly a claim for money and accordingly s 100(2) applies.

7. [46]

   The more difficult issue is whether the Court should award interest under s 100(2) in the circumstances of the present case.

8. [47]

   I am not satisfied that the Court should exercise its discretion, and order interest to be paid in the present case, particularly where:

Determination of costs

1. [48]

   The starting point is that obviously there has been no hearing on the merits and, as such, the Court is deprived of the factor that usually determines whether or how it will make a costs order.

2. [49]

   I do not regard the behaviour of the remaining defendants as being so unreasonable that Dursco Property should obtain the costs of the action. I have set out the detailed chronology above.

3. [50]

   The proceedings were commenced on 7 June 2024, two days after Dursco Property had written to the remaining defendants giving them only two days to agree to return the deposit under threat of commencement of proceedings. This 5 June 2024 letter followed the letter from the remaining defendants over four months earlier, but did not provide any substantive response to the matters raised in that letter. The 23 January 2024 letter raised questions in relation to Dursco Property’s compliance with clause 20 of the contract in circumstances where the remaining defendants did not have any real visibility of what Dursco Property had done to comply with the clause.

4. [51]

   The remaining defendants, by their submitting appearance filed shortly after the proceedings were commenced, confirmed that they were content for the deposit to be returned.

5. [52]

   Further, I do not accept Dursco Property’s contention that the remaining defendants have capitulated in the sense in which that term is used in the authorities. As McHugh J remarked in Lai Qin at 625, such cases where the Court feels confident who would have won at a final hearing, are likely to be rare. The Court is not to embark on a detailed inquiry in this regard: see, for example, Nichols v NFS Agribusiness (2018) 97 NSWLR 681 at [32] per Payne JA.

6. [53]

   Dursco Property’s entitlement to rescind depended on satisfaction of a number of factual propositions. On the material before me, the Court is in no position to determine the outcome of a final hearing.

Conclusion and Orders

1. [54]

   For the reasons set out above, I am not satisfied that the Court should order the remaining defendants to pay interest to Dursco Property.

2. [55]

   Further, the appropriate costs order as between Dursco Property and the remaining defendants is that there should be no order as to costs to the intent that each party should pay their own costs.

3. [56]

   It is not clear from the papers whether any final orders need to be made to finally dispose of the proceedings. I will give the parties 14 days to make application to my chambers for any further orders.

4. [57]

   The orders of the Court are:

   1. (1)

      As between the plaintiff and the first and second defendants, there be no order as to the costs of the proceedings to the intent that each party should pay their own costs of the proceedings.

   2. (2)

      The plaintiff and first and second defendants have liberty to apply to the Chambers of Pike J by no later than 3 April 2025 for any further orders to finally dispose of the proceedings.