Culjak v Akrawe

This case concerns a contract for the sale of land in respect of a residential property in Cobbett Street, Wetherill Park. The contract was entered into on 12 December 2020 by the plaintiffs as vendor and by the first defendant as purchaser. The contract provided for a purchase price of $1,550,000, including a 10% deposit of $155,000. The deposit was paid, and it became held by the second defendant as stakeholder.

The contract provided for a date of completion that was the 42nd day after the date of the contract. After taking account of the fact that that day (24 January 2021) was a Sunday, the contractual date for completion became 25 January 2021 (see cl 21.5 of the contract). However, by agreement between the parties, the date for completion was extended to 22 February 2021. Settlement did not take place on that day.

On 3 March 2021, the plaintiffs served a Notice to Complete that called for completion to take place on the PEXA platform at 12.00pm on 18 March 2021, with time in that respect to be of the essence. Settlement did not take place on 18 March 2021. Late in the afternoon of 18 March 2021, the first defendant’s solicitor informed the plaintiffs’ conveyancer that the defendant needed until 23 March 2021 to settle the purchase. The first defendant’s solicitor also took steps to change the appointed time for settlement in PEXA to 23 March 2021.

On 22 March 2021, the plaintiffs, by their conveyancer, served a Notice of Termination of the contract upon the first defendant. The notice referred to the default of the first defendant in completing the purchase in accordance with the requirements of the Notice to Complete, and stated that the contract was thereby terminated and the deposit forfeited to the plaintiffs.

By their Statement of Claim, the plaintiffs seek a declaration that the contract was duly terminated by them on 22 March 2021, and an order to the effect that they are entitled to the deposit of $155,000. (The deposit, formerly held by the second defendant, has since been paid into Court.) The plaintiffs also made a claim for damages against the first defendant for breach of the contract, but this claim was ultimately not pressed.

By his Amended Defence, the first defendant denied the validity of the Notice to Complete. He also denied that the contract had been validly terminated by the Notice of Termination, on the basis that the plaintiffs were themselves not ready, willing and able to complete the contract. Ultimately, in closing submissions, the first defendant accepted that the Notice to Complete was valid and thus effective to make time of the essence for completion by 18 March 2021. The first defendant also appeared to accept that the plaintiffs were legally entitled to terminate the contract. However, by his Cross-Claim, the first defendant seeks an order that the contract be specifically performed. He contends that in the circumstances of the case he should be relieved against the forfeiture of his interest under the contract, and that the Court should order that the contract be specifically performed. He contends, in the alternative, that the circumstances of the case are such that an order should be made in his favour under s 55(2A) of the Conveyancing Act 1919 (NSW) for the return of the deposit.

The circumstances of the case relied upon by the first defendant concern certain discussions and communications between the parties in relation to entry into a new contract for the sale of the property whereby the first defendant’s son would be the purchaser instead of the first defendant. In short, the first defendant contended that the conduct of the plaintiffs in that regard, particularly in the period from about 11 March 2021 to 18 March 2021, caused or contributed to the failure of the first defendant to complete the contract by the date specified in the Notice to Complete. It was put that whilst the plaintiffs had come to the conclusion that they were not interested in entering into the new contract, they appeared to leave open the possibility of doing so, and this led to the situation where the first defendant failed to complete within the time stipulated in the Notice to Complete.

The proceedings against the second defendant were discontinued following the payment into Court of the deposit.

The contract for sale was entered into on 12 December 2020 following an auction at which the first defendant was the successful bidder. The plaintiffs (Mr and Mrs Culjak) engaged Mrs Frances Belluccini of Kingfisher Conveyancing Services Pty Ltd to act for them on the sale. The first defendant (Mr Akrawe) engaged Mr Kugathas Pathmathas of Path Legal to act for him on the purchase.

On 17 December 2020, Mr Pathmathas sent an email to Mrs Belluccini in which it was stated that the purchaser wanted to change the name of the purchaser to that of his son, Mr Saad Saeed. On 18 December 2020, Mrs Belluccini sent an email in reply, in which it was stated that the plaintiffs did not agree to the request. Mrs Belluccini also sought confirmation that the balance of the 10% deposit had been paid. It seems that only $100,000 had been paid at that stage.

Later on 18 December 2020, Mr Akrawe (then aged 81) and his son, Mr Saeed, went to Mr and Mrs Culjak’s home. There was a discussion about extending the completion date of the contract by 4 weeks, to 22 February 2021. There is a dispute about who requested the extension, but it is unnecessary to resolve it. The evidence is clear that whatever discussion occurred on 18 December 2020, an agreement was reached to extend the completion date to 22 February 2021. That agreement is evidenced by the email sent by Mr Pathmathas to Mrs Belluccini on 19 December 2020, and her email in response on 23 December 2021.

By that time, the full $155,000 deposit had been paid. It seems that Mr Saeed provided the funds for the deposit. He deposed that he paid it in two instalments of $100,000 and $50,000.

I note in passing that it appears from the evidence that Mr Akrawe and Mr Saeed had various discussions, both before and after the contract was entered into, as to who should be named as the purchaser. At least after the contract had been entered into, one consideration was whether it would be preferable for the purchase to be funded by a loan taken out by Mr Saeed rather than by using Mr Akrawe’s funds, which were partly held in United States dollars that would need to be converted into Australian dollars at an unfavourable exchange rate. I think it is likely that Mr Saeed raised this matter on the occasion he and his father attended the Culjak’s home on 18 December 2020.

On 8 February 2021, Mr Saeed and his three children went to the Culjak’s home. Amongst other things, there was discussion on that occasion between Mrs Culjak and Mr Saeed about the Culjaks renting the property for a period following settlement of the contract. Mr Saeed went to the Culjak’s home again on 11 February 2021.

On at least one of those occasions (most likely on 11 February 2021), Mr Saeed made a request that the contract be changed so that he would become the purchaser instead of his father. I think it is likely that Mr Saeed also said that he would want six weeks to complete the purchase. I am satisfied that both Mr and Mrs Culjak responded by saying words to the effect that they would like to help, but they would first need to speak to Mrs Belluccini about it. Mrs Culjak said in cross-examination that she went to see Mrs Belluccini shortly after 11 February 2021, and discussed with her the fact that Mr Saeed wanted a new contract in his name. The content of this discussion, which seems also to have included Mr Culjak, was not explored in any detail in the evidence.

On 12 February 2021 Mr Pathmathas sent a settlement sheet to Mrs Belluccini. On 15 February 2021 Mrs Belluccini sent an email to Mr Pathmathas in the following terms:

At 10:35am on 16 February 2021, Mrs Belluccini sent a further email to Mr Pathmathas that included the following:

Mrs Belluccini sent another email to Mr Pathmathas at 4:27pm on 16 February 2021, in which she sought confirmation that the purchaser had given instructions to proceed to settlement.

In the evening of 16 February 2021, Mrs Culjak sent a text message to Mr Saeed which included the following:

Mrs Belluccini deposed that she had a telephone conversation with the purchaser’s solicitor (presumably Mr Pathmathas) on 17 February 2021 in which she was told that the purchaser would not be able to settle on 22 February 2021 as he did not have the funds to complete. Mrs Belluccini sent an email to Mr Pathmathas later on 17 February 2021 in the following terms:

On 18 February 2021, Mr Pathmathas sent an email to Mrs Belluccini in the following terms:

Later on 18 February 2021, Mrs Belluccini sent an email in response that included the following:

Mrs Belluccini sent a further email on 19 February 2021 in the following terms:

Mr Pathmathas responded later on 19 February 2021 in the following terms:

Mrs Belluccini replied later on 19 February 2021, stating that she would seek instructions from her clients and advise accordingly.

I note that 19 February 2021 was a Friday. Settlement was due to occur on Monday 22 February 2021.

Mr Akrawe and Mr Saeed went to the Culjak’s home on the evening of 21 February 2021. The visit was not by invitation. It seems that Mr Saeed had been attempting to call Mr Culjak and Mrs Culjak on that day, but they did not answer the calls. They deposed that they had been advised by Mrs Belluccini not to speak to Mr Akrawe or Mr Saeed. However, a discussion occurred outside the Culjak’s home on that occasion between Mr and Mrs Culjak, Mr Akrawe and Mr Saeed. The content of the discussion is a matter of dispute between the parties. However, I do not think that anything of significance turns upon the differences between the respective recollections of what was said. I think it is likely that there was discussion about the settlement date for the contract (being the following day), and the fact that the settlement would not actually be proceeding. It is also likely that there was some further discussion about the possibility of cancelling the existing contract and entering into a new contract with Mr Saeed as purchaser. I consider it unlikely that Mr Saeed asked why the new contract had not come to his solicitor as had been agreed. I accept the denials of Mr and Mrs Culjak in that regard. I formed the impression that each was an honest witness who attempted to give accurate evidence to the best of their recollection. In addition, it seems unlikely that Mr Saeed would have spoken in such terms, as Mr and Mrs Culjak had earlier made it clear that they would need to speak to Mrs Belluccini about any new contract, and there is no indication in any of the written communications between the parties that Mrs Belluccini was in the process of preparing a new contract.

A number of emails passed between Mrs Belluccini and Mr Pathmathas on 22 February 2021.

At 12:00pm, Mrs Belluccini sent an email in the following terms:

Mr Pathmathas replied by email at 1:43pm in the following terms:

At 2:52pm, Mrs Belluccini sent an email to Mr Pathmathas that included the following:

Mr Pathmathas replied by email at 3:43pm in the following terms:

Finally, at 4:32pm, Mrs Belluccini sent an email to Mr Pathmathas in the following terms:

It appears that Mr Akrawe later gave instructions to Mr Pathmathas to the effect that he was agreeable to proceeding in accordance with the terms of the above email. I infer that Mr Pathmathas communicated that to Mrs Belluccini, because she proceeded to prepare documents including a Deed of Mutual Rescission of Contract and a new contract for sale which named Mr Saeed as the purchaser.

On 25 February 2021, Mrs Belluccini sent an email to Mr Pathmathas which included the following:

On 1 March 2021, Mrs Belluccini sent an email to Mr Pathmathas in which she enquired as to when she would receive the documents executed by his clients in readiness for exchange. Mrs Belluccini sent a further email to Mr Pathmathas on 2 March 2021 seeking his advice as to his client’s instructions as a matter of urgency, and reserving her clients’ rights pursuant to the contract.

On 3 March 2021, Mrs Belluccini served a Notice to Complete. The notice was served upon Mr Pathmathas by email, and further hand delivered to Mr Akrawe’s address. No dispute was raised concerning service of the notice. The Notice to Complete was in the following terms:

On 5 March 2021, Mr Pathmathas sent an email to Mrs Belluccini in the following terms:

Mrs Belluccini sent an email in reply later on 5 March 2021 in which she stated that she would seek her clients’ instructions.

On 8 March 2021, Mrs Belluccini sent an email to Mr Pathmathas that included the following:

At 1:34pm on 10 March 2021, Mr Pathmathas sent an email to Mrs Belluccini in the following terms:

Mrs Belluccini responded by email at 2:44pm that included the following:

No documents were received by 12:00pm on 11 March 2021. At 12:43pm, Mr Pathmathas sent an email to Mrs Belluccini which included the following:

At 1:05pm, Mrs Belluccini sent an email in which she stated that she would seek her clients’ instructions, and enquired whether Mr Pathmathas’ clients had signed the required documents.

At 1:14pm, Mrs Belluccini sent an email to Mr Pathmathas in which she stated that she had not received the required documents and that, as such, his client had not complied with the timeframe required by her clients.

At 1:18pm, Mr Pathmathas sent an email in response in the following terms:

At 4:28pm, Mrs Belluccini sent an email to Mr Pathmathas in the following terms:

The Notice to Complete called for completion to occur in 7 days’ time, on 18 March 2021.

On 16 March 2021, Mrs Belluccini sent an email to Mr Pathmathas in the following terms:

On 17 March 2021, Mrs Belluccini received a letter from Path Legal, dated 16 March 2021, that enclosed a number of documents including a Deed of Mutual Rescission of Contract executed by Mr Akrawe, a Contract for Sale executed by Mr Saeed as purchaser, and cheques for the deposit and legal fees. The letter included a statement that there would be no legally binding relationship between the parties until “exchange of Contract” had taken place.

At 6:25pm on 17 March 2021, Mrs Belluccini sent an email to Mr Pathmathas in the following terms:

Mr Pathmathas responded by email on 18 March 2021 at 11:14am, in the following terms:

At 11:31am, Mrs Belluccini sent an email in response in the following terms:

At 12:12pm, Mr Pathmathas sent an email to Mrs Belluccini in the following terms:

Mr Pathmathas sent a further email at 2:59pm in the following terms:

At 3:18pm, Mrs Belluccini sent an email in the following terms:

Mr Pathmathas responded by email at 3:26pm in the following terms:

At 4:35pm, Mr Pathmathas sent another email, in the following terms:

Settlement did not occur on 18 March 2021 as called for by the Notice to Complete. As deposed by Mrs Belluccini, the purchaser did not attend to the PEXA settlement on that day. It appears that Path Legal at no stage accepted the PEXA settlement date of 18 March 2021. Moreover, shortly before 5:00pm, Path Legal changed the time and date of settlement in PEXA to 1:00pm on 23 March 2021. It further appears that stamp duty had not been paid by 18 March 2021.

At 11:13am on 22 March 2021, Mrs Belluccini served a Notice of Termination upon Path Legal. The notice included the following:

The concession ultimately made by the first defendant, that the Notice to Complete was valid and thus effective to make time of the essence for completion by 18 March 2021, was properly made. By Special Condition 4.2 of the contract, if completion does not take place by 4:30pm on the Completion Date, a party who is not in default and who is ready to proceed to completion may at any time thereafter give to the other party a notice to complete, by which time will be the essence of the contract. The Completion Date, which was originally 25 January 2021, was extended by agreement to 22 February 2021. Completion did not occur on that date. It was open to the plaintiffs to serve a Notice to Complete on 3 March 2021 because they were not then in default under the contract and the evidence shows that they were ready, willing and able to proceed to completion. Moreover, the notice allowed a period of more than 14 days for completion, such that it must be taken to have provided a reasonable and sufficient time for completion (see Special Condition 4.3). Further, I am satisfied on the evidence that, from the time the notice was given, the plaintiffs remained ready, willing and able to proceed to completion of the contract.

Accordingly, in circumstances where the first defendant failed to complete the contract by 18 March 2021, and thus failed to comply with the contract or a notice under it in an essential respect, the plaintiffs had an entitlement under cl 9.1 of the contract to terminate the contract and recover the deposit. As I have already said, the first defendant ultimately appeared to accept that the plaintiffs had such an entitlement. The plaintiffs exercised the right of termination by the Notice of Termination given on 22 March 2021.

The focus of the case therefore became whether there were circumstances that would justify giving the first defendant relief against forfeiture of his interest under the contract – although the true question in this context is whether equity should intervene on the basis that it would be unconscientious for the plaintiffs to insist upon their legal right to terminate the contract (see Tanwar Enterprises Pty Ltd v Cauchi (2003) 217 CLR 315; [2003] HCA 57 at [5] and [22]). If it would be unconscientious for the plaintiffs to insist upon that right, they could not rely upon their termination of the contract as an answer to the first defendant’s claim for specific performance.

The first defendant submitted that he and his son were doing what was necessary on their part to proceed with the proposal that involved rescission of the original contract and entry into a new contract with the son as purchaser, but were not aware that from 11 March 2021 the plaintiffs were not prepared to agree to any further extensions of time for the proposal to proceed. The first defendant submitted that if he had been informed in a timely manner of the plaintiffs’ position there would have been ample time for him to put funds into PEXA to settle his purchase on 18 March 2021. It was thus submitted that it was a case where the vendor caused or contributed to the circumstances which gave rise to the seeking of relief against forfeiture (viz, the breach by the first defendant of the essential time stipulation: see Tanwar Enterprises Pty Ltd v Cauchi (supra) at [58]). The first defendant submitted that his failure to complete by 18 March 2021 was due to the conduct of the vendors which lacked transparency in failing to disclose as and from 11 March 2021 that they had decided against proceeding with a new contract with Mr Saeed. It was put that the failure to disclose could be regarded as akin to misleading conduct by silence (see Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31 at 32). The first defendant submitted that had the plaintiffs’ position been communicated as and from 11 March 2021, he would have been able to organise the funds required for settlement by 18 March 2021.

The plaintiffs submitted that they gave the first defendant and his son ample opportunity to purchase the property, either via the signed contract for sale or a substituted contract. It was submitted that it was unreasonable to expect the vendors to continually defer the settlement date until such time as finances could be organised. The plaintiffs submitted that when the 11 March 2021 deadline was not met in respect of the proposed new contract, it was made clear that the Notice to Complete, served on 3 March 2021 under the existing contract, was still being relied upon. It was submitted that this position was reinforced on 16 March 2021. The plaintiffs denied that they acted unconscionably in exercising their contractual rights when the first defendant failed to complete by 18 March 2021. The plaintiffs further submitted that the first defendant had not in any event established that he was in a position to settle the contract at any stage.

In order to deal with these submissions, it is necessary to refer to some aspects of the evidence beyond the summary set out earlier. In particular, it is necessary to consider the evidence of Mr Akrawe concerning his finances and preparations for settlement, and the evidence of Mr and Mrs Culjak concerning their intentions with regard to the proposed new contract with Mr Saeed.

Mr Akrawe deposed in his first affidavit that at the time of the auction (on 12 December 2020) he had more than enough funds available to pay the deposit and the price for the property. He said that he had transferred at least $2 million from Iraq to Australia, some of which was transferred to Mr Saeed “or his companies”, some of which was held in United States dollars in a cash security box, and some of which was in his own account with the ANZ bank. He deposed that although it was his preference for the contract to be changed into the name of his son, he was happy to buy the house himself. He deposed that at all times he had sufficient money available to pay for the house in his own name. I note that this aspect of his evidence was the subject of cross-examination. Mr Akrawe further deposed:

Mr Akrawe deposed in his second affidavit that he did not see many of the emails annexed to Mrs Belluccini’s affidavit, and that he was unaware that Mr Pathmathas was informing Mrs Belluccini that he did not have funds to settle the purchase.

Reference should also be made to Mr Saeed’s first affidavit, which included the following in relation to the period around 16 March 2021:

Turning now to the evidence concerning the plaintiffs’ intentions, Mrs Culjak gave an answer in cross-examination to the effect that after the deadlines of 10 March 2021 and 11 March 2021 were not met, she and her husband then decided that “we’re not going ahead”. Later, she said that the decision not to go ahead with the new contract had been made before 17 March 2021 because “we didn’t have any faith in them to go through”.

Mr Culjak also gave evidence in cross-examination to the effect that when the 11 March 2021 deadline was not met he said to his wife that “we should go to [or go back to] the original contract”.

Mrs Belluccini did not agree in cross-examination with the suggestion that Mr and Mrs Culjak told her on 11 March 2021 that they were not prepared to consider any further extensions. She deposed that on 17 March 2021, after she received the signed documents, the Culjaks, given the history of the matter, “decided to proceed under the original contract”. Mrs Belluccini agreed that she did not communicate that to the purchaser. She said that in her view that was unnecessary.

It may be accepted that by about 11 March 2021, Mr and Mrs Culjak had lost confidence in Mr Akrawe and Mr Saeed going ahead with the proposed new contract. That is hardly surprising. Draft documents had been submitted to Mr Pathmathas on 25 February 2021. Enquiries were made of Mr Pathmathas on 1 March 2021 and 2 March 2021 as to when executed documents would be sent, but those enquiries went unanswered. The Notice to Complete was then served on 3 March 2021. Mr Pathmathas explained in his email of 5 March 2021 that his client (which, read in its context, must be understood as a reference to Mr Akrawe) had been sick but had instructed that he now wanted to proceed with the Deed of Mutual Rescission on the terms set out in Mrs Belluccini’s email of 25 February 2021. Mrs Belluccini, by her email of 8 March 2021, indicated that Mr and Mrs Culjak would agree to proceed accordingly, on the basis that the documents and monies were received by no later than 5:00pm on 10 March 2021. In the afternoon of 10 March 2021, that deadline was effectively extended to 12:00pm on 11 March 2021. The extended deadline was not met. Mr Pathmathas explained that the new purchaser (Mr Saeed) was waiting for funds to clear, and that this might take a couple of days.

In those circumstances, Mrs Belluccini stated in her email sent at 4:20pm on 11 March 2021 that, pending her clients’ instructions, the Notice to Complete “still stands”. It should be noted, in that regard, that no challenge had been raised to the validity of the Notice to Complete. Indeed, Mr Pathmathas’ email of 5 March 2021 shows that the Notice to Complete had come to the attention of Mr Akrawe by that time, and the request contained in the email for the notice to be withdrawn is tantamount to a recognition of its validity.

The statement made by Mrs Belluccini on 11 March 2021 was to the effect that, pending her clients’ instructions, the existing contract was required to be completed by 18 March 2021, with time being of the essence. I do not think that statement could be reasonably regarded as anything other than a statement to the purchaser that, unless and until the vendors give instructions to the contrary, the contract is required to be completed in accordance with the Notice to Complete. The vendors were of course at liberty to give, or not give, instructions to the contrary, as they saw fit. Mrs Belluccini’s email thus conveyed that the purchaser would be required to complete by 18 March 2021 unless the vendors chose to take a different approach. The purchaser could not safely proceed on any basis other than that a failure to complete by 18 March 2021 would be a breach of the contract in an essential respect that would entitle the vendors to terminate the contract.

It is true, as submitted by the first defendant, that the plaintiffs were, in a sense, keeping their options open. They were keeping open the possibility that they might agree to a course other than their present insistence upon completion of the contract in accordance with the Notice to Complete. The plaintiffs were perfectly entitled to adopt that stance. However, the essence of the first defendant’s complaint against the plaintiffs is that, having made up their minds not to proceed with the proposed new contract with Mr Saeed, that position was not communicated.

In my opinion, the evidence does not go so far as to establish that on or around 11 March 2021 Mr and Mrs Culjak had come to a final decision that they would not under any circumstances agree to proceed with the proposed new contract. That proposition was not put to either Mrs or Mr Culjak in cross-examination. Nor was it put that they would not genuinely consider proceeding with the new contract if the documents and monies were later provided. In my view, unless the plaintiffs had come to a such a position, the first defendant could not reasonably have expected to be informed about their state of mind concerning the proposed new contract. That proposal remained a matter for negotiation between the parties.

It was clearly stated on 11 March 2021 that the plaintiffs maintained that the contract was required to be completed in accordance with the Notice to Complete which made time of the essence. As I have said, the first defendant could not safely proceed on any basis other than that a failure to complete by 18 March 2021 would entitle the plaintiffs to terminate the contract. If the first defendant had the necessary funds, there was plenty of time to make them available on the PEXA system in readiness for a settlement on 18 March 2021. The evidence given by Mr Akrawe does not explain why that was not done. He does not say, for example, that he delayed doing so because of a belief or hope that the proposed new contract would proceed instead of the existing contract. The fact that he was “shocked” when the plaintiffs did not proceed with the new contract suggests that he may have had such a belief or hope, but the effect that such a belief or hope may have had upon his conduct is not explained. Nor does he say that he would have taken steps to make the funds available on PEXA if he had been told that the plaintiffs would not proceed with the new contract. The first defendant’s evidence in this regard is, in my view, inadequate. In these circumstances, I do not think there is a sound basis to be satisfied that any conduct on the part of the plaintiffs caused or contributed to the failure to make funds available.

In any event, the evidence given by Mr Akrawe about his financial position at that time leaves me unpersuaded that he in fact had sufficient funds to enable him to complete by 18 March 2021. The evidence was imprecise, and in a number of respects contradictory and confusing. It can be accepted that considerable sums (perhaps sufficient in themselves to complete the purchase) were transferred by Mr Akrawe from Iraq to Australia in 2020. However, the evidence (including that given by Mr Saeed) shows that some of the funds were later expended, or placed with Mr Saeed or companies associated with him. Further, whilst a significant portion of the funds are claimed to have been held in cash in a security deposit box (which was held in the name of Mr Saeed), no cogent evidence was adduced to establish the actual amounts of cash so held at the relevant time. Finally, it cannot be overlooked that:

I should add that both Mr Akrawe and Mr Saeed sought to distance themselves from the email communications that passed between Mrs Belluccini and Mr Pathmathas. They each deposed that they had not seen many of the emails annexed to Mrs Belluccini’s affidavit. That evidence may have been intended to suggest that Mr Pathmathas was not keeping them informed about what was occurring. I do not accept any such suggestion. In any event, Mr Pathmathas was plainly Mr Akrawe’s agent with authority to act on the purchase, including by communicating with Mrs Belluccini.

For the above reasons, the first defendant has not established that his failure to complete the contract by 18 March 2021, which was a breach of the contract in an essential respect, was relevantly caused or contributed to by conduct (including silence) on the part of the plaintiffs. In my opinion, taking all of the circumstances into account, there was nothing unconscientious about the plaintiffs’ exercise of the legal right to terminate. It follows that the termination of the contract for breach of the essential time stipulation may be relied upon by the plaintiffs to defeat the first defendant’s claim for specific performance of the contract. The claim for specific performance must be dismissed.

I turn now to the first defendant’s alternative claim for an order under s 55(2A) of the Conveyancing Act for the return of the deposit.

Section 55(2A) of the Conveyancing Act provides:

As explained by Santow JA in Havyn Pty Ltd v Webster (2005) 12 BPR 22,837; [2005] NSWCA 182 at [137], s 55(2A) created a jurisdiction to relieve against forfeiture of a reasonable deposit that was hitherto unknown to courts of equity (see also Luu v Sovereign Developments Pty Ltd (2006) 12 BPR 23,629; [2006] NSWCA 40 at [24]).

In Lucas & Tait (Investments) Pty Ltd v Victoria Securities Ltd [1973] 2 NSWLR 268, Street CJ in Eq stated at 272:

It is not necessary to demonstrate special or exceptional circumstances in order to justify an exercise of the discretion under s 55(2A) (see Harkins v Butcher; Butcher v Lachlan Elder Realty Pty Ltd (2002) 55 NSWLR 558; [2002] NSWCA 237 at [77]; Havyn Pty Ltd v Webster (supra) at [149]). However, a proper approach to the discretion must appreciate the legal context of the established nature of a deposit as an earnest of performance in conveyancing transactions (see Havyn Pty Limited v Webster (supra) at [150]-[151]).

As Santow JA stated in Havyn Pty Limited v Webster (supra) at [155]:

It seems to me, applying these principles, that it would not be appropriate to make an order for the return of the deposit. The deposit (of $155,000) was forfeited due to the failure of the first defendant to perform his obligations in accordance with a Notice to Complete that made time of the essence. It has not been shown that this failure was relevantly caused or contributed to by conduct on the part of the plaintiffs. It has not been shown that were the plaintiffs to recover the deposit, they would make a windfall or profit that in “justice and equity” they ought not be permitted to enjoy. In that regard, it should not be overlooked that the termination of the contract occurred some 16 months ago. Moreover, an attempt by the plaintiffs to re-sell the property later in 2021 was stymied by the lodgement of a caveat by the first defendant. The basis of the caveat, being the existence of a contract for sale, has not been sustained. In all the circumstances, and taking into account the important role played by deposits in contracts for the sale of land, I do not consider that allowing the plaintiffs to recover the deposit, in accordance with the terms of the contract, would be unjust or inequitable to the first defendant. The claim for the return of the deposit will also be dismissed.

A declaration will be made to the effect that the contract for sale between the plaintiffs and the first defendant was validly terminated by notice given by the plaintiffs on 22 March 2021. As a result of that termination, the plaintiffs are entitled to recover the deposit. Accordingly, an order will be made for the deposit monies, which have been paid into Court, to be paid to the plaintiffs. As noted earlier, a claim made by the plaintiffs for damages was ultimately not pressed.

The Cross-Claim brought by the first defendant against the plaintiffs will be dismissed. Given the dismissal of the claim for specific performance, it is appropriate to also make an order for the withdrawal of the caveat (AR599613) lodged by the first defendant.

Costs should follow the event. An order will therefore be made that the first defendant/cross-claimant pay the plaintiffs/cross-defendants’ costs of the proceedings.