CPPIB Credit Investments v Ren

1. [1]

   HIS HONOUR: The essential questions for decision are:

   1. (1)

      did the purchaser of land under a contract for sale validly terminate that contract?

   2. (2)

      Did the vendor terminate the contract, in effect “for convenience”?

   3. (3)

      If the answer to each of the first two questions is “no”, is the purchaser nonetheless entitled to relief against the forfeiture of his deposit?

2. [2]

   The primary facts giving rise to those questions, although a little complicated, are not contentious.

Background

1. [3]

   On 12 December 2006, Ms Xia Kong (Ms Kong), who is the vendor named in the contract for sale that is the subject of dispute, married Mr Jerry Ren. As I understand it, both were nationals of the People’s Republic of China. Their marriage was celebrated in Dalian, according to the laws of China.

2. [4]

   On 3 February 2011, Mr Ren became registered as proprietor of a property at Warrawee (the property).

3. [5]

   On 24 June 2014, Mr Ren transferred the property to himself and Ms Kong as joint tenants. They then mortgaged the property to National Australia Bank (NAB), which mortgage was thereafter registered.

4. [6]

   On 18 September 2016, the marriage between Mr Ren and Ms Kong was dissolved in China pursuant to Chinese law. As I understand it, the courts of this country may recognise that divorce pursuant to s 104 of the Family Law Act 1975 (Cth).

5. [7]

   On 4 November 2016, Mr Ren and Ms Kong made an agreement that described itself as a Binding Financial Agreement (BFA) to which s 90C of the Family Law Act was said to apply.

6. [8]

   On 20 April 2017, creditors of Mr Ren commenced proceedings in the Federal Circuit Court of Australia (the Circuit Court) seeking to set aside the BFA.

7. [9]

   Mr Ren had borrowed a very large sum of money from the plaintiff in these proceedings (CPPIB). On 28 April 2017, this court made freezing orders preventing Mr Ren and Ms Kong from disposing of or dealing with their interests in the property unless, relevantly, the net proceeds of sale were paid into court or into a jointly controlled account.

8. [10]

   On 9 June 2017, Ms Kong sought to have the freezing orders set aside at least so far as they affected her. On 16 June 2017, Ball J dismissed her application with costs, and ordered that the freezing order continue until the further order of the court. As part of his reasons for that conclusion, Ball J held that the BFA had no “binding” effect under s 90C of the Family Law Act. The freezing orders had not been set aside or varied up until the date of the hearing before me (26 September 2018).

9. [11]

   On 28 July 2017, this court gave judgment for CPPIB against Mr Ren, in a sum exceeding USD51.9m. Mr Ren has not paid that judgment debt.

10. [12]

    On 27 September 2017, CPPIB obtained from this court a writ for levy of property and registered that writ on the title to the property.

11. [13]

    On 22 November 2017, the Circuit Court (Judge Harper) ordered Mr Ren to transfer his interest in the property to Ms Kong. It ordered that, in default of his doing so (and default was likely, since he was then in China), a Registrar of the Family Court be empowered to sign the transfer on his behalf. That was done the same day.

12. [14]

    On 5 April 2018, the Circuit Court (Judge Dowdy) made a sequestration order against Mr Ren, and appointed Mr Bruce Gleeson (the trustee) as his trustee in bankruptcy. The sequestration order was based on an act of bankruptcy committed on 28 December 2016.

13. [15]

    On 10 April 2018, Ms Kong contracted to sell the property to Mr Xin He for $11.5 million. Mr He paid a deposit of $1.15 million into the trust account of Ms Kong’s solicitors. Settlement was due on 12 June 2018.

14. [16]

    On 16 April 2018, the Circuit Court (Judge Harper) gave a decision on an interlocutory application in the course of which Ms Kong had apparently argued that CPPIB was a necessary party to the proceeding before the Circuit Court. One of the issues raised for decision was whether, having regard to the judgment of this Court (Ball J) on 16 June 2017), the doctrines of issue estoppel or abuse of process operated to prevent Ms Kong from contending that the BFA was binding. The Circuit Court concluded that they did not.

15. [17]

    The trustee came to learn of the contract for sale of the property. He appears to have formed the view that Mr Ren had some beneficial interest in the property and that, by virtue of the sequestration order, that interest had vested in him as Mr Ren’s trustee. The trustee asserted that another consequence of the making of the sequestration order was to sever the joint tenancy that, hitherto, had subsisted [1] between Mr Ren and Ms Kong.

16. [18]

    On 2 May 2018, Ms Kong’s solicitors Ronayne Owens Lawyers (ROL) informed Mr He’s solicitors Link Lawyers (Link) that the trustee had not agreed that the sale should proceed, and that his present although not final view was that if the sale were to proceed, it should be on terms of a fresh contract in which he was named as a vendor.

17. [19]

    On 10 May 2018, the trustee’s solicitors Ashurst confirmed to Link that this was the trustee’s view. Ashurst provided what they called “sale instructions” to Link. Those instructions set out the terms on which the trustee would join in a sale of the property to Mr He, at the price that had earlier been agreed between Ms Kong and Mr He.

18. [20]

    Link said that Mr He was prepared to contract on those terms if Ms Kong agreed to do so. However, when provided with a draft contract for sale that essentially gave effect to those instructions for sale, Link informed Ashurst that Mr He would not enter into a contract with the trustee.

19. [21]

    On 5 June 2018, Link wrote to ROL, alleging that Ms Kong “did not have unfettered and unrestricted power to pass the title [to the property] to [Mr He]”, and stating that if Ms Kong could not fulfil her contractual obligations by the contractual date for settlement, Mr He “will exercise hir [sic] right to rescind…”.

20. [22]

    Two days later, on 7 June 2018, Link wrote to ROL enclosing for signature by Ms Kong the transfer signed on behalf of Mr He, together with a settlement adjustment statement and requisitions on title.

21. [23]

    On 8 June 2018, ROL advised Link that NAB would not be ready to settle on 12 June 2018, and that Ms Kong was seeking to confirm a date when NAB would be available.

22. [24]

    On 12 June 2018, Link sent ROL what purported to be a notice of rescission.

23. [25]

    ROL disputed the validity of the rescission. They notified Link that settlement had been rebooked for 18 June 2018 and asked for “revised adjustments and cheque directions”.

24. [26]

    On 15 June 2018, the trustee and CPPIB gave undertakings to the Circuit Court:

25. [27]

    Ms Kong’s representatives, and those of the trustee and CPPIB, attended the time and place appointed for settlement. Mr He’s representatives did not.

26. [28]

    On 20 June 2018, ROL gave Mr He notice to complete. That notice appointed 3 pm on 4 July 2018 as the time and date for settlement, nominated the location of settlement, and said that in default of settlement Ms Kong “will be entitled to terminate the contract”. Mr He did not contend that the notice was ineffective because the time allowed was too short.

27. [29]

    It would appear that everyone apart from Mr He or his representatives attended the settlement. There does not seem to be any doubt that between them, those who did attend had everything necessary to ensure that settlement could proceed, including withdrawals of caveats, a withdrawal of the writ for levy of property and a discharge of the mortgage, to ensure that Mr He would get clear title.

28. [30]

    On 5 July 2018, ROL gave Mr He notice of termination of the contract.

First issue: validity of Mr He’s notice of rescission

1. [31]

   Mr de Meyrick of Counsel, who appeared with Mr Currie of Counsel for Mr He, put his client’s case in two ways. First, he said, Ms Kong was in breach of cl 41.3 of the contract, by which she warranted that she was “solely entitled to the whole of the legal and beneficial title to the property as at the date of this contract and as at completion”. He submitted that although the clause was framed as a warranty, it was either a condition, or an intermediate term, because it went to title – a matter of fundamental importance – so that a breach of it would give rise to a right to rescind [2] .

2. [32]

   Alternatively, Mr de Meyrick submitted, Mr He was entitled to rescind “out of hand” as at 12 June 2018 because of the defect then apparent in Ms Kong’s title. Mr de Meyrick submitted that his client was able to rely upon that right in these proceedings even though the notice of rescission had not mentioned it as a ground for termination.

3. [33]

   Although Mr de Meyrick’s argument focused on cl 41.3, it is necessary, as he acknowledged, to consider that clause in the context of the whole of cl 41 and in the context of the facts then known to the parties. Those facts include that the registered proprietors of the property at the date of contract were Mr Ren and Ms Kong. The parties knew that, if only because a copy of a title search disclosing that fact was annexed to the contract for sale.

4. [34]

   I set out the whole of cl 41:

5. [35]

   It is convenient to note at this point that cl 41.8 is the source of the alterative argument identified at [1(2)] above.

6. [36]

   As I have noted already, Mr de Meyrick submitted that the subclause ought be read as an intermediate term, breach of which would go to the root of the contract, or be sufficiently serious so as to entitle Mr He to rescind. He submitted [3] that:

7. [37]

   Mr de Meyrick submitted orally that at the time the contract was made, Ms Kong was not in the position to give that warranty because she was not the sole registered proprietor of the property, and perfection of her title by registering the transfer from Mr Ren would be a breach of the freezing order as continued by Ball J on 16 June 2017.

8. [38]

   Mr de Meyrick submitted that the freezing order permitted only sale of the property on the terms specified; it did not, he submitted, permit a transfer from Mr Ren to Ms Kong or an adjustment of their respective interests prior to sale.

9. [39]

   At one stage, I think, Mr de Meyrick submitted that even the execution and delivery of the transfer might have been done in breach of the freezing order. If that submission were made, it would raise a significant difficulty, in that the transfer was executed and delivered pursuant to an order made by a court of competent jurisdiction (see at [13] above). However, since the submission was not developed, I do not feel inclined to pursue this point.

10. [40]

    Mr Beaumont of Senior Counsel, who appeared with Mr Condylis of Counsel for Ms Kong, submitted that it was necessary to construe cl 41.3 in context and by reference to the mutually known facts, in particular as they appeared from the contract itself. He submitted that cl 41.3 should be read in such a way as to render it consistent with the overall structure of cl 41. Mr Beaumont relied, in particular, upon the mechanism set out in cls 41.5, 41.6 for dealing with what might be broadly described as defects in title or impediments to settlement.

11. [41]

    A submission as to the “effect” of a contractual term is difficult to analyse unless and until the content of that term – the legal obligations imposed by it – is determined by the orthodox processes of contractual interpretation. In this case, it seems to me, one must approach the words of cl 41.3, considered in both their contractual and their factual context, and determine what they mean as a matter of construction, before turning to the more general question of “effect”. That is the approach I propose to take.

12. [42]

    The starting point of the analysis is that, as Mr He acknowledged by cl 41.1 (and as was clear on the face of the contract in any event), Ms Kong was the sole vendor. The significance of that fact must be considered in light of the state of the title as disclosed by the search annexed to the contract [4] : Ms Kong was not the sole registered proprietor. That is why cl 41.2 bound Mr He to accept, on completion, the transfer from Mr Ren to Ms Kong in the form annexed to the contract.

13. [43]

    In those circumstances, looking at the matter objectively, the parties each knew that as at the date of the contract, Ms Kong, not being the sole registered proprietor of the property, could not of herself give title to the whole of the legal and beneficial interests in the property. Further, they must have understood, from the wording of cls 41.2 and 41.4, that Ms Kong was unlikely to become the sole registered proprietor prior to settlement.

14. [44]

    Clause 41.3 is to be construed, so far as possible, taking those known and mutually expected matters into account, and taking into account also the structure of cl 41 overall.

15. [45]

    The warranty given by cl 41.3 is not that Ms Kong is the sole legal owner, or sole proprietor, of the property. It is (leaving aside for the moment the question of beneficial interest) a warranty that she is solely entitled to the legal interest in the property. Registration of the transfer from Mr Ren to her would perfect her legal interest in the whole of the property. And it would, as it was once put, feed the title that she contracted to pass to Mr He. In short, I think, the proper construction of cl 41.3 is that Ms Kong warranted that she was the only person then (at the date of exchange) entitled to the legal interest in the property, and that this situation would prevail as at completion.

16. [46]

    There is no breach of the cl 41.3 warranty, so construed, simply because Mr Ren was a registered proprietor, as joint tenant with Ms Kong. In referring to the nature of their tenancy, I should make it clear that no one argued the effect of the execution and delivery of the transfer. That is to say, no one argued that the, or an, effect was to sever the joint tenancy. That no doubt reflected the obvious position that analysis of cl 41.3 did not depend in any way on the nature of the co-ownership. For the same reason, the trustee’s contention as to the effect of the sequestration order (see at [17] above) may be put to one side for the moment.

17. [47]

    It follows that cl 41.3, so construed, fits comfortably into the scheme of cl 41 overall. It warrants Ms Kong’s entitlement. The subsequent subclauses then set out the way in which impediments to her realisation of that entitlement, even if only for a fraction of a second before perfection of Mr He’s legal interest as registered proprietor, may be dealt with.

18. [48]

    That process of construction reflects, to my mind, the plain reading of cl 41.3 considered in context. It is therefore not necessary to consider whether it should be read down, so as to be made to fit into the scheme of cl 41 overall.

19. [49]

    Mr de Meyrick submitted that Ms Kong could not give the cl 41.3 warranty because she knew, at the time the contract was made, that Ball J had held that the BFA was not a binding agreement for the purposes of s 90C of the Family Law Act. It is no doubt correct to say, based on his Honour’s conclusion, that the BFA did not have the attributes that would follow from s 90C. It does not however follow that the BFA had no other effect. It remained, I think, a contract binding upon Mr Ren [5] . And so long as it bound him – that is, unless and until it was set aside by a court of competent jurisdiction – he remained obliged to perform it.

20. [50]

    Mr de Meyrick submitted, also, that it was significant that the trustee had indicated that he was not prepared to cooperate to ensure that the contract could be completed. That is correct, at least as at 2 and 10 May 2018.

21. [51]

    The trustee was in a position to obstruct settlement, because one consequence of the making of the sequestration order was to sever the joint tenancy, convert it to a tenancy in common, and vest Mr Ren’s interest as tenant in common in the trustee. I do not think either Mr de Meyrick or Mr Beaumont contended to the contrary; but if authority be needed, it may be found in Re Francis; ex parte Official Trustee in Bankruptcy [6] at 153 – 154.

22. [52]

    It could be argued that the matters to which I referred in the preceding paragraph provide an alternative basis for saying that the cl 41.3 warranty was broken at the very moment it was given. Mr Ren’s interests in the property had vested in the trustee five days before the contract for sale was made. And the interest so vested in the trustee was an interest as tenant in common, not as joint tenant. Even if the BFA did have the effect for which s 90C of the Family Law Act provides, the best result, from Ms Kong’s position, might be that the trustee would hold his equitable interest as joint tenant on trust for her. That possible complication was not addressed in submissions.

23. [53]

    Nonetheless, assuming for the moment that for the reasons just indicated, the cl 41.3 warranty was breached at the moment it was given, it does not follow that Mr He was, then or thereafter, entitled to rescind. To read the warranty as having that effect would put it entirely at odds with the carefully drafted scheme for which cl 41, overall, provides. I accept that a breach of the cl 41.3 warranty would give Mr He an entitlement to damages. But damages were not claimed, and no damages were proved in any event. To go further, and hold that the breach of warranty would give rise to a right of rescission, would be inconsistent with the bargain that the parties negotiated.

24. [54]

    Neither Counsel put submissions on the statutory efficacy of the BFA; that is to say, neither Counsel invited me to consider for myself the question of whether it should have the effect for which s 90C provides. I do not propose to re-examine the question. I proceed, as it would appear Counsel were content to do, on the basis that Ball J’s conclusion was correct [7] .

25. [55]

    Mr de Meyrick’s submissions did not demonstrate how, on the assumption that Ball J’s conclusion as to the BFA were correct, there was an immediate breach of cl 41.3 on its proper construction. His submissions addressed, rather, the practical consequences that would follow from the assumed correctness of his Honour’s view. That does not seem to me to go to the point, because those practical consequences are the very matters with which cls 41.5 and 41.6 were intended to deal. To put it another way, the parties, objectively, understood that the circumstances of the sale might have significant practical impediments to completion, and agreed upon a regime that would give Ms Kong an opportunity to overcome those impediments.

26. [56]

    The other answer to this aspect of Mr de Meyrick’s submissions is that stated at [53] above. The classification of cl 41.3 as an intermediate term, breach of which would entitle Mr He to rescind immediately, ignores its setting in the scheme of cl 41 overall. The parties understood that the circumstances in which the sale was effected were such that there might be difficulties in proceeding to completion. They agreed upon a regime whereby Ms Kong could try to resolve such difficulties as might arise.

27. [57]

    It would be inconsistent with that regime – which, among other things, allowed her two months from the contractual completion date (agreed to have been 12 June 2018) to do so – to construe cl 41.3 as giving Mr He an immediate right of rescission within that period if there arose, or was found to exist, some prohibition, restriction or impediment on or obstructing completion. The words used in cl 41.5 (and picked up in cl 41.6) are very wide. There is no reason to restrict them to matters other than defects in title. That is consistent with the general position that a vendor need not have good title at the time of sale, so long as he or she can transfer good title at completion: Bell v Scott [8] at 392.

28. [58]

    Mr de Meyrick relied on the principle that in some circumstances, a purchaser of land may rescind out of hand (or, as in days gone by it used to be said, brevi manu) if there became apparent a defect in title that could not be cured by the time for completion. The principle is well established. Mr de Meyrick referred to the decision of Finkelstein J in Valoutin Pty Ltd v Furst [9] . There are many other decisions to the same effect.

29. [59]

    Mr Beaumont submitted that there were two reasons why this ground of support for the notice of rescission failed. First, he submitted, the right was inconsistent with the structure of cl 41, and thus was not available to Mr He. Secondly, Mr Beaumont submitted, Mr He, although aware of the existence of the right (or of the facts now said to support it), had elected to affirm the contract in any event.

30. [60]

    In my view, both those answers are good. I shall explain why.

Decision

1. [61]

   I start with the first. The claimed right, to rescind out of hand upon discovery of a defect in title, assumes that the defect cannot be cured before completion. In the present case, I do not think that this could be said to have been the case at the time the notice of rescission was given, 12 June 2018.

2. [62]

   But in any event, whether the right exists cannot be considered in the abstract. It must take into account the provisions of the contract. I will not repeat what I have said as to the scheme of cl 41. It is enough to say that the parties must be taken, objectively, to have had in mind that there might be prohibitions, restrictions or impediments preventing completion, and expressly agreed to allow Ms Kong an additional two months from the date fixed for completion to deal with those matters.

3. [63]

   It is inconsistent with that scheme to imply a right to rescind out of hand exercisable at the very beginning of that two month period. Mr He was contractually bound to allow Ms Kong that further time. He was contractually bound to accept title if she could deal with the prohibitions, restrictions and impediments. And he was contractually entitled to rescind only if, two months having elapsed, she had not done so.

4. [64]

   I have referred already to the proposition, based on the High Court’s decision in Bell v Scott, that a vendor need not have good title at the time of sale, as long as good title can be procured and given at the time of completion. That is subject to the rule that where the vendor neither has title nor the power to compel anyone else to give it, the purchaser may rescind as soon as he or she finds that out. That principle is traced to the decision of Sir John Romilly MR in Forrer v Nash [10] . His Lordship said:

5. [65]

   There is a qualification to that rule, as Finkelstein J recognised in Valoutin at 149. That qualification is that if the right of rescission arises, it must be exercised, if it is to be exercised, as soon as the defect is discovered. It will be lost if the purchaser thereafter treats the contract as subsisting.

6. [66]

   In this case, Mr He was aware of the suggested defects by the time, on 5 June 2018, Link wrote to ROL noting that, by reason of the trustee’s assertions, Ms Kong “did not have unfettered and unrestricted power to pass the title to our client”. That was said to be “in conflict with the representations made by your client in the Contract”: clearly enough, a reference, somewhat ineptly phrased, to the warranty given in cl 41.3. The letter, having made those points, continued:

7. [67]

   As I have noted already, two days after that letter was written, Link wrote to ROL in the following terms:

8. [68]

   If Mr He wished to exercise his claimed right of rescission out of hand, he should have done so no later than 5 June 2018. He did not do so. Instead, he notified his intention to do so if Ms Kong could not fulfil her contractual obligations by 12 June 2018. That letter, so far from amounting to an exercise of any right of rescission, instead calls upon Ms Kong to make good her title.

9. [69]

   Again, the letter of 7 June 2018 could only have been sent on the basis that the contract was still in force. There was otherwise no occasion to deliver a transfer. There was no occasion to set out the adjustments to be made on settlement. And the only basis on which requisitions on title could have been made was that there was a subsisting contract. I accept, as ROL replied, that the requisitions were out of time having regard to cl 5 of the contract, but that is, for present purposes, irrelevant.

10. [70]

    The words of Long Innes CJ in Eq in Walker v Public Trustee [11] at 670 are apposite. In the events that happened, Mr He lost his right to repudiate because he “elected to regard the contract as still subsisting, and in effect practically invited [Ms Kong] to remedy the defect”.

Second issue: cl 41.8

1. [71]

   Mr de Meyrick submitted that an email from ROL to Link dated 2 May 2018 amounted to an exercise, by Ms Kong, of the right given by cl 41.8. He submitted, alternatively, that an email dated 8 June 2018, being the email from ROL to Link advising that NAB would not be able to settle on 12 June 2018 (see at [23] above) had this effect.

2. [72]

   The first email upon which Mr de Meyrick relied was sent in response to a request from Link, asking for “an update” as to the Circuit Court proceeding. Link’s email, dated 2 May 2018, reads as follows:

3. [73]

   ROL’s reply reads as follows:

4. [74]

   The email of 8 June 2018 reads as follows:

5. [75]

   Neither email refers to cl 41.8. Neither suggests that the problems facing Ms Kong were insuperable. On the contrary, the first email set out the steps that Ms Kong proposed to take, or the course that she proposed to follow, to ensure that the sale could proceed. True it is that the first email contemplated that the existing contract might be rescinded and a fresh contract might be required, but there was nothing in that email to indicate that Ms Kong was immutably resolved to abandon the existing contract.

6. [76]

   At a level of somewhat greater generality, the first email was a proper professional communication in response to a request for information. I find it very difficult to see how such a communication, giving the information requested, could (let alone should) be interpreted as the exercise of a contractual right that is not referred to, either by reference to the source of the right or its substance, in the email.

7. [77]

   I turn to the second email. It notifies Mr He that the settlement booked for 12 June 2018 cannot proceed. It does not suggest that Ms Kong wishes to abandon the contract, or to exercise her right under cl 41.8. On the contrary, it makes it clear that Ms Kong is seeking to appoint a date when settlement can occur. That is completely inconsistent with the construction put upon it.

8. [78]

   Again, I have difficulty in understanding how a routine communication, exchanged in the course of a difficult conveyancing transaction, could amount to the exercise of a contractual right that is not referred to in it. Again, the email makes no reference to cl 41.8; nor does it refer to the substance of that right given by that clause. And as I have said, so far from indicating an intention to abandon the contract, it is consistent only with Ms Kong’s desire to keep it alive and proceed to settlement.

Third issue: relief against forfeiture

1. [79]

   Mr de Meyrick relied upon s 55(1) of the Conveyancing Act 1919 (NSW). In the alternative, he relied on s 55(2A). I set out s 55:

2. [80]

   I start with s 55(1). That section only applies “where specific performance of a contract would not be enforced against the purchaser… by reason of a defect in the vendor’s title, but the purchaser is not entitled to rescind the contract”. For the right given by the subsection to accrue, it must be shown that specific performance would not have been enforced by reason of a defect in Ms Kong’s title. That has not been shown. Whether it could be shown would depend on the state of affairs that would have been reached had Ms Kong been given the opportunity that cl 41.5 intended to provide.

3. [81]

   That state of affairs is known. As at 4 July 2018, the date fixed for completion by Ms Kong’s notice to complete (see at [28] above), Ms Kong was ready, willing and able to complete.

4. [82]

   CPPIB and the trustee had agreed to do what they needed to do to enable completion to occur. Each of them had given an undertaking to the Circuit Court in substantially those terms. Each of them turned up at settlement, armed with the necessary documents. Ms Kong was represented at the settlement. So, too, was NAB. Between them, those parties had everything that was required to ensure that Mr He would get the title that Ms Kong had contracted to give him, including in the manner (the transfer from Mr Ren to Ms Kong) that Mr He had contracted to accept.

5. [83]

   In the circumstances, there is no basis for thinking that “specific performance of [the contract] would not [have been] enforced against [Mr He]… by reason of a defect in [Ms Kong’s] title”. There was, at least by 4 July, no such defect.

6. [84]

   On my understanding of the evidence, the same could be said of the earlier date fixed for completion, 18 June 2018 (see at [27] above). But it is unnecessary to express a concluded view on that, because the position as at 4 July 2018 is sufficient to ensure that Mr He’s claim under s 55(1) must fail.

7. [85]

   I turn to s 55(2A). The first alternative, “refuses to grant specific performance”, does not arise for the reasons just given. However, Mr Beaumont did not submit that, in the circumstances, the subsection was unavailable. I think it is correct to regard the somewhat unusual constitution of the claim as a “proceeding for the return of a deposit”. Certainly no one argued to the contrary.

8. [86]

   Although I have referred to this as a claim for relief against forfeiture. I do not wish to suggest that the jurisdiction under s 55(2A) is confined by, among other things, the general law jurisdiction to relieve against penalties and forfeitures. In terms, the statutory discretion is unconfined. However, the observations of Santow JA in Havyn Pty Ltd v Webster [12] at [173] are often cited in this context. His Honour there said:

9. [87]

   In Dasreef Developments Pty Ltd v Velkovski [13] , Emmett AJA, sitting at first instance, referred at [40] to the characterisation of a deposit paid pursuant to a contract for the sale of land as being both an earnest of performance and as part payment of the purchase price. Thus, his Honour said at [41] (and I omit his Honour’s reference to Havyn):

10. [88]

    For present purposes, the single most significant feature of this case is that Mr He acted in a way that was both precipitate and inconsistent with the scheme of cl 41 when he purported to rescind. He was bound to allow Ms Kong the opportunity provided by cls 41.5 and 41.6 to give him the title that he had contracted to accept. He ignored that. Instead, as soon as the contractual date for settlement, 12 June 2018, had passed, Mr He, putting it colloquially, jumped the gun.

11. [89]

    Further, this is not a case where Ms Kong, as it were, seized the opportunity given by Mr He’s purported rescission to snaffle the deposit before Mr He could change his mind. The evidence is to the contrary.

12. [90]

    On 13 June 2018, ROL wrote to Link in the following terms:

13. [91]

    In short, Ms Kong gave Mr He the opportunity to repent of his hasty decision. But Mr He did not accept that opportunity. Link replied the following day:

14. [92]

    Even then, Ms Kong did not pounce. ROL wrote to Link on 14 June 2018 in the following terms:

15. [93]

    Thereafter, on 15 June 2018, ROL emailed Link attaching an adjusted settlement sheet, giving cheque directions, and confirming the time, date and place of settlement.

16. [94]

    Finally, when Mr He missed that opportunity to settle, ROL gave the notice to complete that fixed 4 July 2018 as the date for settlement. Again, Link disputed the efficacy of that. In an email of 20 June 2018, they reiterated that the contract was rescinded. They said that Ms Kong had no right to give a notice to complete. They added that they were instructed to commence proceedings to recover the deposit.

17. [95]

    It was not until after Mr He missed the 4 July settlement date that ROL, on behalf of Ms Kong, gave the notice of termination. By that notice, Ms Kong forfeited the deposit and terminated the contract for sale.

18. [96]

    That alone seems to me to be sufficient to resolve the s 55(2A) question against Mr He. He proceeded upon what was at best an erroneous construction of the contract (the alternative, that he decided to ignore cl 41.5, is hardly favourable to him). He was given every opportunity to reconsider and repent, and to proceed to completion. He did not do so.

19. [97]

    The only excuse offered is that Mr He did not wish to buy into a law suit (and that was put by Mr de Meyrick in submissions, not in any of the correspondence in June and July 2018). But by the time the notice to complete was given, it must have been apparent to Mr He, had any consideration been given to what was then known, that he was not doing so. On the contrary, it must have been apparent to him that Ms Kong had got herself to a position where she could complete, and could give him the title that he had agreed to accept.

20. [98]

    In short, the loss of the deposit is all of Mr He’s own making.

21. [99]

    Added to that, there is the fact that Ms Kong has suffered a substantial loss by reason of Mr He’s failure to complete. First of all, the property has been resold, for $500,000 less. That accounts for almost half the deposit.

22. [100]

    Further, there was a very substantial sum, almost $8 million, owing to NAB and secured by the mortgage. Ms Kong has suffered further loss by reason of interest accruing over the period of the delay in settlement. The resale was effected by a contract dated 7 August 2018. That contract called for completion on 2 October 2018, three months (give a few days) after the date fixed by the notice to complete. I do not know what was the rate of interest payable on the debt to NAB. But even if it were a very modest 6% (and that is, in context, so low as to be unrealistic), the delay of 3 months would amount to an interest loss of about $120,000.

23. [101]

    In addition, although this must be relatively insubstantial in the scheme of things, there would be the costs referable to the resale.

24. [102]

    In my view, when one considers all those factors, bearing in mind the character of a deposit as an earnest of performance, the discretion given by s 55(2A) ought not be exercised in favour of Mr He.

Conclusion and orders

1. [103]

   I conclude that, as between Mr He and Ms Kong, Ms Kong is entitled to the deposit paid and interest thereon. There ought be a declaration to that effect, and an order that the deposit be paid out to her or as she may direct. In this context, it may be noted that Ms Kong has resolved her dispute with the trustee over entitlement to the deposit. That is recorded by a deed of settlement dated 21 September 2018. Since it has not been suggested that Ms Kong will not abide by the deed, it is unnecessary for me to say anything more about it.

2. [104]

   There remains the question of costs. On the view to which I have come, Mr He ought pay Ms Kong’s costs. The trustee intervened. He was not made a party. His intervention did nothing to make the resolution of the dispute simpler. There ought be no order as to his costs.

3. [105]

   I make the following orders:

   1. (1)

      direct the parties to bring in draft orders to give effect to these reasons.

   2. (2)

      List matter for directions at 10am on 25 October 2018 before me for the making of orders.