New South Wales Supreme Court CITATION : Australian Land Co Pty Limited v Tumut Festival Centre Pty Limited [2006] NSWSC 828 HEARING DATE(S) : 10 July 2006 JUDGMENT DATE : 10 July 2006 JURISDICTION : Equity Division JUDGMENT OF : Windeyer J at 1 DECISION : Balance deposit payable CATCHWORDS : VENDOR AND PURCHASER - whether part of deposit not paid was a penalty CASES CITED : Luong Dinh Luu v Sovereign Developments Pty Ltd [2006] NSWCA 40 PARTIES : Australian Land Co Pty Limited (Plaintiff) Tumut Festival Centre Pty Limited (Defendant) FILE NUMBER(S) : SC 5278 of 2005 COUNSEL : Mr G McGrath (Plaintiff) Mr D A Allen (Defendant) SOLICITORS : Griffiths Tierney (Plaintiff) John F Morrissey & Company (Defendant) - 1 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION WINDEYER J MONDAY 10 JULY 2006 5278/05 AUSTRALIAN LAND CO PTY LIMITED v TUMUT FESTIVAL CENTRE PTY LIMITED JUDGMENT 1 HIS HONOUR: In this matter the only issue left for determination is whether or not the plaintiff is entitled to judgment against the defendant for the sum of $23,000 being the balance of a sum of $28,000 described as a deposit under a contract of sale dated 25 June 2004 between the plaintiff as vendor and the defendant company as purchaser. That contract was terminated by the vendor, and it is agreed that it was validly terminated. 2 The contract provided for a purchase sum of $238,000 and a deposit of $28,000, leaving a balance of $210,000. Special condition 67 of the contract which is headed "Reduced Deposit" provided that notwithstanding clause 2, which is the printed clause relating to payment and which in 2.2 provides that "normally the purchaser must pay the deposit on the making of this contract and this time is essential." It provides that the deposit be paid as to $5,000 on the date of the contract, and, as to the balance of $23,000, "on the completion date or on default by the purchaser of the purchaser's obligation under this agreement, and nothing shall relieve the purchaser of the obligation to pay the full 10 per cent deposit ... by the vendor." 3 There was a default by the purchaser. The contract was terminated by the vendor. The contract, as I have said, envisaged that normally it would be paid on the making of the contract. However, clause 2.3 of the printed terms provided that if the contract required the purchaser to pay any deposit by a later time, that time was also essential. The simple argument of the defendant is that the sum of $23,000 is a penalty; in other words, it is not an earnest of performance normally paid on entry into a contract but it is a penalty payable on default. For that argument, counsel for the purchaser company relies on the decision in Luong Dinh Luu v Sovereign Developments Pty Ltd [2006] NSWCA 40. That decision dealt with a contract which provided for a purchase price of $6,600,000 and a deposit of $65,000. It included a special condition which provided that if the purchaser paid less than 10 per cent of the purchase price as deposit, then if the purchaser committed a default, the whole of the 10 per cent deposit would become payable, notwithstanding that the contract was not completed. The reasons for judgment were given by Bryson J with whom Justices Handley and McColl agreed. 4 The rationale for the decision was that the deposit under that contract was clearly stated to be $65,000. It could never have been thought that the deposit was $660,000. Whatever might have been the meaning of special condition 5, it did not have the effect, and could not have had the effect, of making the balance between $65,000 and $660,000 a part of the deposit payable under the contract. That is the basis on which the court proceeded and that is the basis on which I think it is clear this matter should be determined. 5 When the provisions, as to the amount of the deposit, the printed provisions, as to payment of the deposit, and special condition 67 are read together, and they can clearly be read together, there is no ambiguity between them. The balance of $23,000 was always a part of the deposit. If the matter had been completed, as it ought to have been, then it would have been paid on completion with the balance purchase moneys. If there were default, then it became payable upon the default. The vendor is entitled to judgment accordingly. I will make that order. 6 It is agreed that the amount of interest payable on the sum of $23,000 at court rates is $2,001.95. In those circumstances, there should be judgment for the plaintiff against the defendant for $25,001.95. The defendant to pay the plaintiff's costs. Exhibits can be returned. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.