Reported Decision : (2006) NSW ConvR 56-162 New South Wales Supreme Court CITATION : Iannello v Sharpe [2006] NSWSC 713 HEARING DATE(S) : 12 and 13 July 2006 JUDGMENT DATE : 13 July 2006 JURISDICTION : Equity Division JUDGMENT OF : Windeyer J at 1 DECISION : Judgment for the defendant on the plaintiffs' claim and for the cross-claimant on the cross claim CATCHWORDS : VENDOR AND PURCHASER - contract for sale of land - amended by solicitor prior to exchange - no evidence of amendment being authorised by purchaser - contract did not come into existence - purchaser entitled to return of deposit PARTIES : Michael Iannello and Anna Iannello (Plaintiffs/Cross-defendants) Malcolm Sharpe (Defendant/Cross-claimant) FILE NUMBER(S) : SC 2896 of 2005 COUNSEL : Mr A M Gruzman (Plaintiffs/Cross-defendants) Mr E Hyde (Defendant/Cross-claimant) SOLICITORS : McBride Harle & Martin (Plaintiffs/Cross-defendants) Malcolm Johns & Company (Defendant/Cross-claimant) - 4 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION Windeyer J Thursday 13 July 2006 2896/05 Michael Iannello & ORS v Malcolm Sharpe Judgment 1 HIS HONOUR: The plaintiffs are the vendors to the purchaser, or at least that is the basis upon which they put their claim, under a contract for sale dated 4 April 2003 of a property 6 Crescent Street, Hunters Hill, the purchase price being $4,500,000. A deposit of the amount of five per cent, namely, $225,000, was paid on exchange. 2 The contract was ultimately terminated by the vendors. It is clear that it was terminated because the purchaser was unable to find the money to complete it. The deposit which was paid on exchange was accounted for by payment to the vendors in accordance with the contract. They claim to forfeit that amount and claim the balance of the deposit, namely $225,000, and in addition they claim damages. 3 The only issue which arises on the pleadings is whether or not a contract came into existence. If it did then it is in my view clear that there would be no defence to the claim of the plaintiff. If it did not, that is of course an end to the matter. The plaintiff would not be entitled to forfeit of the deposit or to obtain payment of that amount of the deposit not paid and the purchaser defendant would be entitled to judgment on his cross-claim, which in essence is a claim for refund of the amount which was paid on exchange. 4 So that there is no undue suspense, I will say that I have come to the conclusion that the plaintiffs' claim fails. That is a conclusion which I must say I very much regret having to come to. All merit is on the side of the plaintiff. There is no merit whatsoever on the side of the defendant. Nevertheless, if he is entitled to judgment in accordance with law that is what he must get. 5 When the contract was signed by the defendant it provided for a deposit of $225,000. There was typed after that figure the words ("five per cent of the price unless otherwise stated and paid in accordance with special condition 14"). Special condition 14 of the contract is headed Reduced Deposit. It provides as follows: 6 "Notwithstanding anything else herein contained, the vendor shall accept on exchange of this agreement payment of $225,000, being part of the deposit. The parties expressly agree that if the purchaser defaults in the observance of performance of any obligation hereunder which is or has become essential, the balance of the deposit, namely $225,000, shall become immediately due and payable and the purchaser shall forfeit the whole of the sum of $450,000 pursuant to clause 9 hereof to the vendor." 7 That clause might have had some purpose had the contract provided for a deposit of 10 per cent, namely $450,000 payable by two instalments. Without that it is difficult to see what effect it had. 8 When the time came for exchange of contracts, and the evidence shows that there was considerable pressure for that, the contract signed by Mr Sharpe as purchaser was in its original form. It included on the front page under the heading Purchaser the name "Malcolm Sharpe or nominee". The words "or nominee" were deleted prior to exchange. There was another alteration of more significance made prior to exchange. The deposit which had been typed in at $225,000 was altered to read $450,000, and where five per cent of the price had originally appeared this was changed to ten per cent. The balance payable on settlement, which had originally appeared as $4,275,000 was changed to $4,050,000. 9 It is clear that these amendments were made in accordance with instructions given by the vendors and required by them or by their solicitor. It is also clear that those amendments were made after Mr Sharpe signed the contract. It is not really necessary for me to decide whether or not the deletion of the words "or nominee" was a significant or material alteration. In ordinary terms, Mr Sharpe could have required the vendor to transfer to his nominee. That might have had some stamp duty consequences, but probably no more than those which would have arisen had the words remained. The change, however, to the deposit provision is, I consider, a material alteration. It is material because it is generally regarded at law in conveyancing matters that no penalty arises if there is provision for forfeiture of a deposit of up to 10 per cent. It is also significant because the change would give some work to special condition 14 of the contract because it would have allowed the deposit to be paid by two instalments, yet the amount of $225,000 not paid on exchange would still remain part of the deposit and become liable to forfeiture upon termination if that termination occurred as a result of default by the purchaser. Had the deposit figure remained at $225,000 then that would have been the amount of the deposit liable to forfeiture under clause 9 and the vendor would have been left to any right in damages to claim any additional amount. 10 The difficulty with this matter is that while I have no doubt that the solicitor for the vendor was authorised to make the alterations which were made by him, there is no evidence that Mr McGrath, who was the solicitor or agent acting for the purchaser, was authorised to make the amendments which were made to the contract on exchange. There can be no doubt that a solicitor is not authorised unless authorised in writing to make a contract on behalf of a client purchaser. There is equally no doubt in my view that if authorised he can agree to and make alterations to the document, even after it has been signed by the purchaser. In this case, however, there is no evidence of such authorisation and the only evidence is that of the defendant after the contract was signed by him. Mr McGrath did not tell him that the words "or nominee" had been deleted, nor that the deposit was changed from five per cent to ten per cent on the front page of the contract. There is no evidence, and he was not asked whether he authorised the change. There was, however, evidence which was objected to and not pressed which might have assisted the plaintiffs' case if estoppel had been raised at the start, but on the issue before the court the fact is that there is no evidence that this material alteration was an alteration made by the purchaser or under his authority. In those circumstances it seems to me the plaintiffs' claim must fail. 11 It follows from that, and it is accepted that it follows from that, that the defendant is entitled to have the amount of $225,000 paid to him, and I will make that order. There is also a pleaded claim for interest on that figure from 4 April 2003 until judgment. I note and am pleased that the cross-claimant does not seek interest. 12 The orders are as follows: 1. Judgment for the defendant on the plaintiffs' claim. 2. Judgment for the cross-claimant on the cross-claim against the cross-defendants for $225,000. 3. Subject to any existing orders, plaintiffs to pay defendant's costs of the proceedings. 4. I order the proceedings on the judgment be stayed for twenty-eight days, the exhibits to remain for twenty-eight days and to be returned if no appeal is lodged. ********** 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. 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