NSW Supreme Court Rejects Claim for Deposit Return

The court refused to return the deposit to the claimant under a contract for sale, holding that the termination of the contract was justified and that the claimant was not entitled to the deposit under section 55(2A) of the Conveyancing Act 1919.

New South Wales Supreme Court

CITATION : [COMPANY] v [NAME] [2009] NSWSC 904

HEARING DATE(S) : 17, 18, 19 August 2009

JUDGMENT DATE : 16 September 2009

JURISDICTION : Equity Division

JUDGMENT OF : [NAME]

DECISION : Return of deposit refused

CATCHWORDS : CONVEYANCING [76] - Relationship of vendor and purchaser - Breach of contract - Deposit - Recovery of deposit - Statutory power to order - Circumstances in which order refused

LEGISLATION CITED : Conveyancing Act 1919, s 55(2A) Liquor Act 1982, s 104

CATEGORY : Principal judgment

Clarke v Dilberovic (1982) NSW ConvR par 55-083 [NAME] v [NAME] [2005] NSWSC 1193 CASES CITED : [COMPANY] v [NAME] [2001] NSWSC 226; (2001) 10 BPR 18,545 [COMPANY] v Victoria Securities Limited [1973] 2 NSWLR 268 [NAME] v [NAME] in Eq, 5 October 1993, unreported [NAME] v [COMPANY] (1995) 6 BPR 14,091

[COMPANY] (plaintiff - 5445/07) [NAME] (defendant - 5445/07) PARTIES : [COMPANY] (first plaintiff - 15089/08) [COMPANY] (second plaintiff - 15089/08) [COMPANY] (defendant - 15089/08)

FILE NUMBER(S) : SC 5445/07; 15089/08

COUNSEL : [redacted] [NAME] (defendant - [NAME] parties)

SOLICITORS : [redacted] [COMPANY] (defendant - [NAME] parties)

IN THE SUPREME COURT OF NEW SOUTH WALES [NAME], 16 September 2009

5445/07 [COMPANY] v [NAME]

15089/08 [COMPANY] & [NAME] v [COMPANY]

JUDGMENT 1 HIS HONOUR: I am hearing together two sets of proceedings both arising out of a contract for the sale ("the contract for sale") and a contract for the lease ("the lease") of the Mercury Hotel at Newcastle ("the premises"). In the first set of proceedings the vendor, [COMPANY] ("[NAME]"), sues [NAME] ("[NAME]") as guarantor of obligations of the purchaser [COMPANY] ("[NAME]") and of the lessee [COMPANY] ("[NAME]") for judgment in respect of moneys owing under the contract for sale and the lease. In the second set of proceedings [NAME] and [NAME] sue [NAME] for an order for the return to [NAME] of the deposit paid under the contract for sale under s 55(2A) of the Conveyancing Act 1919 and for restitution to [NAME] for improvements made to the premises while [NAME] was in possession under the lease.

FACTUAL FRAMEWORK 2 The following facts are not in issue or are easily found. The disputed facts are set out in the respective portions of the judgment relating to particular claims made in the proceedings.

3 By agreement in writing dated 1 October 2004 ("the option") [NAME] granted to [COMPANY] ("B & B") the right to purchase in its own name or by its nominee the freehold of the premises. It was a term of the option that B & B or its nominee should exchange contracts for sale by 1 September 2005 and complete the purchase on or before 1 October 2005.

4 By notice dated 1 September 2005, B & B nominated [NAME] to be the purchaser of the premises from [NAME] and the contract for sale was entered into on that day. The contract for sale was for a purchase price of $2.2 million. The deposit held under it is $50,000. The contract for sale provided for completion on or before 1 October 2005.

5 On 5 October 2005 [NAME] issued to [NAME] a notice to complete requiring completion at or before 4.30pm on 24 October 2005, time of the essence. [NAME] requested the plaintiff to withdraw the notice to complete and to extend the time for completion.

6 By a deed dated 21 October 2005 between [NAME] and B & B ("the deed of guarantee") it was agreed that the time for completion would be extended to the earlier of two dates, one being 12 January 2006; that [NAME] would pay [NAME] $27,500.00 (and it did); and [NAME] guaranteed the due performance by [NAME] of its obligations under the contract for sale ("the first guarantee").

7 [NAME] failed to complete the contract for sale by 12 January 2006. On 13 January 2006 [NAME] issued a notice to complete to [NAME] requiring completion of the contract for sale at or before 4.30pm on 1 February 2006, time of the essence. [NAME] failed to complete the contract for sale by 1 February 2006. From that date [NAME] treated the contract for sale as being at an end.

8 By virtue of clause 9.3 of the contract for sale, [NAME] was liable for [NAME]'s costs of the contract for sale and a related discharge of mortgage. [NAME]'s solicitor's costs of the contract and discharge of mortgage were $7,738.76. There is an issue as to whether or not they have been paid. By virtue of clause 11 of the contract for sale, it was alleged that [NAME] was liable for [NAME]'s costs of the notice to complete. [NAME]'s costs of the notice to complete were $357.27. Again it is disputed whether or not they have been paid. It is alleged that under the first guarantee [NAME] is liable for those costs.

9 By agreement in writing dated 22 April 2005 ("the lease") [NAME] leased the premises to [NAME]. By Part 3.1 of the lease and item 8 of the reference schedule that was annexure A to the lease, [NAME] was obliged to pay rent to [NAME]. By Part 25 of the lease and item 24 of the reference schedule, [NAME] guaranteed the due performance by [NAME] of its obligations under the lease ("the second guarantee"). On 3 January 2006 [NAME] gave to [NAME] a cheque for $9,200 for rent. The cheque was dishonoured. The outstanding arrears of rent under the lease are alleged to be $6,772.

10 Under Part 23 of the lease, [NAME] by notice terminated the lease on 15 February 2006. Part 13.26 of the lease provided that [NAME] [sic] was liable for [NAME]'s costs of the termination of the lease, which were $348.12 and have not been paid.

11 Certain plant, equipment and chattels ("the equipment") were let with the premises. By clause 24.1 of the lease, [NAME] was entitled to upgrade the premises while in possession of them. The premises, including the equipment, were upgraded by [NAME], clearly at considerable expense. On the termination of the lease, [NAME] was by clause 9.3 entitled, indeed obliged, to remove the equipment that it had brought upon the premises. In default of its removal the lessor was entitled by clause 9.4 to dispose of that equipment as it pleased. However, on termination of the lease [NAME] did not remove the equipment it had brought upon the premises and did not, with a minor exception, make any attempt to return the equipment that had been removed from the premises and replaced. [NAME] makes a claim for the value of those items.

12 [NAME] was in possession of the premises, a complaint under s 104 of the Liquor Act 1982 ("the s 104 complaint") was made to the [NAME], apparently in relation to noise emanating from the premises. [NAME] paid $7,073 for its solicitor to attend at the inquiry before the Board.

13 On or about 20 February 2006, [NAME] resold the premises including the equipment as it had been redelivered by [NAME] to [NAME]. That sale was to [COMPANY] ("[COMPANY]") for $2.2 million and was completed. THE PARTIES' CLAIMS 14 [NAME] in the end claimed judgment for $49,851, comprising the following amounts: Under the first guarantee (1) $7,738.00 - costs thrown away in relation to contract for sale (2) $357.00 - costs re notice to complete (3) $348.00 - costs re termination of contract for sale

Under the second guarantee (4) $6,772.00 - rental arrears (5) $348.00 - costs re termination of lease (6) $27,215.00 - damages for non-return of [NAME]'s goods (7) $7,073.00 - costs re s 104 complaint In addition, [NAME] claimed interest on the rental arrears in the sum of $2,339.77.

15 In the second set of proceedings the claims were as follows:

(8) [NAME] claimed a return of the deposit; and (9) [NAME] claimed what it had paid for improvements to the premises, including the equipment, under a cause of action in restitution.

CREDIT OF WITNESSES 16 Among the witnesses who were cross examined the most important were the principal of [NAME] and [NAME] ("[NAME]"), an associate of [NAME] in the conduct of the hotel. [NAME] and [NAME] were both prepared to give answers or make admissions that were against their interests. I formed the impression in relation to each that he was really trying to assist the Court by giving honest answers to the questions asked. They both had reasonable, if not perfect, recollection of these events some time ago. [NAME] was a less credible witness. I formed the view that his recollection of the events in which he participated was quite patchy, perhaps in part due to his less central part in the relevant events. INDIVIDUAL CLAIMS

Claims (1) and (2) under the first guarantee: costs of contract for sale and notice to complete 17 There is no dispute that these amounts were incurred and that, if they are unpaid, [NAME] is liable for them under the first guarantee. [NAME], however, submits that the costs are not unpaid and that they were satisfied by the payment of $27,500 referred to in [6] above.

18 The deed of guarantee described the $27,500 as "being the vendor's costs from 1.10.2005 to 12.1.2006". In clause 1 of the deed of guarantee, if the purchaser completed by 12 January 2006, it would be credited pro rata with that portion of $27,500 applicable to the period between the date of completion and 12 January 2006. On behalf of [NAME] it is contended that "the vendor's costs" referred to were or included the vendor's legal costs.

19 However, in my view, bearing in mind that the consideration for the payment of $27,500 is an extension of the time for completion and taking into account all the provisions of the deed of guarantee, the costs referred to are the additional costs to [NAME] of continuing to own the premises and be liable for the mortgage for a longer time. I reject the argument that the costs in claim (1) and (2) were satisfied by the payment of that $27,500. [NAME] should have judgment for the amount of those costs. Claim (3) under the first guarantee: costs re termination of contract for sale 20 In the end, this claim was abandoned.

Claim (4) under the second guarantee: rental arrears 21 Again there is no dispute that the $6,772 the subject of this claim was at one stage owed by [NAME] to [NAME] and that [NAME] would be liable for it if it were not paid. Again, the contention on behalf of [NAME] is that the amount has in fact been paid.

22 The facts relating to this allegation are that [NAME] deposed that at a time around 14 February 2006 he was paid $10,000 in cash at his home by [NAME], a business associate of [NAME]. [NAME] asked for a receipt, [NAME] made a printout of the most recent account statement and gave a hand written receipt on the foot showing that [NAME]'s liability for $6,772 had been extinguished and $3,228 was to be credited as rent paid by [COMPANY] ("[NAME]"), which had taken a new lease of the premises. [NAME] further said that some time later (probably early in March 2006) he was telephoned by either [NAME] or [NAME], who said that the $10,000 was their money, not [NAME]'s, and that no part of it should have come off the [NAME] account, but it should have all been credited to [NAME]. [NAME] then credited the whole of the $10,000 to [NAME], as shown on the rental account of [NAME] dated 8 April 2006. Both documents are in evidence. [NAME]'s version of the telephone conversation received contemporaneous corroboration in a letter that he wrote on 8 March 2006, addressed to the directors of [NAME]. His recollection was that the "[NAME]" to whom he sent that letter was [NAME], which is borne out by the terms of the letter.

23 The evidence of [NAME] was that he believes that it was he who handed [NAME] the $10,000. He conceded that, if it was [NAME], that would have been done on [NAME]'s behalf. [NAME] deposed that he did not telephone [NAME] and say that the $10,000 should have been credited to [NAME]. [NAME] did not give evidence.

24 On this material, I accept the evidence of [NAME], who is of good credit and is firm in his recollection of these events. Most importantly, his version receives important corroboration from the letter of 8 March 2006. I accept that it was [NAME] who made the payment of $10,000 and that [NAME] and [NAME] were entitled to appropriate that payment. When the appropriation was changed in the telephone call, [NAME] accepted the changed appropriation and recorded the payment accordingly in the rent accounts. In those circumstances, there was not a payment of the $6,772 rent owing by [NAME] on which [NAME] can rely as extinguishing his liability as guarantor and judgment will be given against him for that sum. Claim (5) under the second guarantee: $348 costs re termination of lease 25 The relevant paragraph of the statement of claim wrongly alleges that this was an obligation of [NAME] guaranteed by [NAME]. There was no such guarantee. During final submissions, [NAME], of counsel for [NAME], applied to amend the paragraph of the statement of claim by substituting [NAME] for [NAME]. I refused the application by reason that it was made so late in the proceedings in respect of a trifling amount and there should be no risk of the proceedings being complicated or protracted or the costs increased by an amendment at that stage. Claim (6) under the second guarantee: damages for non-return of [NAME]'s goods 26 This claim was originally made for more than $60,000 but, by reason of deficiencies in [NAME]'s evidence, was pressed only as to $27,215.

27 The lease does not specifically provide for the redelivery of the equipment on termination of the lease. As already noted, it does provide in clause 24.1 that the lessee may at its cost upgrade "the premises". "The premises" are defined as including "such of the air-conditioning and other plant, equipment, machinery, conveniences, amenities and appurtenances ... fixtures and fittings ... as are from time to time provided by the lessor". Wherever else they may fit into these definitions, it appears to me that all the items of equipment which are the subject of the claim pressed in these proceedings fall within the meaning of "appurtenances", which term is defined as including all "furniture, furnishings or chattels in or about the premises". The lessee was therefore entitled to upgrade the equipment and to do that by replacing it.

28 By clause 9.4 of the lease, if the lessee shall not have removed from the premises any of the equipment on the premises to which it is entitled, then the lessor "may deal with the same in such manner as it shall in its absolute discretion think fit". That is precisely what occurred in this case in relation to any of the items of equipment which the lessee upgraded or replaced. They were left behind by the lessee; the lessor treated them as its own in replacement of the relevant items that it had provided; and resold the premises to [COMPANY] with that equipment. In my view, [NAME] was entirely justified in treating the equipment left by [NAME] in that way.

29 If items of equipment were taken by [NAME] and not replaced, then it may be that [NAME] was under an obligation to return those items. This may have been the case in relation to the poker machines mentioned in the statement of claim, which are said to have been removed but not replaced. However, there was no evidence of the value of the poker machines and they were not included among the items of equipment in respect of which the claim was ultimately pressed. There was no evidence or submission that any of the items of the equipment in respect of which the claim was made had been removed and not replaced.

30 In my view, because [NAME] was entitled under clause 24.1 to act in this way in replacing the equipment and because it left the items replacing those that were taken and those items were dealt with by [NAME] as stated above, [NAME] has no claim for damages for breach of contract in respect of the items for which the claim was made. The lease should not be construed as entitling it in the events that have happened to treat the replacing items as its own and also to sue for damages for the non-return of the replaced items. There will be judgment for [NAME] on this claim. Claim (7) under the second guarantee: $7,073 costs re s 104 complaint 31 There are two provisions of the lease that are relevant to this claim made against [NAME]. The first is clause 20.2(iii) which is as follows: "the Lessee and its Licensee shall not do or suffer to be done any act, matter or thing in or about the Premises or land whereby the Licence may be or become liable to be cancelled or suspended or in any way imperilled or jeopardised, or may be made subject to conditions." The second is clause 25: "GUARANTOR

In consideration of the Lessor at the request of the Guarantor referred to in Item 24 of the Annexure "A" Reference Schedule and testified by his execution of this Lease leasing the premises to the Lessee the Guarantor hereby guarantees to the Lessor the payment of the rent and the performance of the covenants and obligations on the part of the Lessee contained in this Lease and the Guarantor indemnifies the Lessor from and against any damage that the Lessor may suffer as a result of the breach or non-performance by the Lessee of any such covenants and obligations..."

32 On its face, a more relevant provision of the lease might be thought to be clause 13.26 concerning legal and other costs. However, although it was mentioned at some stage, it was not in the end relied on on behalf of [NAME]. I take it that the reason for that is because its drafting is so unsatisfactory that it is very difficult to spell out of it the imposition of liability on the guarantor. It has words missing, which in my view could only be inserted by an impermissible engagement in guess work, and its syntax is so broken as to make virtually no sense. In the end, it was not relied on. 33 The facts concerning this matter are that the s 104 complaint was made in July 2005. It related to a period from the time that the lessee commenced to operate this business in June 2005. It related, most relevantly, to the emanation of noise from the premises to an excessive degree late at night. Central to the complaint was an allegation that the premises were trading contrary to the development consent, which permitted the operation of the premises only to 10pm. The complaint was made by a Superintendent of Police. Part of the outcome sought was that the premises should operate only within the hours permitted by the development consent. 34 The s 104 complaint led to the appointment of an inquiry before the [NAME]. Since the powers of the Board after such an inquiry include the imposition of conditions on the licence which the plaintiff was not prepared to undergo, the plaintiff paid the sum of costs mentioned to be represented before the inquiry. 35 It was not conceded on behalf of the lessee or [NAME] that the noise from the hotel was objectively such as to disturb unduly the quiet and good order of the neighbourhood, although it would appear that steps were being taken on behalf of the lessee to improve soundproofing. 36 However, despite [NAME] incurring thousands of dollars of costs in respect of the s 104 inquiry, there is a complete blank in the evidence as to what the findings of the inquiry were. The evidence does not reveal that any finding was made by the inquiry. In [NAME]'s belief, this was because a complaint that the operation of the premises was outside the hours of the development consent could not be initiated by the Police, but only by the Council. Certainly, there was no evidence that there was any adverse finding by the inquiry concerning the lessee's operation of the premises. Therefore, the licence suffered no detriment as a result of the inquiry. Certainly, for an obligation to be imposed on the guarantor for the consequences of a breach, a finding must be made that the lessee or licensee has done or suffered to be done an: "act, matter or thing in or about the Premises whereby the Licence may be or become liable to be cancelled or suspended ... imperilled or jeopardised, or may be made subject to conditions."

Despite some evidence suggesting the emanation of noise from the premises late at night, in light of what I have said about the results of the inquiry and the state of the evidence generally, I find it impossible to make a finding that the lessee or the licensee had done anything that was in fact a breach of clause 20.2(iii) sufficient to activate liability in the guarantor under clause 25. In those circumstances, in my view, claim (7) must fail. Claim (8): the claim by [NAME] for the return of the deposit 37 The law as to the exercise of the Court's jurisdiction to order the return of deposits under s 55(2A) of the Conveyancing Act 1919 has been clear since the judgment of [NAME] in Eq in [COMPANY] v Victoria Securities Limited [1973] 2 NSWLR 268: see my survey of the authorities in [COMPANY] v [NAME] [2001] NSWSC 226; (2001) 10 BPR 18,545.

38 In [NAME] v Tait, [NAME] in Eq said at 272-273: "It is one thing to recognize that there is a wide discretion conferred upon the court under this section; it is another thing to determine the guide lines for the exercise of that discretion. The section was designed to provide relief to a purchaser against an unjust and inequitable consequence of forfeiture of a deposit. It is clear enough that at law a vendor's right to forfeit a deposit to himself in the event of a purchaser's default bears no necessary relation to the damages actually suffered by a vendor. At law a forfeited deposit could result in a vendor making a profit which in justice and equity he ought not to be permitted to enjoy at the purchaser's expense.

In a complementary sense, an order for the return of the deposit does not necessarily affect the vendor's right to sue a defaulting purchaser at law and recover against him such damages as the vendor can prove. The jurisdiction under s55(2A) does not give to a court an overall discretionary supervision of monetary adjustments between parties to a contract under which a deposit was paid but which has been terminated. A vendor who forfeits a deposit in strict enforcement of his legal rights is not to be deprived of it under s55(2A) unless it is unjust and inequitable to permit him to retain it. If the court would not, in its discretion, specifically enforce the contract against the purchaser, then it may follow that it would be unjust and inequitable to allow the vendor to retain the deposit. In appropriate cases he should be left to prove the damages payable to him by the defaulting purchaser in accordance with the established rules governing the measure of damages, rather than simply pocketing the deposit, which might in some cases exceed the damages which would properly be recoverable by him at law. Equity has always looked with disfavour upon penalties or stipulations which result in a party to a contract making a profit at the expense of a defaulting party. It is clear that where the court in its discretion refuses specific performance, whether or not it also orders repayment of the deposit under s55(2A), it will still remain open to the vendor to sue the defaulting purchaser and recover against him whatever damages may be due to the vendor at law in the event of the contract having gone off through the purchaser's breach. The ordinary principles of contract law and of damages stand untouched by this section except in so far as it operates to qualify the ordinary right of a vendor to forfeit and retain a deposit.

Just as the [NAME] whose words I have quoted declined to put a limiting gloss upon the scope of the section, I decline to state my view upon where the boundaries of the discretion are to be drawn. Specific instances of its application are to be found in the cases. They all, however, come under the general category of circumstances in which the court held it to be just and equitable to deny to the vendor the enjoyment of a forfeited deposit.

Attempted classifications within this general category will tend only to obscure rather than to elucidate the approach to the exercise of this statutory discretion."

39 That has been regarded since that time as representing the law. [ADDRESS] has emphasised that the onus lies upon the purchaser to establish that it would be unjust and inequitable to permit the vendor to retain the deposit: Clarke v Dilberovic (1982) NSW ConvR par 55-083 at 56,494; [NAME] v [NAME] in Eq, 5 October 1993, unreported; [NAME] v [COMPANY] (1995) 6 BPR 14,091 at 14,105; [NAME] v [NAME] [2005] NSWSC 1193 at [59].

40 The basis on which [NAME] has put its claim for the return of the deposit has varied from time to time during the proceedings. The claim as put in final written submissions I have found somewhat difficult to follow. That is why I have set its submissions out in full, since I fear that I may distort them through incomprehension if I attempt to summarise them: "In every case, the Court has complete discretion as to whether any order will be made under the subsection. The pivotal consideration is the justice of the situation.

In this particular case, there was a chain of events that has resulted in injustice arising if [[NAME]] is permitted to retain the deposit.

The evidence was that both [[NAME] and [NAME] were aware that the Council approval did not match the licence.

[NAME] conceded that, on the basis of what he had been told by [[NAME], he thought he could sort out the trading hours. The evidence discloses the lodging of a development application.

However, [NAME]'s solicitors then provided certain key documents to cause the development application to be withdrawn in September, shortly after the Contract for Sale was entered into.

It became clear that the trading hours was a real issue. [NAME] asked [NAME] for an extension of time to sort it out.

The outcome of the meeting at Café 16 between [NAME] and [[NAME] is in dispute. It is submitted that all three witnesses were credible. [NAME] conceded that he was willing to provide an extension. He did not believe that one had been granted because he believed he had imposed conditions, namely, ongoing rent and a request in writing.

[NAME] and [NAME] say that they came away believing the extension had been given without the formal conditions.

[NAME]'s unchallenged evidence was that he would not have continued to invest in the business if he thought the extension had not been granted, (with the effect that the contract for sale and the lease were going to be terminated at the end of January).

It is clear that each party had a different view of the position. This is further evidenced by the surprised correspondence from [NAME] when a notice to complete was issued on 13 January 2006 and the equally surprised response from [NAME]'s solicitors.

In December 2005, [[NAME]] and [NAME] attended at the Mayor's office where it was not in dispute that the option in relation to the extension of the trading hours was to re-lodge a development application.

[NAME] not withdrawn the development application in September, it is possible the issue would have been resolved.

It was these two matters which led to the termination of the contract for sale on 1 February 2006.

Whether it was misrepresentation or mutual mistake, the result of the termination with the loss of the deposit would be unjust in light of the history of how the sale transaction proceeded."

41 It is clear on the evidence that all parties knew at material times that the local government approval as to hours of trading did not match the hours of trading allowed by the liquor licence. It is also apparent that the parties believed that insofar as it was necessary, this could be sorted out with the council and that the council was unlikely to take action to restrain the hours of trading under the liquor licence.

42 It seems to me that central to [NAME]'s submissions are two complaints. First, that it was misled into entering into the lease by misrepresentations by [NAME] that no problem arose from the limitation of the trading hours permitted by the local government development consent. Secondly, the purchaser was misled by [NAME] into believing that the time for completion had been extended to April 2006, with no qualification that the rent should continue to be paid.

43 So far as the first misrepresentation is concerned, there seems to be no doubt that on a number of occasions [NAME] did say that he thought that there would be no difficulty relating to the limited hours contained in the development consent. On the other hand, it is quite clear on the evidence that both sides knew of the difference between the hours of the licence and of the development consent. What is more, knowing this, [NAME] was equally of the belief that there would be no problem arising from this difference. It must be remembered that he was the owner of the Great Northern Hotel, just up the road from the premises. He was well aware that the Mercury's development consent contained the limitation of hours that existed. Furthermore, he was well aware that the council had never taken any steps to enforce the limitation and had indeed not objected to the more extended hours contained in the licence. It was on this basis that he believed that no difficulty would arise from the limitation of the development consent hours. He did not rely in coming to this conclusion on anything that was said by [NAME]. 44 As to the second alleged misrepresentation, it was also clear to everyone that, in order for the purchaser to have time to sort out its finance (which was being impeded by the low valuation of $1.5 million arising out of the limitation on trading hours) and to sort out the question of trading hours with the council, which everyone believed could be done, it would need a longer period of time that extended beyond the end of January. The relevant meeting took place at Café 16 in Newcastle on about 30 November 2005. The principal participants were [NAME] and [NAME]. Their accounts of the conversation on this subject matter differ widely. 45 [NAME]'s evidence is that he said that he would be willing to consider a further extension "but it would have to be in writing and on the same conditions as last time." These included a payment of $27,500. To this [NAME] replied, "No, I am not paying any more money." 46 [NAME]'s evidence was that the conversation was as follows: [NAME]: "So where do we stand? Are you able to give me the extension?"

[NAME]: "Yes, I will give you the extension."

However, [NAME], in cross examination, was quite uncertain as to the terms of the conversation and conceded that other things may have been said. 47 [NAME]'s evidence was that the conversation was as follows: Me: "If you give me the extension, I will go and see the Mayor."

[NAME]: "I'll give you the extension on the same terms as what I previously gave."

Me: "No, I am not paying any more money. I will pay rent, and expenses. I've got the bank onside but we need your support on this one..."

[NAME]: "OK, I'll give you another 3 months, provided that you keep paying the rent." This contains a clear admission by [NAME] that, although the extension was granted, [NAME] did impose the condition concerning the payment of the rent. 48 In view of [NAME]'s uncertainty, the versions that compete for acceptance are those of [NAME] and [NAME]. In the circumstances, it seems to me that the likelihood was that the extension would have been granted to permit the contract for sale to be completed, which was in [NAME]'s interests. [NAME]'s evidence contains the clear admission, contrary to interest, that there was a condition that the payment of rent had to continue.

In all the circumstances, on the balance of probabilities, I accept [NAME]'s version of what was said at the meeting.

49 The problem that arose that led to the termination of the agreement was that, as set out at [9] above, the rent cheque in January was dishonoured and the rent payment fell into arrears. This was what led [NAME] to bring the contract to an end when completion did not take place at the end of January, which was the terminal date if the additional extension was not in force. In these circumstances, it seems to me that, bearing in mind the importance of upholding the deposit as an earnest in a real way for the performance of a contract, there is no injustice in the termination of the contract and the forfeiture of the deposit at the beginning of February. I refuse to order the return of the deposit. Claim (9): claim for restitution in relation to the improvements to the premises 50 [NAME] claimed that it should recover what it had paid for improvements to the premises including the equipment, under a cause of action in restitution. 51 There are two answers that appear to me to be fatal to this claim. The first arises from the specific provisions of the lease, that have been adverted to in paragraphs [27]-[28] above. What was to happen in relation to the equipment was clearly dealt with by specific provisions of the lease. The lessee was entitled to remove the equipment that it had imported in replacement of existing equipment in the premises. Indeed, it was obliged to do so, so that it committed a breach of covenant by not removing the equipment and reinstating the premises. The regime that was to apply in relation to the equipment not removed was specified in the lease, the lessor being left to dispose of it as it pleased. In this case it did so by selling the premises with the equipment as it then stood. 52 The second problem with any complaint of unjust enrichment, whether in relation to improvements to the equipment or to the building, is that the price for which the lessor resold the premises was exactly the same as the price under the contract for sale, namely, $2.2 million. There is no evidence that the price on resale was realised only by reference to any improved equipment in the premises or would not have been realised had the original equipment remained there. In these circumstances it seems to me impossible to say that [NAME] received any amount by which it could be said that it was unjustly enriched. 53 The claim for restitution will therefore be determined in favour of [NAME].

CONCLUSION 54 The results are as follows.

In proceedings 5445/07, [COMPANY] v [NAME], on the plaintiff's claim there will be judgment against [NAME] for the following sums: $7,738 $357 $6,772 $14,867 .

In proceedings 15089/08, [COMPANY] v [COMPANY], the plaintiffs' claims will be dismissed. 55 On delivery of these reasons, a time can be appointed for short minutes to be brought in and any argument as to costs to take place. **********

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