Bot v. Ristevski

[1981] VR 120

(Judgment by: Brooking J)

Bot
v.Ristevski

Court:
Supreme Court of Victoria

Judge:
Brooking J

Subject References:
Sale of land
Contract
Vendor and purchaser
Deposit
Vendor accepting purchaser's repudiation
Vendor entitled to recover unpaid balance of deposit

Case References:
Dewar v Mintoft - [1912] 2 KB 373
Farrant v Leburn - [1970] WAR 179
Lowe v Hope - [1970] Ch 94; [1969] 3 All ER 605
Johnson v Jones - [1972] NZLR 313
Lyon v Magnet Nominees Pty Ltd - [1978] VR 673

Hearing date: 18 March 1980
Judgment date: 25 March 1980


Judgment by:
Brooking J

In delivering judgment, having held that the defendants had repudiated the contract ofsale, that the plaintiffs had discharged the contract by accepting that repudiation and that the contract contained nothing to suggest that its discharge in that manner was not to have the usual consequence that the deposit was forfeited to the vendors, continued:


"Everybody", said Lord Macnaghten in Soper v Arnold (1889) 14 AC 429, at p. 435, "knows what a deposit is"; but unhappily the law is not clear on the simple question whether a vendor who puts an end to the contract by accepting the purchaser's repudiation of it may recover a deposit that has been promised but not paid. At the Oxford Winter Assizes in 1912 this problem confronted Horridge, J, sitting with a common jury to try an action brought by Major Dewar against the purchaser of Bainton Farm, which had been been knocked down to the defendant in unusual circumstances after an auction sale held at the Roebuck Hotel, to which the defendant had repaired for refreshment. The contract required a deposit of 164 pounds.17.11, which was never paid. Major Dewar resold the farm at a loss of 81 pounds.1.6. The common jury rejected the defendant's defence that he had not made a bid, and Horridge, J was concerned mainly to deal with a question concerning the Statute of Frauds, which question was determined adversely to the defendant: Dewar v Mintoft, [1912] 2 KB 373. The case is of relevance because of the brief reference with which the report concludes to the direction given to the jury on damages. It seems that the action was framed as an action for damages, not an action for debt. The defendant argued that the damages recoverable were limited to the loss on resale, but Horridge, J. ruled that the damages were the amount of the deposit, and later recorded his reasons thus at ([1912] 2 KB) p. 387: "I ruled that the defendant could not put himself in a better position by refusing to pay the deposit than if the deposit had in fact been paid, in which case it could be retained by the seller (Wallis v Smith (1882) 21 Ch D 243)...".

This ruling in Dewar v Mintoft has received varying treatment at the hands of the textwriters, but it was not until 1969 that it received judicial consideration, with the exception of a passing and indirect reference in 1965 (Watson v Healy Lands Ltd., [1965] NZLR 511, at pp. 516-7, where Woodhouse, J expressed the opinion that a vendor who has determined the contract otherwise than by rescission ab initio may sue for an unpaid deposit). The ruling has in the last 11 years been the subject of judicial pronouncements on four occasions, beginning with the decision of Pennycuick, J. in Lowe v Hope, [1970] Ch 94; [1969] 3 All ER 605, given on 30 July 1969. There the purchaser failed to complete and the vendor, who had received only 40 pounds out of the total deposit payable of 629.10.0 pounds, sued the purchaser for the balance of the deposit and specific performance; in the alternative, he claimed rescission of the agreement and a declaration that the deposit of 629.10.0 pounds had been forfeited to him. On motion for judgment in default of defence the vendor sought an order for payment of the balance of the deposit and rescission of the agreement. Pennycuick, J, in an extempore judgment which referred to no authority other than Dewar v Mintoft, supra, declined to follow that decision and refused to order payment of the balance of the deposit.

Some months later, Wickham, J, in a considered decision in which reference was made to a number of the authorities, concluded that a vendor who had accepted the purchaser's repudiation of the contract could recover the unpaid balance of the deposit and so restored the balance in favour of the view of Horridge, J (Farrant v Leburn, [1970] WAR 179). Within 18 months, however, McMullin, J of the Supreme Court of New Zealand evened the score by following Lowe v Hope, supra, (Johnson v Jones, [1972] NZLR 313). Finally, in Lyon v Magnet Nominees Pty. Ltd., [1978] VR 673 Harris, J followed Lowe v Hope and Johnson v Jones in preference to Dewar v Mintoft, supra, so inclining the balance in favour of the view that an unpaid deposit may not be recovered.

Mr Walker invites me to say that, after all, Horridge, J was right and so to bring it about that two groups of three decisions, each including a judgment of this Court, are arrayed against each other in a regrettable conflict that only an appellate court can resolve.

Mr Walker submits that the survival of the right of a vendor to sue for an overdue deposit where he has discharged the contract by accepting the purchaser's repudiation is a consequence of the principles governing the discharge of contracts and of the nature of a deposit.

By the sale note, the balance of the deposit was payable within seven days of 28 January 1976. Once this seven day period had expired, the plaintiffs were entitled to sue the defendants for the unpaid balance, $1800, as a debt. The question is whether the plaintiffs have lost this right by electing to discharge the contract in reliance upon the defendants' repudiation. It is clear that the determination of a contract by the acceptance of a repudiation does not in general affect rights which have already been acquired by reason of the contact. The contrary view, based on the confusion between rescission for some extrinsic collateral cause, like fraud, and discharge for breach, was rejected by the Supreme Court of South Australia in 1928 (Ettridge v Vermin Board of the District of Murat Bay, [1928] SASR 124; McLachlan v Nourse, [1928] SASR 230, at pp. 233-4) and was finally disposed of in this country five years later by the judgment of Sir Owen Dixon in McDonald v Dennys Lascelles Ltd. (1933) 48 CLR 457, at pp. 476-7: "When a party to a simple contract, upon a breach by the other contracting party of a condition of the contract, elects to treat the contract as no longer binding upon him, the contract is not rescinded as from the beginning. Both parties are discharged from the further performance of the contract, but rights are not divested or discharged which have already been unconditionally acquired. Rights and obligations which arise from the partial execution of the contract and causes of action which have accrued from its breach alike continue unaffected. When a contract is rescinded because of matters which affect its formation, as in the case of fraud, the parties are to be rehabilitated and restored, so far as may be, to the position they occupied before the contract was made. But when a contract, which is not void or voidable at law, or liable to be set aside in equity, is dissolved at the election of one party because the other has not observed an essential condition or has committed a breach going to its root, the contract is determined so far as it is executory only and the party in default is liable for damages for its breach."

See further Hirji Mulji v Cheong Yue Steamship Co. Ltd., [1926] AC 497, at p. 510; Holland v Wiltshire (1954) 90 CLR 409, at p. 416; Cooper v Ungar (1958) 100 CLR 510, at p. 512. In England the formulation of the principle by Sir Owen Dixon in McDonald's Case, supra, has now been endorsed by the House of Lords (Johnson v Agnew, [1979] 2 WLR 487, at p. 495; [1979] 1 All ER 883, at p. 892.

The right of action for debt which arose in the present case on 5 February 1976 in consequence of the purchasers' failure to pay the balance of the deposit within seven days of the sale note will, then, not have been extinguished by the subsequent determination of the contract unless the right to recover the balance of the deposit was conditional upon the subsequent completion of the contract. "It does not,however, necessarily follow from these principles that when, under an executory contract for the sale of property, the price or part of it is paid or payable in advance, the seller may both retain what he has received, or recover overdue instalments, and at the same time treat himself as relieved from the obligation of transferring the property to the buyer. When a contract stipulates for payment of part of the purchase money in advance, the purchaser relying only on the vendor's promise to give him a conveyance, the vendor is entitled to enforce payment before the time has arrived for conveying the land; yet his title to retain the money has been considered not to be absolute but conditional upon the subsequent completion of the contract. 'The very idea of payment falls to the ground when both have treated the bargain as at an end; and from that moment the vendor holds the money advanced to the use of the purchaser' (Palmer v Temple (1839) 9 Ad and E at pp. 520,521; 112 ER at p. 1309). In Laird v Pim (1841) 7 M and W at p.478; 151 ER at p. 854, Parke, B says: 'It is clear he cannot have the land and its value too'; the case, however, was one in which conveyance and payment were contemporaneous conditions (see Laird v Pim (1841) 7 M and W at p. 480; 151 ER at p. 855). It is now beyond question that instalments already paid may be recovered by a defaulting purchaser when the vendor elects to discharge the contract (Mayson v Clouet [1924] AC 980).": McDonald v Dennys Lascelles Ltd. (1933) 48 CLR 457, at pp. 477-8.

Where the vendor discharges a contract for breach, the contract may expressly empower him to forfeit instalments of purchase money payable in advance of conveyance or transfer, so as to make it necessary for the purchaser to invoke equitable relief against forfeiture. If the contract gives no express power of forfeiture, the purchaser may recover by action at law instalments of purchase money paid in advance of conveyance or transfer and will have a good defence at law to an action by the vendor claiming payment of instalments of purchase money which were overdue by the time when the contract was discharged. The vendor's title to retain or recover the purchase money is conditional upon the subsequent completion of the contract by conveyance or transfer: if the contract is not completed, the consideration wholly fails: McDonald v Dennys Lascelles Ltd., supra, at pp. 477-9; Berry v Mahony, [1933] VLR 314, at p. 320; Real Estate Securities Ltd. v Kew Golf Links Estate Pty. Ltd., [1935] VLR 114, at pp. 119-20; Automatic Fire Sprinklers Pty. Ltd. v Watson (1946) 72 CLR 435, at pp. 464-5; Cowan v Stanhill Estates Pty. Ltd. (No. 2), [1967] VR 641, at p. 650.

The vendor's title to retain or recover a deposit is not conditional in this sense, and accordingly it will not be defeated or divested by the subsequent discharge of the contract: Ettridge v Vermin Board of the District of Murat Bay, [1928] SASR 124, at p. 128. True it is that a deposit wears two aspects: if the purchase is carried out, it goes against the purchase money, but its primary purpose is that it is a guarantee that the purchaser means business (Depree v Bedborough (1863) 4 Giff 479; 66 ER 795; Howe v Smith (1884) 27 Ch D 89, at p. 101, per Fry, LJ; Soper v Arnold (1889) 14 AC 429, at p. 435, per Lord Macnaghten). There is no failure of consideration if the land is not conveyed or transferred, for the purchaser has had the benefit of the entry into the contract of sale by the vendor. "Here the purchaser made an unconditional promise to pay a deposit immediately and, although if the contract was completed the moneys would according to ordinary principles be credited towards the purchase price and until then would constitute an earnest for performance, the agreement to pay was not in consideration of conveyance but was in consideration of the contract. It was the price or part of the price of the vendor's promise to sell...": Farrant v Leburn, [1970] WAR 179, at p. 184.

The decision of Pennycuick, J. was influenced by the notion that a vendor who determines the contract by accepting a repudiation cannot assert rights which arise under the contract and must, because of the need for restitutio in integrum, return to the purchaser what he, the vendor, has received under the contract, the vendor's right to retain the deposit being viewed as an exception to the general rule. This notion arose from the failure to distinguish between rescission for some extrinsic collateral cause and the discharge of contracts for breach, a failure for which the noted textwriter, Cyprian Williams, must bear much of the responsibility. The erroneous conception was never allowed to take root in Australia, and happily it has at last been eradicated in England by the House of Lords in Johnson v Agnew, [1979] 2 WLR 487; [1979] 1 All ER 883. It is not surprising that Lowe v Hope, [1970] Ch 94; [1969] 3 All ER 605, should have been noted without criticism by English conveyancers and accepted as the consequence of received doctrine as laid down by Cyprian Williams ((1969) 33 NS Conveyancer and Property Lawyer 410).

In the same way it is my respectful view that McMullin, J, in Johnson v Jones, [1972] NZLR 313, while mindful of the principle laid down by Sir Owen Dixon in McDonald v Dennys Lascelles Ltd., supra, failed to give effect to it in respect of the debt which had arisen for the balance of the deposit. The fact that the vendor might have insisted upon payment before rescinding, which appears to be the ground on which his Honour held the principle to be inapplicable, does not, as it seems to me, afford any reason for treating the debt as extinguished in consequence of the determination of the contract. (In the statement of the principle at ([1972] NZLR) p. 318 of the report the word "conditionally" is plainly to be read as "unconditionally").

In Lyon v Magnet Nominees Pty. Ltd., [1978] VR 673, Harris, J adopted the reasoning in Lowe v Hope, supra. His Honour does briefly discuss the principle laid down by Sir Owen Dixon but does not appear to have been referred to the consideration given to the application of that principle in Farrant v Leburn, [1970] WAR 179.

In Lowe v Hope, supra, Pennycuick, J, after citing a passage by Cyprian Williams, continued (at [1970] Ch p. 98; [1969] 3 All ER p. 608): "Applying those principles in relation to a deposit payable under the contract of sale but not in fact paid by the purchaser, it seems to me that the vendor having elected to bring the contract to an end by rescission is not entitled to insist on the performance of the contract in relation to the deposit. This is admittedly so, in so far as the deposit bears the character of part of the unpaid purchase price. It seems to me it must equally be so, in so far as the deposit bears the character of a pledge; for once the vendor has rescinded the contract there are no outstanding obligations of the purchaser in respect of which the vendor can be entitled to be protected by a pledge.

It would, I think, be quite contrary to principle that a vendor having rescinded a contract so that the contract is at an end should at that stage be entitled to insist that the purchaser shall hand over to him a contractual pledge with a view to its forfeiture."

I prefer to approach the problem by asking whether an unconditional right to recover and retain the deposit arose before the contract was discharged. If such a right did arise, it will survive the determination of the contract, and if the money has been paid before discharge the purchaser will not get it back, while if the money has not been paid before discharge the purchaser will be compelled to pay it. Whether the vendor obtained an unconditional right to recover and retain the deposit will depend upon whether the discharge of the contract will give rise to a total failure of the consideration for payment of the deposit. If it will, then the consequence of discharge will be that the vendor cannot recover the deposit, if unpaid, or retain it, if paid. Either there was an unconditional right to recover and retain the deposit, or there was not. Pennycuick, J thought it contrary to principle that once the vendor had determined the contract, so that there were no outstanding obligations of the purchaser in respect of which the vendor might be protected by a pledge, the vendor should be entitled to get in the pledge with a view to its forfeiture. But if, as I believe, the question what constitutes the consideration will determine not only whether the deposit unpaid may despite the discharge be recovered, but also whether the deposit paid must in consequence of the discharge be refunded, those who contend that the unpaid vendor cannot recover must recognize that the paid vendor should repay, a proposition manifestly untenable.

If the matter may be discussed in terms, not of failure of consideration, but of construction of the contract (Harrison v Holland and Hannen and Cubitts Ltd. (1922) 91 LJKB 337, at pp. 340-1, per Younger, LJ; but see the report in [1922] 1 KB 211, at p. 213). I see no foundation for an implication that if the contract is discharged for breach the deposit is to be forfeited if it has been paid before the date of discharge but not if the purchaser, in breach of contract, has failed to pay it before the date of discharge. Why should it be implied that the purchaser is to be in a better position if, as a result of breaking his contract, he has not paid the deposit? Compare the remarks of Horridge, J in Dewar v Mintoft, [1912] 2 KB 373, at p. 387 and those of Willes, J in Hinton v Sparkes, [1868] LR 3 CP 161, at p. 166.

In Watson v Healy Lands Ltd. [1965] NZLR 511, at pp. 516-7, Woodhouse, J. expressed the opinion that a vendor who has determined the contract otherwise than by rescission ab initio may recover an unpaid deposit.

Among the textwriters, Voumard's The Sale of Land, 3rd ed., p. 421, Stonham, Vendor and Purchaser, p. 709 and Williams on Title, 4th ed., p. 745, support the view that the vendor who discharges the contract in consequence of repudiation can then get in the overdue deposit. Stonham, at p. 709, cites Leslie v MacNichol (1881) 2 LR (NSW) 250, but this decision is not authority for the proposition for which it is cited. Halsbury, 3rd ed., vol 34, at p. 324, note (f), fails to take up a position, referring both to Dewar v Mintoft , supra, and to the criticism of that decision by Cyprian Williams. Goff and Jones, The Law of Restitution, 2nd ed., p. 380, note 55, treats Lowe v Hope, supra, as correctly decided.

Wallis v Smith (1882) 21 Ch D 243, is cited in Roscoe's Evidence in Civil Actions, 19th ed., vol.1, p. 247, as authority for the proposition that where the purchaser fails to make the agreed deposit, the vendor, on default made by the purchaser in completion, is entitled to recover the amount of the deposit. The decision was also mentioned by Horridge, J in Dewar v Mintoft, supra, although it seems to me that his Lordship was there relying on it only in relation to a vendor's right to forfeit a deposit already paid. In fact the agreement in Wallis v Smith, supra, expressly provided that if the balance of the deposit had not been paid the purchaser should forfeit and pay a sum equal to the balance. That case is not presently in point. There are other authorities, however, which do bear on the right of the vendor who chooses to discharge the contract for repudiation to sue for the unpaid deposit.

Ockenden v Henly (1858) EB and E 485; 120 ER 590, is a case often cited in relation to deposits, but not as regards the matter now in hand. It is one of the handful of cases in the books in which the deposit was not paid, either in cash or by the giving of negotiable instrument. The price was 120 pounds and the deposit payable was 20 per centum (24 pounds). The vendor resold the land for 105 pounds, that is only 15 pounds less than the price payable by the defaulting purchaser. The expenses of resale were 9 pounds .5.0 The vendor sued the defaulting purchaser for the 24 pounds deposit, the 15 pounds deficiency and the 9 pounds .5.0 expenses, a total of 48 pounds .5.0, and obtain a verdict for that amount. The conditions of sale provided that if the purchaser failed to comply with the conditions, the deposit should be forfeited and the vendor might resell and recover from the purchaser any deficiency on the resale and the expenses of the resale. The judgment of the Court of Queen's Bench (Lord Campbell, CJ, Coleridge, Erle and Crompton, JJ in Ockenden v Henly, supra) may be cited in full:--


"There having been an actual forfeiture of the deposit by the express words of the seventh condition, the deposit, if paid, could not in any event have been recovered back by the purchaser; and the seller would have been entitled to any additional benefit on a resale. But, the seller having obtained a right to the forfeited deposit, and making a further demand of damages sustained on the resale, it becomes necessary to consider what was the nature of the deposit. Now it is well settled that, by our law, following the rule of the civil law, a pecuniary deposit upon a purchase is to be considered as a payment in part of the purchase money, and not as a mere pledge; Sugd. V and P ch.1. sect. III. art. 18 (13th ed.). Therefore in this case, had the deposit been paid, the balance only of the purchase money would have remained payable. What then, according to the seventh condition, is the deficiency arising upon the resale which the seller is entitled to recover? We think the difference between the balance of the purchase money on the first sale and the amount of the purchase money obtained on the second sale: or, in other words, the deposit, although forfeited so far as to prevent the purchaser from ever recovering it back, as, without a forfeiture, he might have done (Palmer v Temple (9A and E 508)), still is to be brought by the seller into account if he seeks to recover as for a deficiency on the resale. "The rule to reduce the damages to 241 pounds 5s. will therefore be absolute. "Lord St. Leonards takes the same view with ourselves."

The words used by the Court, "the seller having obtained a right to the forfeited deposit", clearly recognize that the vendor was entitled to recover the 24 pounds deposit that had not been paid. Later the Court speaks of the deposit as "forfeited so far as to prevent the purchaser from ever recovering it back, as, without a forfeiture, he might have done". The decision was that, having regard to the dual nature of a deposit (part payment as well as pledge), the forfeited deposit was to be brought to account in determining the amount of the deficiency, in that only the balance remaining outstanding after payment of the deposit was to be treated as the amount payable under the first contract, which amount was to be compared with the amount realized on resale. The Court determined that the total amount recoverable by the vendor was not the amount of the verdict (48 pounds.5.0) but only 24 pounds.5.0. The reduction was effected by bringing the deposit (24 pounds) to account, but the reasons for judgment show that the amount of 24 pounds.5.0 substituted by the Court for the amount of the verdict was represented, as to 24 pounds, by the forfeited deposit and as to 5/-, by the deficiency on resale, and that the deficiency on resale of 5/- was arrived at by the following calculation:--

Amount that should have been paid by defendant, being purchase price of 120 pounds less deposit of 24 pounds, which deposit is to be treated as paid, in that the vendor is now recovering it by action-- 96 pounds .0.0
Less net proceeds of resale (105 pounds less expenses of 9 pounds.5.0)-- 95 pounds.15.0
True deficiency on resale-- 0 pounds .5.0

There are a number of reported cases in which the purchaser has given a negotiable instrument, subsequently dishonoured, or an IOU, in or in lieu of payment of the deposit. There are cases in the books in which the purchaser, instead of paying the deposit in cash, has given the auctioneer an IOU, payable to him, and the auctioneer has recovered on an account stated evidenced by the IOU (Cleave v Moore (1857) 5 WR 234; Hodgens v Keon, [1894] 2 IR 657); but these contain nothing which throws light on the question whether a vendor who has accepted a repudiation can maintain an action for the unpaid deposit.

In Mills v Oddy (1834) 6 Car and P 728; 172 ER 1438 (considered in the difficult case of Doumani v Reynolds, [1924] 1 DLR 1025) a cheque given for the deposit was dishonoured and Parke, B. held that the purchaser had a defence to an action on the cheque if he could have recovered back the deposit if it had been paid in cash. That decision is not of assistance. Similarly, I derive no help from Margetts v Khan (1915) 11 Tas LR 147, where Crisp, J. was concerned, not with a negotiable instrument which was in fact given in payment of a deposit that was according to the terms of the agreement to be paid, but with the question whether certain promissory notes which the agreement itself required to be given were intended to stand as a deposit.

Some of the cases are, however, of present relevancy. The first is Hinton v Sparkes, [1868] LR 3 CP 161, where the purchaser gave the vendor's broker an IOU in respect of the deposit of 50 pounds and promised to pay the money the next day but failed to complete the purchase. The vendor resold at a loss of only 10 pounds but succeeded in an action to recover 50 pounds. The plaintiff set up an account stated (based upon the IOU) and in the alternative a claim for liquidated damages under the contract of sale. The contract expressly provided for the forfeiture of the deposit in the event of the purchaser's failure to perform his part and went on to provide for payment of 50 pounds by either party as liquidated damages for breach of the agreement. The defendant contended that the plaintiff could recover only his actual loss, 10 pounds. The judgments do not distinguish clearly between the two causes of action relied upon by the plaintiff. Bovill, CJ, at ([1868] LR 3 CP 161) p 165 dealt with the matter thus: "All that it is necessary, therefore, for us to do is, to see if there is any contract here, express or implied, that the deposit shall in the event which has happened become, forfeited. There is an express contract here that 50 pounds shall become forfeited on the purchaser's failure to perform his part of the agreement. It is true the words 'in part of the following damages' are added. But I do not think that makes any difference. If the stipulation had simply been, 'if the purchaser shall fail to fulfil his part of the agreement, then the deposit money shall become forfeited', there could not in my mind have been the slightest doubt. Treating the IOU as money, the deposit was in the hands of the vendor. Assuming that to be the state of things, could the purchaser have recovered back the 50 pounds? Clearly not. The intention of the parties, as I collect it from the agreement, is, that this is to be taken as the ordinary case of payment of a deposit, which is to be forfeited on the purchaser's failure to complete the contract. That being so, it follows that the defendant has no answer to the action. This view is entirely in accordance with the decision of the Court of Queen's Bench in Ockenden v Henly."

Willes, J at p. 166, concluded his judgment with these words: "In the event of the purchaser's default, the deposit is to be forfeited; and there is abundant reason for supposing that the parties meant that the damages as against the purchaser should be the sum they have set down. There are many cases to support that view, if it were necessary to refer to them. The only other question is, whether the vendor is to be in any worse position because the deposit was not paid down at the time. I cannot see why the rights of the vendor should be affected by the purchaser's having committed two breaches of contract instead of one. All doubt, however, is removed by the giving of the IOU If the money had been paid, the purchaser clearly could not have recovered it back."

The reason why in Hinton v Sparkes, supra, neither Bovill, CJ nor Willes, J. was concerned to distinguish clearly between the claim on an account stated based upon the IOU and the alternative claim for liquidated damages under the contract of sale is to be found in the nature of the cause of action on an account stated which arises where a debt is acknowledged. An IOU is prima facie evidence of an account stated: Buck v Hurst and Bailey, [1866] LR 1 CP 297. Where an account has been stated, the existence of the debt can be rebutted, in which event the plaintiff will fail: Siqueira v Noronha, [1934] AC 332. So the plaintiff will not succeed where the defendant who has given an IOU shows that in reality there never was a debt: Lemere v Elliott (1861) 6 H and N 656; 158 ER 271. Moreover the defendant can defeat the claim based on an IOU by proving that although there was a debt at the time when the IOU was given, that debt has since ceased to exist. This is what was done in Wilson v Wilson (1854) 14 CB 616; 139 ER 253, where the defendant agreed to pay a deposit of 50 pounds on the signing of the contract but in fact paid only 5 pounds, giving an IOU for 45 pounds. The defendant, objecting to the vendor's title, refused to complete the purchase, whereupon the vendor resold and brought an action for damages for the loss on resale in which he claimed in addition the sum of 45 pounds on an account stated, relying on the IOU, The defendant was held to have been entitled to refuse to complete the contract and both claims failed. The Court of Common Pleas (Jervis, CJ, Cresswell and Williams, JJ.) was of opinion that it was open to the defendant to go behind the IOU and show that the debt therein acknowledged had ceased to be recoverable because "the plaintiff not being in a condition to make a good title, he was not entitled to receive the deposit", (per Jervis, CJ at 14 CB 616 p. 626; 139 ER p. 257).

It is implicit in this decision that if the plaintiff had made a good title (in which case he would have been a vendor who had determined the contract by accepting a repudiation), he would have been able to recover the unpaid balance of the deposit, whether or not the IOU had been given.

Just as in Wilson v Wilson, supra, the Court went behind the IOU and examined the supposed pre-existing debt, so in Hinton v Sparkes, (1868) LR 3 CP 161 the essential question was whether the vendor was entitled to sue for the deposit. Notwithstanding the assertion of the additional cause of action based upon the IOU, it follows from the nature of that cause of action that the plaintiff could recover the amount of 50 pounds only if he was entitled to sue for the deposit notwithstanding the fact that he had accepted the purchaser's repudiation of the contract.

Reference may also be made to the judgment of Denman, J in Led v Whitaker, [1872] LR 8 CP 70, at pp. 76-8, and to McGregor on Damages 13th ed., para. 380, note 78.

Hinton v Sparkes, supra, was considered in New Zealand Loan and Mercantile Agency Co. Ltd. v Foster (1913) 15 GLR 220, where the purchaser gave the vendor a promissory note for the deposit and, the purchaser having failed to carry out the contract, and indorsee of the promissory note succeeded in an action on it. At ((1913), 15 GLR) pp. 220-1 Chapman, J observed: "There is no difference between paying a deposit and acknowledging a sum due as a deposit: Hinton v Sparkes LR 3 CP 161". This brief observation, for what it is worth, favours the existence of a vendor's right to sue for the unpaid deposit after accepting a repudiation.

Some additional support for the view that a vendor who accepts a repudiation can recover an unpaid deposit can, I think, be drawn from cases in which the deposit has been paid, not to the vendor, but to a stakeholder. One such case is Hall v Burnell, [1911] 2 Ch 551, where the purchaser had made default in completing the purchase. The deposit of 50 pounds had been paid to the vendor's solicitors as stakeholders and it was an implied term of the contract of sale (see pp. 554-5) that the deposit so paid should be forfeited to the vendor if the contract went off on the default of the purchaser. The vendor brought an action against the purchaser and sought an order rescinding the contract and a declaration that he was entitled to the 50 pounds in the hands of his solicitors, and Eve, J made the order and declaration sought. So the vendor succeeded in obtaining declaratory relief based on the implied terms of the contract concerning the deposit; Eve, J held that the vendor was entitled to forfeit the deposit and that it made no difference that the deposit had not been paid to the vendor but was in the hands of stakeholders. Similarly, in Collins v Stimson (1883) 11 QBD 142 it was laid down that a deposit paid to an auctioneer as stakeholder is forfeited to the vendor where the contract goes off by default of a purchaser.

Principle and authority have combined to lead me to the conclusion that Horridge, J. was right after all in ruling that a vendor who discharges the contract in consequence of the purchaser's repudiation of it can recover a deposit that should have been paid before the contract was discharged and that I should not follow Lyon v Magnet Nominees Pty. Ltd., [1978] VR 673. (The plaintiff's claim in Dewar v Mintoft, [1912] 2 KB 373 appears to have been framed as one for damages; the action should have been for debt, not damages.)

The claim by the present plaintiffs for payment of the balance of the deposit succeeds.

Judgment and orders accordingly.