Relief against Forfeiture of Deposit

In a recent case determined by the Supreme Court, Dasreef Developments Pty Ltd v Josiv Velkovski [2017] NSWSC 1698, in which we represented the Vendor, the Court considered the operation of s 55(2A) of the Conveyancing Act 1919 (NSW).

Section 55(2A) of the Conveyancing Act 1919 (NSW) confers upon the Court a statutory jurisdiction, if it thinks fit, to order the repayment of a deposit notwithstanding its forfeiture in accordance with the terms of a contract between the parties.

In that case, the Vendor sold a residential unit off the plan to the Purchaser. When the time for settlement arrived the Purchaser was unable to source finance -  the Vendor terminated the Contract for Sale in accordance with its contractual rights.

The Purchaser, in the proceedings, claimed the Court should exercise its discretion under s 55(2A) of the Conveyancing Act 1919 (NSW) to return the deposit by reference to the following factors:

1. The Vendors have suffered no loss as a consequence of the default by the Purchaser, in that they re-sold the unit for $640,000, whereas the price payable by the Purchaser was $630,000.
2. The deposit of $63,000 represented a substantial part of moneys remaining after the sale of the purchaser’s family home. He has no other substantial assets that would enable him to re-establish himself and buy a home for him and his wife. He is now aged 63 and, although he continues to operate his family business, his capacity to rebuild an asset base after the forced sale of his family home has been diminished.
3. The Purchaser was endeavouring to perform the Contract and, notwithstanding that it was in accordance with the terms of the Contract, the termination was, in one sense, peremptory.
4. The Purchasers alleged misunderstanding as to the identification of the unit.  

Ultimately, the Court rejected the Purchasers claim for the deposit and found that it was not unjust or inequitable, as between Vendors and Purchaser, for the deposit to be forfeited to the Vendor.

Should you have any questions in relation to your right to claim or defend proceedings under s 55(2A) of the Conveyancing Act 1919 (NSW) please contact me.

David Shad

https://www.caselaw.nsw.gov.au/decision/5a2745dbe4b058596cbacbd0

Dasreef Developments Pty Ltd v Josiv Velkovski [2017] NSWSC 1698