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High Court of Fiji |
IN THE HIGH COURT OF FIJI
AT SUVA
CIVIL JURISDICTION
Civil Action No. HBC 280 of 2005
Between:
SHAMI ROSHNI RAJ
Plaintiff
And:
ANGELA DEVI PRASAD & NARENDRA PRASAD
1st Defendants
And:
THE REGISTRAR OF TITLES
2nd Defendant
Before: Master Udit
Counsel: Ms Devan counsel for the Plaintiff
Ms. Neelta counsel for the First Defendants
Date of Decision: 29th August, 2008
DECISION
(Interim payment- Deposit- sale of land contract- whether refundable)
Introduction
[1] On 26th March, 2007, the plaintiff filed a Summons pursuant to Order 29, Rules 10(1) and 12 (c) of the High Court Rules 1988 inter-alia seeking the following orders against the First Defendants (Angela Devi Prasad and Narendra Devi Prasad):-
(1) That the First Defendants do make an interim payment to the Plaintiff of such amount as this Honourable Court deems appropriate;
(2) The interim payment be paid into Court pending the determination and finalisation of the within action;
(3) That the costs of the application be costs in the cause.
[2] It is an opposed application.
Documents
[3] The plaintiff relies on the following documents:-
[4] The Defendants rely on the following documents:-
(a) Statement of Defence filed on 2nd February, 2006.
(b) Affidavit in Reply of Narendra Prasad sworn on 10th and filed on 12th July, 2007.
Facts
[5] Central to the dispute in this action is a property comprised in Certificate of Title No. 29353 being Lot 13 on DP No. 7502 in the District of Nadi, on the Island of Viti Levu comprising an area of 848 square meters. At all material time the defendants jointly were the registered proprietors of the said property.
[6] Sometime in April 2004, the plaintiff agreed to purchase and the defendants agreed to sell the said property for a consideration sum of NZ$100,000-00. A written agreement was duly executed between the parties. The reason for not making any reference to a specific date is because the agreement executed by the parties is undated. Under the agreement the plaintiff was to pay a deposit of NZ$40,000-00. It appears NZ$40,000-00 was paid on or before the execution of the agreement. Apart from the deposit, she paid a further sum of NZ$40,000-00. Thus in total the plaintiff paid a sum of NZ$80,000-00. Only a balance sum of NZ $20,000-00 was due and payable. The additional sum was paid after a letter dated 27th July, 2004.
[7] That letter written on behalf of the defendants addressed to the plaintiff reads:-
"Mrs Shami Roshni Raj
Re: Sale and Purchase Agreement Certificate of Title No. 29353
We advise that you had entered into a Sale and Purchase agreement with the Vendors Angela Devi Prasad and Narendra Prasad for the purchase of the above described property in the sum of NZ$100,000-00.
Our office has been advised to inform you that the time for settlement has now expired and you have also paid a deposit of NZ$40,000-00. The Vendors now have the option of rescinding the said sale and purchase agreement and forfeiting the sum of NZ$40,000-00 as liquidated damages i.e. the Vendors may keep the $40,000-00 paid by you and sell the property to another willing buyer.
Could you please inform us whether you are still interested in purchasing the property.
We require your urgent attention in this matter.
Also not this is a reminder letter and not a notice to rescind the sale and purchase agreement.
Thank you.
Yours faithfully
Patel and Sharma"
[8] Notably, the defendant in that letter made it plain that it was "........ a reminder letter and not a notice to rescind the sale and purchase agreement". The second sum of NZ $40,000-00 was accepted unconditionally by the defendants.
[9] On behalf of the plaintiff it is submitted that it is inequitable for the defendant’s to rescind the contract when a substantial sum of the purchase price was directly paid by the purchaser. She further alleged that from the records it is clear that the defendants sold the property unbeknown to her because the new purchaser had offered a better price. Prior to the selling of the property, no notice in writing was given to the plaintiff to remedy any purported breach as contained in clause 7 of the agreement.
[10] On the other hand, the defendants contend that the contract was terminated due to the delays by the plaintiff in settling the payment in accordance with Clause 3 of the Agreement. There is a denial of any breach of the agreement on the part of the defendants. Furthermore all the monies paid was forfeited by virtue of clause 7 of the agreement.
Submissions
[11] This is application for interim payment only. Both the parties on their part, deny any breach of the agreement. In accordance with the agreement, the plaintiff paid a deposit of $40,000-00 (see Annexure "B" of the supporting affidavit). Although the deposit was paid, the settlement as agreed amongst the parties was not done.
[12] The plaintiff paid a sum of NZ$80,000-00 in toto to the defendants. Only sum left to be paid was NZ$20,000-00. Despite a substantial consideration sum paid the defendants subsequently sold the said property to one Biman Chand, which transfer was duly executed on the memorial of the title on 7th June, 2005. He is the current registered proprietor of the said property. The second sale was for $132,500-00, a sum in excess of the earlier sale to the plaintiff.
[13] On behalf of the plaintiff it is argued that the defendants breached the contract. She now seeks the following reliefs:-
(a) That the defendant do refund to the plaintiff the sum of NZ$80,000-00.
(b) General Damages for breach of contract.
(c) Costs of this proceeding.
[14] Ms Devan submitted that no formal notice of termination was ever given by the defendants to the plaintiff. The plaintiff insists that she did not breach the contract. In the alternative it is argued that if there was any breach on her part the same was waived by defendants. She places much reliance on the letter of 27th July, 2004. That is, although she did not pay the consideration sum as stipulated between them, by the letter the Defendants unilaterally extended the time for payment. On that assurance she paid a further sum of NZ$40,000-00. Apart from the solitary reminder letter the defendants did not insist on strict compliance after having received NZ$80,000-00.
[15] In addition it was submitted that the agreement duly executed between the parties was undated. Accordingly, it is unclear as to when the payments were due if the Defendants retrospectively seek strict compliance. It is an important factor in so far as it relates to adherence of time for compliance of the terms of the agreement.
[16] When the letter of 27th July, 2004 was received by the plaintiff, she paid a further sum of $40,000-00. She was ready and willing to settle the consideration sum, however, a dispute arose as to the rental for the period of the occupation of the said property by the plaintiff.
[17] To the contrary it was submitted by the counsel for the Defendants that the Plaintiff’s default in payment forced the sale of the property to a new purchaser. It was emphasised submitted that the Plaintiff breached the contract and the subsequent action taken by the Defendants was inevitable.
Principles of interim payment
[18] There is no dispute that the court is possessed with the power to order interim payment at any stage of a proceeding under O. 29, rules 10(1) and 12 (c) of the High Court Rules 1988 and the Inherent Jurisdiction of the Court; Registrar of Titles -v- Sarda Prasad, Court of Appeal, Civil Appeal Number ABU 0031/2002. The relevant principles governing the appropriateness of an interim payment is summarised in the judgment of Neill L J in Schott Kem Ltd v Bentley and Anor [1991] 1 QB 61 at 71 -73. I do not intend to recite the same in full save to refer to the applicable principles to the present application. The relevant principles are (at pages 71 and 72):-
(a) The main provisions are Order 29 Rules11 and 12 which are to be treated as part of one code. These Rules are:-
Order for interim payment in respect of damages (O.29, r.11)
11.—(1) If, on the hearing of an application under rule 10 in an action for damages, the Court is satisfied—
(a) that the defendant against whom the order is sought (in this paragraph referred to as "the respondent") has admitted liability for the plaintiff’s damages, or
(b) that the plaintiff has obtained judgment against the respondent for damages to be assessed; or
(c) that, if the action proceeded to trial, the plaintiff would obtain judgment for substantial damages against the respondent or, where there are two or more defendants, against any of them,.......
Order for interim payment in respect of sums other than damages (O.29, r.12)
12. -- If, on the hearing of an application under rule 10, the Court is satisfied—
(a) that the plaintiff has obtained an order for an account to be taken as between himself and the defendant and for any amount certified due on taking the account to be paid; or
(b) that the plaintiff’s action includes a claim for possession of land and, if the action proceeded to trial, the defendant would be held liable to pay to the plaintiff a sum of money in respect of the defendant’s use and occupation of the land during the pendency of the action, even if a final judgment or order were given or made in favour of the defendant; or
(c) that, if the action proceeded to trial; the plaintiff would obtain judgment against the defendant for a substantial sum of money apart from any damages or costs,.....
(b) In considering the application for interim payment under both the rules ‘the court approaches the matter in two stages’.
(c) At the ‘’first stage the court has to consider whether it is "satisfied" of one of the matters set out in sub-paragraphs (a), (b), (c) of the rules"
(d) That in order for the court to be satisfied that the plaintiff would obtain a judgment:
"something more that a prima-facie case is clearly required; but not proof beyond reasonable doubt. The burden is high. But it is a civil burden on balance of probabilities, not a criminal burden; see Shearson Lehman [1987] WLR480, 489a per Liyod L.J.""
(e) "That at the second stage the court, if satisfied that the plaintiff would recover a substantial sum, may then proceed, if it thinks fit, to order interim payment "of such amount as it thinks just". Any such payment must not exceed ‘a reasonable proportion of the damages which in the opinion of the are likely to be recovered...’. In addition under the rules the payment must take account of any ‘set-off, cross-claim or counterclaim’
I will adopt and apply the said principles for the determination of the present application.
Consideration
[19] This is an application for an interim payment of an unquantifiable sum. The test for ordering interim payment is a strict one. The Court must be satisfied that the Plaintiff has a realistic prospect and not merely a likelihood of succeeding. In meeting the test the court is required to evaluate the merits or otherwise of the respective parties case.
[20] The question which the court will eventually be required to deliberate upon in the trial is the refund or otherwise of the sum of NZ$80,000-00. In doing so, the issue of the breach of contract will be the pivotal contention for both the parties. Whilst deliberating on the issue of deposit His Lordship, Mr Justice Fatiaki in Ram Binod & Savitri Ram –v- Ratu Joseph Mae Ratumaitavuki [1997] 43 FLR 220 at 224 said; "The reason or cause of a contract falling through is plainly a relevant consideration that fundamentally affects the rights of an innocent party to either forfeit or recover any deposit paid and cannot be ignored". In this interim application it is not appropriate for me to express any firm opinion as to the party who has breached the contract. Nonetheless, this application in my view can still be decided irrespective of the issue of breach. It involves some well established legal principles’ which I will discuss shortly.
[21] In order to consider the interim payment, I have accepted the fact that the performance of the contract by either party is not feasible any more. Thus the question is limited to the NZ$80 000-00 paid to the Defendants together with any damages. On behalf of the Defendants, it is contended that they are entitled to retain it as liquidated damages pursuant to clause 7 of the agreement. On the other hand, the Plaintiff seeks the refund of the entire sum.
[22] "In general, a contractual provision which required one party in the event of his breach of the contract to pay or forfeit a sum of money to the other party is unlawful as being a penalty, unless such provision can be justified as being a payment of liquidated damages being a genuine pre-estimate of the loss which the innocent party will incur by reason of the breach". Workers Trust & Merchant Bank Ltd -v- Dojop Investment Ltd [1993] 66 P. & C. R. 15 at page 17.
[23] It follows from the above, that any sum paid upfront or agreed to be paid by the parties in breach of an agreement falls into two categories. The first is a genuine pre-estimate of the loss that may be occasioned consequent upon the breach of a contract. That sum is called liquidated damages; Wallis –v- Smith [1882] 21 Ch D 243. The second is in the nature of a threat held over the party in breach in terrorem. This latter sum is called a penalty which has always been subject to the equitable jurisdiction of the Court.
[24] However within the said scheme of upfront payment is a sum of money which is categorised as ‘deposit’. Since in this application there are two distinct categories of payments involved, I will deal with them separately. The first payment of $40,000-00 was paid as a deposit and the second payment was payment towards the purchase price, which the Defendants now treat as liquidated damages.
[25] Another reason for treating the two payments separately is that the subject contract is for the sale and purchase of land. Different legal considerations apply In respect of deposits in land sales contract. I will begin with the money paid as ‘deposit’.
Deposit
[26] In Blacks Law Dictionary (6th edition) (1990) is defined a deposit is defined as "money placed with the person as an earnest or security for performance of some contract to be forfeited if the depositor fails in his undertaking." A deposit therefore serves two functions. Firstly it constitutes a part payment of the consideration if the contract materialises. Secondly it is treated as an earnest or security for the performance of the contract which upon breach by the depositor is forfeited by the vendor.
[27] Fry LJ in Howe –v- Smith [1884] 24 Ch. 89 at 101 – 102, aptly described a deposit as follows:-
"A deposit paid under a contract of sale serves two purpose; if the sale is completed it counts as part payment of the purchase-money, but primarily it is security for the performance of the contract, and it is usual to provide expressly that, in the event of the purchaser failing to observe the conditions of the contract, the deposit shall be forfeited to the vendor. Such a provision, however, is not necessary, and unless the contract taken as a whole shows an intention to exclude forfeiture, the vendor is entitled, by virtue of the purpose of the deposit if the contract goes by the default of the purchaser to retain it as forfeited..."
(emphasis added)
[28] An exception to the general rule expressed in paragraph [22] above is payment of deposit involving a sale and purchase of land. Deposits in respect of land transactions has always been treated with speciality compared to other forms of contracts, in that the deposit is capable of being forfeited irrespective of any actual or foreseeable damages. Lord Browne Wilkinson in Workers Trust & Merchant Bank Ltd -v- Dojop Investment Ltd [1993] 66 P. & C. R. 15 at page17 stated this rule as follows:-
"Ancient law has established that the forfeiture of such a deposit (customarily 10 per cent of the contract price) does not fall within the general rule and can be validly forfeited even though the amount of the deposit bears no reference to the anticipated loss to the vendor flowing from the breach of contract."
(emphasis added)
[29] Further, His Lordship then narrated the historical background to the general rule as follows:-
"The special treatment afforded to such a deposit derives form the ancient custom of providing an earnest for the performance of a contract in the form of giving either some physical token of earnest (such as a ring) or earnest money. The history of the law of deposits can be traced to the Roman law of era, and possibly further back still: see Howe v Smith, the nature of such a deposit has been settled in English law. Even in the absence of express contractual provision, it is an earnest for the performance of the contract: in the event of completion of the contract the deposit is applicable towards payment of the purchase price; in the event of the purchaser’s failure to complete in accordance with the terms of the contract, the deposit is forfeited, equity having no power to relieve against such forfeiture."
(emphasis added)
[30] Similar position pertaining to a deposit exists in New Zealand. The Court Appeal in Clive Charles Gament -v- Kozo Ikeda [2001] NZCA 316 at para 44 in relation to a deposit stated the following:
"Although the deposit is part of the purchase price its primary function is as an earnest. It is when the purchaser is in default and the vendor cancels and there is no purchase price payable any more, that the question of forfeiture or recovery of the deposit arises. This is why the primary function of a deposit is to seal the bargain. In a sense it is the price paid by the purchaser for the vendor’s willingness to commit to a sale. If the sale goes off through the purchaser’s default, it has been axiomatic since Roman times that the vendor may keep or recover the price of such commitment."
(emphasis added)
[31] The question is, what constitutes a deposit? Any sum agreed by the parties may not constitute a deposit in the strict sense of its definition. Lord Denning in Stockloser -v- Johnson [1954] 1 QB 476, on the issue of the forfeiture of deposit, said:-
"Again, suppose that a vendor of property, in lieu of the usual 10 per cent deposit, stipulates for an initial payment of 50 per cent, of the price as a deposit and part payment; and later, when the purchaser fails to complete, the vendor resells the property at a profit and in addition claims to forfeit the 50 per cent deposit. Surely the court will relieve against the forfeiture. The vendor cannot forestall this equity be describing an extravagant sum as a deposit, any more than he can recover a penalty by calling it liquidated damages."
(emphasis added)
[32] The Privy Council considered this issue in Linggi Plantations Ltd. –v- Jagatheran [1972] 1 MLJ 89. In delivering the judgment of the Court, Lord Hailsham said that a deposit must be of a reasonable sum. At page 94 His Lordship said:-
"It is also no doubt possible that in a particular contract the parties may use language normally appropriate to deposits properly so-called even to forfeiture which turns out on investigation to be purely colourable and that in such a case the real nature of the transaction might turn out to be the imposition of a penalty, by purporting to render forfeit something which is in truth part payment. This no doubt explains why in some cases the irrecoverable nature of a deposit is qualified by the insertion of the adjective ‘reasonable’ before the noun. But the truth is that a reasonable deposit has always been regarded as a guarantee of performance as well as a payment on account, and its forfeiture has never been regarded as a penalty in English law or common English usage."
(emphasis added)
[33] A reasonable deposit "must be objectively operating as "earnest money" and not as a penalty. In sale of land contract 10% of the consideration sum is regarded as a reasonable deposit or earnest money. In Workers Trust & Merchant Bank Ltd. –v- Dojap Investments Ltd (supra) in describing the nature of deposit, Lord Hailsham noted that the ancient law recognised a "(customarily 10 per cent of the contract price)"(see page 17). Deposit fixed at a ratio of 10% is still prevalent in England; Midill (97PL) Ltd -v- Park Lane Estates Ltd [2008] EWHC 18 (Ch) (16th January, 2008).
[34] Similarly in New Zealand the reasonable deposit stands at 10% of the consideration. The NZ Court of Appeal in Clive Charles Garrat -v- Kozo Ikeda [2001] NZCA 316 (13th Sept. 2001), in re-affirming 10% deposit said:-
"There can be few, if any purchaser in New Zealand who do not understand and accept a 10% deposit is not refundable if they default...."
(see para 40 of the judgment) (emphasis added)
Further the court noted that "the market, which has consistently adhered to a 10% figure will dictate whether any change in practice should occur" (see para 41 of the judgment) (emphasis added)
[35] Does NZ$40,000-00 constitute a "reasonable deposit?" The NZ$40,000-00 was the agreed deposit sum. That sum is 40% of the total consideration. That is in excess of the traditional 10% upheld by the Courts in England and New Zealand. That in itself in my preliminary view does not constitute an "earnest for the performance of the contract." Applying an objective test, to the facts of this case, 40% of the consideration can not be classified as earnest for performance of the contract on the part of the Plaintiff.
[36] Apart from the persuasive authorities and practice in England and New Zealand, I am further fortified in my view because this is a land contact. As stated above, a reasonable deposit is subject to forfeiture without the proof of any damages either as pre-estimate or post the rescinding of the contract. Liquidated damages is a separate concern.
[37] In assessing the interim payment, I will take the deposit at the customary 10% of the consideration sum. If the plaintiff is found to be at fault the defendants are at least entitled to retain 10% of the consideration sum, that is, a sum of NZ$ 10,000-00. In coming to this conclusion, I am greatly assisted by what was said in Workers Trust & Merchant Bank Ltd. –v- Dojap Investments Ltd (supra). There the deposit in contention was 25%. The Jamaican Court of Appeal allowed only 15% as deposit and ordered the return of 10%. However, the Privy Council disagreed with the approach taken by the Court of Appeal. At page 20 of the judgment, Lord Hailsham appositely said:-
"The bank has contracted for a deposit consisting of one globular sum, being 25 per cent of the purchase price. If a deposit of 25 per cent constitutes an unreasonable sum and is not therefore a true deposit, it must be repaid as a whole. The bank has never stipulated for a reasonable deposit of 10 per cent: therefore it has no right to such a limited payment. If it cannot establish that the whole sum was truly a deposit, it has not contracted for a deposit at all".
(emphasis added)
In this case the deposit is 40% of the consideration. Following from the aforesaid authority it is possible the defendants may not be able to claim any portion of the deposit paid but I will leave that to the trial.
[38] In addition to the above the plaintiff may be able to recover the whole or part of the deposit or total sum paid under the principle of ‘unjust enrichment’. The application of this principle was considered in Ram Binod & Savitri Ram –v- Ratu Joseph Mae Ratumaitavuki [1997] 43 FLR 220. At pages 227 and 228 His Lordship Mr Justice Fatiaki discussed the principle by reference to Stockloser -v- Johnson [1954] 1 QB 476. At page 228 His Lordship concluded as follows:-
" Given those findings, I am satisfied that the trial magistrate was entitled to and correctly concluded that in all the circumstances were the defendants to retain or forfeit the plaintiff’s deposit: "It will be a case of defendants enriching themselves unconscionably"
[39] In Ram Binod & Savitri Ram –v- Ratu Joseph Mae Ratumaitavuki (supra) the consideration sum involved was a sum of $125,000-00. Only 10% of the consideration was paid as deposit. That sum was $12,500-00. Even the 10% deposit was ordered to be refunded by His Lordship Mr Justice Fatiaki on appeal from the Magistrates’ Court
[40] It follows from the above discussion the plaintiff has a realistic prospect of recouping at least NZ$ 30,000-00 of the deposit sum. That sum more probable than not be refunded to the Plaintiff. Having said that I will now focus on NZ$40,000-00 paid over and above the allegedly extravagant deposit.
Liquidated Damages or Penalty
[41] The defendants claim that they are entitled to retain the sum of NZ$40,000-00 (including the deposit) as liquidated damages. Thus the issue is whether the said sum constitutes liquidated damages or penalty. It is trite law that if the forfeiture of any performance bond or security is indistinguishable to a penalty, the court must give a relief by ordering a refund less any proportionate liquidated damages; Clydebank Engineering and Ship building Company Ltd. –v- Don Jose Ramos YZ Qioerdp Y Castenda [1905] AC 6 and Commission of Public Works –v- Hills [1906] UKLawRpAC 19; [1906] AC 368.
[42] The judgment in Commission of Public Works –v- Hills was delivered by Lord Dunedin. Later Lord Dunedin considered this issue again in Dunlop Pneumatic Tyre Company -v- New Garage and Motor Company Ltd. [1914] UKHL 1; [1915] AC 79 at 86f. His Lordship offered a very helpful guide to differentiate between a payment for breach stipulated as ‘in terrorem’ thus a penalty and a "genuine covenanted pre-estimate of the damages". The question was one of construction of a particular contract. It is to be construed at the time of its making and not the time of breach of contract. His Lordship said:-
[43] Normally parties do describe at the time of the making of a contract as to what constitutes liquidated damages or for that matter a penalty. The express statement in the agreement is not conclusive. At the end the Court must still decide whether the sum fixed was a genuine forecast of the possible losses thus liquidated damages; Turner -v- Superannuation and Mutual Savings Ltd [1987] 1NZLR 218 at 223. Further the onus of showing a certain sum of money being paid as liquidated damages and not penalty rests on the receiving party; Law v Redditch Local Board [1891] UKLawRpKQB 219; [1892] 1 QB 127 at 132. Ram Binod -v- see head note and page 227.
[44] A number of difficulties lay ahead for the defendants for the retention of the second sum of NZ$40,000-00 as liquidated damages. Firstly following from the guideline of Lord Dunedin the construction of what is liquidated damages or penalty is to be inferred from the time of the making of the contract. When the contract was executed between the parties there is a clear intention that payment was to be made in two instalments. The first being the deposit and the second was the final payment of the balance sum. Certainly it was not within the anticipation of the parties that there was a possibility of a further payment of $40.000-00 in lieu of the balance sum. Thus it cannot be treated as liquidated damages. Secondly, flowing from the first hurdle the liquidated damages is suppose to be a fair assessment of pre-estimate of any damages in case of a breach of contract. For that reason a deposit of $40,000-00 was paid. In other words, it was within the anticipation of the parties that sum was sufficient to cater for any damages in addition to the deposit. Thirdly, the retention of not only NZ$40,000-00 but the entire NZ$80,000-00 is not justified by the Defendants in the affidavit. Actual damages was capable of being ascertained as the property is already resold to another buyer. A schedule of actual damages should specifically have been adduced as evidence. At least that would then have been prima facie evidence and the defendants would at this interlocutory stage discharge the burden of proving that the sum paid was liquidated damages and not penalty. Fourthly, the Defendants rely on clause 7 of the agreement which states that any sum paid by the purchaser is to be forfeited if she defaulted. The mere statement in the agreement is not sufficient to discharge the burden. It still falls for Court to decide. Fifthly, the sum of $80,000-00 is 80% of the total consideration. By any analogy that sum to use the phrase of Lord Dunedin is ‘extravagant and unconscionable’. That in His Lordship’s term is a ‘penalty’. Sixthly, the retention of the $80,000-00 or even $40,000-00 is contrary to the second guideline stated by Lord Dunedin.
[45] Ms. Neelta argued that the vendor was ready and willing to settle but the purchaser did not come up with the money. Under that circumstance, it was argued that the purchaser defaulted. On the other hand, Ms Devan submitted that although the purchaser initially delayed in payment of the balance sum of money, the vendor waived the breach. In fact, the vendors wrote to the purchaser specifically requesting payment. In that letter, it was categorically stated that:-
"Also note this is a reminder letter and not a notice to rescind the Sale and Purchase agreement."
As I have already stated the breach is a matter for trial. The issue before me is for interim payment of the monies paid. Central issue is how much, if any sum, paid is refundable similar to that of Ram Binod & Savitri Ram –v- Ratu Joseph Mae Ratumaitavuki (Supra) in which Fatiaki J ordered the return of all the deposit which was only ten per cent of the consideration.
[46] Next Ms Neelta submitted that the $80,000-00 was forfeited as liquidated damages in accordance with clause 7(b). Is the sum of NZ$40,000-00 a payment in terroran or as pre-estimate of the damages following from the breach of the contract? Certainly, damages for breach of contract can not amount to 40% of the consideration sum. Forty per cent can not be categorised as a fair estimate of damages consequent upon the breach. I am further fortified in my view that as a result of transaction falling through, the vendors did not make any loss on the subsequent sale. To the contrary they made a profit.
[47] Furthermore, Ms Devan submitted that no notice rescinding the agreement was ever given to the plaintiff. If that is so, on the history of the conduct of the parties, it is a factor which weighs heavily in favour of the plaintiff. Under clause 7 of the agreement, on default by purchaser, it was mandatory for the vendor to "...give the purchaser notice in writing specifying the default and requiring the default to be remedied within the period of 14 days after the date of the giving of the notice and if the purchaser fails within such period to remedy the default..." it thus gave the vendor power to exercise the option contained in the agreement. No such notice was adduced before the Court. The notice was required to be given in writing accordingly the notice if any was given should have been adduced in Court. However, I will leave this matter to the trial judge, save to mention, this makes a strong case for making an order for interim payment.
[48] Are the defendants entitled to retain the NZ$40,000-00 as liquidated damages? This was a simple contract. Damages would be very minimal. Having considered the facts of this case and the present application being an interlocutory one, I will give a discount of NZ$10,000-00 being a fair estimate of damages flowing from the breach of the contract, if the Plaintiff at all breached it. Under the circumstances I see no basis for the retention of the balance of NZ$30,000-00.
[49] In my considered opinion the vendors are not entitled to retain at least NZ$30,000-00 as liquidated damages. To do so would be to penalise the purchaser, which is not the purposes of deposit or for fixing a sum of liquidated damages to secure performance.
[50] Pursuant to the principles for making an order for interim payment necessary discount must be given for a counter-claim which in this case is for $10,800-00. I will give the necessary discount.
[51] That in total amounts to:
| (1) | Deposit | $10,000-00 |
| (2) | Possible liquidated damages | $10,000-00 |
| (3) | Alleged Counter-claim | $10,800-00 |
| | | $30,800-00 |
[52] From the evidence as adduced before me, and on the settled law the defendants may prima-facie able to retain at most a sum of $30,800-00. Therefore that leaves a sum of $49,200-00 which the Plaintiff has a realistic prospect of being refunded to her. The Court is vested with a wide discretion to fix the quantum of interim payment. However any such sum must not exceed a reasonable proportion of the possible award. For the foregoing reason I will fix the interim payment in the sum of $145,000-00. I repeat this is only an interim payment which is subject to re-adjustment, at the trial, and final judgment.
[53] In my view the Plaintiff has discharged the burden warranting an interim payment. In Andrews v Schooling & Ors [1991] 3 ALL ER 723 His Lordship Balcome LJ, (Bedlam LJ and Sir Denis Buckley concurring) in delivery the leading judgment of the Court of Appeal at page 726 para f – g stated:-
"Unfortunately, in ignorance of the decision, the deputy judge applied the wrong test. I refer to his judgment where he said:
‘Can the plaintiff satisfy me that (1) the plaintiff is likely to succeed and (2) what damages are likely to be recovered and (3) what is a reasonable proportion, just vis-à-vis the plaintiff and the defendants?’
‘Likely to succeed’ is not enough, and again I refer back to the Qudrex case [1989] 3 ALL ER 492 at 511 [1989] QB 842 at 865-866 and the judgment of Sir Nicolas Brown-Wilkinson V-C’s, where he said:
‘But Ord 29 (as construed by this court in the Shearson Lehman case [1987] All ER 181, [1989] 1 WLR 480) requires the court, at the first stage, to be satisfied that the plaintiff will succeed and the burden is a high one; it is not enough that the court thinks it likely that the plaintiff will succeed at trial’; Browne-Wilkinson V-C’s.""
(emphasis added.)
[54] On the standard of proof in respect of interim payment His Lordship Ralph Gibson in Ricci v Burns Ltd [1989] 3 ALL ER 478 said:-
"The Standard of proof on the probabilities is high but it is not necessary to exclude every possibility of failure because the order for interim payment may be reversed at trial".
Conclusion
[55] For the foregoing reasons, I will allow the plaintiffs application. The Orders I grant are as follows:-
J. J. Udit
Master
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