A recent unanimous decision of the Queensland Court of Appeal in
Willmott v McLeay  QCA 84 confirmed that where part
of a deposit on a contract for the sale of land remains unpaid, the
vendor acquires a debt for the unpaid amount as of the date the
deposit was due. The Court also found that such a debt does not
confer an unfair windfall to the vendors.
The parties entered into a standard form, Real Estate Institute
of Queensland, contract for the sale of land. The purchaser paid an
'initial deposit' of $1,000 on signing the contract, with
the 'balance deposit' of $204,000 to be paid within 7
The purchaser failed to pay the balance deposit within the
allotted time, or by a later date to which an extension had been
given. The purchase price was not paid.
The vendor terminated the contract and sought recovery of the
unpaid balance deposit as a liquidated debt.
Holmes JA was clear that a liquidated debt for the unpaid
balance of a deposit arises at the time the deposit was due. This
debt survives the termination of the contract and does not limit
the vendors other rights under the contract:
"Under cl 2.2(3) the seller acquires a right
to recover the unpaid balance of the deposit at the time when
payment is required under the contract... Clause 9.1 makes it clear
that the seller may terminate for the buyers' default without
limiting its other rights under the contract." (at
Further, Holmes JA held the recovery of such a debt does not
constitute any unfair windfall to the vendors:
"[The] conclusion that the sellers have an
accrued right to claim the deposit as a debt in addition to the
rights conferred by cl 9.4 does not entail, as was suggested in
submissions below, an unfair windfall to the vendors; to the
contrary, it accords with the dual character of the deposit as part
payment of the purchase price but also as "a guarantee that
the purchaser means business" or as "an 'earnest'
of the bargain or its performance"." (at
Fraser and White JJA agreed with the decision and reasoning of
The decision in Willmott v McLeay confirms that the
unpaid balance of a deposit is a liquidated debt incurred as of the
date the deposit was due, and the debt exists independently of the
election to affirm or to terminate the contract, or any subsequent
dealings the vendor may have with the land.
There is no unjust enrichment by recovery of the debt for an
unpaid deposit in circumstances where the vendor has gone on to
sell the land to a new purchaser at the same or higher price and
has arguably not sustained any damage.
Finally, the operation of statutory interest provisions on the
debt will mean the vendor can recover interest at the court rate
from the time the debt arose, i.e. from the date on which the
balance of the deposit was due.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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