Land; deposit -- Workers Trust & Merchant Bank Ltd v Dojap Investments Ltd

PC (Lord Keith of Kinkel, Lord Jauncey of Tullichettle, Lord Donaldson of Lymington, Lord Browne-Wilkinson and Sir Christopher Slade): 22 February 1993: appeal from the Court of Appeal of Jamaica
The purchaser bought premises from the bank.

The agreement provided that a deposit of 25% of the purchase price would be paid and the remainder of the price within 14 days; otherwise the deposit would be forfeited to the bank.

The purchaser was unable to complete and so the bank rescinded the contract and forfeited the deposit.

On an action by the purchaser Zacca CJ refused to grant it relief from forfeiture.

The Court of Appeal partially reversed that decision holding that the bank was only entitled to forfeit 10% of the price.
The bank appealed to the Judicial Committee and the purchaser cross-appealed.
Roald Henriques QC and David Batts (both of the Jamaican Bar) (instructed by Philip Conway Thomas) for the bank.

Richard Mahfood QC (of the Jamaican Bar) and James Guthrie (instructed by Charles Russell) for the purchaser.
Lord Browne-Wilkinson said that a deposit paid pursuant to a contract for the sale of land could only be forfeited if the sum operated objectively as earnest money and not as a penalty.

Since 10% of the purchase price had been the customary deposit in the UK and formerly in Jamaica, a vendor wishing to obtain a greater deposit which could be forfeited had to establish special circumstances justifying such amount.

The bank had failed to establish that the deposit of 25% was a true deposit, and so the provision for its forfeiture was a penalty.

The whole sum was unreasonable and had to be repaid by the bank, less any damage it had suffered owing to the purchaser's non-completion.
Appeal dismissed.

Cross-appeal allowed.

(WLR)