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  • Unreported Judgment

O'Brien v Hillcrown Pty Ltd

 

[2013] QSC 173

 

SUPREME COURT OF QUEENSLAND

PARTIES:

FILE NO:

Trial Division

PROCEEDING:

Trial

ORIGINATING COURT:

DELIVERED ON:

19 July 2013

DELIVERED AT:

Brisbane 

HEARING DATE:

8 July 2013

JUDGE:

Daubney J

ORDER:

  1. There will be judgment for the plaintiffs against each defendant for damages in the sum of $1,091,507 together with interest calculated from 31 December 2002 in the sum of $1,031,900.
  2. I will hear the plaintiffs as to costs.

CATCHWORDS:

DAMAGES – GENERAL PRINCIPLES – DIFFICULTY OF ASSESSING DAMAGES – where the first and second defendants executed a deed by which the first defendant agreed to construct a golf course on one of the plaintiff’s parcels of land and the defendant guaranteed the performance of the first defendant – where the first and second defendants breached their obligations under the deed – where the plaintiffs seek damages suffered as a consequence of the breaches – where the plaintiffs submitted two differing methodologies for the assessment of damages – whether the court should adopt either of the methodologies

Uniform Civil Procedure Rules 1999 (Qld), r 476(1)
Civil Proceedings Act 2011 (Qld), s 58

Hadley v Baxendale (1854) 9 Exch. 341, cited

COUNSEL:

MR Bland for the plaintiffs
No appearance for the first and second defendants

SOLICITORS:

QBM Lawyers for the plaintiffs
No appearance for the first and second defendants

[1] In about 1968, the plaintiffs, who are brothers, bought more than 1,000 acres of land in the Gold Coast hinterland for dairy farming purposes.  They grazed cattle on the land for a number of years, but also, over the years, sold parts of the land for development.  It is clear on the material, and I accept, that it was predominantly Stanley O’Brien who conducted commercial negotiations in respect of the land on his own behalf and on behalf of his brother John.

[2] During the 1980s, Stanley O’Brien obtained local authority approvals for the development of the land.  By the late 1980s, most of the land remaining in the plaintiffs’ names had been approved for future residential development, with a large area of low-lying and flood-prone land identified for development as a golf course (this proposed golf course area is referred to in the pleadings as “Area B”).

[3] During the mid 1990s, Stanley O’Brien negotiated the sale of certain other parts of the plaintiffs’ land (referred to in the pleadings as “Area A”) to companies associated with the second defendant, Mr Ingles.  Those companies were developing residential subdivisions known as “Tee Trees Estate”.  Mr Ingles made application to the Gold Coast City Council, the relevant local authority, for further approvals for the development of that land.  Those applications were made by Mr Ingles in the name of the plaintiffs, and with the consent of the plaintiffs.

[4] On 5 March 1996, the plaintiffs entered into a put and call option agreement with one of Mr Ingles’ companies, Ingles Land (No 3) Pty Ltd, for the sale of A to that company.  By cl 6.4 of that agreement, the parties purported to fix $1,500,000 as the amount of liquidated damages that would be payable by the company if a golf course was not constructed on Area B.  That figure was calculated by multiplying the 50 lots in the land to be retained by the plaintiffs that would have frontage onto the golf course by the supposed $30,000 increase in the value of each of those lots that would result from the construction of the golf course.

[5] On 19 October 1998, that agreement was replaced by another agreement in similar terms.  The option granted by that agreement was exercised.  On 7 June 1990, the second defendant’s then lawyers wrote to the plaintiffs advising that their client intended to commence construction of the golf course immediately following settlement of the acquisition of the land.

[6] On 30 June 2000, the plaintiffs and the first defendant, another of Mr Ingles’ companies, entered into a contract for the sale of Area A and Area B to the first defendant for $9,963,000.  On that same date, the first defendant and the second defendant executed a deed by which the first defendant agreed to construct a golf course on Area B by 30 June 2002, or if construction was delayed for reasons beyond its control by 31 December 2002.  By cl 5 of that deed, the second defendant guaranteed the due and punctual performance by the first defendant of its obligations under the deed. 

[7] Clause 1 of the deed stipulated that the golf course “should be of a standard no less than the Gold Coast Country Club course”.  There is evidence before me from an expert in the design of golf courses, Mr Richard Chamberlain, to the effect that it would be possible to construct a new golf course of similar standard to the Gold Coast Country Club on the land in Area B. 

[8] The first defendant did not complete the golf course by 30 June 2002 or by 31 December 2002.  It is therefore clear that the first defendant breached its obligations under the deed dated 30 June 2000.  By failing to ensure the due and punctual performance by the first defendant of its obligations under that deed, the second defendant also breached the terms of the guarantee given by him under that deed.

[9] The sale of Area A and Area B to the first defendant left the plaintiffs with several parcels of land (referred to in the pleadings as “Area C”).  Area C is immediately adjacent to Area B, i.e. it is adjacent to the area on which the golf course was supposed to have been built.  Stanley O’Brien has deposed that it was always his intention to obtain approvals for the subdivision of Area C and either to carry out the development work on that land himself or to sell the land as an “in globo” site.  Consistent with their previous dealings, John O’Brien left these matters to his brother.

[10] Both plaintiffs deposed to a belief that the value of Area C would have been significantly enhanced if the golf course was constructed.  Stanley O’Brien says that this would have benefited not only the parts of Area C which would have had direct frontage onto the golf course but also the elevated areas which would have had views over the golf course.  On various occasions in November 2002, July 2003 and December 2003, the defendants’ then solicitors gave assurances that the first defendant was endeavouring to complete the golf course as quickly as possible and that work on the golf course was proceeding.  In fact little, if anything, happened. 

[11] In 2008, the second defendant gave the Australian Competition and Consumer Commission an undertaking to publish regular notices regarding the status of the construction of the golf course.  Mr Stanley O’Brien deposes that he subsequently saw announcements made periodically on a website operated by the second defendant’s group of companies regarding the progress of the golf course.

[12] In 2010, receivers of the first defendant were appointed in respect of Area B before any significant construction work had been done on the golf course.  In 2012, the Gold Coast City Council acquired Area B. 

[13] It would appear from the material before me that it is possible that the local authority will turn Area B into a park.  Stanley O’Brien says that there is no chance that a golf course will be built on it.  There is no evidence before me to suggest that Mr O’Brien’s pessimism is misplaced.

[14] In 2009, the plaintiffs applied to the Gold Coast City Council for a development approval in respect of Area C.  As a consequence, Area C has become part of a new planning scheme.  The development approval seeks, however, a higher density development than provided for under the new planning scheme.  The local authority issued an approval subject to conditions, but those conditions have been the subject of an appeal to the Planning and Environment Court.  On the material before me, it appears that without prejudice negotiations between the plaintiffs and the Gold Coast City Council have led to agreement in respect of the main issues in dispute in that matter, but full agreement is yet to be reached and the appeal is still current.

[15] In the present claim, the plaintiffs pursued the first defendant and the second defendant for the damages suffered as a consequence of the breaches of the 30 June 2000 deed.  Neither of the defendants appeared when this matter was called for trial, and accordingly the plaintiffs exercised their right pursuant to r 476(1) of the Uniform Civil Procedure Rules to establish an entitlement to judgment against the defendants.  Leave was given to the plaintiffs to adduce all necessary evidence in chief on affidavit. 

[16] Counsel for the plaintiff advanced two possible bases for the assessment of damages on behalf of the plaintiffs. 

[17] The first was that the plaintiffs’ damages were the difference between:

(a)the value that the lots in the subdivision of Area C having frontage onto Area B would have had if the golf course had been built on Area B by 31 December 2002, and

(b)the value that those lots would have had with frontage onto bushland.

[18] The second approach involves an assessment of the difference between:

(a)the value that Area C would have had as an “in globo” development site if the golf course had been built on Area B by 31 December 2002, and

(b)the value that Area C actually had with Area B remaining as bushland.

[19] As counsel for the plaintiffs frankly, and very properly, conceded in the course of argument before me, the difficulty with the first suggested approach is that it necessarily involves a compounding of hypothetical considerations.  In essence, it seeks to calculate the value of the potential benefits that the plaintiffs might have derived from performance of the deed, and then adjust that according to the degree of probability that the benefit would have been realised.  The difficulty in applying this approach is that it involves a comparison not with the plaintiffs’ actual position in 2002 but with a second hypothetical position, namely the position which the plaintiffs would have occupied had they proceeded with the subdivision of Area C in 2002.  In fact, however, as noted above, the plaintiffs did not apply for a development approval of the Area C land until 2009.  It is not to the point that they had a good reason for delaying the lodgement of the development approval (i.e. an ongoing belief that the value of Area C would be enhanced by the construction of the golf course and by the first defendant’s continuing assurances that it would build the golf course).  What is relevant for present purposes is that this approach involves the compounding of two hypotheticals, and an assessment of probabilities within those hypotheticals.

[20] In contrast, the alternative approach propounded on behalf of the plaintiffs is completely conventional[1] and allows for firm findings to be made with respect to the loss suffered on the basis of cogent and acceptable evidence. 

[21] That evidence, in brief, is of an expert valuer, Mr Hamilton.  Mr Hamilton’s evidence is to the following effect:

(a)Area C would have had a value of $10,175,000 in June 2002 if a golf course had been constructed to the required standard on Area B;  and

(b)Area C would have had an actual value of $8,800,000 in June 2002 with Area B as undeveloped bushland.

[22] The difference between those figures clearly represents the primary assessment of the damages recoverable from the first defendant for its failure to construct the golf course in accordance with its obligations under the 30 June 2000 deed, and also represents the primary assessment of the damages payable by the second defendant for breach of his guarantee obligations. It is clear that on the facts of this case, this is the better approach to the assessment of the plaintiffs’ damages.

[23] There is an amount which needs to be credited against the damages so quantified.  The plaintiffs made claim against their former lawyers, who were involved in the drafting of the 30 June 2000 deed.  In a settlement of that claim, the plaintiffs received $283,493.  That amount needs to be credited against the damages otherwise recoverable from the defendants in this proceeding.

[24] Accordingly, the damages recoverable against the defendants amounts to $1,091,507. 

[25] The plaintiffs also seek to recover interest, pursuant to s 58(3) of the Civil Proceedings Act 2011.  I note that this claim was commenced in 2004.  Until very recently, the defendants were represented by competent solicitors.  It is clear that the pace of the proceedings could generally be best described as pedestrian.  At one point, as a consequence of a caseflow intervention, the proceeding was “deemed resolved”, and it was necessary for application to be made for it to be reactivated.  Some time was also taken by reason of an appeal being pursued against a particular interlocutory order in the proceeding.

[26] Be that as it may, it is clear that, until very recently, the defendants evinced a determination to defend the proceedings, and the plaintiffs therefore had little option but to continue to pursue the defendants.  In those circumstances, I would not be inclined to discount the interest recoverable (which should be calculated from the last date by which the golf course was supposed to be built, i.e. 31 December 2002).  It should also be recalled in this context that the first defendant had the benefit of owning the property during the entirety of the period.  Interest at nine per cent since 31 December 2002 on the judgment sum of $1,091,507 yields $1,031,900.

[27] There will therefore be judgment for the plaintiffs against each defendant for damages in the sum of $1,091,507 together with interest calculated from 31 December 2002 in the sum of $1,031,900.

[28] The plaintiffs have requested leave to put on further submissions with respect to costs, and I will now hear those submissions.

Footnotes

[1] And indeed, is a direct application of the first limb of the rule in Hadley v Baxendale (1854) 9 Exch. 341.

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Editorial Notes

  • Published Case Name:

    O'Brien & Anor v Hillcrown Pty Ltd & Anor

  • Shortened Case Name:

    O'Brien v Hillcrown Pty Ltd

  • MNC:

    [2013] QSC 173

  • Court:

    QSC

  • Judge(s):

    Daubney J

  • Date:

    19 Jul 2013

Litigation History

No Litigation History

Appeal Status

No Status