Elan Boulevard Pty Ltd v Crawford
[2012] QDC 305
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- Unreported Judgment
- Elan Boulevard Pty Ltd v Crawford[2012] QDC 305
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Elan Boulevard Pty Ltd v Crawford[2012] QDC 305
Elan Boulevard Pty Ltd v Crawford[2012] QDC 305
DISTRICT COURT OF QUEENSLAND
CITATION: | Elan Boulevard Pty Ltd v Crawford [2012] QDC 305 |
PARTIES: | ELAN BOULEVARD PTY LTD (Plaintiff) AND GEORGINA LEE-CRAWFORD (Defendant) |
FILE NO/S: | BS11334/11 |
DIVISION: | Civil |
PROCEEDING: | Application |
ORIGINATING COURT: | District Court, Brisbane |
DELIVERED ON: | 28 May 2012 |
DELIVERED AT: | Brisbane |
HEARING DATE: | 20 April 2012 |
JUDGE: | Reid DCJ |
ORDER: | That the defendant pay the plaintiffthe sum of $869,488.55 comprising:i. $475,790 for damages;ii. interest thereon up to and including 28 May 2012 at 15% per annum, amounting to $365,984.08; andiii. costs fixed in the sum of $27,714.47. |
CATCHWORDS: | Breach of contract for purchase of units – Damages – Difference between sale price and current market value – Assessments in falling market |
COUNSEL: | G. Handran for the Applicant No appearance for the Respondent |
SOLICITORS: | Hickey Lawyers for the Applicant No appearance for the Respondent |
Introduction
- [2]The plaintiff, by its statement of claim, claimed damages for breach of two land sale contracts, together with interests and costs. On 19 January 2012 it obtained judgment in default of the defendant’s filing a defence. I am required to assess its damages.
- [3]At the commencement of the hearing I gave leave to the applicant to amend the defendant’s name from “Georgina Lee Crawford” to “Georgina Lee-Crawford”, to reflect her name as set out in the contracts for purchase of the two units in Boulevard Tower, a unit complex at Surfers Paradise.
- [4]The plaintiff has also satisfied me of service of the notice of the hearing for assessment of damages as required by the Uniform Civil Procedure Rules. Indeed, the plaintiff not only served notice of the hearing and of the default judgment, but also attempted to personally serve copies of the affidavits the plaintiff relied on at the hearing, and also served a consumer advocate who had been assisting the defendant with her financial affairs. The defendant did not attend the hearing. She did not respond to her name being called at the commencement of the matter.
- [5]I am satisfied in the circumstances that she has been given proper notice and that I am entitled to assess damages.
Factual Background
- [6]The contracts for sale were of two lots, Nos 11101 and 11203 in a unit block known as Boulevard Tower, Surfers Paradise. They were executed by the defendant on 17 January 2008. The building had not then been completed and the lots were purchased “off the plan”.
- [7]Lot 11101 was purchased for a price of $925,000, inclusive of GST, and provided for a 10% deposit. Lot 11203 was purchased for $935,000, inclusive of GST, and similarly there was provision for 10% of the purchase price as a deposit. Both contracts contained the same terms.
- [8]Relevantly, paragraph 15 of the contract provided, so far as relevant, as follows:
“15.1 You are in breach of contract if:
- (a)you fail to comply with any of your obligations under the contract; or
…
15.2 If you breach the contract, we may affirm or terminate the contract.
…
15.4 If we terminate the contract we may:
- (a)declare any part of the deposit paid by you forfeited and/or sue for breach; or
- (b)declare any part of the deposit paid by you forfeited and/or sell the lot, and any deficiency in the price on a resale and the expenses arising from the re‑sale shall be recoverable by us form you as liquidated damages,
and in either case we may recover from you as liquidated debt any part of the deposit that you have failed to pay.
15.5 Our rights under this clause are in addition to ay other rights which we may have at law or in equity.
15.6 If you fail to pay on the due date any money payable by you under the contract, you must pay interest at 15% per annum on the amount outstanding from the due date until the date of actually [sic] payment. Interest will be calculated and payable by you at the same rate on the same amount of any judgment we obtain against you, from the date of judgment until the date of actual payment. All interest will be paid on the settlement date or, if settlement does not occur, on demand.”
- [9]Both contracts were to settle on the same day, namely 14 clear days after, but not including, the date on which the purchaser, namely the defendant Georgina Lee-Crawford, was given notice under Clause 10.1 of the contract about registration of the plan. This occurred on 29 November 2010. The defendant failed to complete the contract as required. Consequently, for the purposes of assessment of damages, interest has been calculated from 14 December 2010, being the time when the contract ought have been completed but was not, after making due allowance for weekends.
- [10]By notice in writing dated 15 December 2010, the plaintiff gave notice to the defendant that it reserved its rights.
- [11]Subsequently, on 7 June 2011, the plaintiff gave the defendant notice to complete each contract, and nominated 22 June 2011 as the settlement date. The defendant failed to complete on the said date. The plaintiff then terminated each of the contracts by notices in writing of 23 June 2011.
- [12]On 28 June 2011 the plaintiff called up the bank guarantees given with respect to Lot 11101 and received $92,500 on 15 July. It also called up the deposit bond given with respect to Lot 11203 on 28 June, and on 4 July 2011 received the sum of $93,500. Consequently, $832,500 remained owing with respect to Lot 11101 and $841,500 with respect to Lot 11203, subject to considerations of the value of the units and other matters with respect to expenses relevant to the assessment of damages pursuant to Clause 15.4(a) of the relevant contracts.
- [13]Before me the defendant relied on valuation evidence of the certified practising valuer from Herron Todd White, namely a Mr Nichols.
- [14]With respect to Lot 11101, he said:
“Based on a Direct Comparison Approach, we have assessed the total local market value of the subject property on an unfurnished basis, inclusive of GST, as follows:
Date of Assessment Market Value
14 December 2010 $700,000
(Seven Hundred Thousand Dollars)
23 June 2011 $675,000
(Six Hundred & Seventy-Five Thousand Dollars)
14 November 2011 $640,000
(Six Hundred & Forty Thousand Dollars)
12 April 2012 $640,000
(Six Hundred & Forty Thousand Dollars)”
- [15]With respect to Lot 11203, Mr Nichols said:
“Based on a Direct Comparison Approach, we have assessed the total local market value of the subject property on an unfurnished basis, inclusive of GST, as follows:
Date of Assessment Market Value
14 December 2010 $680,000
(Six Hundred & Eighty Thousand Dollars)
23 June 2011 $660,000
(Six Hundred & Sixty Thousand Dollars)
14 November 2011 $645,000
(Six Hundred & Forty-Five Thousand Dollars)
12 April 2012 $645,000
(Six Hundred & Forty-Five Thousand Dollars)”
- [16]He explained the reducing value in the relevant market segment in these terms:
“In particular, conditions have deteriorated in this market segment noticeably throughout 2010 and have eased further over the course of 2011.
The prevailing period for this market segment has been characterised by rapidly falling confidence levels in the new highrise apartment market on the Gold Coast and consequently, poor rates and falling apartment sale prices.
The Further softening in market conditions has been brought on by a combination of factors including the rising rate cycle of mid/late 2010 and further in early 2012, the continued negative media publicity concerning the state of the highrise apartment segment on the Gold Coast, the overall subdued economic and real estate market conditions and the reduced volume of apartment buyers.
This is particularly evident for investors who are typically discretionary purchasers of new apartments on the Gold Coast. …”
- [17]He also said the fact the subject properties were in a complex managed by the Hilton Group resulted in a premium being placed on the value of the units.
Measurement of damages
- [18]The normal measure of damages against the defaulting buyer is the contract price, less the market price at the contractual time fixed for completion. Beyond the normal measure of damages, consequential loss may also be recovered so long as such costs are incidental costs and expenses which have necessarily flowed from the breach. Such costs are those incurred on account of a resale, or the estimated costs of a resale, and holding costs incurred between the time of the breach and the assessment of damages.
- [19]The normal measure of damages is not, however, absolute. Where the seller has reasonably and properly pursued their remedy by way of specific performance but has subsequently had to abandon the attempt to have the contract performed, it is open to the court to assess damages in respect of a fall in the market between the contractual time for completion and the abandonment of specific performance. Such an approach was adopted by Daubney J in South Sky Investments Pty Ltd v Luppi [2012] QSC 27.
- [20]In that case proceedings were commenced and specific performance claimed, only to be later abandoned after a further failed attempt at settlement. Moreover, in that case the buyer failed to complete the contract when scheduled on 9 November 2010. Proceedings were commenced in June 2011 for specific performance or alternatively damages. The buyer failed to enter a defence, but on 15 November 2011 the plaintiff served the defendant with a notice to complete. Settlement was called for a date one month hence, on 15 December. The buyer again failed to settle. Judgment was then entered in default with damages to be assessed. When undertaking that assessment, Daubney J noted the normal measure of damages but, given the history of the matter, the duration of the defendant’s breach and a repeated failure to observe her obligation under the contract, his Honour held that the appropriate time to assess damages was the date of assessment.
- [21]At paragraph 17 and following, his Honour said:
“[17] The proper primary measure of damage, in a case such as the present, where the value of the property has diminished, is the difference between the sale price and the current market value. The relevant principles are explained in Voumard “The Sale of Land” (6th ed) at [12.240] (omitting citations):
‘Thus, a vendor who elects to treat the contract as at an end in consequence of the refusal or the failure of the purchaser to pay the purchase money or an instalment of purchase money is entitled to recover damages for the breach of the contract by the latter. By such an election the vendor reassumes the ownership of the property, and extinguishes the contract, not ab initio, but in futuro, so as to discharge all obligations thereunder as yet unperformed, but the contract remains alive for the purpose of allowing either party to vindicate rights already acquired under it. There is no obligation placed upon a vendor to resell the property. Any rise or fall in the property after the date fixed for performance is at the vendor’s advantage or risk.
The damages to which a vendor is entitled in such circumstances are computed by placing her or him, so far as money can do it, in the same situation as if the contract had been performed. These damages include but are not confined to the difference between the contract price and the net value of the property thrown back on the vendor’s hands (that is, its value at the date of the determination of the contract) but in estimating the damages the vendor must give credit for any deposit received under the contract. Accordingly a forfeited deposit must be set off against any damages claimed by the vendor. The vendor may recover in addition any incidental expenses which have necessarily flowed from the breach. ...’
[18] Whilst there is a general rule that in actions for breach of contract, damages should be assessed as at the date of the breach, this rule is not absolute.
[19] Given the history of this matter, the duration of the defendants’ breach and the repeated failures by the defendants to observe their obligations under the contract, it seems to me that the appropriate date for the assessment of damages is as at the date of hearing before me on 7 February 2012.
[20] The proper approach to the calculation of damages in this case, it seems to me, is as follows.
[21] One commences by deducting from the full contract price the net market value of the property left in the hands of the vendor. This net market value takes account of the market value less costs at resale.2 On the evidence before me, the net market value is $700,000 less the amount of agent’s fees that would be incurred on a sale at that price ($29,645) and the legal costs on such a sale ($2,200), yielding $668,155.
[22] The amount of the forfeited deposit of $101,000 needs to be deducted.
[23] The plaintiff is contractually entitled to interest at the rate of 12 per cent up to the date of assessment. The plaintiff is also entitled to recover for the outgoings (rates, land tax, body corporate fees, etc) incurred on the property up to the date of assessment.3 On the evidence before me, these expenses and interest up to 7 February 2012 amount to $187,638.57.
[24] There remains, then, the question whether the plaintiff should also be entitled to recover for what it described as “holding costs” of the property for a period after the date of assessment. These are detailed in the schedule above. The valuer’s evidence was that it may take up to two years (or longer) for the property to be resold, and on the basis of that evidence it was submitted that it was appropriate to recover these costs for a reasonable period, which was said to be 12 months. I do not consider these ongoing “holding costs” are properly recoverable in the present case, where the proper question is not as to what losses might be suffered in the event of an eventual resale, but rather is to assess, as at the date of assessment, the amount required to put the plaintiff in the same situation, as far as money can do, as if the contract had been performed. It has been held that a vendor in a case such as this is not entitled to claim for the continued payment of mortgage interest on the property as such payments cannot be regarded as flowing from any breach of contract by the purchaser.4 By parity of reasoning, the ongoing “holding costs” after the date of assessment are not recoverable as damages. I would emphasise again that my conclusion in this regard is reached in the context of making an assessment of general damages as at the date of assessment, and not an assessment of the damages recoverable on a resale.
[25] Accordingly, I make the following assessment of damages:
Purchase price $1,010,000.00
Plus holding costs and interest up to 7/2/12 187,638.58
Less deposit 101,000.00
Less net market value as at 7/2/12 668,155.00
$428,483.50”
- [22]In the circumstances of this case, and having regard to the history of the matter, including the duration of the defendant’s breach and her repeated failure to observe her obligations under the contract, and the fact that the market has fallen significantly since the time she executed the contracts for purchase, the appropriate date for the assessment of damages is the date of hearing. I note, in accordance with the valuation evidence, that there is no difference to the assessment of damages if either the date of commencement of the proceedings or the date of the assessment is adopted as the appropriate date.
- [23]In this case the plaintiff claims damages as follows:
Schedule – Damages Assessment
Purchase priceLot 11101Lot 11203 | $925,000.00$935,000.00 | $1,860,000.00 |
PlusAgents fees incurred on sale at market valueLot 111101Lot 11203Marketing & Advertising fees incurred on sale at market valueLot 11101Lot 11203Legal fees incurred on sale at market valueLot 11101Lot 11203 | $14,080.00$14,190.00$28,160.00$28,380.00$990.00$990.00 | $86,790.00 |
LessMarket value on 14/12/11 & 20/4/12Lot 11101Lot 11203 | $640,000.00$645,000.00 | $1,285,000.00 |
Sub-total $661,790.00 | ||
LessDeposits | $92,500.00$93,500.00 | $186,000.00 |
Total $475,790.00 | ||
- [24]I accept such assessments as reasonable. The plaintiff is also contractually entitled to interest at the rate of 15% up to the date of assessment in accordance with Clause 15.6 of the contract, as previously set out.
- [25]With respect to Lot 11101, the relevant amount on which interest is charged is $832,500, and with respect to Lot 11203, is $841,500. I calculate this at a daily rate of $342.12 with respect to Lot 11101, and $345.82 with respect to Lot 11203. Accordingly, from 14 December 2010 to 28 May 2012, a period of 532 days, I calculate interest of $182,007.84 with respect to Lot 11101, and $183,976.24 with respect to Lot 11203.
- [26]Costs should also follow the event. The plaintiff’s solicitor, Mr Eustace, prepared an affidavit setting out the costs said to be reasonably estimated on a standard basis in accordance with Practice Direction No. 3 of 2007. I accept the estimate of costs contained in the affidavit amount to the sum of $27,714.47.
- [27]Accordingly, I give judgment for the plaintiff in the sum of $869,488.55 comprising: