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Baguley v Lifestyle Homes Mackay Pty Ltd[2014] QDC 66

Baguley v Lifestyle Homes Mackay Pty Ltd[2014] QDC 66

DISTRICT COURT OF QUEENSLAND

CITATION:

Baguley v Lifestyle Homes Mackay Pty Ltd [2014] QDC 66

PARTIES:

GEOFFREY ROBERT BAGULEY

(First Plaintiff)

AND

JULIE MAREE BAGULEY

(Second Plaintiff)

v

LIFESTYLE HOMES MACKAY PTY LTD (ACN 115 809 326)

(Defendant)

FILE NO/S:

D68/11

DIVISION:

Civil

PROCEEDING:

Application/Hearing

ORIGINATING COURT:

Mackay District Court

DELIVERED ON:

3 April 2014

DELIVERED AT:

Brisbane

HEARING DATE:

13 November 2013

JUDGE:

Searles DCJ

ORDER:

Judgment for the Plaintiffs is made against the Defendant in the sum of $88,982.00 with interest pursuant to s 47 of the Supreme Court Act 1995 at the prescribed rates from 15 October 2010 to the date of judgment.

CATCHWORDS:

Assessment of Damages – Breach of contract on sale of residential property – claims for deficiency on resale price, interest on loan, commission, conveyance costs and litigation costs – doctrine of election – whether Plaintiffs elected to claim general damages for breach of contract – where the nature of the property had changed between date of breach and date of resale – determination of property’s market value – whether loss of use of money for interest on loan a reasonably foreseeable effect of defendant’s breach – whether conveyance costs and real estate agent’s commission fees on terminated initial sale recoverable

Uniform Civil Procedure Rules 1999 s 680

Supreme Court Act 1995 s 47

Johnson v Perez [1988] 166 CLR 351 applied

Twidale v Bradley [1990] 2 Qd R 464 cited

Liverpool Holdings Ltd v Gordon Lynton Carsales Pty Ltd (1978) Qd R 279 cited

Riggall & anor v Thompson [2010] QCA 144 applied

Vieira v O'Shea [2012] NSWCA 21 applied

4People Pty Ltd v Gregory Keith Pocock [2012] QDC 82 distinguished

Hungerfords v Walker 171 CLR 125 applied

Hadley v Baxendale (1854) 9 Ex. 341 [156 E.R. 145] applied

A.H.R. Constructions Pty Ltd v Maloney [1994] 1 Qd R 460 cited

COUNSEL:

Mr Anthony Barlow for the Plaintiffs

Mr Michael de Waard for the Defendant

SOLICITORS:

Bill Cooper & Associates, Solicitors for the Plaintiffs

Taylors Solicitors for the Defendant

Table of Contents

NATURE OF THE APPLICATION

The Breach

GENERAL LAW DAMAGES AND LIQUIDATED DAMAGES

Defendant’s argument re Plaintiffs’ election to claim general law damages

Did the Plaintiffs elect to claim general law damages or liquidated damages?

Effect of election to claim general law damages

Plaintiffs’ arguments re Assessment Date

National Rental Affordability Scheme (NRAS)

National Rental Affordability Scheme (NRAS) approval

Effect of NRAS approval on market value

DID NRAS APPROVAL EXIST AT DATE OF RESALE?

Development Approval Permit and NRAS approval

Mr Baguley’s evidence

Documentary evidence of NRAS approval

Contract of 4 June 2011 with Tailored Developments Pty Ltd

Conclusion re NRAS approval

Effect of lack of NRAS approval on Assessment Date

ANALYSIS OF EXPERTS’ MARKET VALUE EVIDENCE

Mr Booth’s evidence

Mr Braithwaite’s evidence

Correct market value and Damages for Breach of Contract

INTEREST ON LOAN

Plaintiffs’ argument re Loan Interest

Defendant’s argument re Loan Interest

Discussion re Loan Interest

AGENT’S COMMISSION AND CONVEYANCE COSTS

Plaintiffs’ argument re Commission and Conveyance Costs

Defendant’s argument re Commission and Conveyance Costs

Discussion re Commission and Conveyance Costs

Plaintiffs’ argument re Legal Costs

Defendant’s argument re Legal Costs

Discussion re Legal Costs

ORDERS

NATURE OF THE APPLICATION

  1. [1]
    On 6 August 2010 the Plaintiffs sold a property at 30 Byron Street, Mackay (“Property”) to the Defendant for $400,000.00, with settlement due on 15 October 2010 (“Contract”).  The Defendant failed to settle on the due date (“Date of Breach”), and judgment was entered against it on 9 July 2012, with damages to be assessed at trial.[1]The Property was ultimately resold on 17 October 2012 for $300,000.00, settling on 15 January 2013 (“Resale”).  All that remains is to assess damages.
  1. [2]
    The Plaintiffs claim the following losses as set out in para 13 of the Second Amended Statement of Claim (“Second ASOC”):-[2]
  1. (a)
    The loss of $100,000.00 on resale of the land (the “Loss on Resale”);
  1. (b)
    Interest of $39,982.00 accrued on the Plaintiffs’ loan secured against the land, calculated from 1 November 2010 to 31 August 2012 (“Loan Interest”);
  1. (c)
    Agent’s commission in the sum of $15,400.00, payable by the Plaintiffs in terms with the Contract (“Commission”);
  1. (d)
    Legal costs of $1,045.00 on the conveyance (“Conveyance Costs”); and
  1. (e)
    The costs of this litigation (“Legal Costs”).
  1. [3]
    Relevantly, cl 9 of the breached Contract provides:

“9. Buyer’s Default

9.1 Seller May Affirm or Terminate

If the Buyer fails to comply with any provision of this contract, the Seller may affirm or terminate this contract.

9.2 If Seller Affirms

If the Seller affirms this contract under clause 9.1, it may sue the Buyer for:

  1. (1)
    Damages;
  1. (2)
    Specific performance; or
  1. (3)
    Damages and specific performance.

9.3 If Seller Terminates

If the Seller terminates this contract under clause 9.1, it may do all or any of the following:

  1. (1)
    Resume possession of the Property;
  1. (2)
    Keep the Deposit and interest earned on its Investment;
  1. (3)
    Sue the Buyer for damages;
  1. (4)
    Resell the Property.

9.4 Resale

  1. (1)
    The Seller may recover from the Buyer as liquidated damages:
  1. (a)
    Any deficiency in price on a resale; and
  1. (b)
    Its expenses connected with this contract, any repossession, any failed attempt to resell and the resale;

provided the resale settles within two years of termination of this contract.

  (2) Any profit on a resale belongs to the Seller.

9.5 Seller’s Damages

The Seller may claim damages for any loss it suffers as a result of the Buyer’s default, including its legal costs on a solicitor and own client basis and the cost of any Work or Expenditure under clause 7.6(2). (emphasis added)

9.6 Interest on Late Payments

  1. (1)
    Without affecting the Seller’s other rights, if any money payable by the Buyer under this contract is not paid when due, the Buyer must pay the Seller at settlement interest on that money calculated at the Default Interest Rate from the due date for payment until payment is made.
  1. (2)
    The Seller may recover that interest from the Buyer as liquidated damages.
  1. (3)
    Any judgment for money payable under this contract will bear interest from the date of judgment to the date of payment and the provisions of this clause 9.6 apply to the calculation of that interest.”[3]

The Breach

  1. [4]
    It is common ground that the Defendant breached the Contract when it failed to settle on 15 October 2010.[4]The Defendant had paid an initial deposit of $1,000.00 upon signing the Contract, $9,000.00 short of the Contract deposit of $10,000.00.  On 6 October 2010, after the expiry of the extended due-diligence period, the Defendant gave notice terminating the Contract on the basis it was unsatisfied with its due-diligence investigation.[5]The Plaintiffs subsequently notified the Defendant by letter of their election to affirm the Contract.[6]The defendant failed to settle on the due date and the Plaintiffs filed their Claim and Statement of Claim (“SOC”) on 2 August 2011.

GENERAL LAW DAMAGES AND LIQUIDATED DAMAGES

Defendant’s argument re Plaintiffs’ election to claim general law damages

  1. [5]
    It is helpful at the outset to deal with an argument advanced by the Defendant which it says fundamentally affects the amount and type of damages claimable by the Plaintiffs. That is the question of whether the Plaintiffs have elected to pursue general law damages for breach of contract, or contractual liquidated damages. The Defendant says that, notwithstanding cl 9.5 of the Contract, which permits the seller to “claim damages for any lossit suffers as a result of the buyer’s default…”, the Plaintiffs must elect either to:
  1. (a)
    claim general law damages for breach of contract, which entitles them to the expectation loss, calculated as the original Contract price less the market value of the Property taken at the Date of Breach;[7]or
  1. (b)
    resell the property and sue for the deficiency in resale price as liquidated damages. (emphasis added)
  1. [6]
    The Defendant says these two avenues of remedy are mutually exclusive, regardless of the terms of the Contract, and that a party one it elects may not renege on its election. The Defendant submits the Plaintiffs have chosen to pursue general law damages which consequently precludes them from claiming the deficiency in resale price, as this may only be recovered as liquidated damages.
  1. [7]
    In support of the argument that the Plaintiffs have elected to claim general law damages, the Defendant relies firstly on the Plaintiffs’ Claim which provides:-

“The First and Second Plaintiffs claim:

  1. (a)
    $418,135.60 for general damages on account of breach of contract;
  1. (b)
    $39,065.25 interest on general damages pursuant to the contract; and
  1. (c)
    Costs in the sum of $1,629 and any additional costs in this proceeding.”[8] (emphasis added)

The Defendant says the words in para (a) “for general damages on account of breach of contract” and “interest on general damages” in para (b) can only be interpreted as an election by the Plaintiffs to claim general law damages.  Next, the Defendant points to the Plaintiffs’ SOC,[9]in which they claim “general damagesfor breach of contract” and “interest on general damages”. (emphasis added)  This election to claim general law damages is confirmed, the Defendant says, by the prayer for relief.  Further, the Defendant says, the SOC contains no claim, or intention to claim, for damages under the Contract for the deficiency in resale price because the Property had not yet been resold.[10]The Defendant points to the Amended Statement of Claim (“ASOC”) and the Second Amended Statement of Claim (“Second ASOC”) both of which specifically plead to:

  1. (a)
    the Defendant’s repudiation of the Contract;
  1. (b)
    the Plaintiffs having been “ready, willing and able”; and
  1. (c)
    the Plaintiffs having suffered “loss and damage”.[11](emphasis added)
  1. [8]
    The Defendant says it expressly alerted the Plaintiffs to their “election to claim general law damages”, and the consequences of this election, in its Second Amended Defence, in which the Defendant pleaded that:-
  1. (a)
    the Plaintiffs have “elected to claim damages under the general law for breach of contract”;[12]
  1. (b)
    as such, “any remedy for loss from deficiency on sale… is not available to the Plaintiffs due to the election (to claim general damages)”;[13]and
  1. (c)
    the Plaintiffs have failed to mitigate their losses.[14]
  1. [9]
    Despite this, the Defendant says, the Plaintiffs stated in their Reply that the amount claimed “represent[ed] a loss”,[15]which it argues is again indicative of a claim for general law damages.  These references, the Defendant says, make it unequivocally clear that the Plaintiffs have elected to claim general law damages.

Did the Plaintiffs elect to claim general law damages or liquidated damages?

  1. [10]
    The issue of an election between general law damages and liquidated damages was considered by the Court of Appeal in Riggall & Anor v Thompson [2010] QCA 144, a case relied upon by the Defendant.  In that case the vendor plaintiffs were alleged to have elected to claim general law damages despite having pleaded, in addition to cl 9.5, their right to recover their loss as liquidated damages under cl 9.4(1).  Relevantly, the provisions[16]as to “Buyer’s Default” under cl 9 of the contract in Riggallare the same as those in the subject contract, save for cl 9.5 of the latter’s which includes the words “and the cost of any Work or Expenditure under clause 7.6(2)”.  The Riggalls similarly pleaded to suffering “loss and damage”, and claimed for “loss and damages”,[17]which language Fraser JA, with whom Holmes JA and Daubney J agreed, held to be generally indicative of a claim for general law damages for breach of contract.[18]
  1. [11]
    However, the Court ultimately found that, in the circumstances, pleading “loss and damages” did not preclude reliance on contractual provisions because the pleaded clauses, cls 9.3, 9.4 and 9.5, themselves referred to “damages”, thus references to such concepts could not be considered an unequivocal election to claim under general law. Fraser JA said at [13]:

“The words or conduct required to constitute an election must ordinarily be unequivocal in the sense of being consistent only with the exercise of one of the two sets of rights and inconsistent with the exercise of the other.  The references in the Riggalls’ pleadings to ‘damages’ were neutral as to whether their claim was under the general law or under clause 9, because each of clauses 9.3, 9.4, and 9.5 provided for the recovery of ‘damages’.  Where the amended statement of claim pleaded those particular clauses and incorporated the letter which unequivocally reserved the Riggalls’ rights under them upon their termination under clause 9.1, the references in that pleading to concepts referable to damages under the general law could not be construed as an election to claim damages under the general law to the exclusion of a claim under the contract.  If the Riggalls were required to and did make any election, it was to pursue their claim under clauses 9.4 and 9.5 of the contract rather than under the general law.”[19]  (references omitted)

  1. [12]
    Aside from the Plaintiffs’ SOC, in which the words “general damages” were used, they have, since their ASOC, consistently pleaded their right to recover “damages” under cl 9.5 of the Contract. In the result, the issue of an election between damages under the general law and liquidated damages has no relevance because the Plaintiffs have never sought liquidated damages in relation to the Loss on Resale under cl 9.4.
  1. [13]
    But the absence of a cl 9.4 liquidated damages claim does not deny the Plaintiffs’ recovery of Loss on Resale.  I do not accept the Defendant’s argument that the Loss on Resale may only be recovered as liquidated damages and not as general damages.
  1. [14]
    Contractual liquidated damages are described in Cheshire and Fifoot’s Law of Contractthus:[20]

“The parties to a contract may stipulate what sum shall be payable by way of damages in the event of its breach.  The sum so stipulated will be accepted by the court, and awarded as ‘liquidated damages’ without proof of actual loss, unless it is a ‘penalty’, and therefore unenforceable.” (references omitted)

It will be seen that contractual liquidated damage clauses are designed to allow the parties to agree to a reasonable predetermined loss by way of liquidated damages to avoid the cost of proof.The Plaintiffs have not sought to claim contractual liquidated damages but rather have elected to pursue their claim under general law.  That does not deny them the right to rely on cl 9.5.

Effect of election to claim general law damages

  1. [15]
    The significance of an election to claim general law damages, in addition to the necessity to prove one’s loss, is the point of assessment. Damages for breach of contract are, as a rule, assessed as at the date of the breach (“Assessment Date”), thus an aggrieved party may recover the difference between the purchase price and the market value of the land at the date for completion.[21]However, as the objective of contractual damages is to place the aggrieved party in the position it would have been in had the breach not occurred, the rule is not set in stone.[22]The Assessment Date may be moved if so required in order to properly compensate the aggrieved party.[23]
  1. [16]
    The Plaintiffs offer several arguments as to why the Assessment Date should be moved to 17 October 2012, the date the Property was resold (“Date of Resale”), their claim for the Loss on Resale being dependent on the damages being assessed at that date.

Plaintiffs’ arguments re Assessment Date

  1. [17]
    The Plaintiffs rely on the comments of Meagher JA and Basten JA, with Handley AJA agreeing, in Vieira v O'Shea [2012] NSWCA 21 at [44]-[45], adopting Mason CJ’s comments in Johnson v Perez [1988] 166 CLR 351 at 355-356:

“[44] The general rule is that damages for breach of contract are assessed at the date of breach. However, that rule will yield if “in the particular circumstances, some other date is necessary to provide adequate compensation”: Johnson v Perez [1988] HCA 64; 166 CLR 351 at 367; see generally, 355-356, 371, 386; Smith New Court Securities Ltd v Citibank NA [1997] AC 254 at 266-267. The complaint by the respondent that the time for assessment could only have been the time of breach was not, in principle, supportable: see, eg, E Peel, Trietel, The Law of Contract (12th ed, 2007) at 20-064.

[45] The general rule must give way if, in the interests of justice, another approach is necessary to give the plaintiff an amount of damages which will compensate for the breach of contract. That may be the case where the plaintiff has acquired an asset which would not otherwise have been acquired and the asset is not readily marketable at the time of acquisition; or if the plaintiff does not discover until some time after acquisition, the matter which meant that the asset would not have been acquired; or if for some other reason the plaintiff is “locked in” to holding the asset. In each of these circumstances, the plaintiff may not have acted unreasonably in retaining the asset: see HTW Valuers, at [63] and [66]; Smith New Court Securities, at 265-266.”[24]

  1. [18]
    It follows that the Plaintiffs must establish that their retention of the Property from the Date of Breach in 2010 until the Date of Resale in late 2012, a period of more than two years, was reasonable and that, in the interests of justice, their loss should be assessed at the Date of Resale. In that regard, the Plaintiffs make the following points:
  1. (a)
    Despite the Plaintiffs’ best efforts the land did not sell until late 2012;
  1. (b)
    Accordingly, the Plaintiffs had to hold the land until resale could be achieved, and the Defendant did not submit otherwise;
  1. (c)
    The Plaintiffs’ actual loss, on resale, is $100,000;
  1. (d)
    There is no other date on which damages could be assessed which would reflect the Plaintiffs’ loss; and
  1. (e)
    The only argument against this position is that the Plaintiffs’ failed to mitigate their loss on resale, which they deny.
  1. [19]
    That the Plaintiffs made all reasonable attempts to sell the Property at a marketable price during the relevant sale period in the circumstances has already been admitted by the Defendant’s failure to respond to a Notice to Admit Facts.[25]However, the Defendant seeks subsequently, in its closing submissions,[26]to counter the Plaintiffs’ reliance on that admission on the grounds that it is a conclusion of law and was therefore not capable of concession by the parties.  The Defendant cites an ex tempore decision of his Honour Judge RobinQC, 4People Pty Ltd v Gregory Keith Pocock [2012] QDC 82, but I cannot see how this case supports the Defendant’s contention.
  1. [20]
    The Defendant has not sought to withdraw the admission, and accordingly it has been conceded. With the exception of an argument concerning the Plaintiffs’ purported failure to reapply for what is known as National Rental Affordability Scheme approval, considered below, each of the Defendant’s arguments pertaining to mitigation, namely that the Plaintiffs did not advertise the Property at a reasonable price, and did not accept the highest offer at auction, have previously been conceded. As will be seen, the issue of any failure to reapply for National Rental Affordability Scheme approval ultimately has no bearing on my finding concerning the issue of mitigation. Otherwise, there has been no suggestion from the Defendant as to what other measures the Plaintiffs could have taken. As against that, in the Notice to Admit, the Defendant is deemed to have admitted that three real estate agents were engaged by the Plaintiffs to sell the property, they entered into three fully executed contracts of sale, the final of which effected sale, and there were over twenty interested persons or entities who expressed interest in the Property.  I am satisfied the Plaintiffs made all reasonable efforts to sell the Property at a marketable price during the relevant sale period.

National Rental Affordability Scheme (NRAS)

  1. [21]
    However, that is not to say the Date of Resale is the point which best reflects the Plaintiffs’ actual loss. While the difference between the Contract Price of $400,000.00 and the Resale Price of $300,000.00 is obviously $100,000.00, this figure does not take into consideration whether or not National Rental Affordability Scheme (NRAS) approval attached to the Property at the time of resale. This affects the value of the Property, which will be discussed shortly. It is agreed NRAS approval attached to the Property at the Date of Breach, but it is unclear, and thus for the Court to determine, whether this was the case at the Date of Resale. If it did not, then the Plaintiffs have resold a different ‘product’, it not including NRAS approval, to that which was originally sold to the Defendant, which did include NRAS approval. This issue impacts on the Plaintiffs’ actual recoverable loss, being necessary in the consideration of where to set the Assessment Date. Accordingly, a consideration of NRAS approval, and whether it attached to the Property at Date of Resale, is necessary.

National Rental Affordability Scheme (NRAS) approval

  1. [22]
    NRAS refers to the National Rental Affordability Scheme, which the Defendant’s valuer, Mr Braithwaite, says:

“seeks to address the shortage of affordable rental accommodation by offering tax-free incentives to the business sector and community organisations to build and rent dwellings to low and moderate income households at below-market rates for 10 years.  The aim of the scheme is to:

  • Increase the supply of new affordable rental housing;
  • Reduce rental costs for low to moderate income households; and
  • Encourage large-scale investment and innovative management of affordable housing.

The scheme provides participants with a higher than average yield in the residential property market and is not ‘housing commission’ or ‘social housing’.  NRAS properties are rented to tenants with annual incomes of up to $100,000.”[27]

  1. [23]
    Various valuation reports were provided by Mr Ryan Booth for the Plaintiffs and Mr Scott Braithwaite for the Defendant, all of which provided two separate market values, one premised on the existence of National Rental Affordability Scheme (NRAS) approval attaching to the Property, and the other without.
  1. [24]
    The Plaintiffs submit that NRAS approval was not raised on the pleadings, and as such may not be raised by the Defendant in its submissions. But the issue of NRAS approval was raised by the Defendant in their opening[28]and closing submissions.[29]Mr Baguley, himself, in his second affidavit[30]gave evidence in relation to NRAS approval, and was cross-examined on the issue,[31]as was the Plaintiffs’ valuer,[32]Mr Booth.  Both the Plaintiffs’ and the Defendant’s valuers, Mr Booth and Mr Braithwaite respectively, discuss in their expert reports in detail the NRAS approval, as it is integral to the consideration of market value.  Mr Booth and Mr Braithwaite each attach a copy of Mr Baguley’s NRAS Heads of Agreement[33]to their reports.  The Plaintiffs have joined issue with the Defendant in regard to NRAS approval, and it is therefore relevant.

Effect of NRAS approval on market value

  1. [25]
    One advantage of NRAS approval is the permissibility of higher density development. In this case the Property’s development approval is for eight multiple dwelling units as opposed to four.[34]Mr Braithwaite considered it likely the market would factor in a premium to the value of a development with attaching NRAS approval given the benefits the approval provides, including the higher density, advanced stage of planning, tax-free incentives, and ‘fixed’ 10 year term as a condition of the Development Approval.[35]The Plaintiffs’ valuer, Mr Booth, shared a similar view, adding that the income security and above market returns would provide obvious benefits to investors, resulting in a premium for NRAS approved properties. Both valuers agreed in a joint letter[36]that a premium exists for NRAS-approved development sites in the Mackay market.
  1. [26]
    It is in the Defendant’s interest for NRAS approval to have attached to the Property at the time of resale, as the resulting higher market value may confirm the reasonableness or otherwise of the Plaintiffs’ subsequent resale at $300,000.00. If the NRAS approval did exist, the difference between the ultimate resale price of $300,000.00 and the Defendant’s valuation on Date of Resale of $352,000.00 is $52,000.00 beneath the market value. Conversely, if there were no NRAS approval, then on the Defendant’s valuation of $308,000.00 (incl. GST) the resale price of $300,000.00 falls only $8,000.00 short. The Defendant submits the Plaintiffs would be responsible for the absence of NRAS approval attaching and the resulting deficit on resale, because Mr Baguley gave evidence[37]he chose not to apply for its renewal.  In such circumstances, the Defendant says, they could not be said to have mitigated their loss in that regard.  I will return to this argument later.

DID NRAS APPROVAL EXIST AT DATE OF RESALE?

Development Approval Permit and NRAS approval

  1. [27]
    Turning to as whether NRAS approval attached to the Property on Date of Resale, the Defendant submits it did, and says even the Plaintiffs’ own expert valuer, Mr Booth, was of this opinion.[38]The Defendant points to the exchange between Mr Booth and counsel for the Defendant, Mr de Waard, at hearing, during which it was said:

“Mr de Waard:  Are you of the view that there was NRAS approval on the property?

Mr Booth:  From a valuation perspective – there possibly weren’t any allocation for the NRAS, but the permit – the DA [development approval] permit is still in place, so at that time what was required to get NRAS, I think NRAS was in place”.[39]

  1. [28]
    Mr Booth’s response was somewhat equivocal but should be read in the context of his and Mr Braithwaite’s report and the conditions of the Development Approval permit (“DA”).  Those conditions attach to the Decision Notice of the Mackay Regional Council dated 15 July 2009 granting the DA for the Material Change of Use of the Property, included in a document referred to as a ‘prospectus’[40]at hearing.  This prospectus was created by the Plaintiff’s company, Baguley Developments Ltd, seemingly in January 2010, for the purpose of providing information about the Property to interested parties.  The first condition provides:

“Affordable Housing Fund:

Carry out the approved development in accordance with the approved Management Plan for a period of 10 years from the date the residential use commences in accordance with this development approval.  For the purpose of this approval, the ‘residential use’ is taken to have commenced when a minimum of eight (8) residential affordable dwellings units are occupied by tenants/owners…” (emphasis added)

  1. [29]
    The second condition of the DA provides:

“Affordable Housing Management Plan and Land Title Act 1994:

a) Within 14 days of the date of this approval, provide and execute, free of cost to Council:

  1. i)
    An Affordable Housing Management Plan; and
  2. ii)
    A statutory covenant in favour of Council, enforcing the Management Plan and registrable pursuant to the Land Title Act 1994.”[41] (emphasis added)
  1. [30]
    These conditions take on significance when read against Mr Booth’s retrospective valuation of the Property at 17 October 2012 (resale contract),[42]and Mr Braithwaite’s retrospective valuation of the Property at 15 October 2010 (first contract settlement date).[43]Mr Braithwaite’s report indicates that the ‘Affordable Housing Management Plan’ incorporated into the DA is regulated under NRAS, hence the requirement in Condition 1 of adhering to the “approved Management Plan” for a period of 10 years, the term required under NRAS.  It further says that “the development will incorporate the ‘NRAS’ which promotes affordable unit and dwelling rental accommodation”.[44]His report goes on to say the approval for eight units is contingent on NRAS approval, and that without an NRAS management plan the number of permissible residential dwelling units would likely be reduced to four.[45]I note, however, that Mr Braithwaite’s later report,[46]a retrospective valuation of the Property at 17 October 2012 conducted on 20 September 2013, indicates that the Mackay Regional Council has since relaxed its stance and would likely grant the DA for the higher density at the same site as at 2013 without the NRAS approval.[47]
  1. [31]
    Similarly, Mr Booth’s report indicates the DA is conditional upon NRAS.[48]It goes on to say that “the approved development [is] to be carried out in accordance with the Approved Management Plan (NRAS funding) for a period of ten (10 years) from the date of residential use”,[49]and that the permit remains current for a four year period, expiring on July 2013[50]unless further planning is undertaken.[51]Relevantly, Mr Booth says in his report that “at the time of instruction (6 September 2013), the project has progressed in accordance with the Development Permit, and construction is approximately 70% complete”.[52]This could suggest NRAS approval was in place as at 17 October 2012, the Date of Resale, given the development had progressed in accordance with the DA which necessarily required the existence of, and adherence to, the NRAS.  This is consistent with Mr Booth’s above response to Mr de Waard’s question that, as the DA was still in place, NRAS was likely in place also.
  1. [32]
    Yet this is contradicted by Mr Booth’s valuation dated 23 August 2012[53]in which he says the NRAS approval, while incorporated into the DA, will lapse within 12 months if no progress of the approval takes place.[54]As for what constitutes lack of progress, I shall discuss shortly.  Furthermore, according to Mr Booth’s retrospective report at 17 October 2012[55]a “reduced market value (of the Property) with NRAS is considered appropriate taking into account the perceived potential lapse of the permit and/or expiry of NRAS allocation”.[56]Clearly the NRAS and the DA may lapse independently of one another, although the words “perceived potential lapse” suggest the Property’s NRAS approval as at 17 October 2012 was no more than on the verge of lapsing.
  1. [33]
    That same report of Mr Booth’s says the Property “has Development Permit for a Material Change of Use for eight (8) residential units and includes NRAS approval”.[57]His 16 October 2011 valuation says the Property includes NRAS approval,[58]and his 23 August 2012 report confirms this, while noting it will lapse within 12 months in the absence of progress of the approval.[59]Mr Braithwaite writes in his retrospective valuation at 17 October 2012:

“Following an extended listing period the property was sold on 17 October 2012 for $300,000 with NRAS approval in place.  As of the date of inspection, development of the site was at an advanced stage.”[60]

Mr Baguley’s evidence

  1. [34]
    Despite all the above, Mr Baguley gave evidence that he allowed the NRAS approval to lapse.[61]The Defendant makes the point he did not support this with any documentary evidence and was the only witness to give evidence in this regard.  Mr Baguley deposed to allowing the NRAS approval to lapse because a successful reapplication was not guaranteed, the approval having been withdrawn and reallocated,[62]presumably to another development.  He also acknowledged at hearing a desire to avoid the cost of reapplying for the approval.[63]This was in spite of his admission that NRAS approval would increase the value of the Property in the eyes of “certain people”.[64]
  1. [35]
    Mr Baguley evaded Mr de Waard’s suggestion that the NRAS approval attached to the DA, as evidenced by the Council Decision Notice,[65]and was therefore in place until the expiry of the DA in July 2013, some months past the Date of Resale.[66]He made mention of an “NRAS decision notice” which he said was different to the Council Decision Notice[67]put before him.[68]He said the Council Decision Notice merely referred to a covenant over the site for affordable housing, while the NRAS decision notice concerned a separate application process through the Queensland Affordable Housing Consortium (QAHC), responsible for processing NRAS applications.[69]Mr Baguley said he thought email confirmation from QAHC of the NRAS lapsing formed part of his affidavit material.[70]

Documentary evidence of NRAS approval

  1. [36]
    It appears to me that the only filed communication with QAHC is the initial NRAS Heads of Agreement with Mr Baguley dated 7 September 2009.[71]The exhibited copy of the NRAS Heads of Agreement is unsigned, but it seems undisputed that the NRAS approval was granted in 2009, and attached to the Property at the time of the original Contract.  The agreement may be terminated by either party on 14 days notice, or if the owner does not meet specified key deadlines such as project completion dates, comply with reporting requirements and other conditions, and ensure the property remains eligible for inclusion in NRAS.[72]One could argue that failing to meet such deadlines constitutes a failure to progress the NRAS approval, potentially leading to the NRAS approval lapsing within 12 months, as mentioned in Mr Booth’s report discussed above.[73]
  1. [37]
    Of particular note, however, is Special Condition 5 of the original Contract, which provided:

“The Buyer acknowledges that this lot (30 Byron St) is dedicated to the approval of N.R.A.S with a covenant for affordable housing NRAS – National Rental Affordability Scheme.”[74]

Interestingly, no mention of NRAS approval is made in the 17 October 2012 contract of resale.[75]Nor is it mentioned in the two failed contracts which followed the Breach, the first being on 4 June 2011,[76]and the second 13 April 2012.[77]

Contract of 4 June 2011 with Tailored Developments Pty Ltd

  1. [38]
    The first contract to follow the breach, being that of 4 June 2011, was between the Plaintiffs and Tailored Developments Pty Ltd (“Tailored”) for $365,000.00 which was terminated due to uncertainty surrounding whether or not NRAS approval attached to the Property.  In an email dated 14 June 2011 from a Mr Donald Ritchie of Ritchie Property,[78]who from the contract appears to be associated with Tailored, to the Plaintiffs’ solicitors and real estate agent at the time, Mr Greg Chappell, it was said:

“Attention Greg Chappell,

We refer to the above Contract of Sale with reference to clause 4 of special conditions and inform you that we shall not be able to satisfy ourselves in terms (sic) this clause.

We where (sic) to have a meeting in Brisbane today with a representative of QAHC to establish if the allocation of the NRAS credits are still assigned to this project.  The meeting was called off and we were requested to put our request in writing to their office.  It was indicated that the turnaround would be only sometime next week. 

It was my intent to come up to Mackay on Thursday with the knowledge from the above meeting and meet with the Council to discuss the DA Decision Notice – Assessment Manager Conditions with reference to item 1 and 2.

I feel that we would not be able to have clarity over these two issues before the expiry of our Due Diligence period therefore we terminate the agreement under clause 4 of the Special Conditions.”

  1. [39]
    Clause 4 of the Special Conditions permitted the purchaser to terminate prior to 17 June 2011 should it not be satisfied with its “investigations”, and I take “item 1 and 2” to be referring to the Assessment Manager’s Affordable Housing Funding and Management Plan of the Assessment conditions outlined above.
  1. [40]
    Tailored’s termination of the contract is evidence of two things, the value of NRAS approval to potential investors, and that the existence of NRAS approval around June 2011 was by then contentious. Certainly it was not clear to Tailored whether the approval still attached. But what is perhaps most telling is that the contract between Tailored and the Plaintiffs, unlike the original breached Contract, was silent as to the existence of NRAS approval notwithstanding its value and apparent importance to Tailored. Further, given the importance of NRAS approval and its potential to affect a sale, its omission in the other contracts subsequent to the original breached Contract is surprising if it was still extant.

Conclusion re NRAS approval

  1. [41]
    The Plaintiffs’ counsel, Mr Barlow, made no submissions as to NRAS, other than to argue in his Submissions in Reply that the Defendant raised it as an issue too late. Mr Booth and Mr Braithwaite are evidently of the opinion that the NRAS approval attached to the Property at the Date of Resale, but there is no documentary evidence to establish its existence past the date of the original Contract. Given the absence of any firm evidence, as distinct from expressed opinions, as to the existence of NRAS approval, the best evidence is the contemporaneous documentary evidence of the four contracts together with the email terminating the “Tailored contract”, which on balance suggests, and I accept, that NRAS approval attached to the Property at the time of the original Contract but not at the time of the subsequent contracts.
  1. [42]
    The reasonable inference is open, from its email of termination of the 4 June 2011 contract, that Tailored entered into that contract for $365,000.00 on the understanding that NRAS approval attached to the Property. Its subsequent termination under special condition 4 followed in support upon it being unable to satisfy itself in this regard is evidence of this inference. It follows that the contract price of $365,000.00 evidences that, on balance, the contract price for an “NRAS sale”, is the market value of the land with NRAS approval at that time.

Effect of lack of NRAS approval on Assessment Date

  1. [43]
    Although the Plaintiffs had no obligation to maintain NRAS approval, a property initially sold with NRAS approval is no longer the same ‘product’ if subsequently sold without. For damages to be assessed accurately one must compare two like products. The difference between the original Contract with NRAS approval at $400,000.00 and the subsequent resale of the Property without NRAS approval at $300,000.00 does not assist in assessing the Plaintiffs’ actual loss.
  1. [44]
    The date which best represents the Plaintiffs’ loss is the Date of Breach, that loss being the original contract price of $400,000.00 less the market value of the Property with NRAS approval assessed at the Date of Breach. This accords with the general rule in Johnson v Perez [1988] 166 CLR 351, from which I cannot see cause to depart, notwithstanding the Plaintiffs’ reasonable efforts and inability to dispose of the Property before the Date of Resale.
  1. [45]
    The appropriate award of damages necessarily depends on the market value of the Property on the Date of Breach, and so it must be determined whose expert evidence as to market value to accept.

ANALYSIS OF EXPERTS’ MARKET VALUE EVIDENCE

Mr Booth’s evidence

  1. [46]
    The Defendant attacks Mr Booth’s valuation evidence on the grounds that it is illogical and has a flawed basis, and alleges Mr Booth alters his valuations depending on whom he is compiling a report for. Mr Booth provided four valuations for five respective dates for the Property. I have tabled below his valuations inclusive of NRAS approval contrasted with those of Mr Braithwaite:

Mr Booth

24 May 2010[79]

15 October 2010[80]

(Retrospective)

16 October 2011[81]

 

23 August 2012[82]

17 October 2012[83]

(Retrospective)

$340,000

(excl. GST)

$320,000

(excl. GST)

$320,000

(excl. GST)

$310,000

(excl. GST)

$310,000

(excl. GST)

Mr Braithwaite

 

$350,000[84]

(excl. GST)

 

 

$320,000[85]

(excl. GST)

  1. [47]
    Beginning with the question of Mr Booth’s alleged partiality, the Defendant argues the depreciation or otherwise of the Property’s market value across Mr Booth’s valuations between 24 May 2010 and 17 October 2012 was inconsistent with other market prices in the area, and instead occurred according to which client he was serving and for what purpose. The Defendant points to the $20,000 drop in market value within a six month period between the 24 May 2010 report and the 15 October 2010 report. The first was prepared for the Commonwealth Bank of Australia(“CBA”) in relation to obtaining finance.  The second was prepared retrospectively as at Date of Breach, when proceedings were already on foot.  The lower value would evidently benefit Mr Booth’s clients, the Plaintiffs, in establishing a greater loss.
  1. [48]
    Mr Booth at trial initially denied varying his valuations depending on whom they were for,[86]and said he did not take into account that a lower valuation at the Date of Breach would benefit the Plaintiffs[87]when preparing his 15 October 2010 report.  However, he subsequently conceded that a valuation for the CBA is a “different type of report”, and that there is an acceptable margin such that for “…a job done for mortgage security purposes, you can possibly try to push it on the higher end – to assist the client – to assist the bank”.[88]The following exchange between Mr de Waard and Mr Booth[89]is illuminating:

Mr de Waard: “Okay. So the problem with that is that the first question I asked you is whether or not you consider when you're doing your valuation, I asked you specifically whether you consider who you're doing the valuation for and you said no. You've just completely changed your answer. You've just told the court that you do consider who you're doing the valuation for. And when you've done these last valuations - the last four in time, or the last three in time - you were aware that these proceedings were on foot and you've changed your valuation evidence significantly, based on who you're instructed by. That's what you just said. Well, you have to answer?

Mr Booth:  Yeah, well, I - what I was trying to explain is a valuation for a mortgage security job, and then the other one, they're different - they're addressed to different clients, so do you - do you think of who the valuation is being done for - you possibly do in some form think of where it will end up and your indemnity insurance and whatnot, yeah.

Mr de Waard:  So you value conservatively?

Mr Booth:  Well, no---

Mr de Waard:  Because you’re worried about insurance?

Mr Booth: you valued (sic) in line of what your evidence would suggest.  So, for example, with a bank you may try to push the margin slightly to assist – to assist them, within an acceptable range.

Mr de Waard: And with a bank a client who’s in litigation, you push them down to assist them as well?

Mr Booth:  No, you don’t.  If you go to a – if you’re going to end up in a court of law you try to be fair and reasonable and down the line.” (emphasis added).

  1. [49]
    The Defendant pointed to another exchange[90]with Mr Booth concerning the $20,000.00 decrease in market value between 24 May 2010, (for CBA), and 15 October 2010 (Date of Breach), assessed retrospectively:

Mr de Waard:  “What you’re saying is that something in 2010 within that six month period has caused a $20,000 drop in the value of the property.  That’s the effect of that evidence, isn’t it?

Mr Booth: Yes.  I mean - - -

Mr de Waard:  Well, the answer’s yes?

Mr Booth:  No.  Well, no, not really.  It’s in terms of who you’re doing the valuation for and - - -

Mr de Waard:  We've been down this path?

Mr Booth:  Well, the bank - I'm trying to possibly let you - to get it – for example, a deal over the line from a valuer's perspective, and the bank needs a value.  They will ask you for a certain figure and if it's within the parameters - - -

Mr de Waard:  So you’re a gun for hire?

Mr Booth:  You will – sorry?

Mr de Waard:  Are you a gun for hire then; is that what you’re saying?

Mr Booth:  No.  You will assist the bank within your ranges, which is considered to be acceptable, five, 10 per cent.

Mr de Waard:  Okay?

Mr Booth:  But when you have to do a court proceedings you will try to be more fair and reasonable and straight down the line.  I’m not here to – it is my integrity…”

  1. [50]
    The Defendant says Mr Booth has conceded his valuations are influenced by his client’s needs, and are therefore not objective and cannot be relied upon. The Defendant further submits that Mr Booth lowered his valuations in order to assist the Plaintiffs. The basis for this contention is the drop of $20,000.00 in market value between May 2010 and October 2010, with the value then remaining the same, save for a further $10,000.00 decrease, for the two years leading up to the resale in October 2012. Mr Booth was aware of the proceedings from the second valuation onwards,[91]yet, the Defendant says, his valuations decreased and stabilised even though Mr Booth conceded that the average sale price of property in Mackay continued to increase between 2009 and 2013.[92]
  1. [51]
    Not only did Mr Booth’s valuation of the Property decrease by $30,000.00 between 2009 and 2013 despite the continual climb in sale prices during that period, the Defendant says, $20,000.00 of that loss in value occurred between 24 May 2010 and 15 October 2010, the dates of the CBA valuation and the retrospective valuation associated with these proceedings respectively. The Defendant says this occurrence is inexplicable, and points to Mr Booth’s response when asked about the $20,000.00 decrease at trial:

Mr de Waard:  “How can you maintain the position that within a six month period in 2010, when obviously the sales figures in the Mackay region are increasing over time?

Mr Booth:  Yeah.

Mr de Waard:  How can you maintain the position that there’s a $20,000 drop?

Mr Booth:  Well, it’s pretty close, isn’t it…”[93]

  1. [52]
    The Defendant points to Mr Booth’s subsequent statement that “…in hindsight I was possibly too high in my initial valuation”.[94]The Defendant also argued Mr Booth’s valuations were flawed in that he imported value to dwellings on the basis that they provided holding income, which he subsequently conceded was incorrect.[95]He agreed he should have instead added value to the Property for its absence of a dwelling.  The Defendant made several other arguments identifying mistakes in Mr Booth’s valuations, which I do not consider necessary to detail for the purpose of this finding.

Mr Braithwaite’s evidence

  1. [53]
    Similar to Mr Booth’s, the valuations of Mr Braithwaite, the Defendant’s valuer, also fell between 15 October 2010 and 17 October 2012, with the Property’s value dropping by $30,000.00, as compared to the $10,000.00 fall between those dates in Mr Booth’s assessments. However, Mr Braithwaite considered there had been a fall in the market during that period,[96]although he said his research showed a slight improvement in the market since 2012.[97]
  1. [54]
    The Plaintiffs pointed to the fact that Mr Braithwaite’s 2010 valuation did not include 7 English Street, an NRAS property sold in February 2010 for $370,000.00 whereas Mr Booth’s report did, despite including 20 English Street.  Mr Braithwaite agreed he had overlooked 7 English Street, but said the inclusion of 20 English Street, which sold for the same price around the same time, meant there would be no difference in his valuation,[98]although he would have preferred to include 7 English Street.[99]

Correct market value and Damages for Breach of Contract

  1. [55]
    I am unable to have the degree of confidence in Mr Booth’s evidence sufficient to allow me to rely upon it. Of primary concern is Mr Booth’s concession that the clients whom he is serving influence his valuations. There is also the relatively sudden $20,000.00 drop in the Property’s value between May 2010 and October 2010 despite his own evidence that sale prices in the area were then increasing. His concession that he should have attributed value to the Property for its absence of a dwelling rather than detracting from it is also a relevant consideration. Doing the best I can on the evidence, on balance, I prefer the evidence of Mr Braithwaite.
  1. [56]
    Accordingly the correct market value of the Property with NRAS approval on the Date of Breach is $350,000.00. I note the Defendant seeks to adjust the valuation evidence to include GST. There has been no evidence led as to GST and it is not for the Court to determine. The Plaintiffs are to be awarded $49,000.00 for their loss upon the Defendant’s breach, aside from consequential loss which I shall shortly consider, being the difference between the original Contract price and the market value as at Date of Breach, minus the Deposit of $1,000.00 already paid.

INTEREST ON LOAN

Plaintiffs’ argument re Loan Interest

  1. [57]
    The Plaintiffs claim[100]the interest accrued on the loan secured against the Property in the sum of $39,982.00 calculated from 1 November 2010 to 31 August 2012 on the basis that they would have repaid their mortgage in October 2010 had the Contract settled.  They submit this loss is recoverable, as it stems directly from the Defendant’s breach, and would not have been incurred otherwise.  The Plaintiffs refer to Hungerfords v Walker 171 CLR 125 per Mason CJ and Wilson J at 143-144, in which it was said:

“…the plaintiff is entitled to full compensation for the loss which he sustains in consequence of the defendant’s wrong, subject to the rules as to remoteness of damage and to the plaintiff’s duty to mitigate his loss…the plaintiff sustains an economic loss if his damages are not paid promptly, just as he sustains such a loss when his debt is not paid on the due date.  The loss may arise in the form of the investment cost of being deprived of money which could have been invested at interest or used to reduce an existing indebtedness.  Or the loss may arise in the form of the borrowing cost, i.e. interest payable on borrowed money or interest foregone because an existing investment is realised or reduced. 

The requirement of foreseeability is no obstacle to the award of damages, calculated by reference to the appropriate interest rates, for loss of the use of money.  Opportunity cost, more so than incurred expense, is a plainly foreseeable loss because, according to common understanding, it represents the market price of obtaining money.  But, even in the cause of incurred expense, it is at least strongly arguably that a plaintiff’s loss or damage represented by this expense is not too remote on the score of foreseeability.  In truth, it is an expense which represents loss or damage flowing naturally and directly from the defendant’s wrongful act or omission, particularly when that act or omission results in the withholding of money from a plaintiff or causes the plaintiff to pay away money.”

  1. [58]
    In Hungerfords the court held the plaintiffs’ loss of the use of money to be a foreseeable effect of the defendants’ breach, for it could otherwise have been used to avoid, repay or offset the costs of their business’ significant borrowings.  That principle, the Plaintiffs say, coupled with the broadness of their claim under cl 9.5 of the Contract, which permits recovery of “any loss suffered as a result of the Buyer’s default…”, entitles them to the Loan Interest, being an expense resulting from the Defendant’s breach.  The Plaintiffs rely on an email[101]dated 8 April 2012 from Mr Baguley’s business banker, Chris Lynam of the Commonwealth Bank of Australia (CBA), to Arlene Cooper, Mr Baguley’s solicitor, and Mr Baguley, who was himself copied into the email.  This email purportedly provides a chronological list of monthly interest repayments made by Baguley Developments Pty Ltd between 1 November 2010 and 16 January 2013, when it says the loan was closed.  The payments are invariably for between $1,600 and $2,000.  Mr Lynam refers to it as a “detailed list of interest for loan a/c no.xxxx7628 below”, and it contains an official CBA footer at the bottom of the email, above which is written:

“You should note that interest charge (sic) on the 1st business day of each month is interest for the preceding month.  Interest was debited on the above dates to Baguley Developments Pty Ltd working account numbered 470710561781.”

  1. [59]
    This document is explained, the Plaintiffs say, by Mr Baguley who says:

“Annexed hereto and marked ‘GRB-11’ is a copy of email (sic) received by me from my business banker, Chris Lynam of CBA dated 8 April 2013, showing interest incurred up to that date, from 1 November 2010 to close of the account on 16th January 2013 totalling $48,812.47.  I have inspected bank statements received from CBA and verify that the entries noted match those in the statements.  All loan sums have been paid by our company Baguley Developments Pty Ltd on our behalf as the debt was offset with a loan to ourselves personally and as at the date of this affidavit, the loan and interest in the above sum has been repaid by ourselves.”[102]

  1. [60]
    The Defendant objects to the above paragraph of Mr Baguley’s affidavit[103]and document GRB-11, being the copy of the email, on the basis that they are hearsay and documentary hearsay, respectively.  The Defendant submits document GRB-11 is not Mr Baguley’s document as it was produced by Mr Lynam and sent to Mr Baguley’s solicitor, and therefore cannot be relied upon by Mr Baguley.  This objection overlooks the admissibility of bank records as documentary hearsay under ss 83, 84 and 85 of the Evidence Act 1977 which provide:

“Division 6 Books of account

83 Definitions for div 6

“In this division—

book of account includes any document used in the ordinary course of any undertaking to record the financial transactions of the undertaking or to record anything acquired or otherwise dealt with by, produced in, held for or on behalf of, or taken or lost from the undertaking and any particulars relating to any such thing.

…

84 Entries in book of account to be evidence

Subject to this division, in all proceedings—

(a) an entry in a book of account shall be evidence of the matters, transactions and accounts therein recorded; and

(b) a copy of an entry in a book of account shall be evidence of the entry and of the matters, transactions and accounts therein recorded.

85 Proof that book is a book of account

(1) An entry or a copy of an entry in a book of account shall not be admissible in evidence under this division unless it is first proved that the book was at the time of the making of the entry 1 of the ordinary books of account of the undertaking to which it purports to relate and that the entry was made in the usual and ordinary course of that undertaking.

(2) Such proof may be given by a responsible person familiar with the books of account of the undertaking and may be given orally or by an affidavit sworn or by a declaration made before a commissioner or person authorised to take affidavits or statutory declarations”.

  1. [61]
    The relevant document GRB-11 produced by Mr Baguley’s business manager, Chris Lynam of CBA, is a book of account pursuant to s 83, and is evidence of the accounts therein recorded pursuant to s 84. The proof that the document is a book of account pursuant to s 85(2) has been given by Mr Baguley, himself, who has deposed to having inspected bank statements received from CBA against those entries in GRB-11, and confirms each entry matches those in the statements.[104]This is a statement of fact going to the truth of the contents of the document.  He further deposes to having paid all relevant loan sums.[105]GRB-18, attached to Mr Baguley’s affidavit affirmed 28 August 2013,[106]is a copy of a title search of the Property on a fax confirmation of 15 October 2010, which notes the mortgage to CBA.  Also exhibited to that affidavit is a copy of a settlement statement for the resale[107]provided by the Baguleys’ conveyancers which indicates payment made to CBA paying out the mortgage on settlement of that contract.

Defendant’s argument re Loan Interest

  1. [62]
    The Defendant does not challenge the quantum of the Plaintiffs’ claim for Loan Interest. Instead, the Defendant challenges the admissibility and sufficiency of the evidence led in support of the claim for Loan Interest, the Plaintiffs’ failure to establish its factual and legal entitlement to the Loan Interest, the remoteness of the loss to the breach, and the Plaintiffs’ failure to mitigate their loss.
  1. [63]
    Dealing firstly with the alleged inadmissibility and insufficiency of the Plaintiffs’ evidence, the Defendant says the Plaintiffs’ pleadings do not identify where the amount claimed comes from and how it was incurred. It contends[108]the Plaintiffs must provide evidence of:
  1. (a)
    the existence of the alleged loan account, including that the account was in the Plaintiffs’ names;
  1. (b)
    the loan account having been secured by the Property;
  1. (c)
    what moneys were advanced as a part of the loan (to ensure it only related to money for the Property);
  1. (d)
    what interest rates were applied to the account;
  1. (e)
    what repayments were made and when were they made; and
  1. (f)
    what interest has actually been paid.
  1. [64]
    The Defendant says the Plaintiffs’ evidence, irrespective of its admissibility, is insufficient to establish the Plaintiffs’ entitlement to the Loan Interest because it does not adequately address these issues. It argues the email does not provide details as to the holder of the account, the applicable interest rate, whether it was secured by a mortgage, or whether the mortgage related to the Property.
  1. [65]
    As for the Plaintiffs’ reliance on Hungerfords (supra)at 142-143, the Defendant says the cited passages refer to the position in Canada, specifically opportunity costs, and are not authority for the right to claim interest on a loan.
  1. [66]
    Finally, the Defendant submits the claim for Loan Interest cannot be considered a “loss” pursuant to cl 9.5 of the Contract because there is no evidence the interest was paid in connection with the Property. The Defendant also argues the loss was not foreseeable.

Discussion re Loan Interest

  1. [67]
    I am satisfied the Plaintiffs have on balance established their entitlement to the Loan Interest. The evidence sufficiently indicates the existence of the mortgage to CBA and the Plaintiffs’ incremental loan repayments made to the CBA throughout the relevant period. Concerning the issue of remoteness of loss and the Defendant’s criticism of the inapplicability of Hungerfords (supra)as relating to Canadian law, although the Court referred briefly to the position in Canada[109]it nevertheless held that “…in the cause of incurred expense, it is at least strongly arguable that a plaintiff’s loss or damage represented by this expense is not too remote on the score of foreseeability.  In truth, it is an expense which represents loss or damage flowing naturally and directly from the defendant’s wrongful act or omission, particularly when that act or omission results in the withholding of money from a plaintiff or causes the plaintiff to pay away money”.[110]
  1. [68]
    Mason CJ and Wilson J in Hungerfords (supra) applied the leading authority on remoteness of loss, Hadley v Baxendale(1854) 9 Ex. 341 [156 E.R. 145], and said at 142:

“If a plaintiff sustains loss or damage in relation to money which he has paid out or foregone, why is he not entitled to recover damages for loss of the use of money when the loss or damage sustained was reasonably foreseeable as liable to result from the relevant breach of contract or tort? After all, that is the fundamental rule governing the recovery of damages, according to the first limb in Hadley v Baxendale (see Victoria Laundry (Windsor) Ltd v Newman Industries Ltd [1949] 2 KB 528 at 539) and, subject to proximity, in negligence. The object of the second limb in Hadley v Baxendale was to include loss arising from special circumstances of which the defendant had actual knowledge when that loss does not fall within the first limb because it does not arise from “the ordinary course of things” of which the defendant has imputed knowledge: see Victoria Laundry, ibid. To allow a plaintiff to recover special, but not general, damages, is illogical, subverts the second limb in Hadley v Baxendale from its intended purpose and introduces a new element into the general measure of damages for negligence.

If the distinction between the two limbs is to be rigorously applied in claims for damages for loss of the use of money, a plaintiff who actually incurs the expense of interest on borrowed money to replace money paid away or withheld from him will be entitled to recover that cost, so long as the defendant was aware of the special circumstances, but not otherwise. The expense must fall within the second limb of Hadley v Baxendale in order to be compensable. It cannot fall within the first limb because the defendant cannot be fixed with imputed knowledge of the plaintiff's financial situation and of his need to incur expense by borrowing money. Furthermore, a plaintiff who is not compelled to borrow money by way of replacement of money paid away or withheld will not be entitled to recover for the opportunity lost to him, ie, lost opportunity to invest or to maintain an investment. This is because in the ordinary course of things the defendant appreciates that the plaintiff will replace from his other resources the money lost, so that opportunity cost falls more readily within the first limb of Hadley v Baxendale. How can this difference in treatment be justified? In each case the plaintiff sustains a loss and, ex hypothesi, the defendant's wrongful act or omission is the effective cause of that loss, at least if we put Liesbosch, Dredger to one side.”

  1. [69]
    I consider it reasonably foreseeable that the Defendant’s failure to complete the Contract, leaving the Plaintiffs without the benefit of the money from the sale, could result in their inability to discharge their mortgage until the subsequent resale of the Property enabled them to do so. It is reasonably foreseeable that they would remain liable for their mortgage repayments, and that interest would accrue on their loan. The Loan Interest is a loss not too remote from the Defendant’s breach. Clause 9.5 of the Contract permits the recovery of any loss flowing from the breach. Accordingly I consider the Loan Interest of $39,982.00 incurred between 1 November 2010 and 31 August 2012 recoverable.
  1. [70]
    I have already dealt with the Defendant’s argument as to mitigation of loss.

AGENT’S COMMISSION AND CONVEYANCE COSTS

Plaintiffs’ argument re Commission and Conveyance Costs

  1. [71]
    The Plaintiffs’ claim the commission fee on the original Contract, being $15,400.00, and the legal costs of the conveyance in the sum of $1,045.00.[111]They submit these sums are clearly contemplated by cl 9.5 of the Contract, and either have been or will be paid.  These sums, they say, have been incurred because of the Defendant’s breach, and the amounts are not in dispute.  The Plaintiffs accept these sums were payable irrespective of the Defendant’s breach but point to the fact that these fees were also paid on Resale.  Thus, they submit the Commission and Conveyance Costs were thrown away on the original sale because they were inevitably incurred again on the Resale.  The Plaintiffs say Mr Chappell, their real estate agent who negotiated the original sale, will be paid the outstanding Commission when they receive it from the Defendant.  They refer to Mr Chappell’s evidence at hearing that he expected to be paid for the work, which was completed at the time.[112]

Defendant’s argument re Commission and Conveyance Costs

  1. [72]
    The Defendant’s position is that the Commission and Conveyance Costs do not flow from the Defendant’s breach because the sums were payable irrespective of the breach. Further, the Defendant says Mr Chappell’s evidence at hearing was that he only expected to be paid the Commission in the event that the Court awarded damages.[113]The Defendant says a proper construction of cl 9.5 permits recovery only of a loss already suffered, and so the Commission cannot be claimed, there being only an expectation of payment in the event the Court awards damages.

Discussion re Commission and Conveyance Costs

  1. [73]
    Fraser JA in Riggall (supra), in discussing this head of damage, referred to McGregor on Damages:[114]

“This head of damage requires to be analysed rather carefully, since the expenses of the abortive sale would have been incurred even had the buyer not defaulted; putting the seller into the position he would have been in had the contract been performed still entails his having incurred these expenses. The true analysis is this. The seller recovers the full contract price less the net market value of the property left on his hands, i.e. the amount at which a resale has been or could be made deducting therefrom the costs of resale. Thus the expenses to be looked at are not those of the abortive sale but those of the resale, or, where there has been no resale, the estimated costs of a resale.”[115]

  1. [74]
    The plaintiffs in Riggallwere unable to recover the commission and conveyance costs on the aborted sale because they would still have borne those expenses irrespective of the breach.[116]They were, however, entitled to such expenses necessarily incurred in effecting the subsequent resale.  It follows that the Baguleys would also be entitled to the commission and conveyance costs on the Resale, however, they have not sought to recover these.  Instead, they claim only those of the original sale, which they are not entitled to.

Plaintiffs’ argument re Legal Costs

  1. [75]
    The Plaintiffs submit their legal costs are recoverable on an indemnity basis pursuant to cl 9.5 of the Contract, which provides for the recovery of the Seller’s legal costs on a solicitor and own client basis.

Defendant’s argument re Legal Costs

  1. [76]
    The Defendant says legal costs isnot a proper head of damages, and is to be considered by the Court once judgment has been handed down.  The Defendant refers to the rules governing costs of a proceeding, and cites r. 680 of the Uniform Civil Procedure Rules 1999 (Qld) (the “UCPR”) which provides:

“680 Entitlement to recover costs

A party to a proceeding can not recover any costs of the proceeding from another party other than under these rules or an order of the court.”

  1. [77]
    The Defendant submitsthere is no evidence to indicate that the Court should depart from this rule.

Discussion re Legal Costs

  1. [78]
    I accept the Defendant’s argument that legal costs are not a proper head of damages. The legal costs are to be considered by the Court once judgment is handed down. It could be for instance, that an offer of settlement equal to or more than the damages recovered was rejected by the Plaintiffs which would impact on any costs considerations. Consequently, I will hear further arguments from the parties on the subject of costs.

ORDERS

  1. [79]
    I order that:
  1. Judgment be entered for the Plaintiffs against the Defendant in the sum of $88,982.00 with interest pursuant to s 47 of the Supreme Court Act 1995 at the prescribed rates from 15 October 2010 to the date of judgment.
  1. [80]
    I will hear further arguments from the parties on the subject of costs.

Footnotes

[1]  Court document 14.

[2]  Court document 15.

[3]  See “B4” annexed to doc 1.

[4]  Doc 15 – 2nd Amended Statement of Claim, para 5.

[5]  Ibid para 7.

[6]  Ibid para 8. 

[7] Twidale v Bradley [1990] 2 Qd R 464; Liverpool Holdings Ltd v Gordon Lynton Carsales Pty Ltd (1978) Qd R 279.

[8]  Doc 1. 

[9]  Document 1, p 5.

[10]  Document 1, p 4, para 21. 

[11]  Document 3, paras 9 and 13; Document 15, paras 8, 9 and 13. 

[12]  Document 21, para 6.

[13]  Ibid 6A(c).

[14]  Ibid para 6B. 

[15]  Document 22 – Reply, para 3(c).

[16]  Exhibit “B4” to doc 1 – Statement of Claim; Riggall & anor v Thompson [2010] QCA 144 at [6].

[17] Riggall at [11].

[18] Riggall at [11] – [12].

[19]  Ibid at [13].

[20]  NC Seddon and MP Ellinghaus, Cheshire and Fifoot’s Law of Contract, (9th Aus ed, 2008), at 23.45.

[21] Riggall & Anor v Thompson [2010] QCA 144 at para 26; Johnson v Perez (1988) 166 CLR 351 per Mason CJ at 355-356; per Wilson Toohey and Gaudron JJ at 367; per Deane J at 380; per Dawson J at 386.

[22]  Ibid. 

[23]  Ibid.

[24] Vieira v O'Shea [2012] NSWCA 21 at [44]-[45].

[25]  Exhibit 2 – Notice to Admit Facts.

[26]  Defendant’s closing submissions, para 134.

[27]  Ibid p 20.

[28]  Defendant’s written opening submissions, paras 60-64.

[29]  Defendant’s written closing submissions, paras 29, 96-101.

[30]  Exhibit 5, para 5(a).

[31]  T14, line 10 – T16, line 15.

[32]  T39, line 5 – T 40, line 30; T45, lines 1 – 15.

[33]  Exhibit 12 – Opteon Valuation 16 October 2011; Exhibit 14, p 16. .

[34]  Exhibit 14, p 19; Ex 12, p 2.

[35]  Ibid p 21.

[36]  Exhibit 1.

[37]  Exhibit 5 – Affidavit of Baguley, para 5(a).

[38]  T1-45, line 1.

[39]  T1-44, line 45 – T1-45, line 1.

[40]  Exhibit 8 – 30 Byron Street Development ‘prospectus’.

[41]  Exhibit 8 – Baguley Developments ‘Prospectus’ approx halfway through (p 1 of 9).

[42]  Exhibit 10, RPB-1.

[43]  Exhibit 14.

[44]  Ibid p 13.

[45]  Ibid p 14.

[46]  Ibid p 96.

[47]  Ibid p 122.

[48]  Exhibit 10, p 3.

[49]  Ibid p 10.

[50]  Ibid.

[51]  Ex 13, pp 2 and 9.

[52]  Ibid p 3.

[53]  Exhibit 13.

[54]  Ibid p 16.

[55]  Exhibit 10.

[56]  Ibid p 27.

[57]  Exhibit 10, p 22.

[58]  Exhibit 12, p 25.

[59]  Exhibit 13, p 16.

[60]  Exhibit 14, p 100.

[61]  Exhibit 5 – Affidavit of Baguley, para 5(a). T1–14, line 25.

[62]  Exhibit 5 - Affidavit of Baguley, para 5(a).

[63]  T1-14, line 40; Exhibit 5.

[64]  T-15, line 1.

[65]  Exhibit 8 – Baguley Developments Ltd ‘Prospectus’.

[66]  T1-15 lines 7 – 40.

[67]  Exhibit 8 – Baguley Developments Ltd ‘Prospectus’.

[68]  T1-15 lines 7 – 25.

[69]  T1-15 line 45.

[70]  T1-16 lines 5 – 15.

[71]  Exhibit 12 – Opteon Valuation 16 October 2011.

[72]  Ibid pp 1 & 8 of NRAS Heads of Agreement. 

[73]  Exhibit 13, p 16.

[74]  Exhibit 3 – GRB-1 p 3.

[75]  Exhibit 5 – GRB-2.

[76]  Exhibit 6 – GRB-12.

[77]  Ibid – GRB-14.

[78]  Ibid – GRB-13.

[79]  Exhibit 11.

[80]  Exhibit 10, p 31.

[81]  Exhibit 12, p 3.

[82]  Exhibit 13, p 3.

[83]  Exhibit 10, p 31.

[84]  Exhibit 14, p 6.

[85]  Exhibit 14, p 125.

[86]  T1-25, lines 41-43.

[87]  T1-28, lines 17-23.

[88]  T1-31, lines 45-46.

[89]  T1-32, lines 1-25.

[90]  T1-36, lines 1-11.

[91]  T1-28, line 15; T1-31, lines 35-38; T1-29, lines 25-27; T1-30, line 24. 

[92]  T1-34, lines 9-11; T1-35, lines 3-4.

[93]  T1-36, lines 17-23.

[94]  T1-37, lines 15-16.

[95]  T1-42, lines 40-43.

[96]  T1-49, lines 10-15.

[97]  T1-52, lines 5-10. (The transcript erroneously refers to 2010.  It can only be referring to 2012)

[98]  T1-49, lines 25-30 and T1-53, lines 5-10.

[99]  T1-49, lines 30-45.

[100]  Document 15 – Second Amended Statement of Claim, para 13(b). 

[101]  Exhibit 5 – 2nd Affidavit of Baguley, GRB-11.

[102]  Exhibit 5 – 2nd Affidavit of Baguley, para 13.

[103]  Exhibit 5 – Affidavit of Baguley, para 13.

[104]  Exhibit 5 – Affidavit of Baguley, para 13; Exhibit 7 – Affidavit of Baguley, para 16.

[105]  Ibid para 13.

[106]  Exhibit 7, para 16.

[107]  GRB-19.

[108]  Defendant’s closing submissions, para 108.

[109] Hungerfords (supra) at page 143.

[110]  Ibid.

[111]  Exhibit 5 – Affidavit of Baguley, paras 7-10 (GRB-5, GRB-6, GRB-7 and GRB-8).

[112]  T1-22, line 45.

[113]  T1-22, lines 5-45.

[114]  Harvey McGregor, McGregor on Damages, (17th ed, 2006), at 22-037.

[115] Riggall (supra) at para [25]. 

[116] Riggall (supra) at para [27].

Close

Editorial Notes

  • Published Case Name:

    Baguley v Lifestyle Homes Mackay Pty Ltd

  • Shortened Case Name:

    Baguley v Lifestyle Homes Mackay Pty Ltd

  • MNC:

    [2014] QDC 66

  • Court:

    QDC

  • Judge(s):

    Searles DCJ

  • Date:

    03 Apr 2014

Litigation History

EventCitation or FileDateNotes
Primary Judgment[2014] QDC 6603 Apr 2014Claim for damages arising from a failure to settle a contract for the sale of land: Judgment for the plaintiffs against the Defendant in the sum of $88,982.00 with interest. Searles DCJ.
Appeal Determined (QCA)[2015] QCA 7501 May 2015Application for extension of time refused: McMurdo P, Gotterson JA, Douglas J.

Appeal Status

Appeal Determined (QCA)

Cases Cited

Case NameFull CitationFrequency
4People Pty Ltd v Pocock [2012] QDC 82
2 citations
Jump To
Cite 1 - [2012] QDC 82
Cite 2 - [2012] QDC 82
AHR Constructions Pty Ltd v Maloney[1994] 1 Qd R 460; [1991] QSCFC 68
1 citation
Jump To
Cite 1 - [1994] 1 Qd R 460
Hadley v Baxendale (1854) 156 ER 145
2 citations
Jump To
Cite 1 - (1854) 156 ER 145
Cite 2 - (1854) 156 ER 145
Hadley v Baxendale (1854) 9 Ex 341
2 citations
Jump To
Cite 1 - (1854) 9 Ex 341
Cite 2 - (1854) 9 Ex 341
Hungerfords v Walker (1989) 171 CLR 125
3 citations
Jump To
Cite 1 - (1989) 171 CLR 125
Cite 2 - (1989) 171 CLR 125
Cite 3 - (1989) 171 CLR 125
Johnson v Perez (1988) 166 CLR 351
5 citations
Jump To
Cite 1 - (1988) 166 CLR 351
Cite 2 - (1988) 166 CLR 351
Cite 3 - (1988) 166 CLR 351
Cite 4 - (1988) 166 CLR 351
Cite 5 - (1988) 166 CLR 351
Johnson v Perez [1988] HCA 64
1 citation
Jump To
Cite 1 - [1988] HCA 64
Liverpool Holdings Ltd v Gordon Lynton Car Sales Pty Ltd [1978] Qd R 279
2 citations
Jump To
Cite 1 - [1978] Qd R 279
Cite 2 - [1978] Qd R 279
Riggall v Thompson [2010] QCA 144
10 citations
Jump To
Cite 1 - [2010] QCA 144
Cite 2 - [2010] QCA 144
Cite 3 - [2010] QCA 144
Cite 4 - [2010] QCA 144
Cite 5 - [2010] QCA 144
Cite 6 - [2010] QCA 144
Cite 7 - [2010] QCA 144
Cite 8 - [2010] QCA 144
Cite 9 - [2010] QCA 144
Cite 10 - [2010] QCA 144
Smith New Court Securities Ltd v Scrimgeour Vickers (Asset Management) Ltd [1997] AC 254
1 citation
Jump To
Cite 1 - [1997] AC 254
Twidale v Bradley [1990] 2 Qd R 464
2 citations
Jump To
Cite 1 - [1990] 2 Qd R 464
Cite 2 - [1990] 2 Qd R 464
Victoria Laundry (Windsor) Ltd v Newman Industries Ltd (1949) 2 KB 528
1 citation
Jump To
Cite 1 - (1949) 2 KB 528
Viera v O'Shea [2012] NSWCA 21
3 citations
Jump To
Cite 1 - [2012] NSWCA 21
Cite 2 - [2012] NSWCA 21
Cite 3 - [2012] NSWCA 21

Cases Citing

No judgments on Queensland Judgments cite this judgment.

1

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