Archibald v Powlett
[2017] VSCA 259
•21 September 2017
SUPREME COURT OF VICTORIA
COURT OF APPEAL
S APCI 2015 0063
| KEVIN ARCHIBALD | Applicant |
| v | |
| RACHAEL POWLETT | Respondent |
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| JUDGES: | REDLICH, OSBORN and McLEISH JJA |
| WHERE HELD: | MELBOURNE |
| DATE OF HEARING: | 22 June 2017 |
| DATE OF JUDGMENT: | 21 September 2017 |
| MEDIUM NEUTRAL CITATION: | [2017] VSCA 259 |
| JUDGMENT APPEALED FROM: | [2015] VCC 497 (Judge Anderson) |
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CONTRACT – Breach – Damages for distress, anxiety and depression – Whether damages recoverable – Whether damages for distress, anxiety and depression amount to ‘non-economic loss’ in respect of ‘injury’ under Wrongs Act 1958 pt VBA – Baltic Shipping Company v Dillon (1993) 176 CLR 344; Thomas v Powercor Australia Ltd [2011] VSC 586.
CONTRACT – Breach – Damages for inconvenience – Whether damages recoverable – No recovery where no physical inconvenience alleged – Whether Wrongs Act 1958 pt VBA applies to damages claim for inconvenience alone – Inconvenience not ‘injury’ for purposes of Wrongs Act 1958 pt VBA – Clarke v Shire of Gisborne [1984] VR 971; Boncristiano v Lohmann [1998] 4 VR 82; Thomas v Powercor Australia Ltd [2011] VSC 586.
CONTRACT – Breach – Loss of income and opportunity damages – Remoteness of damages – Defendant aware plaintiff borrowed to expand business – Plaintiff sold part of business to meet loan repayments following breach – Whether loss of income of existing business foreseeable – Burns v MAN Automotive (Aust) Pty Ltd (1986) 161 CLR 653.
CONTRACT – Damages – Basis for award of damages as between compensation and restitution – Whether unjust to recover less in compensation than amount admitted to be owed in restitution – Adjustment of damages to reflect admission of appropriate quantum.
ESTOPPEL – Issue estoppel – Single proceeding against two defendants conducted by separate trials – Whether defendants privies for purposes of estoppel – Defendants parties at all times and no question of privity arises – Defendants liable under different contracts – Whether subsequent trial raised issues resolved in earlier trial – No findings in first trial necessary to determine second trial.
PRACTICE AND PROCEDURE – Abuse of process – Single proceeding against two defendants conducted by separate trials – Whether reasonable justification for conducting second trial – Procedure adopted to accommodate one defendant’s illness – Each trial directed only at respective liability of relevant defendant – No oppression or unfairness to defendant in second trial.
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APPEARANCES: | Counsel | Solicitors |
| For the Applicant | Mr M Y Bearman with Ms L E Davis | Victorian Bar Pro Bono Scheme |
| For the Respondent | Dr A Hanak | Victorian Bar Pro Bono Scheme |
REDLICH JA:
I have had the considerable advantage of reading in draft the reasons of McLeish JA and for the reasons he gives agree with the orders that he proposes.
OSBORN JA:
I agree with McLeish JA that leave to appeal should be granted and the appeal allowed in part, for the reasons which he elucidates.
McLEISH JA:
The respondent Rachael Powlett owned a property in Grenville Street in Daylesford, on which there stood a timber cottage that she let out as holiday accommodation. Ms Powlett intended to expand this operation. In 2011 she responded to an advertisement in the Trading Post for a relocatable house for sale, located in St Arnaud.
The respondent’s response to the advertisement was answered by Peter Weis. At the time, Mr Weis and the applicant Kevin Archibald were working together relocating houses. In April 2011, the respondent agreed to purchase the St Arnaud house, and entered into contracts relating to its sale, transport and restumping.
A few months later, the respondent agreed to purchase another relocatable house in Niddrie that the applicant and Mr Weis had discussed with her. Her intention was to have both the St Arnaud house and the Niddrie house placed on her Daylesford property, appropriately sub-divided, and to let them out for holiday accommodation as an extension of her existing business. It was necessary for her to borrow money in order to purchase the additional houses.
In August 2011, the respondent and Mr Weis executed a set of six contracts for the purchase, transport and restumping of both the St Arnaud house and the Niddrie
house. The set of contracts comprised a sale agreement, a transportation agreement and a restumping agreement for each of the houses. They replaced the earlier contracts relating only to the St Arnaud house that had been executed by the respondent in April 2011. It was agreed by the parties that this later set of contracts comprised the relevant contractual arrangements between them.
Within the set of contracts executed in August 2011, the applicant was named as the party responsible for the sale of the houses under each of the sale agreements and for the transport of the houses under each of the transportation agreements. Mr Weis was named as the party responsible for restumping the houses under each of the restumping agreements.
At various times, the respondent made payments to the applicant in respect of both the St Arnaud and the Niddrie houses. Those payments totalled $130,950.
In December 2011, the applicant and Mr Weis delivered the Niddrie house to a property in Daylesford owned by Mr Edward Comelli (the ‘Comelli property’). The Niddrie house was not delivered to the respondent’s Daylesford property because the St Arnaud house needed to be placed there first. The respondent was told that the Niddrie house was being stored temporarily, but she was not aware of its location. As it turned out, the Niddrie house remained on the Comelli property for over three years, during which time its condition significantly deteriorated.
In the meantime, in April 2012, the respondent discovered that the St Arnaud house was not owned by either the applicant or Mr Weis, who had failed to secure its purchase. As a result, the St Arnaud house was never relocated to the respondent’s Daylesford property. It was sold by its owner to a third party in 2012.
In around August 2012 the respondent discovered the location of the Niddrie house on the Comelli property. In about January 2013 Mr Weis indicated to her that she should prepare for its imminent delivery to her Daylesford property. However, the applicant never delivered the Niddrie house to her.
In 2012, as a result of the failure to deliver the houses, the respondent experienced difficulty in making loan repayments. In 2013, she had to sell one of the blocks of land comprising her Daylesford property, on which the original cottage stood, as well as a property in St Kilda at which she had resided.
In around February 2015, the respondent engaged contractors to move the Niddrie house from the Comelli property to her Daylesford property.
Procedural history
On 20 June 2013, Ms Powlett commenced a proceeding against the applicant and Mr Weis in the County Court seeking damages for breach of contract, misleading and deceptive conduct and negligent misstatement.
The applicant sought a stay of the proceeding due to his poor health. A judge made an order staying the proceeding as against the applicant pending his recovery. The proceeding as against Mr Weis went ahead. The stay was later lifted and the proceeding as against the applicant was heard and determined separately, by a different judge. In effect, the proceeding was split into two trials.
The trial against Mr Weis
In the trial between the respondent and Mr Weis, the judge found that Mr Weis was not a party to the sale agreements or the transportation agreements for the Niddrie house and the St Arnaud house but had signed those contracts as agent for the applicant. On the other hand, Mr Weis was a party to the restumping contracts. The judge also found that there was not enough evidence to conclude that Mr Weis and the applicant were in a partnership in respect of their dealings with the respondent, or that Mr Weis was jointly liable with the applicant in respect of the applicant’s contractual obligations.[1]
[1]Powlett v Archibald [2014] VCC 405 [46]–[47], [49], [59] (‘Powlett’).
The judge found that there had been a total failure of consideration regarding the St Arnaud house restumping contract.[2] It was common ground that some restumping work had been done on the Niddrie house. The claims against Mr Weis based on misleading and deceptive conduct and negligent misstatement were dismissed.[3]
[2]Ibid [64].
[3]Ibid [84], [87].
Judgment was entered against Mr Weis in the amount of $3,950.84, comprising $3,179 to repay the monies the respondent had paid in respect of the restumping of the St Arnaud house and $771.84 in interest.[4]
[4]Powlett v Archibald [2015] VCC 497 [8] (‘Reasons’).
The trial against Mr Archibald
In the trial between the respondent and the applicant, the second judge found that the applicant was party to the sale and transportation contracts. He found that the applicant did not perform the sale and transportation contracts relating to the St Arnaud house at all, and that he only partly performed the sale and transportation contracts relating to the Niddrie house.[5]
[5]Ibid [87], [99]–[101].
The claims against the applicant based on misleading and deceptive conduct and negligent misstatement were dismissed.[6]
[6]Ibid [154]–[155].
The judge then decided the damages to be awarded for the applicant’s breaches of contract. This aspect of his decision is the main focus of the application for leave to appeal.
Reasoning of the second trial judge
Breach of contract — calculation of damages
The judge found that the respondent’s damages were to be assessed based on what she had lost as a result of the applicant’s failure to perform his obligations, so as to place her as far as possible in the same position as if the contracts had been fully performed. She was therefore to be awarded damages so as to place her in the same position as she would have been in had the St Arnaud and Niddrie houses been placed on her property and, after they were renovated, let as holiday accommodation.[7]
[7]Ibid [89]–[91], [99]–[100].
As such, the damages did not include any amounts that the respondent would have paid in any event had the applicant performed his obligations, including the payments she made to him or those that were originally contemplated as part of the project.[8] Otherwise, the judge reasoned, the respondent would be placed in a better position than if the contracts had been performed.
[8]Ibid [91]–[95], [101], [103].
The judge found that the respondent would not have incurred the following costs had the applicant performed the contracts:[9]
[9]Ibid [95].
(a) the cost of restoring the Niddrie house as a result of its deterioration while it was stored at the Comelli property;
(b) additional costs resulting, for example, from the duplication of tasks or the extended time over which borrowings were required; and
(c) losses resulting from the realisation of assets, necessitated by the delays in the project.
The judge therefore found that the respondent should recover all the additional or duplicated costs she incurred as a result of the applicant failing to complete the contracts, including those incurred in renovating the Niddrie house following its deterioration, any lost income resulting from the respondent’s inability to let the houses as holiday accommodation, and the expenses she incurred arising from further work and delays that would not have been reasonably anticipated had the contracts been performed, including the cost of additional borrowings.[10] The trial judge also allowed damages for distress, anxiety and depression.[11]
[10]Ibid [99]–[100].
[11]Ibid [100], [146]–[188].
The trial judge noted that the respondent had not attempted to quantify the loss of any expected capital improvement to her Daylesford property as a result of the applicant’s failure to sell and deliver the St Arnaud house to her.[12] As such, the loss of such capital improvement was not included in the damages awarded.
[12]Ibid [100].
Damages were calculated as follows:
(d) Interest on borrowings: $14,740.74. The respondent claimed interest on loans obtained specifically to purchase the two houses. The judge allowed only a proportion of her claim as, although the money borrowed would have been repaid earlier had the applicant performed the contracts, the respondent would have borrowed some of the money in any event.[13] This amount is not challenged.
[13]Ibid [103], [106], [107], [110]–[111].
(e) Money spent in reliance on performance: $5,545. The judge allowed the respondent to recover the costs of additional lawn mowing and rental to store building materials, which would not have been necessary had the applicant performed the contracts.[14] This amount is not challenged.
[14]Ibid [112]–[113].
(f) Cost of restoring the Niddrie house: $39,000. The judge allowed damages relating to the respondent’s repair costs as a consequence of the deterioration of the Niddrie house caused by its storage at the Comelli property, a storage fee paid to Mr Comelli by the respondent, and the cost of the removal of the Niddrie house to the respondent’s Daylesford property.[15] This amount was the subject of an abandoned ground of appeal (see [30] below).
[15]Ibid [114]–[131].
(g) Loss of income and opportunity (Niddrie house): $78,411.60. The judge allowed for an income of $1,000 per week for 34 months (April 2012 to February 2015), less likely expenses relating to the property, and less a further 40 per cent discount for other costs involved in letting holiday accommodation including advertising, booking fees, maintenance etc and for additional exigencies, including the possibility that the letting of the cottages would take a period of time before the level of occupation of the existing cottage was reached. The weekly amount of $1,000 was based on the records of income for the existing cottage on the Daylesford property, which the judge found was similar accommodation.[16] This is part of the subject of ground 4.
[16]Ibid [132]–[141].
(h) Loss of income and opportunity (St Arnaud house): $28,248. The judge allowed for an income of $350 per week, again for 34 months (April 2012 to February 2015), less likely expenses and less the further 40 per cent discount as applied in respect of the Niddrie house. The weekly amount of $350 was accepted by the judge based on an appraisal letter dated 13 October 2011 from a real estate agent estimating that a weekly rental for the house on the respondent’s Daylesford property ‘in the vicinity of $340.00 would be achievable’.[17] This is also the subject of ground 4.
[17]Ibid.
(i) Loss of income and opportunity (the existing cottage): $24,000. The judge allowed for an income of $40,000 in total (over a shorter period since the cottage was sold in 2013), less the same 40 per cent discount.[18] This is the subject of ground 2.
[18]Ibid.
(j) Damages for distress, anxiety and depression: $30,000. The judge found that in appropriate circumstances the court could award modest compensation where a person suffers distress and anxiety as a consequence of a party’s breach of their contractual obligations. In the circumstances, the judge found that the respondent had been subject to ‘increasing pressure, both financially and emotionally’ as a result of the applicant’s failure to perform his contractual responsibilities,[19] and stated that:
Contractual arrangements relating to the pursuit of accommodation and business plans, which are bound up with an individual’s personal hopes for their future life, are likely to result in the sort of distress and anxiety which [the applicant’s] actions have caused for [the respondent].[20]
This is the subject of ground 1.
[19]Ibid [142]–[147].
[20]Ibid [146].
As mentioned, the judge declined to make orders for the repayment of the amounts the respondent had paid to the applicant under the contracts for both houses.
Accordingly, the Court awarded the respondent a total of $219,933.34 in damages.[21]
[21]There is a minor calculation error here — the judge allowed a total amount for loss of income and opportunity of $130,647.60 (Reasons [141], [156]). But the sum of $177,746 which the judge used (Reasons [133], [141]) as the two purchased houses’ combined anticipated gross income should actually have been $177,766 ($130,686 + 47,080), giving a total claimed loss of income for all three houses of $217,766 ($177,766 + $40,000). On the judge’s method of assessing loss, the deduction of 40 per cent should have been applied to that figure to give $130,659.60.
The application for leave to appeal
The applicant applied for leave to appeal against the judgment on the following grounds (which were articulated more discursively in the application for leave to appeal):
1.The judge erred in awarding damages for distress, anxiety and depression because such damages are not recoverable for breach of contract.
2.The judge erred in awarding damages in respect of the loss of income from the existing cottage on the Daylesford property because:
(a)the sale of the Daylesford property was not a foreseeable consequence of the applicant’s breach of contract;
(b)the respondent intended to sell the Daylesford property in any event, so that any loss of income from that property was not a consequence of the applicant’s breach of contract; and
(c)the evidence regarding the amount of loss of income resulting from the sale of the Daylesford property was inadequate.
3.…[22]
4.The judge erred in awarding damages in respect of the loss of income and opportunity from the St Arnaud house and the Niddrie house because:
(a)the evidence regarding the amount of lost income in respect of the St Arnaud house was inadequate, consisting only of an outdated letter from an estate agent who was not called to give evidence;
(b)the evidence regarding the amount of lost income in respect of the Niddrie house was inadequate, consisting only of statements of earning relating to a different house; and
(c)the judge erred in reducing the amount awarded by 40 per cent to allow for expenses and exigencies in lieu of adequate evidence because even if the applicant had fulfilled the contracts, the St Arnaud house and the Niddrie house could not have been let as accommodation until they had been renovated and occupancy certificates obtained and no appropriate evidence was led regarding the likely dates by which these steps would have been taken.
[22]Proposed ground 3 was abandoned during the hearing.
The applicant was initially unrepresented in the appeal, but pro bono counsel was engaged to assist him before the hearing. As a result, the applicant applied to add the following grounds to his application for leave to appeal:
5.The learned Trial Judge erred by hearing and deciding the proceeding on the basis that he was not bound by a prior decision of the County Court made after an earlier trial between the respondent and a different party to the proceeding because the applicant was a privy of that party in respect of the respondent’s claims, and hence, the respondent was bound by an issue estoppel against the applicant in respect of those claims.
6.The learned Trial Judge so erred because the earlier trial and later trial concerned the same issues such that:
(a)the actual and potential conflict between the prior Court’s decision and the learned Trial Judge’s decision was contrary to the principle of finality in judicial determination, and thereby tended to erode public confidence in the administration of justice; and
(b)it was unjustifiably oppressive to the applicant for the issues already disposed of by the earlier trial to be re-litigated before the learned Trial Judge.
7.The learned Trial Judge should have found that, as the issues before him had been heard and determined by the Court at an earlier trial, it was not open to the respondent to re-litigate those issues in a further trial before him.
The matters having been fully argued and no prejudice flowing to the respondent by reason of the lateness of the amendment, leave should be granted to the applicant to add these further grounds.[23]
[23]Although the respondent argued that the grounds could have been raised at the second trial, such that leave to add them on appeal should be refused, she did not point to any evidence which could have been led by her at trial, or any different course she might have taken, had they been raised below: Metwally vUniversity of Wollongong (1985) 60 ALR 68, 71; Whisprun Pty Ltd v Dixon (2003) 200 ALR 447, 461 [51] (Gleeson CJ, McHugh and Gummow JJ); Nolan v Executive Directive, Land Management Policy, Department of Environment and Primary Industries [2015] VSCA 301 [48]–[53].
Issue estoppel and abuse of process (grounds 5–7)
The applicant submitted that, should the additional proposed grounds of appeal be permitted, the original grounds were to be read in the alternative to those additional grounds. It is convenient to deal with the additional proposed grounds first.
The applicant submitted that, in the second trial, an issue estoppel arose precluding any claim by the respondent against the applicant, as Mr Weis’s privy, that was already decided against the respondent in the first trial (ground 5). The applicant relied on Tomlinson v Ramsey Food Processing Pty Ltd for the proposition that an issue estoppel precludes a party, or their privy, from ‘raising in a subsequent proceeding … an ultimate issue of fact or law which was necessarily resolved as a step in reaching the determination made in the judgment’.[24]
[24](2015) 256 CLR 507, 517 [22] (French CJ, Bell, Gageler and Keane JJ) (‘Tomlinson’).
The applicant submitted that, since Mr Weis was acting as the applicant’s agent in entering into four of the contracts (as found in the first trial), a privity of interest existed between Mr Weis and the applicant. This was the basis for an issue estoppel. As refined in oral argument, the ultimate issue of fact or law said to have been determined was that there had been a total failure of consideration in respect of all the contracts for the St Arnaud house. The applicant submitted that the judge in the second trial had found the applicant liable for breach of all six of the contracts in issue, dealt with as a whole rather than distinguishing between each contract. This was necessarily inconsistent with the finding in the first trial that Mr Weis alone was liable under two of those six contracts.
Counsel for the applicant properly conceded that, if this argument succeeded, the applicant would have to refund the respondent for the amount she had paid him in respect of the St Arnaud house, as he had always contended was the correct measure of loss in respect of that house.
The applicant also submitted that the judge in the second trial erred in hearing and determining the trial (grounds 6 and 7), irrespective of whether the applicant was the privy of Mr Weis. He submitted that the second trial amounted to an abuse of process on the part of the respondent.[25] The proceeding was contrary to the public interest in the finality of judicial decisions and fairness, or was unjustifiably oppressive, given the duplication of facts and issues in the two trials and the fact that the applicant was not able to participate in the first trial. The applicant submitted that there ought not be two trials in which inconsistent findings could potentially be made, even where no inconsistent findings were actually made. In particular, the fact that the question of joint liability was determined in his absence, during the first trial, effectively prevented him from raising the question of joint liability in the second trial.
[25]Tomlinson (2015) 256 CLR 507, 518 [25] (French CJ, Bell, Gageler and Keane JJ); Censori v Gillard (2015) 45 VR 605, 619–20 [59]–[60]; Censori v Adult Parole Board (2015) 254 A Crim R 455, 473 [61].
The respondent submitted that the second trial did not decide the ‘same question’ as the first trial as required by the authorities in order to show an issue estoppel.[26] The respondent submitted that the doctrine applied only when an issue relied on in the earlier proceeding is fundamental to the decision made in the later proceeding,[27] and that the issue determined in the earlier proceeding must be identical to that raised in the later proceeding.[28] No issue estoppel arose in the second trial, because the claims against the applicant in that proceeding related to different contracts than those against Mr Weis in the first trial. The second trial dealt with the sale and the transportation agreements for each house, for which the applicant was responsible and to which Mr Weis was not a party. The judge in the first trial made findings relating to the restumping agreements under which Mr Weis, and not the applicant, was responsible. The respondent further submitted that the applicant had made admissions that he was responsible under the sale and transportation agreements, and that the second trial was heard and determined on that basis.
[26]Forster v Legal Services Board (2013) 40 VR 587, 608 [100], citing Carl Zeiss Stiftung v Rayner & Keeler Ltd[No 2] [1967] 1 AC 853, 935.
[27]Blair v Curran (1939) 62 CLR 464, 531–3 (Dixon J) (‘Blair’).
[28]Ramsay v Pigram (1968) 118 CLR 271, 276–7 (Barwick CJ); Kuligowski v Metrobus (2004) 220 CLR 363, 379 [40].
In relation to the abuse of process argument, the respondent submitted that, in considering whether it is vexatious to bring two civil actions where one will lie, the court must consider whether there was a reasonable justification for bringing the second proceeding.[29] Here, the reason for the claims against the applicant and Mr Weis being heard separately was the applicant’s request to defer the proceeding as against him owing to his ill health. This was said to be a reasonable justification for conducting the second trial and to show that it would be oppressive and unfair to the respondent to uphold the applicant’s submission that there had been an abuse of process.
[29]Kermani v Westpac Banking Corporation (2012) 36 VR 130, 154 [97](13).
The respondent submitted that no prejudice flowed to the applicant as a result of the finding in the first trial that he and Mr Weis were not jointly liable under the contracts. The applicant never sought to argue that Mr Weis was jointly liable under the sale and transportation contracts. The second trial proceeded on the basis that Mr Weis was the applicant’s agent, as the first judge had found.
The High Court reviewed the principles governing issue estoppel in Tomlinson.[30] Issue estoppel ‘operates to preclude the raising in a subsequent proceeding of an ultimate issue of fact or law which was necessarily resolved as a step in reaching the determination made in the judgment’ in an earlier proceeding.[31] The principle applies to prevent an issue of fact or law which has been judicially determined from being raised afterwards between the same parties or their privies.[32]
[30](2015) 256 CLR 507, 515–20 [17]–[27] (French CJ, Bell, Gageler and Keane JJ).
[31]Ibid 517 [22] (French CJ, Bell, Gageler and Keane JJ).
[32]Blair (1939) 62 CLR 464, 531 (Dixon J); Tomlinson (2015) 256 CLR 507, 517 [22] (French CJ, Bell, Gageler and Keane JJ).
The parties directed some argument to the question whether the applicant and Mr Weis were privies. The arguments masked a mistaken premise in the issue estoppel argument, which was that there were here two proceedings. In fact there was a single proceeding which was, in effect, conducted by separate trials. Mr Weis and the applicant were parties at all times in the County Court. No question of one being the privy of the other arises.
Although there was a single proceeding, the first trial resulted in a judicial determination, binding on the parties, as to the liability of Mr Weis to the respondent for breach of contract. That matter having been fully heard and determined, there is no reason in principle why an issue estoppel could not arise, albeit later in the same proceeding, if a party were to seek to have the court make findings of fact or law contrary to a finding that was necessary to the earlier judicial determination.
The applicant contends that it was decided in the first trial that there had been a total failure of consideration in respect of all three contracts for the St Arnaud house, attracting an obligation on the part of the respective contractors to repay the amounts paid by the respondent under those contracts.[33] The amounts paid were allocated first to the sale and transportation agreements and secondly to the restumping agreements.
[33]Powlett [2014] VCC 405 [63].
It is true that the judge in the first trial made statements to this effect. However, the determination that was made in the first trial was that Mr Weis was liable under the restumping contracts and not under the other contracts. No orders were made in respect of the applicant’s liability, which was not in issue at the first trial. It was in no way necessary for the determination of the issues in the first trial for the judge to make any finding about the liability of the applicant. The judge’s observations as to the consequences of breach of the sale and transportation contracts, to which he had found that Mr Weis was not a party, were not relevant, still less necessary, to his conclusions as to the liability of Mr Weis. The judge plainly recognised this in the qualified way in which he expressed his conclusion that ‘the obligation to repay the [St Arnaud house] monies paid under those agreements rests with Mr Archibald or, at any rate, not with Mr Weis’.[34]
[34]Ibid.
It is true that the judge found, in the course of identifying the extent of the liability of Mr Weis, that he and the applicant were not jointly liable under the contracts, and were not liable as partners, on the basis that Mr Weis signed the sale and transportation contracts as the applicant’s agent. But the applicant never sought to have the second judge make any finding to the contrary, and the second trial proceeded on that very basis.
For these reasons the issue estoppel argument fails.
The abuse of process argument is also devoid of merit. In Kermani v Westpac Banking Corporation,[35] Robson AJA (with whom Neave and Harper JJA agreed) summarised the principles by reference to which an abuse of process may be identified:[36]
[35](2012) 36 VR 130.
[36]Ibid 154–5 [97]. See also Angeleska (known as Slaveska) v Victoria (2015) 49 VR 131, 172–174 [154]–[159]; Timbercorp Finance Pty Ltd v Collins [2016] VSCA 128 [225]–[228].
The guiding considerations are oppression and unfairness to the other party to the litigation and concern for the integrity of the system of administration of justice. Regard may be had to:
(a)the importance of the issue in and to the earlier proceeding, including whether it is an evidentiary or ultimate issue;
(b) the opportunity available and taken to fully litigate the issue;
(c) the terms and finality of the finding as to the issue;
(d) the identity between the relevant issues in the two proceedings;
(e)any plea of fresh evidence, including the nature and significance of the evidence and the reason why it was not part of the earlier proceeding;
(f)the extent of the oppression and unfairness to the other party if the issue was relitigated and the impact of the relitigation upon the principle of finality of judicial determination and public confidence in the administration of justice; and
(g)an overall balancing of justice to the alleged abuser against the matters supportive of abuse of process.
The procedure that was adopted in the present case facilitated the resolution of the claims against Mr Weis in order to accommodate the ill-health of the applicant. It was not the respondent’s decision to adopt the procedure which resulted. Nor was it in any way oppressive to the applicant. Accepting that abuse of process may be invoked more broadly than issue estoppel,[37] the applicant has not pointed to any unfairness to which he was exposed as a result of the liability of Mr Weis being first determined in his absence.
[37]Tomlinson (2015) 256 CLR 507, 518 [25] (French CJ, Bell, Gageler and Keane JJ).
The procedure that was adopted in this case was unorthodox but this Court was not informed of the full circumstances leading to its adoption. There were clearly risks associated with dividing the proceeding into two trials, each conducted in the absence of one of the two defendants who were both being sued under the same contracts. The second judge sought to ameliorate those risks by indicating before the trial that, in the absence of agreement between the parties, he would rehear the evidence and not be bound by the conclusions reached by the first judge as they applied to the applicant.[38] That approach, while readily understandable,
risked giving rise to inconsistent findings. In particular, it did not accommodate the prospect of an issue estoppel arising. However, that risk did not come to pass.
[38]Reasons [43].
Despite the difficulties which the procedure entailed, it has not been shown that it involved any abuse of process. The two trials were directed to the respective liability of two defendants. It could not be said that any claim was thereby relitigated, even if the underlying factual matrix was the same in each trial. The course was adopted for the benefit of the applicant, rather than so as to be oppressive of him. The administration of justice was not impaired in any way by the course that was taken.
Leave to appeal on proposed grounds 5 to 7 should be refused.
‘Distress’ damages (ground 1)
It will be recalled that the judge found that the respondent had been subject to ‘increasing pressure, both financially and emotionally’ as a result of the applicant’s failure to perform the contracts. The judge found that the court could award ‘modest compensation’ where a person suffers distress and anxiety as a consequence of a party’s breach of contract, and fixed an amount of $30,000 for ‘distress, anxiety and depression’.[39]
[39]Ibid [142]–[147]; see [27](g) above.
The applicant submitted that damages for distress, anxiety and depression were not recoverable in contract unless the object of the contract is to provide ‘pleasure, relaxation or freedom from molestation’.[40]
[40]Baltic Shipping Company v Dillon (1993) 176 CLR 344, 363 (Mason CJ) (‘Baltic Shipping’).
The respondent submitted that damages of this description can also be recovered where they proceed from physical inconvenience caused by the breach of contract.[41]
[41]Ibid 362–3, 365 (Mason CJ), 381 (Deane and Dawson JJ), 405 (McHugh J).
The respondent also quite properly pointed out that, as a consequence of pt VBA of the Wrongs Act 1958, damages for anxiety or stress cannot be recovered unless there is evidence of a ‘significant injury’ (which there was not in this case).[42] It is therefore convenient to begin by considering the application of pt VBA to this case.
[42]Thomas v Powercor Australia Ltd [2011] VSC 586 [116] (‘Thomas’); Lakic v Prior [2016] VSC 293 [157] (‘Lakic’).
Part VBA is entitled ‘Thresholds in relation to recovery of damages for non-economic loss’. Section 28LB defines ‘non-economic loss’ to mean any one or more of pain and suffering, loss of amenities of life and loss of enjoyment of life. The Part applies to claims for the recovery of damages for such loss, with presently immaterial exceptions.[43] It extends beyond claims in tort and applies to claims founded on breach of contract or any other cause of action.[44]
[43]Section 28LC.
[44]Section 28LC(4).
The critical provision is s 28LE, which provides that a person is not entitled to recover damages for non-economic loss ‘in respect of an injury to a person caused by the fault of another person’ unless the person injured has suffered ‘significant injury’. Section 28LB defines ‘injury’ to mean ‘personal or bodily injury’, including (relevantly) psychological or psychiatric injury and disease.
The concept of ‘significant injury’ is defined in s 28LF. It is not in issue that the respondent did not establish that she had suffered such an injury. The question is therefore whether the damages for ‘distress, anxiety and depression’ which were awarded were damages for ‘non-economic loss’ and, if so, whether it was loss ‘in respect of an injury’.
It has been held that a claim for damages that involves any component of mental distress, anxiety or stress (including as part of a claim for inconvenience) falls within these definitions such that pt VBA applies.[45] On that basis, pt VBA prevented the respondent from recovering the amount the judge awarded for distress, anxiety and depression. However, there is also authority that a claim for inconvenience alone, at least in tort, may be made without any claim for mental distress, anxiety or stress, provided at least that the inconvenience is of some significance.[46] Such a claim falls outside pt VBA because it is not ‘in respect of an injury’. As explained below, the respondent sought on appeal to justify the contractual damages awarded to her for distress, anxiety and depression on this basis instead. For the reasons given below, even if such a course were now to be permitted (which may be doubted), the claim would fail.
[45]Thomas [2011] VSC 586 [116]; Lakic [2016] VSC 293 [157]; see also, in relation to the corresponding New South Wales provision, New South Wales v Ibbett (2005) 65 NSWLR 168 [121]–[125]; Insight Vacations Pty Ltd v Young (2010) 78 NSWLR 641, 644 [78] (Spigelman CJ), 649 [125] (Basten JA), 655 [175] (Sackville AJA); New South Wales v Corby (2010) 76 NSWLR 439, 443–4 [21]–[23]; New South Wales v Williamson [2011] NSWCA 183 [67] (Hodgson JA, Macfarlan JA agreeing).
[46]Thomas [2011] VSC 586 [117]–[132] and the cases there cited.
In this context, the respondent submitted that damages for physical inconvenience may be recovered, despite pt VBA, if that inconvenience is of ‘some significance’.[47] She identified a number of cases in which damages for inconvenience, anxiety and distress have been awarded in a building and construction context, in claims for both breach of contract and tort.[48] She also relied on other cases where similar awards had been made.[49]
[47]Ibid [129]–[130].
[48]Perry v Sidney Phillips & Son [1982] 1 WLR 1297, 1299, 1302–3 (Lord Denning MR) (‘Perry’); Brickhill v Cooke [1984] 3 NSWLR 396, 400 (‘Brickhill’); Clarke v Shire of Gisborne [1984] VR 971, 994–5, 996, 997, 999 (‘Clarke’); Campbelltown City Council v Mackay (1989) 15 NSWLR 501, 511–12 (McHugh JA) (‘Campbelltown City Council’); Watts v Morrow (1991) 1 WLR 1421, 1441–1443 (‘Watts’); Carborundum Realty Pty Ltd v RAJA Archicentre Pty Ltd [No 1] (1993) Aust Torts Reports 81–228 (‘Carborundum Realty’); Boncristiano v Lohmann [1998] 4 VR 82, 94–5 (‘Boncristiano’).
[49]Muirhead v Kingborough Council [No 2] [2000] TASSC 127 [15] (‘Muirhead’); Nouvelle Homes Pty Ltd v G & M Smargiassi [2008] WASC 127 [76]–[82], [86], [100] (‘Nouvelle Homes’); Willshee v Westcourt Ltd [2009] WASCA 87 [78]–[79] (‘Willshee’).
The general rule is that damages for anxiety, disappointment and distress are not recoverable in an action for breach of contract.[50] The principal exceptions to that rule are where the contract is one whose object is to provide enjoyment, relaxation or freedom from molestation,[51] and where the damages proceed from physical inconvenience caused by the breach.[52] It is the latter exception upon which the respondent relied.
[50]Baltic Shipping (1993) 176 CLR 344, 361–3, 365 (Mason CJ), 380–1, 383 (Deane and Dawson JJ), 387 (Gaudron J), 405 (McHugh J).
[51]Ibid.
[52]Ibid 365 (Mason CJ), 383 (Deane and Dawson JJ), 387 (Gaudron J), 405 (McHugh J).
The respondent pointed to several cases in which damages for anxiety, distress and disappointment have been awarded following breach of a building contract giving rise to physical discomfort or inconvenience.[53] However, all of these cases involved physical imposition upon the plaintiff, whether by virtue of having to live with offensive odours or a leaking roof, or in unsanitary or dirty conditions, or being obliged to vacate the defective premises. Nothing of this kind was alleged in the present case, where the respondent’s premises were intended for the conduct of a business rather than her own occupation.
[53]Perry [1982] 1 WLR 1297, 1299, 1302–3 (Lord Denning MR); Watts (1991) 1 WLR 1421, 1441–1443; Boncristiano [1998] 4 VR 82, 94–5; Nouvelle Homes [2008] WASC 127 [76]–[82], [86], [100]; Willshee [2009] WASCA 87 [78]–[79]; Campbelltown City Council (1989) 15 NSWLR 501, 511–12 (McHugh JA). The last case was based on tort rather than contract.
The respondent also relied on cases in which damages were awarded for inconvenience or discomfort as a distinct head of damage.[54] All of the cases relied upon were claims in tort, rather than contract. However, damages may also be recovered for inconvenience flowing from a breach of contract. In Clarke v Shire of Gisborne, Gobbo J concluded that the right to recover damages in contract for physical inconvenience was clearly recognised.[55]
[54]Brickhill [1984] 3 NSWLR 396, 400; Clarke [1984] VR 971, 994–5, 996, 997, 999; Carborundum Realty (1993) Aust Torts Reports 81–228; Muirhead [2000] TASSC 127 [15].
[55][1984] VR 971, 996.
It was not there necessary to decide the scope of this head of damage because Clarke was not a contract case. But the issue arose for consideration by the Court of Appeal in Boncristiano v Lohmann.[56] In that case, general damages were awarded for ‘inconvenience’ occasioned by a builder’s breach of contract. The Court took this to include damages for deleterious consequences to health flowing from the physical inconvenience.[57] Winneke P, with whom Charles and Batt JJA agreed, said:
It now appears to be accepted, both in England and Australia, that awards of general damages of the type to which I have referred can be made to building owners who have suffered physical inconvenience, anxiety and distress as a result of the builders’ breach of contract, but only for the physical inconveniences and mental distress directly related to those inconveniences which have been caused by the breach of contract.[58]
[56][1998] 4 VR 82.
[57]Ibid 94.
[58]Ibid.
The case illustrates the difficulty in separating a claim for inconvenience from one for distress and anxiety. But in any event, the respondent’s case did not satisfy the above test. The ‘inconveniences which have been caused by the breach of contract’ for these purposes are not the time and trouble inevitably spent as a result of dealing with the consequences of any breach of contract.[59] They are the actual disruption and physical imposition resulting from the building and construction works not having been performed as agreed. In the present case, there was no evidence of such inconvenience having been caused by the applicant’s breaches of contract, nor did the judge make any finding to that effect. The position is not assisted by seeking to rely on ‘inconvenience’ as a distinct head of damage. Moreover, that was not a claim made or upheld at trial.
[59]See Falko v James McEwan & Co Pty Ltd [1977] VR 447, 453.
In the absence of any evidence, or finding, that the applicant’s breaches of contract caused any inconvenience to the respondent of the kind required, the award of damages for anxiety, distress and depression must be set aside. Ground 1 should therefore be upheld.
Availability of loss of income and opportunity damages — Daylesford cottage (ground 2)
The applicant submitted that the judge erred in awarding $24,000 ($40,000 less a discount of 40 per cent) in damages for loss of income in respect of the existing cottage on the respondent’s Daylesford property. He submitted that the respondent’s financial difficulty with respect to that property was not in the parties’ contemplation at the time they entered into the contracts, so that he could not have foreseen this loss of income as a consequence of his breach. He also submitted that the claimed loss of income on the Daylesford property was not sufficiently established.
The respondent submitted that the trial judge had made the following findings, none of which were challenged on appeal: the respondent informed the applicant of what she had achieved in renting the existing cottage; her financial difficulties were caused by the applicant’s failure to deliver the houses to her Daylesford property; she sold the existing cottage on her Daylesford property to pay her bills; she could not move the Niddrie house on to her Daylesford property until she sold the existing cottage and her home in St Kilda; and she would not have incurred losses from the sale of these two assets had the applicant completed the contracts.[60] She relied in particular on evidence that the applicant knew that she meant to rent the houses out as soon as possible, and that he knew she was buying them to expand her existing business. She also gave evidence that it was the applicant’s idea for her to buy the second house, and that she had to apply to borrow more money in order to do that.
[60]Reasons [30], [64]–[65], [86], [95], [137].
The respondent submitted that, given the applicant’s knowledge of the respondent’s business from the existing cottage and her intention to expand that business with two new houses, a reasonable person in the applicant’s position would have realised that loss of income was likely to result from a failure to perform the contracts. As a result, the loss may be recovered under either the first or the second limb of the rule in Hadley v Baxendale.[61]
[61](1854) 9 Ex 341; 156 ER 145, 151. See C Czarnikow Ltd v Koufos [1969] 1 AC 350, 385 (Lord Reid) (‘C Czarnikow’); Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64, 99 (Brennan J) (‘Amann Aviation’); National Australia Bank v Nemur Varity Pty Ltd (2002) 4 VR 252, 269 [44] (Batt JA).
In relation to quantum, the respondent submitted that it was sufficient to establish that the applicant’s breach had caused the loss of a commercial opportunity that had some value. She relied on Sellars v Adelaide Petroleum NL in submitting that the value of the opportunity was to be ascertained by an assessment of the prospects of the opportunity being realised.[62] The trial judge had correctly relied on objective evidence of the income earned from the cottage over a period of four years, the letter from the real estate agent and the respondent’s uncontradicted evidence that her accommodation business was running successfully.
[62]Sellars v Adelaide Petroleum NL (1994) 179 CLR 332, 355 (Mason CJ, Dawson, Toohey and Gaudron JJ).
Damages are awarded for breach of contract in order to put the plaintiff in the position they would have been in if the contract had been performed.[63] The plaintiff must prove that the loss suffered resulted from the breach and that, when the contract was made, such loss was reasonably foreseeable as likely to result from such a breach.[64] That means that the loss must be such as may fairly and reasonably be considered either as arising naturally from such a breach, that is, in the usual course of things, or such as may reasonably be supposed to have been in the contemplation of both parties, when they made the contract, as the probable result of its breach.[65]
[63]Tabcorp Holdings Ltd v Bowen Investments Pty Ltd (2009) 236 CLR 272, 286 [13]; Amann Aviation (1991) 174 CLR 64.
[64]Reg Glass Pty Ltd v Rivers Locking Systems Pty Ltd(1968) 120 CLR 516, 523 (Barwick CJ, McTiernan and Menzies JJ).
[65]Hadley v Baxendale (1854) 9 Ex 341, 354; 156 ER 145, 151; Amann Aviation(1991) 174 CLR 64, 91–2 (Mason CJ and Deane J), 98–9 (Brennan J); Baltic Shipping (1993) 176 CLR 344, 368 (Brennan J).
This test of remoteness has been expounded as presenting the question whether, on the information available to the defendant when the contract was made, the defendant should, or a reasonable person in the defendant’s position would, have realised that such loss was sufficiently likely to result from the breach of the contract to make it proper to hold that the loss flowed naturally from the breach, or that loss of that kind should have been within the defendant’s contemplation.[66]
[66]C Czarnikow [1969] 1 AC 350, 385 (Lord Reid); Burns v MAN Automotive (Aust) Pty Ltd (1986) 161 CLR 653, 667 (Wilson, Deane and Dawson JJ); Amann Aviation (1991) 174 CLR 64, 91–2 (Mason CJ and Deane J), 99 (Brennan J); Baltic Shipping (1993) 176 CLR 344, 368–9 (Brennan J); Unity Insurance Brokers Pty Ltd v Rocco Pezzano Pty Ltd (1998) 192 CLR 603, 613 [24] (McHugh J); Kenny & Good Pty Ltd v MGICA (1992) Ltd (1999) 199 CLR 413, 435 [46] (McHugh J).
A useful application of these principles for present purposes was undertaken by the High Court in Burns v MAN Automotive (Aust) Pty Ltd.[67] In that case, the plaintiff acquired a vehicle on hire purchase from the defendant, who falsely warranted that it had been fully reconditioned. The defendant knew that the plaintiff intended to use the vehicle in his business and should also have known that he was not in affluent circumstances. The basis of that finding is not revealed in the judgments, although Brennan J stated that the defendant knew that the plaintiff depended on the vehicle to earn his income.[68] The vehicle gave constant trouble after its purchase until the plaintiff eventually ascertained that the engine had not been reconditioned and required expenditure for its repair which he could not afford. He continued to operate his business, at a loss. He was denied damages for loss of profits in respect of the period after which it became clear that the engine had not been reconditioned.
[67](1986) 161 CLR 653.
[68]Ibid 670 (Brennan J).
Wilson, Deane and Dawson JJ held that such damages were not recoverable because they went beyond the point at which it was reasonable to contemplate damage as flowing from the breach. Notwithstanding the plaintiff’s impecuniosity, it was reasonable to expect that he would continue to run his business before he knew about the false representation about the state of the engine, but it was not reasonable to contemplate that, after discovering the misrepresentation, he would continue to operate the business at a loss instead of terminating the contract and obtaining compensation for the breach; he was not ‘locked into a situation from which he could not escape’.[69] Gibbs CJ reached the same result on the basis that the plaintiff should at that point have mitigated his loss; again, he was not ‘locked’ into the business. He agreed with the plurality that damage might reasonably be in the contemplation of the parties and be recoverable, even though the plaintiff’s impecuniosity had contributed to the loss.[70]
[69]Ibid 668 (Dawson, Deane and Wilson JJ).
[70]Ibid 658, 660. Brennan J dissented on the basis that the plaintiff had a hire-purchase debt to repay which he could not have done without continuing to run the business: 676–7.
The case demonstrates that damages for breach of contract may be recoverable notwithstanding that the impecuniosity of the plaintiff has contributed to the loss. It follows that the fact that the present respondent was driven to sell the Grenville Street property as a result of financial pressure is not a bar to recovery of the profits thereby lost in connection with the business she had operated using that property. As explained further below, while each case naturally depends on its own facts, the case also illustrates the choices a plaintiff may face as to the conduct of a business following the impact of the defendant’s breach of contract.
The remoteness inquiry commences by identifying the information that was available to the defendant when the contract was made. In the respondent’s statement of claim she alleged that she had informed the applicant and Mr Weis that she was a single mother and paying a mortgage for the Grenville Street property and her property in St Kilda.[71] Her evidence at trial did not go so far. The relevant passage is as follows:
[71]This allegation was pleaded in connection with the claim for damages for distress, anxiety and depression. Although no claim for loss of profits in respect of the Grenville Street house was specifically pleaded, the claim was made at trial and no point was taken by the applicant in that regard.
HIS HONOUR: … Was there any discussion with Mr Weis or Mr Archibald about what you were getting the houses for?
MS POWLETT: Always, Your Honour. When we first met on the block we sat on the verandah of my already existing business and I explained to them that this is what I did; that I had purchased this as a removable house and I had renovated it myself actually at that time, with the help of a builder but I did a lot of the work myself on that one. I remember sitting in the sunshine with Kevin while he explained to me how that sounded great and how much I reminded him of his daughter and he wished he had children like me who were so, you know, capable of looking after themselves. We sat there and looked at the block and I said ‘Well this is what I want to do. I want to put a house on here’, and that was the St Arnaud house. As it came up that I was able to get a bank loan it was actually Kevin’s suggestion that I put a second house on, while they were doing the first house, and at the time, Your Honour, it seemed to make sense. So I went and applied for even more money because obviously to get a second house I needed to have a little bit more to work with. They were very aware of the urgency of getting the houses on as soon as possible so that I could start making income on them. …
Although the judge did not make explicit findings in relation to this matter, the evidence appears not to have been challenged. It established that, before the six contracts were signed, the applicant knew that the three houses were intended to be operated together as a business, and that the respondent needed to take out a bank loan for the purpose of funding the additional houses. There is no evidence that the applicant was aware that there was an existing loan on the Grenville Street property. However, he was told that the respondent needed to borrow to expand the business. A reasonable person in the circumstances would apprehend that, without earning income from the new homes, the respondent might not be able to meet the repayments of the loans sustaining the business.
It is a short step then for a reasonable person to perceive that, by virtue of that situation, the respondent might eventually be driven to divest assets of the business in order to meet her repayment obligations. If that occurred, she would lose the income she would have earned from those assets. Such a loss ought reasonably to have been in the applicant’s contemplation by virtue of what he knew about the business and the respondent’s circumstances. In effect, the respondent did what the plaintiff in Burns did not do. Rather than continue to conduct her business despite the impact of the applicant’s breaches of contract, she took steps to limit the damage by selling part of the business. In Burns it was not reasonably contemplated that the plaintiff would continue to operate a loss-making business. For the reasons given, here it was reasonably contemplated that the respondent might suffer loss as a result of reducing the size of her business to meet her loan repayments.
For these reasons, the respondent was entitled to damages for the loss of income and opportunity which she suffered in respect of the Grenville Street property.[72]
[72]Damages were not claimed in respect of the sale of the St Kilda property.
The applicant’s challenge to the calculation of damages should also be rejected. The respondent advanced evidence of the income the property had earned. That evidence was uncontradicted and the judge was entitled to rely on it as a basis for calculating the likely future loss incurred.
Ground 2 therefore fails.
Assessment of loss of income and opportunity damages — Niddrie and St Arnaud houses (ground 4)
The parties accepted that there was a calculation error in respect of the remaining loss of income claims. The respondent had claimed $117,746 in respect of income she expected to receive from the two purchased houses. That figure was based on combined income of $177,746,[73] less anticipated renovation costs of $60,000. The judge applied a 40 per cent discount, as explained above, but applied it to the $177,746 figure rather than first reducing that amount by $60,000.[74]
[73]$177,746 was used rather than $177,766: see n 21 above.
[74]The judge referred to the $60,000 renovation cost also in the context of assessing the cost of repairs to the Niddrie house as a result of its deterioration (Reasons [130]), but treated the renovation expense as a distinct cost which the respondent would have incurred in any event.
The parties differed as to the consequences of this omission. The applicant contended that the figure of $60,000 needed to be deducted from the anticipated income. The respondent agreed as to the deduction but submitted that, had the judge realised his mistake, he might well have discounted the income figure by an amount less than 40 per cent, because that figure may have taken account of renovation costs.
The judge did not expressly refer to renovation costs in explaining the discount. He referred to the ‘other costs which would ordinarily be expected to be involved in letting holiday accommodation including advertising, booking fees, maintenance etc’ and added that it was appropriate to allow a further discount ‘for exigencies, including the possibility that the letting of the cottages would take a period of time before the level of occupation of the existing cottage was reached’.[75] Those descriptions do not suggest that the judge had in mind the start-up renovation costs which the respondent had anticipated in her claim; the judge was describing the ongoing costs of running the business. Since he had expressly referred to the cost of renovations earlier in the judgment,[76] the better view is that the omission of the $60,000 was simply an arithmetical error and the full amount should now be deducted from the anticipated income figure.
[75]Reasons [140].
[76]Ibid [133].
Next, the applicant submitted that the calculation of damages in respect of the respondent’s loss of income and opportunity in respect of the Niddrie and St Arnaud houses was not supported by evidence about the size and nature of the different houses, and the rental income they were therefore likely to generate, or about the costs of running the houses as rental accommodation. The evidence led comprised an appraisal letter from a real estate agent concerning the existing cottage on the Daylesford property, and the respondent’s previous income from that cottage over a period of four years. It was submitted that this was insufficient evidence from which to extrapolate to the respondent’s future potential income from the St Arnaud and Niddrie houses.
The applicant also submitted that the judge had referred to different amounts of estimated weekly rental in respect of the St Arnaud house (variously $300, $340 and $350 per week) in different parts of the judgment, leading to error in the calculation.
The respondent submitted that the trial judge relied on evidence of the income earned from the existing cottage on the respondent’s Daylesford property, the real estate agent’s letter estimating the rental income from that property and the respondent’s evidence that she was intending to use the St Arnaud house and the Niddrie house as part of her accommodation business. This evidence established the existence of her commercial opportunity and allowed the judge to assess damages for the loss of that opportunity. Given that the houses were to be placed in the same location as the existing cottage (on the respondent’s Daylesford property), the income from the existing cottage was a reasonable comparison for that which could be expected to be generated from those houses. The judge allowed for an income for the Niddrie house equivalent to that of the existing cottage and an income for the St Arnaud house substantially less than that. Finally, the income calculated by the judge in respect of the St Arnaud house and the Niddrie house was reduced by a substantial discount of 40 per cent to reflect the period of time taken to reach the level of occupation of the existing cottage.
The respondent’s submissions should be accepted. The real estate agent’s letter was a sound basis for estimating the likely rental income from the St Arnaud house, and it was open to use the evidence of rental income from the existing house as a basis for estimating the likely rental from the Niddrie house as similar accommodation. In both cases, the judge was assessing the damages for deprivation of a commercial opportunity, by reference to his assessment of the prospects of success if that opportunity had been pursued, in accordance with the principle in Sellars v Adelaide Petroleum NL.[77]
[77](1994) 179 CLR 332, 355 (Mason CJ, Dawson, Toohey and Gaudron JJ).
Nothing turns on the mention by the judge of different figures in his reasons as the likely rental for the St Arnaud house. Although his calculation was described as being based on the $300 weekly amount, the arithmetic reveals that he in fact used the $350 figure referred to when explaining the calculation. On that basis, the reference to the $300 figure can be seen to be a typographical error. While the judge did not explain why the $340 estate agent figure was not used, the difference of $10 is marginal and readily explicable by the lapse of time since the agent’s valuation was obtained.
However, the appeal needs to be upheld under this ground in so far as the omission to deduct the $60,000 renovation expenses has been agreed to be in error. The result is that the damages for loss of income and opportunity should be reduced. The total lost income, less the $60,000, would have been $117,766.[78] When 40 per cent is deducted for the expenses and contingencies identified by the judge, the correct figure is $70,659.60. It may be assumed that the $60,000 deduction for renovations ought to have applied in equal shares to the two houses, meaning that the amounts recovered are $10,248 in respect of the St Arnaud house and $60,411.60 in respect of the Niddrie house.
[78]Rather than $117,746: see n 21 above.
Conclusion
The result is that the heads of damage, when added together, total $153,945.34 (a reduction of $30,000 under ground 1 and $36,000 under ground 4, adjusted by $12 to correct an arithmetical error).[79] This reduction gives rise to a final matter for resolution.
[79]Ibid.
It will be recalled that the applicant accepted that, if his issue estoppel or abuse of process arguments were accepted, he was bound to repay to the respondent the amounts she had paid in respect of the sale and transportation of the St Arnaud house (in respect of which there was a total failure of consideration). So much was admitted in the applicant’s defence. The same result must follow if the damages established by the respondent in respect of the St Arnaud house are less than the amount she paid. It is therefore necessary to make that comparison.
First, it is necessary to apportion the amounts paid by the respondent as between the two houses. This matter was addressed in the first trial and there is no reason to adopt any different approach now. The first judge held that $128,950 had been paid, as to which $75,229 was attributable to the St Arnaud house.[80] Deducting the sum of $3,179 paid and recovered in the first trial in respect of restumping, the amount paid for sale and transportation of the St Arnaud house was $72,050.
[80]Powlett [2014] VCC 405 [66].
Adopting the same proportionate allocation in respect of the damages awarded, the respondent has succeeded in establishing claims in respect of the St Arnaud house for:
(a) interest on borrowings in the proportionate amount of $8,599.70;
(b) additional or duplicated expenses in the proportionate amount of $3,234.93;
(c) loss of income and opportunity in respect of the St Arnaud house in the amount of $10,248; and
(d) loss of income and opportunity in respect of the Grenville Street house in the proportionate amount of $14,001.52.
The total established is therefore $36,084.15, substantially less than the $72,050 which the respondent paid to the applicant for the house. It is fundamental that a party cannot recover damages by way of compensation for breach of contract as well as full restitution for that which the party has paid under the contract.[81] Equally, it would be unjust for the plaintiff to recover a sum less than the amount paid under the contract, admitted to be due to her.
[81]Baltic Shipping (1993) 176 CLR 344, 359 (Mason CJ, Toohey J agreeing), 379–80 (Deane and Dawson JJ), 387 (Gaudron J), 392–3 (McHugh J).
For that reason, the award of damages should be adjusted so that the sum of $153,945.34 previously identified as the total amount of damages is reduced by $36,084.15 and then increased by $72,050.
The appeal should therefore be allowed and judgment should be entered in favour of the respondent in the substituted amount of $189,911.19.
The second judge awarded interest on the judgment sum other than that amount awarded for interest on borrowings (which was $14,740.74) and damages for distress, anxiety and depression, from 20 June 2013. No challenge was made to that approach, which should be applied to the reduced judgment sum. On that basis, interest should be awarded on the sum of $175,170.45 from 20 June 2013 to the date of judgment in this Court.
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