Balog Investments Pty Ltd v Colliers Jardine (NSW) Pty Ltd

[1995] FCA 497

IN THE FEDERAL COURT OF AUSTRALIA )

)No. NG20 of 1995

NEW SOUTH WALES DISTRICT REGISTRY )
  )
GENERAL DIVISION                 )

ON APPEAL FROM A JUDGE
             OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN:BALOG INVESTMENTS PTY LIMITED (ACN 000 280 384) and J DAN PTY LIMITED (ACN 000 138 072)

Appellants

AND:COLLIERS JARDINE (NSW) PTY LIMITED (ACN 001 481 681)

Respondent

CORAM:WILCOX, DRUMMOND and SACKVILLE JJ

PLACE:    SYDNEY
DATE:     24 MAY 1995

EXTEMPORE REASONS FOR JUDGMENT

THE COURT: In the course of a lengthy and careful judgment the learned trial Judge considered several bases of liability advanced to her by the applicant, Colliers Jardine NSW Pty Limited. She rejected all but one, the applicant's claim that the conduct of the respondents, Balog Investments Pty Limited and J. Dan Pty Limited, was misleading or deceptive conduct within the meaning of s.52 of the Trade Practices Act 1974. The appellants, the respondents at first instance, do not now challenge the trial Judge's finding against them on this basis, but they say that the applicant did not rely upon this misleading conduct and that, in any event, it sustained no damage.

The applicant below, the respondent before us, not only presses the causes of action rejected at the trial but says that her Honour erred in awarding only $126,000 damages rather than the sum of $252,000 which was sought; or, as we think more correctly, $247,000 being 2 percent of the net price after deducting commission. We are of the opinion that the s.52 claim must succeed and in the sum of $247,000; so it is unnecessary for us to consider the other causes of action relied upon by the applicant.

There was clear evidence of reliance.  In his affidavit of 24 September 1993, Mr A.K. South, the senior officer of the applicant involved in the transaction, said:

"50.If I had known of Country Comfort's right of first refusal before 16 July 1992 I would have immediately taken steps to clarify with Mr Balog the position in relation to Colliers Jardine's commission.  If necessary, Colliers Jardine would have required the execution of a written agreement confirming its entitlement to be paid commission on the sale of the Hotel in the event that Country Comfort exercised its right.

51.If I had known of Country Comfort's right of first refusal during my negotiations with Mr Landrey, I would have informed Country Comfort that Mr Landrey's interest was primarily as an owner, not an operator and that there was therefore no reason for Country Comfort to exercise its right.  By the time I learned of Country Comfort's right, there was no time for me to prevent Country Comfort from purchasing the Hotel because Mr Landrey's offer to purchase the Hotel was based on RHM or himself operating the Hotel and Country Comfort did not wish to lose its presence in Sydney's Central
Business District.  With more time, I would have been able to negotiate an agreement between Mr Landrey and Country Comfort for Country Comfort's management of the Hotel under Mr Landrey's ownership."

Mr South was not cross examined on this evidence.  Her Honour was clearly entitled, if not bound, to accept it. 

In relation to the quantum of damages, the trial judge reviewed the relevant authorities and said:

"In the present case, I am satisfied that the respondents' omission to inform the applicant of Country Comfort's right of first refusal, meant that the applicant was deprived of the opportunity to negotiate terms of the second agency agreement, whereby it would be entitled to commission if Country Comfort exercised its right of first refusal.  However, I am not satisfied that the applicant would have been successful in negotiating the same rate of commission as was specified in the second agency agreement.  Mr Balog presented as a person who would always seek to achieve the best bargain possible.  His conduct in relation to the various offers for the purchase of the property was indicative of that.  Mr South gave evidence that the 2% rate specified in the agency agreement was an average rate for such contracts, with the rate varying between 1% and 3%.  Thus it was possible that the respondents would seek to negotiate a lower sum than that specified in the agency agreement as the commission payable should Country Comfort purchase the hotel pursuant to its right of first refusal.  It was also possible, and again I consider likely, that Mr South would have agreed to the lower percentage of 1% to ensure that the applicant's work was remunerated should Country Comfort purchase.  Accordingly, I consider that the applicant is entitled to damages calculated on the basis of 1% of the sale price to Country Comfort."

With respect to her Honour, it seems to us that this
passage mis-states the critical question.  At least in terms, the question was not whether the applicant had demonstrated that it "would have been successful in negotiating the same rate of commission as was specified in the second agency agreement" that is two per cent.  The question, rather, was that identified by Mason CJ and Dawson, Toohey and Gaudron JJ in Sellars v Adelaide Petroleum No Liability (1994) 179 CLR 332 at 355, namely, what was the value of the loss of the opportunity of doing either of the things deposed to by Mr South. In our view the value of that loss was $247,000, an amount equal to two per cent of the net sale price.

It is noteworthy that, as late as July 1992, Mr Balog accepted that the applicant would be entitled to commission at this rate if Country Comfort purchased the freehold pursuant to its right of first refusal.  If that was his position in July, it is logical to infer that it would also have been his position in March when the second agency agreement was being negotiated.  At that time he had more need of Collier Jardine's continuing interest in the property than in July, when Mr Landrey was known to be willing to exchange contracts at an acceptable price.  It seems apparent that Mr Balog changed his mind at the last moment when he perceived an opportunity of cutting Collier Jardine out of its promised commission. 

Furthermore, the logic of the situation suggests that, if the matter had been raised in March, the parties would have agreed that 2 percent commission would be payable to Collier Jardine if, as a result of that company finding a purchaser other than Country Comfort, Country Comfort defensively decided to exercise its right of first refusal.     Plainly, Country Comfort was not minded to purchase the freehold before there was a prospect of a purchase by someone else who might terminate its management arrangement.  If Country Comfort were persuaded to change its position because of Collier Jardine's activities, it would have been logical for the parties to have decided that Collier Jardine had effectively earned its commission.  The identity of the purchaser made no difference to the vendors, provided the sale price and conditions were the same.  From Collier Jardine's point of view, it seems to us highly unlikely that the company would have been prepared to accept a situation where it was required to devote time and resources to finding a purchaser with the prospect of being deprived of its agreed commission because, stimulated by the result of its activities, Country Comfort decided to exercise its right of first refusal.

Sellars requires the determination of probabilities. The result we have indicated applies a view that the probability of agreement on a commission of 2 per cent amounted to 100 per cent, that is virtual certainty.  This is in fact our assessment of the position. 

If the determination of damages depended upon the trial judge's assessment of conflicting evidence, it would be inappropriate for us to interfere.  However, our view depends on evidence that was undisputed at the trial and her Honour's own findings. 

The appeal should be dismissed.  The cross appeal should be allowed and the order made by the trial judge should be amended so as to substitute for the figure of $126,000 a figure of $247,000.  The appellants must pay the costs of the appeal and cross-appeal.

[Counsel addressed regarding pre-judgment interest.]

The matter of pre-judgment interest has been raised by Mr Simpkins.  This was sought in the filed Application.  Her Honour made no order in respect of that matter and it was not dealt with in the notice of cross-appeal.  But Mr Simpkins has sought leave to amend the notice of cross-appeal to cover this.  The application is not opposed and we grant leave.  The Court feels that the appropriate way in which to deal with pre-judgment interest is to take a period of 30 months, allowing interest on $247,000 at 10 per cent per annum.  That amounts to $61,750. 

Accordingly, the order of the Court will be that the judgment be varied by substituting for the figure of $126,000 the figure of $308,750.   The order for costs has already been made.  The Court will now adjourn.

I certify that this and the preceding six (6) pages
are a true copy of the Reasons for Judgment
of the Court.

Associate:

Dated:    24 May 1995

APPEARANCES

Counsel for the Appellant:           W G Hodgekiss & G A Moore

Solicitors for the Appellant:             D C Balog & Associates

Counsel for the Respondent:          J B Simpkins

Solicitors for the Respondent:       Minter Ellison Morris Fletcher

Date of hearing:  24 May 1995