Barrington Tops Developments Pty Ltd v Low

[2008] NSWSC 832

CITATION:	Barrington Tops Developments Pty Ltd v Low [2008] NSWSC 832
HEARING DATE(S):	29 & 30 April 2008, 16 May and 5 June 2008
JUDGMENT DATE :	14 August 2008
JURISDICTION:	Equity
JUDGMENT OF:	Hamilton J
DECISION:	That plaintiff had committed a breach of contract. Damages assessed at $230,000.
CATCHWORDS:	CONTRACTS [120] - General contractual principles - Construction and interpretation of contracts - Other matters – Whether a term for the carrying out of a subdivision or the sale of certain lots was an absolute promise – Whether a term should be implied that the obligation imposed was only to use reasonable endeavours.
LEGISLATION CITED:	Community Land Development Act 1989 Environmental Planning and Assessment Act 1979 s 80(3)
CATEGORY:	Principal judgment
CASES CITED:	Butt v M’Donald (1896) 7 QLJ 68 Codelfa Construction Proprietary Limited v State Rail Authority of New South Wales (1982) 149 CLR 337 Day v United States 245 US 159 (1917) Mackay v Dick (1881) 6 App Cas 251 Royal Botanic Gardens and Domain Trust v South Sydney Council (2002) 76 ALJR 436 Scanlan’s New Neon Limited v Tooheys Limited (1943) 67 CLR 169 Secured Income Real Estate (Australia) Limited v St Martins Investments Proprietary Limited (1979) 144 CLR 596 Taylor v Caldwell (1863) 3 B&S 826; 122 ER 309
TEXTS CITED:	30 Williston on Contracts (4th ed, 2004) [77:38] Carter, Peden and Tolhurst, Contract Law in Australia (5th ed, 2007) [33-03] Seddon and Ellinghaus, Cheshire and Fifoot’s Law of Contract (9th Aust ed, 2008) [10.40]
PARTIES:	Barrington Tops Developments Pty Limited (P) Stephen Thomas Low (D)
FILE NUMBER(S):	SC 5999/06
COUNSEL:	R J Colquhoun (P) P T Russell (D)
SOLICITORS:	Borthwick Wilson & Mitchell (P) W J Enright & Prentice (D)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

HAMILTON J

THURSDAY, 14 AUGUST 2008

5999/06 BARRINGTON TOPS DEVELOPMENTS PTY LTD v STEPHEN THOMAS LOW

JUDGMENT

1 HIS HONOUR: The subject matter of these proceedings is whether there has been a breach by the purchaser of a term of a contract for the sale of land (“the property”) at Clarence Town near Dungog. The central question is whether the substance of a term concerning the carrying out of a subdivision of the property and sale of certain lots was an absolute promise to carry out and register the subdivision and sell those lots within two years of the completion of the contract or whether its substance was only that the purchaser would act reasonably and use its reasonable endeavours to have the appropriate subdivision approved, registered and sold within that time.

FACTS

2 The vendor is the defendant, Stephen Thomas Low, who is a member of the Dungog Shire Council (“the Council”) and was until September 2006 the Mayor. The purchaser, the plaintiff, is Barrington Tops Developments Pty Ltd, of which company Michael Richard Downes is the sole director.

3 Until about 10 March 2004, the defendant was the registered proprietor of Lot 26 in DP 1007844 (“Lot 26”), Lot 65 in DP 753216 (“Lot 65”), Lot 101 in DP 789655 (“Lot 101”) and Lot 2 in DP 581904 (“Lot 2”), being land on Limeburners Creek Road, Clarence Town. The property comprised the whole of Lot 26, Lot 65 and Lot 2 and part of Lot 101.

4 In about 1999 or 2000, the plaintiff carried out a subdivision development under the provisions of the Community Title legislation of 1989 known as “The Meadows”, which is situated north of and adjoining Lots 65 and 101.

5 In 2002, there were negotiations between the defendant and Mr Downes for the sale by the defendant to the plaintiff of the property, so that the plaintiff could carry out a Community Title subdivision development of the property and sell lots in that subdivision.

6 Prior to the exchange of contracts there is no doubt that there were conversations between the defendant and Mr Downes concerning the transaction. It was common ground that the plaintiff’s purpose in purchasing the property was to carry out a development whereby the property would be subdivided under the Community Title legislation and the subdivided lots sold. Part of the subject matter of the discussions was how the purchase price of $860,000 would be paid.

7 During a meeting of 24 October 2002, the defendant and Mr Downes agreed that the method of payment of the consideration for the purchase of that land would be that the plaintiff would pay $400,000 to the defendant on completion and transfer three lots from the development to the defendant on completion of the subdivision in two years.

8 Thereafter, agreement was reached to vary that part of the consideration to be provided by the plaintiff relating to the transfer of the three lots. In lieu of transferring the three lots, the plaintiff would pay to the defendant at the end of two years after completion of the contract $460,000 interest free together with any additional amount received by the plaintiff over $460,000 on the sale of the three lots.

9 Whilst there was conflicting evidence as to the precise terms of these conversations, Mr Downes agreed that he said to Mr Low in November 2002, “I will pay you the difference between the sale price of those lots and $460,000 by way of compensation”.

10 On the evidence, at no time during the negotiations between Mr Downes and the defendant was it mentioned that:

(a) there was a possibility that the subdivision development would not be carried out;
(b) the plaintiff would only act reasonably or use its reasonable endeavours to carry out the subdivision.

11 Contracts were exchanged on 6 February 2003 in the form of Contract for the Sale of Land – 2000 Edition for a stated purchase price of $860,000 (“the contract”).

12 The contract contained the following Special Conditions:

“1 - Upon completion the Purchaser shall give and the Vendor shall take a mortgage back to secure part of the purchase price being the sum of four hundred and sixty thousand dollars ($460,000) such mortgage shall be in the form annexed hereto and marked ‘A’. The parties agree that such mortgage shall provide for the payment of the principal sum at the expiry of two (2) years from the date of completion. No interest shall be payable pursuant to such mortgage if the principal sum is paid on the expiry of such period or within one (1) month thereof.

2 - The parties agree and acknowledge that the Purchaser proposes to register a plan of subdivision, Development Contract and Management Statement pursuant to the provisions of the Community Land Development Act, 1989 and the Community Land Management Act, 1989. The Vendor agrees that he will execute such plan and instruments and to take such steps as may be necessary including the execution of any document and the production of any deed as may be necessary to give effect to such registration and shall upon request by the Purchaser execute from time to time any partial discharge of a mortgage over any such lot in subdivision as may be required by the Purchaser to give effect to the sale by it of any such lot.

3 – The parties agree that on discharge of the mortgage referred to above in addition to the principal sum secured by such mortgage pay to the Vendor a sum equivalent to any amount by which the nett [sic] sale price received by the Purchaser on the sale of the three most easterly lots in such subdivision after deduction of agent’s commission and legal costs and any GST payable by the Purchaser on said sales incurred on such sales shall exceed the sum of Four hundred and sixty thousand dollars ($460,000).

4 – In addition to the consideration hereunder the Purchaser agrees that he shall on completion hereof transfer to the Vendor without expense to the Vendor other than the Vendor’s legal expenses and registration costs on transfer part of the land in Lot 17 in DP 285645 owned by the Purchaser being so much of the land in such lot as is annexed hereto and marked ‘B’. The parties agree that the plan of subdivision whereby this land is excised from the said Lot 17 shall be a plan effecting a boundary change between the parties and such land shall be incorporated in adjacent land owned by the Vendor. The parties hereto shall do all such acts and execute all such documents as may be necessary to give effect to this subdivision. In the event that this subdivision shall not have been effected at the date of completion of this Contract the parties shall nevertheless proceed to completion hereof and the transfer to the Vendor shall be effected thereafter as soon as possible. The Purchaser acknowledges its obligations under this clause shall be secured by the mortgage provided for above.

5 – The parties hereto acknowledge that the cost of effecting the subdivisions provided for in clauses 2 and 4 being the subdivision pursuant to the Community Land Development Act of a neighbourhood plan and of the boundary change referred to including survey fees, registration fees and fees payable to any State or Local Government authority but not including any legal costs of the Vendor shall be borne by the Purchaser and the cost of effecting the subdivision of Lot 101 in DP 789655 including such survey fees, registration fees and fees payable to any such authority but not including the legal costs of the Purchaser shall be borne by the Vendor.

6 – The parties agree that the provisions of the foregoing clauses shall not merge upon completion.”

13 Clause 20.12 of the contract provided:

“Each party must do whatever is necessary after completion to carry out the party’s obligations under this Contract.”

14 On about 28 February 2003, the plaintiff lodged DA 54/03 with the Council for Stage 1 of the proposed subdivision to create twelve 4 ha rural residential lots under the Community Title legislation on the property.

15 It is not in dispute between the parties that the subdivision referred to in DA 54/03 was the “subdivision” contemplated and referred to by the parties in Special Conditions 2, 3 and 5 of the contract. Further, it is not in dispute that Lots 5, 6 and 7 of the proposed subdivision in DA 54/03 were “the three most easterly lots in such subdivision” contemplated and referred to by the parties in Special Condition 3 of the contract.

16 On about 28 March 2003, the plaintiff lodged DA 80/03 for Stage 2 of the proposed subdivision of ten 4 ha rural residential lots to be developed on the property.

17 On 16 September 2003, the Council gave deferred commencement consent pursuant to s 80(3) of the Environmental Planning and Assessment Act 1979 in respect of DA 54/03 and DA 80/03.

18 In March 2004, completion of the contract took place. On completion the plaintiff paid the defendant the sum of $400,000 subject to adjustments in exchange for a signed transfer of the property. At that time a mortgage was granted by the plaintiff to the defendant in accordance with Special Condition 1 of the contract.

19 On 31 August 2004, the Council wrote to the plaintiff and informed it that the Schedule 1 conditions for the deferred development consents for DA 54/03 and DA 80/03 had been satisfied and the consents were in operation.

20 From March 2006, correspondence passed between the parties and their solicitors in which the plaintiff asserted that it was entitled to discharge the mortgage upon payment of only the principal sum of $460,000 and that, as the subdivision and sale referred to in Special Condition 3 had not eventuated, no additional moneys were payable upon the discharge of the mortgage.

21 Although some further work was carried out pursuant to the development consents, the subdivision referred to in the Special Conditions was not carried out within two years after settlement and has not been carried out to this day. The plaintiff did not pay out the mortgage at its expiry in March 2006.

22 In September 2006 the plaintiff entered into a Project Delivery Agreement with Clarence Town Property Developments Pty Limited and Stronach Downes Management Pty Limited by way of joint venture for a 150 rural lifestyle subdivision under the Community Land Development Act 1989 on, inter alia, the property and entered into a contract (“the Clarence Town Property Developments Contract”) for the sale of one undivided share or moiety in land, including the property, to Clarence Town Property Developments Pty Limited. A rezoning application was lodged on behalf of the plaintiff and Clarence Town Property Developments Pty Limited for a 150 lot rural lifestyle subdivision.

23 On 22 November 2006, the plaintiff filed its summons in these proceedings seeking, inter alia, a discharge of the mortgage. It also claimed an order that the defendant withdraw a caveat he had placed on the property and an order that the defendant deliver to the plaintiff a bank cheque for $460,000 and a discharge of mortgage.

24 On 8 December 2006, completion of the Clarence Town Property Developments contract took place, at which the defendant provided a discharge of mortgage. The $460,000 secured by the mortgage was paid on 8 December 2006, but with no interest and on terms which were noted by the Court on 14 December 2006.

25 A claim originally made for rectification has not been pursued and a claim for further interest said to be due on the $460,000 paid on the discharge of the mortgage has been settled. The substantive contest in the proceedings has been fought upon the defendant’s cross claim, in which the relevant claim is for damages for breach of contract.

26 The issues which the parties initially proffered to the Court as arising for determination between the parties relevantly included the following:

“1 Was the implied obligation or term of the Contract:

(a) that the plaintiff would carry out, register and sell the subdivision referred to in DA 54/03 within two years of completion on the Contract [or alternatively within a reasonable time of completion of the Contract]? – as contended for by the defendant; or

(b) that the plaintiff would act reasonably and use its reasonable endeavours to have an appropriate subdivision approved and registered and to sell the three most easterly lots in such a subdivision within two years of completion of the Contract? – as contended for by the plaintiff.”

27 However, the Court expressed the view that there was an antecedent issue as to whether the contract on its proper construction imposed on the plaintiff an obligation in terms of Issue 1(a) without implication of a term.

28 On 30 April 2008 I made an order for the separate decision of a question in the following terms:

“3 Order that there be determined separately from and after all other questions in the proceedings any question as to whether the plaintiff breached any provision of the subject contract which required that the plaintiff would act reasonably and use its reasonable endeavours to have an appropriate subdivision approved and registered and to sell the three most easterly lots in such a subdivision within 2 years of completion of the contract.”

29 It was finally agreed between the parties that the issues to be determined on the trial that took place before me were are as follows:

“1 On the proper construction of the contract and in particular clause 20.12 thereof, was there an express obligation that the plaintiff would carry out, register and sell the subdivision referred to in DA 54/03 within two years of completion of the contract [or alternatively within a reasonable time of completion of the contract]?

2 If no to 1, was the implied obligation or term of the contract:


(a) that the plaintiff would have the subdivision approved and registered and to sell the three most easterly lots within two years of completion of the contract – as contended for by the defendant; or

(b) that the plaintiff would act reasonably and use its reasonable endeavours to have the subdivision approved and registered and to sell the three most easterly lots within two years of completion of the contract – as contended for by the plaintiff?


3 Has the plaintiff breached its obligations under the terms of the contract set out in 1 or 2(a)?

4 To what damages is the defendant entitled as a result of any breach of the contract by the plaintiff? In particular, what monies would have the defendant received under Special Condition 3 of the contract if the plaintiff had complied with its obligation to carry out the subdivision and sell the three most easterly lots?

5 To what interest is the defendant entitled on those damages pursuant to section 100 of the Civil Procedure Act 2005?”

ISSUES 1 AND 2(a)

1 On the proper construction of the contract and in particular clause 20.12 thereof, was there an express obligation that the plaintiff would carry out, register and sell the subdivision referred to in DA 54/03 within two years of completion of the contract [or alternatively within a reasonable time of completion of the contract]?

(a) that the plaintiff would have the subdivision approved and registered and to sell the three most easterly lots within two years of completion of the contract – as contended for by the defendant.

30 As a preliminary matter, I should say that Issue 1 as formulated in my view placed an undue emphasis on the part played in the construction of the contract by clause 20.12. I say that because it seems to me that, on a proper approach, that clause only comes into play after a party’s obligations under the contract have been determined, rather than in the determination of what those obligations are. In any event clause 20.12 is not substantially different from the obligation imposed by construction or implication on a party to a contract to do all that is necessary for the carrying out of the contract on his part: see Mackay v Dick (1881) 6 App Cas 251 per Lord Blackburn at 263; Butt v M’Donald (1896) 7 QLJ 68 per Griffith CJ at 70 - 71; Secured Income Real Estate (Australia) Limited v St Martins Investments Proprietary Limited (1979) 144 CLR 596 per Mason J at 607 - 608. The process should be to determine first what the parties’ obligations are and then to apply to those obligations whatever duty is imposed by an express or implied term to do everything necessary to carry them out.

31 Turning to the question of construction, it has been a moot point for centuries rather than decades whether contractual terms apparently absolute on their face should be regarded as imposing absolute or strict obligations or whether the stringency of the obligations should be moderated in some way. If the liability is regarded as being strict, then, if, for whatever reason, the obligation is not or cannot be carried out, its non fulfilment will sound in damages in favour of the obligee. The strictness of the doctrine was at its height in the 17th century. Since then, its application has softened somewhat. One factor in this softening has been the development of the doctrine of frustration, where there has been an unforeseen and major change in circumstances. Another factor has been the greater readiness with which courts have implied terms that may diminish the strictness of the obligation. Yet another factor has been the greater readiness of the courts to construe obligations as not being absolute, by reference to surrounding circumstances or otherwise.

32 Despite that, there are still many circumstances in which an obligation stated in absolute terms and not qualified will be treated as absolute or strict. Indeed, that is still regarded as the general rule. If this were not so, it might be argued that an obligation to pay monetary consideration might be avoided in case of a party’s inability to pay.

33 The general principle has been stated by many eminent authorities over a long period. In Taylor v Caldwell (1863) 3 B&S 826; 122 ER 309, an important case in the development of the law of frustration, that master of the common law, Blackburn J, said B&S at 833; ER at 312:

“There seems no doubt that where there is a positive contract to do a thing, not in itself unlawful, the contractor must perform it or pay damages for not doing it, although in consequence of unforeseen accidents, the performance of his contract has become unexpectedly burthensome or even impossible. The law is so laid down in 1 Roll Abr 450, Condition (G), and in the note (2) to Walton v Waterhouse (2 Wms Saund 421 a 6th ed), and is recognised as the general rule by all the Judges in the much discussed case of Hall v Wright (E B & E 746). But this rule is only applicable when the contract is positive and absolute, and not subject to any condition either express or implied…”

34 In the Supreme Court of the United States, Holmes J said in Day v United States 245 US 159 (1917) at 161:

“One who makes a contract never can be absolutely certain that he will be able to perform it when the time comes, and the very essence of it is that he takes the risk within the limits of his undertaking. The modern cases may have abated somewhat the absoluteness of the older ones in determining the scope of the undertaking by the literal meaning of the words alone. The Kronprinzessin Cecilie , 244 US 12, 22. But when the scope of the undertaking is fixed, that is merely another way of saying that the contractor takes the risk of the obstacles to that extent. Carnegie Steel Co v United States , 240 US 156, 164. Globe Refining Co v Landa Cotton Oil Co , 190 US 540, 543, 544.”

In 30 Williston on Contracts (4th ed, 2004) [77:38], part of the above passage is cited in support of the proposition that “impracticability is no excuse for failing to perform an absolute, unconditional promise.”

35 In the High Court of Australia, Latham CJ said in Scanlan’s New Neon Limited v Tooheys Limited (1943) 67 CLR 169 at 198:

“There is no reason why what McCardie J, in Blackburn Bobbin Co Ltd v T W Allen & Sons Ltd (1918) 1 KB 540 at 543, described as the original rule of English law should not be applied to the contracts in question, namely: ‘Where a party by his own contract creates a duty or charge upon himself he is bound to make it good notwithstanding any accident by inevitable necessity, because he might have provided against it by his contract: see per curiam ( Paradine v Jane (1647) Aleyn 26 [82 ER 897])).’ This decision was affirmed in the Court of Appeal ((1918) 2 KB 467). Following the example of McCardie J, I refer to Leake on Contracts, 6th ed. (1911), pp 494-498, where many cases can be found where unexpected things had happened which deprived a party of the benefit expected from the contract, and where, nevertheless, he was held to the obligations which he had expressly undertaken. In my opinion, an undertaking absolute in form should be construed according to its words, and not as being subject to any general principle that it is to be limited by unexpressed conditions relating to events which may unexpectedly happen in the future.”

And see generally Carter, Peden and Tolhurst, Contract Law in Australia (5th ed, 2007) [33-03].

36 The question as to whether the obligation is absolute and unqualified will be determined upon the usual principles of the construction of contracts, by seeking to ascertain the parties’ intention as expressed in the wording of the contract between them, whether documentary or oral.

37 In this case, the contract is written. To answer Issue 1, there really need to be determined two separate although related questions. The first is whether the obligation is to be construed as absolute on its face. The second is whether, if absolute on its face, it should be construed as imposing an absolute or strict obligation.

38 I should add that in this area the border between construction and implication of terms is far from entirely clear. Seddon and Ellinghaus in Cheshire and Fifoot’s Law of Contract (9th Aust ed, 2008) say at [10.40]:

“ Implication compared with inference and interpretation. Although implied terms are, by hypothesis, terms which were not actually agreed by the parties, there cannot be a precise border between actual and implied terms. First, it is difficult to distinguish between implied terms and inferred terms (the actual terms of a contract include unexpressed terms to which the partis’ assent can be inferred: see 10.18 ). Second, it is often difficult to draw a line between interpreting express terms and implying unexpressed terms. For example, in Butt v Long (1953) 88 CLR 476 (compare Devaugh Pty Ltd v Lamac Developments Pty Ltd [1999] WASCA 280 at [99]-[103]) a clause restrained the seller of a business from competing for five years. Did the clause refer to the whole of Australia or some more restricted locality? The issue was treated as a matter of interpretation by Fullagar and Webb JJ, while Dixon CJ thought it was a matter of implication. The truth is that in many cases the court, in purporting to interpret the words of a contract in effect adds unstated terms, although it uses the language of exegesis rather than implication. Conversely, implication can be a part of interpretation, as where it involves determining the ‘implications contained in the express words of the contract’.” (some footnotes omitted)

39 Many of the considerations which follow will be applicable both to the construction of the express term of the contract and the question of whether a term ought be implied.

40 The plaintiff argues that the use in Special Condition 2 of the verb “proposes” in reference to registration of a plan of subdivision is not a promissory word. The plaintiff says that the obligation to pay the amount equivalent to the profit on the three most easterly lots is a conditional obligation, being conditional on, among other things, the occurrence of sales and whether or not the net sale price exceeds $460,000. It points to the generally uncertain outcomes of proposals to carry out real estate developments.

41 The defendant, on the other hand, draws attention to the fact that the relevant promise is made in Special Condition 3, of which the words are firmly promissory. He draws attention to the fact that the promise is of payment of a sum that is to form part of the consideration for which the property is to be (and, indeed, has been) transferred. The formula adopted in Special Condition 3 ultimately is in absolute terms. It ultimately replaced a proposed promise of a sum certain as the sale price. Furthermore, in so far as this formula potentially increased the previous sale price, it is to be borne in mind that the payment of part of the sale price was to be deferred for at least two years. It could hardly be that the third element in the consideration as finally formulated should be an optional sum, the obligation to pay which the plaintiff could avoid by simply not proceeding with the subdivision or not proceeding with the sales. The defendant says that the payment is not in truth “conditional” upon the sale price exceeding $460,000: it is merely that the amount payable (in relation to which there is a firm promise) will be quantified at nil if the sale price does not exceed that sum. He relies on clause 20.12 as indicating the obligation is absolute.

42 As I have said, if the express term be not characterised as absolute, the defendant puts the same considerations in support of the implication of a term that the plaintiff will carry out the subdivision and sell the lots within two years or within a reasonable time after completion.

43 In fact, the time by which the obligation must be carried out does not matter in the present circumstances, where the plaintiff has clearly indicated its intention not to carry out the development by dealing with the property in an inconsistent fashion.

44 In general terms, I reject the plaintiff’s arguments and accept the defendant’s arguments in favour of the proposition that the contract should be construed as imposing an absolute, unconditional obligation to have the subdivision approved and registered, to sell the three most easterly lots and to pay any excess of the sale price over $460,000 to the defendant. This means that I construe Special Condition 3 as absolute in its terms and as imposing an absolute obligation. Essentially this is on the basis of acceptance of the defendant’s submissions in par [41] above, except for the submission based on clause 20.12, which I have dealt with in [30] above. The plaintiff’s reference to the use of the word “proposes” has some force, but does not prevail on an overall reading of the Special Conditions in the context of the whole contract. Despite an element of uncertainty inherent in all property developments, I am of the view that the contract should be construed so that the plaintiff should be taken to have undertaken an absolute obligation to carry out this development, sell the lots and pay the defendant any excess over $460,000 received on their sale.

45 I come to this conclusion on the basis of the words of the contract alone, which in my view are not to be taken as being ambiguous. If I viewed the words as ambiguous or susceptible of more than one meaning, I should be entitled to advert and should advert to the evidence of surrounding circumstances in the interpretation of the contract: Codelfa Construction Proprietary Limited v State Rail Authority of New South Wales (1982) 149 CLR 337 per Mason J at 352; Royal Botanic Gardens and Domain Trust v South Sydney Council (2002) 76 ALJR 436 per Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ at [9]. Those surrounding circumstances include the evidence of prior negotiations, bearing in mind the limitation placed by Mason J on the use of such negotiations. Reference to that material, if necessary, confirms the conclusion that I have already expressed.

46 In view of this conclusion it is not necessary to consider whether or not a term to this effect is implied, as the defendant submits if necessary. If it were necessary for such a term to be implied, I should find that it is implied for essentially the same reasons as I have applied in construing the contract in the way that I have.

ISSUE 2(b)

(b) that the plaintiff would act reasonably and use its reasonable endeavours to have the subdivision approved and registered and to sell the three most easterly lots within two years of completion of the contract – as contended for by the plaintiff?

47 In view of the answer on Issue 1, the term contended for by the plaintiff would not be implied as it would conflict with the term which I have found established.

ISSUE 3

3 Has the plaintiff breached its obligations under the terms of the contract set out in 1 or 2(a)?

48 The plaintiff is clearly in breach of the term established. It did not effectuate the subdivision and sell the lots by March 2006 or by the time the mortgage came to be discharged in December 2006. In any event, the plaintiff had clearly put performance beyond its power by entering into the Clarence Town Property Development Contract in September 2006.

ISSUE 4

4 To what damages is the defendant entitled as a result of any breach of the contract by the plaintiff? In particular, what monies would have the defendant received under Special Condition 3 of the contract if the plaintiff had complied with its obligation to carry out the subdivision and sell the three most easterly lots?

49 There is not a great deal of controversy as to the assessment of damages, if the plaintiff is found to be in breach of its obligation. The defendant submits that the damages to which he is entitled are in a sum equivalent to what would have been payable under Special Condition 3 had the plaintiff complied with that Condition. The obligation, as I have found it, was an obligation to pay those monies by 10 March 2006. The defendant has tendered the evidence of Wayne Brorson, valuer. Mr Brorson valued the relevant lots at $255,000 each as at 18 June 2004 and $280,000 each as at 10 March 2006. For the plaintiff to have complied with its promise, it would have had to sell the lots before 10 March 2006. Mr Brorson’s evidence does not indicate the course of the rise in value of the lots between June 2004 and March 2006. Doing the best I can on Mr Brorson’s evidence, I find that, if the promise were carried out, the lots would have been sold some time before March 2006 at an average price of $270,000. This would have provided a total sale price of $810,000, providing an excess over $460,000 of $350,000. The deductions from the gross sale price for agent’s commission, legal costs and disbursements and GST have been calculated at $119,548, giving a total net excess over $460,000 of $230,452. In light of that figure I assess the defendant’s damages at $230,000. The plaintiff has not contested the valuation or the calculations of deductions and has not seriously contested the assessment of damages.

ISSUE 5

5 To what interest is the defendant entitled on those damages pursuant to s 100 of the Civil Procedure Act 2005?

50 The defendant is entitled to interest on the amount of the damages at the statutory rate from 10 March 2006 to the date on which judgment is given and the parties should agree on the calculation of this sum.

CONCLUSION

51 Short minutes should be brought in to give effect to these reasons, including the agreed amount of interest. It would seem that the plaintiff ought be ordered to pay the defendant’s costs of the proceedings, but any question about that can be raised when the short minutes are brought in.

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