Bensons Property Group Pty Ltd v Manderson and Tan (No 3)
[2021] VCC 326
•29 March 2021
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
GENERAL LIST
Case No. CI-19-00990
| Bensons Property Group Pty Ltd | Plaintiff |
| v | |
| Jason Luke Manderson and Alex Kean Hong Tan | Defendants |
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JUDGE: | His Honour Judge Woodward | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | On the papers, last submissions received on 13 October 2020 | |
DATE OF JUDGMENT: | 29 March 2021 | |
CASE MAY BE CITED AS: | Bensons Property Group Pty Ltd v Manderson and Tan (No 3) | |
MEDIUM NEUTRAL CITATION: | [2021] VCC 326 | |
REASONS FOR JUDGMENT
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Subject: PRACTICE AND PROCEDURE
Catchwords: Assessment of damages – damages in lieu of specific performance – date of assessment – application of common law principles to equitable remedies
Cases Cited:Giller v Procopets (2008) 24 VR 1, Madden v Kevereski [1983] 1 NSWLR 305, Wroth v Tyler [1974] Ch 30, Bosaid v Andry [1963] VR 465, ASA Constructions Pty Ltd v Iwanov [1975] 1 NSWLR 512, Tymstock Pty Ltd v Patrick [2019] VCC 1092
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APPEARANCES: | Counsel | Solicitors |
| For the plaintiff | Mr C A Conner | Tony Hargreaves & Partners |
| For the defendants | In person | - |
HIS HONOUR:
Background and outcome
1 By judgment and reasons dated 6 May 2020 (Bensons Property Group Pty Ltd v Manderson and Tan [2020] VCC 543) (“first reasons”), I gave judgment for Bensons and dismissed the defendants’ counterclaim. Terms used in these reasons have the meanings given in my first reasons. My first reasons left open the question of relief.
2 By further reasons dated 23 June 2020 (Bensons Property Group Pty Ltd v Manderson and Tan (No 2) [2020] VCC 543) (“second reasons”), I determined that Bensons’ application for specific performance of the Contract should be refused and made preliminary findings on costs. The parties were unable to reach agreement on final orders and have since filed further affidavits and submissions on the assessment of damages. These reasons deal with damages (including interest) and make final orders on costs. They should be read with my first and second reasons.
3 For the reasons below, there will be judgment for Bensons against the defendants in the sum of $40,659.94, which sum includes interest to the date of these reasons. As foreshadowed in my second reasons, I will order that the defendants pay Bensons’ costs of the proceeding (including reserved costs) on the standard basis up to and including 1 July 2019, and on an indemnity basis thereafter. Again, for the avoidance of doubt, I note that the order for costs above does not extend to the costs of senior counsel.
New causes of action and defences
4 The defendants have raised several matters in their primary submissions that are either misconceived or precluded by either res judicata or Anshun estoppel.[1] I agree with Bensons’ submissions on these matters and cannot usefully add to them. They are as follows (citations omitted):
“1.The defendants cannot rely on s 26 of the Wrongs Act 1958 since here there is no contractual duty of care that is both concurrent and co-extensive with a duty of care in tort. Contributory negligence is a common law concept, and is not a remedy available in equity which has retained its identity as a separate and coherent body of principles. The contention in paragraph 3 of the defendants’ submission is untenable both at law on and the facts. The defendants at no stage attempted to settle according to the terms of the contract and were determined to rescind and recover their deposit.
2.The defendants are precluded by res judicata from making application under s 49(2) of the Property Law Act 1958 because a claim for return of deposit was included in their Counterclaim which the Court has dismissed. Since the plaintiff remained ready, willing and able to complete the contract there was no failure by the vendor of the consideration for which the deposit was paid. In Mallett v Jones the Full Court held that “exceptional circumstances” are required to justify departure from a forfeiture of deposit clause. The very purpose of a deposit is to guarantee performance by the purchaser.
3.Other than a vendor’s obligations created by statute or by the contract, there is no duty at common law requiring a vendor of an off-the plan apartment to take reasonable care to a purchaser. The defendants are precluded from agitating any of the four specific instances set out in paragraph 6 (a) – (d) of their submissions because of res judicata or alternatively the Anshun estoppel. Relief under s 9AC of the Sale of Land Act 1962 can only arise where the amendment to the plan of subdivision materially affects the lot. The amendment to the Plan of Subdivision due to the removal of the planter boxes which had been part of the common property actually increased the external area of Lot G04. The alteration caused no detrimental effect on the value of the apartment for the purchasers.”
[1]Port of Melbourne Authority v Anshun Pty Ltd [1981] HCA 45; (1981) CLR 589.
Assessment date
5 In its submissions, Bensons has also helpfully set out a brief summary of the history of the court’s power to award damages under s38 of the Supreme Court Act 1958 (Vic) (“SCA”) (including by reference to Lord Cairns’ Act), and explained how that power extends to this court. Again, it is unnecessary for me to repeat that summary. Bensons submits that the appropriate date is the date of judgment for damages in lieu of specific performance, being 26 June 2020.
6 In support of that proposition, Bensons referred me to the Victorian Court of Appeal decision of Giller v Procopets[2]. In Giller, Neave JA held that equitable damages are sui generis and may cover circumstances in which common law damages are unavailable. For example, for breach of a proprietary right, common law damages only cover breaches occurring up to the date of the commencement of proceedings, whereas Lord Cairns’ Act damages can cover future breaches. Bensons also notes that, much earlier, Helsham CJ, sitting in the Equity Division of the NSW Supreme Court, had said in Madden v Kevereski:[3]
“The damages which the court may order under s68 are sui generis; the power to award them is a power to enable the court to do complete justice so far as equity considers it ought to be done, by supplementing with money the equitable remedy, or attempting with money to substitute a remedy.
[2](2008) 24 VR 1.
[3][1983] 1 NSWLR 305 at 307.
7 Bensons also relied upon Wroth v Tyler,[4] in which Megarry J interpreted the words “in lieu of specific performance” to mean that Lord Cairns’ Act damages are assessed on the date when specific performance could be ordered, namely at the date of judgment. Similarly, in Bosaid v Andry,[5] Sholl J held that where a plaintiff has sought specific performance of a contract of sale of land, and was awarded damages in lieu under section 62(3) of the SCA, the contract is notionally determined by the judgment of the court awarding damages.
[4][1974] Ch 30; [1973] 1 All ER 897 Megarry J.
[5][1963] VR 465.
8 The defendants argue that the appropriate date is “the date when the plaintiff could have resold the apartment if, as the vendor, it had accepted the purchasers’ purported rescission by their letter dated 22 February 2019… as repudiatory conduct”, being 1 July 2019. The defendants say that this is when the contract was “deemed to be gone”, citing Bosaid v Andry.[6] They submit, in the alternative, that 31 July 2019 is the appropriate date. They note that this date excludes any loss caused by COVID-19; and losses that were not reasonably foreseeable when the parties entered the contract.
[6]Ibid.
9 Assessment at the date of judgment as pressed by Bensons might be said to be the usual or even default basis for assessing damages in lieu of specific performance. However, in my view, the authorities on which Bensons primarily relies do not detract from the broader proposition that the discretion of the court is at large. For example, in ASA Constructions Pty Ltd v Iwanov (“ASA Constructions”),[7] Needham J held (citation omitted):
“While I concede the force of the reasoning of Megarry J, in Wroth v Taylor, I do not think that the principle he espouses there is to be considered applicable to all cases of equitable damages in substitution for specific performance. The present case, in my opinion, is one where it would be unjust to apply the principle or, perhaps, where the party seeking relief has not shown that the application of the principle would work justice rather than injustice.”
[7][1975] 1 NSWLR 512 at 519.
10 And in Madden v Kevereski, immediately following the passage cited in Bensons’ submissions, Helsham CJ in Eq held: [8]
“If this be the correct view there is no date which can be said to be the date at which damages under s68 should be assessed. They will be assessed so as to do that which is just as between the parties in the particular circumstances of each case, so far as the court's special remedies and money can effect this.”
[8][1983] 1 NSWLR 305 at 307.
11 There have been a total of six possible dates postulated in Bensons’ submissions, and the subject of the valuations of the property obtained by Bensons from Anthony Rohan, a certified practicing valuer. These are:
· 6 December 2018 (the settlement due date) - $610,000.
· 22 February 2019 (14 days after the delivery of the letter dated 8 February 2019 from Piper Alderman to the defendants which required them to remedy the breach) - $600,000.
· 1 July 2019 (a date Bensons could have re-sold the Apartment if it had accepted the defendants’ purported rescission by their letter dated 22 February 2019 as repudiatory conduct) - $580,000.
· 26 June 2020 (the date of judgment for damages in lieu of specific performance) - $560,000.12
· 17 July 2020 (when Bensons formally rescinded the Contract as a result of its acceptance of the defendants’ repudiatory conduct) - $560,000.
12 In my judgment, the particular circumstances of this case justify a departure from what might be termed the usual approach as discussed in the authorities relied on by Bensons. It is clear from the correspondence up to and including the defendants’ purported rescission by their letter of 22 February 2019 that the defendants had determined not to proceed with the purchase under the Contract. It was also tolerably clear that the defendants were unable to do so, and had disclosed this to Bensons as early as 30 October 2018, when their then solicitors noted that the defendants could not obtain a loan for the amount required to complete the purchase.[9]
[9]First reasons at [34], second reasons at [7]-[8].
13 Although the precise circumstances of this are unclear, I also note that Bensons initially served a rescission notice on 11 January 2019 and then withdrew it on 23 January 2019.[10] It seems likely that the service of this notice reflects a realisation by Bensons or its then lawyers that the prospects of a settlement were remote and diminishing. I can only speculate about Bensons’ reasons for later withdrawing the notice, but there is no evidence to suggest that this was because the defendants were beginning to show any signs that they may be willing to settle – all the evidence points the other way.
[10]First reasons at [35].
14 Further, Mr Rohan’s valuation evidence, together with Mr Curtis’s evidence of defaults by other purchasers,[11] and increasing difficulties with the sale of the Vanguard apartments following completion,[12] suggest two things. First, that by late 2018 and early 2019, the market for apartments like apartment G04 was steadily deteriorating. And, second, that Bensons was aware of this.
[11]Curtis affidavit sworn 2 October 2020 at [4].
[12]Curtis affidavit sworn 20 August 2020 at [17].
15 In the circumstances described, I am satisfied that a vendor acting reasonably and prudently, would have acted promptly to bring the Contract to an end on, or as soon as practicable after, 22 February 2019. That date was both 14 days after the delivery of the letter dated 8 February 2019 from Piper Alderman to the defendants which required them to remedy the breach, and the date of the defendants’ letter purporting to rescind the Contract (thus giving rise to a clear repudiation of the Contract by the defendants).
16 Put another way, paraphrasing Needham J in ASA Constructions [13] Bensons as the party seeking relief has not shown that the application of the principle would work justice rather than injustice. On the contrary, in my view, it was unreasonable of Bensons to continue to press for settlement from the point where the objective facts showed that a prompt rescission and resale was the appropriate course. It may have suited Bensons’ broader commercial objectives to press for specific performance until trial, but in the case of these particular counterparties and this particular Contract, it was commercially imprudent.
[13]At 519.
17 I should note that in reaching this conclusion I have been conscious of the need to avoid viewing matters with the benefit of hindsight. Of course, no-one could reasonably have predicted the early effects on the property market from the COVID-19 pandemic. However, as I have sought to explain above, it seems that the deteriorating market conditions were already developing by the time settlement was due in December 2018, and were even more apparent by February 2019, the time of the repudiation by the defendants. And there is no suggestion in any of the evidence that any improvement was imminent.
18 In my judgment, what is just as between the parties in the particular circumstances of this case, is to fix the date for assessment as 22 February 2019. My conclusion that Bensons acting prudently should have rescinded the Contract at around this time, is relevant not only to the calculation of Bensons’ equitable damages for the loss of the Contract. In my view, it also informs the appropriate approach to the other elements of Bensons’ equitable damages claim, including for interest, as discussed further below.
Quantum
19 Bensons submits that the quantum of damages where a purchaser fails to settle a contract of sale is the difference between the contract price and the market value of the land at the time that the bargain was lost, with any consequential adjustments that are required.[14]
[14]Ng v Filmlock Pty Ltd (2014) 88 NSWLR 146 cited in Broughton v B & B Group Investments Pty Ltd [2017] VSCA 227 at [153].
20 The purchase price stated in the Contract was $684,400. However, the defendants note that any loss of market value should be assessed against the net purchase price of $650,000 (which allows for the rebate that would have been paid on settlement) rather than the contracted purchase price of $684,400. I agree. I can see no basis for Bensons claiming the amount of the rebate which, had the Contract not been breached, it would never have received. To suggest otherwise is contrary to the “ruling principle” with respect to damages at common law for breach of contract upon which Bensons itself relies.[15] Applying principles of equity to achieve a just result in all the circumstances, yields the same outcome. In my view, the Contract price for the purposes of assessing Bensons’ damages for loss of the Contract was $650,000.
[15]Tabcorp Holdings Ltd v Bowen Investments Pty Ltd [2009] HCA [8] at [18], cited in Bensons submissions at [25].
21 As noted above, Bensons relies on the valuation of Mr Rohan, and his assessment of value on the various dates listed above. The defendants rely upon the valuation of Rod Borlai, a certified practising valuer of CBRE Residential Valuations Pty Ltd. Mr Borlai assessed the value as at 19 August 2019 at $684,400, being the sale priced under the Contract (not allowing for the $34,400 rebate).
22 Bensons objects to the admissibility of the CBRE Valuation on the ground of non-compliance with Order 44 of the County Court Civil Procedure Rules 2018: “Mr Rod Borlai has neither acknowledged that he has read the expert witness code of conduct nor has he agreed to be bound by the Code”. They also point to Mr Rohan’s criticism of the CBRE Valuation as being unsupported by the sales evidence outlined in that valuation or that relied on by Mr Rohan. These objections have considerable force, and I accept them.
23 In any event, and regardless of the admissibility of the CBRE Valuation, Mr Rohan’s valuation is to be preferred. It comprises a more robust assessment of relevant sales evidence at the various dates and Mr Rohan has expressly deposed that before providing his report he “had read the Expert Witness Code of Conduct (Form 44A)” and agreed to be bound by its contents. Further, the CBRE valuation provides no assistance in assessing value at the date I have determined to be the applicable date for assessment, namely, 22 February 2019.
24 I therefore assess the first element of Bensons’ loss and damage in lieu of specific performance as $50,000, being the difference between the value of the Contract that Bensons lost, and Mr Rohan’s assessment of the value of apartment G04 on 22 February 2019, namely, $600,000. I note that this figure also coincides with the market valuation that the defendants’ obtained to support their loan, resulting in their inability to secure finance to complete the purchase of apartment G04.[16]
[16]Second reasons at [5].
25 Bensons next makes claims for damages comprising the cost of the estate agent’s commission and marketing expenses of reselling the apartment at 6% of the relevant market value. It says those losses flow naturally from the breach and relies on the evidence of Mr Curtis in relation to the arrangements that it had in place for reselling apartments.
26 It is not entirely clear from Mr Curtis’s affidavits what sale arrangement might have been in place had it taken steps shortly after 22 February 2019 to effect a resale. However, I am satisfied on his evidence as a whole that, even at this relatively early stage, Bensons may have needed to turn to non-traditional agents and referrers. On the other hand, it does appear that commission percentages higher than 5% were not being incurred until around February 2020.[17]
[17]Curtis affidavit sworn 28 August 2020 at [13].
27 The defendants submit that:
· clause 3.4(a) of the contract provides that Bensons is not obliged to pay any fees for the marketing and sale of the apartment should the contract be rescinded for any reason;
· clause 3.4A(b) provides that Bensons must provide Marshall White a period of not less than three months following the rescission of the contract of sale to resell that property at no additional cost;
· because the fees payable to re-sell the property would have been paid if the property had settled, Bensons has not and will not suffer any loss as a result of the breach of contract;
· any loss due to selling the property by another channel, such as referral partners, is not as a result of the breach of contract, but is due to Bensons’ opinion of their capability of their real estate agent, without having provided them with the contractual right to resell the property; and
· any requirement to engage referral partners was not caused by the breach of contract, but by the current market conditions caused by COVID-19.
28 I have already concluded that the evidence establishes a falling market and difficult selling conditions by late 2018 and early 2019. Mr Curtis has also explained why a sale under the existing arrangements with Marshall White was problematic.[18] I accept that evidence. In my view, it is appropriate to award damages for the cost of resale, but I would fix the rate at 5%, not the 6% figure sought by Bensons. To my mind, this marginally lower commission rate reflects what might have been applied had the resale proceeded promptly after 22 February 2019. Based on a sale price of $600,000, that gives rise to an additional cost to Bensons of $30,000.
[18]Curtis affidavit sworn 2 October 2020.
29 In my view, Bensons is also entitled to some allowance for rates and owners corporation fees pursuant to special condition 14.3(b) of the Contract, as reasonable expenses incurred by Bensons as a result of the defendants’ breach. However, this too should be limited by the application of the principles for determining equitable damages discussed above, to what it would have incurred had it rescinded the Contract and proceeded to resale on about 22 February 2019. Although the evidence of the extent of such fees incurred by around this date is inexact, a review of the exhibits to Mr Curtis’s affidavit suggests this should comprise $473.12 for rates and $1,106.55 for owners corporation fees.[19]
[19]Exhibits “RFC-17” and “RFC-18” to the Curtis affidavit sworn 2 October 2020..
30 However, the claim for legal costs is in a different category. It is clear from the attendance schedule to the invoice from Piper Alderman dated 28 June 2019[20] that the work referable to the claim of $5,013.80 is not limited to Bensons’ “solicitors proper costs of and incidental to the preparation and service of notice of default” (special condition 14.3(c) of the Contract). Indeed, some of those costs would appear to be costs of this proceeding. I do not propose to attempt to extract a value attributable to work properly falling with clause 14.3(c) (if any), let alone assess whether those cost are “proper” costs. For example, are the costs of serving and later withdrawing the notice of recission “proper” costs? The degree of uncertainty attending this claim leads me to conclude that there should be no damages awarded for legal costs.
[20]Exhibit “RFC-8” to the Curtis affidavit sworn 20 August 2020.
Interest
31 In its prayer for relief, Bensons has claimed: “Damages for breach of the Contract of Sale in lieu of or in addition to specific performance”. There is no claim for interest pursuant to the Contract or statute (or otherwise). However, I agree with Bensons that is not essential to include a prayer for interest in the statement of claim. Benson’s claim for interest has been made in its particulars of damages dated 31 July 2020 under the heading: “Damages by way of interest”, where it has provided seven alternative computations of interest.
32 The first of these is a claim at the rate of 14% per annum provided for in the Contract on the full purchase price of $684,400 for the period from the due date for settlement on 6 December 2018 to 17 July 2020, being the date on which Bensons rescinded the Contract by notice following the delivery of my first reasons. Bensons argues that this is the correct measure of damages by way of interest, because equitable damages can be assessed the same as common law damages. Bensons further submits that:
“In McKenna v Richey [1950] VLR 360 an order for specific performance of the defendant’s business had been made three years earlier but had not been enforced in the meantime. Leave was then granted to rescind the agreement and for the court to assess the plaintiff’s damages. O’Bryan J held that the plaintiff was entitled to judgment for damages to be measured by the loss suffered as a result of the defendant’s breach of contract, either as damages in lieu of specific performance or as common law damages. His Honour said he did not think that the measure of damages in that case was any different under whichever jurisdiction they were awarded.”
33 However, in this case, my decision to decline Bensons’ application for specific performance and award damages in lieu as explained in my second reasons, coupled with my analysis above, has produced a measure of damages that is materially different from common law damages. I have assessed damages based on a notional rescission on 22 February 2019 and marketing costs at 5%, resulting in a figure of $80,000. An assessment based on the actual date of rescission as in McKenna v Richey, would have produced a significantly higher figure, calculated by Bensons to be in the order of $158,000 (not including rates and owners corporation fees but before deducting the deposit).
34 After carefully considering the various alternatives postulated in Bensons’ submissions and taking into account the matters raised by the defendants, I have concluded that interest should be calculated as a component of Bensons’ claim for damages in lieu of specific performance and on the same basis as the other elements of Bensons’ equitable damages claim. Again, in my view, this approach does that which is just as between the parties in the particular circumstances of this case.
35 Consistently with my finding on the date for assessment, in my view, interest should therefore be assessed as if Bensons had brought the Contract to an end when it was reasonable and prudent to do so, being on 22 February 2019. Thus, all of Bensons claims should be assessed as if it had acted on or about 22 February 2019 to rescind the Contract and re-sell, and such resale had been achieved reasonably promptly, for Mr Rohan’s valuation figure of $600,000.
36 On this scenario, applying the reasoning advanced by me in Tymstock Pty Ltd v Patrick[21] (“Tymstock”) Bensons would have been entitled to interest under special conditions 14.3(a) and 9 of the Contract from the date of settlement (6 December 2018) up to and including the date of rescission on 22 February 2019. I agree with Bensons for the reasons it gives that such interest should be assessed on the full amount of the purchase price at the rate of 14% per annum, not compounding. That is, $262.51 per day for 78 days, giving a total of $20,475.
[21] [2019] VCC 1092, summarised at [114] – see also Bensons’ reply submissions at [6].
37 Thus, as at 22 February 2019, Bensons would have had crystallised losses totalling $102,054.67, made up as follows:
· Shortfall on resale: $50,000.00
· Marketing costs: $30,000.00
· Rates: $473.12
· Owners corporation fees: $1,106.55
· Default interest pursuant to the Contract: $20,475.00
38 Bensons would also on that date have been entitled to forfeit the deposit of $68,440, giving a net loss as at 22 February 2019 of $33,614.67. I agree with Bensons that pursuant to special condition 7.2 of the Contract, any interest earned on the deposit monies prior to the rescission of the Contract as a result of the purchasers’ default remains the property of the vendor and not that of the purchasers.
39 Finally, and again for the reasons discussed in Tymstock (at 117), this would have been properly characterised as a sum certain attracting interest from 22 February 2019 at the rate of 10% per annum pursuant to SCA s58(1) (or $9.1975 per day). And even if I were wrong about this, I am satisfied that Bensons would have been entitled to interest on this sum pursuant to SCA s60(1) from the commencement of the proceeding on 5 March 2019, being mere days after the notional rescission date of 22 February 2019. Thus, the result is essentially the same.
40 I therefore assess Bensons’ total loss and damage as at the date of these reasons and final orders (29 March 2021 – a total of 766 days) as $7,045.28 plus $33,614.67, giving a total of $40,659.95.
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Certificate
I certify that these 13 pages are a true copy of the judgment of His Honour Judge Woodward delivered on 29 March 2021.
Dated: 29 March 2021
Sean Bricknell
Associate to His Honour Judge Woodward
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