Blackley Investments Pty Ltd v Burnie City Council (No 4)
[2013] TASSC 39
•25 July 2013
[2013] TASSC 39
COURT: SUPREME COURT OF TASMANIA
CITATION:Blackley Investments Pty Ltd v Burnie City Council (No 4) [2013] TASSC 39
PARTIES: BLACKLEY INVESTMENTS PTY LTD
v
BURNIE CITY COUNCIL
FILE NO: 89/2006
DELIVERED ON: 25 July 2013
DELIVERED AT: Hobart
HEARING DATE: 25 July 2013
JUDGMENT OF: Holt AsJ
CATCHWORDS:
Damages – Measure and remoteness of damages in actions for breach of contract – General – Reliance damages recovered where expenditure reasonably incurred in respect of steps which should have been within the contemplation of the defaulting party as sufficiently likely to have been taken in reliance on the promise which was breached.
Aust Dig Damages [12]
REPRESENTATION:
Counsel:
Plaintiff: S B McElwaine SC
Defendant: M E O'Farrell SC
Solicitors:
Plaintiff: Bartletts
Defendant: Levis Stace & Cooper
Judgment Number: [2013] TASSC 39
Number of paragraphs: 14
Serial No 39/2013
File No 89/2006
BLACKLEY INVESTMENTS PTY LTD
v
BURNIE CITY COUNCIL
REASONS FOR JUDGMENT HOLT AsJ
25 July 2013
The plaintiff contracted to purchase land from the defendant in December 2003. The land was zoned "Industrial". The contract required the plaintiff to apply for a rezoning and a permit to develop the land with the construction of at least 70 residential units on individual titles, a small retail development and a restaurant or coffee shop. In the event that approval was obtained the plaintiff was then obliged by the terms of the contract to complete construction of a substantial part of the building works within a short timeframe. The contract required the plaintiff to pay a deposit of $20,000 to the defendant upon signing and a further deposit of $30,000 upon the lodgment of the rezoning application to a stakeholder. The plaintiff paid $20,000 on 2 December 2003. The further $30,000 was paid direct to the defendant rather than to a stakeholder on 1 July 2004. The application for a permit was refused in July 2006. Notwithstanding the refusal, the plaintiff was entitled to have the purchase contract proceed to completion. The defendant refused to complete and the plaintiff issued a writ for specific performance. In Blackley Investments Pty Ltd v Burnie City Council (No 2) [2011] TASFC 6 the Court found that the plaintiff was entitled to specific performance. At the request of the parties the Court awarded damages to be assessed in substitution for an order for specific performance.
The plaintiff claimed damages for loss of profits and in the alternative, if it could not be shown that the plaintiff would have profited from completion of the contract, damages in respect of expenditure incurred in reliance on the defendant's promise to complete. The latter type of damages are known as reliance damages. The law presumes that the plaintiff would have recovered the expenditure incurred in reliance on the broken promise unless the defendant proves that some or all of the expenditure would not have been recouped. The plaintiff's claim for reliance damages was particularised at about $245,000. Except for the claim for the return of the $50,000 deposit the damages particularised were mostly, but inexplicably not always counted, as exclusive of GST. In addition, the plaintiff claimed damages in the nature of interest pursuant to the principles set out in Hungerfords v Walker (1989) 171 CLR 125. The parties agreed that items of expenditure allowed should carry interest from the date of the expenditure to the date of judgment at the rate of 8% per annum, compounding monthly. The addition of interest increased the particularised claim for reliance damages to about $460,000.
In Blackley Investments Pty Ltd v Burnie City Council (No 3) [2013] TASSC 14, it was determined that the plaintiff's claim for loss of profits should fail. The defendant failed to show that the amount claimed for reliance damages, namely about $460,000, would not have been recouped if the contract was completed. It followed that the plaintiff obtained a determination that it was entitled to recover reliance damages as supported by the evidence.
The only remaining question was whether the items of expenditure claimed were reasonably incurred by the plaintiff in respect of a step which should have been within the contemplation of the defendant as a step sufficiently likely to have been taken by the plaintiff in reliance on the defendant's promise to complete the contract. TheCommonwealth v Amann Aviation Pty Ltd (1992) 174 CLR 64 per Brennan J (as he then was) at pp98 – 99.
At the request of counsel for the defendant argument on the remaining question was deferred.
The defendant has identified the items in dispute. Argument confined to these items has now been presented.
The first group of items in contest comprise advertising expenditure designed to attract early interest from prospective purchasers of houses to be constructed in the event that development approval was obtained. The advertising expenditure amounted to a total of $20,457.54. The evidence was that almost all of this expenditure was incurred by mid-2004. It was used to print 1,000 copies of a 20 page colour booklet and for the services of a real estate agent who advertised the proposal in newspapers in Tasmania and interstate. There was also a large sign containing a photoboard erected on the land.
I consider that the advertising expenditure was reasonable and in respect of a step which should have been in the contemplation of the defendant. The contract required the plaintiff, upon the issue of approval for the development, to commence construction promptly. The advertising was designed to obtain expressions of interest from prospective purchasers. Having a list of prospective purchasers would assist in obtaining early sales, perhaps off the plan, by the time building work was to commence. This step would have assisted the plaintiff in obtaining finance for the development from a lending institution and would also have been productive of an early cash flow had development approval been forthcoming. The amount of the expenditure was modest in the context of the $1 million purchase price for the land and the likely costs associated with the development. The defendant, having included in the contract a requirement for early commencement of construction, should have contemplated that the plaintiff would undertake some early advertising. This claim will be allowed.
The second item contested was a claim for $5,600 incurred shortly prior to the planning hearing in April 2006. The money was spent on developing 3D montages. This was obviously reasonable preparatory work to be undertaken ready for the planning hearing which took place in April 2006. This claim will be allowed.
Next, in dispute, was the plaintiff's claim for a small amount for an overnight trip to Brisbane in September 2006, shortly following the planning application being rejected. The amount was $822.52 comprised of $782.61 for airfares and $39.91 for a meal. The plaintiff had an option to complete the purchase. If the purchase was completed the land could only have been developed for industrial use. The plaintiff had no experience in the industrial development of land. The plaintiff's director travelled to Queensland to consult with a property developer and to see if that property developer was interested in entering into a joint venture with the plaintiff in respect of the land. The amount claimed is small. The expenditure should have been within the contemplation of the defendant. This claim will be allowed.
Lastly, in dispute, was a claim for $302.37 for a meal in Burnie on the evening following the first day of the two day planning hearing. The plaintiff had engaged out-of-town counsel and some out-of-town witnesses. Had the meal not been provided counsel and the witnesses could have claimed a meal allowance. The amount was reasonable and in respect of an item which ought to have been within the contemplation of the defendant. This claim will be allowed.
The award of damages is a substitute for specific performance. The plaintiff is entitled to be put in the position it would have been in had the land been transferred to it. The plaintiff had the benefit of a presumption that it would have recouped its expenditure pursuing development approval and other expenditure if the land had been transferred to it. I have already determined, in the earlier decision, that the defendant had not rebutted the presumption. In particular the defendant did not prove that all or part of the expenditure would not have been recouped by the plaintiff had the contract proceeded to completion in October 2011 when the Court awarded damages in substitution for specific performance. The land might have been on-sold by the plaintiff for about $1.4 million, being a sum sufficient to cover the balance purchase price and the amount expended on the venture.
The particulars of the quantum of the claim for reliance damages delivered by the plaintiff contained a double counting of one item of expense. There were some claims which were not pursued and some minor discrepancies between the particulars and the evidence. I have produced a schedule comprising all of the plaintiff's items of expenditure, clear of GST except for the deposit, which were reasonably incurred in respect of steps which should have been within the contemplation of the defendant as steps sufficiently likely to have been taken in reliance on the defendant's broken promise to complete the contract. The schedule also contains my calculation of interest at the rate agreed by the parties, namely 8% per annum compounding monthly from the date of payment to the date of judgment. The schedule is set out below.
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Damages are assessed in the sum of $462,549.72 plus interest from 18 July to 25 July being $569.17, making a total of $463,118.89. Taking into account the defendant's payment into court and interest earned on that payment, being a total of $91,574.93, which was paid out to the plaintiff on 18 July 2013 the balance payable is $371,543.96. Final judgment will be given for this amount.
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