Bloom as Executor of the Estate of Farr (deceased) v Paradise Lake Pty Ltd (No.2)
[2019] FCCA 1914
•17 July 2019
FEDERAL CIRCUIT COURT OF AUSTRALIA
| BLOOM AS EXECUTOR OF THE ESTATE OF FARR (DECEASED) v PARADISE LAKE PTY LTD (No.2) | [2019] FCCA 1914 |
| Catchwords: CONSUMER LAW – REMEDIES – Equitable compensation for sale of property in circumstances where material non-disclosure made by agent of vendor – whether the property had a market value at time of sale that exceeded the price for which the property was sold – equitable compensation awarded. |
| Legislation: Evidence Act 1995 (Cth), ss.79(1), 76(1) Federal Circuit Court of Australia Act 1999 (Cth), s.76 |
| Cases cited: Arcus Shopfitters Pty Ltd v Western Australian Planning Commission [2002] WASC 174 |
| Applicant: | MELVYN BLOOM AS EXECUTOR OF THE ESTATE OF JOHN RONALD FARR (DECEASED) |
| Respondent: | PARADISE LAKE PTY LTD (ACN 059 700 775) |
| File Number: | SYG 1729 of 2017 |
| Judgment of: | Judge Manousaridis |
| Hearing date: | 7 February 2019, 10 May 2019 |
| Date of Last Submission: | 10 May 2019 |
| Delivered at: | Sydney |
| Delivered on: | 17 July 2019 |
REPRESENTATION
| Counsel for the Applicant: | Ms M Bateman |
| Solicitors for the Applicant: | Whittens & McKeough |
| Counsel for the Respondent: | Mr M Pope |
| Solicitors for the Respondent: | Derek Legal |
ORDERS
The respondent pay to the applicant $45,394.73, this amount being the sum of:
(a)equitable compensation of $29,675; and
(b)interest of $15,719.73 pursuant to s.76(3) of the Federal Circuit Court of Australia Act 1999 (Cth) on $29,675 from 20 June 2011 to 17 July 2019.
Subject to order 3, the respondent pay the applicant’s costs of the proceeding as agreed or as assessed or taxed.
The parties have liberty to apply within 14 days to vary or discharge order 2.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYG 1729 of 2017
| MELVYN BLOOM AS EXECUTOR OF THE ESTATE OF JOHN RONALD FARR (DECEASED) |
Applicant
And
| PARADISE LAKE PTY LTD (ACN 059 700 775) |
Respondent
REASONS FOR JUDGMENT
Introduction
In an earlier judgment (earlier judgment) I found that the respondent (Paradise Lake), in breach of its duty, failed to disclose to the applicant, Mr Bloom, that a director of the company (Ripcord) to whom Mr Bloom sold the property known as “Site No: 155 Paradise Lake Resort, 368 Oxley Drive, Runaway Bay” (Home) was associated with the directors of Paradise Lake.[1] As I noted in the earlier judgment the parties agreed that in those circumstances Mr Bloom is entitled to an award of equitable compensation measured by the amount, if any, by which the market value of the Home as at 20 June 2011 exceeded the price for which Mr Bloom sold the Home to Ripcord.
[1] Bloom As Executor Of The Estate Of Farr (deceased) v Paradise Lake Pty Ltd [2018] FCCA 1959
In these reasons for judgment I consider whether the Home had a market value greater than the price for which Mr Bloom sold the Home to Ripcord. That turns, at least in substantial part, on my assessment of the expert valuations on which each party relies. Paradise Lake, relying on a valuation by Mr Stanaway, submits the market value of the Home was $121,000, the price for which Mr Bloom sold the Home to Ripcord, while Mr Bloom, relying on a valuation by Mr Hamilton, submits the Home had a market value ranging from $155,000 to $160,000. As will be seen, the single most significant matter that accounts for the different valuations is not the methodology each of Mr Hamilton and Mr Stanaway used, but the factual assumptions on which they relied. The most significant factual assumption concerns the condition of the Home at the time Mr Bloom sold it to Ripcord. Mr Hamilton assumes the Home “was in only fair condition given its age, fair wear and tear etc., however it was structurally sound/no leaks etc”.[2] Mr Stanaway, on the other hand, assumes the Home was not structurally sound, and that the Home required work “to bring it back to reasonable condition”.[3]
[2] Valuation report of Mr Hamilton (Hamilton Report), [1.10]. Mr Hamilton also assumed the Home “was in relatively similar condition in 2013 as inspected in 2018” (Hamilton Report, [6.1].) This, however, was for the purpose of his valuing the Home as at 2013, which is not relevant to the matters I deal with in these reasons.
[3] Valuation report of Mr Stanaway (Stanaway Report), [10.1]
These reasons are therefore arranged as follows. First, I will identify some principles that are relevant to my assessing the evidence about the value of the Home. Second, I will describe the evidence given by each of Mr Hamilton and Mr Stanaway. Third, I will identify the evidence that relates to the condition of the Home at the time Mr Bloom agreed to sell it to Ripcord, and make findings based on that evidence. Finally, I will consider whether the evidence permits me to make a finding about the value of the Home at the time Mr Bloom sold it to Ripcord, and, if so, what the value was.
Notion and assessment of “Value”
The “need to determine the value of assets arises in many different legal contexts”, and it is “the context which determines the relevant principles of valuation to be applied”.[4] One context is that with which I am concerned in these reasons for judgment, namely, “market value”. “Market value” in relation to land has been classically defined in Spencer v The Commonwealth.[5] Griffith CJ said:
In my judgment the test of value of land is to be determined, not by inquiring what price a man desiring to sell could actually have obtained for it on a given day, i.e., whether there was in fact on that day a willing buyer, but by inquiring “What would a man desiring to buy the land have had to pay for it on that day to a vendor willing to sell it for a fair price but not desirous to sell?” It is, no doubt, very difficult to answer such a question, and any answer must be to some extent conjectural. The necessary mental process is to put yourself as far as possible in the position of persons conversant with the subject at the relevant time, and from that point of view to ascertain what, according to the then current opinion of land values, a purchaser would have had to offer for the land to induce such a willing vendor to sell it, or, in other words, to inquire at what point a desirous purchaser and a not unwilling vendor would come together.
[4] Leichhardt Council v Roads & Traffic Authority of NSW [2006] NSWCA 353, at [36] (Spigelman CJ, Beazley, Bryson, and Basten JJA and Campbell J agreeing).
[5] (1907) 5 CLR 418
Isaacs J said:
To arrive at the value of the land at that date, we have, as I conceive, to suppose it sold then, not by means of a forced sale, but by voluntary bargaining between the plaintiff and a purchaser, willing to trade, but neither of them so anxious to do so that he would overlook any ordinary business consideration. We must further suppose both to be perfectly acquainted with the land, and cognizant of all circumstances which might affect its value, either advantageously or prejudicially, including its situation, character, quality, proximity to conveniences or inconveniences, its surrounding features, the then present demand for land, and the likelihood, as then appearing to persons best capable of forming an opinion, of a rise or fall for what reason soever in the amount which one would otherwise be willing to fix as the value of the property.
The best evidence of market value of land is that of comparable sales of other land, either before or after the date on which land is to be valued.[6] The meaning of “comparable sales”, and how “comparable sales” may be used to assess market value, were described by Wells J in Crompton v Commissioner of Highways:[7]
Upon reading some works on comparable sales, one might be pardoned for supposing that, within narrow limit of tolerance, sales of land similar to the subject land must fall into two rigid categories: comparable sales and non-comparable sales. Such a supposition would, in my opinion, be an oversimplification and could lead into error. It seems to me that, ideally, the valuer should, in the first instance, look at the sales of land over a wide geographical, and temporal range, and from these select those that appear potentially useful as a basis for comparison. Those selected should then be carefully analysed by reference to an extensive list of characteristics of land sales the compilation and assessment of which fall clearly within the province of experts. Whether or not one or more of those sales is, and how it or they ought, to be compared with the subject land becomes a matter of degree, and a final decision is reached, often by those same experts drawing a series of nice distinctions. Obviously, no two sales of land will be found to be the same, or even similar in all respects. Those that bear a close similarity to the assumed sale of the subject land will be more realisable than those whose similarity is less proximate and in respect of which adjustments or allowances must be made before they can be safely introduced into the valuation process. At a particular point it will be found that, in respect of the remaining available sales, the adjustments and allowances that would need to be made are of such magnitude that it ceases to be safe or sound to treat them as sufficiently similar to the assumed sale of the subject land, and they must thenceforth be rejected.
[6] Commonwealth v Arklay (1952) 159, at page 170
[7] (1973) 5 SASR 301, at page 317
As noted by Griffith CJ in Spencer, any valuation of land must to some extent be conjectural. That implies that the “valuation of land and buildings involves matters of judgment”.[8] Further:[9]
There is no scientific exactitude in the valuations of land and buildings. They are as hypothetical as is the hypothetic purchaser whom they assume.
[8] Karenlee Nominees Pty Ltd v Gollin & Co Ltd [1983] 1 VR 657, at page 669
[9] Karenlee Nominees Pty Ltd v Gollin & Co Ltd [1983] 1 VR 657, at page 669. See also Mason J in Federal Commissioner of Taxation v St Helens Farm (A.C.T) Pty Ltd (1981) 146 CLR 336, at page 381: “Valuation is a matter of estimation, not of precise mathematical calculation.”
Although most valuations involve matters of judgment, the “question of the value of land or a chattel is an intelligible question of objective fact, to be decided on evidence like any other question of fact”.[10]
[10] Hall v Busst (1960) 104 CLR 206, at page 221
Findings on the value of a particular parcel of land are usually based on opinions offered by expert valuers. In federal courts such opinions are usually received into evidence under s.79(1) of the Evidence Act 1995 (Cth) (Evidence Act) as an exception to the opinion rule stated in s.76(1) of that Act. An opinion is admissible under s.79(1) of the Evidence Act if the person giving the opinion has specialised knowledge based on the person’s training, study, or experience, and the opinion is based on that specialised knowledge.
It has been held that, to be admissible under s.79(1) of the Evidence Act, evidence of an opinion must disclose the reasoning by which the opinion has been arrived at. This principle has been applied to a person who expresses an opinion about the value of land purportedly on the basis of comparable sales without disclosing the reasoning by which the person has arrived at the opinion. A ruling rejecting evidence of an opinion of value on this ground was upheld by the New South Wales Court of Appeal in Rolleston v Insurance Australia Ltd for the following reasons:[11]
The Valuation Report does not demonstrate how the opinion expressed by Mr Lechner is based on his specialised knowledge. There is nothing in the Valuation Report to explain how the sales of Property 1, Property 2, Property 3 and Property 4, for prices of $7.35 million, $9.25 million, $6.7 million and $11.06 million respectively, led to his conclusion that the Property would be likely to have a value of $7.5 million, as at 27 February 2014 . . . . There was no error on the part of the primary judge in rejecting the tender of the Valuation Report.
[11] [2017] NSWCA 168, at [35]
In the case before me neither party objected to the admissibility of the expert opinions provided by Mr Hamilton and Mr Stanaway. Nevertheless, that which may render an opinion inadmissible under s.79(1) of the Evidence Act may lead a court to give little weight to an opinion which has been admitted without objection if the opinion does not disclose the reasoning that supports it. Pullin J made that point in Arcus Shopfitters Pty Ltd v Western Australian Planning Commission:[12]
It is not satisfactory, in my opinion, for a valuer who values land using the comparable sales method, to list a number of comparable sales, each one suggesting a different value for the subject land and each of which requires some adjustment, and then simply to state an opinion about the value of the subject land. Such an opinion will only have any value if the valuer explains which is the most important of the comparable sales, why that is so, and what adjustments have been made to reach a conclusion about the value of the subject land.
[12] [2002] WASC 174, at [78]. As McDougall J noted in Rolleston v Insurance Australia Ltd [2016] NSWSC 1561, there was a successful appeal from the decision of Pullin J (Western Australian Planning Commission v Arcus Shopfitters Pty Ltd [2003] WASCA 295) but, as McDougall J further noted (at [23], [24]) there was nothing in the judgments on appeal “to suggest that the approach that Pullin J had taken to an unreasoned “ipse dixit” valuation was incorrect”.
When assessing the evidence of competing valuers, a trial judge is not obliged to accept only one of the competing valuations; but the trial judge must not cast himself or herself in the role of a third valuer.[13] The task of a trial judge when evaluating conflicting valuation evidence was described by Wells J in Brewarrana Pty Ltd v Commissioner of Highways (No.2):[14]
The judge may have proper and rational grounds for preferring one expert to another; such grounds are well-known and accepted. He may, by a consideration of the whole of the evidence, expert and non-expert, be able to conclude that one opinion is more likely to be sound than another or others, even though both or all opinions are given by men of integrity, learning and skill, and are supported, within self-ordained limits, by impeccable reasoning. He may, because he has been persuaded by the evidence of one expert, find that there is a fatal flaw in the reasoning of another. It may appear that, having regard to the whole of the evidence, certain factual assumptions, and hence the opinions based on those assumptions, are not well founded. But the judge cannot arrogate to himself the role of an expert who is, in any respect, primus inter pares.
[13] Flotilla Nominees Pty Ltd v Western Australian Land Authority [2001] WASC 122, at [25]
[14] (1973) 6 SASR 541, at page 545. The expression “primus inter pares” which appears at the ends of this passage is commonly translated as “first among equals”.
Finally, it would be useful to say something about the notion of “highest and best use”, because it is a notion to which Mr Hamilton refers. In Port Stephens Shire Council & v Tellamist Pty Ltd Santow J said:[15]
It is accepted from Spencer’s case that the valuation must be a ‘valuation for highest and best use’. Isaacs J cited The Queen v Brown (1867) LR 2 QB 630, in which Cockburn CJ stated (at 631):
“A jury … in assessing the amount to which the landowner is entitled, have to consider the real value of the land, and may take into account not only the present purpose to which the land is applied, but also any more beneficial purpose, to which, in the course of events at no remote period it may be applied, just as an owner might do if he were bargaining with a purchaser in the market. This is the mode in which the land would be valued.”
[15] [2004] NSWCA 353, at [220]
The expert evidence
Having set out some principles, I will describe the evidence given by each of Mr Hamilton and Mr Stanaway.
Mr Hamilton’s evidence
Mr Hamilton says that the purpose of the Hamilton Report is to assess the “market value” of the Home.[16] Mr Hamilton employs the following definition of “market value”:[17]
Market value is defined as the estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm’s length transaction, after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion.
[16] Hamilton Report, [1.2]
[17] Hamilton Report, [2.2]. This is the definition Mr Stanaway also uses. As stated by Mr Stanaway, the definition is taken from the International Assets Valuation Standards Committee.
Mr Hamilton first describes the residential park on which the Home is situated and the Home itself.[18] He says he was advised that “at the time the home “was in only fair condition given its age, fair wear and tear etc., however it was structurally sound/no leaks etc (Description provided by Mr Mel Bloom)”.[19]
[18] Hamilton Report, [4], [5], [6]
[19] Hamilton Report, [1.10]
Second, Mr Hamilton describes the valuation methodology he applied:[20]
The most appropriate methodology to assess the likely sales range is to compare the home with similar/comparable homes that have sold.
It is important to note there are no public records which detail the date and sale price of the homes.
The demand for manufactured homes tends to follow the demand for other forms of affordable housing in the general locality.
It is unlikely that a financial institution would provide funding to acquire a home, therefore buyers have to fund the purchase from their own resources. This is usually achieved by the sale of their own home. So, as the general market increases in value, the potential buyers have access to greater funds to purchase a home in the park.
[20] Hamilton Report, [8.2]
In that context Mr Hamilton considered the “highest and best use” of the Home. After providing a definition of “highest and best use”,[21] Mr Hamilton referred to two potential uses. One was a “light refurbishment to basically improve the home’s overall presentation”, noting that this would have been a temporary option, given the age of the structure, and that it constituted an under-utilisation of the site on which it is located. The second use was an “extensive upgrade and enlarging of the structure”. Here Mr Hamilton records that such an extensive upgrade and enlarging of the structure “was undertaken by Ripcord Pty Ltd in Circa 2012/2013”, noting that “Neate Construction advised the works cost in the order of $102,293”. Mr Hamilton concluded: [22]
[21] Hamilton Report, [8.1]: “The use of an asset that maximises its potential and that is physically possible, legally permissible and financially feasible.”
[22] Hamilton Report, [8.1]
In my opinion, in circa 2011 the home was a sound refurbishment opportunity.
The demand for the home for redevelopment and on-sale would have been limited to those parties familiar with this type of work. These potential buyers are most cost-conscious as they have to acquire the home, complete the works and on-sell for a profit.
Third, Mr Hamilton made the following general observations about the “affordable housing market” in the Gold Coast:[23]
The Gold Coast affordable housing market, in tune with all forms of real estate, operates in a cycle fashion.
After the GFC in 2008, demand for housing declined sharply. There was a minor recovery in 2009/10 however the demand declined in 2011 and remained somewhat subdued until 2013/14 when market conditions improved.
[23] Hamilton Report, [8.1]
Fourth, Mr Hamilton refers to the sale on 30 January 2012 of two other homes on the site, both to Ripcord, one for $150,000, and the other for $97,500.[24] The second of the two homes was a one-bedroom home. Mr Hamilton identified these two sales together because he had been provided with a copy of the contracts of sale for the homes.
[24] Hamilton Report, [9.1]
Fifth, Mr Hamilton sets out information in relation to the sale of eight homes, the first occurring on 16 December 2011, and the last on 19 December 2012. Mr Hamilton treated this group of sales separately from the two sales to which I have referred because the evidence of these sales was contained “in the form of hand-written notes from the Paradise Lakes [sic] Resort Open House brochure dated 1 October 2011 [sic]”.[25] In this part of his report Mr Hamilton identifies the reported sales price, the date of sale, and briefly describes each of the homes. The homes and prices are as follows:
[25] Hamilton Report, [9.1]
Site No.
Date of sale
Sale Price
26
10 April 2012
$222,000
30
22 June 212
$283,000
39
9 March 2012
$222,000
79
16 December 2011
$245,000
138
3 September 2012
$165,000
147
12 April 2012
$160,000
156
19 December 2012
$180,000
160
22 March 2012
$179,000
The heart of the Hamilton Report is section 9.2, which is headed “Reconciliation – June 2011”. It may be summarised as follows:
a)Mr Hamilton noted that the sales to which he referred earlier in the report were conducted in 2012.
b)There was no “discernible change in market conditions over the period”, and there “were no intervening events that were particular to Paradise Lakes [sic] Resort which would impact on demand for homes in the Resort over the 2011 and 2012 period”.
c)Mr Hamilton considered that the sale of the Home in June 2011 would have attracted a higher value than site 164 ($97,500), and was of inferior value to sites 26 ($222,000), site 30 ($283,000), site 39 ($222,000), site 79 ($245,000), site 156 ($180,000), and site 160 ($179,000).
d)The “likely range is demonstrated by Site 148 ($150,000), Site 147 ($160,000), and Site 138 ($165,000)”.
Mr Hamilton concluded as follows:
Given the difficulties posed by the retrospective nature of the valuation exercise, I am only able to provide a likely sales range.
I have assessed the likely range of Site 155 [that is, the Home], given appropriate marketing and proper presentation to be $155,000 to $160,000.
Mr Hamilton addressed the significance of the Home having been sold for $121,000 in June 2011. Mr Hamilton said:[26]
I acknowledge the sale price of $121,000 in June 2011 is somewhat below my assessed likely sales range. This sale price appears to reflect the circumstances of the sale and the disparity of knowledge concerning the market for homes in the Park between the parties.
[26] Hamilton Report, [9.2]
Mr Hamilton also addressed the significance of the carrying out of work “as described by Mr Hall”. That is a reference to work Mr Hall, in evidence I will set out later, identified would have needed to be undertaken on the Home to have substantially improved its “appearance and serviceability”, and Mr Hall’s estimate of the cost of that work.[27] Mr Hamilton said the following about this work:
The prudent action of the vendor, acting knowledgeable [sic], would have been to undertake the works as described by Mr Hall (Mr Hall’s budget was in 2011 terms approximately $4,350) before offering the property for sale. These works would have, in my opinion, increased the likely demand from those parties seeking an affordable home that could be occupied immediately.
Had the works been completed it is reasonable to conclude the price achieved would have been approximately $5,000 to $10,000 more than my assessed range of $155,000 and $160,000.
[27] See the affidavit of Terence Kemp Hall 18.09.2018, [11(k)]
Mr Hamilton also gave evidence under cross-examination, most of which was directed to the home at site 148 (Home 148).[28] Photographs of particular aspects of Home 148 were shown to Mr Hamilton, and he was asked whether the features depicted in the photographs were superior to the equivalent features and presentation of the Home. Mr Hamilton accepted that the condition of Home 148 as depicted in the photographs was superior to those of the Home as depicted in the photographs Mr Hamilton considered when preparing his report. Given his acceptance of these matters, however, Mr Hamilton did not accept that it followed that the sale price for the Home 148 was not a good comparison with the sale of the Home; and he gave reasons for not accepting that:[29]
MR POPE: So if it’s more attractive in the marketplace, it’s not really a good comparison, is it?---No, no. With valuations, what you do, you establish a number of benchmarks. You – it’s extremely rare that you get something that’s absolutely comparable. It could vary from aspect, was one of the issues you pointed out. The date could vary. The circumstances of the sale could vary. So you need to get a cross-section. Some inferior, some superior. Some are more comparable than others but you can’t reject a sale just because it may not have every attribute or quality that the subject property has. You have to work with the sales evidence you have, and then make a judgment of where you feel the subject property lies within that cross section of sales. And what I’ve said there is in the – the two – below the two bullet points, I say, well, clearly, 164 is inferior. Clearly those others are more – you know, clearly – not significantly superior but superior, there’s no debate. And there are three around about which provide the best level of, I think, comparability.
The least expensive of which is more superior than the subject house?--- As I said, and the circumstances of the sale could be such that that’s – there’s a reason for that. But I can’t – it would be wrong for me to say there’s one sale and disregard all the others. There has to be a range of sales, and that sale sits at 150, whereas you’ve got two others around that 165. And it’s a long time since the properties were sold but just doing what I can with all that evidence – and there’s a fair bit of evidence there over the timeframe. You know, I’ve tried to get a nice central position in there.
[28] The photographs are exhibit I
[29] T55.40-T56.10
Mr Hamilton was also asked whether he would need to revise his opinion if he were to take into account two matters about which he did not receive instructions. One of the matters was what counsel for Paradise Lake said was a finding I made in the earlier reasons that an offer to purchase the Home for $135,000 had been made in March 2011. Another was the sale of the home at site 17 (Home 17) on 31 March 2011 for $135,000. The sale of Home 17 is the subject of an affidavit by the purchaser, Mr Postma. Mr Hamilton gave the following evidence:[30]
All right. So with those two pieces of information, how does that affect your valuation? --- Well, I don’t have enough details of site 17, so it’s a bit hard for me to make a comparison. The fact that there was an offer at 135, I guess that would – I’m not sure whether that was an opening offer, that was a final offer, that would have been, I guess – I would imagine there would have been negotiations from that point. But an offer – you don’t put a lot of weight on offers, not as much as you do on contract. So, yes, it would have been of interest, yes.
And how - - -?---Whether it would change my mind in terms of dollars for the property, probably not.
[30] T58.40-T59.5
Mr Stanaway’s evidence
Mr Stanaway’s opinion in the Stanaway Report concerns the “Market Value of Improvements” of the Home, and Mr Stanaway uses the definition of “market value” that Mr Hamilton uses.
Mr Stanaway begins by describing the residential park on which the Home is situated and the Home itself, and the sales history of the Home. He there records the Home was sold for $121,000 on 26 June 2011, for $317,000 on 16 April 2013, and for $317,500 on 7 February 2018. Mr Stanaway then refers to the sales of six other homes located on the park:
Site No.
Date of sale
Sale Price
17
31 March 2011
$135,000
18
9 September 2011
$160,000
147
12 April 2012
$160,000
148
3 February 2012
$150,000
160
22 March 2012
$179,000
162
16 November 2011
$160,000
Mr Stanaway notes that each of the units comprises two bedrooms, and are of the same general size and layout as the Home “but having slightly varying floor plans and all located on sites fronting the lake”. He further notes:[31]
All of the sales based on information available to the Valuer were in a superior condition to the subject property and, whilst a number of the sales are at levels just above the subject property, they did not require work to the extent required on the subject property to bring it back to reasonable condition.
[31] Stanaway Report, page 8
Under the heading “General Comment” Mr Stanaway gives a brief description of the Home, provides details of the site agreement relating to the Home, and details of the terms of the contract for sale by which Mr Bloom sold the Home to Ripcord. Mr Stanaway then referred to “[m]arket condition as at the date of valuation for residential real estate in the Gold Coast area”. Here Mr Stanaway made a number of observations:
a)The Global Financial crisis led to major lending institutions imposing strict lending criteria for all areas of the residential market in the Gold Coast, and to the majority of lenders seeking to reduce their loan portfolio, especially for what has been termed “discretionary spending”, being holiday homes and units.
b)These “ongoing market conditions resulted in a decline in both sales numbers and market levels throughout 2011 and 2012”.
c)Market conditions within manufactured home parks were further impacted by the unavailability of finance for purchases of this type.
d)It was “an accepted fact in the general residential market that properties in the hands of a deceased estate generally sell at a figure which would represent the lower end of the indicative range, mainly due to the general condition of this type of property but also due to the executors wishing to realise on the estate without incurring expenses such as maintenance and rates on a freehold property and in manufactured Park site rentals which are still payable”.
Mr Stanaway concluded this part of his report as follows:[32]
Taking into account all factors previously indicated, market value of the property is considered to be within the range of $120,000 to $130,000 with the contract price of $121,000 adopted as market value albeit at the lower end of the indicative market.
[32] Stanaway Report, page 11
Under cross-examination it became apparent that Mr Stanaway assumed the Home was not “structurally sound”, and that he relied on “Mr Neat’s report”.[33] I will refer to that “report” later in these reasons. Mr Stanaway gave the following evidence:[34]
And what aspect about it do you say was not structurally sound that you’re relying on to give that opinion today?---Mr Neate’s report.
Yes, but what aspect are you relying on? What weighed on your mind to say that it’s not structurally sound?---With the – the whole of the property was not – the deck wasn’t structurally sound. The floor – the floor wasn’t structurally sound.
And what aspect about it do you say was not structurally sound that you’re relying on to give that opinion today?---Mr Neate’s report.
Yes, but what aspect are you relying on? What weighed on your mind to say that it’s not structurally sound?---Well, the – the whole of the property was not – the deck wasn’t structurally sound. The floor – the floor wasn’t structurally sound.
Okay. So what was it about the deck that wasn’t structurally sound?---Well, based on Mr Neate’s report, that it required replacement.
Okay. So – all right. So if it was the case that the court doesn’t accept that the – the improvements to site 155 were not – were in fact structurally sound and they were essentially cosmetic improvements that may – may have been required, if anything, to the property for it to be sold, then it is the case, is it, that your valuation of will be too low?---That would be true.
Okay. And, in fact, in those circumstances, so long as it was – if the court was of the view that it was basically structurally sound but required – or could have benefited from some cosmetic improvements, and even perhaps some chopping or something like that to level it, then – and there was an offer on for $135,000, that were just standard – that were just standard conditions and there was – there was no good reason to – to expect that it wouldn’t complete, then your valuation couldn’t come in at any less than $135,000, could it?---I would agree with that.
[33] T111.5
[34] T111.10-T111.25
In evidence given under cross-examination, Mr Stanaway accepted that the methodology he used for valuing the Home was the same as the methodology Mr Hamilton used;[35] that the main reason for the difference between his valuation of the Home and Mr Hamilton’s valuation is the assumption Mr Stanaway made that the Home was not structurally sound, another reason being that Mr Hamilton did not use the sales of homes 17, 18, 147, 160 and 162, as comparable sales;[36] that the sale of Home 147 for $160,000, being the house described in the Paradise Lake Resort open house brochure as having a wide southerly water aspect “needing TLC”, sounded reasonably comparable;[37] and that the sale of site 138 for $165,000 was reasonably comparable, although the site was superior to the Home, and although the sale of site 138 was some nine months after the sale of the Home.[38]
[35] T112.30
[36] T112.45
[37] T114.3
[38] T114.15
Evidence concerning the condition of the Home
As I have already noted, Mr Hamilton relies on the assumption that the Home “was in only fair condition given its age, fair wear and tear etc., however it was structurally sound/no leaks etc”.[39] Mr Hamilton says this assumption is based on Mr Bloom’s description of the Home. Mr Stanaway, on the other hand, appears to have valued the Home on the assumption that it was not structurally sound, and that he relied on “Mr Neate’s report”.
[39] Valuation report of Mr Hamilton (Hamilton Report), [1.10]
Before I set out the relevant evidence, it would be useful to describe how the issue of the condition of the Home was raised. The starting point is Paradise Lake’s filing affidavits by Mr Neate, Ms Lazzarin, and Mr Postma. Mr Neate is a director of Ripcord, Ms Lazzarin is his wife, and Mr Postma was the owner of Home 17 who, on 31 March 2011, sold that home to Ripcord for $135,000. Mr Neate attached to his affidavit what he described as a “condition report in relation to the state of the home at site 155 detailing its state/condition at settlement”.[40] That “report” contained what purports to be opinions about the condition of the Home, which, in turn, attaches a diagram of the Home which depicts what the diagram describes as “excessive deflection in bearer due to faulty mid-span posts”, and “angular deflection 1.85% both sides of ridgeline, total deflection 3.7%”. Mr Bloom filed two affidavits in response to these affidavits. One is an affidavit he made on 12 December 2018 in which he responds to Mr Neate’s affidavit, as well as to matters contained in the Stanaway Report. The other is an affidavit made by Mr Hall on 18 September 2018.
[40] Affidavit of Jason Kenway Neate 07.08.2018, [3]
On objection I ruled inadmissible the various opinions contained in the “condition report” that was annexed to Mr Neate’s affidavit, but I permitted counsel for Paradise Lake to lead evidence in chief from Mr Neate of matters of fact concerning the condition of the Home. In examination in chief Mr Neate was asked questions about when he prepared the diagram.[41] In answer to questions I asked, Mr Neate said he prepared the diagram at around the time he prepared the affidavit to which it was annexed,[42] and that he prepared the diagram and the numbers included in the diagram on the basis of what he remembered occurred in 2012.[43] Also during examination in chief Mr Neate said the “condition report” was the third occasion on which he prepared such document. The first occasion was in 2012 or 2013 after Mr Bloom’s solicitors had written to Paradise Lake,[44] “in response to accusations by Mr Bloom before we had sold the house”.[45] Counsel for Mr Bloom called for the document on the basis of which Mr Neate said he prepared the “condition report”. A document was produced and marked “MFI3 Response to Letter of claim by Melvyn Bloom dated 25/09/2012”.[46] Mr Neate also gave evidence that in around April 2011 he inspected the Home.[47] He said he observed the door to the front of the Home had a broken window;[48] the gutter on the carport was full of vegetation, and the downpipe was blocked;[49] the kitchen was a “very basic kitchen”, containing foodstuffs and other things in it, with the bench tops covered with linoleum, and the stove being quite dirty; the bathroom vanity was pink and the vanity had water damage; the toilet was reasonably new; the decking timbers were soft wood but “not too bad but the nails were all popping out and that’s because the joists underneath were rotten”;[50] the handrails on the deck were split, warped, and had some wood rot; part of the deck had been enclosed inside the garden; the garden shed did not have a locking door; and there were items under the Home. Mr Neate said he prepared the document that is MFI3 on the basis of the matters he observed in April 2011.[51]
[41] The diagram was admitted into evidence and marked Exhibit J
[42] T78.45
[43] T79.5
[44] T81.40
[45] T82.45
[46] T86.45
[47] T87.45
[48] T88.45
[49] T89.5
[50] T90.5
[51] T88.55
During his cross-examination Mr Neate was taken to a document titled “Neate Construction Budget Estimate” which is annexed to the Hamilton Report. This appears to be part of a document described earlier in item 3 of section 2.9 of the Hamilton Report as “[e]mail from Neate Construction Pty Ltd dated 5 December 2018 containing after renovation floor plans and excel spreadsheet with renovation cost details”. The Hamilton Report does not otherwise expressly consider these documents; and Mr Bloom says that Mr Hamilton advised him that Mr Hamilton received the documents from Neate Construction. Mr Neate said that the document was “the budget and job costing figures that I ran on the project”.[52] He said that the first column, which was headed “Budget”, represented a total budget of $60,000; the heading “expenses” was for “the plant and materials for the project”, but he accepted there were no items under that heading, and under the heading “Labour” there is recorded “my back of the note book, total of what I think I’m spending on wages week by week on the project”.[53] Mr Neate also said that “MOD Building Company did the works”, but “Neate Constructions billed Ripcord for the works”.[54] Mr Neate confirmed that the amounts in the column headed “Labour” were estimates of the work done. The reason they were estimates is that the project on the Home was “our overflow project and sometimes they would be on this job two days a week”, and “sometimes it would be five days a week”; so “these figures [were] my back of a piece of sheet of paper dead reckoning of what I think I’ve incurred on the job”.[55]
[52] T93.15
[53] T94.15
[54] T94.40
[55] T95.15
In her affidavit Ms Lazzarin deposed to the floor plans of Home 17 being the mirror image of the floor plans of the Home. Mr Postma also deposed that the floor plans of Home 17 are a mirror image of the floor plane for the Home.
In his affidavit Mr Hall deposed that he has known Mr Bloom for approximately 47 years; and since about the age of 15 years he has been involved in the repair, generation, restoration, and decoration of a large number of building structures. He first visited the Home in about early to mid-June 2011 for the purpose of buying some of the furniture contained in it. Mr Hall says that during that visit he had a fair opportunity to walk through the interior and around the exterior of the Home. At the conclusion of the first meeting, Mr Bloom asked Mr Hall if he had access to a metal detector so the interior and the exterior of the Home could be tested for concealed metal objects. Two days later Mr Hall attended the Home and for around 2 hours used a metal detector to conduct tests for concealed metal objects. Mr Hall says that he used the metal detector over “a period of hours to conduct tests for concealed metal objects, paying special attention to the walls, floors, and accessible underfloor areas”. Mr Hall then set out his recollection of what he observed. He says he did not notice any “substantial differential settlement” in the home; nor did he observe any “sharp peak along the centreline of the house”. Mr Hall also did not detect any wood rot in the underneath of the deck. He expressed the opinion, however, that the deck would have benefitted from a timber restorative product and annual fumigation. Mr Hall also expressed the opinion that the appearance and serviceability of the Home would have substantial improved if certain matters were attended to, these being repainting the interior and exterior, removing and relocating the shed, placing a new vinyl flooring to the hall, various handyman repairs, and treating the timber on the deck.
Parties’ submissions
Counsel for Mr Bloom submits I should find that the lowest sale price of the three sale prices on which Mr Hamilton relied, being the sale of Home 148, was tainted by a breach of fiduciary duty because it was a sale to Ripcord in circumstances where it was not disclosed to the vendor that the directors of Ripcord were associated with the directors of Paradise Lake; and, for that reason, the sale price for Home 148 was “an aberrant sale price”. That submission was said to be based on evidence given by Ms Lazzarin in cross-examination.[56] Counsel further submits I should prefer Mr Hamilton’s valuation to that of Mr Stanaway because Mr Stanaway’s valuation relies on Mr Neate’s opinions about the state of the Home, and in particular his opinions about the Home not being structurally sound, and those opinions were not admitted into evidence.
[56] T71-T72
Counsel for Paradise Lake, on the other hand, makes two submissions. First, he submits that Mr Hamilton conceded that the comparable sales on which he relied do not satisfy the definition of “market value” and, for that reason, “his evidence fails at the first hurdle”.[57] Secondly, Mr Hamilton relied on information provided to him by Mr Hall and Mr Bloom, and specifically on Mr Hall’s evidence that a budget of $4,350 needed to be spent on the Home to refurbish it, and on Mr Bloom’s informing Mr Hamilton that the Home was in only fair condition given its age wear and tear; and it is “patently clear on the evidence that neither of those statements are correct”. Counsel relies on three matters.
[57] Respondent’s Submission on Remedy, page 2
The first is the submission that Mr Bloom and Mr Hunt’s observations of the condition of the Home were based on matters they had observed in 2011 in circumstances where they relied entirely on their memory rather than on any contemporaneous or near contemporaneous document. Mr Neat’s information for his condition report, on the other hand, “was available to him before the 27th June 2012, which is the time he did the budget for the renovations, and he specifically addressed the issues in an email dated 25 September 2012, which had the report attached”.[58] The second matter on which counsel relies is the submission that “there was no challenge to his evidence that the Lot 155 had levelling and there was a cost overrun”. [59] That is a reference to evidence Mr Neate gave in cross-examination. Third, counsel referred to an affidavit made by Mr Whitten, the solicitor for Mr Bloom, filed on 19 October 2018 which, counsel submits, shows the “purchase of Shims for the purposes of levelling”.[60]
[58] Respondent’s Submission on Remedy, page 3
[59] Respondent’s Submission on Remedy, page 3
[60] Respondent’s Submission on Remedy, page 3
Issues and assessment of value
From these competing submissions, the following questions arise:
a)Is it open to the Court to assess Mr Hamilton’s valuation on the basis that one of the comparable sales on which he relied was “aberrant”?
b)Is Mr Hamilton’s valuation flawed because he did not form the opinion that the prices of the sales on which he relied as comparable did not satisfy the definition of market value he employed for assessing the value of the Home?
c)Assuming (b) is answered in the negative, does the evidence establish that the Home was in the condition Mr Hamilton assumed it to be; that is, “in only fair condition given its age, fair wear and tear etc., however it was structurally sound/no leaks etc”?
d)Assuming (c) is answered in the affirmative, is there evidence on the basis of which it is open to me to assess the value of the Home and, if so, what is the value for which I should assess the Home?
Aberrant price?
It is not open to me to assess Mr Hamilton’s valuation on the assumption that the sale of Home 148 was “aberrant”. First, I am not prepared to find that Home 148 was sold to Ripcord in circumstances where any association between the directors of Paradise Lake and those of Ripcord were not disclosed. Ms Lazzarin gave evidence that this association was disclosed orally.[61] Second, even if I were to find there had been non-disclosure, that would not be a matter on which I could have relied for revising Mr Hamilton’s opinion. It was a matter for Mr Hamilton to assess whether such non-disclosure was relevant, and the weight that should be given to such fact.
[61] T72.35
Invalid valuation because not satisfied comparable sales reflected market values?
That Mr Hamilton did not satisfy himself that the sales he considered to be comparable reflected market value does not manifest any error by him in the application of the comparable sale methodology he used to assess the value of the Home. The purpose of the comparable sale methodology is to assess the market value of a particular item of land by reference to what the valuer considers to be comparable sales (as that notion was explained by Wells J in Crompton). Neither Mr Hamilton, nor Mr Stanaway have given evidence that the comparable sale valuation methodology requires that the comparable sales must reflect market value. Nor does the description of that methodology given by Wells J in Crompton suggest any such thing. That is not surprising. If the submission that a sale could be considered to be comparable only if it reflected market value were correct, that would require a valuer who uses such methodology to assess the market value of each property he or she considered to be comparable before the valuer could consider the sales prices comparable. Further, if, on counsel’s submission, a sale could not be considered to be comparable unless it reflected market value, the valuer would be required to value each comparable property by a methodology other than the comparable sale methodology. That would be absurd.
Condition of the Home
There are a number of items of evidence relevant to the condition of the Home that I must assess. One is the evidence of Mr Hall. Although his evidence consists of his recollection of events that occurred more than seven years before he made his affidavit, and there is no suggestion he revived his memory by reference to any contemporaneous or near contemporaneous document, there are matters that give cogency to his evidence. The first is that Mr Hall visited the Home twice. The second is that on his second visit Mr Hall undertook an activity over a significant period of time that exposed him to the condition of the Home, that activity being the use of a metal detector on the walls, floors, and accessible underfloor areas of the Home. These are matters that are likely to have made a firm impression on Mr Hall’s memory. For those reasons, I accept Mr Hall’s evidence of his recollection of what he observed and did not observe on his visit to the Home. In particular I accept his observation that he did not notice any “substantial differential settlement” in the Home, or any “sharp peak along the centreline of the house”. My confidence in accepting Mr Hall’s evidence is fortified by Mr Neate having annexed to his affidavits photographs of the Home before Ripcord commenced work on the Home, none of which, however, Paradise Lake submits shows any “substantial differential settlement”, or any “differential settlement”, or any “sharp peak along the centreline of the house”.
A second item of evidence is that given by Mr Neate in chief of his recollection of an inspection of the Home in around April 2011. I have difficulty accepting Mr Neate’s evidence that he inspected the Home in April 2011, and that it was on the basis of his inspection on that day that he prepared a report some 15 months later, specifically to provide material to respond to a letter from Mr Bloom’s solicitors. There is no apparent explanation why Mr Neate would have inspected the Home in April 2011 which, on the evidence he gave in chief, included his crawling underneath the Home, and also punching the bearers with a screwdriver. At that time Mr Bloom, as the executor of his uncle’s estate, owned the Home. It is unlikely that Mr Neate would have taken the liberty to enter the Home without the owner’s licence, and damage property that did not belong to him or to his company. For that reason I am not prepared to find that Mr Neate inspected the Home in April 2011. It may be that Mr Neate undertook some inspection after Ripcord acquired the Home, and the evidence Mr Neate gave in chief purported to be based on his observations on such later inspection. Mr Neate, however, did not give evidence that this is what occurred, and Paradise Lake does not submit that this is what may have occurred. In these circumstances, I am not prepared to find that although he did not inspect the home on 11 April 2011, Mr Neate did so at some later time, and that it is on the basis of such inspection that he recalled the condition of the Home.[62]
[62] In his affidavit of 7 August 2018 Mr Neate deposes that approximately four weeks after settlement he took several colour photographs of the Home. He does not say, however, that on this occasion he carried out any inspection of the Home.
Even if I were to accept that Mr Neate inspected the Home in April 2011 or at some later time, but before he prepared the “condition report”, I would prefer the evidence of Mr Hall to the extent it conflicts with Mr Neate’s evidence. As I have already noted, Mr Hall undertook activities in relation to the Home that exposed him to the condition of the Home. Thus, I prefer Mr Hall’s evidence about his not noticing any wood rot on any part of the Home. I also accept his evidence that he did not notice any “substantial differential settlement” in the Home; nor did he observe any “sharp peak along the centreline of the house”. I accept there is possibility that Mr Neate observed wood rot in places that were not exposed to the view of Mr Hall; and that although not apparent to close observation, precise measurements could have revealed some differential settlement or some peak along the centreline of the Home. Even assuming the truth of these matters, that would not render inaccurate Mr Bloom’s description of the Home being “in only fair condition given its age, fair wear and tear etc., however it was structurally sound/no leaks etc”.[63] That is, the presence of some wood rot, as Mr Neate says he recalled, or a measurable differential settlement or peak otherwise not apparent to the observant eye, would not render inaccurate the description of the Home’s being “in only fair condition given its age, fair wear and tear etc., however it was structurally sound/no leaks etc”.
[63] Hamilton Report, [1.10]
A third item of evidence is the plan of the Home that was annexed to the “condition report”.[64] As I have already noted, the diagram purports to represent “excessive deflection in bearer due to faulty mid-span posts”, and “angular deflection 1.85% both sides of ridgeline, total deflection 3.7%”. There are a number of matters to note about this document. First, it was prepared after Mr Bloom, by a letter dated 23 August 2012 from his lawyers complained about the non-disclosure, and for the purpose of responding to those complaints.[65] Second, there is nothing to suggest that at the time Mr Neate says he inspected the Home, which is the basis on which Mr Neate says he prepared the diagram and the “condition report” to which it is annexed, Mr Neate had noticed or measured the deflections. In the absence of any such evidence, the inference is available to be drawn, and I do draw the inference, that Mr Neate included the measurements after the day on which he says he inspected the Home. For these reasons alone, I am not prepared to give any weight to the diagram as evidence that the Home was subjected to the deflections asserted in the diagram. Third, even if I were to accept as true these assertions of the deflections, there is nothing to suggest that they rendered inaccurate the observations as recalled by Mr Hall, and in particular his observation that he did not notice any “substantial differential settlement” in the Home, or any “sharp peak along the centreline of the house”; or that they rendered inaccurate the Home being described as being “in only fair condition given its age, fair wear and tear etc., however it was structurally sound/no leaks etc”.
[64] Exhibit J
[65] Bloom As Executor Of The Estate Of Farr (deceased) v Paradise Lake Pty Ltd [2018] FCCA 1959, at [66]
A fourth item of evidence is somewhat shadowy; and it relates to the work Ripcord carried out in relation to the Home. The evidence consists of what is said to be a budget for that work, and the cost of carrying out the work. The nature and extent of the work is most clearly, although briefly, described in the Hamilton Report as an “extensive upgrade and enlarging of the structure undertaken by Ripcord Pty Ltd in Circa 2012/2013”, which “Neate Construction advised the works cost in the order of $102,293”.[66] It has not been expressly submitted, although, perhaps, it has been insinuated, that the work Ripcord undertook reflected the work that was required to be undertaken to put the Home into fair condition. To the extent Paradise Lake makes such submission I do not accept it. Mr Hamilton’s brief description of the work shows it was work to upgrade the Home extensively. That Ripcord undertook such work does not render inaccurate the Home being described as being only in “fair condition given its age, fair wear and tear etc., however it was structurally sound/no leaks etc” at the time Mr Bloom agreed to sell the Home to Ripcord.
[66] Hamilton Report, 8.1
A fifth item of evidence is something that has not been admitted into evidence; it is an exhibit to an affidavit of Mr Whitten, the solicitor for Mr Bloom, filed on 19 October 2018. The exhibit is a document titled “Neate Constructions Pty Ltd . . . Jobs Transactions [Accrual]”. That document appears to record, among other things, items purchased by Neat Constructions Pty Ltd on 22 July 2011, and the prices for those items. The price of one item is recorded to be $42.80, next to which there is handwritten “shims to level house”. There was evidence given in relation to the levelling the Home. First, there is the “Neate Construction Budget Estimate”. One of the work items described in that document is “level house”; and the amount budgeted for that item is $600. Second, there is evidence Mr Neat gave in cross-examination.[67]
[67] T104.5 – T104.45
All right. So can you have a look at that document, Neate Construction budget estimate, house renovation budget was actual. Were you budgeted, level house $600?---Yes.
Yes. And that was a, you know, reasonably accurate estimate for the levelling of the house; is that right?---No.
No. Okay. And what was inaccurate about that?---The corner line stumps did not take any weight, so they had to be re-concreted in. The external perimeter stumps were re-levelled. Would have been accurate enough for them, but the major cost was having to redo all the concrete footings to the corner line stumps.
Okay. But these weren’t things that you had formed a view about at the time that Ripcord Proprietary Limited had contracted to purchase the property, were you?---I knew about the perimeter stumps.
Okay. And - - -?---But - -
So in determining your budget for improvements to site 155, you took that into account; is that right?---From a basic preliminary inspection, I knew it had to be relevelled. I expected to just have to raise the perimeter stumps. When we got into the works, the corner line stumps weren’t constructed properly. There was no concrete underneath them, so the job got a lot bigger to - - -
Okay?--- - - - re-level and structurally support the corner lines.
When did it first become apparent to you that the job had become bigger?---During the works.
Okay. So not at the time that you were contracting to purchase - - -?--At the time of
site 155?--- - - - inspection it was quite obvious that the house was out of level.
Yes, and that’s why you provided for $600 to level the house in your budget; is that right?---Correct.
Counsel for Paradise Lake places great emphasis on this evidence. As I have already noted, counsel submits there was no challenge to Mr Neate’s evidence “that the Lot 155 had levelling and there was a cost overrun”. There is, however, an unstated assumption in this submission. It assumes that the levelling work that was undertaken on the Home was work that was necessary to put the Home “in only fair condition given its age, fair wear and tear”. Stated another way, the submission assumes that, but for the levelling work Ripcord in fact carried out, the Home would not have been “in only fair condition given its age, fair wear and tear”. In my opinion, these assumptions are incorrect.
First, I have already accepted Mr Hall’s evidence that he did not notice any “substantial differential settlement” in the Home; nor did he observe any “sharp peak along the centreline of the house”; and that my accepting this evidence is not inconsistent with there being measureable differential settlement and peak otherwise not apparent to the observant eye. That Ripcord carried out work to level the floor, therefore, does render inaccurate the Home being described as “in only fair condition given its age, fair wear and tear etc., however it was structurally sound/no leaks etc”. Second, and as I have also noted, the work Ripcord undertook consisted of “an extensive upgrade and enlarging of the structure”. That Ripcord levelled the Home as part of “an extensive upgrade and enlarging of the” Home, therefore, does not imply that the Home required to be levelled, or levelled in the manner Ripcord levelled the Home, to render it “in only fair condition given its age, fair wear and tear”. On the contrary, given I have accepted the evidence of Mr Hall, I find that “an extensive upgrade and enlarging of the” Home was not necessary to put the Home in a fair condition.
My overall assessment of the condition of the Home as at 20 June 2011 is that although it may have had some wood rot, and there may have been measurable differential settlement and a measurable peak along the centreline of the Home, the Home presented in the manner reported by Mr Hall in his affidavit; and on the basis of that evidence I find that Mr Bloom was correct in describing to Mr Hamilton that the Home was “in only fair condition given its age, fair wear and tear etc., however it was structurally sound/no leaks etc”.
Value
I am satisfied that the opinion of the value of the Home contained in the Hamilton Report is one on which I could reasonably rely to find that the Home had a value within the range of $155,000 to $160,000. First, I have found that the key assumption on which Mr Hamilton provided his opinion, namely, the Home was in only “fair condition given its age, fair wear and tear etc., however it was structurally sound/no leaks”, is correct. Second, Mr Hamilton sets out the methodology he has used, and he has identified the sales he has considered to be comparable, and the reasons why he has considered them to be comparable. It is true that Mr Hamilton has not revealed in detail the reasoning underlying his reaching the value that he did. That, however, does not detract from the weight his opinion otherwise bears, first, because valuation involves a measure of judgment and, second, I am satisfied that Mr Hamilton has actively engaged with the tasks of determining what sales are comparable, which of those are the most comparable and, on the basis of the ones he has considered to be more comparable, determining the value that should be assigned to the Home.
By contrast, my impression is that Mr Stanaway did not actively engage, or at least he did not engage as actively as did Mr Hamilton, with the question of determining what value should be assigned to the Home, given the sales he found to be comparable. My impression is based on the following:
a)Mr Stanaway was of the opinion that the Home had a value within the range of $120,000 to $130,000, but assessed the value of the Home at $121,000 without giving any reason for choosing the lower range. That is to be contrasted with Mr Hamilton’s approach where he gave an opinion over a range of values, and explained why he expressed his opinion on the basis of a range of values.
b)Second, the value Mr Stanaway assigns to the Home – $121,000 – is $14,000 lower than the lowest price in the set of sales he considered to be comparable. Those sales range from $135,000 to $179,000. The only apparent explanation given in the Stanaway Report is that the comparable properties “did not require work to the extent required on the subject property to bring it back to reasonable condition”.[68] The Stanaway Report, however, does not identify what Mr Stanaway understood by “reasonable condition”, the respects in which the Home was not in that condition, the work Mr Stanaway assumed was required to bring the Home back to reasonable condition, or the reasonable costs of that work. Given that Mr Stanaway was provided with Mr Neate’s affidavit that annexed the “condition report”, it may be that the work Mr Stanaway had in mind is that described in the “condition report”. Even if that is accepted, it is not apparent how Mr Stanaway relied on the information contained in the “condition report” to assess the value of the Home, given the sales he considered to be comparable.
c)Third, during cross-examination, Mr Stanaway said that his valuation was based on the assumption that the Home was not structurally sound. That assumption does not appear in the Stanaway Report. In any event, Mr Stanaway did not in cross-examination say in what way he understood the Home was not structurally sound, other than to refer to the “condition report”, or how that consideration led him to value the Home at $121,000, given the range of sales he considered to be comparable.
[68] Stanaway Report, 10.1
I therefore prefer Mr Hamilton’s opinion to Mr Stanaway’s opinion.
An additional reason I prefer Mr Hamilton’s opinion is that Mr Stanaway’s opinion is to a large extent apparently based on opinions about the condition of the Home contained in the “condition report”. Given those opinions were not admitted into evidence, and I have found that the assumption on which Mr Hamilton assessed the value of the Home, namely, that the Home was in “fair condition given its age, fair wear and tear etc., however it was structurally sound/no leaks”, is correct, a significant assumption of fact on which Mr Stanaway’s opinion is based is incorrect which, in turn, significantly, if not entirely, undermines the weight his opinion is capable of bearing.
Conclusion and disposition
I have accepted Mr Hamilton’s opinion, and Mr Hamilton has given a value range of between $155,000 to $160,000. It is reasonable to assess the value of the Home at the lowest end of the range, namely $155,000. The measure of equitable compensation should therefore be the difference between $155,000 and $121,000, namely, $34,000, from which the agency fee that would have been payable should also be deducted. That is so because Mr Bloom did not pay any agent’s fee and it is reasonable to assume that, had the Home been sold at market value, he would have paid such fee. Counsel for the applicant submits that Mr Bloom would have been charged an agent’s fee of 5% on the first $18,000 ($900) and 2.5% on $137,000, being the balance ($3,425[69]). That does not appear to be in dispute. Accordingly, the amount of equitable compensation is $29,675.
[69] (155,000-18,000) x 2.5% = $137,000 x 2.5% = $3,425
Mr Bloom claims interest. Subsection s.76(2) of the Federal Circuit Court Act 1999 (Cth) (FCCA Act) provides that an application may be made for interest under s.76(3) of that Act. Subsection 76(3) provides if an application is made for an order under s.76(3) of the FCCA Act, and if the Court is not satisfied that good cause has been shown for not making an order for interest under s.76(3) of the FCCA Act, the Court must either:
(c)order that there be included in the sum for which judgment is given interest at such rate as the Federal Circuit Court of Australia or the Judge thinks fit on the whole or any part of the money for the whole or any part of the period between:
(i) the date when the cause of action arose; and
(ii) the date as of which judgment is entered; or
(d)without proceeding to calculate interest in accordance with paragraph (c), order that there be included in the sum for which judgment is given a lump sum in lieu of any such interest.
Paradise Lake has not submitted there is good cause for an order not being made under s.76(3) of the FCC Act. Accordingly, I propose to include in the sum for which I propose to give judgment an amount of interest. The date on which the cause of action accrued is the day on which Mr Bloom sold the Home to Ripcord, namely, 20 June 2011. I propose to calculate interest by applying the rates prescribed by the Interest on Judgments Practice Note (GPN-INT) issued by the Federal Court of Australia. That practice note provides for an interest rate of 4% above the cash rate last published by the Reserve Bank of Australia. I propose to apply the average rate of interest over the period 20 June 2011 to 17 July 2019, being the day on which I propose to pronounce my orders. On these assumptions, I have calculated interest and the total amount to be paid as follows:
Loss
Period
Interest rate (average)
Interest
Total Amount to be paid
$29,675
20.6.2011-30.06.2019
6.57%
$15,650.62
$29,675
01.07.2019 – 17.07.2019
5.0%
$69.11
$15,719.73
$45,394.73
I propose, therefore, to order that Paradise Lake pay to Mr Bloom the sum of $45,394.73.
Finally, there is the question of costs. There is no apparent reason why costs should not follow the event. I propose, therefore, also to order that Paradise Lake pay Mr Bloom’s costs, either as agreed or as assessed or taxed, but I will reserve liberty to the parties to apply within fourteen days to vary or discharge the order for costs I propose to make.
I certify that the preceding sixty-four (64) paragraphs are a true copy of the reasons for judgment of Judge Manousaridis
Associate:
Date: 17 July 2019
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