Reported Decision: 65 NSWLR 648
(2006) NSW ConvR 56-157
Court of Appeal
CITATION: CASTLE CONSTRUCTIONS PTY LIMITED v FEKALA PTY LIMITED & ORS [2006] NSWCA 133 HEARING DATE(S): 15 March 2006
JUDGMENT DATE:
29 May 2006JUDGMENT OF: Mason P at 1; Beazley JA at 94; Bryson JA at 95 DECISION: Appeal dismissed with costs. CATCHWORDS: CONTRACTS – Sale of land – Vendor in breach – Damages – Causation – Where purchaser forms subjective uninformed views that contract not profitable – Where influences purchaser’s election not to affirm while vendor willing to proceed – Whether causal link between breach and loss broken – Breach yet productive of loss where but for breach purchaser in a position to realise expected profit. - CONTRACTS – Sale of land – Development site – Vendor in breach – Damages – Remoteness – Whether vendor may be imputed with knowledge of developer’s intention to resell at a profit – No general rule that buyer recovers loss of profits from resale. - CONTRACTS – Sale of land – Vendor in breach – Termination – Damages – Mitigation – Reasonableness – Whether duty to mitigate might reasonably compel performance of contract validly terminated – Whether reasonable for purchaser to accept late delivery of contractual product – Whether alternative property on the market a direct substitute. - REAL PROPERTY – Sale of land – Development site – Vendor in breach – Damages – Loss of bargain – Calculated as difference between contract and market price – Nature of market value – Present value of economic potentialities – Potentialities ordinarily built into present value as reflected in market price – Potential for profitable resale in future – Only discounted profits recoverable if not too remote – Profit to exclude “holding” costs incurred over period between purchase and resale – Subsequent resale price of property if sold soon after breach is prima facie evidence of market value at time of breach. (D) CASES CITED: Alexander v Cambridge Credit Corporation Ltd (1987) 9 NSWLR 310
Bain v Fothergill (1874) LR 7 HL 158
C Czarnikow Ltd v Koufos [1969] 1 AC 350
Cottrill v Steyning & Little Hampton Building Society [1966] 1 WLR 753
Cubillo v Commonwealth (No 2) (2000) 103 FCR 1
Diamond v Campbell-Jones [1961] Ch 22
Engell v Fitch (1869) LR 4 QB 659
Forsyth v Blundell (1972) 129 CLR 477
Hadley v Baxendale (1854) 9 Exch 341; 156 ER 145
Harvela Investments Ltd v Royal Trust Co of Canada (CI) Ltd [1986] AC 207
Hoffman v Cali [1985] 1 Qd R 253
Holland v Hardy (1882) 3 NSWLR 450
Jackson v Royal Bank of Scotland plc [2005] 1 WLR 377 (HL)
Koch [Marine Inc v D’Amica Societa di Navigazione ARL (the “Elena d’Amico”) [1980] 1 Lloyds Rep 75
Lohar Corporation Pty Ltd v Dibu Pty Ltd (1976) 1 BPR [97014]
Metal Fabrications (Vic) Pty Ltd v Kelcey [1986] 3 VR 507 at 513
Payzu Ltd v Saunders [1919] 2 KB 581
Robinson v Harman (1848) 1 Ex…
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Details
- Case
- [2006] NSWCA 133
- Decision Date
CaseChat Overview and Summary
Castle Constructions Pty Ltd (the purchaser) appealed a decision of the Supreme Court of New South Wales concerning a contract for the sale of a development site to Fekala Pty Ltd (the vendor). The purchaser alleged the vendor was in breach of the contract and sought damages for loss of bargain.
The primary legal issues before the Court of Appeal were whether the purchaser's subjective, uninformed views about the profitability of the development broke the causal link between the vendor's breach and the purchaser's loss, and whether the vendor could be imputed with knowledge of the purchaser's intention to resell at a profit. The court also considered the principles of remoteness and mitigation, specifically whether the purchaser was reasonably compelled to accept late delivery of the property or whether an alternative property on the market constituted a direct substitute.
The Court of Appeal reasoned that the purchaser's decision not to affirm the contract, influenced by their own uninformed views, did not sever the causal connection to the vendor's breach. The court affirmed that where a vendor's breach prevents a purchaser from realising an expected profit, that loss is recoverable if it is not too remote. The court held that the loss of bargain damages, calculated as the difference between the contract price and the market price at the time of the breach, should reflect the present value of economic potentialities, including the potential for profitable resale. However, it was clarified that only discounted profits, excluding holding costs, are recoverable if not too remote, and a subsequent resale price shortly after the breach is prima facie evidence of market value.
The appeal was dismissed with costs.
The primary legal issues before the Court of Appeal were whether the purchaser's subjective, uninformed views about the profitability of the development broke the causal link between the vendor's breach and the purchaser's loss, and whether the vendor could be imputed with knowledge of the purchaser's intention to resell at a profit. The court also considered the principles of remoteness and mitigation, specifically whether the purchaser was reasonably compelled to accept late delivery of the property or whether an alternative property on the market constituted a direct substitute.
The Court of Appeal reasoned that the purchaser's decision not to affirm the contract, influenced by their own uninformed views, did not sever the causal connection to the vendor's breach. The court affirmed that where a vendor's breach prevents a purchaser from realising an expected profit, that loss is recoverable if it is not too remote. The court held that the loss of bargain damages, calculated as the difference between the contract price and the market price at the time of the breach, should reflect the present value of economic potentialities, including the potential for profitable resale. However, it was clarified that only discounted profits, excluding holding costs, are recoverable if not too remote, and a subsequent resale price shortly after the breach is prima facie evidence of market value.
The appeal was dismissed with costs.
Orders
Orders of the court
Appeal dismissed with costs.
Background
Background to the litigation
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Evidence
Evidence Before The Court
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Decision
Reasons for decision
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Ratio Decidendi
Legal Principle Established
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