Coleston v Carney
[2019] VCC 177
•1 March 2019
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
GENERAL LIST
Case No. CI-17-05457
| Shane Coleston & Rachel Coleston | Plaintiffs |
| v | |
| Graeme Carney | Defendant |
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JUDGE: | Judicial Registrar Tran | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 1 February 2019 | |
DATE OF JUDGMENT: | 1 March 2019 | |
CASE MAY BE CITED AS: | Coleston & Anor v Carney | |
MEDIUM NEUTRAL CITATION: | [2019] VCC 177 | |
REASONS FOR JUDGMENT
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Legislation Cited: Civil Procedure Act 2010 (Vic).
Cases Cited:24 Hour Fitness Pty Ltd v W & B Investment Group Pty Ltd [2015] VSCA 216; Bill v Clarke [2015] VCC 1721; Colgate-Palmolive Co v Cussons Pty Limited (1993) 46 FCR 225; Galafassi v Kelly (2014) 87 NSWLR 119; Hadley v Baxendale (1854) 9 Exch 341; Legal Services Commissioner v Bone [2014] QCA 179; Motium Pty Ltd v Arrow Electronics Australia Pty Ltd [2011] WASCA 65; Simply Irresistible Pty Ltd v Couper [2010] VSC 601; Taree Pty Ltd v Bob Jane Corporation Pty Ltd [2008] VSC 228; Trailer Trash Franchise Systems Pty Ltd v GM Fascia & Gutter Pty Ltd [2017] VSCA 293; Ugly Tribe Co Pty Ltd v Sikola [2001] VSC 189; Wilson v Bauer Media Pty Ltd [2018] VSC 161.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | D Bailey | Armstrong Ross Lawyers |
| For the Defendant | D Lloyd | Aughtersons Lawyers |
JUDICIAL REGISTRAR:
This is the assessment of the damages which should be awarded to Shane and Rachel Coleston (“the Colestons”) as a result of breaches of a contract of sale and licence agreement by Graeme Carney.
Background
On 19 February 2017, the Colestons entered into a contract of sale to sell their home in Macclesfield (“the Kennedy Rd home”) to Graeme Carney for a total price of $1,180,000 with a deposit of $5,000 and the balance of $1,175,000 due on 24 March 2017.
Shortly afterwards, Buy and Sell, who was apparently acting as conveyancer for all parties, sent a letter to Mr Carney asking (among other things) if he would agree “to amend the Contract of Sale to pay a deposit of $50,000 by 13 March 2017”. The explanation given for this requested amendment was that the Colestons were “required to put down a deposit on their purchase which has to come from the sale in order for them to obtain early occupation of the property.”
Mr Carney replied by email sent on about 22 February 2018, stating “Annette as discussed with yourself and Kerry (Stockdale & Lego) once I receive your banking details I will be transferring the full amount of money for the purchase of the property which you can release the $50,000 deposit to the Vendor”. Amended particulars of sale were subsequently prepared for the parties, in which “$5,000” was struck out and $50,000 inserted, the date for payment of the deposit amended to 20 March 2017, the balance payable at settlement amended to $1,130,000 and the settlement date amended to 24 March 2017.[1]
[1]Exhibits “SJC-18” and “SJC-19” to the affidavit of Shane Joseph Coleston sworn 1 February 2019.
On about 28 March 2017, the Colestons and Mr Carney agreed to vary the contract of sale so as to extend the date of settlement until 26 May 2017. At the same time, the Colestons and Mr Carney entered into a licence agreement permitting Mr Carney to move into the Kennedy Rd home prior to the completion of the purchase. Mr Carney says that the licence agreement was entered into “in a spirit of co-operation with the Defendant”. As will become apparent, it was a spirit of co-operation which would come to be deeply regretted by the Colestons.
Mr Carney did not pay the balance of the purchase price on 26 May 2017. Nor did he surrender possession of the Kennedy Rd home.
A notice of rescission was sent to Mr Carney on about 5 September 2017. Mr Carney contested its validity. He did not pay the balance of the purchase. He did not surrender possession of the Kennedy Rd home.
A further notice of rescission was sent to Mr Carney on 22 September 2017. He did not pay the balance of the purchase price. He did not surrender possession of the Kennedy Rd home.
On 21 November 2017, the Colestons commenced these proceedings by Writ and Statement of Claim claiming that the contract of sale and licence had been rescinded and seeking, among other things, possession of the property, damages and costs on an indemnity basis.
The Colestons were unable to personally serve the Writ and Statement of Claim on Mr Carney and so obtained an order for substituted service on 2 February 2018.
On 20 March 2018, default judgment for damages to be assessed was entered against Mr Carney. The trial assessment was listed for 7 May 2018. On 4 May 2018, Mr Carney filed an affidavit. The trial assessment was adjourned to 7 June 2018.
Mr Carney still did not enter an appearance and on 8 May 2018, default judgment for possession of the Kennedy Rd home was entered.
Mr Carney did not surrender possession of the Kennedy Rd home.
On 17 May 2018, Mr Carney applied by summons to set aside the default judgment. That application was listed to be heard on 12 June 2018. It necessitated the adjournment of the trial assessment.
On 12 June 2018, His Honour Judge Cosgrave adjourned the further hearing of the application to set aside the default judgment in order to permit Mr Carney to put on further affidavit material. His Honour ordered Mr Carney to pay the Colestons’ costs of the day. He specifically ordered that the Colestons were at liberty to proceed with the warrant of possession.
Mr Carney did not surrender possession of the Kennedy Rd home.
On 23 July 2018, I dismissed Mr Carney’s application to set aside the default judgment.
Mr Carney did not surrender possession of the Kennedy Rd home.
Finally, at 2.19pm on 22 August 2018, the Colestons’ warrant for possession was executed by the Sherriff and the Colestons regained possession of the Kennedy Rd home.
Money to be brought to account
By a contract of sale dated 14 September 2018, the Colestons finally re-sold the Kennedy Rd home for a purchase price of $1,275,000. This was an increase of $95,000 over the sale price in the contract of sale with Mr Carney. All parties have proceeded on the assumption that this amount should be brought to account in the assessment of damages.[2]
[2]This would seem appropriate if the assessment is made in accordance with Clause 28.4(c)(iii) of the Contract of Sale. It is less clear if the assessment is made under ordinary contractual principles, where loss is ordinarily calculated as the difference between the purchase price and the value of the property on the date of breach. However, in the absence of evidence of the value of the property on the date of breach, I accept that the price at which the property was sold is a reasonable estimate of that value.
In addition, Mr Carney has paid the sum of $50,000 towards the purchase price. I accept the submissions made on behalf of the Colestons that this sum of $50,000 was a deposit, pursuant to an amendment of the contract of sale made about 22 February 2017, which should be treated as forfeited pursuant to the terms of the contract of sale. In any event, the parties agreed that this amount must also be brought to account in the assessment of damages.
The Colestons have undoubtedly been put through extraordinary and unjustified inconvenience and stress by the actions of Mr Carney. As Mr Carney knew from at least 22 February 2017,[3] the Colestons were selling one home and purchasing another more suited to their needs. This was a transaction of a kind which is completed smoothly by home owners thousands of times every year in Victoria. The Colestons had every right to expect that in their case it would be completed just as smoothly. Instead they were put to almost 1 ½ years of stress, risk and legal and other expenses. Mr Carney has not given any satisfactory explanation or justification to the Court for his behaviour in remaining in possession of the Kennedy Rd home until evicted by the Sherriff.
[3]See email dated 22 February 2017 from Mr Carney to the Colestons’ conveyancer.
Having said that, the damages actually claimed by the Colestons are compensatory and pecuniary in nature rather than punitive. I am required to assess each of the items claimed by the Colestons according to law. As part of that process, it was agreed that allowance must be made for the fact that the Kennedy Rd home was re-sold at a higher price and for the deposit of $50,000 paid by Mr Carney. The Colestons will therefore not be entitled to more than nominal damages unless they can establish that the loss they have suffered exceeds $145,000.
I am annexing a spreadsheet showing each item claimed by the Colestons. The spreadsheet is numbered in the left-hand column. The numbers of the headings below correspond to these numbers.
1ACosts of enforcement/proceedings
As at 27 September 2018, the Colestons had incurred over $34,000 in legal fees and expenses in relation to the enforcement of the contract of sale and licence agreement. The bulk of these fees and expenses are the costs of these proceedings. The Court retains a discretion in relation to the costs of proceedings which take them outside the ordinary principles of assessment of damages.[4] I accept the submissions made on behalf of Mr Carney that it is appropriate that these be considered separately as the costs of the proceeding rather than as a head of damages.
[4]Taree Pty Ltd v Bob Jane Corporation Pty Ltd [2008] VSC 228 at [38]-[44] and cases referred to therein. See also s.78A of the County Court Act 1958 (Vic).
I will allow the costs of enforcement which do not form part of the costs of this proceeding (i.e.: which pre-date the commencement of preparation for the proceeding). Having regard to the itemised bill of Armstrong Ross dated 27 September 2018, I assess these costs at $1,400.
1B Legal costs re delays to settlement on Spillers Road home
The Colestons sold their Kennedy Rd home to purchase another home in Macclesfield (“the Spillers Rd home”). The Colestons entered into a contract to purchase the Spillers Road home on about 1 March 2017, with settlement due on 26 May 2017. They also entered into a licence agreement with the vendors so that they could move into the Spillers Rd home prior to settlement.
The Spillers Rd contract of sale and licence agreement was extended on a number of occasions as a result of Mr Coleston’s breaches of the contract of sale and licence agreement, and his failure to surrender possession of the Kennedy Rd home. The Colestons were not able to effect settlement on the Spillers Rd home until the re-sale of the Kennedy Rd home settled on 16 November 2018. They negotiated an agreement to extend the Spillers Rd home contract of sale and licence agreement, and as part of that agreement paid the vendor’s legal expenses.
Had Mr Carney settled on 26 May 2017, these costs would not have been incurred. I am satisfied that it was reasonable for the Colestons to negotiate the extension of the contract of sale and licence agreement for the Kennedy Rd home, and to pay the vendor’s legal expenses of doing so in order to obtain the vendor’s agreement. In circumstances such as these, concerning the sale and purchase of residential properties, I consider that such expenses fall within both the first and second limbs of Hadley v Baxendale.[5] I assess those expenses at $3,135.[6]
[5]Hadley v Baxendale (1854) 9 Exch 341; (1854) 156 ER 145
[6]I have relied on the invoices exhibited to the Affidavit of Shane Joseph Coleston sworn 1 February 2019 (“second Coleston affidavit”) as exhibit SJC-26, which include one additional invoice to the invoices exhibited to the Affidavit of Shane Joseph Coleston sworn 19 October 2018 (“first Coleston affidavit”) as exhibit SJC-3.
2Convenyancing fees of re-sale
I assess the conveyancing expenses incurred on the re-sale of the Kennedy Rd home at $880.
3Allianz Building Insurance
The Colestons paid building insurance on the Kennedy Rd home for 2017-2018. I assess this loss at $1,388.
4Licence fees paid to vendor
The Colestons paid licence fees of $67,085.17 for the Spillers Rd home until settlement on 16 November 2018.[7]
[7]Exhibit DJB 1 to the affidavit of Donald James Bolton sworn 4 February 2019.
The Colestons would have had to pay licence fees for the Spillers Rd home up until 26 May 2017 even had Mr Carney paid the purchase price when due. However they would not have incurred the licence fees paid from 26 May 2017 until 16 November 2018 if Mr Carney had settled on 26 May 2017. Based on the payment history exhibited as “SJC-6” to the first Coleston affidavit, I assess the licence fees referrable to the period up to and including 26 May 2017 to be $6,700. I have deducted $6,700 from the licence fees paid, and assess this head of damages at $60,385.
However, the Colestons have also received licence fees from Mr Carney, which it was accepted must be brought to account. Had settlement occurred on 26 May 2017, the Colestons would have received licence fees from Mr Carney for the period 28 March 2017 until 26 May 2017, but no further licence fees. In fact, ultimately the Colestons received payments from Mr Carney of somewhere between $39,216 and $42,120.[8] I assess the amount which Mr Carney ought to have paid for licence fees for the period 28 March 2017 until 26 May 2017 at $5,616 (2 months’ fees). Accordingly, an amount of at least $33,600 ($39,216 minus $5,616) must be deducted from any damages suffered by reason of the need to pay licence fees for the Spillers Rd home.
[8]There was no satisfactory evidence on the issue. In submissions for the Colestons, it was said that the amount was $39,216. In a letter from Mr Carney’s solicitors dated 13 February 2019, sent in response to a query from my associates, it was said the amount was $42,120.
12Claim for interest at penalty interest rate plus 2% for period until 7 October 2017.
I have included this as item 12 in the attached schedule, but for convenience deal with it together with the other interest/loss of use type claims made by the Colestons.
The Colestons claimed interest at the penalty interest rate plus 2% for the period from 27 May 2017 until 7 October 2017, relying upon Clause 26 of the General Conditions in the Contract of Sale, which provided that:
“Interest at a rate of 2% per annum plus the rate for the time being fixed by section 2 of the Penalty Interest Rates Act 1983 is payable on any money owing under the contract during the period of default, without affecting any other rights of the offended party.”
Counsel for Mr Carney submitted that upon the rescission of the Contract of Sale for the breach, the entitlement to interest fell away. He relied upon a decision in Galafassi v Kelly (2014) 87 NSWLR 119 (Galafassi). In that case, the New South Wales Court of Appeal overturned a finding by the trial judge that “Special condition interest” from the completion date until termination of the contract was recoverable as part of the calculation of damages. In the passages relied upon by Counsel for Mr Carney, Gleeson JA, with whom Bathurst CJ and Ward JA agreed, stated:
“Special condition interest is not part of the purchase price on the first contract but rather a sum contractually payable if settlement is delayed. It is an amount contingent on completion… Since completion never occurred, the better view, in my opinion, is that special condition interest is not included as part of the price under the first contract.”
The contractual provisions at issue in Galafassi were quite different to the standard form clauses at issue in the present case. The relevant clause in Galafassi was special condition 34.2, which provided:[9]
“If completion does not take place on or before the completion date for any reason not solely attributable to the vendor the purchaser must pay to the vendor interest at a rate of 10% per annum calculated on a daily basis on the price (less half the deposit actually paid) for the period from but excluding the completion date to and including the actual date of completion. It is an essential provision of this contract that any interest be paid on completion. The purchaser agrees any interest payable pursuant to this additional condition represents a genuine pre-estimate of the liquidated damages likely to be suffered by the vendor as a result of completion not taking place on or before the completion date. The vendor’s right to the payment of interest is in addition to and does not restrict any other rights of the vendor under this contract.” [Emphasis added]
[9]Galafassi v Kelly (2013) 17 BPR 32,123; [2013] NSWSC 680 at [45].
As can be seen from the underlining in the extract above, this clause expressly contemplated that the interest in question be calculated to actual completion and be paid on completion, whereas the clause in issue in the current proceeding states only that interest is “payable”. It is possible that Galafassi may be distinguished on this basis.
Galafassi and other relevant authorities were considered by His Honour Judge Macnamara in the decision of Bill v Clarke [2015] VCC 1721. After a detailed and careful consideration of the authorities, His Honour concluded that it was appropriate for him to follow Galafassi with respect to a contract of sale which contained identical provisions for interest as the provisions in the contract of sale in this proceeding. In the circumstances, it is appropriate that I, too, follow Galafassi.
Accordingly, the Colestons are not entitled to interest at the rate which is 2% higher than the penalty interest rate for the period from 27 May 2017 until 7 October 2017.
5-6 Borrowing expenses and other claimed loss of use
Counsel for the Colestons submitted that the damages for loss of use of money for the entire period from 8 October 2017 until settlement of the re-sale could either be calculated at the penalty interest rate, or could be assessed at $26,695 (item 5) plus $8,500 (item 6) on the basis of paragraphs 10 and 11 of the Affidavit of the First Plaintiff sworn 19 October 2018.
Hungerfords damages are compensatory in nature and required to have some evidential foundation. It is not appropriate that they be assessed at a “penalty” interest rate without any specific evidence supporting a finding that the loss suffered as a result of Mr Carney’s failure to settle on 26 May 2017 approached that amount.
I am unable to accept the evidence of Mr Carney that, had he received the purchase price on 26 May 2017, he would have used it to discharge the mortgage of $537,000, repay personal loans and credit cards to the value of $93,275 and invested the balance of $549,725 in term deposits. This evidence is directly contrary to, and inconsistent with, the claim that Mr Carney’s failure to settle on 26 May 2017 resulted in the Colestons being unable to settle the purchase of the Spillers Rd home. I find that had Mr Carney settled on 26 May 2017, the Colestons would have immediately used the bulk of these funds to settle on the purchase of the Spillers Rd home. Compensation for the inability to do so is best calculated by reference to the licence fees payable for the Spillers Rd home (Item 4, above).
Had the sale proceeded as intended, the Colestons would have been able to settle on the Spillers Rd home and would also have had the benefit of some additional funds which most likely would have been used to reduce the Colestons’ credit card debt. Additional Hungerfords “loss of use of money” type damages could only be available on the difference between the purchase price of Spillers Rd home and the price that Mr Carney contracted to pay for the Kennedy Rd home.
I accept on the basis of paragraph 10 of the Affidavit of the First Plaintiff sworn 19 October 2018, that the Colestons were placed under considerable financial stress as a result of the inability to access the difference between the sale price of the Kennedy Rd home and the purchase price of the Spillers Rd home. I accept that this financial stress lead them to draw on funds borrowed through credit cards, and pay the rates ordinarily applicable to this type of lending. I also accept that Mr Carney ought reasonably have contemplated that his conduct would place the Colestons in such a position of financial stress. However, I am not satisfied that the entirety of the credit card interest incurred by the Colestons can reasonably be attributed to Mr Carney’s default. Doing the best I can on the limited evidence available, I assess the additional damage suffered by the Colestons through loss of use of the purchase price from 27 May 2017 to 19 November 2018 at $20,000.
7Unpaid licence fees
I have made allowance for the fact that two months’ licence fees be paid by Mr Carney under item 4. I do not accept it is appropriate to include further licence fees in circumstances where it was accepted on behalf of the Colestons that any licence fees paid by Mr Carney would need to be brought to account in any event.
8-10Repairs to property
I accept the evidence filed on behalf of the Colestons that the following sums were required to be paid to repair and rectify the Kennedy Rd home once they had regained possession of it:
a) Repairs and maintenance - $1,128.95;
b) Rectification to Council requirements - $6789.20;
c) Window repair - $90.
11Bell real estate commission
The Colestons paid a commission of $27,500 to Bell Real Estate for commission and expenses in relation to the re-sale of the Kennedy Rd home. This would not have been incurred if not for Mr Carney’s failure to settle on 26 May 2017, and properly forms part of the damages suffered by the Colestons.
Conclusion on assessment of damages
The end result is that, once account is taken for the increase re-sale price, the forfeited deposit of $50,000, and the fees received from Mr Carney as licence fees, the Colestons have not established that any compensable pecuniary loss has flowed from Mr Carney’s breaches. This is the case even if I assume, in favour of the Colestons, that Mr Carney has paid only $39,216 in licence fees.
Nevertheless, in the circumstances I consider it appropriate that there be some acknowledgment of Mr Carney’s prolonged infringement of the Colestons’ rights in the Judgment given by the Court. Accordingly, I assess nominal damages at $100.[10]
[10]Motium Pty Ltd v Arrow Electronics Australia Pty Ltd [2011] WASCA 65; Simply Irresistible Pty Ltd v Couper [2010] VSC 601 at [397].
Costs
The Colestons seek their costs of the proceeding on an indemnity basis.
Mr Carney accepts that the Colestons should have their costs of the proceeding up to and including 23 July 2018, when Mr Carney’s application to set aside the default judgment was dismissed and the proceeding was listed for trial assessment. However he submits that after that date he ought to have his costs of the proceeding, alternatively there should be no order as to costs.
The submissions made on behalf of Mr Carney do not take into account the fact that it was not until 22 August 2018 that the Colestons were able to regain possession of the Kennedy Rd home (notwithstanding the fact that there had been judgment entered granting the Colestons possession on 8 May 2018). Plainly it was reasonable for the Colestons to continue the prosecution of this proceeding until they had regained possession of the property.
The next significant step taken by the Colestons in the proceeding was the filing of an affidavit on 22 October 2018. By that time a contract of sale had been signed re-selling the Kennedy Rd home at an increased price. Settlement had not yet taken place. However, it ought to have been apparent to the Colestons by then that there was a real probability that they would not be able to establish any significant pecuniary loss.
On the other hand, the Colestons had suffered a significant infringement of their rights and were entitled to seek to vindicate that with their claim for damages. Further, the expense of the trial assessment was also increased due to Mr Carney taking issue with rectification and other expenses which were not ultimately pressed at the hearing of the trial assessment.
Considering all of these matters, in the exercise of my discretion it is appropriate that there be no order as to costs for the period from 25 August 2018.[11]
[11]I have allowed up to 25 August 2018 so as to include necessary communications between the Colestons and their solicitors in relation to the execution of the warrant on 22 August 2018.
In relation to the costs prior to 25 August 2018, special circumstances are required to justify an order for indemnity costs. Each case must be determined in light of its own particular facts. It is not generally sufficient in and of itself to justify a special costs order that proceedings have been maintained (or defended) with substantially no prospect of success.[12]
[12]Legal Services Commissioner v Bone [2014] QCA 179 at [71].
In the present case, a number of factors point towards the making of an indemnity costs order. It took the Colestons nearly a year and a half, and significant legal expense, to regain possession of the Kennedy Rd home from Mr Carney. The proceeding required orders for substituted service, entry of default judgment, and consideration of several adjournment applications at the instigation of Mr Carney, or as a result of late filing of material by Mr Carney. Whilst some allowance may be made for the fact that Mr Carney was self-represented for much of the proceeding, there has been no reasonable explanation for his refusal to accept the termination of the contract of sale and to surrender possession, even when faced with a Judgment for possession and confirmation by a Judge of this Court that that Judgment was enforceable. It is unquestionable that his conduct in this proceeding up until the execution of the warrant for possession has significantly delayed its resolution and increased the legal costs to the Colestons.[13]
[13]A relevant factor - Colgate-Palmolive Co v Cussons Pty Limited (1993) 46 FCR 225 [23] – [24]; Ugly Tribe Co Pty Ltd v Sikola [2001] VSC 189, applied in 24 Hour Fitness Pty Ltd v W & B Investment Group Pty Ltd [2015] VSCA 216.
In all the circumstances, I consider that it is appropriate that Mr Carney pay the Colestons’ costs of the proceeding up to and including 24 August 2019 on an indemnity basis.
I have the power to fix the costs of the proceeding under section 65 of the Civil Procedure Act 2010 (Vic). Mr Carney did not oppose the fixing of costs. I am satisfied that it is in the interests of justice that I do so in the particular circumstances of this proceeding. In coming to this conclusion, I have had regard to the matters discussed in cases such as Wilson v Bauer Media Pty Ltd [2018] VSC 161 and ACN 074 971 109 v National Mutual Life Association of Australasia Ltd [2013] VSC 137. It seems to me that particularly relevant factors in this proceeding are the need to bring what has been an unnecessarily protracted dispute to a close, the benefits of certainty and finality which will be provided, concerns as to proportionality and the limited means of the parties, and the nature of the steps taken in the proceedings.[14]
[14] As the proceedings were resolved by default judgment, the work performed was highly visible to the Court - there have been none of the usual interlocutory steps of a proceeding resolved at trial such as discovery, in relation to which assessment on a broad brush approach might be more difficult.
The Colestons’ solicitors issued a bill of costs dated 27 September 2018 which included fees and disbursements up to and including 24 August 2018 of $40,290.19 (including GST). Some of these costs pre-date the proceeding (see item 1A). Having considered this bill of costs and the history of this proceeding, and applying a broad brush approach,[15] I fix the costs of the Colestons of the proceeding up to and including 24 August 2019, on an indemnity basis, at $35,000.
[15] Trailer Trash Franchise Systems Pty Ltd v GM Fascia & Gutter Pty Ltd [2017] VSCA 293 at [64]; Wilson v Bauer Media Pty Ltd [2018] VSC 161 at [10].
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Certificate
I certify that these 13 pages are a true copy of the judgment of Judicial Registrar Tran delivered on 1 March 2019.
Dated: 1 March 2019.
Larissa Travassaros
Associate to Judicial Registrar Tran
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