| JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA LOCATION : PERTH CITATION : DOWNING -v- NEWSFLASH NOMINEES PTY LTD [2012] WADC 26 CORAM : STEVENSON DCJ HEARD : 25 JANUARY 2012 DELIVERED : 25 JANUARY 2012 PUBLISHED : 20 FEBRUARY 2012 FILE NO/S : APP 69 of 2011 BETWEEN : VANESSA MARY DOWNING Appellant
AND
NEWSFLASH NOMINEES PTY LTD
Respondent
ON APPEAL FROM:
Jurisdiction : MAGISTRATES COURT OF WESTERN AUSTRALIA Coram : MAGISTRATE BOON Citation : CIV 7825 of 2009 (Page 2)
Catchwords: Contract for the sale of land - Repudiation by purchaser - Termination of contract by the seller - Section 6 Sale of Land Act 1970 - Whether contract terminated - Termination by accord and satisfaction - Damages for breach of contract - Proper construction of release clause - Rule in Hadley v Baxendale Legislation: Sale of Land Act 1970 Result: Appeal and crossappeal dismissed Representation: Counsel:
Appellant : Mr S M MacDonald
Respondent : Mr S K Shepherd
Solicitors:
Appellant : Macdonald Rudder
Respondent : Tottle Partners
Case(s) referred to in judgment(s):
Capper v Thorpe [1998] HCA 24
Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337
Hadley v Baxendale (1854) 2 CLR 517
Palasty v Parlby [2007] NSWCA 345
(Page 3)
1 STEVENSON DCJ: [This judgment was delivered extemporaneously on 25 January 2012 and has been edited from the transcript.]
The appeal 2 I am now in a position to give my judgment, having had the opportunity to consider the parties written submissions and having had the benefit of exploring the issues raised by the appeal in oral submissions with counsel. 3 I reserve the right to supplement and vary these reasons for decision if the need arises. I would also add that these reasons are informed by my discussions with counsel during the course of submissions today. 4 As I indicated earlier, the outlines of submissions filed by the parties and, indeed, the appeal book itself and its contents are of a high standard. This has permitted me to give the matter some consideration before today, as would have been evident from my exchanges with counsel during the course of submissions. 5 I indicated at the outset that, notwithstanding the attack by the appellant on the way in which the learned magistrate reached her decision in relation to the termination of what has been referred to as 'the land contract', it may, in the end, not materially affect the outcome of the appeal. I explored with counsel an alternative basis for the position reached by the parties as evidenced in the document signed by them on 20 March 2008, which has been referred to as 'the termination agreement'. 6 The appellant and the respondent differ in their view as to the proper interpretation of the evidence and the findings of fact by the learned magistrate and, indeed, as to how the parties came to a final position that the land contract would not proceed to settlement. 7 This is an appeal from the Magistrates Court and, as such, it is an appeal by re-hearing as opposed to a hearing de novo. Therefore, it is incumbent upon the appellant to persuade this court that the learned magistrate was in error in her findings of fact or application of the law to the facts as she found them before the appeal could be granted. This is in contradistinction to a hearing de novo, where the appeal court is permitted to reach its own opinion based on its own reasoning in relation to the evidence properly before it for the purpose of the appeal. The appellant therefore carries the onus in relation to her appeal. (Page 4)
8 The facts which can be discerned from the evidence adduced in the Magistrates Court are not complex. Having said that, there is a difference in emphasis by the parties as to the way in which findings of fact should be made in respect to the evidence before the Magistrates Court. Those differences are, in some respect, critical to the positions adopted by the parties on the appeal. But, as I have indicated, in practical terms at the end of the day, it may not amount to much. 9 I will state briefly the facts of the matter. On or about 18 January 2008, the appellant entered into a written contract with the respondent whereby she agreed to purchase a property and the respondent agreed to sell that property to her (the land contract). The property is situated at and described as 47C Ewen Street, Scarborough. 10 The purchase price provided for in the land contract was $765,000 and settlement was to occur on 28 February 2008. 11 On or about 30 January 2008, there was a variation in writing to the land contract and a further sum of $10,000 was paid by the appellant and described as an 'increased deposit'. At that time, both parties agreed that the contract was no longer conditional and that the deposit paid by the appellant was therefore $17,500. 12 In consideration of the payment of the increased deposit, the respondent allowed the appellant to enter into early possession of the property prior to the settlement date. The appellant moved into the property on 1 February 2008. 13 The date for settlement passed and the evidence discloses that there were attempts by Mr Mannino, the agent for the respondent, and Mr Lorton, on behalf of the respondent, to contact the appellant to ascertain her position and intentions. 14 In addition, the respondent caused a notice of default dated 13 March 2008 to be issued to the appellant. The evidence is that she received the notice on 19 March 2008. 15 The respondent does not seek to rely upon the notice for the relief claimed against the appellant in the proceedings in the Magistrates Court. It is accepted by the parties that the notice was defective because it provided for a 10-day notice period, and it is common ground that the land contract is a terms contract governed by the provisions of s 6(1) of the Sale of Land Act 1970, which relevantly provides: (Page 5)
… a terms contract shall not be determined or rescinded on account of a breach by the purchaser of any term of the contract unless and until the vendor has served on the purchaser a notice in writing specifying the breach complained of and requiring the purchaser to remedy the breach within the time mentioned in subsection (2) and the purchaser has failed to do so. (emphasis added) 16 Section 6(2) provides that the notice period for a breach involving a failure to pay a sum of money under a terms contract must be a period of not less than 28 days from the date of its service on the receiving party, in this case, the appellant. 17 The evidence is not controversial. There was a meeting and discussion between the appellant and Mr Mannino and Mr Lorton on behalf of the respondent, on or about 20 March 2008. As a result of those discussions, the parties signed 'the termination agreement' dated 20 March 2008. 18 The termination agreement is set out at p 150 of the appeal book and contained the following terms and conditions: 20/3/08 To Wright Real Estate + Newsflash P/Ltd Re: 47C Ewen St Scarborough. I am unable to effect settlement of 47C Ewen St, and hereby agree to terminate the contract. I agree to forfeit the deposit funds of $17,500 held in trust by Wright Real Estate, pay to NEWSFLASH Nom. Pty Ltd. immediately. No further claim shall be made against the seller or Wright Real Estate. Vacant possession shall be returned to the seller on 23/3/08. No further claims will be made against the purchaser upon inspection of the home and it being in the same condition to purchaser gaining possession. Yours faithfully, Mrs V Downing Mr Lorton (seller) Mr Mannino (witness) (Page 6)
19 It is common ground that the last clause, which provides, 'No further claims will be made against the purchaser upon inspection of the home and it being in the same condition to the purchaser gaining possession' was inserted after the agreement was initially prepared. It was intended to reflect further discussions between the parties at the time and, obviously, to record their agreement at that time. 20 The clause was amended at the time of its execution to delete the word 'similar', to provide that the condition in which the premises must be delivered up as being the 'same' as at the time possession was obtained. That of course, was not physically possible because at the time possession was given, the premises were brand new. On the evidence, that is not a material issue for the disposition of the appeal between the parties. 21 It is common ground between the parties that the appellant did not give possession of the premises to the respondent in compliance with the termination agreement, because the premises were not materially in the same condition as they were when the appellant obtained possession. However, the live issue between the parties in the appeal is the proper interpretation of the conditional release purported to be given by the respondent to the appellant in the clause I have referred too. 22 I note, pursuant to the termination agreement that the appellant agreed, as part of her obligations and consideration for the agreement that she would not make any further claim against the seller, which is the respondent, and also Wright Real Estate, which is the business for which Mr Mannino worked. The legal effect of the appellant's release of the respondent is not itself directly in issue in the appeal. 23 In the course of submissions, both counsel addressed the court in relation to the proper construction of the termination agreement in respect of the clause containing the respondent's alleged release and discharge of the appellant. 24 The trial before the learned magistrate proceeded on 23 August 2011 and her Honour delivered written reasons for decision on 26 August 2011. 25 On 15 September 2011, the appellant filed an appeal notice in this court. On 6 October 2011, the respondent filed a cross-appeal. On 23 January 2012, the appellant filed submissions on the cross-appeal and a notice of intention in respect of the cross-appeal. 26 In summary, the learned magistrate found, on the evidence, that the appellant repudiated the land contract; that her statements and conduct in (Page 7)
this regard constituted a repudiatory breach; and that the respondent accepted that breach, thereby terminating the land contract. 27 The difference between the parties in respect of the evidence in this regard may be summarised as follows. In the appeal, the appellant says that the learned magistrate erred in finding as a fact that there was a repudiatory breach by the appellant. Further, there was in any event no acceptance of that repudiation by the respondent, thereby terminating the land contract. 28 Alternatively, the appellant says that the learned magistrate erred in law in construing the termination agreement, on the basis that the respondent had accepted the appellant's repudiation of the land contract before the parties entered into the termination agreement; because those facts directly contradict both the express terms of the termination agreement, and because of the evidence referred to concerning grounds 1 and 2 of the appeal. According to the appellant at par 4.1 of the appeal notice, the learned magistrate should have found that the termination agreement terminated the land contract by accord and satisfaction. That is an alternative submission by the appellant. 29 The position of the respondent is that the evidence before the learned magistrate and upon which her findings of fact were made, relevantly and properly, was to the effect that there was a repudiatory breach, by which the appellant disclosed her intention in unequivocal terms to the respondent, that she would not settle on the land contract. In other words, she evinced a clear and unambiguous intention that she no longer considered herself to be bound by the contract. 30 The position of the respondent is that on acceptance of that repudiatory breach by the appellant, the land contract was thereby terminated and that the termination agreement merely evidenced the oral agreement of the parties as a result of the consequences of the termination of the land contract. The respondent says that the termination agreement must be given its plain and ordinary construction in accordance with its terms, bearing in mind of course the circumstances in which it was entered into by the parties. 31 As already indicated in these reasons for decision, it seems to me that at the end of the day it probably does not matter which process or reasoning is correct so far as the end result is concerned. The appellant says this is critical because, if the land contract was terminated by accord and satisfaction, then the respondent cannot claim the damages it seeks to (Page 8)
claim against the respondent. Instead, it is limited to the terms of the termination agreement, which the appellant says, on its proper construction, provides a complete release by the respondent of the appellant in respect of all claims except those which may be fairly said to arise out of her failure to deliver up the premises in the same, or as nearly the same, condition as possible on giving possession back to the respondent. 32 The learned magistrate had the benefit of hearing the oral evidence of each of the witnesses, the persons to whom I have already referred, including in the context of their written statements which form part of the appeal book. I am not persuaded that the learned magistrate was in error in finding, as she did, that the appellant indicated plainly and unequivocally that she was not going to complete the contract. I do not propose to refer to the learned magistrate's reasons for decision in full. They are set out at p 11 and following of the appeal book. Relevantly in this regard, the learned magistrate found, at appeal book 21, as follows: My view of the evidence is that Ms Downing repudiated the contract. She advised both Mr Lorton, the director of Newsflash, and the agent Mr Mannino that she was unable to settle as she did not have the funds. She wanted to end the contract. All three witnesses agreed that Ms Downing told Mr Lorton and Mr Mannino she was unable to settle. It was clear that Ms Downing would be unable to settle within a reasonable period. The document signed 20 March 2008 further confirms that she agreed that she was unable to settle. Newsflash accepted the repudiation and chose to terminate the contract. Therefore there was a repudiation of the contract by Ms Downing. 33 I am not persuaded by reference to the evidence that this finding of fact was not reasonably open to the learned magistrate on the evidence before her. It accords with my view of the evidence, in any event. 34 The comment by her in the passage I have cited, that, 'It was clear that Ms Downing would be unable to settle within a reasonable period', in my view is by way of additional comment and, to the extent that it may have been a finding of fact by the magistrate, it is not material because the critical thing is that the magistrate was satisfied on the balance of probabilities that the appellant was not going to settle the land contract. 35 I do not see in the evidence before me any direct evidence to the effect that the appellant was, at this point in time, saying that she was 'hanging out' for an improvement in the exchange rate between the South African rand and the Australian dollar in order to settle the contract. (Page 9)
36 In my view, the evidence discloses that she had reached a point where she had herself decided she was unable to settle the contract and that she was not going to do so. I am not persuaded that the magistrate was in error in making the findings of fact about the repudiation and its acceptance by the respondent or her application of the law in that regard. 37 I will come back to the conditional release of the appellant by the respondent in the termination agreement in a moment. 38 In respect of ground 3 of the appeal notice, the appellant contends in the alterative that the learned magistrate erred in law in finding that the respondent accepted the appellant's repudiation of the land contract on the basis that there was no evidence to support that finding. 39 This is where the interaction and relationship of the termination agreement is brought to bear by the appellant. In ground 3 the appellant goes on to say on the contrary, the evidence was to the effect that the land agreement came to an end by agreement, namely by the agreement in writing made between the parties on 20 March 2008, referred to as the termination agreement. 40 Implicitly, if not expressly from what I have said, I am not persuaded for the purpose of the appeal that the learned magistrate was not entitled to reach the view she did on the evidence before her in making the findings of fact that she did; that is, that there was a repudiatory breach. Also, it follows from what she said in her reasons, as I have cited already, that there was an acceptance of that repudiatory breach by the respondent. 41 In oral submissions, it is contended on behalf of the appellant that the evidence was not sufficiently strong before the magistrate. The appellant considered that the evidence was to the effect that there was in fact a statement on behalf of the respondent that it would terminate the land contract, as opposed to an unequivocal statement that it accepted the repudiation and, as a result, thereby terminated the land contract. 42 To the extent that this may have been the purport of the evidence, there is an element of futurity or prospectivity about it. In my view, it is plain that there was an unequivocal acceptance of the repudiatory act of the appellant by the respondent and that the magistrate was entitled to make the finding of fact that she did; which is that it was accepted. 43 The finding was, in my view, open to the learned magistrate and for that reason I am not persuaded, on balance, that she was in error and was (Page 10)
not entitled to find as a fact that, as she expressed it, there was an acceptance of the repudiation by the respondent. 44 The fifth ground of appeal by the appellant is that there was no evidence before the learned magistrate that the respondent was ready, willing and able to settle the contract. 45 The appellant says, in the appeal notice there was no evidence to the effect that, at the time the respondent elected to terminate the land contract, it was ready, willing and able to fulfil its own obligations under the contract. 46 In the course of submissions with counsel there was discussion about the role of pleadings in the Magistrates Court. In this regard, it was submitted by the appellant that it was a condition precedent, in the sense that it was an element of the respondent's cause of action against the appellant in the Magistrates Court, that it prove on the balance of probabilities it was ready and able to settle. 47 The respondent's answer to this ground of appeal is set out in detail at par 30 and following in its written submissions. Plainly, at the commencement of a trial the parties, as between themselves, are entitled to know and must know the issues between them and about which they require the decision maker to determine. It is the fact that at the trial below, the issue of the respondent's willingness and readiness to settle was not joined and was not raised by the appellant. 48 There was also nothing in the appeal book, insofar as the evidence is concerned, to suggest there was anything known at the relevant time, or even subsequently, by the appellant that the respondent was other than in a position to settle and, in fact wanting to settle the land contract. 49 As set out in the respondent's written submissions it is of course the fact that the respondent had already given possession to the appellant of the property, a strata unit at 47C Ewen Street, Scarborough. The evidence is that the unit was ready for sale at the end of 2007. As noted above, possession of the property was given to the appellant on 1 February 2008 on the basis that an increased deposit was paid, indicating to the respondent that the appellant intended to and would settle on the settlement date a few weeks later. 50 There is also the evidence, albeit defective, of the notice by the respondent dated 13 March 2008, which was plainly intended to cause the appellant to proceed to settlement. There is not one shred of evidence (Page 11)
adduced by the appellant that the respondent was not in a position to comply with its obligations under the land contract. Therefore the only reasonable inference from all the objective evidence, none of which is disputed by the appellant, is that the respondent was ready, willing and able to settle the land contract. 51 It is common ground that the property was subsequently sold by the respondent to a later purchaser in November 2008 for a lesser amount, namely $705,000. 52 The only inference from the evidence before the court is that the respondent was not only ready, willing and able to settle, but that it was keen to do so, if not on the settlement date of 28 February 2008, as soon as possible thereafter as the appellant was prepared to complete the contract. 53 The difficulty, of course, was that the appellant by this time, 20 March 2008, had reached a position where she could no longer afford to meet her obligations under the contract and she could not settle. 54 I do not accept the characterisation of the appellant's evidence that what she was saying was, 'I can't settle, but I want to settle at some indeterminate point in the future', because in my view that is not a proper characterisation of what she was saying. In any event, it is not the finding made by the magistrate who heard the evidence, and I am not persuaded that she was in error in that regard. 55 There is also the issue of finality in litigation. In my view, matters which are not the subject of argument or agitation below are rarely in any appeal court allowed to be run later in the proceedings for the reason that when parties join issue, all issues are intended to be agitated and resolved at the same time. 56 To the extent that I was taken to passages in some decisions in respect of this issue, the position of course is that modern case management principles have moved practice and procedure in respect to civil litigation a long way since some of those statements were made. 57 I am also concerned about what the practical effect of upholding this ground of appeal would be. I cannot for a moment accept that it would result in the judgment below and the time invested in that trial process coming to nought due to a simple factual issue about which there was, and is no proper factual controversy in any event. (Page 12)
58 In my view, ground 5, cannot be upheld. 59 Ground 6 of the appeal notice concerns the provisions of the Sale of Land Act1970. It is also an alternative ground of appeal and states that the learned magistrate erred in law in finding that the effect of the appellant's repudiation and its acceptance was that the provisions of s 6 of the Sale of Land Act 1970 do not apply. 60 Again, I was taken to a number of authorities which bear upon this issue. In particular, the appellant refers to the passage contained in the magistrate's reasons for decision, at p 24 of the appeal book, being the following extract from the decision of the High Court in Capper v Thorpe [1998] 194 CLR 342, 347 - 348: It is important in considering the issues presented by the appeal to keep in mind the objects of section 6 of the Act. Those objects appear, clearly enough, from the language of the section. Contracts of the specified kind may not be determined or rescinded unless a notice in writing has been served on the purchaser. The parties cannot, by their contract, agree to exclude the operation of this requirement. Its object is plainly to afford the recipient of the notice time within which to secure advice and to attempt to cure the default. Quite often the default will have arisen from an inability to raise funds. In that context, each day of the period of notice maybe important to the purchaser in default. The provision is a protective one. It should not be construed in a way that would undermine or frustrate the achievement of the clear legislative purpose. The requirement of service of a notice on the purchaser must be understood, and the section construed, in the context of the achievement of that purpose. 61 The appellant says that on a strict literal reading, it should be understood to be a statement by the High Court that in circumstances, as in this case, where there has been an acceptance of a repudiation of the agreement, as opposed to a mere breach, that s 6 of the Sale of Land Act 1970 prevents termination of, in this case, the land contract. In other words, it is contended that there is no lawful way the respondent can effectively bring to an end the land contract without first giving a 28-day notice of default to the appellant. 62 In this case, the relevant circumstance is that the appellant has repudiated the contract, as opposed to being merely in breach of a term of the contract, by indicating that she will not settle the contract, even at some point in time in the future. 63 I accept that s 6 of the Sale of Land Act 1970, as mentioned in submissions, is a protective provision and that it has very valuable work to do for consumers. However, it is expressed in the context of alleged (Page 13)
breach of a contract by a party, as opposed to the position where there is plain and unequivocal repudiatory conduct by a party to no longer be bound by the contract, which entitles the other party to terminate the contract. 64 It was open to the appellant at the time to stand on her legal rights and to invoke the protection afforded to her by s 6 of the Sale of Land Act 1970. She did not do so. Instead, she evinced a plain and unequivocal intention not to be bound by the contract, which was conduct which the respondent was entitled to accept as repudiation by her of the contract, which it did, thereby terminating the contract. 65 The respondent does not contend that the contract was terminated on any other basis (e.g. on the basis of its default notice) and it does not say that the contract was terminated based on any alleged breach by the appellant of a contractual obligation or term of the contract. This is not a case where the parties have in any relevant sense purported to agree 'by their contract' to exclude the operation of s 6 of the Sale of Land Act 1970. 66 Therefore, in my view, s 6 does not apply and ground 6 (there is no ground 6.1) of the appeal notice must fail. 67 Ground 6.2 of the appeal notice concerns a pleading point and is no longer maintained by the appellant. I say nothing further about it. 68 The position between the parties therefore reverts to the legal effect of the respondent's conditional release and waiver of the appellant in the termination agreement. Subject to the construction of that provision, it may impact upon the judgment given by the learned magistrate. 69 The appellant contends that the conditional release should be construed on the basis that 'no further claims' means that the parties agreed to exclude all claims except any claims which fairly and reasonably arise out of the failure of the appellant to deliver up possession of the premises in the same condition as when she took possession. The appellant accepts that the premises were not delivered up in the agreed condition and does not dispute her liability to the respondent, to the limited extent of 'make good' damages, consistent with her interpretation of the clause. 70 On the other hand, the respondent says that the wide language 'no further claims' is a reference to all claims the respondent had available to it at the time as a result of its acceptance of the appellant's repudiation of the land contract. (Page 14)
71 The law is trite in this regard. Reference has been made to Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337. The language in the provision must be given its plain and ordinary meaning, and only in the event of ambiguity can resort be had to extrinsic material. That is not to say it cannot be understood in the context of the whole of the terms of the document, and also to the circumstances in which it was entered into. 72 Having regard to these matters, in my view, what the parties agreed to on 20 March 2008 in the termination agreement was said in plain and unambiguous language. They agreed that, provided the appellant delivered up the premises in the same condition as she received them, then the respondent would release her from any further claims arising out of the termination of the land contract. 73 I do not construe the provision as being limited in the way contended for by the appellant. The clause must be construed as a whole and in context. It follows on immediately from a complete and unconditional release of the respondent by the appellant in respect of any claims she may have against the respondent or Wright Real Estate. 74 The respondent's release of the appellant is not unconditional. It is subject to the proviso which, if not complied with, results in it having no force and effect. The obligation was not enlivened because the appellant did not comply with the proviso. The respondent, to its detriment, incurred further expense and wasted time in making good the premises. 75 Subject to the exception contained within the proviso, the intention of the parties was to discharge each other from any further liability to each other under the land contract. It was the plain intention of the parties, subject to the appellant leaving the premises in the same condition, that there would be a resulting mutual release and discharge of each other from any further claims under the contract. Unfortunately, the appellant did not maintain her side of the bargain and, as a result, she is not entitled to the benefit of the release provisionally given to her. 76 For these reasons, in my view the appeal cannot succeed. I am not persuaded on the balance of probabilities that the reasons of the learned magistrate are attended by any factual error, legal error or any error in the exercise of judicial discretion by her in handing down the judgment that she did on 26 August 2011. 77 That is all I wish to say at this point in relation to the appellant's appeal. (Page 15)
The cross-appeal 78 I propose to give reasons for decision in relation to the cross-appeal. 79 As with my reasons for decision in relation to the appeal itself, these reasons are informed by submissions with counsel and I do not propose to repeat all those submissions. 80 By a notice of respondent's intention dated 6 October 2011, the respondent cross-appeals against the decision of the learned magistrate as to the quantum of damages only and has indicated that it relies upon the following grounds: (1) The learned magistrate erred in fact by finding that the holding costs sought by the respondent were in respect of a sum greater than the purchase price of the property, when the costs actually sought were in respect of the amount which would have been paid to the respondent had the appellant performed the contract; (2) Such costs fairly and reasonably arose from the appellant's breach of contract and repudiation of it or were reasonably in the contemplation of the appellant as the probable result of her breach; (3) the respondent is entitled to interest on the losses suffered as a result of the appellant's breach of the contract as from the date the loss was incurred. 81 The respondent, in its statement of claim filed in the Magistrates Court and dated 20 May 2009, sought damages against the appellant for a breach of contract. In par 15 of the pleading, the respondent said: As a result of the failure of the defendant to settle the purchase of the property and her breach of the conditional agreement, the claimant has suffered loss and damage being additional interest paid to the claimant's mortgagee, BankWest, from the settlement date of the contract of 4 February 2008 to 10 November 2008, when Jesse Cameron Forbes and Matthew James Woods paid $705,000. The total interest - the total additional interest paid is $46,351.58. 82 It follows that the respondent's claim at the trial below was for a sum of $46,351.68, calculated by reference to additional interest paid on its mortgage with BankWest during the relevant period. This is also reflected in the prayer for relief set out at p 36 of the appeal book. (Page 16)
83 By reason of other claims for damage arising out of the appellant's breach of the contract, the total amount claimed by the respondent by way of damages is in excess of the $75,000 jurisdictional limit of the Magistrates Court of Western Australia. The respondent therefore abandoned that part of its damages claim in excess of $75,000, which was at the time about $15,000. 84 The evidence at the trial was that the appellant had no knowledge of the fact of any mortgage or liability of the respondent to BankWest as a result of funds borrowed concerning the property, the subject of the land contract made on or about 18 January 2008. 85 In her reasons for decision, the learned magistrate made a finding of fact to this effect. I do not understand it to be in dispute by the parties, that the appellant had no knowledge of any mortgage liability of the respondent which is relied upon, at least initially, in this respect of its claim for damages. 86 At p 29 of the appeal book, the learned magistrate in her reasons for decisions dealt with the claim the subject of the cross-appeal, which was described as a claim for holding costs of the property. As she noted, it is not disputed that Mr Lorton, on behalf of the respondent, did not tell the appellant, Ms Downing, of the respondent’s mortgage. 87 At the trial, according to the magistrate's reasons for decision, the respondent submitted that its claim in this regard came within the rule expressed in Hadley v Baxendale (1854) 2 CLR 517. The respondent submitted that the holding cost must reasonably have been within the contemplation of the parties. 88 On the appeal, the respondent says that the holding cost fell fairly and squarely within not only the first limb but also, in the alternative, the second limb in Hadley v Baxendale. 89 I accept that the learned magistrate may have misunderstood the basis of the respondent's claim for interest in this regard in her reasons for decision at p 30 of the appeal book, although it is a matter of construction. However, in my view, that does not infect the reasoning in respect of her judgment. 90 I am not persuaded she formed the view to which she ultimately came on the basis of the interpretation placed by the respondent on the relevant part of her judgment, being a concern on the part of the court that the appellant would not have appreciated she was liable on default to (Page 17)
payment of interest or part of the interest on such a 'large amount which was significantly more than the purchase price stated in her contract'. 91 In my view, this case is distinguishable from the decision of Palasty v Parlby [2007] NSWCA 345 in a number of respects. First, in this jurisdiction and in respect of the contract under question, there was agreement by the parties at the time they made the contract, on or about 18 January 2008, that in the event of a resale of the property within 12 months as a result of a default by the purchaser, namely the appellant, or a repudiation by the appellant of the contract (which occurred in this case), then there is agreement between the parties that in such circumstances the respondent's loss as the vendor shall be, by way of liquidated damages as set out in cl 24.6 of the general terms and conditions, being the difference between the amount held by the seller and the purchase price. 92 In that regard, the respondent achieved in the judgment of the Magistrates Court the sum of $42,500, being described in the reasons for decision of the learned magistrate as the 'balance of reduction in sale price achieved after taking into account the deposit'. 93 I do not understand there to be any dispute between the parties that there was any failure by the respondent to mitigate its loss in that regard in the relevant period or there to be any concern by the appellant in relation to the resale price of the property by the respondent. 94 The award of what is described as interest damages in the case of Palasty v Parlby must, in my view, be understood in the context of the uncontroverted facts in that case. In particular, the fact that at the time the contract of sale was entered into between the parties in that case, the purchaser knew that the vendor intended purchasing other property from the proceeds of the sale of Hunters Hill. 95 I note at [17] of the reasons for decision in that case that the court said: The issue litigated in the District Court and in this court was whether the Killara losses fell within the second limb of the rule in Hadley v Baxendale. The purchaser argued that the losses were too remote. 96 That paragraph concerns only part of the damages claimed in that case by the vendor. 97 Those damages which relate to the loss of the deposit on the Killara property, were assessed by reference to Hadley, on the basis that the (Page 18)
relevant loss was being 'such as may reasonably be supposed to have been in the contemplation of both parties at the time they made the contract as the probable result of the breach of it'. I am referring to [18] of that decision. 98 At [22] in respect of this aspect of the claim the court said, the trial judge found that it was quite apparent that, before the exchange of contracts, the purchaser's husband knew that the vendor intended purchasing other property with the proceeds of the sale at Hunters Hill and that the husband's knowledge was that of the purchaser since he was authorised to negotiate the terms of the contract of sale as her agent and acquired the knowledge in that context. 99 His Honour concluded that a reasonable person armed with Mr Palasty's knowledge of the vendor's straightened circumstances would, had he turned his mind to it, have concluded that there was a serious possibility that, if the purchaser defaulted, then the vendor would be unable to complete his own purchase of another property and would suffer financial loss. 100 The difference here, of course, is that the damages, at least initially, are claimed on the basis and are referable only to the fact of the existence of the respondent's mortgage, a fact of which the appellant, the purchaser, had no knowledge. 101 So far as the second limb is concerned, I am not persuaded, on the balance of probabilities in the circumstances of this case, where there was no knowledge that the purchase proceeds, or the sale proceeds of the sale of the land, were required to discharge the mortgage and would have been used for the discharge of the mortgage, that it can fairly be said it was in the contemplation of the parties, including, in particular, the appellant that this loss would arise out of her repudiation of the contract. 102 In my view it is not caught by the second limb and is too remote to be recoverable on the facts as they were found by the learned magistrate. It is, of course, not in dispute that the respondent would have, if it had received the sale proceeds in accordance with the contract of sale, used them to discharge the mortgage, or at least part of the mortgage, to the extent that those sale proceeds were available. 103 In my view, the decision of the magistrate is not attended with sufficient doubt to displace it. On appeal, it appears that the respondent has argued an alternative basis for the calculation of damages, to (Page 19)
compensate it in another way for loss as a result of not receiving the sale proceeds as intended by the contract of sale. 104 Alternatively, the respondent claims an award of interest on a contractual rate of nine per cent, which is arrived at by reference to cl 4.1(A)(1) of the sale conditions. This is the contract amount provided for in the general sale conditions, in different circumstances where there is in fact a resale of the property. In my view, that percentage is agreed for a different purpose and applies in different circumstances and is not the appropriate percentage. 105 Alternatively, the respondent says the interest award should be calculated at the rate of 6%, on the basis that that is the judgment sum rate applied by the courts. 106 It is noteworthy that this claim for damages was not the subject of the trial below. To some extent, it seems to me, the issue has taken the appellant by surprise. In any event, I am not persuaded that an interest calculation in the way contended for in the alternative by the respondent is open on either limb of Hadley v Baxendale. 107 I am not persuaded that there is any material error of fact, law or exercise of judicial discretion by the learned magistrate in her reasons for decision in this regard on an issue raised by the cross-appeal. 108 In my opinion, for these reasons the cross-appeal must also be dismissed.
Orders made 109 As a result I would make the following orders: 1. The appeal is dismissed. 2. The appellant pay the respondent's costs of the appeal, to be taxed. 3. The cross-appeal is dismissed. 4. The respondent pay the appellant's costs of the cross-appeal and notice of contention, to be taxed.
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