Eastbound Estate Pty Ltd v DC Consolidated Investments Pty Ltd (No 2)
[2024] VSC 130
•22 March 2024
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
COMMERCIAL LIST
S ECI 2022 02254
| EASTBOUND ESTATE PTY LTD (ACN 650 348 164) | Plaintiff |
| v | |
| D.C. CONSOLIDATED INVESTMENTS PTY LTD (ACN 006 180 365) ATF THE DE FELICE FAMILY TRUST NUMBER FIVE | Defendant |
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JUDGE: | Croft J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 14 March 2024 |
DATE OF JUDGMENT: | 22 March 2024 |
CASE MAY BE CITED AS: | Eastbound Estate Pty Ltd v DC Consolidated Investments Pty Ltd (No 2) |
MEDIUM NEUTRAL CITATION: | [2024] VSC 130 |
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CONTRACT — Damages in lieu of specific performance — Calculation of damages — Supreme Court Act 1986, ss 24, 38 and 60.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr P Bick KC with Mr B Gibson and Mr MQ Nguyen | Rigby Cooke |
| For the Defendant | Mr P Solomon KC with Mr J Grant | SBA Law |
HIS HONOUR:
Background
On 16 February 2024, reasons for judgment were delivered in this proceeding upholding the plaintiff’s claim that the defendant’s purported termination of the Sale Agreement pursuant to special condition 10.7 was invalid.[1]
[1]Eastbound Estate Pty Ltd v DC Consolidated Investments Pty Ltd [2024] VSC 40. Expressions used in the reasons delivered on 16 February 2024 import the same meaning in these reasons.
By its Statement of Claim, the plaintiff sought specific performance of the Sale Agreement and, further or alternatively, damages either in addition to, or in lieu of, specific performance.[2]
[2]Statement of Claim dated 20 June 2022 at [15]-[16], and [A] and [B] of the prayer for relief: CB15–16.
The plaintiff was entitled to pursue these remedies concurrently in the proceeding but must make an election prior to judgment.[3] The plaintiff now elects to recover damages rather than to pursue the remedy of specific performance.
[3]Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589, 611–612 (Brennan J).
The plaintiff made detailed submissions in relation to the relevant principles applicable to its entitlement to damages in lieu of specific performance and with respect to findings and evidence relevant to awarding damages in lieu of specific performance.[4]
[4]Plaintiff’s Outline of Submissions on Relief (7 March 2024), [4]–[13].
Concluding its submissions in this respect the plaintiff contends that, it having elected damages in lieu of specific performance, the Court should now proceed to assess damages according to the same compensatory principles that apply to a claim for common law damages for breach of contract. That is, it is said, the damages necessary to put the plaintiff in the position it would have been in had the contract not been breached, and instead been performed as promised.
The defendant does not contend that the plaintiff, following its election, was not entitled to compensatory damages for breach of contract on the basis it indicates. Consequently, its submissions are confined to addressing the following three matters:[5]
[5]Defendant’s Submissions Regarding Final Relief (12 March 2024), [1].
(a) the quantum of damages sought by the plaintiff in lieu of specific performance;
(b) the interest sought by the plaintiff in accordance with s 60 of the Supreme Court Act 1986; and
(c) an application for a short interim stay of execution of the final orders to be made by the Court, pending applications to the Court of Appeal for leave to appeal and for a stay of the Court’s final orders.
Subsequently to these submissions the defendant made further submissions with respect to the plaintiff’s claimed entitlement to return of the deposit and interest thereon pursuant to special condition 10.7 of the Sale Agreement and also advised the Court that an application for a short interim stay of execution of the final orders would not be pursued.[6]
[6]Defendant’s Further Submissions Regarding Final Relief (13 March 2024), [4]–[7], [9] (Defendant’s Updated Proposed Minute of Order deleting any reference to a stay of execution of orders).
Plaintiff’s submissions on quantification of damages
The plaintiff’s claims at trial were put on the basis that the defendant’s unlawful purported termination of the Sale Agreement deprived it of the profit it stood to gain from purchasing Lot 2 of the relevant land and then on‑selling that lot to a third party. More specifically, the plaintiff submitted that it would have obtained a profit of $13,500,000 had the Sale Agreement been performed as promised.[7] It was not, the plaintiff says, contended at trial that this was an inappropriate measure of the plaintiff’s loss and, as the defendant’s submissions now indicate, that position is not controversial. Rather, the controversy is the calculation of the quantum of damages.
[7]Plaintiff’s opening submissions at [4]; plaintiff’s closing submissions at [16].
In relation to this issue the plaintiff makes reference to various findings set out in the reasons for judgment.
On 30 April 2021, the plaintiff and the defendant entered into a Heads of Agreement for the sale of Lot 2 for $55,475,000 plus GST. On 28 May 2021, the parties entered into the Option Deed, which conferred on the plaintiff a call option to purchase Lot 2. Upon signing, the plaintiff paid $554,750, being 1 per cent of the sale price, in accordance with the terms of the Option Deed.[8] The plaintiff entered into an On Sale Agreement, on 29 August 2021, under which it agreed to sell Lot 2 to a third party for $68,975,000 plus GST.[9] The On Sale Agreement was conditional upon settlement of the Sale Agreement and the registration of the Plan of Subdivision.[10]
[8]Eastbound Estate Pty Ltd v DC Consolidated Investments Pty Ltd [2024] VSC 40, [9].
[9]CB1480.
[10]Eastbound Estate Pty Ltd v DC Consolidated Investments Pty Ltd [2024] VSC 40, [10].
On 17 December 2021, the plaintiff exercised its call option under the Option Deed by serving notice on the defendant. It paid $4,992,750, being the balance of the deposit, pursuant to the Option Deed. The Sale Agreement was executed on 20 December 2021[11] and recorded the purchase price of $55,475,000 plus GST.[12] It follows, the plaintiff says, that its expected profit from completing the Sale Agreement and on‑selling Lot 2 was $13,500,000 less the transaction costs of completing the Sale Agreement and the On Sale Agreement.
[11]Eastbound Estate Pty Ltd v DC Consolidated Investments Pty Ltd [2024] VSC 40, [10].
[12]CB1632.
It was held, as set out in the reasons for judgment, that it was not open to the defendant to form the opinion that the conditions of Planning Permit M/2021/554 that were relied upon by the defendant as a basis to terminate were “too onerous for the Vendor to perform” within the meaning of special condition 10.7 of the Sale Agreement.[13] Rather, to the contrary, it was found that the conditions were reasonably expected and relatively simple to perform.[14] Evidence was rejected that the conditions were out of the ordinary.[15] Moreover, the plaintiff observes that the defendant did not contend and, it is said, nor could it have on the evidence, that the defendant would have, or could have, terminated the Sale Agreement for any other reason. Nor did the defendant contend that there was any other impediment, actual or potential, to the Sale Agreement or On Sale Agreement being completed or that the profit on the On Sale Agreement should be reduced or discounted for any reason.
[13]Eastbound Estate Pty Ltd v DC Consolidated Investments Pty Ltd [2024] VSC 40, [101], [107], [110].
[14]Eastbound Estate Pty Ltd v DC Consolidated Investments Pty Ltd [2024] VSC 40, [98]–[99], [103]–[104].
[15]Eastbound Estate Pty Ltd v DC Consolidated Investments Pty Ltd [2024] VSC 40, [105]–[106].
In light of these matters the plaintiff contends:[16]
22.… the measure of damages which would prima facie put the plaintiff in the position it would have been in if the contract had been performed is $19,047,500. That amount reflects that the plaintiff has lost the price under the On Sale Agreement, being $68,975,000, but that is offset by not paying the remainder of the purchase price under the Sale Agreement, being $49,927,500.[17]
23.From this figure there should be deducted the stamp duty payable on the transfer of the land to the plaintiff under the Sale Agreement of $3,585,875,[18] transfer registration fees of $3,607,[19] and conveyancing costs of $3,000,[20] leaving net damages payable of $15,455,018.[21] The deposit of $5,547,500 and interest accumulated on it ($112,423.38 to date[22]) should be paid to the plaintiff in partial satisfaction of the damages and interest.
[16]Plaintiff’s Outline of Submissions on Relief (7 March 2024), [22], [23].
[17]Put another way, in circumstances where the plaintiff has previously paid the defendant $5,547,500 as a deposit …, $19,047,500 is the amount necessary to place the plaintiff in the same position (of having a net profit of $13,500,000) that it would have been in if the Sale Agreement and On Sale Agreement had been performed.
[18]Calculated in accordance with the State Revenue Office Land Transfer Stamp Duty Calculator.
[19]Calculated in accordance with the 2024 schedule of fees published by Land Use Victoria.
[20]Estimate for conveyancing costs not yet expended on the Sale Agreement and the On Sale Agreement.
[21]No allowance is made for any cost (to be borne by the plaintiff under special condition 12.1 of the Sale Agreement) for rectification of defects in Clipsal Drive referred to in condition 5 of the Planning Permit (set out in [2024] VSC 40 at [15]). As the Court found at [110]: “The defendant led insufficient evidence to support its theory that Clipsal Drive would need to be upgraded, at considerable expense, to ensure it was compliant with Council standards.” See also at [128]. The defendant’s traffic expert witness Mr Walsh was asked to express an opinion as to the cost of “improving the condition of the Clipsal Drive road” but declined to do as it was beyond his expertise (CB149). Mr Walsh and the plaintiff’s traffic expert Mr Gnanakone in their joint report described the cost of complying with condition 5 as unknown (CB291).
[22]As advised by the stakeholder.
Concluding, the plaintiff submits that there should be orders made that there be judgment for the plaintiff against the defendant in the sum of $15,455,018 in lieu of specific performance, together with interest pursuant to statute of $2,680,280.40,[23] such sum to be paid in part by payment of the deposit and accumulated interest to the plaintiff. Additionally, it is submitted that orders should be made that the defendant pay the plaintiff’s costs of and incidental to the proceeding, such costs to be taxed on a standard basis in default of agreement.
[23]Interest is calculated in accordance with s 60 of the Supreme Court Act 1986 from the commencement of the proceeding on 20 June 2022 to 8 March 2024.
Defendant’s submissions on quantification of damages
At the outset, the defendant accepts the “high‑level calculations” set out in the Plaintiff’s Outline of Submissions on Relief, at [22].[24] On this basis, it is said that the measure of damages which would prima facie put the plaintiff in the position it would have been in if the Sale Agreement had been performed is $19,047,500 less deductions for the costs which the plaintiff would have had to incur to complete the on‑sale of the land. Moreover, it is accepted that the deposit and interest accrued thereon, presently held by the defendant’s solicitors, should be applied on account of those damages.
[24]See above, [12].
The defendant contends the plaintiff’s calculation of stamp duty payable on the sale (which both parties agree should be deducted from the damages amount[25]) is incorrect as is the manner of calculation of interest pursuant to s 60 of the Supreme Court Act. These matters are addressed in some detail.
Quantification of stamp duty
[25]Plaintiff’s Outline of Submissions on Relief (7 March 2024), [23].
Stamp duty assessed as payable on the transfer of the land was payable by the plaintiff as purchaser.[26] The plaintiff claims that the amount of the stamp duty payable on the transfer would have been $3,585,875 “[c]alculated in accordance with the State Revenue Office Land Transfer Stamp Duty Calculator.”[27]
[26]CB1652 (special condition 21.1 of the Sale Agreement).
[27]Plaintiff’s Outline of Submissions on Relief (7 March 2024), fn. 30. No evidence was led with respect to that matter at trial.
The defendant submits that the Court can, in any case, calculate the amount which would have been payable by reference to the applicable provisions of the Duties Act 2000. Section 20 of the Duties Act applies to duty payable for the transfer of land in Victoria,[28] and relevantly provides as follows:
(1)The dutiable value of dutiable property that is the subject of a dutiable transaction is the greater of—
(a)the consideration (if any) for the dutiable transaction (being the amount of a monetary consideration or the value of a non‑monetary consideration); and
(b)the unencumbered value of the dutiable property.
[28]Section 10(1)(a) of the Duties Act.
Section 22 of the Act defines the “unencumbered value of the dutiable property” as follows:
(1)The unencumbered value of dutiable property is the amount for which the property might reasonably have been sold in the open market—
(a)in the case of a transfer of dutiable property on a sale of the property—at the time the contract of sale was entered into;
(b)in any other case—at the time the dutiable transaction occurred—
free from any encumbrance to which the property was subject at that time.
The rate of duty payable is calculable (in the present case) per the final line item of the table at s 28(1) of the Duties Act:
Dutiable value of the dutiable property the subject of the dutiable transaction
Rate of Duty
…
More than $2,000,000
…
$110,000 plus 6.5% of that part of the dutiable value that exceeds $2,000,000
The plaintiff’s calculation of stamp duty is, the defendant says, predicated on the basis of the purchase price set out in the Sale Agreement and thus s 20(1)(a) of the Duties Act (“the consideration (if any) for the dutiable transaction”). That is:
$110,000 + (6.5% x ($55,475,000 - $[2,000,000])) = $3,585,875.
The defendant submits, however, that the Court should conclude that the “unencumbered value of the dutiable property” as at the date of entry into the Sale Agreement was in fact higher than the “consideration (if any) for the dutiable transaction”, and that the amount of duty payable on transfer of the land would have been calculable and payable on that higher amount.
It is said that this position follows because the purchase price under the Sale Agreement was first agreed between the plaintiff and defendant when they entered into the Heads of Agreement on 30 April 2021, and then later the Option Deed on 28 May 2021.[29] Between that time and execution of the Sale Agreement on 20 December 2021,[30] the plaintiff, on 29 August 2021, contracted to sell Lot 2 to a third party for $68,975,000.[31] It follows that the best evidence[32] of the “unencumbered value of the dutiable property” is the price per the On Sale Agreement, entered into after the purchase price per the Sale Agreement was agreed, and closer in time to the date the Sale Agreement was executed. (It is implicit in the plaintiff’s case that there were no impediments to completion of the sale under the On Sale Agreement save for completion of the Sale Agreement). On this basis, the stamp duty payable on the transfer would have been $4,463,375 calculated as follows:
$110,000 + (6.5% x ($68,975,000 - $[2,000,000])) = $4,463,375.
Interest
[29]Eastbound Estate Pty Ltd v DC Consolidated Investments Pty Ltd [2024] VSC 40, [9].
[30]Eastbound Estate Pty Ltd v DC Consolidated Investments Pty Ltd [2024] VSC 40, [10].
[31]Eastbound Estate Pty Ltd v DC Consolidated Investments Pty Ltd [2024] VSC 40, [10].
As the defendant observes, pursuant to s 60 of the Supreme Court Act, the Court must, in a proceeding for the recovery of damages “unless good cause is shown to the contrary, give damages in the nature of interest … from the commencement of the proceeding to the date of the judgment over and above the debt or damages awarded”. The defendant submits that in the present circumstances, there is good cause to the contrary and that the Court should not allow interest to the plaintiff; at least without qualification for the reasons relied upon by the defendant.
More particularly, the defendant purported to terminate the Sale Agreement on 19 April 2022.[33] The plaintiff commenced this proceeding two months later, on 20 June 2022. The defendant says in its submissions that it is presumably agreed that completion of the Sale Agreement could not have occurred within two months. The defendant was required to take steps to cause the Plan to be certified and registered,[34] and the “Planning Permit requires various things to be done and then approved by Maroondah City Council including amending the Plan of Subdivision, various surveys, a condition assessment of Clipsal Drive and the rectification of any defects to the satisfaction of Maroondah City Council.”[35] The Sale Agreement was subject to and conditional upon registration of the Plan (which entailed all the above) before 20 December 2024.[36] It follows, the defendant contends, that the plaintiff may not have achieved the profit now sought to be reflected in an award of damages for many months, and certainly not by 20 June 2022.
[33]Eastbound Estate Pty Ltd v DC Consolidated Investments Pty Ltd [2024] VSC 40, [16].
[34]CB1644 (special conditions 10.1 and 10.2 of the Sale Agreement).
[35]Plaintiff’s Outline of Submissions on Relief (7 March 2024), [10].
[36]Special condition 10(a) of the Sale Agreement, at CB1492.
The defendant observes that the purpose of the Court’s power to award damages in the nature of interest is to compensate the plaintiff for being kept out of its money,[37] and a plaintiff is not entitled, by an award of damages, to be put in a position superior to that which the plaintiff would have been in had the contract been performed.[38] Consequently, it is contended that to allow interest from the commencement of the proceeding would permit the plaintiff to recover more than it would have received had the contract been performed.
[37]Clarke v Foodland Stores Pty Ltd [1993] 2 VR 382.
[38]Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64, 82 (Mason CJ and Dawson J); Clark v Macourt (2013) 253 CLR 1, [27] (Crennan and Bell JJ), [60] (Gageler J).
On this basis, the defendant submits that in circumstances where the commencement of a proceeding is not an appropriate starting point, and it is conceivable that the defendant may, as at today’s date, have still been taking steps to perform the Sale Agreement without breach, there is good cause for the Court to not allow any interest pursuant to s 60 of the Supreme Court Act. Moreover, it is said that in circumstances where the Court has no evidence as to how long completion would have taken, but does know that it would not have occurred by 20 June 2022, a conservative estimate would be a period of one year from the date of the planning permit (4 April 2022): that is, 4 April 2023. Thus the defendant contends that the Court should allow interest only from 4 April 2023.
Return of the deposit
In the defendant’s further submissions it sought to address the plaintiff’s entitlement to return of the deposit and interest thereon pursuant to special condition 10.7 of the Sale Agreement.[39]
[39]Defendant’s Further Submissions Regarding Final Relief (13 March 2024), [4]–[7].
The defendant says that it had not apprehended that it was the plaintiff’s position that the deposit and interest should be returned and that the position would not have changed as a result of any appeal because the Sale Agreement has been terminated. More particularly, the defendant says that it had not apprehended this to be the plaintiff’s position, because:
(a) the defendant had sought to return the deposit and interest to the plaintiff but had received no response to that communication;[40]
(b) an application for specific performance proceeds on the premise that the relevant contract remains on foot, and in this case, that the defendant’s (purported) termination was invalid; and
(c) when the plaintiff did, on 7 March 2024, elect to seek damages in lieu, the damages it sought treated the deposit paid as a loss[41] and sought an order that the deposit and interest thereon be paid on account of those damages (which, on the position until now advanced by the plaintiff, the defendant agreed to).
[40]Refer the final paragraph of the Termination Letter at CB1831–2: “Please provide account details into which the deposit, together with interest (less bank charges) can be transferred.” The subsequent correspondence exchanged between the parties’ solicitors (CB1833, 1837, 1838–1839, 1840, 1841 and 1843) ignored that request, and it is uncontroversial that the deposit continues to be held by Tan Partners.
[41]See Plaintiff’s Outline of Submissions on Relief (7 March 2024), [22] and fn. 29.
The defendant submits that the plaintiff’s, said to be altered position in this respect, affects the relief which the Court might order in the following ways:
(a) the amount of the plaintiff’s prima facie loss (before deductions of sale costs) is not $19,047,500[42] but $13,500,000, as the deposit sum ($5,547,500) and interest accrued thereon is the plaintiff’s property, albeit held on trust by Tan Partners on interest bearing deposit. It has suffered no loss in respect of that sum, and its remedy for recovery of that sum does not sound in damages (but would, rather, be restitutionary or by way of an application in equity to compel performance of a trust[43]);
(b) it follows that order 2 proposed by the plaintiff is conceptually inapposite — the deposit and interest are the plaintiff’s property, and it makes no sense for them to be applied in partial satisfaction of a liability owed by the defendant to the plaintiff; and
(c) a reduction in the damages payable to the Plaintiff (as indicated in sub‑paragraph (a), above) will necessarily reduce the interest component of the Court’s orders.
[42]Cf. ibid.
[43]Although no such claim was advanced in the proceeding, the defendant does not contend the deposit and interest should not be returned to the plaintiff.
Moreover, with respect to its submission that a reduction in the damages payable (as indicated in sub‑paragraph (a) of the preceding paragraph) will necessarily reduce the interest component of the Court’s orders the defendant says that:
(a) the damages upon which the Court might allow interest pursuant to s 60 of the Supreme Court Act would necessarily be lower;
(b) there would, in any case, be “good cause to the contrary”[44] not to award interest on the deposit sum because the plaintiff has only been kept out of that sum because of its own decision not to accept return of the deposit whilst pursuing the remedy of specific performance; and
(c) the Court cannot, in any case, allow interest on that sum pursuant to s 60 due to the operation of s 60(2)(b) of the Supreme Court Act as interest has accrued on the deposit and the plaintiff is, as it contends, contractually entitled to that sum.[45]
[44]Whether under s 58 or 60 of the Supreme Court Act.
[45]See also Supreme Court Act, s 60(2)(a).
Responsive submissions and analysis
Quantification of stamp duty
As the plaintiff observes, it is common ground that, by operation of s 20 of the Duties Act 2000 the dutiable value of the property, by reference to which stamp duty is to be calculated, is the greater of the consideration for the transaction and the unencumbered value of the dutiable property.
Further, it is not in issue that the consideration for the transaction is the $55,475,000 plus GST, being the purchase price payable under the Heads of Agreement for the sale of Lot 2 entered into on 30 April 2021. The purchase price under the Sale Agreement, executed on 20 December 2021, was also $55,475,000 plus GST.
As indicated, the defendant submits that the unencumbered value of the property exceeds the contract price under the Heads of Agreement and is to be fixed by reference to the $68,975,000 plus GST purchase price under the On Sale Agreement entered into on 29 August 2021.[46]
[46]See above [21]; and see Transcript 10 and 12–13 (14 March 2024).
The plaintiff submits that, contrary to the defendant’s submissions in this respect, the best evidence of the unencumbered value of the dutiable property as at the date on which the Sale Agreement was executed in December 2021 is not the purchase price under the On Sale Agreement entered into four months earlier. On the contrary, the plaintiff says that the best evidence of the unencumbered value of the dutiable property on the date upon which the Sale Agreement was executed is the purchase price under the Sale Agreement itself. Moreover, the plaintiff observes that no evidence was led by the defendant as to the open market value of Lot 2 at any date or as at any date. Although the defendant relied upon a witness statement by a valuer, Michael Leech,[47] it did not ask him any question concerning the open market value of Lot 2, being the land sold at any date.
[47]CB158–236.
As the plaintiff observes, the defendant now asks the Court to assume that the On‑Sale purchaser was paying open market value which, in turn, assumes the On‑Sale purchaser was a willing but not anxious purchaser. There is, as the plaintiff contends, no evidence to that effect before the Court; a position which, in the context of the evidence before the Court, is not answered by any general inference to this effect which the defendant seeks to draw.[48]
[48]Transcript 9 (14 March 2024).
The plaintiff also emphasises that the On-Sale purchaser was purchasing something materially different to and more valuable than the purchase of Lot 2 by the plaintiff. The On‑Sale purchaser was buying this lot subdivided, without any additional financial obligation, and with the ability to commence a development process immediately. As the plaintiff contends, at the time the Sale Price was agreed, it was buying proposed Lot 2 to, hopefully, be subdivided but subject to unknown conditions that may apply to the creation of Lot 2 and with the obligations under special condition 12.1[49] to pay for “all works specified by the Approvals and otherwise necessary to procure Registration of the Plan” including “all Earth Works, traffic and road works, any works associated with easements, rights of way, construction, drainage, water, sewerage, electricity and all other service and infrastructure works”. Moreover, and clearly highly significantly, the Vendor had the right to terminate the Sale Agreement if a condition too onerous to perform was imposed; but the purchaser under the On Sale Agreement did not bear that burden.
[49]CB1646.
As the plaintiff submits, with the wisdom of hindsight, it was later learned when the Planning Permit was issued on 4 April 2022 that these works consisted of assessing and rectifying all defects in the Clipsal Drive road, footpath and drainage assets to be transferred to the Council under permit condition 5.[50] Neither party, however, led evidence of the cost of these works but, in any event, the plaintiff would have had to bear that expense. [51] It follows, in my view, that as the plaintiff submits, at the date the price of $55,475,000 was agreed under the Sale Agreement the impact of Council requirements on proposed Lot 2 and on the plaintiff were unknown and the costs the plaintiff would have to bear were potentially considerable. It follows, for reasons previously indicated and as submitted by the plaintiff, that the stamp duty should be calculated on the price agreed in the Sale Agreement and not the On Sale Agreement of the created and development process-ready Lot 2. Consequently, I reject the defendant’s submission, as put at the hearing of this aspect of the proceedings, that there was no material difference in what was being sold, the subject matter with all its attributes and “detractions”, under each of the Sale Agreement and the On Sale Agreement.[52]
Interest
[50]CB1809.
[51]And see Transcript 20 (14 March 2024).
[52]Transcript 11 and 12 (14 March 2024).
It is, as the plaintiff observes, common ground that by the operation of s 60(1) of the Supreme Court Act the Court, on application in any proceeding for the recovery of damages, must, unless good cause is shown to the contrary, give damages in the nature of interest at such rate not exceeding the rate for the time being fixed under s 2 of the Penalty Interest Rates Act 1983 as it thinks fit from the commencement of the proceeding to the date of the judgment over and above the debt or damages awarded.
As indicated previously, the defendant submits that because interest is intended to compensate a plaintiff for being kept out of his or her money and because registration of the plan (which itself depended on fulfilling the permit conditions) was a precondition to completion of the Sale Agreement and the On Sale Agreement, interest should only run from the date on which completion would have taken place.[53]
[53]See above [25].
More particularly, with reference to the defendant’s submissions, it says that:[54]
(1) it is “presumably” agreed that completion could not have occurred by 20 June 2022, being the date on which the proceeding was commenced;
(2) it follows from the fact that completion was conditional that the plaintiff “may not” have achieved the profit now sought to be reflected in an award for damages “for many months and certainly not by 20 June 2022”;
(3) it is “conceivable that the defendant may, as at today’s date, have still been taking steps to perform the Sale Agreement without breach” (emphasis original);
(4) in circumstances where the Court has “no evidence” as to how long completion would have taken but “does know” that it would not have occurred by 20 June 2022, a “conservative estimate” would be a date of one year from the date of the planning permit (4 April 2022), being 4 April 2023; and
(5) interest should run from that date.
[54]Defendant’s Submissions Regarding Final Relief (12 March 2024), [15]–[17]; and see above [23]–[24].
The plaintiff does not concede, nor, it says, was it contended for or found on the proceeding, that the Sale Contract could not have completed by 20 June 2022. To the contrary, the plaintiff says, the planning permit was issued on 4 April 2022 and the Court found that, but for the defendant’s failure to cooperate and its unlawful purported termination of the Sale Agreement, fulfillment of the permit conditions was not “too onerous”.
The defendant does concede[55] that there is no evidence before the Court as to how long completion would have taken but, nevertheless, invites the Court to speculate as to when completion would have taken place and to fix what the plaintiff says is an arbitrary date one year after the permit was issued.[56] As the plaintiff observes, the defendant had every opportunity to lead evidence about when completion would be expected to occur but chose not to do so.
[55]Refer to the Defendant’s Submissions Regarding Final Relief (12 March 2024), [15].
[56]Transcript 14 (14 March 2024).
Having regard to the matters raised in the plaintiff’s submissions and the findings of the Court in these proceedings and the lack of any evidence supporting the defendant’s contentions, I am not satisfied that “good cause [has been] shown to the contrary” for the purposes of s 60(1) of the Supreme Court Act.
The deposit
The defendant submits that the deposit of $5,547,500 together with accumulated interest (of $112,423.38) should be paid into a joint interest-bearing account pending the hearing and determination of the application for leave to appeal.[57] The defendant’s case which it will seek to sustain on appeal is that it validly terminated the Sale Agreement on 19 April 2022. The plaintiff observes that if such an appeal succeeds the result will be that the plaintiff should have received the deposit back forthwith after 19 April 2022. On that basis, the plaintiff contends that there is absolutely no reason why the deposit and accumulated interest should not be immediately paid to the plaintiff.
[57]Defendant’s Submissions Regarding Final Relief (12 March 2024), [20(c)].
In further submissions in relation to this issue,[58] the plaintiff sought to reinforce its contention that the deposit should be immediately paid to the plaintiff and to seek to clarify the position. Contrary to the defendant’s further submissions, the plaintiff sought to clarify its position that it is not put that the deposit and interest held on trust are the property of the plaintiff, but that it is entitled to damages in lieu of specific performance to be calculated in accordance with the plaintiff’s previous submissions. Accordingly, it seeks an order that the deposit and interest held for the benefit of the defendant be applied to discharge some of that liability. Moreover, it says that in the event that the defendant’s foreshadowed appeal to the Court of Appeal is made, and succeeds, and the Court of Appeal finds that the Sale Agreement was validly terminated, but not otherwise, the plaintiff would then be entitled to the return of the deposit and interest on it, pursuant to Special Condition 10.7 of the Sale Agreement which relevantly provides:
[58]Plaintiff’s Brief Response to Defendant’s Further Submissions on Relief (14 March 2024), [5]–[7].
Without limiting special condition 10.2, if the responsible Authority…
(b)imposes a Requirement that in the opinion of the Vendor (in its absolute discretion) is too onerous for the Vendor to perform,
the Vendor may terminate this Contract by giving written notice to the Purchaser in which case the Deposit and any Interest will be refunded to the Purchaser … [plaintiff’s emphasis]
Thus the plaintiff says that whether such an order for payment of the deposit to it is in the nature of part payment of an order for damages in lieu of specific performance, now or in the event that the foreshadowed appeal is unsuccessful; or pursuant to Special Condition 10.7 of the Sale Agreement in the event that the foreshadowed appeal succeeds, the plaintiff should receive the deposit and interest.
Having regard to the provisions of Special Condition 10.7 of the Sale Agreement and for the reasons advanced by the plaintiff I am of the opinion that the plaintiff should now receive payment of the deposit and interest as provided for in the orders. Moreover, in my view, the defendant’s submissions with respect to notional rescission of the contract by electing to have damages in lieu of specific performance, raised for the first time and in very general terms at the hearing on 14 March 2024, does not detract from or otherwise affect this position.[59]
[59]See Transcript 6–7 and 17–18 (14 March 2024).
Conclusion and orders
For the preceding reasons there will be judgment for the plaintiff against the defendant in the sum of $15,455,018 in lieu of specific performance, together with interest pursuant to statute of $2,680,280.40; together with an order that the deposit paid under the Sale Agreement between the plaintiff as purchaser and the defendant as vendor dated 20 December 2021 and accumulated interest thereon be paid to the plaintiff in partial satisfaction of these sums.
In the absence of any opposition on the part of the defendant there will be an order in favour of the plaintiff that the defendant pay the plaintiff’s costs of and incidental to the proceeding including reserved costs, such costs to be taxed on a standard basis in default of agreement.
Orders will be made accordingly.
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See Chief Commissioner of State Revenue (NSW) v Dick Smith Electronics Holdings Pty Ltd (2005) 221 CLR 496, 504 [20] (Gleeson CJ and Callinan J, in dissent but not on this point); Re Marriott [1968] VR 260,
268–9.
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