G W Sinclair & Co Pty Ltd v Cocks
[2001] VSCA 47
•26 April 2001
SUPREME COURT OF VICTORIA
COURT OF APPEAL
No. 4907 of 1999
| G.W. SINCLAIR & COMPANY PTY. LTD. (ACN 007 065 625) | Appellant |
| v. | |
| JOHN ROBERT COCKS and ROBYN COCKS | Respondents |
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JUDGES: | BROOKING, CHARLES & BUCHANAN, JJ.A. | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 25-26 September 2000 | |
DATE OF JUDGMENT: | 26 April 2001 | |
MEDIUM NEUTRAL CITATION: | [2001] VSCA 47 | |
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Damages – Assessment – Sale of land – Deprivation of commercial opportunity – Future or potential events – Likelihood of occurrence – Prospect of benefit to be established on balance of probabilities - Relevance to measure of damages – Calculation of value of loss – Costs of proceedings against third party –Whether recoverable as damages.
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| APPEARANCES: | Counsel | Solicitors |
| For the Appellant | Mr G.A.A. Nettle, Q.C. | Middletons Moore & Bevins |
| For the Respondents | Mr R.H. Smith | Blake Dawson Waldron |
BROOKING, J.A.:
I agree with Charles, J.A.
CHARLES, J.A.:
John Robert Cocks and his wife, Robyn Cocks (the respondents) brought proceedings as plaintiffs in the County Court against the first defendant, Matlock & Associates Pty. Ltd. ("Matlock") claiming payment of the balance of a deposit payable under a rescinded contract for sale of the Cocks's home at 40 Monomeath Avenue, Canterbury. In September 1995 the respondents joined their estate agent, the appellant ("Sinclair & Co."), as a second defendant claiming damages for misleading and deceptive conduct, and also damages for breach of the terms of Sinclair & Co.'s retainer as real estate agent in connection with the sale of the property. In June 1996 Sinclair & Co. commenced a second action against Mr and Mrs Cocks in the Magistrates' Court for the balance of its commission and marketing expenses it claimed were owed as a result of the sale of the property by the respondents to Matlock. That second matter was later uplifted to the County Court and in June 1998 was consolidated with the proceeding brought by Mr and Mrs Cocks and thereafter was treated as a counterclaim.
Mr and Mrs Cocks's claim came on for trial in the County Court at Melbourne on 12 June 1998. It was heard first as an undefended matter against Matlock. By this time the claim appears to have become a claim for damages for breach of an enforceable contract. Judgment was entered for damages for $204,212 and costs. The trial of Mr and Mrs Cocks's claim against Sinclair & Co. commenced on 2 February 1999. After a hearing of 12 sitting days on 7 March 1999 the learned judge gave judgment for Mr and Mrs Cocks against Sinclair & Co. in the sum of $47,872.40 together with damages by way of interest of $16,564.93. The counterclaim by Sinclair & Co. was dismissed. Sinclair & Co. now appeals against the damages so awarded.
Factual background
In 1994 Mr and Mrs Cocks had owned and occupied 40 Monomeath Avenue for approximately 20 years. They decided to sell the property because it had become too large for them. They consulted three real estate agents including Sinclair & Co.. On 22 June 1994 Sinclair & Co. sent a proposal to the respondents headed "Opinion of current market value and suggested marketing strategy". In this document Sinclair & Co. said –
"Our recent extensive Canterbury/Camberwell/Balwyn house sales experience; particularly nearby, tells us that quality, large family holdings, so well positioned in the environs of the 'Golden Mile' and the 'Reid Estate' and so convenient to a host of facilities, will be hotly contested under auction conditions thereby achieving your stated objective of price maximisation."
After examining what were said to be comparable local sales figures and basing itself upon "our extensive knowledge of prevailing local market conditions" Sinclair & Co. estimated that the property if placed on "today's market" should realize conservatively $900,000 to $1m. The document continued "Of course, if a better figure can be achieved it will be, as we pride ourselves on obtaining exceptional Sales Results – particularly in Canterbury".
On 3 August 1994 Mr and Mrs Cocks signed a "Residential Exclusive Auction Authority" by which they appointed Sinclair & Co. as their sole selling agent to auction the property on Saturday 29 October 1994. Sinclair & Co. was authorized to spend $7,909.65 for marketing expenses. The commission to be charged by Sinclair & Co. was stated to be as per the written submission which provided a 20% discount from the REIV scale if the sale price did not exceed $939,999, the discount decreasing as the price increased. No discount applied if the sale price was $1,020,000 or more.
On 3 August 1994 Sinclair & Co. wrote to Dunhill Madden Butler ("DMB"), Mr and Mrs Cocks's solicitors, requesting that they draw contracts and vendor statements for the proposed auction. On 3 October DMB wrote to Mr and Mrs Cocks enclosing contracts of sale and vendor statements under s.32 of the Sale of Land Act 1962. On 4 October Mrs Cocks delivered the contracts and vendor statements prepared by DMB to Sinclair & Co.. The DMB form of contract contained several clauses described by the trial judge as being of considerable value to the respondents.
By Saturday 22 October a substantial number of groups had inspected the property. On that day, Russell Hogg, a director of Matlock, made an offer for the property of $780,000 to Peter Smith, an estate agent employed by Sinclair & Co.. The offer was rejected out of hand but Mr Smith told Mr Cocks of the fact that the offer had been made, and that he had rejected it out of hand because he knew Mr and Mrs Cocks would not be interested in that price. That evening, during a meeting between Gregory William Sinclair (the principal and a director of the appellant), Mr and Mrs Cocks and a town planner, the option of sub-dividing the property was discussed. Mr Sinclair expressed concern that there were no apparent buyers, and said to the respondents that he did not recommend proceeding with the auction and that Mr and Mrs Cocks should consider a "fall-back" strategy of sub-dividing and developing the property themselves.
On Tuesday 25 October 1994 Matlock made a further offer to purchase the property for $850,000. Sinclair & Co. prepared a contract note which was signed by Mr and Mrs Hogg. The purchaser was described as "Matlock & Associates Pty Ltd as trustee for the Hogg Family Trust and/or nominee". The terms of the contract note, as drafted by Sinclair & Co., included terms that:
(a)The price was $850,000 payable by a deposit of $85,000, $10,000 of which was acknowledged to have been paid, and the balance, $75,000, by 31 January 1995.
(b)The balance of the purchase price was due and payable on 28 April 1995.
(c)The sale was subject to the purchaser's solicitors' approval of title within 14 days of the date of the contract ("the special condition").
The contract note did not contain terms equivalent to those in the DMB form of contract concerning persons signing on behalf of a corporation being personally liable, or the procuring of directors' guarantees. No form of guarantee and indemnity was annexed.
A meeting then took place between Mr and Mrs Cocks, and Messrs Sinclair and Smith on the evening of 25 October at the Cocks property. The substance of the discussion at the meeting was that acceptance of the offer of $850,000 was recommended by Mr Sinclair but rejected by Mr and Mrs Cocks. On the advice of Mr Sinclair, the respondents authorized a counter-offer of $900,000 by altering the price on the contract note from $850,000 to $900,000, initialling that alteration and signing the contract note.
Mr and Mrs Cocks, and Messrs Sinclair and Smith gave differing accounts in the witness box of what occurred and what was said at that meeting. The judge preferred the evidence of Mr and Mrs Cocks, finding that Mr Sinclair and Mr Smith had made no mention to the respondents of the absence of guarantees or of the refusal by Matlock in the person of Mr Hogg to sign the DMB form of contract. The judge accepted that Mr Cocks had expressed concern about the ease with which the purchaser could walk away from the contract in the first three months because all he would lose was $10,000. His Honour found that the agents had told Mr Cocks that the purchaser could not do so because the contract note was a binding contract and, further, that Mr Hogg was not a man of straw. The judge found that had there been mention of a refusal to sign the DMB contract or of a refusal to sign guarantees, this would have set off "alarm bells" with Mr and Mrs Cocks. Had DMB been consulted by Mr and Mrs Cocks or by Sinclair & Co. concerning the absence of terms dealing with directors' guarantees or about the special condition, DMB would have advised the respondents not to sign such a contract.
On 26 October Matlock rejected the respondents' counter offer of $900,000. Then on 27 October Mr Hogg, on behalf of Matlock, was encouraged by Sinclair & Co. to make a further offer for the property. Mr Hogg agreed to increase his offer to $880,000, but otherwise on the same terms as those contained in the contract note. On the afternoon of 27 October, Mr Smith altered the contract note by crossing out the purchase price of $900,000 and substituted $880,000 in lieu thereof. Mr and Mrs Hogg initialled the alterations. Mr Smith took the altered contract note to Mr and Mrs Cocks that evening and they signed and initialled all alterations. On 28 October Sinclair & Co. wrote to the respondents, DMB and the purchasers' solicitors advising that the property had been sold and that they were holding a part-deposit of $10,000 and enclosing the contract note.
On 11 November 1994, the period of 14 days from the date of the contract note expired. Meanwhile there had been no word from the purchasers' solicitors regarding the special condition. On 28 November Matlock lodged a caveat on the title to the property claiming an interest in fee simple as purchaser. Then, on 3 January 1995 DMB received a letter from Matlock's solicitors advising that Matlock did not wish to proceed with the contract. They alleged that the contract was at an end since the special condition had not and could not have been complied with within the 14 days specified and the solicitors requested the refund of the deposit paid.
On 9 January 1995, Mr and Mrs Cocks became aware that there were problems with the sale of the property. By 31 January the balance of the deposit had not been paid.
On 22 February 1995 Matlock's solicitors wrote to DMB re-stating an earlier offer to recompense Mr and Mrs Cocks for the costs of the auction by payment of the sum of $20,000. DMB advised Mr and Mrs Cocks not to accept that offer and the respondents acted upon that advice. Then on 23 February 1995 DMB served a notice of rescission on Matlock relying on the failure to pay the balance of the deposit on 31 January 1995. As at 23 February, Mrs Cocks considered the property was back on the market.
In late February Mr and Mrs Cocks first consulted Adrian Jones of R.G. Woodard Pty Ltd in relation to selling the property. On 3 March 1995 an amendment to the Camberwell Planning Scheme was approved by the Minister for Planning, creating a single dwelling covenant as a planning overlay in respect of most properties in Monomeath Avenue, including that of the respondents.
Mr Jones gave evidence that over the period February to November 1995 no offer was received for 40 Monomeath Avenue at an amount over $800,000. The property was finally sold on 11 December 1995 by Mr and Mrs Cocks for $805,000.
Sinclair & Co. retained the original part-deposit of $10,000 that had been paid by Matlock in October 1994. It applied part of that sum as reimbursement of advertising expenses incurred in connection with the marketing of the property in or before October 1994 and applied the balance on account of sales commission claimed by it. Sinclair & Co. has never remitted the part-deposit to Mr and Mrs Cocks.
Matlock's caveat remained on the property until it was withdrawn in July 1995. Matlock's solicitors (Williams Hunt) had suggested to DMB that the part-deposit be released to DMB and on 26 May 1995 offered to withdraw Matlock's caveat on condition that DMB undertook not to disburse the deposit.
The legal proceedings against Matlock
Mr and Mrs Cocks, as I have said, proceeded first against Matlock, the trial of that claim proceeding undefended in June 1998. The question at that stage was whether Matlock was bound by an enforceable contract of sale. The judge held that it was enforceable, and accordingly entered judgment against Matlock in the sum of $204,212 with costs. This appeal was conducted on the basis that Matlock paid no part of this judgment. The remainder of the trial was then adjourned to a date to be fixed.
Legal proceedings against Sinclair & Co.
Leave was then granted to Mr and Mrs Cocks to amend their claim against Sinclair & Co. to delete the claim relating to allegations of misleading and deceptive conduct that had been raised by Matlock, and to add a claim for damages for negligence in relation to Sinclair & Co.'s performance of the retainer.
The judge's conclusions
The judge held that by reason of the contract of agency, there arose a duty in Sinclair & Co. to act with reasonable care in the interests of the plaintiffs, Mr and Mrs Cocks, in selling the property and that failure to act in accordance with the plaintiffs' instructions would constitute a lack of reasonable care and a breach of the contract of agency. His Honour held that Sinclair & Co. had breached its retainer by not acting in accordance with the plaintiffs' instructions (which his Honour held to have incorporated the DMB contract) and, in any event, had not acted in accordance with the standards of a reasonably careful estate agent by failing fully to inform the plaintiffs as to the differences between the contract note drawn by it and the contract drawn by the plaintiffs' solicitors and by failing to point out that the contract note did not include guarantees or the risk which that presented to the plaintiffs.
The judge held that as a consequence of Sinclair & Co.'s breach of retainer and negligence, the plaintiffs suffered loss and damages in terms of the expenses that were wasted by reason of their having entered into the contract, being all the legal and conveyancing costs and disbursements of the sale to Matlock, including the costs of removing the caveat lodged on the title by Matlock; the costs of commencing and prosecuting legal proceedings against Matlock to judgment and execution; and the value of the loss of the opportunity to sell the property over the period 27 October 1994 to 10 March 1995. His Honour held that the plaintiffs lost the opportunity of marketing the property between those dates, and that the degree of probability of the property being sold at its market value in that period was 40%. The judge found that the value of the property in October 1994 was $862,000, and had declined to $805,000 by December 1995. His Honour said that the market was steady during the months October 1994 to March 1995 but declined thereafter. The judge also said that the plaintiffs could have sold the property earlier, within six or seven months, at a price of about $832,000 based upon a straight line depreciation in the market, and assuming a sale at that price, the loss was therefore 40% of $30,000, namely $12,000.
In the course of his reasons, the judge said of the conduct of Sinclair & Co. and its consequences for the plaintiffs that –
"In presenting that [contract note] without explanation in clear terms as to that difference and in particular without drawing attention to the omission of these two terms, I believe Sinclair & Co. was acting not in accordance with its instructions. In any event it was not acting in what I believe on the evidence, especially of Mr Courtney but also of Mr Pratt, was the path which in the same circumstances would have been taken by the reasonably careful estate agent. When he draws the contract differently from the one which is part of his instructions, the agent assumes the duty of fully informing his principal as to what the differences are and why they are made. In failing so to inform Sinclair & Co. was in breach of its duty.
The agent failed properly to point out to the principal the risk to the principal presented by special condition 1 ["the special condition"]. The agent gave confusing, if not contradictory, explanations of special condition 1. The agent failed to point out that the contract note did not include guarantees and the risk which that presented to the vendor. The agent recommended that the principal accept an offer of $880,000 supported for three months by a part deposit of only slightly more than 1% of the price and failed to point out the risk to the vendor, thereby assuaging Mr Cocks' own expressed concern.
Had the agent properly drawn attention to the differences between the contract note and the D.M.B. contract, I am satisfied that the Cocks would not have signed the contract note without taking the advice of their solicitors. Such advice in turn would have probably resulted in their not signing the note at all. Accordingly, I am satisfied that the agent's breach of duty was a cause of the damage complained of.
In my view the Cocks are entitled to compensation consisting of the expenses which were wasted by reason of their having entered into the contract plus the value of the lost chance of marketing and possibly selling their property in the four months before 10th March 1995. I do not accept the argument that no damage flowed from the agent's breach of duty. Causation seems to me to be established. The Cocks wanted to sell, they were in no particular hurry, but they did want to sell. They eventually sold at the end of 1995 for $805,000. Settlement was in April 1996. The evidence indicates that up to February or March 1995 the market in the area was relatively steady and that thereafter it declined. Their chance of selling before March was real and therefore not worthless."
Issues raised on the appeal
The appellant did not challenge any of the judge's findings on liability, but instead raised six issues, all of which related to the damages found by the judge and awarded to the plaintiffs. They were as follows –
1.whether there was any loss of opportunity to sell the property;
2.if there was any loss of opportunity to sell, whether the judge erred in his calculation of the value of such lost opportunity;
3.whether the judge erred in including in the amount of damages awarded to the plaintiffs, advertising and marketing costs relating to the marketing of the property in and prior to October 1994;
4.whether the plaintiffs were entitled to recover from Sinclair & Co. the costs of pursuing Matlock;
5.whether it was permissible for the judge to make an award of damages including costs of the proceedings against Matlock, having regard to the provisions of Order 63A.07;
6.whether the judge erred in not taking into account the sum of $10,000 deposit which had been received from Matlock by way of part-deposit.
Loss of a chance
The first issue and that to which most attention was directed in argument before this Court was the loss of a chance. The judge had held that because of the plaintiffs' entry into the contract, they had been deprived of the chance to sell the land at market value during the period that the land remained subject to the contract of sale. The judge preferred the evidence of the plaintiffs and their witnesses to those of the appellant and it was not suggested that his Honour erred in so doing. Counsel for the appellant attacked the judge's conclusions on two principal bases. The first argument was that no chance had in fact been lost, because on all the evidence it was less than likely that the respondents would have agreed to sell the property for $862,000, even if that sum had been available. Counsel argued secondly that far from losing the chance of selling the property, the respondents had made their own informed decision to pursue Matlock for an over-market price premium. Having done so, they could not later say that any loss of a chance was caused by the negligence of the appellant. Their decision to pursue the greater price for an above-market value could not be put against the appellant. I shall deal later with a subsidiary argument concerning the offer of settlement made by Matlock in the sum of $20,000. It was also argued that even if any chance had been lost, it was minuscule in value and certainly not to be estimated at $12,000, being the judge's conclusion of its worth.
Counsel for the respondents submitted that as to the question whether any chance had been lost the judge had made a finding of fact and that there was evidence to support that finding. Having seen all the witnesses called by both sides, his Honour was in the best position to make that finding. It was submitted that the evidence supporting the judge's conclusion was to be found in the evidence of the estate agents, Mr Jones called by the respondents, and the two expert witnesses called by the appellant, Messrs Pratt and Bourke. Mr Jones had said that there was a real prospect that the property would have been sold in the relevant period, and the judge had accepted the evidence of the appellant's expert witnesses that the market value of the property remained steady following October 1994 and for some months afterwards. In their estimate of "market value" those experts had correctly adopted the test laid down in Spencer v. The Commonwealth[1].
[1](1907) 5 C.L.R. 418.
In Sellars v. Adelaide Petroleum NL and Ors[2] Mason, C.J., Dawson, Toohey and Gaudron, JJ. said that damages for deprivation of a commercial opportunity, inter alia by reason of breach of contract,
"should be ascertained by reference to the court's assessment of the prospects of success of that opportunity had it been pursued. The principle recognized in [Malec v. Hutton[3]] was based on a consideration of the peculiar difficulties associated with the proof and evaluation of future possibilities and past hypothetical fact situations, as contrasted with proof of historical facts. Once that is accepted, there is no secure foundation for confining the principle to cases of any particular kind.
On the other hand, the general standard of proof in civil actions will ordinarily govern the issue of causation and the issue whether the applicant has sustained loss or damage. Hence the applicant must prove on the balance of probabilities that he or she has sustained some loss or damage. However, in a case such as the present, the applicant shows some loss or damage was sustained by demonstrating that the contravening conduct caused the loss of a commercial opportunity which had some value (not being a negligible value), the value being ascertained by reference to the degree of probabilities or possibilities. It is no answer to that way of viewing an applicant's case to say that the commercial opportunity was valueless on the balance of probabilities because to say that is to value the commercial opportunity by reference to a standard of proof which is inapplicable."[4]
[2](1994) 179 C.L.R. 332, at 355.
[3](1990) 169 C.L.R. 638, at 643.
[4]That the balance of probabilities was the appropriate standard of proof required to establish both causation and the existence of a loss was also the view of Brennan, J. at 367.
In the present case it was necessary therefore, in order to support the judge's conclusions, for his Honour to have been appropriately satisfied on the balance of probabilities that (a) a selling price of $862,000 or more could have been obtained for 40 Monomeath Avenue in the period from 27 October 1994 to 10 March 1995 and (b) that if such a price had been offered to Mr and Mrs Cocks in that period, they would have accepted it. Both these issues raised questions of considerable difficulty on the facts before the judge.
Mr Sinclair (who, as the judge observed, had an interest in assessing the prospects of selling at such a price at as low a figure as possible) said in evidence that the chance of selling in the relevant period was only 5% There was uncertainty in the market resulting from objections to the proposed multi-unit development at 39 Monomeath Avenue and Mr and Mrs Cocks had been told on 27 October that the Minister for Planning was likely to call in the Administrative Appeals Tribunal appeal concerning the development at 39 Monomeath Avenue and impose a single dwelling covenant over Monomeath Avenue, advice which was finally justified by what occurred on 3 March 1995. Furthermore, December and January were on the evidence not peak periods for the sale of real estate. The offer made by Matlock was in fact the only offer that had been received by Sinclair & Co. in the marketing period prior to 29 October 1994. Although Sinclair & Co. had advised the respondents that the amount they hoped to obtain for the sale of the property was between $900,000 and $1m., Mr Sinclair later advised Mr and Mrs Cocks that the offer made by Matlock of $880,000 on the terms proffered would not be matched over the next one to two years. The evidence of Mr Jones also was that he commenced marketing the property at the end of February 1995 and that he had received no offer above $800,000 until the offer of $805,000 was made and accepted by the respondents in December 1995.
On the other hand Mr Jones stated several times his opinion that in the period from October 1994 to February 1995, the market value of 40 Monomeath Avenue was between $850,000 and $880,000. His evidence was that he was very familiar with the area. He had indeed been contacted by Mr Sinclair after Matlock made its offer of $880,000 for the property, and had expressed his view to Mr Sinclair that it was a "pretty good offer". During his evidence he stated his opinion as to the real estate market in general and specifically in relation to 40 Monomeath Avenue that in 1995, the market started to turn downwards for a variety of reasons, such as the coming of a Federal election and the fact that the general economy in Australia had flattened out, but he said that from October 1994 to early 1995, the market was healthier in that period. Asked whether there was any reason why the property would not have sold for approximately its market value had it remained on the market between October and February 1995, Mr Jones replied "I can't see why it wouldn't have, there was a long enough time to find another buyer." When his attention was drawn to the fact that it had been proposed to withdraw the property from auction in October because of the seeming unlikelihood of the property selling, he gave evidence that properties do sell after auction, that was a known fact, and repeated his evidence that there was "I would say a better than 50% chance" of a sale of the property being achieved at approximately the market value of the property. Earlier in his evidence, Mr Jones had spoken of persons who had shown no interest at auction often buying properties, and said that whereas 75% of properties sell at auction, another 20% sell within four weeks after auction. Pressed vigorously in cross-examination by counsel for Sinclair & Co., Mr Jones repeated his evidence that the market value of the property in October 1994 to February 1995 was anywhere between $850,000 and $880,000, that the principal drop in price occurred in 1995, that the market generally diminished in value from February 1995 to December 1995 while he was marketing the property, and repeated his evidence that there had been a better than 50% chance of selling 40 Monomeath Avenue over the period from October 1994 to February 1995.
Much the same opinion was expressed by Mr Gavin Michael Bourke, a valuer called on behalf of the appellant. His written summary of evidence contained the statement that the price obtained by the plaintiffs of $880,000 for 40 Monomeath Avenue on 27 October 1994 represented fair market value, and that had the property continued to be marketed after the contract of sale was repudiated by Matlock on 3 January 1995, the plaintiffs should have been able to obtain a similar price for the property at that time. When Mr Bourke came to give his oral evidence, he stated his view that the market value of the property as at 27 October 1994 was $862,000, reducing his valuation from $880,000 to $862,000 by excluding from his consideration the sale of the property to Matlock on 27 October 1994. In cross-examination, however, he repeated his evidence that had the property continued to be marketed through to early January 1995, the plaintiffs should have been able to obtain a price similar to the Matlock price of $880,000.
There was therefore an abundance of evidence upon which the judge could be satisfied on the appropriate basis that the property could have been sold for $862,000 before 10 March 1995. I turn then to the second issue, whether Mr and Mrs Cocks would have accepted such an offer at this time. For only if the evidence could support such a conclusion could Mr and Mrs Cocks have been properly found to have been deprived of the chance to sell the land at market value during the period that the land remained subject to the contract of sale.[5]
[5]Cf Price Higgins v. Drysdale [1996] 1 V.R. 346 at 355 per Winneke, P.
Counsel for the appellant argued that there was clear evidence that throughout the period from 27 October 1994 to 10 March 1995 the respondents would not have been prepared to sell the land for less than $880,000. The argument was as follows. Mr Cocks had given evidence that if he and his wife had not sold the land to Matlock, they would have cancelled the auction. They would then have waited to see what happened with the planning issues. Two other properties in Monomeath Avenue were on the market for sale over the period and neither sold. There had been no other offer made for 40 Monomeath Avenue, and Mr Sinclair had advised the respondents that the auction should be cancelled, which advice they had accepted. The offer made by Matlock was the only offer that had been received during the marketing period prior to 29 October 1994. Mr and Mrs Cocks had both agreed in evidence that they were in no hurry to sell. Each had a belief that their property was worth no less than $890,000, and that, without good cause, such as advice from Mr Sinclair who would have remained their agent at least until the end of November 1994, they would not have accepted less. Mr Jones also had expressed his opinion that the property would sell in the early to mid-$900,000 range. Furthermore emphasis was placed on the evidence given by Mr Jones that he had commenced marketing the property in February 1995, and that he had received no offer above $800,000 until the offer of $805,000 was made and accepted by the respondents in December 1995. All of this, so it was said, confirmed that there had been no opportunity lost during the period October 1994 to March 1995 resulting from the failure to market the property over that period. The submission continued that it was irrelevant that there may have been a 40% chance of selling the land at a price of $862,000 when the fact was that the respondents would not have exploited that chance. The existence of the loss of a chance had, therefore, not been established on the balance of probabilities.
Mr and Mrs Cocks both gave lengthy evidence, including as to the price at which they might have been willing to sell their property. It is true that both said they were not in a hurry to sell, but Mr Cocks swore that they were nonetheless keen to sell, partly because of the atmosphere in the street, being rather outcast, because they had not joined the group who were campaigning against subdivision of blocks in Monomeath Avenue, and Mrs Cocks having been "somewhat vilified" in the earlier part of 1995. Both Mr and Mrs Cocks gave evidence that they refused Matlock's offer of $850,000 feeling they were able to gain a better price from Matlock. Mrs Cocks said in her evidence that they refused $850,000 when Mr Smith told them that he might be able to get Mr Hogg up to a higher figure. Although their "bottom line" up to the middle of October 1994 had been $900,000, they agreed to accept $880,000, according to Mrs Cocks, when they were advised to accept it, as it was believed to be Matlock's final offer.
During his evidence, Mr Cocks said that if an offer under $880,000 had been received in and between November 1994 and January 1995 they would have considered it. If somebody had offered $870,000 or $860,000, they "may well have" sold. They would have considered an offer of $860,000, and might well have considered an offer of $840,000. Later Mr Cocks said that if the Matlock contract had not been entered into, they would have taken advice from whatever real estate agent was acting for them. To the question "If a real estate agent had told you 850 or 860 or 840, whatever might have been advised for you, would that have been something that you would have paid much attention to?" Mr Cocks answered "Absolutely. That's in fact what had happened all through."
Mrs Cocks, in her evidence, said that in October 1994 it was "a very changing landscape". By the time Matlock had offered $880,000, "it was abundantly clear to us that this was Mr Hogg's final offer and we decided to accept it." Later Mrs Cocks said that she and Mr Cocks did not have any particular fixed position about a price, that "the scene was changing". She said that they had hopes, a series of benchmarks, but no fixed position. I have mentioned that Mrs Cocks said they refused the offer of $850,000 when Mr Smith said that he might be able to get Mr Cocks up higher and the offer of $880,000 was accepted when it was understood to be a final offer. Later Mrs Cocks said that if the property had not been sold to Matlock and had continued to be marketed through October and November and December, they were not fixed on any particular price but would have listened to Mr Sinclair. In accepting this evidence, the judge would have been entitled to take into account that on the evidence Mr and Mrs Cocks had both carefully considered the offer from Matlock of $850,000, well below the figure that Sinclair & Co. had encouraged them to expect (more than $900,000 in their letter of advice) and had, as I have said, rejected this offer, according to Mrs Cocks, only when Mr Smith told them that he thought he could get Matlock higher. They had then accepted the advice of Messrs Sinclair and Smith to accept $880,000. And later they had accepted the advice of Mr Jones in December 1995 to accept $805,000, a much lower figure. The judge could have been in no doubt that Messrs Sinclair and Smith, having already urged the respondents in October 1994 to accept $850,000, and Mr Sinclair having told them that an offer of $880,000 would not be repeated for a considerable time would, if continuing to act, have urged Mr and Mrs Cocks to accept any offer of $850,000 or better.
The judge said on the issue of causation that –
"I do not accept the argument that no damage flowed from the agent's breach of duty. Causation seems to me to be established. The Cocks wanted to sell, they were in no particular hurry, but they did want to sell. They eventually sold at the end of 1995 for $805,000. Settlement was in April 1996. The evidence indicates that up to February or March 1995 the market in the area was relatively steady and that thereafter it declined. The chance of selling before March was real and therefore not worthless."
In my view there was clearly sufficient evidence to support this conclusion. The judge had seen Mr and Mrs Cocks in the witness box for two-and-a-half days, and was entitled to form his own view of their credibility. His Honour later found that the degree of probability of the property being sold within that four-month period for $862,000 was 40%. In fixing on this percentage I think his Honour properly took into account the risk factors involved in the two questions, namely whether an offer of $862,000 or better would have been received, and secondly whether Mr and Mrs Cocks would have been prepared to accept any such offer.
I have already mentioned the appellant's next argument that far from losing the chance of selling the property, Mr and Mrs Cocks made their own informed decision to pursue Matlock for an over-market price premium, and that, having done so, they could not later say that any loss of a chance was caused by the negligence of the appellant. Their decision to pursue the greater price at an above-market value could not be put against the appellant. I do not accept this argument. The judge's findings show that the appellant's breaches of contract and negligence had placed Mr and Mrs Cocks in a very difficult situation. Sinclair & Co. had first given the respondents advice as to the value of 40 Monomeath Avenue which doubtless encouraged them to place an estimate on its worth which was somewhat higher than the real market value of the property. Sinclair & Co then urged them to enter into a contract for a price less than the minimum figure at which it had assessed the property's value, on a contract which did not contain a number of important terms which DMB had recommended, with a purchaser from whom ultimately they were unable to recover damages, and on a contract the terms of which the judge found were open to serious legal question. The contract was, however, found to be enforceable and damages of more than $200,000 were awarded against Matlock. To the argument that the plaintiffs had made an informed choice, the answer given by the judge, accepting the evidence of a most experienced solicitor, Mr Geoffrey Gibson, was that had the plaintiffs not pursued the purchase of Matlock, they would have exposed themselves to an attack by the appellant on the basis of failure to pursue the person primarily liable. In my view the judge was perfectly entitled to accept this evidence and to conclude as he did that the choice to pursue Matlock provided no answer to the claimed loss of a chance. It surely does not lie in the mouth of this appellant to complain that the respondents made an "informed decision to pursue Matlock for an over-market price premium". The appellant had itself encouraged the respondents to expect a price over $900,000. The evidence of its own valuer at trial was that had the property continued to be marketed after 3 January 1995, the respondents should have been able to obtain a price similar to $880,000 at that time. Mr Jones had given evidence that this price was "full but fair" and close to the market price. In my view there is no substance in the appellant's argument that the respondents should be held to have gone on at their own risk in pursuit of a "bigger prize", that is, an over-market price premium.
The value of the lost chance
The appellant then submitted that even if there had been evidence to establish that a chance had been lost, the judge should have determined that the value of the chance was limited by reference to the difference between the market value of the land during the relevant period and the market value of the land at or shortly after rescission. The submission continued that erroneously his Honour calculated the chance by reference to the difference between the market value of the land during the relevant period and the sale price which the respondents obtained when they finally chose to sell the land at the end of 1995. The submission continued that once the contract was rescinded on 10 March 1995, Mr and Mrs Cocks were then free to re-sell and thus, from that point on, they had the same chance to sell that they would have had if the contract had not been made during the relevant period. Assuming that there was a 40% chance that the land would have sold during the relevant period, the only thing of value of which Mr and Mrs Cocks were deprived, because of the existence of the contract, was a 40% chance of selling during the relevant period at a premium equal to the difference between the market value during the relevant period and the market value immediately after the relevant period. The submission was that the difference between the market value during the relevant period and the market value immediately after the relevant period was only 1%, that is to say $8,620, leaving a loss of not more than, say, 45% of this figure, that is $3,448.
The process to be undertaken in assessing damages for future or potential events, was discussed by Deane, Gaudron and McHugh, JJ. in Malec v. J.C. Hutton Pty. Ltd.[6] as follows –
"When liability has been established and a common law court has to assess damages, its approach to events that allegedly would have occurred, but cannot now occur, or that allegedly might occur, is different from its approach to events which allegedly have occurred. A common law court determines on the balance of probabilities whether an event has occurred. If the probability of the event having occurred is greater than it not having occurred, the occurrence of the event is treated as certain; if the probability of it having occurred is less than it not having occurred, it is treated as not having occurred. Hence, in respect of events which have or have not occurred, damages are assessed on an all or nothing approach. But in the case of an event which it is alleged would or would not have occurred, or might or might not yet occur, the approach of the court is different. The future may be predicted and the hypothetical may be conjectured. But questions as to the future or hypothetical effect of physical injury or degeneration are not commonly susceptible of scientific demonstration or proof. If the law is to take account of future or hypothetical events in assessing damages, it can only do so in terms of the degree of probability of those events occurring. The probability may be very high – 99.9% - or very low – 0.1%. But unless the chance is so low as to be regarded as speculative – say less than 1% - or so high as to be practically certain – say over 99% - the court will take that chance into account in assessing the damages. Where proof is necessarily unattainable, it would be unfair to treat as certain a prediction which has a 51% probability of occurring, but to ignore altogether a prediction which has a 49% probability of occurring. Thus the court assesses the degree of probability that an event would have occurred, or might occur, and adjusts its award of damages to reflect the degree of probability. The adjustment may increase or decrease the amount of damages otherwise to be awarded ... The approach is the same whether it is alleged that the event would have occurred before or might occur after the assessment of damages takes place."
See also Sellars v. Adelaide Petroleum NL[7].
[6](1990) 169 C.L.R. 638 at 642-643.
[7]179 C.L.R. at 355.
The judge's conclusion as to the value of the lost chance was set out in the following passage –
"It is, of course, a fact that the property did not sell until December 1995, i.e. 13 to 14 months after the start of the relevant period. To some extent, that is due to the Cocks' choice of marketing and their personal commitments which supervened. It seems to me that I should fix the degree of probability of the property being sold within the four months for $862,000 at 40%. By not selling at that price and time they lost $57,000. Had they, however, not been affected by personal factors, and pursued the marketing more energetically, they would probably have sold earlier and therefore for a higher figure. For my purposes I believe that I should assume a sales figure only $30,000 below the value of $862,000. I base that on the actual loss of $57,000 over some 13 months or so. Treating that as a straight line depreciation in the market, I take the figure at just over half-way. The basis for that is my view that without the intervention of factors personal to them, the plaintiffs could have sold within six or seven months.
I value the lost chance by taking the inferred loss of $30,000 and allowing 40% of that. That figure is $12,000."
It is true that personal reasons for not selling the property earlier had intruded on the respondents' plans for selling the property. Mr Cocks said in his evidence that, having lost the opportunity of selling the property in the spring, and when the garden had been superb, they were then in a time when he became exceptionally busy, and he had three overseas trips. But the respondents also then had the court case proceeding against Matlock, and Matlock was maintaining its caveat on the property. On 23 February 1995 Mr and Mrs Cocks had consulted Mr Jones, and on 18 April they had appointed Mr Jones and his firm R.G. Woodard Pty. Ltd. as agents to sell the property. Matlock's caveat was not withdrawn until July 1995.
The judge's assessment proceeded on the basis that Mr and Mrs Cocks could have sold within six or seven months, that is presumably by the end of May 1995. His Honour then worked on a straight line depreciation in the market, and fixed on $30,000 as the inferred loss, taking 40% of that figure.
If any error is to be found in this process, it is in my view in favour of the appellant. Matlock had offered, on 26 May 1995, to withdraw its caveat on condition that the DMB undertook not to disburse the deposit. DMB could not comply with this condition, which in my view was in any event quite unreasonable, the deposit being in the hands of Sinclair & Co. Mr Jones had given evidence that there were difficulties in selling a property while there remained a caveat on it and he had in any event advised Mr and Mrs Cocks to commence the selling of the property with a low key campaign, followed later by a "slightly beefier" campaign, followed by an auction. As I have already noted, Mr Jones said that from the time he began marketing the property in February 1995, he received no offer for it above $800,000 until the offer of $805,000 in December 1995. In these circumstances an assessment that the respondents could have sold the property by the end of May was, if anything, most generous to the appellant.
Furthermore, the appellant's argument assumed a fall in market value and price on a declining scale of something like mathematical precision. There was little warrant for this in the evidence. Mr Jones had stated his belief that the market had generally diminished in value from February 1995 to December 1995 while he was marketing the property. The figure of 1 to 2% per month came from Mr Bourke and his evidence of a continuing decline in value of this nature had been based only on his knowledge of two unnamed properties where a reduction in value had occurred in 1995. Although the judge accepted Mr Bourke's assessment of the market value of the property in October 1994 as at $862,000, this was of course no more than consistent with the evidence of Mr Jones. His Honour plainly did not accept Mr Bourke's evidence of a mathematical decline, since he also pointed out that, if this were accurate, it should have produced the result that Mr and Mrs Cocks would only have received a price in December 1995 of $749,940. Having regard to Mr Jones' evidence, an assessment that by the end of May the value of the property had only fallen to $832,000 also seems generous to the appellant. Furthermore there was the evidence of Mr Sinclair himself to consider. On 3 March 1995, one week before the contract for sale of the property had been rescinded Amendment L44 to the Camberwell Planning Scheme had been approved by the Minister for Planning, creating a single dwelling covenant as a planning overlay in respect of most properties in Monomeath Avenue, including the Cocks property. Mr Sinclair's evidence was that the effect of the Minister's action was, at that time, to devalue the market for properties in Monomeath Avenue 10 to 15 per cent. Mr Sinclair explained in detail his reasoning for this decline in value, all of which suggested that the decline in value would have been immediate rather than gradual. A 10 per cent decline in value at the start of March 1995 would have accounted for virtually the whole difference between the sale price actually agreed with Matlock, as against the later sale at $805,000 in December 1995.
The process of attempting to fix degrees of probability of the occurrence of events, in accordance with the passage already quoted from Malec v. Hutton, is plainly one of great difficulty, in which the trial court must be allowed considerable latitude. The judge had found that the respondents lost the opportunity of selling their property from October 1994 to 10 March 1995, during which period his Honour also held that they had a 40% chance of selling the property for $862,000. Thereafter they were impeded in selling the property by Matlock's caveat at least until July 1995. Their agent, approached in February 1995 and appointed in April, did not receive an offer for the property at a figure over $800,000 until December 1995. In all the circumstances, the assessment of the value of the lost chance at $12,000 is, if anything, in my view undervalued, and I would accordingly reject the appellant's argument as to the value of the lost chance.
The costs of pursuing Matlock
Counsel for the appellant next submitted that the judge should have held that the measure of recoverable damages was no more than the amount necessary to put the respondents into the position they would have been in if they had not entered into the contract of sale. He submitted that the judge was in error in awarding the respondents damages on the basis that they were entitled to be compensated by Sinclair & Co. for the costs which were incurred in unsuccessfully pursuing Matlock for the difference between the true value of their land and the greater price which Matlock had agreed to pay. The principal argument made in counsel's written submissions was based on the offer of settlement of $20,000 confirmed in writing by Matlock on 22 February 1995. The argument was that if the respondents had accepted this offer, $20,000 would have more than covered all of the costs which had been incurred to that point which, it was submitted, on the most pessimistic estimate were not more than $17,500. The offer of settlement would have then returned a small profit on the transaction leaving Mr and Mrs Cocks to sell the land at market value. Instead of accepting the offer however, the respondents chose to sue Matlock for damages and in doing so incurred costs of nearly $24,000 which could not be recovered from Matlock. The submission continued that those costs were not the consequence of entering into the contract, but rather resulted from an informed choice to seek more by way of action against Matlock than was necessary and available from the offer of $20,000, which would have placed them back in the position in which they would have been had they not entered into the contract.
With the wisdom of hindsight, acceptance of the offer may well have been wise from a commercial viewpoint. But at the time the offer was made, Matlock was liable to pay Mr and Mrs Cocks under the contract note a substantially higher amount. The respondents had received legal advice from DMB not to accept the comparatively paltry offer of $20,000. The judge took the view it was reasonable for them to seek to recover the full amount allegedly owed to them. Had the respondents been successful in recovering from Matlock, the claim against Sinclair & Co. would of course have been reduced and might have been extinguished. The wisdom of pursuing Matlock was later demonstrated by the fact that in its defence to the plaintiffs' original claim, Sinclair & Co. alleged that the plaintiffs had failed to mitigate their loss by failing to wind up Matlock and failing to require a liquidator to recover assets held on trust by Matlock.
The judge took the view that it was reasonable for the respondents to pursue Matlock in the circumstances. His Honour was, I think, entitled to decide that the costs of pursuing Matlock were part of the loss naturally arising from the breach of the retainer by Sinclair & Co. and were reasonably within the contemplation of the parties at the time of the contract, as a probable result of its breach. Accordingly they were within the rule in Hadley v. Baxendale[8]. In pursuing Matlock for moneys due under the contract, the respondents were doing no more than attempting to mitigate their loss; see Simonius Vischer & Co. v. Holt & Thompson[9]; Lloyds & Scottish Finance Ltd v. Modern Cars & Caravans (Kingston) Ltd[10]; London and South of England Building Society v. Stone[11]; Mann Judd v. Paper Sales Australia (W.A.) Pty Ltd[12].
The argument under Order 63A r.7, and the costs of pursuing Matlock
[8](1854) 9 Ex 341.
[9](1979) 2 N.S.W.L.R. 322.
[10](1966) 1 Q.B. 764.
[11][1983] 3 All E.R. 105.
[12]Unreported, Supreme Court of Western Australia, 25 September 1998 at 9-11.
By an amended notice of appeal served shortly before the hearing of this appeal, the appellant sought to attack the assessment of damages in relation to the costs of pursuing Matlock on the ground that the payments, whether to DMB or to Blake Dawson Waldron, had been the subject of a prior costs order in the same proceeding on 12 June 1998 when judgment was pronounced against Matlock. Accordingly the proposed ground claimed that costs in the same proceedings could not be treated as damages occasioned to the plaintiff by another party to that proceeding; and alternatively that the damages awarded should have been limited to taxed costs. Leave was therefore sought to amend the notice of appeal. Reliance was placed on Order 63A and on Berry v. British Transport Commission[13]; see also Little v. Law Institute of Victoria (No. 3)[14]. The substance of these submissions was that on the authority of the cases cited, it was not open to a court having previously in the same action made an order against a different party as to costs, to treat those costs as damages recoverable by the plaintiffs from Sinclair & Co. in the same proceeding, or to embark upon an assessment of those costs for the purpose of a damages claim in the same proceeding. It would, it was submitted, have been an entirely different matter if the costs had been awarded in separate proceedings taken by the plaintiffs against Matlock alone. The submission was that the trial court had a number of options open to it; first, to reserve the question of costs as against Matlock until the conclusion of the proceeding, secondly, to order those costs once taxed to be paid by Sinclair & Co.; or thirdly to order that Sinclair & Co. pay the solicitor-client difference to be taxed in addition to the party-party taxed costs. None of these options had of course been adopted by the court, nor did the plaintiffs pursue any of these possibilities.
[13](1962) 1 Q.B. 306, especially at 318ff, per Devlin, L.J.
[14][1990] V.R. 257 at 280 per Ormiston, J.
The argument based on Berry v. British Transport Commission was not taken in the court below and counsel for the respondents objected to the appellant now being permitted to argue the point. In my view we should not now grant leave to the appellant to amend its notice of appeal to raise this new ground[15] in circumstances where the relevant point was not taken at trial. The hearing of the trial concluded on 17 February 1999. Nineteen months later, at the outset of the hearing of the appeal, the appellant sought for the first time to rely on this argument. This Court will only in exceptional circumstances exercise its discretion to grant leave to a party to argue a point which could have been raised and dealt with in the court below: Geelong Building Society v. Excel[16]; Stevedoring Industry Finance Committee v. Paul Henderson[17]. It would be quite unrealistic now to suggest that, had the matter been raised below, the respondents would not have taken one of the options which the appellant's own submissions say were available. To raise the point now, so long after the trial concluded, is in my view far too late. I would reject the application for leave to amend the notice of appeal, and reject this aspect of the appellant's submissions accordingly.
Advertising costs thrown away
[15]The proposed grounds were numbered 17A and 17B.
[16][1996] 1 V.R. 594, at 605-7 per Tadgell, J.
[17][2000] VSCA 216 at [6].
It was next submitted that the judge had incorrectly included in the damages recoverable by the respondents the deposit of $10,000 which had been applied to payment of Sinclair & Co.'s commission and disbursements. The submission was that if the respondents had not entered into the contract there would not have been any deposit, and thus the fact that it was applied to the payment of costs and disbursements did not give rise to any damage. Further it was submitted that $7,854.16 of the costs and disbursements represented the costs of a marketing campaign which, it was said, would have been incurred whether or not the contract had been entered into. Thus, so far from allowing damages in the amount of $10,000, the judge should have deducted $7,854.16 from any other damages suffered.
In my view there is no substance in these submissions as to the advertising and marketing costs. The judge dismissed the appellant's counterclaim for commission and advertising expenses, and the rejection of that claim is not now challenged in the appeal. In any event, even if Sinclair & Co. could now be said to have any entitlement to a commission on the ground that it succeeded in obtaining an enforceable contract with Matlock, its negligence in relation to the making of that contract would result in any amount of commission actually paid simply adding to the damages suffered by the respondents. Furthermore the judge was, I think, clearly entitled to find that the advertising costs incurred in and prior to October 1994 were wasted. The property was, of course, not re-sold by Mr Jones of R.G. Woodard & Co until December 1995.
The part deposit of $10,000
There remains the question however whether the sum of $10,000 paid as deposit should be taken into account in assessing the damages paid by Sinclair & Co. But it is not necessary to pursue this question because during argument the respondents' counsel conceded that the deposit should in any event be brought into account by reducing the damages by that sum. The curious consequence of this result is that it seems to follow that Sinclair & Co., which had no justification on the judge's finding for keeping the $10,000, now seems able to benefit by retaining it.
Conclusion
It follows that in my view the appellant succeeds only in relation to the deposit of $10,000 since the respondents cannot claim that sum without also bringing it into account in reduction of their damages. The total sum awarded in damages should therefore be reduced by $10,000. On that basis the amount which ought to have been awarded for damages was $37,872.40. I would allow the appeal to that limited extent only, together with such adjustment of interest as may be necessary.
BUCHANAN, J.A.:
In my opinion this appeal should be allowed to the limited extent identified by Charles, J.A. Otherwise I agree with him that the appeal should not succeed.
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