Gerrard v Wang - [2015] WASC 173

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL

CITATION: GERRARD -v- WANG [2015] WASC 173

CORAM: MARTIN CJ

HEARD: 8 SEPTEMBER 2011

DELIVERED : 25 MAY 2015

FILE NO/S: CIV 1152 of 2004

BETWEEN: PATRICIA NORA GERRARD and
PATRICIA NORA GERRARD as Executor of the Estate of the late MAXWELL VERNON GERRARD
Plaintiffs
AND
HELLENE WANG
Defendant

Catchwords:

Contract - Damages - Termination of contract for sale of land for repudiation by purchaser

Legislation:

Supreme Court Act 1935 (WA)

Result:

Damages awarded to the plaintiffs in the sum of $2,197,183.75
Defendant's counterclaim dismissed

Category: B

Representation:

Counsel:

Plaintiffs: Mr T Galic
Defendant: No appearance

Solicitors:

Plaintiffs: Galic & Co
Defendant: In person

Case(s) referred to in judgment(s):

Johnson v Agnew [1980] AC 367
Royal Botanic Gardens and Domain Trust v South Sydney City Council [2002] HCA 5
MARTIN CJ:

Overview

In 2004 Maxwell Vernon Gerrard and Patricia Nora Gerrard (Mr and Ms Gerrard) commenced these proceedings claiming damages from Ms Hellene Wang and others as a result of Ms Wang's failure to complete a contract under which she agreed to purchase land owned by Mr and Ms Gerrard situated at 1 Page Street, Attadale, Perth. Because of Ms Wang's failure to perform her contractual obligation to purchase the land, Mr and Ms Gerrard terminated the contract and sold the land to others, for a price which was less than the price which Ms Wang was bound to pay.
For some years Ms Wang vigorously defended the proceedings through lawyers acting on her behalf. However, those lawyers were eventually given leave to withdraw. Thereafter Ms Wang did not appoint other lawyers to act on her behalf, took no further part in the proceedings and did not respond to the service of any documents upon her.
Mr and Ms Gerrards' claim against another party was settled and a payment of $200,000 was received by them pursuant to the terms of the settlement on 2 June 2009. They accept that they must give credit for that amount in their claim for damages against Ms Wang. Their claim against another party has been discontinued.
After it became apparent that Ms Wang did not propose to take any further active role in the defence of the proceedings brought against her, I made directions listing the matter for trial on the basis that the evidence upon which Mr and Ms Gerrard would rely at trial would be adduced by affidavit. At trial I was satisfied that Ms Wang had been served with notice of the trial. However, she did not appear. I was advised at trial that, unfortunately, Mr Gerrard had by then passed away, and no grant of probate had at that time been made to the executor of his estate, who was Ms Gerrard. As Mr and Ms Gerrard were joint tenants of the land, their interest in the damages claim was also held jointly, and it was therefore necessary for probate of Mr Gerrard's estate to be granted before any judgment could be entered. Nevertheless, in the circumstances it was agreed that the trial should proceed and evidence and argument was presented in support of the claim on the basis that evidence of the grant of probate of Mr Gerrard's estate would be adduced in due course. That evidence was adduced sometime later, along with particulars relating to the calculation of interest due under the contract and on the damages claimed. Unfortunately, when the revised submissions and evidence of the grant of probate were provided to my Associate, the matter was not drawn to my attention with the result that delivery of these reasons and entry of judgment has been inordinately delayed.

The facts

At trial the only evidence adduced took the form of a joint affidavit sworn by Mr and Ms Gerrard in April 2010. As Ms Wang did not appear at trial, Ms Gerrard was not cross‑examined on the affidavit. The following findings of fact are drawn from that affidavit and are limited to the facts necessary to establish the plaintiffs' claim.
Mr and Ms Gerrard were previously the registered proprietors of the land situated at 1 Page Street, Attadale, being more particularly described as Lot 4 on Diagram 10512 and being the whole of the land the subject of Certificate of Title Volume 1905 Folio 884 (the Property).
Early in the year 2000 Mr and Ms Gerrard were approached by a Ms Anne Little, who was employed as a sales representative by Fieldgate First National Real Estate. Ms Little was responding to enquiries which Mr and Ms Gerrard had made about selling the Property. She advised that she had buyers who were interested in purchasing the Property and later identified those buyers as being Ms Wang and her father, John Wang. Mr Wang lived in Hong Kong.
Mr and Ms Gerrard advised Ms Little that they wanted $4,000,000 for the Property. Ms Little advised that she would be travelling to Hong Kong very shortly in order to meet with Ms Wang and Mr Wang and would endeavour to procure a written offer to purchase the Property for that amount.
In due course Ms Little telephoned Mr and Ms Gerrard from Hong Kong to advise that she had obtained an offer to purchase the Property for $4,000,000 and later faxed through to Mr and Ms Gerrard a copy of a written offer by Mr Wang to purchase the Property for that amount. The offer was dated 26 July 2000. Mr and Ms Gerrard each endorsed their acceptance on that contract the following day, 27 July 2000, and sent it back to Ms Little by facsimile. The contract was unconditional (save for a condition relating to inspection by Mr Wang, which is not material) and provided that settlement was to take place on or before the date 45 days after acceptance. As Mr and Ms Gerrard accepted the offer on 27 July 2000, settlement was due to take place by 10 September 2000.
According to the affidavit sworn by Mr and Ms Gerrard, sometime later then agreed to rewrite the contract to make Ms Wang the purchaser. They deposed that they took this step on the advice and recommendation of Ms Little, who advised them that it was necessary because:
Hellene's father John Wang had not honoured the first contract, and the same according to Little became null and void;
John Wang who was named as being the purchaser in the first contract we signed was also not present in Perth and there was a need for a new contract to be written up between ourselves and his daughter Hellene as purchaser.[1]
[1] Affidavit of Mr and Ms Gerrard sworn 23 April 2010 [10].
Acting upon that advice Mr and Ms Gerrard executed another form of written contract for the sale of the Property at a price of $4,000,000. The contract is signed by Ms Wang as purchaser and by Mr and Ms Gerrard as vendors. Adjacent to the portion of the contract which has been signed by Ms Wang the date '26/7/2000' has been written. Adjacent to the portion of the contract signed by Mr and Ms Gerrard the date of '27/7/2000' has been written. Those dates correspond with the dates of execution of the first contract for sale of the Property to Mr John Wang.
It seems clear that the contract for sale of the Property to Ms Wang was not executed by the parties on the dates shown on the document. The evidence does not establish when the parties executed that document, although it seems more likely than not, and I find, that the document was executed by the parties sometime after 10 September 2000. I make that finding because of the evidence of Mr and Ms Gerrard to the effect that they were advised to accept the offer made by Ms Wang because Mr Wang had not honoured his contract. As the time for performance of Mr Wang's contract was 10 September 2000, such advice could not have been given until that date had passed.
It is also of some significance that, unlike the contract for sale of the Property to Mr Wang, the time for settlement was not specified as a period of days following acceptance but rather as a specified date - namely, 10 September 2000. This suggests, and I find, that the essential character of the agreement executed by Mr and Ms Gerrard and Ms Wang was a novation of Mr Wang's rights and obligations under the contract for the purchase of the Property to his daughter, Ms Wang, who agreed to assume those rights and obligations. The fact that the date for settlement had passed does not prevent this characterisation of the agreement, because the evidence establishes that both Ms Wang and her father had made and continued to make representations to Mr and Ms Gerrard to the effect that they would perform the obligation to purchase the Property and settle the transaction as soon as funds were released from a transaction which was to take place in China imminently.
Each of the contracts for purchase of the Property executed by Mr Wang and Ms Wang incorporated the 2000 Joint Form of General Conditions for the Sale of Land published by the Law Society of Western Australia and the Real Estate Institute of Western Australia (the General Conditions). Under those General Conditions, failure by the purchaser to complete the transaction at the time specified for settlement did not bring the contract to an end automatically, but conferred upon the vendor a right to call upon the purchaser to perform the contract by serving notice to that effect, and in the event the purchaser fails to perform in accordance with the notice, to treat the contract as terminated and exercise certain remedies specified in the General Conditions. If that right is not exercised by a vendor and settlement occurs later than the contractually stipulated date, under the General Conditions the purchaser is obliged to pay interest on the sum due at settlement at the rate of 12% per annum as and from the date upon which settlement was due.
The written contract pursuant to which Ms Wang agreed to purchase the Property must be construed and enforced according to its terms. However, in construing the contact, in the event of ambiguity, the court can take account of the matrix of objective facts known to the parties at the time the contract was made and the circumstances in which the contract was made.[2] The evidence establishes that all parties were aware of the earlier contract under which Mr Wang was to purchase the Property, and that the date for settlement of that contract had passed. In those circumstances they back-dated the date of the contract with Ms Wang to dates which matched the dates of the earlier contract, and specified a settlement date which matched the date upon which settlement was due under the earlier contract, but which had passed.
[2] Royal Botanic Gardens and Domain Trust v South Sydney City Council [2002] HCA 5.
Properly construed in the context of those factual circumstances, the effect of the contract executed by Mr and Ms Gerrard and Ms Wang was that Ms Wang acquired rights and obligations equivalent to those of Mr Wang under the earlier contract, including the right to purchase the Property for $4,000,000 and an obligation to pay interest at the rate of 12% per annum on the outstanding purchase price as and from 10 September 2000. Conversely Mr and Ms Gerrard acquired rights against Ms Wang equivalent to the rights which they had against her father under the earlier contract, including the right to call upon Ms Wang to perform her obligation to settle the purchase by a notice to that effect, and to treat the contract as terminated in the event that Ms Wang failed to comply with the notice and settle, and to then exercise the remedies conferred by the General Conditions, if they so chose.
Over the period which followed the execution of the contract for the purchase of the Property by Ms Wang, each of Ms Wang and her father continued to make representations to Mr and Ms Gerrard to the effect that they would be in a position to settle the transaction shortly following the receipt of funds from China. However, those representations were never honoured and in September 2002 Mr and Ms Gerrard instructed solicitors acting on their behalf to serve notice of default on Ms Wang.
The notice of default was served on Ms Wang on 20 September 2002. It specified that unless she remedied her default by settling the purchase of the Property within 14 days of the date of service of the notice, the contract would be terminated and Mr and Ms Gerrard reserved the right to sell the Property to others. The default was not remedied by Ms Wang, either within the period specified or at all, and accordingly the contract was terminated by the operation of the notice of default on 4 October 2002, although the evidence is to the effect that the solicitors acting on behalf of Mr and Ms Gerrard served a notice of termination to that effect on or about that date.
Mr and Ms Gerrard placed the Property on the market for sale. The Property was offered for sale at auction, but was passed in because no bid exceeded the reserved price. After a period over which the Property was marketed for sale, Mr and Ms Gerrard entered into a contract dated 26 June 2003 to sell the Property to others for a price of $3,160,000. Although Mr and Ms Gerrard would appear to be entitled to all additional costs associated with the resale of the Property, there is no evidence of the amount of those costs and no claim for those costs has been included in the particulars of claim provided by their solicitors.

The pleadings

Pleadings were exchanged at a time when Ms Wang was legally represented. In the defence and counterclaim filed on her behalf, she admits that she signed a document relating to the purchase of the Property from Mr and Ms Gerrard in or about late September or early October 2000, being a date after 10 September 2000. For the reasons I have given, that admission appears to me to be consistent with the evidence.
The defence filed on behalf of Ms Wang makes other factual assertions which are not established by the evidence, including assertions with respect to oral terms of the agreement which are said to give rise to claims for rectification, misleading and deceptive conduct, negligent misrepresentation, estoppel and waiver. As no evidence has been adduced of the facts asserted in the defence, it follows that those claims, and the counterclaim incorporating them, must be dismissed.

Uncertainty and waiver

However, two aspects of the defence filed on behalf of Ms Wang remain alive because of my finding that the agreement under which she was to purchase the Property was executed by the parties after the date specified for settlement in that agreement. The defence asserts that by reason of that fact, the agreement is void for uncertainty or alternatively gives rise to a waiver of the rights of Mr and Ms Gerrard to insist upon settlement.
The answer to each of these assertions lies in my conclusion that the substantive effect of the agreement executed by Ms Wang and Mr and Ms Gerrard was that Ms Wang assumed all the rights and obligations of her father in relation to the contract which he had previously executed. Those rights included the right to purchase the Property at the agreed price at any time prior to termination of the contract by Mr and Ms Gerrard. Those obligations included the obligation to settle the purchase of the Property for a price of $4,000,000 when called upon by Mr and Ms Gerrard by the issue of a notice to that effect, and at settlement to pay interest at the rate of 12% on the outstanding purchase price as from 10 September 2000. In the event that Ms Wang failed to perform that obligation, she was subject to the obligations imposed by the General Conditions, including liability to the remedies conferred upon Mr and Ms Gerrard in the event of termination by reason of Ms Wang's default.
Characterised in this way, there is no uncertainty in relation to any of the material terms of the agreement, nor have Mr and Ms Gerrard waived any of their rights, including the right to insist upon the payment of interest as and from the date upon which settlement was due, or the right to terminate the agreement by reason of Ms Wang's default and thereafter exercise the remedies conferred by the General Conditions, including the right to sue a defaulting purchaser for damages for breach of contract.[3]
[3] General Conditions, cl 18 and cl 19.

Conclusion as to liability

As the evidence adduced in support of the plaintiffs' claim establishes the existence and validity of the contract for purchase of the Property by Ms Wang, her breach of that contract by failure to perform the obligation to pay the purchase price and termination of the contract by reason of Ms Wang's failure to perform by service of notice of default in accordance with the procedures specified in the General Conditions of Sale incorporated into the contract, I am satisfied that Ms Wang is liable to the plaintiffs in damages for breach of contract.

The quantum of damages

Clause 19 of the General Conditions provides that in the event the contract is terminated by reason of the purchaser's failure to perform after service of notice of default in accordance with the procedures stipulated in the General Conditions, if the vendor resells the Property and the resale is settled within 12 months following the date of termination, 'any deficiency arising from that re-sale and all expenses incurred by the Vendor … arising from that re-sale are recoverable by the Vendor from the Purchaser as liquidated damages'.
As I have noted, Mr and Ms Gerrard entered into a contract to resell the Property on 26 June 2003 for a price which is $840,000 less than the price which Ms Wang was obligated to pay. However, no evidence was adduced of the date on which that resale was actually settled, and the contract of resale specifies the time for settlement as 'on or before 31 December 2004'. Accordingly, Mr and Ms Gerrard have not made out their claim to liquidated damages under cl 19 of the General Conditions.
Instead, Mr and Ms Gerrard are entitled to the ordinary measure of contractual damages, which, in essence, entitles them to the sum required to put them in the position they would have been it the contract had been performed. Where a vendor elects to terminate a contract for the sale of land by reason of the purchaser's breach or repudiation, the ordinary measure of damages will be the difference between the purchase price and the market value of the land at the time of the breach or repudiation. However, this is not an absolute rule, and in a situation such as the present where the innocent party to a contract of sale continues to attempt to have the contract completed before ultimately terminating it, the date on which the contract is lost is the appropriate date for assessing damages.[4]
[4] Johnson v Agnew [1980] AC 367, 400.
The resale price obtained by an arms-length sale of the Property within a reasonable time is the best available evidence of its market value. Mr and Ms Gerrard are therefore entitled to the amount of $840,000, being the difference between the price which they were entitled to receive under the contract with Ms Wang and the price which they later received as a result of the sale to other parties, by way of general damages rather than liquidated damages pursuant to the provisions of the General Conditions.
Further, as I have noted, under the contract in addition to payment of the purchase price of $4,000,000 at settlement, Ms Wang would have been obliged to pay interest on that amount at the rate of 12% from 10 September 2000 until settlement. Accordingly, if settlement had taken place at any time prior to the date of termination of the contract on 4 October 2002, Mr and Ms Gerrard would have been entitled to payment of the purchase price of $4,000,000, plus interest at the rate of 12% on that amount from 10 September 2000 (no deposit was paid). The period between 10 September 2000 and termination on 4 October 2002 is 2 years and 24 days. Interest at the rate of 12% on the amount of $4,000,000 equals $480,000 per annum or $1,315.07 per day. Accordingly interest for the period of 2 years and 24 days totals $991,561.68.

Interest is claimed on the loss of bargain damages (that is, not including the component relating to interest for late settlement), and should be awarded from the date those damages crystallised (4 October 2002) until judgment, but allowing for a credit of $200,000 as a result of settlement of the claim made against another party on 2 June 2009. Interest is claimed at the rate due pursuant to the provisions of the Supreme Court Act 1935 (WA), which was 6% over that entire period. The period between 4 October 2002 when the claim for damages crystallised, and 2 June 2009 when $200,000 was received from another party is a total of 2,433 days. Interest at the rate of 6% per annum on the amount of $840,000 over that period is equivalent to a daily rate of $138.08, giving a total amount of interest due over that period of $335.948.64.
As and from 2 June 2009, interest at the rate of 6% per annum on the amount of $640,000 (being the amount of $840,000 less the amount received from another party) is equivalent to a daily rate of interest of $105.21. The total number of days between 2 June 2009 and the date upon which these reasons are to be published is 2,183 giving rise to a total amount of interest of $229,673.43 due in respect of that period.
I note that no claim has been made for interest under the Supreme Court Act in respect of the component of Mr and Ms Gerrards' claim relating to interest due under the contract for late settlement. While it is perhaps arguable that interest could be allowed on that component of the damages due, as no claim has been made for such interest, it is unnecessary to give further consideration to it.
It follows that Mr and Ms Gerrard are entitled to judgment in an amount made up of the following components:
(a)Loss of bargain (after allowance for an amount received from another party) - $640,000.
(b)Interest due under the contract in respect of late settlement - $991,561.68.
(c)Interest on loss of bargain damages between 4 October 2002 and 2 June 2009 - $335,948.64.
(d)Interest on loss of bargain damages between 2 June 2009 and judgment - $229,673.43.
Total amount: $2,197,183.75.
Judgment will be entered for that amount.