Humphries v City of Mount Gambier No. Scciv-02-809

CITY OF MOUNT GAMBIER v HUMPHRIES
[2002] SASC 348
Magistrates Appeal

PERRY J. This is an appeal from the Magistrates Court (Civil Division) following the trial of a minor civil action heard at Mount Gambier.
The respondent was the plaintiff in the proceedings in the court below. It claimed against the appellant a total of $2,084.50 alleged to be due for arrears of rates payable with respect to three separate properties at Mount Gambier, together with interest and fines.
In his defence and counterclaim, the appellant conceded liability on the plaintiff’s claim for an amount of $1,958.35. However, he counterclaimed $6,825 which he alleged was payable by way of damages for breach of a contract entered into between the respondent and the appellant. He claimed to set off the amount of damages which he sought against that part of the plaintiff’s claim which he admitted, which would have resulted in a net amount due to the respondent of $4,866.65.
The learned trial magistrate found that the respondent was liable to the appellant on the counterclaim for damages for breach of contract, which she assessed at $825. The respondent had intimated that if there should be judgment for the appellant on the counterclaim, it pursued its claim only for the amount admitted by the appellant, that is, $1,958.35.
In the result, the learned trial magistrate directed that there be a set-off of the two amounts. She entered judgment in favour of the respondent for the balance of $1,133.35.
I mention in passing that I very much doubt whether in a claim by a corporation for arrears of rates, it is proper for the court to allow a set-off for an amount of damages claimed by the ratepayer. But no point was taken as to that aspect of the matter, either in the court below or on the hearing of the appeal. I do not pursue it further.
I turn to the facts of the matter.
The appellant, who is a solicitor, owned a commercial property at 1 Bay Road, Mount Gambier. For some years there were negotiations between the respondent and the appellant directed towards reaching agreement on terms of a sale by the appellant to the respondent of the property. The respondent wished to purchase the property with the intention ultimately to demolish it and consolidate the land on which it stood with a reserve.
The property was leased to a number of tenants. The terms of the tenancies, together with rights of renewal, extended to 2009. Given the purposes for which the respondent was interested in acquiring the property, it was not interested in taking possession until it was free of tenants.
Discussions between the parties as to the terms upon which the property might be sold commenced as early as 1996, and it appears, continued in a somewhat desultory fashion during the ensuing years.
A fresh round of negotiations began again in about September 2000. An account of the negotiations was given by the appellant, who was the only witness called at the trial, the rest of the evidence being documentary evidence which was tendered by consent. The learned trial magistrate accepted the appellant’s evidence.
His evidence was to the effect that the respondent eventually agreed to buy the land at a discounted price, namely for a sale price of $350,000. $300,000 was to be paid upon the signing of an agreement for sale, and the final payment, being the balance of $50,000, would be made when settlement could be effected.
Settlement would not be effected until the last of the tenancies in the building came to an end, which would be in 2009, or possibly earlier.
In the meantime, the appellant intended to use the $300,000 down-payment to partially discharge a first mortgage over the property in favour of BankSA. In consideration of that payment, BankSA would relinquish its position as first mortgagee and take a second mortgage for the balance then due to it. A first mortgage would be given in favour of the council to secure its position until final settlement. Until settlement, the appellant would continue to receive the rents.
The attraction of the agreement from the point of view of the appellant was that he saved interest payments on the $300,000 and continued to receive the rents. The attraction from the point of view of the respondent was that it secured the property for an amount less than its commercial value.
When the essential terms of the agreement had been reached, the council made an offer to purchase the property in a letter dated 20 September 2000. The letter set out the offer to buy the property for $350,000, subject to the respondent obtaining legal advice to ensure that its interests were adequately protected over the period leading up to final settlement.
Following receipt of the letter, the appellant proceeded to correspond with the respondent’s solicitor, Ms Dowd, to see if agreement could be reached on a basis satisfactory to both parties which would enable the conditions stipulated by the respondent in its letter of offer of 20 September 2000 to be satisfied.
The learned trial magistrate accepted the appellant’s evidence that agreement was reached between him and Ms Dowd on the outstanding issues in late November or early December 2000. Ms Dowd was then due to be absent for some weeks on leave and the appellant’s offices were also closed for the Christmas break.
Just before Christmas, the appellant became aware that a sub-committee of the respondent, namely its Corporate and Community Services Committee had recommended to it that the agreement which had been reached with the appellant be rescinded. The sub-committee’s recommendation was due to be considered by the respondent at its meeting to be held on 19 December 2000.
In a letter to the respondent dated 18 December 2000, the appellant emphasised that the agreement was binding. He said in the letter:
“I wish to make it clear to council (if it is not already) that the terms proposed in your letter of 20 September last have been accepted and as such constitutes (sic) a binding agreement and I would be most surprised and disappointed if council were to attempt to renegotiate those terms.”
The appellant remained concerned that the respondent might nonetheless seek to resile from the agreement. In an endeavour to head off that possibility, he sent a further letter dated 21 December 2000 suggesting alternative terms and requesting that they be considered at the forthcoming January meeting of the council. But he again emphasised the binding nature of the agreement which had been reached.
The appellant’s concerns were well founded. At the council’s January meeting, the sub-committee recommendation was reconsidered, as were the alternative terms advanced in the appellant’s letter of 21 December 2000. At the January meeting, the respondent resolved to withdraw its offer and to attempt to renegotiate the transaction, on the footing of an increase in the overall purchase price but an earlier settlement date.
By letter of 17 January 2001, the respondent advised the appellant of its decision.
The appellant instructed solicitors. They wrote to the respondent, and maintained the binding nature of the agreement which had been reached, based on the respondent’s letter of 20 September 2000.
The respondent thereupon took legal advice. In consequence of that advice, at its meeting in February 2002 it resolved to acknowledge the legal efficacy of the agreement which the appellant asserted had been reached between them, and resolved “to now proceed to purchase the property as per the council offer of 20 September 2000 ...”.
Events then proceeded slowly. The sequence of steps taken leading up to settlement was the subject of facts agreed between the parties. They are set out in the reasons for judgment of the learned trial magistrate, which I quote:
“The unexecuted loan agreement was posted to the defendant on 3^rd April 2001. On 26^th April the defendant posted the signed agreement back to the Council’s solicitors Norman Waterhouse. On 14^th May, Ms Dowd sent the e-mail which is Exhibit P2 to the defendant indicating that the $300,000 was available. On 9^th July a time was booked for ‘settlement’ being the removal of the bank’s mortgage and the provision of the $300,000. This date was vacated because the bank was awaiting documents. The handover finally took place on 18^th July at the Land Titles Office when the $300,000 was given to the bank. It was not in dispute that there had been an earlier attempt to settle on 26^th June but this was unable to go ahead because Bank SA were not ready to proceed.”
In his counterclaim, the appellant pleaded that the respondent’s purported rescission of the contract was wrongful, and (in effect) in breach of the contract. He asserted that in the result he had suffered “loss and expenses” which he particularised as follows:
“7.1Interest payments on $300,000 at 12% for two months (December 2000 to February 2001) - $6,000.
7.2Legal fees incurred to Johnson Winter & Slattery $825.”
Although in his counterclaim the appellant asserted that the respondent purported to rescind the contract in December 2000, the learned trial magistrate held (correctly, in my view) that the purported rescission took place in January 2001. Although she found that the purported rescission amounting to a breach of contract occurred at the council’s meeting in January 2001, the better view is that the purported rescission is constituted by the letter dated 17 January 2001 to the appellant, but nothing turns on the distinction.
The learned trial magistrate reasoned that in fact the “delay” which was the subject of the appellant’s counterclaim was “in reality” “a maximum of one month - from the January council meeting until its February meeting”.
It was not in dispute that the appellant’s mortgage interest rates varied over that period between 10.51% and 10.21%, the average being 10.35%. On that footing, the interest on $300,000 for one month amounted to $2,587.50.
Mr Durkin, who appeared as counsel for the appellant, argued the appeal on the footing that he accepted that the relevant delay was for one month only. In the result, he sought an increase in the amount awarded on the counterclaim of $2,587.50.
When it was eventually written up and executed by the parties, the formal contract between them, described as a “loan agreement”, was executed on 26 April 2001. In the recital to the loan agreement appears the following:
“F.The parties have agreed that the Council will advance Humphries the sum of $300,000 (‘the advance’) as at the date of this Agreement plus $50,000 (‘the deferred payment’).”
There is no other reference in the loan agreement to the date upon which the $300,000 was to be paid.
Insofar as that passage in the recital might suggest that it was to be paid on the date of the loan agreement, that is, on 26 April 2001, it was not paid then, It seems clear from the sequence of events thereafter that the parties agreed that it would be paid on “settlement”, which is when the discharge of mortgage forthcoming from BankSA and the title was made available to the respondent for it to register the mortgage to it. As appears from the agreed facts which I have quoted above, this did not occur until 18 July 2001.
Notwithstanding her finding that if there had been a delay of one month, this would have occasioned a loss to the appellant of $2,587.50, the learned trial magistrate was not satisfied that the delay between January and February 2001 in fact delayed the receipt by the appellant of the $300,000 by one month.
On the other hand, the legal fees incurred by the appellant in engaging his solicitor were held by the learned trial magistrate to have been fairly incurred with respect to the purported rescission, hence the judgment on the counterclaim for $825.
On the evidence which was before her, that finding was clearly right.
There was no evidence as to when Ms Dowd was due to return from leave in January 2001; there was no explanation by the appellant as to the delay of three weeks between his receiving the loan agreement and returning it, following its execution by him; and importantly, there is no evidence from which it would be right to conclude that even if the documents had been executed a month earlier, BankSA would have been in a position to settle any earlier than it did.
In disposing of the case, the learned trial magistrate dealt with an alternative argument which was put by the appellant, namely that there was an implied term in the contract between him and the respondent that the respondent would “proceed reasonably”, by which I assume is meant proceed reasonably promptly, in the preparation of the loan agreement and in the settlement of it. She declined to consider that argument, on the footing that it was different from the pleaded case.
Although the counterclaim is pleaded in somewhat cryptic terms, in paragraph 7, the appellant asserts:
“The plaintiff’s action has caused the defendant to suffer loss and expenses as follows:” (emphasis added)
(Paragraphs 7.1 and 7.2 which I have set out above, follow.)
The “action” referred to in paragraph 7 is the alleged action of the respondent in purporting to rescind the agreement.
Even if, contrary to that plea, it was open for the appellant to present a case based on an unreasonable delay on the part of the respondent in proceeding with the preparation of the formal agreement and the settlement of it, the evidence fails to establish a proper basis upon which the learned trial magistrate might have laid the blame for any such delay at the feet of the respondent.
I would dismiss the appeal.
I so order.
I will hear the parties as to costs.

[2002] SASC 348

29 October 2002