James Pantlin v Christina King
[2012] NSWSC 37
•03 February 2012
Supreme Court
New South Wales
Medium Neutral Citation: James Pantlin v Christina King [2012] NSWSC 37 Hearing dates: 3 February 2012 Decision date: 03 February 2012 Jurisdiction: Equity Division Before: McDougall J Decision: Money paid into court to be paid out to plaintiff. Plaintiff to have judgment for damages for $20,925.00 with interest. Defendant to pay plaintiff's costs on indemnity basis. Stand over for orders.
Catchwords: CONTRACT - for sale of land - termination - breach - whether plaintiff validly served notice to complete on defendant - whether at time of service of notice plaintiff was in breach DAMAGES - contract - assessment of damages - whether plaintiff failed to mitigate loss. Legislation Cited: Real Property Act 1900 (NSW) Cases Cited: Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397
Oshlack v Richmond River Council (1998) 193 CLR 72
Ballieu Knight Frank (NSW) Pty Ltd v Ted Manny Real Estate Pty Ltd (1992) 30 NSWLR 359Category: Procedural and other rulings Parties: James George Pantlin (Plaintiff)
Christina Louise King (Defendant)Representation: M P Heraghty (Plaintiff)
Christina King (In person) (Defendant)
Dezarnaulds Basten (Plaintiff)
File Number(s): 2011/113912
Judgment - EX TEMPORE (revised 4 february 2012)
HIS HONOUR: The essential question in these proceedings is whether a contract for sale of land made on 4 September 2010 between the plaintiff (Mr Pantlin) and the first defendant (Ms King) as purchaser has been validly terminated by Mr Pantlin.
The further adjournment application
Before I deal with the issues in the case, I will deal with Ms King's renewed application to adjourn the hearing. I say "renewed", because I dealt with a similar application, made by Ms King, on 31 January 2012, on which date I refused the application. When the application was renewed today, I refused it and said that I would give reasons when dealing with the matter overall. These are my reasons for refusing the adjournment.
Essentially, the basis for the adjournment application was Ms King's medical condition. She put nothing before the court further to that which had been put on 31 January 2012. Thus, the factual basis did not change beyond that addressed on 31 January 2012. In my view, the matters raised on 31 January 2012 were insufficient (for the reasons I then gave) to justify adjourning (for the fourth time) the hearing of proceedings involving an amount of money, which by the standard of this Court, is not substantial.
Ms King made some additional submissions. She referred to the fact that the claim was small, and that the estimate of costs incurred by Mr Pantlin to date was substantially higher than the amount of the claim. To the extent that this is correct, it is most unfortunate. But it must be observed that it is Ms King's own behaviour, in seeking and obtaining an adjournment of a hearing date on three prior occasions, and in moving for a further adjournment on a fourth occasion, that has contributed to the extent of the costs incurred by Mr Pantlin.
It should also be recorded that although Ms King filed a notice of appearance on 3 May 2011, she did not appear before the court on any of the first three occasions when the matter was listed for directions and when directions were given. Nor did she put on any evidence in support of whatever defence it might be that she claimed to have. Again, those matters can hardly have decreased the costs incurred by Mr Pantlin.
To the extent that the costs are excessive, that is as I have said a matter for regret. But adjourning the hearing yet again, after it has been prepared and the hearing has started, is hardly likely to diminish the costs properly incurred.
Ms King submitted, further, that she had a "very strong" defence. For the reasons that follow, I do not agree.
I return to the question in dispute.
The contract
As I have said, the contract was made on 4 September 2010. It provided for a purchase price of $781,500 and for completion to occur fourteen weeks or ninety-eight days, after the date of the contract. It is common ground that the contractual date for completion thus fixed was 13 December 2010.
Although the contract provided for, and stated as payable, a deposit of ten per cent of the purchase price (or $78,150.00), Mr Pantlin accepts that he agreed to accept a five per cent deposit. Pursuant to that agreement, and notwithstanding that it is inconsistent with the contract Mr Pantlin does not seek to depart from it, Ms King paid $39,075.
The deposit was held by the selling agent and invested by it in accordance with the contractual authority to do so. The deposit has not been paid out to Mr Pantlin because Ms King refused to authorise that. Accordingly, after these proceedings were commenced (with the selling agent as second defendant), the selling agent, by agreement with the plaintiff, paid the deposit plus accrued interest into court and was thereupon released from the proceedings.
Events leading up to the date for settlement
I am satisfied, on the evidence, that Mr Pantlin's solicitor, Ms Basten, made numerous attempts, leading up to and on 13 December 2010, to arrange for settlement of the sale. Unfortunately, settlement did not occur. On the evidence, the first communication from Ms King to Ms Basten was a letter of 10 November 2010 enclosing requisitions on title and seeking a five weeks' extension for completion until 17 January 2011. The requisitions on title were out of time, as Ms Basten pointed out; and the request for an extension of the time for completion was refused.
There was further correspondence in which Ms King asserted, and Ms Basten denied, that a letter had been sent by Ms King to Ms Basten on 13 September 2010 enclosing requisitions on title. I am satisfied, on the evidence, that no such letter was received by Ms Basten. Further, I have very grave doubts that any such letter was sent. Had it been sent, one might have expected that fact to have been referred to in the letter of 10 November 2010. Had there been prior correspondence of the kind suggested, one would not have expected the letter of 10 November 2010 to commence (as it did) with the statement:
I am the purchaser of [the subject property].
Ultimately, Ms Basten took the commonsense approach that, notwithstanding the fact that the right to make requisitions had been lost by delay, she would, on behalf of Mr Pantlin, reply. That was done on 13 December 2010. I am satisfied, on the evidence, that the letter was personally delivered to the address given by Ms King in the contract, and there received by a person who claimed to be Ms King's father. I do not accept the assertion made by Ms King in correspondence, that this and other documents, from time to time, were not properly served.
Notice to complete
The sale did not proceed to completion on 13 December 2010, and subsequent attempts to arrange settlement before the end of the year failed. Accordingly, on 11 January 2011, Ms Basten gave, on behalf of Mr Pantlin, a notice to complete. I am satisfied that the notice to complete (and other documents) was delivered, in the manner indicated earlier, to the address given in the contract on 12 January 2011. The notice appointed 3pm on 1 February 2011 as the time for completion and gave an address for the place for completion.
The contract specified, by cl 33.1, that if either party became entitled to issue a notice to complete, it could issue such a notice and fourteen days would be a proper and reasonable time to limit for completion. In the events that happened, the notice delivered on 12 January 2011 allowed nineteen clear days for completion.
I am satisfied, on the evidence, that a representative of Ms Basten's firm attended the place identified for settlement and stayed there from before the time appointed for about an hour. I am satisfied, further, that the person made attempts to contact or have identified Ms King, but was unable to do so. Ms King does not suggest that she did in fact attend on completion.
There was some further correspondence between Ms Basten and Ms King between 1 and 3 February 2011. That correspondence related, among other things, to the condition of the property. I will return to the alleged significance of this.
Notice of termination
On 3 February 2011, Ms Basten served, again on behalf of Mr Pantlin, a notice of termination on Ms King. I am satisfied, on the evidence, that this notice was served, both at the address, provided in the contract and at Ms King's professional address on 3 February 2011.
It follows that, unless (as Ms King claims to be the case) Mr Pantlin was disentitled to issue the notice to complete, or was not in a position to complete on either 13 December 2010 or 1 February 2011, this aspect of Mr Pantlin's case has been made good.
The "defences" relied on
The nature of Ms King's "defence" is difficult to understand. She has however supplied some written submissions, on which she relies. Unfortunately, Ms King, saying that she was unable to continue with the hearing, withdrew part way through the presentation of Mr Pantlin's case, and I have nothing but the written outline of submissions to guide me.
In relation to completion and the entitlement to issue notice to complete, Ms King asserts that there was extensive material damage to the subject property both at the time the notice to complete was given and at 13 December 2010. She maintains that the same position applied on 1 February 2011.
There is no evidence from Ms King in support of those allegations. However, because they were outlined in correspondence, they have been dealt with by Mr Pantlin in his affidavit evidence. With one exception, I am satisfied that the defects alleged as to the condition of the property either existed as at the time the contract was made or were not defects at all.
The defects alleged include items of broken glass, missing tiles and the like. Mr Pantlin gives evidence that those matters had existed at all material times.
The defects alleged also include doors and windows that were locked and could not be opened. Mr Pantlin's response is that there were keys for those doors and windows, that the keys had been given to the agent, and that they would have been handed over on or following completion in the usual way.
There are complaints of items of furniture and equipment left on the property. On Mr Pantlin's evidence, those items were minimal and could have been removed if required. The submissions for Ms King are somewhat in the nature of hyperbole on this point, but as I have said she has not put on any evidence to support them.
There was a question as to a "bar" said to have been removed from the property after contract and before completion. Mr Pantlin says that the bar was not a fixture, and that he caused it to be removed. (In fact the item was not a "bar" as such, but an old shop counter that Mr Pantlin had caused to be placed there.) Ms King says that there was some representation by the selling agent that the bar would remain on the property and pass with it on completion. There is no evidence of that.
The only item of damage that is admitted is that an old garden shed, which existed on the property at the time of completion, had become dilapidated, and I suspect essentially useless, by reason of storm damage between contract and completion. Mr Pantlin accepts that this is so. He says that it would have cost under $300 to replace the shed (and supports this evidence by reference to his inquiries made of a well-known hardware store).
By cl 7 of the contract, Ms King was entitled to make a claim before completion by serving it with a statement of the amount claimed. She did not do so. In the circumstances, it may be doubted that she has any entitlement to claim for this amount. But whatever the position may be (and it is not necessary to express a concluded view) it cannot be said that this dilapidated shed was something of such a major character as to disentitle Mr Pantlin to give a notice to complete or to prevent him from asserting, either as at 13 December 2010 or as at 1 February 2011, that he was not ready and willing to complete.
Ms King sought to supplement this point by pointing out that Mr Pantlin, as vendor, had obligations to care for the property in her interest, by reason of the equitable interest that she asserted she acquired through the contract. The equitable interest was of course coextensive with her right to obtain specific performance of the contract. The extent of that right is open to doubt, given that she failed to attend on the contractually appointed date for completion. But be that as it may, reference to Mr King's duties as "trustee" does not rise higher than its source, in the sense that the extent of those duties, and the question of their performance, is still to be measured by the extremely scanty evidence of dilapidation or disrepair. On no basis can it be said that the extent of dilapidation or disrepair was such as to do anything other than to give some entitlement to compensation or diminution of the purchase price on completion.
Ms King relied also on the fact that the settlement figures prepared for Mr Pantlin, I think for the settlement to take place on 1 February 2011, included an adjustment of land tax. As I understand it, land tax was chargeable for the 2011 year, but would not have been chargeable (and thus adjustable) had the contract been settled, as should have occurred, on 13 December 2010. Be that as it may, the contract provided for adjustment of current year land tax (and other matters). Although Ms King may have had a right to require it to be cleared prior to settlement, she did not avail herself of that right. Thus, the contractual process of adjustment was one appropriate to be followed.
The defences fail
Accordingly, I conclude that Mr Pantlin was in a position to issue the notice to complete when he did so, that the notice to complete was valid and made time of the essence for completion, and that Ms King's failure to attend and complete at the appointed time was a breach of a requirement of the contract made essential by the notice to complete.
It follows, further, that Mr Pantlin was entitled to do, as he did, and terminate the contract; and that the notice of termination served on 3 February 2011 was effective.
Damages
That leads to the question of damages. The contract provided for two alternatives. If the property is resold within twelve months after termination, the deficiency on resale and other expense are recoverable (cl 9.3.1). Otherwise, there is a common law entitlement to recover damages for breach (cl 9.3.2).
The property has not been resold. The damages that are claimed include interest under cl 35 of the contract, on the unpaid purchase price, from the due date for completion up to the date of hearing. They include also a claim for capital gains tax that will now be payable if the property is sold, claims for council and water rates and the like, and a claim for wasted expenses of the sale to Ms King.
The effect of the evidence on this point is that if the property were sold within two years of the date of death of Mr Pantlin's mother, then no capital gains tax would be exigible. Since the late Mrs Pantlin died on 15 July 2009, it follows that a sale prior to 15 July 2011 would not attract that liability.
Any sale by Mr Pantlin after 15 July 2011 will attract capital gains tax. There is expert evidence calculating the amount of that tax on various assumptions (all of which are proved on the evidence) as to the base value, the likely selling price, the costs of sale, and Mr Pantlin's tax rate on the assumption that he will recover a judgment that includes a substantial amount for interest.
It is put that capital gains tax, and for that matter cl 35 interest, are properly recoverable because it was necessary for Mr Pantlin to bring these proceedings to vindicate his right for sale. I do not agree with that submission. The position is that once the contract was terminated, Mr Pantlin was at liberty to resell. I accept that Ms King filed a caveat, claiming to protect the interest she asserted she still had under the contract. But a lapsing notice was given in respect of that caveat and it lapsed in about mid-March 2011. As is made clear by s 74O of the Real Property Act 1900 (NSW), it was not thereafter open to Ms King to lodge a further effective caveat claiming the same estate, interest or right or purporting to be based on the same facts as the caveat which had lapsed. Thus, in my view, at least once that caveat lapsed, there was no impediment to sale.
Mr Heraghty of counsel, who appeared for Mr Pantlin, submitted that it was necessary for the proceedings to be brought before any further sale that could be effected. That was so, he submitted, because a failure to disclose the existence of the proceedings could amount to misleading or deceptive conduct. But that simply begs the question. If it was not necessary to bring the proceedings before selling, then there would have been no proceedings to disclose; and if the proceedings were brought out of some sense of greater caution, or in an attempt to vindicate Mr Pantlin's right to damages, then that would not go to the essence of the sale.
It is true to say of course that once the proceedings were commenced, Ms King sought to defend them. It is not correct to say, as was put at one stage, that she sought to do so "vigorously". On the contrary, as I have noted, she did not turn up at any of the first three directions hearing, and did not put on any affidavit evidence in the in defence of the claim.
In my view, Mr Pantlin, acting reasonably and seeking to mitigate his loss, should have sought to resell the property straight away. He had from February until July to do so without attracting any liability to capital gains tax. Had he done so, then not only would there be no liability for that tax, the claim for interest pursuant to cl 35 would have been much diminished.
I should interpose to say that cl 35 of the contract provides that if the contract is not completed on the stipulated date, then Ms King is liable to pay interest at the rate of ten per cent per annum on the balance of the purchase price. Although such a clause might not survive termination, it is in my view correct to say that it provides a guide to the measure of the loss that the termination of the contract, by reason of essential breach, has caused Mr Pantlin to suffer. It follows, I think, that it is appropriate to include as a component of that loss interest at the rate stipulated by cl 35, but not as a result of the application of that clause. Rather, it is an entitlement, the benefit of which has been lost, and which therefore is recoverable as damages.
However, it does not follow that Mr Pantlin can sit by and let interest accrue for as long as it pleases him. I repeat that in my view it was open to him to sell the property well before the present time. In my view, acting reasonably and in pursuance of his obligation to mitigate his loss, he should have done so.
If one assumes that it would have taken some three to four months to find a purchaser and enter into a contract and settle it (and I do not think this is being unrealistic) then it is possible to make some estimate of loss based on the available figures. In round terms, interest for that range at the contractual rate of ten per cent on the unpaid purchase price would range from about $18,600 to $24,800. There are wasted expenses in relation to the first sale, of $5,058. I note that it has been suggested in some cases that wasted expenses of the first sale may not be recoverable. On the facts of this case, I think, it was eminently foreseeable, at the time the contract was made, that if the sale did not proceed to completion then the advertising expenses and legal costs incurred would be wasted, and that further such expenses would need to be incurred to resell the property.
There is also evidence that the selling price of the property would have been about $750,000. That is some $31,500 less than the amount of the contract price agreed between Mr Pantlin and Ms King. Although cl 9.3.2 of the contract does not apply in terms, nonetheless, I think, it is again plainly foreseeable, at the time of a contract for sale of land is made, that if it is not completed and the property is resold, there may be a loss on resale.
There will also be an amount for rates, land tax, electricity and the like. The evidence does not permit any precise assessment of those, but I think an amount of about $1,500 would do more than justice to this aspect of Mr Pantlin's claim, on the assumption (as I have said) that the sale process should have been undertaken as soon as possible after termination of the contract.
As a matter of very rough arithmetic, and rounding off from time to time, those figures suggest a range of damages between $46,500 and $62,500. Since the principal variation between those figures relates to some estimate of how long it would have taken to resell the property, I think that the safer course is to take a figure towards the upper end of that range, and accordingly I propose to fix the amount of $60,000 as the measure of damages incurred by Mr Pantlin.
As Mr Heraghty properly accepted, the amount of the deposit must be taken into account in the calculation of damages. If my arithmetic is correct (and this is a very dodgy assumption), deducting the amount of $39,075 from the amount of $60,000 leaves a balance of $20,925. Accordingly, I propose to award that amount by way of damages, and in addition to order that the money paid into court by the second defendant be paid out to the plaintiff.
There is then a question of pre-judgment interest on the damages. For the reasons that I have given, that interest should accrue from the date of notional sale up until the date of entry of judgment. I say "the date of notional sale" because the calculation of interest on the foregone purchase price under the earlier contract makes allowance for a figure for interest up until the date of sale.
If, on an arbitrary basis, one fixes 15 July 2011 as the date of completion of the hypothetical contract by reference to which I have measured the damage of Mr Pantlin, then interest on the sum of $20,925 should run from that date until this date at the rate of ten per cent per annum simple.
Since I have not done the necessary calculations, I will stand the matter over to permit them to be performed and verified by affidavit, and to enable short minutes of order to be brought in.
Costs
The remaining matter to address is the question of costs. Mr Pantlin seeks not only his costs but also an order that those costs be assessed on the indemnity basis. He submits that (to use the words of Gaudron and Gummow JJ in Oshlack v Richmond River Council (1998) 193 CLR 72 at 89 [44], there has been "relevant delinquency" on the part of Ms King. He relies, in particular, on the fact that there has been no defence ever supported by affidavit, nor even any defence shown. In this context, see Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397 at 401 and Ballieu Knight Frank (NSW) Pty Ltd v Ted Manny Real Estate Pty Ltd (1992) 30 NSWLR 359.
In my view, in the absence of any attempt at all by Ms King to substantiate the matters upon which she relies, and taking into account also my view, that those matters, even if substantiated, did not give her any answer to the requirement to complete and a fortiori gave her no answer to these proceedings, it is appropriate to order that she pay Mr Pantlin's costs and that she do so on the indemnity basis.
I do not however propose to make the precise order sought by Mr Pantlin. It will be sufficient for the orders to provide that Ms King, the first defendant, pay Mr Pantlin's, the plaintiff's, costs and that those costs be assessed on the indemnity basis.
**********
Decision last updated: 08 February 2012
0