LORDS -v- VON THOMANN [No 2] - [2014] WASC 320

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL

CITATION: LORDS -v- VON THOMANN [No 2] [2014] WASC 320

CORAM: BEECH J

HEARD: 14, 15, 18 & 19 AUGUST 2014

DELIVERED : 12 SEPTEMBER 2014

FILE NO/S: CIV 2409 of 2012

BETWEEN: DONNA JEAN LORDS
WAYNE FRANCIS GRIMSHAW
Plaintiffs
AND
JOHN VON THOMANN
LISA BENWELL
Defendants

Catchwords:

Contract - Contract for sale of land - Whether Sellers' agent made misrepresentations to Buyers - Turns on own facts

Contract - Damages - Date for assessment - Sale of land - Default by Buyers - Sellers attempted to resell - Resale took over two years - Whether damages assessed by reference to market value at date of termination or contract price on resale

Legislation:

Nil

Result:

Judgment for the plaintiffs
Damages awarded to plaintiffs

Category: A

Representation:

Counsel:

Plaintiffs: Mr R R Cywicki
Defendants: Mr N D C Dillon

Solicitors:

Plaintiffs: Holborn Lenhoff Massey
Defendants: Vogt Graham Lawyers

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

Alexander v Cambridge Credit Corp Ltd (1987) 9 NSWLR 310
Baltic Shipping Co v Dillon [1993] HCA 4; (1993) 176 CLR 344
BGL Operations Pty Ltd v Allied Express Transport Pty Ltd [2011] NSWCA 41
Burns v MAN Automotive (Aust) Pty Ltd [1986] HCA 81; (1986) 161 CLR 653
Carpenter v McGrath (1996) 40 NSWLR 39
Castle Constructions Pty Ltd v Fekala Pty Ltd [2006] NSWCA 133; (2006) 65 NSWLR 648
Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54; (1991) 174 CLR 64
European Bank Ltd v Evans [2010] HCA 6; (2010) 240 CLR 432
Fazio v Fazio [2012] WASCA 72
Flamingo Park Pty Ltd v Dolly Dolly Creation Pty Ltd (1986) 65 ALR 500
Golden Strait Corporation v Nippon Yusen Kubishika Kaisha [2007] 2 AC 353
Hadley v Baxendale (1854) 9 Exch 341; (1854) 156 ER 145
Hooper v Oates [2013] EWCA Civ 91; [2014] Ch 287
HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd [2004] HCA 54; (2004) 217 CLR 640
Hungerfords v Walker [1989] HCA 8; (1989) 171 CLR 125
Jamal v Moolla Dawood Sons & Co [1916] 1 AC 175
Johnson v Perez [1988] HCA 64; (1988) 166 CLR 351
Koufos v C Czarnikow Ltd (The Heron II) [1969] 1 AC 350
Laird v Pim (1841) 7 M & W 474
Lake Cumbeline Pty Ltd v Effem Foods Pty Ltd (Unreported, FCA, 29 June 1995)
Luxer Holdings Pty Ltd v Glentham Pty Ltd [2007] WASCA 209; (2007) 35 WAR 254
National Australia Bank Ltd v Nemur Varity Pty Ltd [2002] VSCA 18
Palasty v Parlby [2007] NSWCA 345
Radford v De Froberville [1977] 1 WLR 1262; [1978] 1 All ER 33
Robinson v Harman (1848) 1 Ex 850; (1848) 154 ER 363
Smith New Court Securities Ltd v Scrimgeour Vickers (Asset Management) Ltd [1997] AC 254
South Sky Investments Pty Ltd v Luppi [2012] QSC 27
Statewide Developments Pty Ltd v Higgins [2011] NSWCA 35
Tabcorp Holdings Ltd v Bowen Investments Pty Ltd [2009] HCA 8; (2009) 236 CLR 272
The Achilleas; Transfield Shipping Inc v Mercator Shipping Inc [2008] UKHL 48; [2009] 1 AC 61
Vieira v O'Shea [2012] NSWCA 21
Vouzas v Bleake House Pty Ltd [2013] VSC 534
Watson v Foxman (1995) 49 NSWLR 315
Wenham v Ella [1972] HCA 43; (1972) 127 CLR 454
BEECH J:

Introduction

It is not in dispute that:
(a)on 25 July 2008, the plaintiffs (the Sellers) and the defendants (the Buyers) entered into a contract for sale of land (the Contract) by which the Sellers agreed to sell and the Buyers agreed to buy property situated at 164 Riseley Street, Booragoon (the Property) for a purchase price of $1.785 million;
(b)the Contract required the Buyers to pay a deposit of $80,000 by no later than 30 July 2008;
(c)the Buyers failed to pay the deposit on 30 July 2008, or at all; and
(d)after issuing a notice of default on 1 August 2008, on 26 August 2008 the Sellers, by their solicitors, served the Buyers with a notice of termination, terminating the Contract.
The Sellers put the Property back on the market. Almost two and a half years later on 9 February 2011, they sold the Property for $955,000. The Sellers claim damages in the amount of $830,000, being the difference between the price under the Contract and the price ultimately obtained in 2011.
The Buyers claim that before they entered the Contract, the Sellers' selling agents made negligent misrepresentations in relation to the Property, in a telephone conversation and in the course of two inspections of the Property, so that the Buyers are entitled to damages or to rescind the Contract. The Buyers also claim that it was agreed between the Buyers and the Sellers' agents, in a telephone conversation, that the parties would not proceed with the Contract.
For the reasons that follow, I am not satisfied that the Sellers' agents made any of the alleged representations, or that the Sellers' agents agreed that the parties would not proceed with the Contract. Consequently, the Sellers' claim for breach of contract succeeds.
There is an issue whether the Sellers' damages should be assessed by reference to the difference between the Contract price and the ultimate resale price, or as the difference between the Contract price and market value at the date of termination. While the latter reflects the general rule, in the circumstances of this case I find that departure from the general rule is necessary in order to give adequate compensation to the Sellers.
It is convenient to outline the Buyers' claims, before setting out my factual findings.

The Buyers' claims

The Buyers defended the Sellers' action by reference to claims made by the Buyers. The Buyers claim that they are entitled to damages for the tort of negligent misrepresentation, or they are entitled to avoid the Contract under the general law, on the grounds of three misrepresentations made by the Sellers' agent on behalf of the Sellers. There is no claim for misleading or deceptive conduct under the Trade Practices Act 1974 (Cth) or the Fair Trading Act 1987 (WA).[1]
[1] Those Acts have now been superseded, but applied at the time of the events in question.
The First Representation is alleged to have occurred in the course of a telephone conversation between the Sellers' agent, Mr Francisco Sanchez and Mr von Thomann in which Mr Sanchez stated to Mr von Thomann that:
(a)the Property was valued at $1.8 million to $1.9 million;
(b)the Property is listed for auction on site on 20 August 2008; and
(c)there is a significant amount of interest in the Property, and it will either sell before the auction or at the auction for between $1.8 million and $1.9 million.[2]
[2] Second Further Amended Defence and Counterclaim (Defence and Counterclaim) [13].
The Second Representation is said to have occurred at the first inspection of the Property conducted by Mr Raymond Faccin as Selling Agent. The Buyers plead that at that inspection:
a)[Mr von Thomann] said to Mr Faccin that he wanted to purchase an investment property in the Booragoon area that was large enough or could be converted so that it could accommodate [Mr von Thomann's] orthodontic practice;
PARTICULARS
(i)[Mr von Thomann's] orthodontic practice required 200 square metres, consisting of:
A.four consulting rooms 4.8 x 3.8 = 18 x 4 = 72
B.three offices 3 x 4 = 12 x 3 = 36
C.sterilising room 3 x 4 = 12
D.radiography room 2 x 2.5 = 5
E.patient waiting area 3.8 x 4 = 15
F.reception area 2 x 6 = 12
G.staff amenities area 3.8 x 4 = 15
H.laboratory 2.8 x 3.5 = 5
I.storage 2 x 2.5 = 5
J.staff toilet 2.3 x 1.3 = 3
K.patient toilet and brushing area 2 x 2 = 4
(ii)For [Mr von Thomann's] orthodontic practice to operate, it was also necessary for car parking facilities to be provided for staff and patients.
b)Mr Faccin said:
i)The Property would make a 'wonderful investment';
ii)The existing dwelling on the Property was large enough to easily be converted to accommodate [Mr von Thomann's] orthodontic practice and [Mr von Thomann] would be able to operate his orthodontic practice from the Property;
PARTICULARS
Mr Faccin advised the orthodontic practice could be operated from the Property as the Property was within an area zoned by the local authority for businesses such as [Mr von Thomann's] orthodontic practice.
iii)If:
(A)[Mr von Thomann] purchased the Property for between $1.8 million and $1.9 million;
(B)a building with an office and consulting rooms were constructed at the front of the Property;
(C)4 apartments were constructed at the rear of the Property; and,
(D)the 4 apartments were leased,
the Property would provide a return of about 6.9 percent per annum;
(the Second Representation).[3]
[3] Defence and Counterclaim [16].
The Third Representation is alleged by the Buyers to have been made at the second inspection at the Property on 24 July 2008.
The Buyers plead that in the course of that inspection Mr Faccin said:
(a)the Property was valued in excess of $1.8 million;
(b)[Mr von Thomann] would be able to operate his proposed orthodontic practice from the Property;
PARTICULARS
Mr Faccin advised the orthodontic practice could be operated from the Property as the Property was within an area zoned by the local authority for businesses such as [Mr von Thomann's] orthodontic practice.
(c)if [Mr von Thomann] purchased the Property he could demolish the existing house and construct an office and consulting facility together with four residential apartments at the back of the block;
(d)if [Mr von Thomann] developed the Property in the manner described in the preceding subparagraph the return on the investment (with a $1.8 million purchase price) would be about 7 to 8 percent;
(e)the purchase of the Property (with a $1.8 million purchase price) was a wonderful investment,
(the 'Third Representation').[4]
[4] Defence and Counterclaim [17A.4].
The Buyers plead that Mr von Thomann relied on the First, Second and Third Representations in entering into the Contract.[5]
[5] Defence and Counterclaim [17].
The Buyers also plead that after the Second Inspection, his Practice Manager, Ms Debra Holland advised Mr von Thomann that he should purchase the Property, and that her advice was given in reliance on the Third Representation, and that Mr von Thomann relied on her advice in entering into the Contract.[6]
[6] Defence and Counterclaim [23A], [23].
The Buyers plead that the Sellers' agent knew or ought to have known that the Buyers would rely on the representations they respectively made and that the Sellers, by their agents, owed a duty to ensure that the representations were true and reliable.
The First Representation is said to have been false or made negligently in that the Property was not worth $1.8 ‑ $1.9 million, but was worth $1.45 million.[7]
[7] Defence and Counterclaim [32].
The Second Representation is said to have been false or made negligently in that:
(a)the purchase of the Property was 'not a wonderful investment';
(b)Mr von Thomann was not able to operate his orthodontic practice from the Property;
(c)the Buyers would not make a return on investment of 6.9%;
(d)the existing dwelling on the Property was not large enough and the internal layout too small to be converted to accommodate Mr von Thomann's orthodontic practice;
(e)it was not reasonably possible to have functioning access by vehicles arriving and departing from the Property if operated as an orthodontic practice or to allow parking necessary for staff and patients;
(f)[abandoned];
(g)by reason of the matters in (d) and (e), Mr von Thomann was not able to operate his orthodontic practice from the Property.[8]
[8] Defence and Counterclaim [34].
The same matters are said to sustain the conclusion that the Third Representation was false.
The Buyers claim that they have suffered loss and damage to the extent of their liability under the Contract, that the Contract is voidable at the election of the Buyers and that the Buyers have elected to avoid the Contract.
In particulars, the Buyers state that their election to avoid the Contract was made when Mr von Thomann said to Mr Faccin that he wanted to cancel the Contract and Mr Faccin replied by saying words to the effect that that is okay.
There was also a plea of estoppel arising from that conversation, but that was abandoned in closing.[9]
[9] ts 363.
The Sellers deny that their agent made any of the representations pleaded by the Buyers. They plead different versions of each of the relevant conversations. They also plead that their agents were not authorised to make any of the alleged representations.
It is not necessary to detail the other matters pleaded in reply by the Sellers.

Findings of fact

3.1 General observations

In this case there are stark conflicts between the evidence of the witnesses for one party and the evidence of the witnesses for the other party. Essentially, Mr von Thomann's evidence is that the three pleaded representations were made to him. Ms Holland gives evidence that Mr Faccin made the Third Representation at the Second Inspection. Mr Sanchez, the principal of Ace Realty, the Selling Agent, denies making the First Representation. Mr Faccin denies making the Second Representation. That evidence is supported by the evidence of Ms Lords, one of the Sellers, who was present during that inspection. Mr Faccin denies making the Third Representation. Mr Faccin and the Sellers deny that any Second Inspection occurred.
The Buyers bear the onus of proving their claims, including proving that the pleaded representations were made.
The events in question in this case occurred six years ago, in July and August 2008. The litigation was only commenced in mid‑2012. Consequently, it is likely that witnesses were not asked to, and had no reason to, recall the detail of events until several years after the events in question, and then only in the context of the litigation. No witness had any notes or other document from which to refresh their memory of the crucial conversations.
In the circumstances, the following observations of Tamberlin J[10] should be borne in mind:
[Given the lapse of time] between the events and conversations raised in evidence and the hearing of the evidence before me, the only safe course is to place primary emphasis on the objective factual surrounding material and the inherent commercial probabilities, together with the documentation tendered in evidence. In circumstances where the events took place so long ago, it must be an exceptional witness whose undocumented testimony can be unreservedly relied on. The witnesses in this case unfortunately did not come within that exceptional class. The discussions referred to in evidence were capable of bearing quite opposed meanings depending on subtle differences of nuance and emphasis, and a proper appreciation of the significance of those matters must necessarily be considerably diminished over such a long period of time.
[10] Lake Cumbeline Pty Ltd v Effem Foods Pty Ltd (Unreported, FCA, 29 June 1995) [412], cited with approval in Fazio v Fazio [2012] WASCA 72 [43] (Murphy JA).
The following observations of McClelland CJ in Watson v Foxman[11] are also apposite:
[H]uman memory of what was said in a conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene, and the processes of memory are overlaid, often subconsciously, by perceptions or self-interest as well as conscious consideration of what should have been said or could have been said. All too often what is actually remembered is little more than an impression from which plausible details are then, again often subconsciously, constructed.
[11] Watson v Foxman (1995) 49 NSWLR 315, 319.
In many cases, the contemporaneous documents are of considerable assistance in resolving conflicts in oral evidence. In this case that is less so, in that, broadly speaking, with exceptions that I will identify, the competing versions of events are equally consistent with the contemporaneous documents.
In their closing submissions, the Buyers emphasised that:
(1)Ms Debra Holland was the only witness who does not have an interest in the outcome of the proceedings; and
(2)the consistency between what Ms Holland says Mr Faccin told her at the Second Inspection and what Mr von Thomann says Mr Faccin told him at the First Inspection (as well as at the Second Inspection) provides strong support for Mr von Thomann's evidence.
Broadly, I accept these two propositions. Ms Lords, Mr Grimshaw and Mr von Thomann, as parties, have a direct interest in the proceedings. There is no evidence that the Sellers' agents, Mr Faccin and Mr Sanchez, have a direct interest in the proceedings. They are not parties, and there is no evidence of any threat of proceedings if the Buyers' claims were to succeed. Nevertheless, findings in favour of the Buyers might create a risk of liability on the part of the Sellers' agents. Further, the agents have a reputational interest in not having a finding that their conduct gave risk to grounds for the Buyer to avoid a contract, or gave rise to liability on the part of the Sellers. Ms Holland was in a de facto relationship with Mr von Thomann from before July 2008 until October 2013. There is no ongoing personal relationship between Ms Holland and Mr von Thomann that would give Ms Holland an interest in the proceedings. Nevertheless, Ms Holland was in a de facto relationship at the time the proceedings were commenced against Mr von Thomann, and for the first 17 months of those proceedings.
Notwithstanding the two points emphasised by the Buyers to which I have just referred, I am not satisfied that any of the pleaded representations were made. In my view, these points are outweighed by the matters referred to below. When the evidence of Mr von Thomann conflicts with the evidence of one or more of the Sellers' witnesses I prefer the evidence of the Sellers' witnesses. In making some findings I will explain particular reasons why that is so. The following observations explain why I generally prefer the evidence of the Sellers' witnesses to the evidence of Mr von Thomann.
First, in my view, on each of the crucial conflicts of evidence, the objective probabilities favour the version of events advanced by the Sellers' witnesses, and militate against acceptance of Mr von Thomann's evidence. I will explain this in the course of making findings about each of the three pleaded representations, and about the conversation said to have occurred on 28 July 2008 between Mr von Thomann and Mr Faccin.
Secondly, in my view, Mr von Thomann's conduct, as I find it to have been in the month after the Contract was entered into, tells strongly against acceptance of his evidence. I find that:
(1)Mr von Thomann did not make any call to Mr Faccin on 28 July 2008;
(2)on 30 July 2008, after several unsuccessful attempts, Mr Faccin telephoned Mr von Thomann and asked him about payment of the deposit. Mr von Thomann said he would not be going ahead. Mr Faccin asked why he was not proceeding, but Mr von Thomann did not respond;
(3)in the next day or so, Mr Sanchez telephoned Mr von Thomann about the need to pay the deposit. Mr von Thomann said he was not going ahead with the Contract. Mr Sanchez asked why, and in response Mr von Thomann did not say anything about representations having been made to him about the value of the Property or returns on it;
(4)on 31 July 2008 a solicitor for the Sellers, Mr Michael Sutherland, telephoned Mr von Thomann and asked him if he was proceeding with the Contract and paying the deposit. Mr von Thomann said he was not going to pay the deposit or carry on with the Contract. Mr von Thomann did not say anything to explain why he was not proceeding with the Contract;
(5)in the next day or so Mr Sutherland sent a letter to Mr von Thomann enclosing a notice of default. Mr von Thomann did not respond, in writing or at all, to that letter. He did not write back complaining of the representations that had been made to him. Nor did he say that a few days earlier, on 28 July 2008, it had been agreed between him and Mr Faccin that the Contract would be brought to an end;
(6)later in August 2008 the Sellers' solicitors sent Mr von Thomann a letter terminating the Contract and reserving the Sellers' rights, including the right to sue for damages. Again, Mr von Thomann did not respond, in writing or otherwise, to this letter.

Thirdly, there are aspects of Mr von Thomann's evidence in cross‑examination, and the manner in which he gave that evidence, which undermined or detracted from the weight to be given to his evidence:
(1)Whilst Mr von Thomann was adamant about his evidence relating to the crucial conversations and representations, his recollection was otherwise generally poor or non‑existent.
(2)There were many things said in his witness statement which, when he was asked about the topic in cross‑examination, he said he did not recall.[12] This undermines the weight to be given to what is said in his witness statement.
(3)At one point in his evidence, he nodded (twice) in response to a question but then, almost immediately, when questioned denied that he had done so.[13]
(4)Mr von Thomann's evidence was that after the First Inspection of the Property, he spoke to his accountant. It was put to him that he had the opportunity to ask his accountant to do an independent assessment of the likely return on his contemplated investment in the Property. Mr von Thomann responded: 'No, he was in South Australia. He didn't have the ability to do that'.[14] When pressed on why the accountant did not have the ability to calculate a return on a proposed investment he repeated: 'Because he was in South Australia'.[15] When asked to explain how living in South Australia had any influence on his ability to calculate a return, Mr von Thomann said that he did not know.[16]
This exchange illustrated a willingness on Mr von Thomann's part to say things to try and explain away something he felt may be detrimental to his case. In this instance, he proffered an explanation that was illogical, and for which he had no foundation when he said it. When pressed, he could not explain what he meant at all.
(5)At times in his evidence in cross‑examination, Mr von Thomann embellished his earlier evidence with claims that, in the crucial conversations with Mr Faccin, he had said additional things not mentioned in any of his witness statements. For example, he claimed that he told Mr Faccin that his proposed extended orthodontic surgery would need 200 sqm.[17] Further, he claimed that he told Mr Faccin, when in the process of drawing up the first offer, that he was relying on Mr Faccin's assessment of a 6.9% return.[18]
(6)In my view, Mr von Thomann's evidence about his alleged conversation with Mr Faccin on 28 July 2008 lacks credibility, and detracts from Mr von Thomann's credibility generally.
[12] See, for example, exhibit 1A [20], ts 192 ‑ 193; exhibit 1A [23], ts 194; exhibit 1A [62], ts 231; exhibit 1A [35], ts 224; exhibit 1A [79], ts 240; exhibit 1B [19]; ts 241.
[13] ts 204.
[14] ts 224.
[15] ts 225.
[16] ts 225.
[17] ts 221 ‑ 222.
[18] ts 223.
Fourthly, to my mind, criticisms of a similar nature could not be made of the evidence in cross‑examination of Ms Lords, and, especially, Mr Faccin. In closing submissions, counsel for the Buyers did not point to anything in the evidence of Mr Faccin or Ms Lords in cross‑examination, or anything in the manner in which they gave their evidence, that undermined or detracted from the weight to be given to their evidence. To my mind, there was nothing of that character in Mr Faccin's evidence and, with one exception, nothing in Ms Lords' evidence. Unless I say otherwise, I accept Mr Faccin's evidence.
The exception was that I formed an impression that Ms Lords was, in some respects in her evidence, a little too adamant. This may have been brought about by a combination of the force of her personality, her interest in the proceedings, and the passage of time. For example, in cross‑examination, Ms Lords claimed that there was no way anything was said between Mr Faccin and Mr von Thomann that she did not hear.[19] I regard that as an over‑statement. Nevertheless, I accept that she heard at least the substantial part of what was said between Mr Faccin and Mr von Thomann, and I generally accept her evidence. This is so even for conversations which Ms Lords was some distance away from. At one point during the First Inspection Mr Faccin and Mr von Thomann were outside talking. Ms Lords was inside, approximately 2 metres away.[20] When Mr von Thomann requested a plan of the house Ms Lords immediately brought one out.[21] This is an indication that Ms Lords was listening attentively. The impression I formed of Ms Lords in court reinforced the likelihood that that would have been so.
[19] ts 77, 82.
[20] ts 82, 118.
[21] ts 118.
I turn to my factual findings.

3.2 Mr von Thomann looks for a new practice location

In 2008, Mr von Thomann was conducting his practice as an orthodontist from premises in Geraldton. He also had premises in Subiaco.
In early 2008, Mr von Thomann decided to look for premises in the Booragoon area, near Garden City, with a view to buying and conducting his orthodontic practice there.
In 2008, Mr von Thomann was in a de facto relationship with Ms Debra Holland.
For some months in 2008, Mr von Thomann and Ms Holland investigated possible properties in the general vicinity of Garden City, Booragoon.[22]

3.3 The decision of the Sellers to sell the Property

[22] Exhibit 2B [5] ‑ [8].

The Sellers bought the Property in September 1989.
In 2008, a neighbour approached the Sellers about purchasing a small portion of the Property. That led the Sellers to contact some real estate agents and obtain their appraisals of the Property. Several agents provided appraisals, all of which were somewhere between $1.8 and $2 million. All of the agents suggested that the Property be sold by auction.

3.4 The appointment of Ace Realty

One of the appraisals was given by Mr Frank Sanchez of Ace Realty. He appraised the Property at $1.8 to $1.85 million, suggesting the Property be sold by auction.[23]
[23] Exhibit D1 [17] ‑ [18].
The Sellers decided to engage Ace Realty to market and auction the Property.
The Sellers signed an authority to auction the Property with Ace Realty on 15 July 2008.[24] The authority provided that the Property would be auctioned on 20 August 2008 with the reserve price to be advised. The agent's fee was stipulated as 2%. An illustrative example of the agent's fee was given if the selling price was $1.8 million.

3.5 The marketing of the Property

[24] Exhibit A1.

The only information the Sellers supplied to Ace Realty to assist in the marketing and sale of the Property was two photocopied floor plans of the Property dealing with the position before and after an extension.[25]
[25] Exhibits A4, A5; exhibit D1 [22]; exhibit F1 [17].
The agents involved in marketing the Property were Mr Raymond Faccin, who had the primary carriage of the sale, and Mr Francisco (Frank) Sanchez.
At the time when Ace Realty was appointed selling agent, Ms Lords asked Mr Sanchez how much the Property was worth, to which he said around $1.8 million.[26]
[26] Exhibit G1 [9].
The auction was arranged for 20 August 2008.
The Property was advertised in the West Australian newspaper and on realestate.com.au.[27]
[27] Exhibit D1 [23]; exhibit E1 [19]; exhibit F1[21]; exhibit A3.
Mr Faccin prepared an auction flyer[28] and a booklet for interested parties.[29] Mr Sanchez reviewed these. The flyer described the Property as zoned R50 commercial or residential, and as 'a unique opportunity to develop or invest in this strategic location'. The booklet for interested parties emphasised the traffic flow and location, stating that the Property would suit doctor, dentist or office use. It also attached extracts from planning instruments. I will say more about this document later in these reasons.

3.6 The telephone conversation between Mr von Thomann and Mr Sanchez: Did Mr Sanchez make the First Representation?

[28] Exhibit A15.

[29] Exhibit A27.

Sometime after 15 July 2008 and before 23 July 2008, Mr von Thomann telephoned Ace Realty and spoke to Mr Sanchez. This was the first contact between them. The Buyers claim that in the course of this conversation, Mr Sanchez made what is referred to in the Defence and Counterclaim as the 'First Representation'.[30]
[30] Defence and Counterclaim [13.1] ‑ [13.3].
Mr von Thomann's account of the conversation set out in his witness statement[31] is as follows:
[31] Exhibit 1A [19] ‑ [23].
19)I said to him that I was interested in purchasing a property near Garden City (Booragoon). I said that I was an orthodontist and that I want to purchase commercial premises near Garden City because:
a)the busport at Garden City, the shops around Garden City shopping centre and the good schools in the area all presented potential prospects to establish an orthodontic practice; and,
b)I wanted to close my Geraldton practice and start a new practice in Perth.
20)I told Mr Sanchez I was looking for a property near Garden City where I could operate an orthodontic practice from and that I had a desire to expand my then current practice. He told me about various properties on the market that he had listed including 164 Riseley Street, Booragoon.
21)Ace Realty is located on Canning Highway in close proximity to 164 Riseley Street, Booragoon. Mr Sanchez said he had worked in the area a long time, knew the area well, was experienced and knowledgeable and was selling other commercial properties in the area. He also explained that Mr Faccin was also experienced and knowledgeable and that he would explain to me a lot more about the Property.
22)From what Mr Sanchez had said to me I understood that Mr Sanchez and Mr Faccin had expertise in the area of commercial property development and investments.
23)He told me the Property had been valued between $1.8 and $1.9 million. He also told me the Property is listed for auction on site to occur on 20 August 2008 and that there is a significant amount of interest in the Property and it will either sell before the auction or at the auction for between $1.8 to 1.9 million.
Mr Sanchez's evidence is to the effect that:
(a)Mr von Thomann telephoned him and mentioned that he was looking for a property for commercial purposes as he was a dentist or other similar health professional;
(b)they discussed the Property and other properties that were available for sale or that had recently been sold including 17 Riseley Street and 29 Kernes Crescent, Ardross; and
(c)he did not tell Mr von Thomann that the Property was worth or valued or had been valued at $1.8 million to $1.9 million.[32]
[32] Exhibit G1 [19] ‑ [26]; ts 139, 144.
For the reasons that follow, I accept this evidence of Mr Sanchez and I am not satisfied that Mr Sanchez said words to the effect of the First Representation in the course of this telephone conversation.
Mr von Thomann's version of events strikes me as somewhat unlikely. This was the first contact of any kind between Mr Sanchez and Mr von Thomann. The Sellers had not communicated any reserve price to Mr Sanchez. The Property was to be auctioned in about four weeks time. In that context, to my mind, it would be surprising if a real estate agent acting for the Sellers stated that the Property had been valued at a particular sum or within a reasonably confined range.
I accept Mr Sanchez's evidence[33] that his general practice, adopted in this case, is to be very cautious about what he says to a prospective purchaser about price, especially when a property is coming up for auction.
[33] Exhibit G1 [30], [33].
In the original defence and counterclaim filed on 5 October 2012[34] the Buyers did not plead anything about any representations said to have been made by Mr Sanchez. Moreover, since then, at different times Mr von Thomann has advanced different versions of what he claims was said by Mr Sanchez. It has been expressed in terms that 'the Property is worth …';[35] 'the Property had been valued between …'[36] and, in cross‑examination 'that the Property was valued at …'.[37]
[34] Exhibit K1.
[35] Exhibit K2, Amended Defence and Counterclaim November 2012.
[36] Exhibit 1A [23].
[37] ts 195.
I also refer to my general observations on Mr von Thomann's credibility in section 3.1.
I find that this telephone conversation was introductory in nature, brief in duration, and involved no more than a general enquiry and discussion. I am not satisfied that Mr Sanchez made the First Representation.

3.7 A telephone conversation between Mr von Thomann and Mr Faccin

Mr Faccin gives evidence of a telephone conversation he had with Mr von Thomann before the first inspection of the Property. That conversation was not mentioned in Mr von Thomann's primary witness statement. Nor is it pleaded. However, in his witness statement in reply, Mr von Thomann says that in this conversation Mr Faccin told him the Property was valued at between $1.8 and $1.9 million.[38]
[38] Exhibit 1B [25].
Mr Faccin says that Mr von Thomann said to him that:
(1)he was looking for a property he could use for his orthodontic practice;
(2)he wanted to the view the Property; and
(3)he asked the price of the Property.[39]
[39] Exhibit F1 [27].
In response, Mr Faccin said that:
(1)the Property was going to be auctioned;
(2)he did not know the reserve price;
(3)Mr von Thomann could put an offer in before the auction, but it would need to be unconditional;
(4)a nearby property had recently sold for $1.8 million; and
(5)an offer of around $1.8 million might have a chance as he thought the Property would sell for around $1.8 million.[40]
[40] Exhibit F1 [28] ‑ [31].
He arranged for a viewing to take place on 21 July 2008 (although it may have been a day or two after that).
This evidence of Mr Faccin was not challenged in cross‑examination, and I accept it.
As I have said, in his witness statement in reply, Mr von Thomann says that in this conversation Mr Faccin told him that the Property was valued at between $1.8 million and $1.9 million. In my view, it is revealing that Mr von Thomann made this assertion, for the first time, in his witness statement in reply. He pleaded, as the First Representation, an alleged statement by Mr Sanchez during a telephone conversation that the Property was valued at $1.8 million to $1.9 million. No reason is apparent as to why, if Mr Faccin had made a statement to the same effect during a telephone conversation, that would not also have been pleaded.
I think it is likely that Mr von Thomann's response to Mr Faccin's witness statement saying that, in a telephone conversation Mr Faccin had said that an offer of around $1.8 million might have a chance, was to turn that statement, in Mr von Thomann's mind, into a statement as to the value of the Property. In this regard, it may be noted that during Mr von Thomann's evidence, he was asked if, when he spoke at an earlier stage to other agents about other properties, he enquired of those agents about the asking price. He responded that he would have asked what the value of the property was.[41] This may be indicative of a tendency, on the part of Mr von Thomann, to translate information about asking price, or a price that sellers at or before auction may be willing to consider, into a statement as to value.

3.8 The First Inspection: Did Mr Faccin make the Second Representation?

[41] ts 190.

On 21, 22 or 23 July 2008, Mr von Thomann inspected the Property. Mr Faccin and Ms Lords were present. Most of the conversation was between Mr Faccin and Mr von Thomann.
Mr von Thomann's evidence about the discussion is as follows:
28)I said to Mr Faccin that my orthodontic practice consisted of me as the Orthodontist, 1 existing nurse. However, I proposed my expanded practice would also include a dental therapist, a nurse to support the dental therapist, a dental technician and a receptionist.
29)I said to Mr Faccin that I wanted to purchase an investment property in the Booragoon area that was large enough or could be easily converted so that the property could accommodate my expanded orthodontic practice.
30)Mr Faccin said that if:
a)I purchased the property for between $1.8 and $1.9 million;
b)the Property would make a 'wonderful investment';
c)I would be able to operate my proposed Orthodontic practice from the Property. The existing dwelling on the Property was large enough to easily be converted to an orthodontic practice that could accommodate my expanded orthodontic practice and that I would be able to operate my expanded orthodontic practice from the Property;
31)Mr Faccin then said that if I decided not to convert the Property then I had another option.
32)I cannot be sure the exact words Mr Faccin used but I recall that Mr Faccin said that if:
a)I spent about $800,000 building an office and consulting rooms at the front of the property and 4 apartments at the rear of the property and I leased the 4 apartments; then,
b)with a purchase price of $1,785,000 the property would provide a return on investment of about 6.9% per annum.
33)During this meeting I noticed that Mr Faccin was making notes of his calculations whereby he arrived at a return on investment of 6.9% per annum. Mr Faccin made these notes easy for me to see but he did not provide me a copy to take away.[42]
[42] Exhibit 1A [28] ‑ [33].
Mr Faccin says, in summary, as follows:
(a)Mr von Thomann asked what the R50 zoning meant, saying that he wanted to know that the Property could be used for an orthodontic practice. In response, Mr Faccin said that under the R50 zoning the Property could be used for an orthodontic practice if the carport was demolished and council parking requirements were met which, would need to be checked with the council, and that if the existing dwelling was demolished, R50 zoning meant that four apartments could be built on the Property;
(b)he provided the booklet for interested parties to Mr von Thomann;
(c)in accordance with his usual practice, he told Mr von Thomann to make his own enquiries with the council;
(d)he denies that he was told of the requirements of Mr von Thomann's proposed expanded orthodontic practice;
(e)he denies that he said the Property would be a wonderful investment;
(f)he denies that he said the Property was large enough to easily be converted to accommodate the expanded practice requirements as explained by Mr von Thomann;
(g)he denies he said anything about the possibility of demolishing the existing residence and building an offence and consulting rooms at the front, and four apartments at the rear;
(h)he denies that he made any statements about the return on investment of a development of the Property; and
(i)he does not have the skills and training to provide information on the expected returns on property development.[43]
[43] See exhibit F1 [35], [37] ‑ [44]; ts 118, 120 ‑ 123.
Ms Lords gives evidence that is broadly consistent with the evidence of Mr Faccin. She denies Mr von Thomann's version of the conversations.[44]
[44] Exhibit D1 [32] ‑ [45]; exhibit D2 [14] ‑ [17].
For the reasons that follow, and for the reasons explained in the general observations in section 3.1 of these reasons, I accept the evidence of Mr Faccin, and do not accept Mr von Thomann's evidence about what happened at the First Inspection.
In my view, the objective probabilities militate against Mr Faccin having made the Second Representation as alleged by Mr von Thomann. I begin with the alleged representation that a development of an office and consulting rooms at the front of the Property, and four apartments at the back, would produce a return on investment of about 6.9%. There are two reasons why I consider it unlikely that Mr Faccin made any representation to this effect.
First, Mr Faccin's alleged statement about the return on investment is based upon a development proposal which in my view was obviously, and to Mr Faccin's knowledge, inconsistent with the requirements of the R50 zoning of the Property. Mr Faccin had a working knowledge of the R‑Codes.[45] Construction of four stand‑alone apartments on the Property, the area of which was 809 sqm, would not leave any room for an orthodontic surgery and office. When it was put to Mr Faccin that he had said to Mr von Thomann that if Mr von Thomann spent $800,000 on building an office and consulting rooms at the front and four apartments at the rear, he could lease the four apartments and use the consulting rooms himself, Mr Faccin responded, 'No you can't do that. … I wouldn't say that because you can't do that. It's not allowed'.[46] Mr Faccin gave this evidence in a tone that seemed to me to indicate that, to his mind, the position was clear and obvious: such a development was not permitted. I am satisfied that in July 2008 Mr Faccin understood the R‑Codes sufficiently to understand that an R50 code for a block of 809 sqm meant that the maximum subdivision potential of the block was for four lots. I am satisfied that he did not mistakenly think that it would be open to subdivide the Property into four apartment lots at the rear and also construct the orthodontic surgery and offices at the front.
[45] ts 114 ‑ 116.
[46] ts 122.

Moreover, Mr Faccin distributed information about the R‑Codes to Mr von Thomann, and to other prospective purchasers, as part of the auction package.[47] The last page of that package stated that for property that was R50, the minimum average lot size would be 180 sqm. Thus if Mr Faccin had spoken about the return from the development of four apartments and an orthodontic surgery, what he was saying would have been inconsistent with the material that he was providing to Mr von Thomann and to others. By contrast, on Mr Faccin's evidence, what Mr Faccin said about the effect of R50 was consistent with the material he was providing to purchasers. To my mind, that is a consideration favouring acceptance of Mr Faccin's version over Mr von Thomann's.
[47] Exhibit A27.
Secondly, a calculation of the return on investment would require information which, on the evidence, Mr Faccin did not have. On Mr von Thomann's evidence, the calculations were done by Mr Faccin; they were not a joint exercise.[48] Mr Faccin did not have information to enable the making of any estimate about the revenue that would be generated by the proposed development. Apart from anything else, Mr Faccin was in no position to make any estimate of the likely rent return on the orthodontic surgery and offices. Mr von Thomann did not give any evidence that Mr Faccin asked or that he, Mr von Thomann, provided any information about what rent would be charged for the orthodontic surgery. In this respect, it should be borne in mind that the surgery would be owned by Mr von Thomann, or an entity controlled by him, so that rent would not necessarily reflect a market rent.
[48] ts 245.
Another element of the Second Representation alleged by Mr von Thomann is that he in effect sought and obtained advice from Mr Faccin as to whether the existing dwelling on the Property was large enough to be converted to accommodate his expanded orthodontic practice. In my view, it is objectively unlikely that Mr von Thomann would have made any such enquiry of Mr Faccin, and unlikely that Mr Faccin would have expressed an opinion.
There is no apparent reason why Mr von Thomann would think that Mr Faccin was in a better position than Mr von Thomann to assess whether the dwelling which they were then inspecting was big enough to accommodate Mr von Thomann's expanded practice. The size of the existing dwelling was apparent on inspection. Even on Mr von Thomann's evidence, by that stage neither Mr Sanchez nor Mr Faccin had said much to suggest Mr Faccin had any substantial experience much less expertise in the process of property development. Paragraph 21 of Mr von Thomann's statement states that Mr Sanchez told him that Mr Faccin was experienced and knowledgeable in selling commercial properties. Mr von Thomann then says in his statement that from what Mr Sanchez said he understood that Mr Faccin had expertise in the area of commercial property development and investment. I do not accept that evidence. I think it is the product of reconstruction, many years after the event, in the light of the litigation. I do not think that what Mr Sanchez had, on Mr von Thomann's evidence, told him provided any foundation for that view.
In my view, Mr von Thomann's conduct in the month or so after he signed the Contract is a strong indicator against acceptance of his evidence about the Second Representation.
As I explain in section 3.13, I find that Mr von Thomann did not telephone Mr Faccin on 28 July 2008. Rather, Mr Faccin made some unsuccessful attempts to contact Mr von Thomann, following which Mr Faccin telephoned Mr von Thomann on or about 30 July 2008. In the course of that conversation Mr von Thomann did not say anything about returns on the investment or any other matter the subject of the alleged Second Representation.
Likewise, Mr von Thomann did not say anything about statements regarding the return on investment or other subject matter in the Second Representation when he spoke with Mr Sutherland on 31 July 2008.[49]
[49] See section 3.14.
When he received a solicitor's letter enclosing a notice of default in early August 2008, and when he received a solicitor's letter giving notice of termination of the Contract, Mr von Thomann did not respond in writing, or at all.
Had Mr von Thomann received and relied upon the Second Representation and performed the calculations over the weekend of 26 and 27 July 2008 producing vastly inferior returns, it is very unlikely that Mr von Thomann would have acted in these ways.
I also take into account the substantial consistency between the evidence of Mr Faccin and the evidence of Ms Lords as to what was said and what occurred during the inspection. It is noteworthy that that consistency extended to matters of detail raised only in cross‑examination. For example, Mr Faccin and Ms Lords both said that when Mr Faccin and Mr von Thomann went outside, Ms Lords went into her son's bedroom and was only about 2 metres away.[50] They also both referred to the trailer loads of garden refuse at the rear of the Property.[51] I am satisfied that consistency is not the result of any prior discussion between them, but rather, is an indication of the reliability of their evidence about what happened during the First Inspection.

3.9 The first offer and the counteroffer

[50] ts 79, 82, 118.

[51] ts 84, 94, 127.

Mr von Thomann rang Mr Faccin sometime between 22 July and 24 July 2008 and said that he intended to make an offer of $1.7 million. Mr von Thomann came to Mr Faccin's office and an offer was completed.[52] The offer was dated 24 July 2008. The purchase price was $1.71 million. The offer was made in Mr von Thomann's name personally.
[52] Exhibit A6.
Later that day the offer was given to the Sellers. The Sellers made a counteroffer, also dated 24 July 2008. The counteroffer replaced the purchase price with the sum of $1.83 million.[53] Mr Faccin told Mr von Thomann about the counteroffer of $1.83 million and arranged to meet with Mr von Thomann the next morning.[54]
[53] Exhibit A46.
[54] Exhibit F1 [51] ‑ [53].
The Second Inspection, dealt with in the next section, is also said to have occurred on 24 July 2008. In my view, the offer and counteroffer were completed before the alleged Second Inspection. I find that that is so because I prefer Mr Faccin's and Ms Lords' evidence on this point and because the sequence of events proposed by Mr von Thomann[55] is unlikely to have occurred after any second inspection said to have taken place after 5.00 pm.

3.10 The alleged Second Inspection: Did Mr Faccin make the Third Representation?

[55] Exhibit 1A [44] ‑ [47].

Mr von Thomann and Ms Holland say that a second inspection of the Property took place on 24 July 2008. Ms Lords, Mr Grimshaw and Mr Faccin deny that this inspection occurred.
Ms Holland's evidence includes the following:
(a)over dinner on 23 July 2008, Mr von Thomann recounted what he had been told by Mr Faccin about the ability to convert the Property so that he could conduct his expanded practice there, and about an alternative of constructing an office, consulting room and four two bedroom units;[56]
[56] Exhibit 2A [24] ‑ [30].
(b)Ms Holland said she would be interested to meet with Mr Faccin to hear what he was saying;[57]
[57] Exhibit 2A [32].
(c)a meeting was arranged for after work on 24 July 2008;[58]
[58] Exhibit 2A [35].
(d)after work on 24 July 2008, she went to the Property and met Mr von Thomann and Mr Faccin;[59]
[59] Exhibit 2A [37].
(e)she told Mr Faccin that her purpose for coming to the meeting was to hear from Mr Faccin the reasons why he thought the Property was suitable for Mr von Thomann's expanded practice and to see what rooms could be converted to accommodate his intended new staff;[60]
(f)Ms Holland remembers touring through the rooms of the house, including that the Property was generally cluttered and untidy and had features she remembers, such as a leadlight door and old fashioned mosaic wall tiles;[61]
(g)she told Mr Faccin that Mr von Thomann was keen to set up a new practice that would accommodate him, his nurse, a hygienist, a technician, another nurse, other specialists and a receptionist, and asked if the council would allow him to set up consulting rooms for that expanded practice;[62]
(h)Mr Faccin said he was sure the council would allow that because he had sold property nearby for commercial redevelopment similar to what Mr von Thomann had in mind, referring specifically to Cohen's Lifestyle Clinic;[63]
(i)Ms Holland said she understood that he had said there was an alternative of demolishing the house and constructing an office and some residential apartments. In response, Mr Faccin said that Mr von Thomann could construct four residential apartments at the back and the clinic at the front;[64]
(j)she asked Mr Faccin what the return on investment would be. Mr Faccin said he had worked out a return of about 7% ‑ 8%;[65]
(k)when she asked why the owners did not develop the Property, he said they could not afford to do so because they had too many debts;[66]
(l)there was also discussion about accessibility and parking;[67]
(m)at the end of the meeting, Mr Faccin said the Property would make a wonderful investment;[68]
(n)that night Ms Holland told Mr von Thomann he should definitely buy the Property based on what Mr Faccin had said and that she agreed with him that the Property would make a wonderful investment.[69]
[60] Exhibit 2A [39].
[61] Exhibit 2A [42] ‑ [53].
[62] Exhibit 2A [54] ‑ [55].
[63] Exhibit 2A [56] ‑ [57].
[64] Exhibit 2A [61] ‑ [62].
[65] Exhibit 2A [64].
[66] Exhibit 2A [65].
[67] Exhibit 2A [71] ‑ [73].
[68] Exhibit 2A [74].
[69] Exhibit 2A [76] ‑ [77].
Mr von Thomann's first statement makes very little reference to this inspection. He says that the three of them met and that Mr Faccin spoke mainly to Ms Holland.[70]
[70] Exhibit 1A [41] ‑ [42].
In his further witness statement of 30 July 2014, Mr von Thomann says that during the meeting Mr Faccin said:
(a)the Property was valued in excess of $1.8 million;
(b)that Mr von Thomann would be able to operate his expanded orthodontic practice from the existing dwelling because, among other things, the Property was located in an area zoned by the City of Melville for businesses such as his orthodontic practice;
(c)if he purchased the Property, he could demolish the existing house and construct an office and consulting rooms together with four residential apartments;
(d)he had experience in the area, having sold property for the purpose of conversion to commercial enterprise;
(e)if he purchased the Property for $1.8 million and if he developed the Property by demolishing the existing house and constructing an office and consulting rooms together with four residential apartments, the return on the investment would be about 7% to 8%; and
(f)if he purchased the Property for $1.8 million, it would be a wonderful investment.[71]
[71] Exhibit 1C [10].
Ms Lords, Mr Grimshaw and Mr Faccin deny that this inspection occurred. They each say that Mr Faccin was not provided with keys to the Property or with the access code for the alarm system, and was told that the Property was only to be inspected with Ms Lords present.[72]
[72] Exhibit D2 [1] ‑ [5]; exhibit E2 [6]; exhibit F2 [2] ‑ [6]; exhibit F4 [2] ‑ [3].
Ms Lords says, in effect, that a number of elements of the house described by Ms Holland are inaccurately described or did not exist, including references to curtains in a bedroom, the wooden archway feature over the entrance to the kitchen, and the tiling of the laundry and the bathroom.[73]
[73] Exhibit D2 [7] ‑ [10].
It is not necessary for me to make a finding on whether there was a Second Inspection. That is because I am satisfied that, if there was a Second Inspection, Mr Faccin did not make the alleged Third Representation.
I have, at the least, very significant doubt that there was a Second Inspection. That is so for the following reasons.
First, nothing in the evidence of the Sellers and Mr Faccin in cross‑examination provided any real basis to reject the cogent and consistent evidence of the Sellers and Mr Faccin that there was no Second Inspection, and that no inspection could have occurred without Ms Lords' knowledge because Mr Faccin did not have a key or other means of accessing the Property. Of course, this evidence must be weighed against the conflicting evidence of Ms Holland and Mr von Thomann.
Secondly, I find that in the course of their evidence, Mr von Thomann and Ms Holland significantly exaggerated Ms Holland's role in Mr von Thomann's orthodontic practice, and her role and influence in Mr von Thomann's consideration and decision‑making about the purchase of the Property. In their witness statements, they say that Ms Holland was the Practice Manager. Ms Holland says she was, 'employed as Practice Manager'.[74] Ms Holland was not an employee. She was not in the books of the business. She was not paid. She performed casual and occasional services mainly to do with marketing, and attended some conferences with Mr von Thomann. The very limited scope and irregularity of what she did means that she was not, in any ordinary sense, managing Mr von Thomann's practice. The Buyers did not produce any business card, or suggest one had existed, referring to her by the title of Practice Manager. There was no evidence that she had an email address within the domain of Mr von Thomann's practice. There was no evidence that she was referred to by the title Practice Manager in any dealings with staff or externally.
[74] Exhibit 2A [6].
The evidence of Mr von Thomann and Ms Holland paints a picture that Ms Holland wanted to satisfy herself about the appropriateness of purchasing the Property for Mr von Thomann's orthodontic practice, and that Mr von Thomann wanted her view. In my opinion, the following evidence is inconsistent with that picture. Ms Holland was not told by Mr von Thomann of the chain of offer, counteroffer and new offer as they occurred. By the time Mr von Thomann and Ms Holland had dinner on 24 July 2008, after the alleged Second Inspection, the Buyers had made an offer of $1.7 million; that offer had been rejected, the Sellers had made a counteroffer of $1.83 million and Mr Faccin had told Mr von Thomann of this. But when Mr von Thomann and Ms Holland spoke that evening, he did not mention the fact that his offer of $1.71 million was rejected, and that the Sellers had made a counteroffer of $1.83 million.[75] Mr von Thomann did not discuss what he should do having regard to the counteroffer.[76] Ms Holland was not involved, at all, in the calculations that, on Mr von Thomann's and Ms Holland's evidence, Mr von Thomann did over the weekend of 26 and 27 July 2008, and they had no discussion about it over those days.[77] Mr von Thomann did not tell her that he had been contacted by Mr Sanchez on 30 July 2008 to ask about the non‑payment of deposit, or that he had been contacted by the plaintiffs' solicitors on that topic, or that he had received a default notice, or later received a letter terminating the Contract.[78]
[75] ts 297.
[76] ts 298.
[77] ts 300 ‑ 301.
[78] ts 302.
Fourthly, a number of elements of the house as described by Ms Holland do not reflect the state of the Property in July 2008. I accept that the photographs tendered through Ms Lords[79] were taken in August or September 2008 (with the exceptions identified by Ms Lords). Ms Holland says she definitely saw curtains in bedroom two;[80] that bedroom had no windows or curtains. Ms Holland described a square wooden archway feature.[81] On examination of the photographs Ms Holland was driven to say that the shelving shown in photograph 4 of exhibit B was the square wooden archway feature she had described. See also the evidence about what Ms Holland described as mosaic tiles.[82]
[79] Exhibit B.
[80] ts 288 ‑ 289; exhibit 2A [49].
[81] Exhibit 2A [51]; ts 289 ‑ 290.
[82] Exhibit 2A [52], ts 291 ‑ 292; exhibit B photographs 7 and 8.
Fifthly, cross‑examination revealed that significant elements of Ms Holland's evidence about her discussions with Mr von Thomann were reconstruction.[83]
[83] ts 298 ‑ 301.
In any event, even if I were to find that the Second Inspection did occur, I am not satisfied that Mr Faccin made the Third Representation, and I am not satisfied that Mr von Thomann relied on anything said or done at the Second Inspection. My reasons are as follows.
The subject matter of the Third Representation is the same as the Second Representation. What I have said about the objective unlikelihood of the Second Representation applies equally to the Third Representation. Similarly, what I have said about Mr von Thomann's conduct in the month or so after he signed the Contract applies equally to the Third Representation as to the Second Representation.
Mr von Thomann's primary witness statement includes the following:
On 24 July 2008 [Ms Holland], Mr Faccin and I met at the Property.
During this meeting Mr Faccin's spoke mainly to [Ms Holland].
On 24 July 2008 in reliance upon what Mr Faccin said to me the day before [at the First Inspection] I instructed Mr Faccin to prepare an offer and acceptance document for presentation to the Sellers. [84]
[84] Exhibit 1A [41] - [43].
This does not sit well with his assertions, in his further witness statement of 30 July 2014, of many things said by Mr Faccin to him during the Second Inspection. The Second Inspection was not referred to in the original defence and counterclaim, the amended defence and counterclaim or the re‑amended defence and counterclaim. None of these pleadings made any mention of what was later referred to as the Third Representation. The Second Inspection and the Third Representation were first introduced in a pleading in the weeks leading up to trial. The substance of the Third Representation is the same as the Second Representation. In his further witness statement of 30 July 2014,[85] Mr von Thomann purported to recount things said by Mr Faccin to Ms Holland and to him, outlined at the beginning of this section of the reasons. I reject that evidence.
[85] Exhibit 1C.
The Buyers' case in defence of the Sellers' claim always relied upon representations said to have been made by Mr Faccin to Mr von Thomann at any inspection of the Property. In that context it is unthinkable that in preparation of pleadings and his primary witness statement, Mr von Thomann would have not mentioned, or would have forgotten about, substantially identical statements made to him at another inspection by Mr Faccin within a day or two after the First Inspection, and then remembered them for the first time in the weeks leading up to the trial, almost six years after the event.
For these reasons I am not satisfied that Mr Faccin made the Third Representation.

3.11 The Contract

On 25 July 2008, Mr von Thomann attended Mr Faccin's office. Mr von Thomann provided details of the superannuation fund trust which he wished to use to purchase the Property. A new offer was prepared.[86] Both parties signed the Contract on 25 July 2008.
[86] Exhibit A7.
The Contract provided for the purchase of the Property for a price of $1.785 million, with a deposit of $80,000 payable within five days.

3.12 Mr von Thomann's conduct after signing the Contract

Mr von Thomann's evidence is that:
(a)on the same day that the Contract was signed, 25 July 2008, he spoke to a planning officer at the Melville City Council and asked about developing a property.[87]
(b)he says that in the course of that discussion there was some discussion about the driveway at the Property concluding with the officer saying that it would need to be two cars wide in order for planning approval for an expanded orthodontic practice to be granted;
(c)on the weekend of 26 and 27 July 2008 he investigated the investment return using information he obtained from his investigation of nearby property values, rental income, construction costs, newspaper information, the internet and telephone calls to real estate agents and property construction companies;[88]
(d)from his investigation he came to the conclusion that the return would be only in the region of 4.5% and if there was a development of four apartments and the commercial office space, all of which were sold there would be a significant shortfall.[89]
[87] Exhibit 1A [52].
[88] Exhibit 1A [60] - [61].
[89] Exhibit 1A [63] - [68].

I do not accept this evidence in its detail. For reasons I have explained already, I do not accept that Mr Faccin had said anything about a development entailing construction of four residential apartments at the rear of the Property and an office and consulting rooms at the front. However, I think it likely that Mr von Thomann did some form of assessment or analysis of the Property over this weekend. That is consistent with, and would explain, his conduct the following week in refusing to pay the deposit and proceed with the Contract.

3.13 Conversations between Mr von Thomann and the agents

Mr von Thomann says in his evidence that on 28 July 2008, he telephoned Mr Faccin and said that he had calculated the investment returns, and arrived at the conclusion that the returns that Mr Faccin represented would not in fact be made. Mr von Thomann then said that he wanted to cancel the Contract, to which Mr Faccin said words to the effect that that was okay.[90]
[90] Exhibit 1A [73] ‑ [77].
Mr Faccin denies having spoken to Mr von Thomann on 28 July 2008, and denies saying at any time that it was okay to cancel the Contract.[91] On 28 July 2008, Mr Faccin wrote to both the Sellers and the Buyers confirming the Contract.[92] The letter to the Buyers referred to the deposit being due on 30 July 2008, requesting that it be sent to the office payable to Ace Realty Trust Account.
[91] Exhibit F2 [12] ‑ [13].
[92] Exhibits A9, A10.
Mr Faccin says that after the Contract was signed by both parties, he made various attempts to contact Mr von Thomann but he did not answer his phone. He said he first spoke to Mr von Thomann on 30 July 2008. He remembers this date because it was the date the deposit was due. Mr Faccin asked when Mr von Thomann was coming in to pay the deposit, to which Mr von Thomann said that he had changed his mind and was not going ahead with it. He warned Mr von Thomann that there would be legal consequences of not proceeding.[93] Mr von Thomann denies all of that evidence of Mr Faccin.[94]
[93] Exhibit F1 [58] ‑ [62].
[94] Exhibit 1B [36] ‑ [39].
Mr Faccin says that he asked Mr von Thomann why he did not intend to proceed with the Contract, but Mr von Thomann did not answer him. Specifically, Mr Faccin says that Mr von Thomann did not say anything about investment returns having been calculated or spoken about.[95]
[95] Exhibit F1 [63].
I accept Mr Faccin's evidence, and reject Mr von Thomann's evidence, about these events. In my view, Mr von Thomann's version of events is inherently improbable. In particular, I consider it inherently unlikely that an agent for the sellers under an unconditional contract of sale would respond to a statement that the buyers wanted to cancel the contract by saying that that was okay. Further, Mr von Thomann did not refer to this alleged conversation of 28 July 2008 in his conversations with Mr Sanchez on 30 July 2008 or with Mr Sutherland on 31 July 3008. Nor did he respond to the notice of default by stating that the agent had already agreed that the Contract could be cancelled. I also refer to my observations on credibility in section 3.1.
Mr von Thomann's evidence that he believed, based on this conversation, that the Contract was at an end, strains credibility. On Mr von Thomann's evidence, Mr Faccin said that it was okay to cancel the Contract without any communication with the Sellers. In cross‑examination he said that 'I thought he [Mr Faccin] would tell them [the Sellers]'.[96] I am satisfied that Mr von Thomann did not believe that a seller's agent could agree to terminate a contract for sale of land without speaking to the seller, and his evidence suggesting or implying such a belief detracts from his credibility.
[96] ts 237.
Following this, Mr Sanchez telephoned Mr von Thomann about the need to pay the deposit. Mr von Thomann said that he was not going ahead with it. Mr Sanchez asked Mr von Thomann why he was not going ahead. Mr von Thomann did not say anything to the effect that Mr Faccin had told him that it was okay for the Contract to be cancelled or make any reference to statements about the value of the Property, or to returns not being what they had been estimated to be by Mr Faccin.[97] Mr Sanchez was not cross‑examined on this evidence, and I accept it.

3.14 Conversation between the Sellers' solicitor and Mr von Thomann

[97] Exhibit G1 [46].

On 31 July 2008 Ms Lords made an appointment with the solicitor, Mr Michael Sutherland. She went to his office. At the office, Mr Sutherland telephoned Mr von Thomann and asked him whether he was proceeding with the Contract and paying the deposit.[98]
[98] Exhibit I [7]; exhibit D1 [62].
There was a conflict in evidence as to what Mr von Thomann said in reply. It is common ground that he said he was not going to pay the deposit or carry on with the Contract. Both Mr Sutherland and Ms Lords say that Mr von Thomann did not say anything to explain why he was not proceeding with the Contract.[99] Mr von Thomann says that during his telephone conversation with Mr Sutherland he said words to the effect that the information the agents had given him was incorrect, and the return would not be as described.[100]
[99] Exhibit I [7]; exhibit D1 [63].
[100] Exhibit 1B [18].
Ms Lords' evidence is that Mr Sutherland made the telephone call on speaker phone. Mr Sutherland's evidence was that he did not make the phone call on speaker phone and does not normally put the phone on speaker phone.[101]
[101] ts 174.
In closing submissions, the Buyers appeared to invite acceptance of Ms Lords' evidence in this respect, suggesting that the fact Mr Sutherland did not recall how the phone call was made was a ground to consider his evidence about the contents of the phone call unreliable.[102] I prefer Mr Sutherland's evidence to Ms Lords on this point. I consider it likely that he adopted his general practice of not using the speaker phone and then, at the end of the telephone conversation, informed Ms Lords of what had been said in the conversation.
[102] ts 357.
I prefer Mr Sutherland's evidence to Mr von Thomann's evidence as to whether Mr von Thomann said anything to explain why he was not proceeding with the Contract.

3.15 Notice of default and termination of the Contract

On 1 August 2008, Mr Sutherland sent a default notice and covering letter to the Buyers.[103] The notice of default demands that the Buyers pay the deposit of $80,000 within 48 hours of service of the notice, failing which the Sellers might sue for damages or terminate the Contract and sue for damages.
[103] Exhibit A47.
Mr von Thomann says that he received the letter and default notice in early August 2008.[104]
[104] Exhibit 1A [79].
Mr von Thomann did not respond in any way to the letter or notice of default.
As Mr Sutherland had ceased practising as a solicitor, the Sellers were referred to another solicitor, Mr Barry O'Toole. Mr O'Toole sent a letter dated 26 August 2008 to the Buyers terminating the Contract and reserving the Sellers' rights under the Contract, including the right to sue for damages, stating that the Sellers were proceeding to re‑sell the Property.[105]
[105] Exhibit A19.
Mr von Thomann gave inconsistent evidence on whether he received the letter of termination. In his primary witness statement he said that after receiving the letter of 1 August 2008 and the enclosed default notice he did not receive anything further until June 2012.[106] In his responsive witness statement he said that he had formed the view that it was not necessary to respond to the letter of 28 August 2008 terminating the Contract because he had already advised Mr Faccin of his position in the conversation of 28 July 2008.[107] In oral evidence in cross‑examination, Mr von Thomann said that he could not recall receiving the letter of termination.[108]
[106] Exhibit 1A [79] - [80].
[107] Exhibit 1B [19].
[108] ts 241.
I find that:
(a)Mr von Thomann received the letter of 26 August 2008;
(b)he did not respond to it in writing or at all;
(c)his failure to respond to it, and to the letter enclosing a notice of default received earlier, tells against acceptance of Mr von Thomann's evidence that Mr Faccin made the Second Representation and Third Representation to him.

The result of the findings of fact

I have found that none of the representations pleaded by the Buyers were made. I have also found that the conversation on 28 July 2008 in which Mr von Thomann said that he wanted to cancel the Contract did not occur.
The result of this is that all of the claims by the Buyers must be rejected.
Consequently, the Sellers' claim that the Buyers wrongfully repudiated the Contract and breached an essential term by failing to pay the deposit succeeds.
I turn to the question of damages.

Damages

5.1 Introduction

The Sellers claim damages of $830,000, alternatively $385,000. The sum of $830,000 reflects the difference between the price payable under the Contract and the price payable under the contract ultimately entered into by the Sellers in February 2011. The sum of $385,000 reflects the difference between the purchase price under the Contract and the market value of the Property at the date of termination in August 2008. It is an agreed fact that the value of the Property on 26 August 2008 was $1.4 million.
The Sellers claim that in order to compensate them for the Buyers' breach, and to put the Sellers in the position they would have been had the breach not occurred, damages should be awarded in the sum of $830,000. The Buyers submit that if the Sellers succeed in their claim for breach of contract, damages should be awarded in the sum of $385,000. These competing contentions invite attention to the question of the appropriate date for assessment of the Sellers' loss.
I begin by setting out the facts relating to the Sellers' attempts to resell the Property, and the ultimate sale of the Property.

5.2 Attempts to resell the Property

The Property was auctioned, as planned, on 20 August 2008. The only bid received was a vendor bid of $1.5 million. The Property was passed in. The Sellers had determined that the reserve price was $1.6 million.[109]
[109] Exhibit A17; exhibit D1 [69] ‑ [71]; exhibit E1 [32] ‑ [34]; exhibit G1 [49] ‑ [56].
From then, Mr Faccin, on behalf of Ace Realty, continued to market the Property.
The next day, on 21 August 2008, the Property was advertised on the internet for $1.667 million.[110]
[110] Exhibit A48.
Advertisements on realestate.com.au continued from 21 August 2008 until the Property was sold.[111]
[111] Exhibit D1 [76].
The Property was advertised in the real estate section of the West Australian newspaper from then until February 2011. With the exception of a period of about a month in December 2010, advertisements were placed at least weekly.[112]
[112] Exhibit A30.
The evidence does not directly identify the price at which the Property was advertised from August 2008 until the middle of 2010. Selling agency agreements entered into on 20 November 2009 and on 1 May 2010 each identify an asking price of $1,495,000.[113] That supports an inference that between those dates at least the asking price was $1,495,000. When the advertised price was first reduced to that sum is not clear on the evidence.
[113] Exhibit A21; exhibit A22.
By July 2010 the asking price had been reduced to $1,295,000.[114]
[114] Exhibit A28.
In early 2011, the asking price was reduced to $1,195,000 and then $1,175,000.[115]
[115] Exhibit A28; see also exhibit A26.
The Sellers also personally produced many copies of a flyer which they delivered to professionals in the general area.[116]
[116] Exhibit D1 [78] ‑ [81]; exhibit E1 [39] ‑ [42].
Until February 2011, the Sellers did not receive any offers for the Property.[117]

5.3 Resale of the Property

[117] Exhibit E1 [43].

On 10 February 2011, the Sellers entered into a contract (the Resale Contract) to sell the Property to purchasers for $955,000.[118] That sale settled on 16 March 2012.[119] The 12‑month settlement period in that contract was the result of a request by the purchasers.[120]
[118] Exhibit A32.
[119] Exhibit A31.
[120] ts 96, 106, 129.
I turn to the legal principles relevant to the date of assessment of a plaintiff's loss and damage.

5.4 Legal principles

5.4.1 The object of contract damages

The object of an award of damages for breach of contract is well known. Where an innocent party sustains a loss by reason of a breach of contract, damages are awarded to that party so that it is placed in the same position, as far as money can do, as if the contract had been performed.[121]

5.4.2 Date of assessment of damages

[121] Robinson v Harman (1848) 1 Ex 850, 855; (1848) 154 ER 363, 365 (Parke B); Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54; (1991) 174 CLR 64, 80 (Mason CJ & Dawson J), 98 (Brennan J), 134 (Toohey J), 148 (Gaudron J), 161 (McHugh J); Tabcorp Holdings Ltd v Bowen Investments Pty Ltd [2009] HCA 8; (2009) 236 CLR 272 [13].

The general rule is that damages are to be assessed at the date when the cause of action arises. But this is not an inflexible rule. Damages will be assessed at a different date if that is necessary to ensure just and adequate compensation.[122] Thus, the date of assessment 'rule' is subject to the compensation principle; the date of assessment must be fixed so as to give effect to the compensation principle.
[122] Johnson v Perez [1988] HCA 64; (1988) 166 CLR 351, 355 ‑ 356 (Mason CJ), 367 (Wilson, Toohey & Gaudron JJ), 370 ‑ 371 (Brennan J), 380 (Deane J); Hungerfords v Walker [1989] HCA 8; (1989) 171 CLR 125, 146 (Mason CJ & Wilson J).
In a case where a defendant's fraud causes a plaintiff to acquire an asset, the date of transaction rule - that damages are the difference between the price paid and the value of the asset at the date of transaction - is 'only a means of giving effect to the overriding compensatory rule'[123] and is 'simply a second order rule applicable only where the valuation method is employed'.[124]
[123] HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd [2004] HCA 54; (2004) 217 CLR 640 [63].
[124] Smith New Court Securities Ltd v Scrimgeour Vickers (Asset Management) Ltd [1997] AC 254, 284, cited with approval in HTW Valuers v Astonland [63].
As these statements make clear, questions of the date of assessment may reflect the deeper question of the proper identification of the plaintiff's loss.
As Mason CJ explained in Johnson v Perez,[125] where there is a market in which the injured party can obtain a replacement, the rationale behind the rule 'lies in the inquiry - at what date could the plaintiff reasonably have been expected to mitigate the damages by seeking an alternative to performance of the contractual obligation?'.[126]
[125] Johnson v Perez (357), referring to Oliver J in Radford v De Froberville [1977] 1 WLR 1262, 1285; [1978] 1 All ER 33, 56.
[126] See also Golden Strait Corporation v Nippon Yusen Kubishika Kaisha [2007] 2 AC 353 [79] (Lord Brown).
Mason CJ further explained that the requirement of mitigation can in turn be explained in part by notions of fairness to the party at fault.[127] Once the injured party learns of the breach, he or she can minimise the loss for which the other will be required to compensate by immediately purchasing a replacement.[128]
[127] Johnson v Perez (357 ‑ 358).
[128] Johnson v Perez (358); Vouzas v Bleake House Pty Ltd [2013] VSC 534 [215] ‑ [216]; see also McGregor on Damages (19^th ed, 2014) [9 ‑ 039].
In any sphere of damages, care must be taken to avoid 'treating rules which constitute useful guidance in the ascertainment of damages as rigid rules of universal application, instead of treating them as prima facie rules which may be displaced or modified whenever it is necessary to do so in order to achieve a result which provides reasonable compensation for a breach of contract without imposing a liability upon the other party exceeding that which he could fairly be regarded as having contemplated and been willing to accept'.[129]
[129] Wenham v Ella [1972] HCA 43; (1972) 127 CLR 454, 466 (Walsh J).
The rule that in a case of supply of defective goods, the prima facie measure is the difference between the value of the goods as contracted and the value of what was supplied reflects a notional transaction where the buyer sells the defective goods on the market and purchases the goods as contracted.[130]
[130] Tabcorp Holdings v Bowen [13].
In my view that is an illustration of a broader proposition: that the general rule as to date of assessment reflects a notional transaction by which the plaintiff goes into the market, after terminating the contract, and, if the seller, sells the property, or, if the buyer, buys a substitute. Only the difference between contract price and market value has been lost because, it is assumed, the plaintiff can go into the market and (if the seller) realise the market value or (if the buyer) acquire a substitute at market price. Thus, if there is a market for the property, and the seller makes a choice not to resell, damages will generally be assessed at the date of termination, regardless of whether the market price rises or falls.[131] To the extent that the facts are contrary to this assumption, there may well be good justification for departing from the general rule as to date of assessment.
[131] Jamal v Moolla Dawood Sons & Co [1916] 1 AC 175, 179; Golden Strait Corp [79]; BGL Operations Pty Ltd v Allied Express Transport Pty Ltd [2011] NSWCA 41 [58] ‑ [59] (Macfarlan JA, Giles & Campbell JJA agreeing); Statewide Developments Pty Ltd v Higgins [2011] NSWCA 35 [71] ‑ [73] (Sackville AJA, Macfarlan & Handley JJA agreeing).
So, for example, as the High Court observed in Tabcorp v Bowen,[132] in a case of supply of defective goods, where the contract is not for the sale of a marketable commodity, selling the defective item and purchasing an item corresponding with the contract is not possible. In such cases, diminution in value, assessed at the date of termination, does not restore the innocent party to the position as if the contract had been performed.
[132] Tabcorp Holdings v Bowen [13].
In a claim for loss of bargain damages, the critical date in applying the general rule is the date of termination, rather than the date of breach.[133]
[133] Luxer Holdings Pty Ltd v Glentham Pty Ltd [2007] WASCA 209; (2007) 35 WAR 254 [33] (Buss JA), [136] (EM Heenan AJA).
In the context of a claim by a seller of land for loss of bargain damages consequent upon non‑performance by a buyer, the general rule is that damages are the difference, if any, between the contract price and the market value at the time the contract was terminated or breached.[134]
[134] Laird v Pim (1841) 7 M & W 474, 478 (Parke B); Carpenter v McGrath (1996) 40 NSWLR 39, 59 (Sheller JA); Palasty v Parlby [2007] NSWCA 345 [43] ‑ [45] (Mason P, Tobias JA & Handley AJA agreeing); Castle Constructions Pty Ltd v Fekala Pty Ltd [2006] NSWCA 133; (2006) 65 NSWLR 648 [11], [36], [53] (Mason P, Beazley JA agreeing); Luxer Holdings v Glentham [50] (Buss JA); McGregor on Damages (19^th ed, 2014) [25‑036].
The general rule, that damages are assessed at the date of breach or termination, must be departed from whenever it is necessary to provide adequate compensation. Apart from that, it is not possible to state, in a definitive and comprehensive way, the circumstances in which it will be appropriate to depart from the date of breach in assessing damages. A number of examples have been given in the cases.
Departure from the date of breach rule will often be appropriate where there is no market for the goods or property the subject of the contract.[135]
[135] Johnson v Perez (357); Smith New Court (266); HTW Valuers v Astonland [66]; Vieira v O'Shea [2012] NSWCA 21 [45] (Basten & Meagher JJA, Handley AJA agreeing).
In cases where the defendant's breach causes the plaintiff to acquire an asset that it would not have acquired, departure from the date of acquisition rule will generally be justified if the plaintiff does not discover until sometime after acquisition the matter which meant that the asset would not have been acquired, or if the plaintiff was for some other reason 'locked in' to holding the asset.[136]
[136] Smith New Court (265 ‑ 267); HTW Valuers v Astonland [63], [66]; Vieira v O'Shea [45].

There is English authority that a reasonable time must be allowed, after termination, for the plaintiff to go into the market and make a substitute transaction, and the relevant market price is the price at the end of that period.[137]
[137] Golden Strait Corp [34] (Lord Scott), [80] (Lord Brown).
There are indications in some cases that if a seller demonstrates that it took all reasonable steps to sell the property and was unable to do so, for a substantial period, or at all, this may justify departure from the general rule.[138]
[138] BGL Operations Pty Ltd v Allied Express Transport Pty Ltd [58] ‑ [59]; Statewide Developments Pty Ltd v Higgins [71] ‑ [73]; and see the cases discussed in the balance of this section of these reasons.
In HTW Valuers v Astonland, the plaintiff took advice from valuers before purchasing a shopping arcade. The advice was misleading, negligent and in breach of contract. Although damages were not ultimately assessed on this basis, an alternative approach to damages invited by the plaintiff received approval from the High Court. By the time of trial, the plaintiff still owned the shopping centre because 'despite its best efforts, it has not succeeded in effecting a sale'.[139] The plaintiff contended that it was entitled to recover the purchase price it paid less the value of the shopping centre at the time of trial. The High Court stated that there was merit in this approach. The court said, in effect, that where a plaintiff cannot bring into account the proceeds of sale because it has acted reasonably in retaining the asset, or has, despite its best efforts, failed to effect a sale, it would be appropriate to deduct the value of the asset at the time of trial from the purchase price in order to assess the plaintiff's damages.[140] The court noted that the trial judge had found that the decline in value of the shopping centre had no cause other than the subject matter of the valuers' breach of contract.[141]
[139] HTW Valuers v Astonland [64].
[140] HTW Valuers v Astonland [63] ‑ [67].
[141] HTW Valuers v Astonland [65].
In Vieira v O'Shea, in January 2007 the appellant bought a horse on the advice of the respondent. It was held that that advice was given in breach of contract. The trial judge assessed damages on the basis of the difference between the amount paid by the appellant and the value of what he acquired as at 31 March 2009. The respondent cross‑appealed against that assessment, contending that the comparison should have been between the price paid and the value at the time of purchase, or alternatively the value as at July 2007 when the appellant became aware of the horse's condition. The Court of Appeal rejected that contention, for the following reasons:
In this case, as the primary judge held at [172], the appellant did not become aware of the horse's condition until July 2007. At that time the horse was undergoing surgery and until its condition settled down the appellant was effectively 'locked in'. The primary judge's assessment that it was unreasonable to expect the appellant to have sold before March 2009 has not been shown to be an error. By that time the appellant had also incurred expenditure in relation to the horse's condition. Accordingly, to compensate the appellant fairly it was necessary to assess damages as at March 2009 and to include in that compensation the additional expenditure incurred to that time.[142]
[142] Vieira v O'Shea [46].
The English Court of Appeal has recently said that if the buyer under a contract of sale of land defaults, and the seller attempts to resell and, notwithstanding the seller's reasonable endeavours, the resale process takes years, the seller is generally entitled to damages assessed as the difference between the two contract prices. In Hooper v Oates[143] the plaintiffs agreed to sell their property to the defendant. The defendant buyer defaulted and the sellers terminated in July 2008. The sellers then proceeded to attempt to resell the property over the course of the next three years, apart from a period of six months when they leased the property to a tenant. In the middle of 2011 the sellers gave up on their attempts to resell and moved back into the property. By then, the value of the property had fallen substantially. The Court of Appeal held that damages were correctly assessed by reference of the difference between the contract price and the value of the property at the date when they ended their efforts to resell and returned to the property.[144]
[143] Hooper v Oates [2013] EWCA Civ 91; [2014] Ch 287.
[144] Hooper v Oates [40].
In the course of his judgment, Lloyd LJ (with whom Leveson and Toulson LJJ agreed) said that specific rules such as the breach date rule are individual examples of how the general principle in Robinson v Harman[145] is to be carried into effect of putting the innocent party in the same position as it would have been if the party in breach had performed. That reflects the accepted position in Australia. He also observed that, unlike some commodities or securities, land cannot be immediately realised, and how long is required will depend in part on economic circumstances.[146]
[145] Robinson v Harman (1848) 1 Ex 850; (1848) 145 ER 363.
[146] Hooper v Oates [34].
Lloyd LJ expressed the general position when a disappointed seller attempts to resell, as follows:
If he [the seller] resells, the buyer may be able to show that, in so doing, the seller failed to take reasonable steps to mitigate his loss, for example by taking too long, or failing to follow proper professional advice, or in some other way. Absent any feature of that kind, the eventual resale price is likely to be the figure to be set against the contract price for assessment of the damages, not because it represents the market value at the date of the breach, but because it shows what loss the seller has suffered, uncomplicated by issues of remoteness or failure to mitigate. If the property market has declined during that time, it is of no avail for the defaulting buyer to say that this should not be laid at his door. If he had completed the contract, he would have suffered that decline in value, so this is part of the loss for which the seller needs to be compensated.[147]
[147] Hooper v Oates [38].
In South Sky Investments Pty Ltd v Luppi,[148] Daubney J assessed damages in a claim by a seller of land against a defaulting purchaser by reference to the difference between the contract price and the net market value of the property at the time of trial. In that case, the seller had not resold the property.
[148] South Sky Investments Pty Ltd v Luppi [2012] QSC 27.
In my opinion, both principle and this review of the authorities support the proposition that where a buyer of land defaults and the seller terminates and puts the property on the market, if, despite the seller taking all reasonable steps to sell, no resale is effected until a substantial period later, even years, the seller's loss will generally be represented and reflected by the difference between the two contract prices.

5.4.3 Remoteness

The principle in Robinson v Harman is subject to the rule that a loss must not be too remote. In Hadley v Baxendale[149] it was said that damages may be awarded if the loss is 'such as may fairly and reasonably be considered either [as] arising naturally, i.e., according to the usual course of things from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it'.
[149] Hadley v Baxendale (1854) 9 Exch 341, 354; (1854) 156 ER 145, 151 (Alderson B).
In Koufos v C Czarnikow Ltd (The Heron II)[150] Lord Reid restated the rule in the following terms, as requiring:
[O]n the information available to the defendant when the contract was made, he should, or the reasonable man in his position would, have realised that such loss was sufficiently likely to result from the breach of contract to make it proper to hold that the loss flowed naturally from the breach or that loss of that kind should have been within his contemplation.
[150] Koufos v C Czarnikow Ltd (The Heron II) [1969] 1 AC 350, 385.
This statement has been adopted in a number of judgments in the High Court.[151]
[151] Wenham v Ella (471 ‑ 472) (Gibbs J); Burns v MAN Automotive (Aust) Pty Ltd [1986] HCA 81; (1986) 161 CLR 653, 667 (Wilson, Deane & Dawson JJ); Commonwealth v Amann Aviation Pty Ltd (92) (Mason CJ & Dawson J), (99) (Brennan J); Baltic Shipping Co v Dillon [1993] HCA 4; (1993) 176 CLR 344, 368 (Brennan J); European Bank Ltd v Evans [2010] HCA 6; (2010) 240 CLR 432 [13].
It is not necessary that the parties, or in particular the contract breaker, contemplate the extent of damage which in fact occurs. Rather, it is enough that the kind or type of damage be contemplated.[152] The precise chain of events giving rise to the damage need not have been contemplated as long as the parties contemplated the kind or type of loss or damage suffered.[153]

5.5 How should damages be assessed in this case?

[152] Alexander v Cambridge Credit Corp Ltd (1987) 9 NSWLR 310, 365 (McHugh JA); Flamingo Park Pty Ltd v Dolly Dolly Creation Pty Ltd (1986) 65 ALR 500, 521 (Wilcox J); National Australia Bank Ltd vNemur Varity Pty Ltd [2002] VSCA 18 [44] (Batt JA); The Achilleas; Transfield Shipping Inc v Mercator Shipping Inc [2008] UKHL 48 [21]; [2009] 1 AC 61 (Lord Hoffmann); Seddon N, Bigwood R and Ellinghaus M, Cheshire & Fifoot Law of Contract, (10^th Aust ed, 2012) [23.39].

[153] Cambridge Credit (365); Cheshire & Fifoot [23.39].

In my view, for the reasons that follow, to assess the Sellers' loss by reference to the difference between the Contract price and the market value in August 2008 would not achieve the basic object of compensation for breach of contract - to put the Sellers in the position as if the Contract had been performed. The Sellers' loss in this case is the difference between the purchase prices under the two contracts.
But for the Buyers' breach, the Sellers would have realised the Property in August 2008 and received the Contract price. Instead, they received the sum of $955,000 in March 2012. The Sellers kept the Property on the market at all times from August 2008 until it was eventually sold in February 2011. They attempted to realise the Property, but were unable to do so until the sale in 2011.
I am satisfied that the Sellers made all reasonable efforts to sell the Property. The Property was marketed thoroughly and regularly throughout the period in question. The Sellers did not refuse any offer for the Property - none was received until February 2011. Over time, the Sellers dropped their asking price.
In hindsight, the Sellers advertised the Property during the first 12 months of the reselling period, from August 2008 to August 2009, at a price that was distinctly above the market value of the Property. It is an agreed fact that the market value in August 2008 was $1.4 million, and on 20 February 2009 and 26 August 2009 it was $1.3 million. However, advertising an asking price that is above the market price is not, in itself, unreasonable. A seller, acting reasonably, may wish to leave room to negotiate. Further, and in any event, market value is a matter on which minds can and often do differ. It may be inferred that the Sellers were acting on the advice of their agents in fixing an asking price.
Further, I note that Mr Faccin was informed by a potential purchaser in about mid‑2009 that the purchaser was prepared to pay $1.45 million for the Property but the bank would not provide finance, so no offer proceeded.[154]
[154] Exhibit F1 [75].
The Buyers pleaded that the Sellers failed to mitigate their loss, but they abandoned that allegation before trial.[155] The Buyers did not lead any evidence, or make any submission, that the Sellers acted unreasonably in the conduct of their attempts to resell the Property generally, or, more specifically, in setting the advertised asking price.
[155] Defendants' outline of submissions [27].
The expert evidence of Mr Garmony may provide some explanation for the difficulties experienced by the Sellers in their attempts to resell the Property. The six to 12 months following the termination of the Contract saw real estate prices fall. It was a period of considerable uncertainty for developers and investors, resulting in minimal sales of development and investment properties during that period.[156] There were no sales of similar zoned properties in the same locality in the period August 2008 to May 2009.[157]
[156] Exhibit 4, 32.
[157] Exhibit 4, 32.
But for the Buyers' breach, the Sellers would not have been exposed to the difficult market conditions existing from August 2008 onwards, with limited demand and falling prices.
In a sense, the Sellers were locked in to the Property by the Buyers' breach in that, after termination, the Sellers made every effort to resell the Property, but were unable to do so until February 2011.
For these reasons, I find that in order to put the Seller in the position they would have been had the Contract been performed, their damages must be assessed as the difference between the Contract price and the Resale Contract price. The difference between the Contract price and the market price of the Property in August 2008 does not reflect their loss, because, despite their best efforts, they were unable to realise the Property on the market until two and a half years later.
In closing submissions, the Buyers' counsel submitted that, if I was persuaded to assess damages by reference to the Sellers' loss assessed at February 2011, rather than at the date of termination, I should not award the full difference between the price under the Contract and the price under the Resale Contract of February 2011. Rather, I should award the difference between the price under the Contract and the market value as at February 2011 which, in the opinion of Mr Garmony, was $1.2 million.
I do not accept Mr Garmony's evidence that as at February 2011, the Property was worth $1.2 million. In making his assessment of value, Mr Garmony was aware of the Resale Contract entered into by the Sellers in February 2011. Mr Garmony's report makes no reference to the price under that contract in assessing the question of the value of the Property as at February 2011. Nothing in Mr Garmony's report or evidence in cross‑examination satisfactorily explains why he made no reference to it. Mr Garmony said, in cross‑examination, that an actual sale of the Property to be valued is 'something you should be considering'.[158] But he did not mention it in assessing market value in his report.
[158] ts 318.
In cross‑examination Mr Garmony also expressed the view that the sale of the Property in February 2011 at $955,000 in an arms‑length transaction was a below market value transaction, assessed by reference to sales at that point in time.[159] By reference to his report, he said that that his view of market value was founded on two sales.[160] In my view, Mr Garmony has not convincingly or satisfactorily explained his opinion that the sale of the Property was below market value when his view of market value appears to be derived simply from two comparable sales. There is no explanation as to why the two comparable sales are given greater weight, as they evidently are in Mr Garmony's reasoning, than the sale of the property in question. Nor did he explain why he would derive a market value for the Property from two sales of other properties, without regard to the Resale Contract, and then assess the price under the Resale Contract against that market value.
[159] ts 321.
[160] ts 322; exhibit 4, 26.
For these reasons, I would assess the Sellers' damages in the sum of $830,000, being the difference between the Contract price of $1,785,000 and the Resale Contract price of $955,000.
The Buyers did not plead or submit that the damages claimed by the Sellers were too remote. In my view, the Sellers' claim is not one for consequential loss. Rather, properly identified, the Sellers' primary loss is the difference between the purchase price under the two contracts. In any event, it is not necessary that the parties contemplate the extent of the loss suffered, only the kind of loss. Loss to the Sellers resulting from a fall in the market was within the parties' contemplation as a not unlikely prospect.

Conclusion

For these reasons:
(1)I am not satisfied that the Sellers' agents made any of the pleaded representations;
(2)consequently, the Sellers succeed in their claim of breach of the Contract; and
(3)I assess damages at $830,000.
I will hear from the parties as to the orders to be made and as to costs.