Mandurah Moorings Pty Ltd (Receivers and Managers Appointed) v Symbol Nominees Pty Ltd [No 2] - [2015] WASC 240

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: MANDURAH MOORINGS PTY LTD (Receivers & Managers Appointed) -v- SYMBOL NOMINEES PTY LTD [No 2] [2015] WASC 240

CORAM: MASTER SANDERSON

HEARD: 30 JUNE 2015

DELIVERED : 3 JULY 2015

FILE NO/S: CIV 2220 of 2012

BETWEEN: MANDURAH MOORINGS PTY LTD (Receivers & Managers Appointed)
First Plaintiff
STRZELECKI HOLDINGS PTY LTD
Second Plaintiff
AND
SYMBOL NOMINEES PTY LTD
Defendant

Catchwords:

Assessment of damages - How interest to be calculated when default on purchase of land - Turns on own facts

Legislation:

Supreme Court Act 1935 (WA)

Result:

Interest under s 32 of the Supreme Court Act 1935 (WA) allowed

Category: B

Representation:

Counsel:

First Plaintiff                  :     Mr K J Mony De Kerloy
Second Plaintiff             :     No appearance
Defendant:     Mr J N D'Angelo

Solicitors:

First Plaintiff                  :     Herbert Smith Freehills
Second Plaintiff             :     No appearance
Defendant:     D'Angelo Legal

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

Nil

MASTER SANDERSON: This is an assessment of damages. It raises a short point about the way in which interest is to be calculated after a default by a purchaser under a contract for sale of land.
There is no dispute between the parties as to the relevant facts. They can be summarised as follows. The defendant entered into a contract to purchase Apartment 6 of The Moorings, a unit in a property development in Mandurah, on 21 October 2011. The first plaintiff was the vendor of the property. The contract required the defendant to pay a deposit of $100,000 within three days of acceptance. The deposit was never paid. After issuing a notice of default on 9 January 2012 the first plaintiff served on the defendant a notice of termination terminating the contract. The plaintiffs thereupon issued these proceedings and applied for summary judgment. On 8 November 2012 I granted judgment. I determined notices were issued and properly served by the first plaintiff and there was no defence to the first plaintiff's claim. I ordered there should be judgment for the first plaintiff with damages to be assessed.
Under the contract, settlement on the property was due on 1 December 2011. The Moorings comprises 40 luxury apartments many of which were sold 'off the plans' during the height of the property boom in Mandurah in late 2006. The property market in the Peel Region slowed in 2007 and went into decline throughout 2008 and the start of 2009. The market for luxury residential apartments in the broader Peel Region showed sharp retractions in values or achievable sale prices from the late 2006 market peak.
During 2011 there were only two apartments in The Moorings which had been sold on an arm's length basis. Apartment 37 sold on 3 February 2011 and Apartment 7 sold on 11 July 2007. There were two other apartments sold being Apartments 33 and 20 which had been sold to the builder and the developer's consultant on 26 October 2011 and 3 November 2011 respectively.
During 2012 there had been no arm's length sales of any apartments in The Moorings. The only apartment which had been sold was Apartment 39 which had been sold to the developer on 1 February 2012.
Following the termination of the contract in January 2012 the property was immediately put back on the market for a comparable price. It and the other remaining apartments in The Moorings were actively marketed continuously from that date until the appointment of receivers and managers to the first plaintiff in November 2012. No offers were received.
Following their appointment the receivers and managers reappointed the O'Farrell Property Group to market the apartments. They were actively marketed until 25 September 2013. No prices were set by either the receivers or the O'Farrell Property Group during this selling campaign. The property was marketed on the basis that the receivers and managers would consider offers for the property in the range of early to mid $1 millions. The aim was to allow the market to establish its own level. Still no offers were received.
The receivers and managers then decided to change agents. On 26 September 2013 the Di Prinzio Property Group was engaged to market all of the unsold apartments in The Moorings. The advertising campaign was ramped up. Television advertisements were used. The evidence discloses the marketing campaign was targeted and relentless. There is no doubt nothing more could have been done.
On 5 February 2014 the receivers and managers accepted an offer of $1,050,000 for the apartment. This was the only offer received since the contract was terminated. Settlement occurred on 28 March 2014.
Between their appointment and the date of sale of the property the receivers and managers obtained three written valuations of the property from a licenced valuer, Mr Paul Timms of LMW Hegney. These valuations were dated 11 December 2012, 27 March 2013 and 10 October 2013. In the first of these valuations Mr Timms put the value of the property at $1,200,000. His opinion remained unchanged as at March 2013. In October 2013 he valued the property at $1,150,000. The cost of remarketing the property was $7,149.
The defendant did not dispute the first plaintiff was entitled to damages. It agreed those damages should include the difference between the original sale price and the eventual sale price together with the cost of remarketing the property. In other words there was no dispute between the parties the first plaintiff was entitled to damages of $557,149. What was at issue between the parties was the way in which interest ought be calculated.
The first plaintiff says they are entitled to interest on $1,600,000 from 1 December 2011 until 28 March 2014. That is a period of 848 days. The first plaintiff uses an interest rate of 6% per annum pursuant to s 32 of the Supreme Court Act 1935 (WA). That gives an amount of $223,035.61. Interest is then claimed on $550,000 from 29 March 2014 until the date of judgment. That figure has not been calculate precisely but will amount to something more than $8,400.
It is one of the curious aspects of the joint form of general conditions for the sale of land that an interest rate is not specified when a buyer defaults. Clause 24 deals with what is to become of interest earned on a deposit paid by a defaulting purchaser but contains no provision of general application in the case of buyer default.
In that situation the first plaintiff has resorted to s 32 of the Supreme Court Act. That section is in the following terms:
32.Pre judgment interest, Court may order
(1)In any proceedings for the recovery of any money (including any debt or damages or the value of any goods), the Court may order that there shall be included, in the sum for which judgment is given, interest at such rate as it thinks fit on the whole or any part of the money for the whole or any part of the period between the date when the cause of action arose and the date when the judgment takes effect.
(2)This section does not -
(a)authorise the giving of interest upon interest; or
(aa)apply in relation to any general damages in respect of pain and suffering or the loss of the enjoyment or of the amenities of life awarded in relation to personal injury or the death of a person; or
(b)apply in relation to any debt upon which interest is payable as of right whether by virtue of any agreement or otherwise; or
(c)affect the damages recoverable for the dishonour of a bill of exchange.
(2a)In subsection (2)(aa) personal injury includes any disease and any impairment of a person's physical or mental condition.
As I understand the defendant's submissions it is not suggested interest pursuant to s 32 is inappropriate. Indeed the first plaintiff relied on an affidavit of Mark David Englebert sworn 29 June 2015 which, has as an annexure, details of the funding agreements entered into by the first plaintiff to allow construction of The Moorings. Because the funding agreement covered all of the apartments that were constructed it is somewhat difficult to work out just what amount of interest was paid with respect to Apartment 6. That being so it seems to me resort to s 32 is the fairest way to approach the matter.
What the defendant says is that interest ought only be calculated on $550,000 being the different between the price offered by the defendant and the additional sale price. That, they say, is the proper measure of damages.
In my view there is no substance in that submission. The fact is if the contract for sale of Apartment 6 had been honoured the first plaintiff would have got $1,600,000 on 1 December 2011. In fact they did not get any amount until March 2014. They were kept out of their money for that period and consequently they ought have interest on that sum for the whole of the period. That is the only way they can be adequately compensated. Of course, after the sale of the property they are only entitled to interest on the difference between the original contract price and the sale price - that is, $550,000.
In summary then I am satisfied the first plaintiff has made out the claim for damages. Subject to finalising the figures there will be judgment as sought by the first plaintiff.