Murphy v MITANOVSKI - [2012] SASC 158

SUPREME COURT OF SOUTH AUSTRALIA
(Magistrates Appeals: Civil)
MURPHY v MITANOVSKI
[2012] SASC 158
Judgment of The Honourable Justice White
13 September 2012
MAGISTRATES - APPEALS AND REVIEW - SOUTH AUSTRALIA - APPEAL TO SUPREME COURT
CONVEYANCING - BREACH OF CONTRACT FOR SALE AND REMEDIES - VENDOR'S REMEDIES - DAMAGES
DAMAGES - GENERAL PRINCIPLES - MITIGATION OF DAMAGES - PLAINTIFF'S DUTY TO MITIGATE
Magistrate dismissed appellant's claim for damages for breach of contract - appellant contracted to sell her property to the respondents for $782,000 - respondents failed to settle - appellant terminated contract and retained the $10,000 deposit - respondents renewed their offer to buy for original purchase price - appellant refused offer and later sold property at auction for $750,000 - appellant sought to recover difference and other costs incurred - appeal against Magistrate's dismissal.
Whether appellant proved that her loss was the difference between the contract price and the auction price - whether appellant failed to mitigate her loss by refusing respondents' renewed offer - whether Magistrate erred in reversing onus of proof - whether appellant entitled to recover costs of bridging finance - whether any entitlement to damages of the appellant exceeds the retained deposit.
Held: appeal dismissed - appellant proved that her loss was the difference between the contract price and the auction price - appellant did not fail to mitigate her loss by failing to accept the respondents' renewed offer at the time it was made - Magistrate erred in reversing the onus of proof for mitigation - appellant failed to mitigate her loss when one month later she decided to sell by auction without enquiring whether the respondents were still willing to pay $782,000 - appellant's entitlement to damages does not exceed the amount of the retained deposit.
Carpenter v McGrath (1996) 40 NSWLR 39; Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64; Electricity Trust of South Australia v O'Leary (1986) 42 SASR 26; Hadley v Baxendale (1854) 9 Ex 341; Ideal Phonograph Co v Shapiro (1920) 58 DLR 302; Johnson v Perez (1988) 166 CLR 351; Payzu Ltd v Saunders [1919] 2 KB 581; Statewide Developments Pty Ltd v Higgins [2011] NSWCA 35; Watts v Rake (1960) 108 CLR 158; Wenham v Ella (1972) 127 CLR 454, considered.

MURPHY v MITANOVSKI
[2012] SASC 158
Magistrates Appeal

WHITE J. On 14 February 2010 the appellant agreed to sell her home at Glenelg East to the respondents for $782,000. However, the respondents failed to settle on the contract. Subsequently, the appellant served a notice of termination on the respondents and retained their deposit of $10,000.
In October 2010 the appellant again advertised the home for sale and sold it at auction on 20 November 2010 for $750,000.
In the proceedings in the Magistrates Court the appellant sought to recover the difference of $32,000 together with the costs involved in the resale and the costs of the bridging finance which she had taken out in order to complete her purchase of a replacement property. As the aggregate of these sums exceeded the jurisdictional limit of the Magistrates Court, the appellant limited her claim to the sum of $40,000.
A Magistrate dismissed her claim entirely. The appellant appeals against that dismissal.
Background
As already noted, on 14 February 2010 the appellant contracted to sell her family home to the respondents for $782,000. They agreed upon a long settlement, with completion not due until 2 July 2010. Unfortunately, the respondents did not settle at that time, being apparently unable to do so.
In anticipation of settlement proceeding on 2 July 2012, the appellant entered into a contract to buy a replacement property. Settlement on that contract was also due on 2 July 2010. When the respondents did not settle, the appellant took out bridging finance so as to be able to complete her own contract on 30 July 2010. She incurred costs in doing so.
The appellant served a notice requiring the respondents to complete the contract on 20 July 2010 and again on 30 July 2010, but on each occasion the respondents failed to do so. Subsequently, on 27 August 2010, the appellant gave notice of termination of the contract and retained the deposit of $10,000.
At about the same time, the appellant let her home to some tenants, and there was other evidence that the appellant had withdrawn the property from the market.
Some two months later, the appellant advertised the property again with a different agent. An auction was held on 20 November 2010. The appellant sold her property at that auction to a different purchaser for $750,000 with settlement occurring on 17 December 2010.
The Magistrate dismissed the appellant’s claim for the difference between the two sale prices. The Magistrate held that the appellant had not established that she had suffered any loss, or at least a loss exceeding the amount of the retained deposit of $10,000. The Magistrate also made other findings which suggested that he considered that the appellant had acted unreasonably in not accepting an offer made by the respondents on 22 September 2010 to purchase the home for $782,000 provided that credit was given to them for the previous deposit of $10,000 and with settlement to occur on 12 November 2010.[1] The Magistrate’s conclusions appear in the following passages:
[31]… I accept Mr Lazarevich’s general submissions … that the evidence given by Mrs Murphy is insufficient to make findings and in the absence of expert evidence the plaintiff has failed to prove that the market value at the date of the breach was less than the contract price.
…
[37]I accept Mr Lazarevich’s submission that there is insufficient evidence to establish the loss. The offer should have been accepted. In my view the plaintiff was poorly advised and probably poorly represented. She should have been made aware that she could accept the plaintiff’s offer but reserve her position as to costs in the interim.
[38]I accept Mr Lazarevich’s submission that the plaintiff had failed to establish that she acted reasonably in failing to accept the offer of $782,000 made on 22 September 2010. I accept Mr Lazarevich’s submission that although the plaintiff theoretically has an entitlement to damages for the losses sustained in having to again place the property on the market, the evidence before the Court is insufficient to substantiate that any loss by failure to settle would exceed $10,000 – being the amount of the deposit retained.
Aspects of these passages suggest that the Magistrate considered that, after making allowance for the retained deposit, the appellant had not established any loss at all. Other aspects suggest that the Magistrate considered that the appellant had failed to take reasonable steps to mitigate any loss which she had sustained. Although the Magistrate did not express it in these terms, his conclusion concerning mitigation appears to be an alternative finding, ie, a finding that even if the appellant did suffer some loss, she was disentitled from recovering damages by reason of her failure to mitigate.
[1] This offer was first made orally on 21 September 2010 and was confirmed in writing on 22 September.
Issues on the Appeal
The appeal gives rise to the following issues, some of which are interrelated.
(1)Proof of loss. Did the appellant prove that, subject to the question of mitigation, her loss was the difference between the contract price of $782,000 and the price obtained at auction of $750,000?
(2)Mitigation. Did the appellant fail to mitigate her loss by failing to accept the respondents’ offer in September 2010 to buy her home at the original purchase price? Did the Magistrate err by reversing the onus of proof on this issue?
(3)Bridging Finance Costs. Was the appellant entitled to recover her bridging finance costs? Were losses of this kind in the reasonable contemplation of the parties? Did the appellant’s withdrawal of the property from the market in the period between August 2010 and October 2010 have the effect of precluding her from recovering bridging finance costs?
(4)Did the damages to which the appellant was entitled exceed the sum of $10,000, being the amount of the retained deposit?
As will be seen, it is not necessary for the Court to consider the third and fourth issues in any detail.
Did the Appellant Establish a Loss?
Clauses 9.3 and 9.4 of the parties’ contract of 14 February 2010 specified the rights and entitlements of the appellant in the event of default by the respondents at settlement:
9.3     Default by Purchaser in Settlement
In the event the Purchaser defaults in the due observance or performance of the obligations on the Purchaser’s part to settle and such default continues for a period of three (3) clear business days after the Settlement Date then the Vendor may serve a notice on the Purchaser requiring the default to be remedied and appointing a time for settlement being not less than three (3) clear business days after the service of the notice requiring the Purchaser to settle at the time and date appointed in the notice. If the Purchaser fails to comply with the notice the Vendor may terminate the Contract by further written notice without prejudice to the Vendor’s rights and entitlements at law. The Vendor will be entitled to serve more than one notice without prejudice to any of its rights and obligations.
9.4Remedies of Vendor
(a)     In the event this Contract is terminated by the Vendor then the Vendor may either retain the property or sell the property and in either event sue the purchaser for damages.
(b)     The Vendor will be entitled to retain the deposit if this Contract is terminated by the Vendor.
(c)     If the Vendor re‑sells the property the Vendor may retain absolutely any surplus arising from such re‑sale in excess of the original Purchase Price and expenses arising from the re‑sale and all losses and expenses incurred by the Vendor resulting from the Purchaser’s default.
(d)     …
It can be seen that cl 9.4(a) entitled the appellant, on termination of the contract, either to retain or to sell the property and, in either event, to recover damages from the respondents. Clause 9.4(b) entitled the appellant to retain the deposit.
Proof of Loss
The general principle pertinent to the present case is that the measure of loss of a vendor of land who terminates a contract on the purchaser’s breach is the difference between the contract price and the market value of the land at the due date for completion.[2] This principle applies whether the vendor exercises a contractual entitlement to retain the property or to sell the property to another. It reflects the underlying principle that, subject to the rule in Hadley v Baxendale,[3] the parties not in default are to be placed in the same position as they would have been if the contract had been performed.[4] The onus is on the vendor to establish the loss alleged and that that loss was caused by the purchaser’s breach.[5]
[2]    Carpenter v McGrath (1996) 40 NSWLR 39 at 59.
[3] (1854) 9 Ex 341; 156 ER 145.
[4]    Wenham v Ella (1972) 127 CLR 454 at 460; Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64 at 80.
[5]    Statewide Developments Pty Ltd v Higgins [2011] NSWCA 35 at [58].
The damages are ordinarily to be assessed as at the date of the breach. However, that rule is not inflexible and the circumstances of a given case may warrant an assessment at a later date if that will most fairly compensate vendors for the losses which they have suffered.[6] Any forfeited deposit is to be set off against the damages claimed.[7]
[6] Johnson v Perez (1988) 166 CLR 351 at 355-6.
[7] Carpenter v McGrath (1996) 40 NSWLR 39 at 45.
The respondents’ first contention was that the appellant had not established any loss at all in accordance with the above principles because she had not adduced any evidence as to the value of her home at the time of their breach, or breaches, in July 2010. The sale price achieved at auction on 20 November 2010 could not be regarded as such evidence because house values had declined in the intervening four months and, in any event, the manner in which the property had been marketed meant that the auction did not realise the best price reasonably obtainable.
The appellant submitted that it was appropriate to regard the price obtained at auction as evidence of the home’s value in July. She submitted, in the alternative, that that this was a case in which it was appropriate for the Court to select a date after the breach as the date for assessment, and in particular to select the date of the auction.
Apart from the Magistrate’s overall conclusion that the appellant had not proved that the market value of the home as at the date of breach was less than the contract price, the Magistrate did not make findings about these matters.[8]
[8] The Magistrate did record that Mr White, the land agent who acted for the appellant in relation to the November sale, had given evidence that “the market” was throughout the latter part of 2010 a falling market (Reasons at [24]). The Magistrate was mistaken in that respect as Mr White did not give any evidence to that effect. However, the Magistrate does not appear to have acted on this mistaken view of the evidence.
Experience suggests that, in ordinary circumstances, the value of a home such as that of the appellant does not fluctuate significantly over short periods. Accordingly, in most cases, it is reasonable to regard the price obtained at a properly conducted auction on the open market as evidence of the value of the same property some four months previously. Expert evidence as to value is not usually required in these cases.
However, the respondents contended that in the present case two matters indicated that the price achieved at auction on 20 November 2010 could not be regarded as evidence of the home’s value in July 2010. The first was said to be the general decline in real estate values during 2010 which had affected the appellant’s property, and the second was the shortcomings which the respondents contended had occurred in the marketing of the home for auction.
Although the Magistrate noted the respondents’ criticisms regarding the manner in which the home was marketed, he made no findings on the topic. This makes it necessary to consider the evidence on this issue afresh.
The respondents contended that the promotional material used by the appellant’s land agent would have caused potential purchasers to believe that she was overly anxious to sell and therefore that it was not necessary for them to offer the true value of the property in order to obtain a sale. They referred in particular to the following statements in the advertising material issued by the agent:
“Re-released due to failed contract.” “A great opportunity here – definite sale – Vendor says SELL!”
In my opinion, it cannot be concluded that these expressions meant that the appellant did not at auction obtain the best price which was then reasonably obtainable. The words used by the agent would have indicated that the property was definitely to be sold and may have indicated that any reserve price would be realistic in the prevailing market conditions. However, the impugned expressions cannot reasonably be understood as indicating that the sale was a forced sale or, that in some other way, the appellant was prepared to sell for less than its market value.
I note in addition that the respondents’ counsel at trial did not cross‑examine the appellant’s land agent in a way suggesting that he had not sought to obtain the best price reasonably obtainable, or that the result of the auction was otherwise than a proper testing of the market.
Accordingly, I reject the respondents’ contention that the price achieved at auction did not reflect the market value of the home at that time. It remains to be considered whether that price can also be regarded as indicative of the value of the home in July 2010.
Before considering the evidence bearing on that issue, I mention the submission of the respondents concerning the effect of their offer of 22 September 2010. They contended that their offer to purchase the home for $782,000 was evidence of the market value of the home as at that time. This meant that it could be inferred that the home also had that value in July 2010, with the consequence that there was no differential between the contract price, on the one hand, and the value of the home at the time of completion, on the other, which could be recovered as damages. Alternatively, the respondents contended that their offer could be regarded as evidence of market value as at 22 September 2010 which in turn indicated that the price realised at auction on 20 November 2010 was less than the true value of the home at the time.
These submissions were not consistent with other submissions made by the respondents but they cannot in any event be accepted. The respondents’ offer of 22 September 2010 cannot be regarded as evidence of the home’s value at that time. In the first place, an offer to purchase is not generally speaking admissible at all as evidence of value and cannot properly be made the basis of an assessment of value.[9] Secondly, and in any event, the respondents’ offer was not that of an arms‑length purchaser because, at the time of the offer they had a potential liability in damages to the appellant in respect of the property which was the subject of the offer. These considerations in their case, which did not apply in the case of the hypothetical willing but not over anxious potential purchaser of the property, may have affected their view of the amount to be offered.
[9] Electricity Trust of South Australia v O’Leary (1986) 42 SASR 26.
The respondents’ principal submission was that there had been a continuing decline in property values during 2010. This meant that the auction price did not reflect the value of the home in July. As the appellant had not adduced any expert evidence of the home’s value in July she had not established that she had suffered any loss, let alone the extent of the loss.
For relevant purposes, any decline in value of the appellant’s home had to have occurred in the period between July 2010 and November 2010.[10] If there had been a decline in the value of the home before July, then that decline represents the measure of the plaintiff’s loss occasioned by the respondents’ failure to complete the contract at the purchase price of $782,000. Accordingly, for a decline in value to be material it had to be a decline which occurred after July 2010 and to have been reflected in the purchase price achieved at auction. The appellant’s reliance on the price achieved at auction as evidence of value in July meant that she had the onus of negativing a decline in value between July and 20 November.
[10] For this purpose it is not necessary to distinguish between the original date on which completion was required (2 July) and the subsequent dates in July fixed by the appellant’s notices to complete.
Much of the evidence in the trial concerning a general decline in property values was of a circumstantial kind. Further, it was not directed specifically to the period between July 2010 and November 2010.
The respondents referred first to the Valuer‑General’s valuation of the appellant’s home at $820,000 at 1 January 2010 and compared that value with the contract price of $782,000 on 14 February 2010 and with the price of $750,000 obtained at auction. I agree that these comparisons appear to indicate a decline in value, but they are of limited assistance in reaching a conclusion as to when, in relation to July 2010, that decline occurred.

Such oral evidence as was led on the topic was adduced from the first respondent. No oral evidence on this topic was adduced from the appellant and her witnesses, and neither party called any expert valuation evidence.
The respondents are developers. They had intended to raise the finance with which to buy the appellant’s home by the sale of home units/townhouses which they had constructed at Oaklands Park, a nearby suburb. They experienced difficulties in effecting those sales.
The first respondent gave evidence that originally they had planned to sell the home units for $550,000-$560,000 but eventually sold them for a little over $400,000.[11] He said that “the market had slowed down dramatically”.[12] The first respondent said that he and his wife were trying to sell the townhouses at the time of negotiating the contract with the appellant, and for this purpose had sought her agreement to a longer than usual period before settlement.[13] He said that at that time “we were struggling to sell them … it was hard to get offers on the table … The market was just falling rapidly”.[14]
[11] TX 56-7.
[12] TX 57.
[13] TX 56.
[14] TX 66.
Faced with the inability to sell the townhouses, the respondents decided to sell their own home in Cornish Street, Glenelg East. They entered into an agency agreement with the land agent for this purpose on 30 May 2010. However, by that time the market for houses of that kind had also declined. The first respondent said that “By the time we went to market … we found that the market was dropping quite considerably …”.[15]
[15] TX 63.
It was the respondents’ inability to sell the townhouses and their own home which caused their inability to settle on the appellant’s property on 2 July 2010 and on the later two dates in July.
This all suggests that the decline in values about which the first respondent gave evidence had occurred, at least substantially, before July 2010. It follows that if the market for the appellant’s property was affected in the same way, the decline in its value had also occurred, at least to a significant extent, before July 2010.
The respondents’ counsel pointed to other evidence. The first respondent gave evidence that although he and his wife had put their Cornish Street property on the market at a price of $1.65m, they sold it eventually for the much reduced price of $1.36m. In similar vein, counsel pointed to the appellant’s contracts with her sales agents which indicated that the proposed asking prices were much higher than the sale prices later achieved. However, I do not consider that this evidence can be regarded as evidence of a decline in values. It is more in the nature of an indication of the amount which the respective vendors expected or hoped to achieve on sale. That of course is not evidence of value.
In summary, the evidence that there may have been some continuing decline in the value of the appellant’s home between July and November 2010 is limited. I note again that in ordinary circumstances one would not expect any significant fluctuation in the value of the home during such a short period. All these matters lead me to conclude that the price achieved at auction can be regarded as evidence of the value of the home as at July 2010 and accordingly that the appellant did establish a loss at that time.
This conclusion makes it unnecessary to consider the appellant’s alternative submission that the appellant’s loss should be assessed as at 20 November 2010 rather than at the due date for completion. I indicate, however, that had it been necessary to determine that issue I would not have accepted this submission. I formed the strong impression that it was a submission made by counsel on appeal in an attempt to match the evidence presented by the appellant at trial with the time at which the assessment should be made, and to overcome the apparent deficiencies in that evidence pointed up by the respondents’ submissions.
My conclusion is that, subject to the question of mitigation, the plaintiff did establish a loss of $32,000.
Did the Appellant Fail to Mitigate her Loss?
The respondents’ case at trial was that by rejecting their offer of 22 September 2010 the appellant had failed to mitigate her loss. Had she accepted the offer, she could thereby have obtained the same price for her home as was agreed in the contract of 14 February. In addition, she would not have incurred to the same extent the bridging finance costs which she sought to recover from them as part of her damages.
The appellant, who was elderly, said that she had relied heavily on her son Lyall in relation to the sale of her home. She acknowledged that Lyall had told her of the respondents’ offer (which she understood to be with “no penalties”) in September and that they had discussed it. The appellant said that the offer had upset her because they had previously given the respondents a long period in which to settle, the matter had been going “on and on”, and they did not have any faith in the respondents settling under the new offer.[16]
[16] TX 7, 24.
Lyall, on the other hand, said that at the time of the offer the home was not for sale and had been let to tenants.[17] He had been informed of the respondents’ offer by the appellant’s conveyancer, Scott Petherick. He was asked in cross‑examination about the reason he gave to Mr Petherick for rejecting the offer (with the inference being that this was the true reason):
QWas part of the discussion with your mother’s conveyancer to relay that your intention was to hold the property?
AWhen I returned the phone call to Scott after talking to mum, I said “We’re working out what we’re going to do with the place and there would be a good chance it could come on the market so if he’s interested in it he can keep his eye out for it” and that was the last thing I said to Scott.[18]
[17] TX 52.
[18] TX 53.
As can be seen, the cross‑examiner sought to elicit evidence that the decision had been made to “hold” the property. Lyall also agreed that the property was put back on the market in the last week of October and that it had not been marketed at all between July and 23 October.[19]
[19] TX 53-4.
The respondents led evidence from their conveyancer, Mr Kappos, that he was told by Mr Petherick’s assistant:
It’s off the market now, they’ve tenanted it, so it’s not for sale.[20]
[20] TX 72.
Although the Magistrate noted the issue as to whether the home had been rented out between July and October, he did not make any express finding to the effect that the property had been withdrawn from sale. However, Mr Lazarevich for the respondents had submitted that the property had been removed from the market while the appellant considered her position, and it seems that this was one of several submissions made by Mr Lazarevich which the Magistrate accepted.
As can be seen from [38] of the Magistrate’s reasons quoted earlier, he found that “the plaintiff had failed to establish that she acted reasonably in failing to accept the offer of $782,000 made on 22 September 2010”. That indicates that the Magistrate considered that the appellant had the onus of proof on the issue of mitigation. That was an error. It was the respondents, as the party in default, who had the relevant onus.[21] That error by itself requires the issue of mitigation to be considered afresh.
[21] Watts v Rake (1960) 108 CLR 158 at 159.
The respondents submitted that a plaintiff who has refused to accept an offer from a defendant to enter into a substitute contract providing the same benefits as under the original will generally be found to have acted unreasonably.[22] They referred in particular to Payzu Ltd v Saunders.[23] In that case a commercial vendor breached his contract with the purchasers by refusing to deliver further instalments of product on the agreed credit terms. He offered instead to deliver product in exchange for cash. It was held that, by rejecting that offer, the purchasers had failed to mitigate their loss. McCardie J at first instance said:
I feel no inclination to allow in a mercantile dispute an unhappy indulgence in far‑fetched resentment or an undue sensitiveness to slights or unfortunately worded letters. Business often gives rise to certain asperities. But I agree that the plaintiffs in deciding whether to accept the defendant’s offer were fully entitled to consider the terms in which the offer was made, its bona fides or otherwise, its relation to their own business methods and financial position, and all the circumstances of the case; and it must be remembered that an acceptance of the offer would not preclude an action for damages for the actual loss sustained. Many illustrations might be given of the extraordinary results which would follow if the plaintiffs were entitled to reject the defendant’s offer and incur a substantial measure of loss which would have been avoided by their acceptance of the offer.[24]
In the Court of Appeal Scrutton LJ said:
[I]n commercial contracts it is generally reasonable to accept an offer from the party in default. However, it is always a question of fact.[25]
[22] Halsbury’s Laws of Australia at [110-11230].
[23] [1919] 2 KB 581.
[24] Ibid at 586.
[25] Ibid at 589.
The question of whether a plaintiff has failed to act reasonably so as to mitigate his or her loss is a question of fact to be determined having regard to all the circumstances of the case.
The present case differs from the circumstances considered in Payzu. It does not involve a mercantile or commercial contract, but the sale of the home in which the appellant had lived with her family for many years. The emotional and sentimental connections the appellant had with the home should not be ignored, and nor should the appellant’s age.
Further, a plaintiff should not be required to accept an offer from a defaulting party if the acceptance would involve a negation or abandonment of the rights which the plaintiff has under the contract against the defendant.[26] Strutt v Whitnell[27] provides an example. In that case, a vendor contracted to sell a house but the purchaser could not obtain vacant possession at settlement because it was occupied by a protected tenant. The vendor offered to re‑purchase the home from the purchaser but the purchaser rejected his offer. The Court of Appeal held that the refusal was justified. The purchaser could only accept the vendor’s offer by giving up the ownership of the land which he had acquired under the contract. MacKenna J said:
The seller cannot compel [the buyer] to forego his right to substantial damages as the price of retaining what has become his own property.[28]
[26] SM Waddams, The Law of Damages, (1983) at [1208].
[27] [1975] 1 WLR 870.
[28] Ibid at 874. See also Ideal Phonograph Co v Shapiro (1920) 58 DLR 302.
At the very least the fact that acceptance of a defendant’s offer may require a plaintiff to forego an entitlement which has accrued under a contract is a very material consideration in the assessment of the reasonableness of a plaintiff’s conduct.
These considerations make it necessary to consider the rights which the parties themselves had agreed the appellant should have in the event of a failure by the respondents to complete. Those rights were contained in cll 9.3 and 9.4 of their contract, quoted earlier in these reasons.
The effect of these provisions was that on the respondents’ failure to complete, the appellant was entitled to terminate the contract (cl 9.3) and then either to retain or sell the property (cl 9.4(a)). In either of those two events, the appellant was entitled to sue the respondents for damages.
The evidence of the appellants’ son and Mr Kappos, which seems to have been accepted by the Magistrate, was to the effect that the appellant had elected, at least for the time being, to retain the property. That was the position at the time of the respondents’ September offer.
Thus, acceptance of the respondents’ offer would have required the appellant to forego her contractual entitlement to keep the property and to recover damages. The appellant would, in other words, have had to abandon her entitlement to maintain ownership of the property. In those circumstances, I do not consider that the respondents have established that the appellant’s refusal on or about 22 September 2010 of their offer was unreasonable.
Did the position change when the appellant decided, only one month later, to forego continued ownership and put the property back on the market? At that time, the respondents’ offer, having been rejected, was no longer open to be accepted. However, the appellant’s obligation to take reasonable steps to mitigate her loss was a continuing one. It was open to the appellant in October to have enquiries made of the respondents as to whether they wished to renew their offer. There were circumstances known to the appellant at the time which would have made it sensible for such an enquiry to be made. I refer in this regard to the information which the appellant received from her agent, Mr White, in October that he expected the property to sell at a price in the range $670,000-$730,000.[29] This was considerably less than the sum of $782,000 offered by the respondents only one month previously. Mr White’s estimate of the price which may be achieved was supported by reference to the sales of other properties in the Glenelg East area.
[29] Exhibit P2, p 28.
In these circumstances, it would have been reasonable for the appellant to have instructed Mr White to enquire whether the respondents were still interested in buying the house at $782,000 and, if so, to provide some evidence of their ability to complete the contract. The appellant did not cause any such enquiry to be made.
The evidence did not disclose the response which the respondents may have made to such an enquiry, but did indicate that the respondents had the financial capacity to settle on the appellant’s home following the sale of their Cornish Street property.
It is understandable that the appellant had concerns about the respondents’ reliability and financial capacity. It is understandable that she did not wish to experience again the uncertainty and difficulties which had occurred in July in relation to the completion of the contract. However, by October the appellant had already moved out of her home into new premises. Any delays by the respondents would not have caused the personal inconvenience which she no doubt experienced in July.
The absence of express evidence from the respondents as to their attitude had the appellant enquired in late October about their willingness to renew the offer is troubling. However, I think it likely that the respondents would have renewed the offer. The respondents must have been aware of their potential liability to the appellant for damages following the breach. That by itself gave them an incentive to renew the offer. Further, the offer made in September indicates the respondents’ continued interest in the property.
In these circumstances, I consider that the respondents have established that the appellant did not take reasonable steps to mitigate her loss following from their breach.
The Appellant’s Remaining Claims
My conclusion about the appellant’s failure to mitigate her loss means that she cannot recover the $32,000 difference between the contract price of 14 February 2010 and the value of the home in July. Nor can the appellant recover the additional advertising costs incurred in connection with the auction.
The appellant claimed the bridging finance costs which she had incurred in relation to the purchase of her replacement property. Originally the appellant claimed $4,400.54 for those costs. However, on the appeal, her counsel indicated that the amount for bridging finance costs, if allowable as part of the damages, was $3,921.63.
The appellant’s claim for the bridging finance costs gave rise to a number of issues, including whether the prospect that such costs may be incurred was within the reasonable contemplation of the parties at the time the contract was made, and as to the effect of the appellant’s election on termination of the contract to retain the property for the time being. However, it is not necessary to consider the submissions about these matters in any detail. On any view, the amount which the appellant may recover for bridging finance costs and for interest does not exceed the sum of $10,000, being the amount of the retained deposit. It follows that the Magistrate was correct in dismissing the appellant’s claims for these amounts.
Conclusion
For the reasons given above, the appeal is dismissed.