Orchid Avenue Realty Pty Ltd v Chang

[2014] QDC 58

[2014] QDC  58

DISTRICT COURT OF QUEENSLAND

CIVIL JURISDICTION

JUDGE R S JONES

No 372 of 2012

ORCHID AVENUE REALTY PTY LTD  Plaintiff

and

HAI CHANG
and GE WEN WU  Defendants

SOUTHPORT

2.05 PM, THURSDAY, 20 MARCH 2014

JUDGMENT, EX TEMPORE

HIS HONOUR: This proceeding is concerned with an application for the assessment of damages arising out of a breach of contract on the part of the defendants. The proceeding was conducted in the absence of the defendants who reside in China. Despite the absence of the defendants, pursuant to rule 509 of the Uniform Civil Procedure Rules, the assessment is to be conducted in a way as nearly as possible as if it were a trial. Accordingly, the applicant bears the onus of proof. Further, the defendants are required to be given notice of the date of the proceeding. This was done by correspondence, addressed to the defendants at their last known residential address, on 5 March 2014.For the reasons that follow, I give judgment in the following terms.

1.  The defendants are to pay the plaintiff the amount $358,195.19, including $174,711.16, by way of interest, up to today’s date, 20 March 2014. 

2.  The defendants pay interest on the sum of $358,195.19, at the rate of 15 per cent, from 21 March 2014 until the date of payment. 

3.  The defendants pay the plaintiff’s costs of the proceeding, fixed in the amount of $19,207.52.

On the evidence which was provided by way of affidavit, being the affidavit of service sworn 12 March 2014; affidavit of Murray Douglas Gordon, sworn 13 March 2014; the further affidavit of Murray Douglas, sworn 13 March 2014; the affidavit of Scott David Eustace, sworn 13 March 2014; and the further affidavit of Scott Eustace sworn 13 March 2014; and the further affidavit of Murray Douglas Gordon, sworn 18 March 2014, I am satisfied that the evidence establishes the following facts. 

By claim and statement of claim filed in this court on 16 July 2012, the plaintiff claimed damages against the defendants for breach of a land sale contract and a furniture contract, together with interest and costs.  Default judgment was granted against the defendants on 21 February 2014, conditionally upon damages and costs being assessed by the court.  On 7 May 2008, the defendants entered into a contract of sale to purchase lot 22405 in the Orchid Tower situated in Surfers Paradise, otherwise known as lot 22405 on SP214302.  Pursuant to the contract, the defendants agreed to purchase lot 22405, for a purchase price of $935,000, inclusive of GST.  The defendants paid a deposit of $93,500 to the plaintiff, leaving balance proceeds of $841,500 payable at settlement date, subject to any relevant adjustments. 

The contract was described as an off-the-plan contract.  The contract relevantly provided in clause 15:

15.1  You are in breach of the contract if:

(a)  you fail to comply with any of your obligations under the contract.

15.2  If you breach the contract we may affirm or terminate the contract.

15.4  If we terminate the contract, we may

(a) declare any part of the deposit, paid by you, forfeited and/or sue for breach, or

(b) declare any part of the deposit paid by you forfeited, and/or sell the lot, and any deficiency in the price on a resale, and the expenses arising from the resale shall be recoverable from you as liquidated damages.  And in either case we may recover from you, as a liquidated debt, any part of the deposit that you have failed to pay.

15.5  Our rights under this clause are in addition to any rights which we may have at law or in equity.

15.6  If you fail to pay on the due date any money payable by you under the contract, you must pay interest at 15 per cent per annum on the amount outstanding from the due date until the date of actual payment.  Interest will be calculated and payable by you at the same rate, on the same amount, of any judgment we obtain against you, from the date of judgment until the date of actual payment.  All interest will be paid on the settlement date, or, if settlement does not occur, on demand.

On 7 May 2008, the defendants also entered into what was referred to as a furniture contract.  Pursuant to that contract, the defendants agreed to purchase furniture, which was identified within the contract for the amount of $35,300, including GST.  The defendant paid a deposit of $3530, leaving a balance of $31,770 payable on settlement.  The relevant term of the furniture contract provided, in clause 12:

If you fail to pay, on the due date, any moneys payable by you under this agreement

(a) you must pay us interest on the unpaid amount at 15 per cent per annum from and including the due date until and including the actual date of payment.

(c) You agree that the interest payable under this clause is a genuine pre-estimate of our loss as a result of your failure to pay moneys due in accordance with the agreement, and

(d) all such interest is payable on the completion date, or, if completion does not occur, on demand by us. 

The defendants were given notice under clause 10.1 of the unit contract on 31 August 2011 that settlement was to take place on 15 September 2011.  On 16 September 2011, time for settlement was extended to 15 October 2011.  On 18 October 2011, settlement date was extended to 24 October 2011.  On 28 October 2011, settlement date was extended to 31 October 2011.  On 31 October 2011, the defendants failed to complete the unit contract and the furniture contract.  By notice in writing, dated 1 November 2011, the plaintiff terminated both contracts and declared the deposits forfeited. The defendants did not dispute the plaintiff’s entitlement to retain the deposits, and those deposits were released by the stakeholder to the plaintiff on 1 November 2011. 

Subsequently, on 18 September 2012, the subject unit and furniture were sold to third parties for the total sum of $675,000, inclusive of GST.  That sale settled on 3 December 2012.  Based on the further affidavit of Murray Gordon, sworn 18 March 2014, I am satisfied that this was a bona fide arms-length transaction.  I should point out here that the finalisation of this matter was adjourned to today’s date, to allow my concerns about that particular issue to be satisfied:  the marked difference in the respective sale price being a function of market forces in play between the respective dates of sale. 

It was submitted on behalf of the applicant that the normal measure of damages against a defaulting purchaser is the contract price less the market price at the contractual time fixed for completion, and, in fact, that was the measure of damages pleaded in the statement of claim. However, subsequent to filing of the statement of claim, the subject property and furniture has been resold. Pursuant to clause 15.4 (b) of the unit contract, the plaintiff was entitled to resell the unit and claim, as damages, any deficiency in the price on resale. In the circumstances of this case, I agree that that is an appropriate measure for damages, and proceed on that basis. In my view, rules 156 and 658 of the Uniform Civil Procedure Rules allow for that to occur.

The liquidated damages were assessed by the applicant in the following way.  First, the initial contract price of $935,000 was identified, together with the furniture price of $35,300.  Thereafter, the amount of $26,207.50 in commission was deducted, as were legal fees in the amount of $990.  This resulted in a total price of $943,102.50.  On resale, the plaintiff received $759,618.47 as a consequence of the resale contract price in the amount of $675,000, the forfeited unit contract deposit of $93,500 and the forfeited furniture deposit of $3,530.  The plaintiffs also received rental income between the date of the two sales in the amount of $3428.47, which was taken into account.  After adjustment for commission and legal fees, this resulted in a total remuneration package of $759,618.47.  That resulted in final liquidated damages in the amount of $183,484.03 being the balance left after subtracting from the aforesaid $943,102.50, the aforesaid $759,618.47. I consider those calculations to be an acceptable and reasonable assessment of liquidated damages. 

Interest was calculated on the basis of 15 per cent as it was provided for in the contract.  Interest at 15 per cent was applied on the total amount of $943,102.50 for a period of one day.  Thereafter, interest was calculated on the amount of $846,072.  That amount being the sale price less the total of the deposits forfeited.  Thereafter, interest was calculated at the rate of 15 per cent on the balance referred to above being the amount of liquidated damages in the sum of $183,484.03.  Again, I consider that assessment to be reasonable and appropriate.  As was submitted on behalf of the plaintiff, in respect of the question of costs, there was no reason why costs should not follow the event.  Unlike the common situation found in many security documents nowadays such as guarantees, the subject contract did not specify that any costs incurred in any recovery action were to be assessed on a solicitor-client basis and, accordingly, such costs ought to be calculated on the standard basis. 

Mr Eustace, solicitor for the applicant, has prepared a schedule of costs be reference to the relevant scale and in accordance with practice direction 2007.  I can see no reason why costs should not follow the event, and I am satisfied that Mr Eustace’s calculation of cost is a reasonable one and therefore, will award costs in the sum of $19,207.52.