Paul John Denny v Adrian Noel Ashton No. 4217 Judgment No. SCGRG 92/2580 Number of Pages 3 Contracts

[1993] SASC 4217

COURT IN THE FULL COURT OF THE SUPREME COURT OF SOUTH AUSTRALIA KING CJ(2), MILLHOUSE(3) AND DEBELLE(1) JJ

CWDS
Contracts - damages - sale of landbroking business - breach of contract of sale by respondent purchaser - assessment of damages arising from breach - no proof of actual damages arising from breach - appeal from decision not to award damages - appellant entitled to nominal damages only. Luna Park (NSW) Limited v Tramways Advertising Pty Ltd (1938) 61 CLR 286, applied.

HRNG ADELAIDE, 8, 11 October 1993 #DATE 11:10:1993
Counsel for appellant:     Mr G Britton
Solicitors for appellant:    Adams Kandelaars
Defendant in person.

JUDGE1 DEBELLE J This is an appeal from a judgment of the District Court in which it was held that the appellant had not proved any loss consequent upon a breach of contract by the respondent. 2. The appellant is a land broker. At different times, he has practised either alone or in partnership as a land broker at Stirling and later at both Stirling and Adelaide. In 1991, he was conducting a practice on his own account at both Stirling and Adelaide. The practices were conducted as two practices and he regarded them as such. By the middle of 1991, he noticed that the turnover of his Stirling practice was declining. At that time, the appellant was spending an average of about two hours a day at Stirling. The office was then staffed by one assistant only. The appellant decided to sell the Stirling practice and concentrate upon his practice in Adelaide. The appellant was then conducting his practice at Stirling from leasehold premises. 3. On 25 November 1991, he entered into an agreement in writing with the respondent to sell him the practice at Stirling, together with the balance of the term of the lease of the premises, and all fixtures, plant and equipment in the premises. The purchase price to be paid by the respondent was $60,000, being $40,000 for the goodwill of the business, and $20,000 for the fixtures, plant and equipment. 4. The parties stipulated 2 January 1992 as the date for the completion of the contract. The agreement was conditional upon the respondent obtaining finance but the respondent later waived that condition. The respondent had difficulty in completing the contract by 2 January 1992. The agreement was varied and the date for completion was extended to 25 January 1992. However, the respondent did not then complete the contract. He informed the appellant that he had no intention of performing his obligations under the agreement. 5. On 3 February 1992, the appellant terminated the agreement. The trial judge found that the respondent was in breach of the agreement to buy and sell the business. 6. There was little dispute that the respondent had acted in breach of the agreement. The real issue at the trial was the assessment of damage and the evidence at trial was largely directed to that issue. 7. After he had terminated the contract, the appellant decided to do what he could to preserve his practice at Stirling. In his evidence, he referred to his reasons to do so:
"Q. You have told us that you decided to consolidate the
    Stirling practice back to Adelaide and combine them. Did you
    consider continuing the Stirling practice as a going concern.
    A. I did.
    Q. Was there some reason why you decided against that course.
    A. Yes, there were a number of reasons. One of them was the
    fact that business had continued to decline at Stirling to the
    point where, as far as I was concerned, it was marginal whether
    it was profitable or not anyway, and the other reason was that I
    was in desperate need of staff in my Adelaide office, and my
    intention was to move the existing employee from Stirling to
    Adelaide. Had I continued to work at Stirling, not only would
    the demands on my time have been more than I could have coped
    with, I would have had to employ someone else, which would have
    meant a period of disruption for the business at a time when I
    could least afford it." 8. Thus, because the practice at Stirling had declined, and because he was in need of staff for his Adelaide office, the appellant decided to operate the two practices solely from the Adelaide office. 9. On 10 February 1992, he closed the Stirling office and moved his one employee at the Stirling office to the Adelaide office. He then conducted both practices from the Adelaide office. The appellant's claim for damages fell under four heads. The first was for the loss of the sale of the goodwill of the Stirling practice. The second was for the rent for the leasehold premises from which he had conducted his business at Stirling, which rent would have been payable by the respondent had he completed the contract. The third was for council rates and other outgoings payable pursuant to the lease. The fourth was for the loss of the value of the fixtures, plant and equipment the subject of the contract. The trial judge found that the appellant had failed to prove any damages. He entered judgment for the respondent with costs. The appellant appeals from that decision, contending that he is entitled to damages under each of the four headings mentioned. 10. Any loss which the plaintiff might have suffered under each of these four headings was caused, not by the failure of the respondent to complete the contract, but by the appellant's decision to retain his Stirling practice, and from his decision to close his office at Stirling and conduct his business solely from his office in Adelaide. Once the appellant had made the decision to retain his practice rather than resell it, the goodwill of the business was no longer for sale and any diminution or increase in the value of the goodwill would be affected, among other things, by the manner in which the appellant chose to conduct his practice. 11. One of the management decisions made by the appellant was to close the office at Stirling. He could have retained the office and run it as before with one employee, or he could have employed more staff and attempt to build up the practice which, by then, had declined. The decision to continue to operate the Stirling business was an intervening act which broke the chain of causation between the failure of the respondent to complete the contract and any loss which might have been sustained by the appellant. The decision to conduct both practices from the Adelaide office, in all likelihood, would have had a detrimental effect upon the goodwill of the Stirling practice. In other words, any loss which the appellant has suffered flows from his decision to continue to run the practice and from his management of the practice but not from the breach of contract by the respondent. 12. The appellant is not, therefore, entitled to recover damages for any loss of goodwill, or reimbursement for rent he has paid, or for the rent which he must continue to pay under the lease. For like reasons, the appellant is not entitled to damages for any outgoings in respect of the leasehold premises or for the value of the fixtures, plant and equipment which were to be sold. 13. The appellant has, in my view, failed to prove that such loss or damage as he has incurred was caused by the failure of the respondent to complete the contract. Having failed to prove actual damage, the appellant is entitled to nominal damages only: Luna Park (NSW) Limited v Tramways Advertising Pty Ltd
(1938) 61 CLR 286. I would award the appellant $100 as nominal damages. 14. For these reasons, I would allow the appeal and set aside the decision of the trial judge. In lieu thereof, I would order the respondent to pay the appellant $100 nominal damages, together with the costs of the action in the District Court to be taxed on the Magistrates Court scale applicable to a judgment in the sum of $100.

JUDGE2 KING CJ There was no evidence in this case proving damages for loss of bargain. The items of damages actually claimed were not shown to flow from the breach of contract, but rather resulted from other causes as demonstrated by Debelle J in the reasons which he has just delivered. 2. I agree with the order proposed by Debelle J and his reasons therefor.

JUDGE3 MILLHOUSE J I agree with the order proposed and the reasons which have been given, both by Debelle J and by the Chief Justice.