QM Properties Pty Ltd v Belscorp Pty Ltd - [2018] QSC 158

SUPREME COURT OF QUEENSLAND

CITATION:

QM Properties Pty Ltd v Belscorp Pty Ltd [2018] QSC 158

PARTIES:

QM PROPERTIES PTY LTD ACN 010 716 935

(plaintiff)

v
BELSCORP PTY LTD ACN 053 831 806

(defendant)

FILE NO/S:

No 3340 of 2008

DIVISION:

Trial

PROCEEDING:

Trial

ORIGINATING COURT:

Supreme Court of Queensland

DELIVERED ON:

25 July 2018

DELIVERED AT:

Brisbane

HEARING DATES:

12 February 2018 - 2 March 2018; 10 May 2018

JUDGE:

Dalton J

ORDER:

1. Judgment for the defendant against the plaintiff on the plaintiff’s claim.

2. Judgment for the defendant against the plaintiff in the sum of $2,943,250 on the counterclaim.

COUNSEL:

RA Perry QC, with C Jennings of counsel, for the plaintiff

D Kelly QC, with J Baartz of counsel, for the defendant

SOLICITORS:

HWL Ebsworth for the plaintiff

Burns and Associates for the defendant

On Friday 14 September 2007 the plaintiff, QM, contracted to buy numerous parcels of land from Belscorp. The total purchase price was over $22 million. One parcel of land was at Albany Creek,[1] the purchase price was $3,835,000. The land was sold with the benefit of a development application (made but not approved) for residential subdivision. Before completion QM, through its solicitors, wrote to the solicitors for Belscorp, saying that due to misrepresentations about the effect of powerlines running through the Albany Creek property and the amount of land which the Council would require as a buffer to residential development along the northern boundary of the land (the South Pine River):
“… our client hereby relies upon its rights pursuant to s 52 of the Trade Practices Act and at general law to terminate this contract.”[2]
[1] Lots 1 and 2 on RP115421, County of Stanley, Parish of Bunya.
[2] Tab 236 of ex 1, 8 November 2007.
The date for completion was 13 November 2007. QM did not tender the contract price on that day. QM then commenced this proceeding on 16 November 2007 claiming a declaration that the contract had been validly terminated, and asking for the return of its deposit. The pleading went through an unusual number of iterations. The seventh was filed on 27 August 2015 and by then the relief claimed had expanded to include seeking an order pursuant to the Trade Practices Act setting aside the contract as an alternative to the declaration sought; a claim for damages pursuant to the Trade Practices Act and a claim in tort for negligent misrepresentation.[3] QM’s claim to have validly terminated the contract, and its alternative claim to have the contract set aside under the Trade Practices Act, were based on the same facts: essentially, that representations were made by Belscorp; relied upon by QM in deciding to buy the Albany Creek property, and proved to be false and misleading.
[3] In its Reply and Answer the plaintiff raised mistake. No submissions were made by the plaintiff in support of this claim. Neither the pleading nor the evidence disclose any mistake known to the law: Menegazzo v Pricewaterhousecoopers

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2018] QSC 158
Decision Date: 25 July 2018

CaseChat Overview and Summary

In the case of QM Properties Pty Ltd v Belscorp Pty Ltd, the plaintiff, QM Properties, brought an action against the defendant, Belscorp Pty Ltd, seeking specific performance of a contract for the sale of certain land. Belscorp, in turn, filed a counterclaim against QM Properties for damages resulting from the alleged breach of the contract by QM Properties. The case was heard by the court, which had to determine various legal issues, including the value of the land in question and the extent of damages, if any, suffered by Belscorp as a result of the alleged breach.

The court was required to decide on the valuation of the Albany Creek land, which was central to determining the damages Belscorp might be entitled to recover. This involved assessing the evidence of economic feasibility and the highest and best use of the land, as well as the impact of shared access and lack of privacy on its value. The court also had to consider whether the sale price of $3.835 million could be used as evidence of the land's value, given that the transaction did not complete and there was no claim for specific performance.

In its reasoning, the court concluded that the Albany Creek land was most appropriately valued as a single rural residence, but it also found that the highest and best use of the land was now a 16-lot subdivision on the south-western part of the land. This was based on the evidence of economic feasibility and the difficulties with shared access and lack of privacy, which made the land marginally more valuable for a developer considering such a subdivision. The court awarded damages to Belscorp in the amount of $2,943,250, which represented the difference between the value of the land at the time of the alleged breach and the contract price, less the deposit paid by QM Properties. The court also granted interest on the awarded damages.

The court ordered that judgment be entered in favour of Belscorp on both the plaintiff's claim and the defendant's counterclaim. Specifically, the court dismissed QM Properties' claim for specific performance and awarded Belscorp $2,943,250 on its counterclaim, plus interest.

Orders

Orders of the court

1. Judgment for the defendant against the plaintiff on the plaintiff’s claim.

2. Judgment for the defendant against the plaintiff in the sum of $2,943,250 on the counterclaim.

Background

Background to the litigation

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Evidence

Evidence Before The Court

On the evidence before me, on the balance of probabilities, even if the Council had allowed the 28 block subdivision shown in DSC Plan B, it would not have been economically feasible, having regard to the purchase price which QM paid for the Albany Creek land. Mr Murphy had paid $1,045,000 for the land in 2003. While not conclusive, the evidence tends to suggest that even at that price, the land could not be economically developed, either by way of a 28 lot subdivision, or a 14 lot subdivision.Valuation Evidence The Albany Creek land consisted of two lots. Lot 1 was just over 1,000 square metres in size and lot 2 was 7.8 hectares in size. There was no independent access to lot 2; access to that lot depended upon an easement which was registered over lot 1. There were old wooden houses on each of lots 1 and 2. The valuers were agreed that the houses were of no material value. The sale price on the contract between Belscorp and QM Properties was $3.835 million. However, I do not think this can be used as evidence of value.[63] To begin with, the sale was not independent, but part of a larger transaction where several properties were purchased for the price of $22 million. Secondly, the transaction did not complete and by the time of trial there was no claim for specific performance. [63] See Mr Iveson on this point at t 10-55. Mr Slater’s Opinion. Mr Slater said that a single rural residence was the highest and best use of the two lots of land. His first reason for that conclusion was that whether or not a 14 lot development or a 28 lot development was considered, it could not be profitable unless the land was acquired for less than $500,000. This conclusion is given some support by the evidence I have just discussed as to economic feasibility. Mr Slater set out his views on the economic feasibility of these development scenarios at Annexures E1 and E3 to his report of 29 May 2015. These annexures show as the last figure on each page the amount of money which a developer would pay for the land in order to take the risk of making a profit on the development. That is, they are not values of the land per se.[64][64] See paragraphs 5.15.7.1 and 5.17 of the joint expert report of valuers. Unfortunately, Mr Slater assumed that the powerlines would prevent development of two lots on the south‑western side of the block in his calculations at Annexure E1. I think that the probability is that they would not, having regard to the evidence as to rephasing. Mr Slater was not able to recalculate to allow for the effect of that in the witness box. He could say that the two extra lots would produce another $470,000 income to the project and increase development costs by around $100,000. That is, he seemed to accept that the developer would be better off by an amount of $370,000 by reason of the land yielding 16 rather than 14 lots, but because of the complicated structure of his financial analysis in Annexure E1, was not able to say what difference that would make to the price a fully informed developer would be prepared to pay in order to acquire the land for such a development.

Decision

Reasons for decision

Mr Iveson gives a dozen small lot sales which he says are comparable to lot 1 of the Albany Creek land. At page 17 of his report he makes fairly cursory comments about them.Conclusions as to Valuation and Assessment of Damages As noted, I am not prepared to act on the basis of Mr Iveson’s second and third alternative bases for valuation. I accept that the difficulties with shared access and lack of privacy and amenity identified by Mr Slater in relation to the idea of using the Albany Creek land as two separate residential lots are valid. I prefer his valuation of the Albany Creek land as a single rural residence to the first of Mr Iveson’s alternative valuations because Mr Slater takes account of these difficulties with access and amenities and Mr Iveson does not. Further, I think Mr Slater’s comparison sale is more comparable than those used by Mr Iveson. Having said that, it seems to me that having regard to my conclusion at paragraph [197] above, that on Mr Slater’s evidence, valuation as a single rural residence is no longer the highest and best use of the land. It is marginally more valuable to a developer considering a 16 lot subdivision on the south-west part of the land. Such a purchaser would be likely to pay around $700,000 for the land on this basis. I conclude that this is the value of the land at the time of breach of contract.Damages The difference between the value of the land at the time of breach of contract and the sale price of $3.835 million is the measure of the defendant’s loss of profit on the contract. The deposit QM Properties paid on the Albany Creek property was $191,750. Belscorp remains in possession of that money. Therefore, I award an amount of $2,943,250 to the defendant on its counterclaim.Interest On 2 March 2018 I granted leave to the defendant to amend its counterclaim. Prior to 2 March 2018 the defendant pleaded that the plaintiff’s purported termination was a breach of contract and a repudiation of contract not accepted by the defendant as terminating the contract – paragraph 124 of the pleading. The primary claim of specific performance was for an order that QM pay the purchase price together with interest at the contractual rate for monies payable under the contract – paragraphs 125, 126, and 129 of the pleading. Paragraph 130 of the pleading, however, claimed that “further and alternatively”, because of QM’s breach of contract, Belscorp had suffered loss and damage “being the difference between the contract price and the value of the property at the date of the plaintiff’s breach of contract, less the deposit, plus holding costs and interest”. Paragraph 131 of the pleading said: “In the alternative to the claim in paragraph 129 above for specific performance and consequential relief, the defendant claims damages in lieu of the claim for specific performance as a result of the plaintiff’s breach and repudiation of the contract”. The particulars were given as the holding costs and the difference between the contract price and the value of the property as at the date of breach less the deposit.

Ratio Decidendi

Legal Principle Established

Full text does not contain this section.

CITATION:	QM Properties Pty Ltd v Belscorp Pty Ltd [2018] QSC 158
PARTIES:	QM PROPERTIES PTY LTD ACN 010 716 935 (plaintiff) v BELSCORP PTY LTD ACN 053 831 806 (defendant)
FILE NO/S:	No 3340 of 2008
DIVISION:	Trial
PROCEEDING:	Trial
ORIGINATING COURT:	Supreme Court of Queensland
DELIVERED ON:	25 July 2018
DELIVERED AT:	Brisbane
HEARING DATES:	12 February 2018 - 2 March 2018; 10 May 2018
JUDGE:	Dalton J
ORDER:	1. Judgment for the defendant against the plaintiff on the plaintiff’s claim. 2. Judgment for the defendant against the plaintiff in the sum of $2,943,250 on the counterclaim.
COUNSEL:	RA Perry QC, with C Jennings of counsel, for the plaintiff D Kelly QC, with J Baartz of counsel, for the defendant
SOLICITORS:	HWL Ebsworth for the plaintiff Burns and Associates for the defendant