Re Vissaritis, J. v Ex parte Dimos, M.C.
[1985] FCA 578
•14 NOVEMBER 1985
Re: JAMES VISSARITIS
Ex Parte: MICHAEL CHRIS DIMOS, TILEMACHOS CHRIS DIMOS and VASSILIKI DIMOS (as
Executrix of the Will of CHRIS DIMOS deceased)
And: JAMES VISSARITIS and MICHAEL WILLIAM HOSKING (as trustee of the property
of James Vissaritis, a debtor)
No. 131 of 1984X
Bankruptcy - Contract
COURT
IN THE FEDERAL COURT OF AUSTRALIA
BANKRUPTCY DISTRICT OF THE
STATE OF VICTORIA, GENERAL DIVISION
Woodward J.
CATCHWORDS
Bankruptcy - application for orders declaring composition of creditors void or terminating composition - preliminary question of applicants' standing to bring application as creditors.
Contract - sale of land - repudiation by purchaser - measure of damages - time for assessing damages - relevance of resale price as evidence of market price.
Bankruptcy Act 1966 (C'th) ss.222 and 242
Transfer of Land Act 1958 (Vic)
HEARING
MELBOURNE
#DATE 14:11:1985
ORDER
The applicants be declared to have standing to bring the present application.
The application be restored to the list for callover at 9.30 a.m. on 22 November 1985.
Costs be reserved.
(Note: Settlement and entry of orders is dealt with by Bankruptcy Rule 124 of the Bankruptcy Act, 1966).
JUDGE1
This is an application for a declaration that a composition entered into between a debtor and his creditors is void, or alternatively for an order that it be terminated (Bankruptcy Act 1966 ss.222 and 242).
A preliminary objection has been taken by the debtor that the applicants have no standing as creditors to bring the application because they are not owed anything by the debtor. It is agreed that this matter should be determined at the outset, without considering the grounds of the application.
The facts relevant to the objection are not in dispute and can be stated shortly. On 23 June 1977, the first two applicants, and the deceased person whose estate is now represented by the third-named applicant, entered into a contract to sell a piece of land with three dwellings on it to the debtor. The debtor paid a deposit of $3000. On 20 July 1977 he failed to pay the balance of $59,000 in accordance with the contract. On 18 August 1977 the solicitors for the vendors sent a notice to him requiring him to remedy his default within 14 days. In referring to action that would be taken if the payment was not made, the notice relied upon Table A of the Transfer of Land Act 1958 (Vic) and not, as it should have done, on the relevant clause 5 of the contract itself which was copied from the 1964 Copyright Conditions of Sale. The notice was thus defective, and did not operate to bring into effect the specific provisions of those conditions relating to resale (see Nund v McWaters (1982) VR 575).
Nevertheless it is conceded on behalf of the debtor that he did repudiate the contract and that that repudiation was accepted by letter from the vendors' solicitors dated 12 October 1977.
A week before this letter was sent, on 5 October, Chris Dimos died. The third-named applicant was granted probate of his will on 24 November 1977.
In February 1978, an estate agent was asked to sell the property in question and, in March, instructions were given for an auction sale. This took place on 8 April 1978, the property being sold for $47,500. Agent's fees and legal expenses added up to $2,451.90. The agent has sworn that, in his opinion, the sale price represented fair market value at that time. There is no evidence to indicate why there might have been any decline in the value of the property concerned between June 1977 and April 1978.
It is conceded by counsel for the debtor that if there were persuasive evidence to show, on the balance of probabilities, that the vendors had suffered damages in excess of the $3000 forfeited as a deposit, they would have standing to bring the present application. But counsel has argued that the relevant time to assess damages is the time of breach or, at latest, the time of repudiation. And there is no evidence to prove that the value of the property had dropped at that time. For all we know, it was argued, the price for such houses might have risen then, or been stable, and fallen in the months that followed.
I cannot accept this argument. To begin with, the general rule in a case such as this is that "the party not in default is to be placed in the same position as that in which he would have been had the contract been performed" (per Barwick CJ in Wenham v Ella (1972) 127 CLR 454 at 460.
If the disappointed vendor elects to retain the property for the time being, or is for some reason unable to resell, the normal measure of damages is the contract price less the market price at the time of breach. However, as Lord Wilberforce said in Johnson v Agnew, (1980) AC 367 at 401
"... this is not an absolute rule: if to follow it would give rise to injustice, the court has power to fix such other date as may be appropriate in the circumstances.
In cases where a breach of a contract for sale has occurred, and the innocent party reasonably continues to try to have the contract completed, it would to me appear more logical and just rather than tie him to the date of the original breach, to assess damages as at the date when (otherwise than by his default) the contract is lost".
When the vendor is able to resell, and elects to do so, although the price at which he resells "is strictly not to be taken in preference to the market price", it usually is taken (see McGregor on Damages, 14th Ed, para 745). Indeed, in the absence of special circumstances, it is hard to see what better evidence there could be of the market price, provided that the sale appears to be at the best price attainable and takes place within a reasonable time of the loss of the contract - which I find occurred in this case in mid-October 1977. In view of the need to obtain probate of the estate of one vendor, the time required to advertise an auction properly, and the notoriously flat period for house sales between mid-December and the beginning of February, I am unable to find, on the evidence before me, any default, or failure to mitigate damage, on the part of the present applicants.
In a case such as this, the only way in which the applicants can be placed in the same position as they would have been had the contract been performed, is for the defaulting purchaser to pay damages made up of the difference between the contract price and the best resale price available (having regard always to the requirement to mitigate damage), plus costs of resale, less deposit forfeited.
It would not be appropriate for this Court, on the limited material before it, to prejudge an action for damages, which I understand has already been instituted in the Supreme Court of Victoria. Some evidence of failure to mitigate damage, for example, could come to light in a full hearing. It is sufficient for present purposes to say that, having regard to the expenses of resale, and the heavy loss on resale, it is highly probable that the applicants are entitled to some substantial amount of damages from the debtor and they thus have standing to bring this application.
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