Scott v Medley Close Pty Ltd (No 2)
[2006] VSC 118
•31 March 2006
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
COMMERCIAL LIST
No. 4254 of 2004
| DAVID JOHN SCOTT | Plaintiff |
| v | |
| MEDLEY CLOSE PTY LTD (ACN 007 135 186) and TIMOTHY KEITH MAXWELL | Defendants |
AND BETWEEN
| MEDLEY CLOSE PTY LTD (ACN 007 135 186) and TIMOTHY KEITH MAXWELL | Plaintiffs by counterclaim |
| v | |
| DAVID JOHN SCOTT | Defendant by counterclaim |
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JUDGE: | HABERSBERGER J | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 10 MARCH 2006 | |
DATE OF JUDGMENT: | 31 MARCH 2006 | |
CASE MAY BE CITED AS: | SCOTT v MEDLEY CLOSE PTY LTD [NO. 2] | |
MEDIUM NEUTRAL CITATION: | [2006] VSC 118 | |
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Damages – Assessment - Breach of agreement to secure rezoning of property prior to settlement of purchase - Property sold pursuant to court order – Unequal contributions by co-owners to funding of purchase – Division of the net proceeds of sale between co-owners.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr P.C. Golombek | Samantha Ward Pty |
| For the Second Defendant | No appearance |
HIS HONOUR:
Introduction
On 14 October 2004 I published my reasons for judgment in this proceeding.[1] In effect, the reasons for judgment concerned liability only because on 29 October 2004 I relevantly ordered that:
[1][2004] VSC 395
(1)The land described in Certificates of Title Volume 9681 Folio 763 and Volume 10313 Folio 508 ("the LaTrobe Boulevard property") be sold altogether out of court as one lot pursuant to s.223 of the Property Law Act 1958.
(2)The sale of the LaTrobe Boulevard property be by public auction by a real estate agent to be appointed by agreement between the plaintiff, David John Scott, and the second defendant, Timothy Keith Maxwell or (in default of agreement) appointed by the court, at a reserve price and on a date agreed by Mr Scott and Mr Maxwell or (in default of agreement) fixed by the real estate agent.
(3) The solicitors for the parties have the conduct of the sale.
(4)Mr Scott and Mr Maxwell be each allowed to bid at the sale pursuant to s.225 of the Property Law Act 1958.
(5)The sale of the LaTrobe Boulevard property be for cash payable by a 10% deposit and the balance within 60 days and otherwise on terms agreed by the parties or (in default of agreement) determined by the court.
(6) The proceeds of sale be applied as follows:-
(a) first, to secure a discharge of the mortgage;
(b) secondly, in payment of the costs and expenses of the sale;
(c)thirdly, the balance to be paid into a joint interest bearing account in the names of the solicitors for the parties pending further order.
(7)Mr Maxwell and Mr Scott do all such things and execute all documents required to effect the sale.
(8)Within 30 days of the date of the settlement of the sale of the LaTrobe Boulevard property Mr Scott file and serve:-
(a) an account of:–
(i)all proceeds of sale and amounts applied therefrom to discharge the mortgage and in payment of the costs and expenses of the sale; and
(ii)all sums paid by him in relation to the LaTrobe Boulevard property;
such account to be verified by affidavit;
(b)itemised particulars of any damages claimed by him as a result of the breach by Mr Maxwell of the term of the agreement between them that Mr Maxwell would obtain rezoning of the LaTrobe Boulevard property prior to completion of its purchase, such particulars to be verified by affidavit;
(c)an affidavit listing all documents, records, books of account and papers in his possession, custody or power relating to the above matters.
(9)Within 21 days (or such further time as may be ordered) after service of the account, the affidavit or affidavits verifying the same and the affidavit of documents, Mr Maxwell file and serve:-
(a)a notice setting out such objections, if any, as are taken by him to the account and the particulars in such form as to give proper notice to Mr Scott of the objections made and the grounds of those objections and, where appropriate, an affidavit in support of such objections;
(b)itemised particulars of all amounts paid by Mr Maxwell as contributions to the financing of the LaTrobe Boulevard property or in relation to attempting to obtain rezoning or permission for redevelopment, such particulars to be verified by affidavit;
(c)an affidavit listing all documents, records, books of account and papers in his possession, custody or power relating to all of the above matters.
The present judgment is concerned with the entitlements of Mr Scott and Mr Maxwell to a share of the net proceeds of sale of the two lots known as Lot 2, LaTrobe Boulevard, Geelong ("the LTB property") which was owned by Mr Scott and Mr Maxwell, and with the assessment of any damages payable by Mr Maxwell to Mr Scott.
There was another dispute dealt with in my reasons for judgment. This was between Mr Scott and the first defendant, Medley Close Pty Ltd ("Medley Close"), concerning the development of three properties at 48 Queens Park Road Newtown ("the QPR development"). On 29 October 2004 I also made orders concerning the taking of accounts in respect of this development.
Medley Close went into liquidation on 13 December 2004. The dispute between the liquidators of Medley Close and Mr Scott over the entitlements to the net proceeds of the sale of the three properties involved in the QPR development was not settled until 13 February 2006 at the commencement of the final hearing. The only orders sought by the parties to the QPR development dispute was that the plaintiff's claim be struck out with no order as to costs.
Relevantly, in respect of LTB property, I found that the agreement between Mr Maxwell and Mr Scott was that they would have equal shares in that project[2] and that Mr Scott was to be entitled to his equal share in the venture upon payment of the deposit of $60,500 for the purchase by Mr Maxwell and Mr Scott of the LTB property.[3] I further found that there were terms of the agreement that Mr Maxwell would secure a rezoning of the property to permit residential development before the date for completion of the purchase contract and that any borrowings would be made jointly by Mr Scott and Mr Maxwell and secured by a mortgage of the land.[4]
[2]At [94]
[3]At [104]
[4]At [105]
I found that Mr Maxwell breached the agreement by not securing the rezoning of the property before the date for completion of the purchase contract. This breach meant that the balance of the purchase price for the LTB property had to be found before there had been any rezoning and this, in turn, meant that not all of the required funds were able to be borrowed against the property itself. Therefore, as events turned out, the funding and the costs of funding were not borne equally by Mr Scott and Mr Maxwell. I held that any losses suffered by Mr Scott as a result of Mr Maxwell not obtaining the rezoning prior to settlement were recoverable from Mr Maxwell.[5]
[5]At [109]
Mr Scott's relevant claim in this proceeding was that the parties were compellable to make partition of the LTB property pursuant to the provisions of Part IV of the Property Law Act 1958 ("the PLA") but in lieu of partition he sought an order pursuant to s.222 or s.223 of the PLA that the LTB property be sold altogether out of court. As a half owner of the property, Mr Scott was entitled under s.223 to an order for sale unless the Court "sees good reason to the contrary."[6] I found that there was no "good reason to the contrary"[7] and held that it was an appropriate case for an order for a sale of the LTB property and distribution of the net proceeds, if any, equally between Mr Maxwell and Mr Scott after repayment of the relative contributions made by each of them to the balance of the purchase price (not including the deposit). I further held that if the proceeds of the sale, after repayment of the loan from the mortgagee, Questco Pty Ltd ("Questco"), were not sufficient to repay the rest of the funding and the costs of funding, then Mr Scott might be entitled to be paid in priority to Mr Maxwell to the extent of his claim for damages against Mr Maxwell.[8]
[6]At [111]
[7]At [113]
[8]At [114]
Background
One of the reasons for the delay in getting to a final hearing of these disputes has been Mr Maxwell's failure to co-operate in any way with the sale of the LTB property or to assist the liquidators of Medley Close with the intricacies of the QPR development. Mr Maxwell and his solicitors parted company soon after the publication of my reasons for judgment and since then he has not had any legal representation.
Mr Maxwell's lack of co-operation with the sale of the LTB property was quickly exemplified by the need for Mr Scott's solicitors to return to court on 18 November 2004 seeking orders for the appointment of a real estate agent to conduct the auction and the appointment of solicitors to have the conduct of the sale.
The LTB property was sold by public auction on 25 June 2005. Pursuant to the right reserved in my order for each co-owner to be entitled to bid, Mr Scott was the successful purchaser. He paid a 10% deposit on that day. Despite it being a term of the contract that the balance of the purchase price was payable on 28 August 2005, settlement did not occur until 9 December 2005. Nearly three months of that delay resulted from difficulties experienced by Mr Scott in arranging finance.
Nevertheless, the last three weeks or so of that period of delay before settlement was once again caused by Mr Maxwell's failure to co-operate. By letter dated 18 November 2005 Mr Scott's solicitors, Harwood Andrews, wrote to Mr Maxwell requesting him to sign and return the transfer of the LTB property so that settlement could occur on 30 November 2005 and indicating that application would be made to the Court should he fail to do so. There was no response from Mr Maxwell
On 25 November 2005 the matter came before me. There was no appearance by Mr Maxwell. Apart from the question of whether it had been proved that all of the papers had been properly served at Mr Maxwell's address for service, I ruled that the application could not proceed on that day because counsel for Mr Scott sought to amend the application to include an order that a caveat lodged by Mr Maxwell on 27 June 2005 be forthwith removed. The existence of this caveat had only come to light the day before the hearing when Mr Scott's solicitors conducted a title search. In that caveat Mr Maxwell claimed an estate in fee simple on the ground that:
"As registered proprietor of the within described land the duplicate certificate of title is not under my control and to protect against fraudulent/improper dealings."
No notice of this caveat, which was lodged two days after the sale of the property, had been received by Mr Scott. The lodging of the caveat was a flagrant breach of my order of 29 October 2004.
The application was accordingly adjourned to 29 November 2005. Orders were made concerning notification to Mr Maxwell of the adjourned amended application. On 28 November 2005 Mr Maxwell became aware of the new hearing date, either by service of the relevant documents or, as he insisted, by a chance discussion with a representative of the liquidators of Medley Close. Late that day he contacted the Court seeking an adjournment, stating that he was then in Queensland and could not return to Melbourne in time for the proposed hearing.
On 29 November 2005 the amended application was adjourned to 1 December 2005. Messages were left with Mr Maxwell advising him of this date and through subsequent telephone and facsimile communications it was obvious that he was aware of the latest hearing date. However, Mr Maxwell did not appear on 1 December 2005. Instead, he sought a further adjournment of one week to "allow myself interstate practicability of representation." The ruling I gave refusing any further adjournment was as follows:
"On last Tuesday I adjourned the further hearing of this matter on the written application of the second defendant, Mr Timothy Keith Maxwell, to enable him to attend the hearing, as he had indicated he wished to do so. On that occasion it seemed to me that if indeed he had only become aware of the plaintiff's application the afternoon before the hearing, and he was then in Broadbeach, Queensland, it was not unreasonable to adjourn the matter on the basis of the difficulty of him returning to Melbourne in the short space of time.
Other things being equal, I would probably have adjourned it to a later date but I was informed that Mr Scott, the plaintiff, was leaving for overseas on Friday and not surprisingly, there was a desire to have this matter finalised before he departed. It seemed to me that in the circumstances an adjournment of 48 hours was more than adequate to enable Mr Maxwell to arrange to return to Melbourne if he wished to do so, or to arrange legal representation. I am therefore not disposed to grant any further adjournment.
An important factor in that consideration is that as Mr Northrop submitted on the last occasion, in none of the communications that I have received in the last few days has Mr Maxwell raised any argument as to why the sale of the property should not be settled. I therefore propose to deal with the matter today in Mr Maxwell's absence."
Pursuant to the orders made by me on 1 December 2005 the transfer to Mr Scott was signed on behalf of Mr Maxwell by the Prothonotary and Mr Maxwell's caveat was removed. As a result of the above events, settlement occurred on 9 December 2005 and not on 30 November 2005. This meant that a further month's interest was payable to the mortgagee.
On 16 December 2005 I ordered that the final hearing in relation to both the QPR development and the LTB property be fixed for 13 February 2006. I also set out a timetable for the filing of any further affidavits to be relied upon by Mr Scott and Mr Maxwell in relation to the taking of the accounts for the LTB property.
On 13 February 2006 there was no appearance by Mr Maxwell. However, Mr Scott was now represented by new solicitors and new counsel, who had only come into the matter very recently. For a number of reasons counsel for Mr Scott sought to have the hearing concerning the LTB property adjourned. The relevant orders made on 13 February 2006 were as follows:
(1)Any further affidavits to be relied upon by the Plaintiff in relation to the taking of the accounts for the LaTrobe Boulevard property be filed and served by 4.00 p.m. on 20 February 2006.
(2)Any further affidavits to be relied upon by the Second Defendant in relation to the taking of the accounts for the LaTrobe Boulevard property be filed and served by 4.00 p.m. on 6 March 2006.
(3)The further hearing of this proceeding in relation to the LaTrobe Boulevard property mentioned above is adjourned until 10.30 a.m. on 10 March 2006 before the Honourable Justice Habersberger.
(4)That any Summons by the Plaintiff seeking an order from the Court that any balance of moneys in Court be held in court pending the taxation of any costs awarded or to be awarded in favour of the Plaintiff against the Second Defendant and that such costs be paid to the Plaintiff out of such balance of moneys in court be made returnable before the Court on the adjourned hearing on 10 March 2006 before the Honourable Justice Habersberger and that such Summons be filed and served on the Second Defendant by 4.00 p.m. on 20 February 2006.
(5)That a copy of this order be served on the Second Defendant by 4.00 p.m. on 20 February 2006.
On 10 March 2006 again there was no appearance by Mr Maxwell, and no material had been filed by him. I was satisfied, however, from reading the affidavit of Erynne Sherri Hepburn sworn on 7 March 2006 that copies of the following documents had been served at Mr Maxwell's address for service at 444 Ryrie Street, Geelong at approximately 6.00 p.m. on 20 February 2006:
(a) a notice of address for service for Mr Scott dated 17 February 2006;
(b) the order made by me on 13 February 2006;
(c)a summons filed on 16 February 2006 seeking the relief referred to above; and
(d)the affidavit of David John Scott sworn on 17 February 2006 together with a copy of the adjusted report of Mr Scott exhibited to that affidavit.
Although this was approximately two hours later than the time contained in my order, no point was raised on behalf of Mr Maxwell that he did not have sufficient time to respond to Mr Scott's material or to arrange to appear on 10 March 2006. My decision to treat the service as sufficient compliance with my order was strengthened by the fact that, according to her affidavit, Ms Hepburn had attempted to serve the papers at approximately 10.00 a.m. on 19 February 2006. On that occasion:
"2.The door was opened by a male person who had dark brown wavy hair wore glasses was of medium build and average height. He looked to be middle aged.
3.I told him that person [sic] that I had Court documents to serve on Timothy Keith Maxwell. He told me that Maxwell did not live there anymore and that he did not know his present whereabouts. He said that if I left the documents there he would throw them over his neighbour's fence.
4.He made a number of remarks concerning Court proceedings which indicated to me that he knew that there were Court proceedings instituted against Maxwell and that he was aware of the substance of those proceedings. He made a remark to the effect that nobody would get any money out of Maxwell and that allegations against him were not true.
5.I was intimidated by his attitude and left the premises without leaving the documents there.
6.I returned the next day at approximately 6 pm. I knocked on the door of the premises and heard sounds of movement within the premises but nobody opened the door. I then left the documents at the premises in the letter box."
Accordingly, I proceeded with the final hearing concerning the LTB property despite the absence of Mr Maxwell. Mr Scott gave evidence in response to a number of questions asked by me in respect of certain issues raised in his adjusted report. His counsel also made submissions.
Division of the Net Proceeds of Sale
The first issue for decision is how the net proceeds of sale were to be divided between Mr Scott and Mr Maxwell given that they had made unequal contributions to the funding and the costs of funding.
Mr Scott's calculation that the net proceeds of sale came to $456,710.97, which was set out in his adjusted report or account exhibited to his affidavit sworn on 17 February 2006, was as follows:
Sale Price
$800,000.00
Add Adjustments on settlement:
Council Rates (203 days) Purchaser Pays$954.32
Land Tax (22 days) Purchaser Pays $66.30 Discharge of Mortgage Caveats ($92.40)
$800,928.22Less Payments to Questco:
Repayment of Mortgage$300,000.00
Interest for December 2005 $3,093.75 Discharge Fee $250.00 $303,343.75 $497,584.47 Less Solicitors' Fees on Mortgage Discharge $220.00
$497,364.47Less Agents' Fees on Sale $19,200.00
$478,164.47Less Payment of Outstanding Levies: Council rates arrears to June 2005 $7,332.60 Council rates current year to June 2006 $1,715.90 Land Tax Arrears $2,405.00 $11,453.50 $466,710.97 Less Legal Fees on Sale $10,000.00 Net Proceeds on Sale
$456,710.97
Pursuant to my order of 1 December 2005, Mr Maxwell's potential half share of the net proceeds of sale of $228,355.47 was paid into court on 28 December 2005 and Mr Scott retained his half share, said to be $228,355.48. (It seems to me that there is an immaterial discrepancy of 2 cents throughout Mr Scott's calculations and that Mr Scott probably retained $228,355.50).
Relevant invoices justifying each of the above figures were contained in Mr Scott's report. I accept the validity of his calculation. The only item which caused me any hesitation was the deduction by Mr Scott's former solicitors of $10,000 for their "legal fees on sale." This seemed to be an extremely high figure for the conveyancing fees. In fact, the amount charged by the former solicitors was even more because Mr Scott had already paid an earlier bill for $3,356.20. I was concerned that those two amounts might have contained charges which more properly related to the costs of the proceeding itself. Mr Scott gave evidence that he had queried the amounts and had been told that it did all relate to the sale and conveyancing tasks and was so high in large part because of all of the extra work caused by Mr Maxwell's failure to co-operate both at the time of the auction and at the time of settlement. Having read both bills, which were contained in Mr Scott's adjusted reports, I am satisfied that the activities detailed in those bills properly fell within the category of "legal fees on sale" and therefore that the $10,000 deduction was valid.
As previously stated, I found that the funding and the costs of funding were not borne equally by Mr Scott and Mr Maxwell and that these unequal contributions should be repaid prior to distribution of the net proceeds. I accept Mr Scott's claim that his capital contribution, apart from the deposit, totalled $376,976.92, calculated as follows:
Interest to Vendor May 2002
$5,549.42
Interest to Vendor June 2002 $5,370.41 Nicholas O'Donahue & Co up front fees borrowing $1,558.50 Questco Pty Ltd up front fees borrowing $2,750.00 Plumpton Place Pty Ltd balance at settlement $194,795.39 Plumpton Place Pty Ltd refund overpayment ($3,465.00) Gadens Lawyers refund of legal fees ($59.00) Gadens Lawyers Mortgage variation costs $1,782.00 Registrar of Titles $69.00 National Australia Bank $270.00 Harwood Andrews Legal Costs on sale $3,356.20 Monthly Interest paid to Questco (40 x $4,125) $165,000.00
$376,976.92
I also accept Mr Scott's assertion that Mr Maxwell's capital contribution was $102,381.41, calculated as follows:
Interest to Vendor April 2002
$5,012.40
Additional Deposit June 2002 $100,000.00 Refund of overpaid interest to vendor ($2,630.99)
$102,381.41
Together, Mr Scott and Mr Maxwell contributed capital, apart from the deposit, of $479,358.33.
According to Mr Scott's analysis, another figure needed to be taken into account before repayment of the unequal capital contributions. This was because the development incurred a loss of $83,147.38, calculated as follows:
Income
Sale of Property $800,000.00 Total Income $800,000.00 Expenses Advertising on Sale $1,600.00 Borrowing Costs $13,080.00 Commission on Sale $17,600.00 Council Rates $8,105.29 Interest Expense Questco $172,625.60 Vendor $ 13,301.24 Total Interest Expense $185,926.84 Land Tax $2,644.45 Legal Fees on Sale $13,448.60 Legal Fees Purchase $1,992.20 Mortgage Discharge Costs $470.00 Purchase Price $605,000.00 Registration of Title $1,320.00 Stamp Duty $31,960.00 Total Expenses $883,147.38 Gross Profit (Loss)
($83,147.38)
Mr Scott split that loss equally between Mr Maxwell and himself, by deducting $41,573.69. Thus, according to Mr Scott's calculations, the respective capital contributions become $335,403.23 or 84.65% of the total net capital contribution for Mr Scott and $60,807.72 or 15.35% for Mr Maxwell. In tabular form this calculation is as follows:
Scott
Maxwell
Total
Capital Contributed $437,476.92 $102,381.41 $539,858.33 Less Deposit Paid by Scott ($60,500.00) ‑ ($60,500.00) $376,976.92 $102,381.41 $479,358.33 Less Share of Loss ($41,573.69) ($41,573.69) ($83,147.38) Net Capital Accounts $335,403.23 $60,807.72 $396,210.95 % of Capital Account
84.65%
15.35%
100%
I accept the validity of Mr Scott's calculation of the respective capital contributions up to this stage.
However, Mr Scott then applied the percentage entitlements to the whole of the net proceeds of sale of $456,710.97. I do not agree with this part of his calculation. In my opinion, as the capital accounts after deduction of the loss on the development totalled less than the net proceeds of sale, each co-owner is entitled to be repaid his respective capital contribution and the balance should be shared equally. According to my calculations, that balance is $60,500.02, which is reached by deducting the total net capital contribution figure of $396,210.95 from the net proceeds of sale figure of $456,710.97. Thus, Mr Scott's share of the net proceeds is $365,653.24 and Mr Maxwell's share $91,057.73, calculated as follows:
Scott
Maxwell
Total
Net Capital Accounts
$335,403.23
$60,807.72
$396,210.95
Half Share of balance of net proceeds on sale
$30,250.01
__________$30,250.01
__________$60,500.02
__________Total
$365,653.24
$91,057.73
$456,710.97
Thus, out of the $228,355.47 paid into court in respect of Mr Maxwell's notional share, Mr Scott is entitled to be paid $137,297.74 to bring his share of the net proceeds of sale up to $365,653.24 and leaving Mr Maxwell's share of $91,057.73 still in court.
Damages
I turn then to the question of damages for Mr Maxwell's breach of the agreement. There were two heads to this claim by Mr Scott. The first was for interest on the funds contributed by Mr Scott to the project initially, from the date of settlement of the original purchase of the LTB property, being 28 June 2002, and throughout the period up to the date of settlement of the sale of the property, being 9 December 2005. Mr Scott's calculation at 7% per annum compounded monthly came to $78,351. I accept that 7% was a reasonable rate to use for the period in question. I also accept that for the purposes of this calculation it is appropriate to compound monthly the interest calculation.
However, I disagree in two respects with Mr Scott's calculation. First, it seems to me that his calculation is in error because it does not give credit for Mr Maxwell's contribution to the funding. If the rezoning of the property had been secured by Mr Maxwell before settlement, the intention was that the balance of the funds required to purchase the property would have been borrowed by the co-owners. Interest would still have been payable by them. Therefore, it seems to me that the loss suffered by Mr Scott as a result of having to contribute funds to enable the property to be purchased is not correctly represented by calculating interest on all of the funds contributed by him. Rather, the loss is the cost to him of funding a disproportionate amount. I consider that this loss can be ascertained by calculating interest on the extra funds contributed by Mr Scott, as compared with Mr Maxwell, over the relevant period.
Secondly, Mr Scott's calculation claims interest throughout the period, including during the period between 28 August 2005, when settlement should have occurred, and 9 December 2005, when it actually took place. When Mr Scott finally arranged his finance, settlement was scheduled to take place on 30 November 2005, but a further nine days was lost because of Mr Maxwell's failure to sign the transfer and the wrongful lodging of his caveat. Therefore, I consider that Mr Scott is not entitled to claim as part of his damages, the interest expense during the period between 29 August and 30 November 2005.
I have therefore assessed this head of damages to be $44,630. The details of my calculation of this amount are set out in the schedule to this judgment.
The second head of damages claimed by Mr Scott was for the loss on the reduced value of the property due to Mr Maxwell's failure to achieve rezoning. He calculated this figure at $175,000, being half of the difference between $1,150,000, being the estimated market value of the property at the date of sale if the rezoning had been obtained and the actual sale price of $800,000. Part of Mr Scott's adjusted report was a valuation by a certified practising valuer, Mr Todd Devine, dated 21 July 1995, which valued the property as at 28 June 1995 at $1,150,000 on the assumption that it had been zoned "Residential 1" under the Greater Geelong Planning Scheme.
I do not accept that Mr Scott has established that he has suffered a loss of $175,000. Whatever might have been the position had the property been purchased by a third party, the fact is that it is now owned by Mr Scott. To award Mr Scott damages of $175,000 on the basis of the reduced value of the property would be quite wrong, in my opinion, when he may be able in the near future to secure the rezoning, thereby increasing its value over and above what he paid for it. I consider that that outcome would be a clear case of double dipping, which means that he would wrongfully be "placed in a superior position to that which he … would have been in had the contract been performed."[9].
[9]The Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64 at 82 per Mason CJ and Dawson J.
When I put this to Mr Scott, he responded by saying that it was not simply a matter of putting in an application to the Council and having the rezoning approved. In March 2005 he had been advised by a planning consultant, Chubb Fadgyas, that the Planning Scheme Amendment initiated by Mr Maxwell's consultant in March 2003 was unlikely to be proceeded with at all or for at least four to five years given the unfinished state of the West Fyans Strategic Land Use Plan. Mr Scott said that at a subsequent meeting between a Council officer and Mr Scott and his consultant he was told that the Council would reject any application from him at that stage. Nevertheless, he went ahead and purchased the property after outbidding another interested party.
Although the evidence on this issue is far from satisfactory, I consider that the correct analysis is that Mr Scott has suffered a loss because there is a risk that the property will never be rezoned, alternatively that it will not be able to be rezoned until well into the future after considerable further expenditure by Mr Scott. Doing the best I can, I estimate that there is a 25% risk of that happening.[10] I therefore consider that Mr Scott's damages under this head should be assessed at one quarter of $175,000 or $43,750.
[10]See Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 at 355 per Mason CJ, Dawson, Toohey and Gaudron JJ; Mallett v McMonagle [1970] AC 166 at 176 per Lord Diplock; The Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64 at 83 per Mason CJ and Dawson J.
Interest
Next, Mr Scott sought interest on the damages awarded to him pursuant to s.60 of the Supreme Court Act 1986. It seems to me that this claim has to be broken down into three parts. First, the amount of damages under the first head (being the interest on Mr Scott's disproportionate capital contribution) already accrued by the time this claim commenced. Secondly, the balance of the damages under the first head which accrued from time to time thereafter. And thirdly, the damages under the second head (being the reduced value of the property). I will deal with each in turn.
The claim relating to the LTB property did not commence until 3 March 2004 when Mr Scott was given leave to amend his statement of claim to include the dispute over this property. By then, according to my calculations set out above, Mr Scott had already suffered loss and damage under the first head totalling $17,659.61. Interest on that sum from 3 March 2004 to 30 March 2006 at 11% per annum is in round figures $4,025. The interest rate of 11% per annum is the lowest maximum rate fixed under the Penalty Interest Rates Act 1983 during this period.
After this claim commenced, Mr Scott's damages under the first head, as calculated above, increased by $26,970.20. However, as that amount accrued over time, I consider it appropriate to calculate interest at 11% per annum over the above period on only half of that amount. In round figures, this comes to $3,075.
Finally, there is the claim for interest on the damages awarded under the second head. As this loss only crystallised at settlement on 9 December 2005, the relevant calculation, in my opinion, is interest on $43,750 at 11% per annum from 9 December 2005 to 29 March 2006. In round figures, this comes to $1,450.
In summary, I consider that Mr Scott is entitled to be paid by Mr Maxwell damages in the sum of $88,380, together with interest in the nature of damages, in the sum of $8,550, making a total of $96,930. To the extent that money remains in court Mr Scott can be paid that money in satisfaction, or more likely in part satisfaction, of his claim for damages and interest.
Costs
Mr Scott sought an order that his costs of the proceeding, including reserved costs, be paid by Mr Maxwell. At the hearing, I pointed out to counsel for Mr Scott that as the proceeding involved two separate claims, one of which had been settled on 13 February 2006 on the basis that there be no order as to costs, it seemed to me that the appropriate order might be that Mr Maxwell pay only half of Mr Scott's costs. Counsel accepted that, in the circumstances, this broad brush approach was a sensible course. After looking again at the various hearings involved in this proceeding, it seems to me that some fine tuning of the costs order is necessary.
I have already ordered the second defendant to pay the plaintiff's costs of the hearings on 18 November 2004, 25 and 29 November and 1 December 2005, so no further order is required in respect of those hearings. Also costs were reserved on 29 April, 20 May, 3 June and 28 June 2005, but it seems to me that those hearings related only to the QPR dispute which subsequently settled. Finally, I do not consider that Mr Scott is entitled to any costs from Mr Maxwell in respect of the hearing on 13 February 2006 because Mr Scott was not in a position to proceed on that day.
Thus, I consider that the order for costs should be that the second defendant pay one half of the plaintiff's costs of the proceeding incurred during the period from 3 March 2004 to the publication of reasons for judgment on 14 October 2004 and one half of the costs reserved on 29 October 2004 and 16 December 2005 and all of the plaintiff's costs of and incidental to the hearing on 10 March 2006. These costs are to be taxed on a party and party basis.
Although it is probably no longer necessary, I consider that, in the circumstances of this case, it would be appropriate to order that any balance of moneys remaining in court continue to be held in court pending any taxation by Mr Scott of any of the orders for costs made in his favour. This is particularly the case given the flagrant breach by Mr Maxwell of my orders which necessitated Mr Scott having to incur further costs in respect of the hearings on 18, 25 and 29 November and 1 December 2005. In my opinion, if any balance is remaining in court after Mr Scott has satisfied his judgment for damages and interest, it would be most unjust to allow Mr Maxwell to receive that money when there are these substantial orders for costs against him. The reality would seem to be that apart from the money in court, Mr Scott is unlikely to recover anything further from Mr Maxwell.
Orders
Therefore, the orders that I would propose making are as follows:
1.There be judgment for the plaintiff against the second defendant as follows:
(a)the net proceeds of sale of the LaTrobe Boulevard property be divided between the plaintiff and the second defendant in the sums of $365,653.24 and $91,057.73 respectively;
(b)the second defendant pay to the plaintiff damages in the sum of $88,380, together with interest in the nature of damages in the sum of $8,550; and
(c)the second defendant pay one half of the plaintiff's costs of the proceeding incurred during the period from 3 March 2004 to the publication of reasons for judgment on 14 October 2004 and one half of the costs reserved on 29 October 2004 and 16 December 2005 and all of the plaintiff's costs of and incidental to the hearing on 10 March 2006, such costs to be taxed on a party and party basis.
2.From the moneys presently held in Court in Common Fund No. 1 Account No. 69381 in the name of "Scott, David John v Medley Close Pty Ltd and Timothy Keith Maxwell",
(a)the plaintiff be paid the sum of $137,297.74 to bring his share of the net proceeds of sale up to the sum of $365,653.24;
(b)the plaintiff be paid the sum of $96,930 or the balance remaining in the said account in satisfaction or part satisfaction of the judgment for damages and interest; and
(c)any balance remaining in the said account be held pending any taxation by the plaintiff of any of the orders for costs made in his favour.
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SCHEDULE
Contribution
Interest @ 7%
Scott's contribution to 30/06/2002 $206,558.72 Less Maxwell's contribution to 30/06/2002 $105,012.40
$101,546.3231/07/2002 Interest 31 days $603.71 $603.71 31/07/2002 Questco $4,125.00 31/07/2002 Refund to Maxwell $2,630.99
$108,906.0231/08/2002 Interest 31 days $647.47 $647.47 31/08/2002 Questco $4,125.00
$113,678.4930/09/2002 Interest 30 days $654.04 $654.04 30/09/2002 Questco $4,125.00 $118,457.53 31/10/2002 Interest 31 days $704.25 $704.25 31/10/2002 Questco $4,125.00 $123,286.78 30/11/2002 Interest 30 days $709.32 $709.32 30/11/2002 Questco $4,125.00 $128,121.10 31/12/2002 Interest 31 days $761.71 $761.71 31/12/2002 Questco $4,125.00 $133,007.81 31/01/2003 Interest 31 days $790.76 $790.76 31/01/2003 Questco $4,125.00 $137,923.57 28/02/2003 Interest 28 days $740.63 $740.63 28/02/2003 Questco $4,125.00 $142,789.20 31/03/2003 Interest 31 days $848.91 $848.91 31/03/2003 Questco $4,125.00 31/03/2003 Refund of Legal Costs ($59.00) $147,704.11 30/04/2003 Interest 30 days $849.80 $849.80 30/04/2003 Questco $4,125.00 $152,678.91 31/05/2003 Interest 31 days $907.71 $907.71 31/05/2003 Questco $4,125.00 $157,711.62 30/06/2003 Interest 30 days $907.38 $907.38 30/06/2003 Questco $4,125.00 $162,744.00 31/07/2003 Interest 31 days $967.55 $967.55 31/07/2003 Questco $4,125.00 31/07/2003 Legal Costs re: mortgage Extension $2,121.00 $169,957.55 31/08/2003 Interest 31 days $1,010.43 $1,010.43 31/08/2003 Questco $4,125.00 $175,092.98 30/09/2003 Interest 30 days $1,007.38 $1,007.38 30/09/2003 Questco $4,125.00 $180,225.36 31/10/2003 Interest 31 days $1071.48 $1,071.48 31/10/2003 Questco $4,125.00 $185,421.84 30/11/2003 Interest 30 days $1,066.81 $1,066.81 30/11/2003 Questco $4,125.00 $190,613.65 31/12/2003 Interest 31 days $1,133.24 $1,133.24 31/12/2003 Questco $4,125.00 $195,871.89 31/01/2004 Interest 31 days $1,161.32 $1,161.32 31/01/2004 Questco $4,125.00 $201,158.21 29/02/2004 Interest 29 days $1,115.71 $1,115.71 29/12/2004 Questco $4,125.00 $206,398.92 31/03/2004 Interest 31 days $1,223.73 $1,223.73 31/03/2004 Questco $4,125.00 $211,747.65 30/04/2004 Interest 30 days $1,214.95 $1,214.95 30/04/2004 Questco $4,125.00 $217,087.60 31/05/2004 Interest 31 days $1,287.10 $1,287.10 31/05/2004 Questco $4,215.00 $222,499.70 30/06/2004 Interest 30 days $1,276.64 $1,276.64 30/06/2004 Questco $4,125.00 $227,901.34 31/07/2004 Interest 31 days $1,351.22 $1,351.22 31/07/2004 Questco $4,125.00 $233,377.56 31/08/2004 Interest 31 days $1,383.69 $1,383.69 31/08/2004 Questco $4,125.00 $238,886.25 30/09/2004 Interest 30 days $1,370.66 $1,370.66 30/09/2004 Questco $4,125.00 $244,381.91 31/10/2004 Interest 31 days $1,448.93 $1,448.93 31/10/2004 Questco $4,125.00 $249,955.84 30/11/2004 Interest 30 days $1,434.17 $1,434.17 30/11/2004 Questco $4,125.00 $255,515.01 31/12/2004 Interest 31 days $1,514.94 $1,514.94 31/12/2004 Questco $4,125.00 $261,154.90 31/01/2005 Interest 31 days $1,552.62 $1,552.62 31/01/2005 Questco $4,125.00 $266,832.52 28/02/2005 Interest 28 days $1,432.85 $1,432.85 28/02/2005 Questco $4,125.00 $272,390.37 31/03/2005 Interest 31 days $1,619.42 $1,619.42 31/03/2005 Questco $4,125.00 $278,134.79 30/04/2005 Interest 30 days $1,600.23 $1,600.23 30/04/2005 Questco $4,125.00 $283,860.02 31/05/2005 Interest 31 days $1,687.61 $1,687.61 31/05/2005 Questco $4,125.00 $289,672.63 30/06/2005 Interest 30 days $1,666.61 $1,666.61 30/06/2005 Questco $4,125.00 $295,464.24 31/07/2005 Interest 31 days $1,756.60 $1,756.60 31/07/2005 Questco $4,125.00 $301,345.84 28/08/2005 Interest 28 days $1,618.19 $1,618.19 31/08/2005 Questco $4,125.00 $307,089.03 09/12/2005 Interest 9 days from 30/11/2005 $530.04 $530.04 $44,629.81
0
3
0