Silvestri v Oxlade
[2009] SADC 86
•14 August 2009
DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
SILVESTRI v OXLADE
[2009] SADC 86
Judgment of His Honour Judge Tilmouth
14 August 2009
DAMAGES - MEASURE AND REMOTENESS OF DAMAGES IN ACTIONS FOR BREACH OF CONTRACT - REMOTENESS - LOSS OF PROFITS
The defendant breached a real estate contract for sale and purchase of a property. The plaintiff seeks damages as provided for under the contract, in addition to other alleged losses, including the loss of bargain.
Held: The plaintiff is entitled to damages assessed as of the date of trial under the contract, plus general breach of contract damages including loss of bargain and Walker v Hungerfords type damages, to put the plaintiff back in the position he would have been in had the contract been fulfilled.
Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1; Nelson v Bellamy [2000] NSWSC 182; Johnson v Agnew [1980] AC 367; Laws v Collins Exposed Aggregate Pty Ltd (Unreported NSWSC No. 214 of 1992) BC9302251, referred to.
Johnson v Perez (1988) 166 CLR 351; Hungerfords v Walker (1989) 171 CLR 125; Willis v The Commonwealth (1946) 73 CLR 105; Luxer Holding Pty Ltd v Glentham Pty Ltd (2007) 35 WAR 254; Noble v Edwards (1877) 5 ChD 378, applied.
SILVESTRI v OXLADE
[2009] SADC 86Preliminary
John Silvestri, a restauranteur and sometime architect, bought a residential property in Unley Park in the latter part of 2007 with a view to renovation and sale at a profit. The defendant Colin Oxlade executed a contract for the purchase thereof, in late January 2008. The defendant has proved unwilling or unable to settle. As a consequence Mr Silvestri claims damages as provided for under the contract, in addition to other alleged losses, including the loss of bargain. The case proceeded to trial on the issue of damages. The defendant was unrepresented and made no appearance. This state of affairs came about in this way.
Factual background
Mr Silvestri originally purchased the subject property situated in Rutland Avenue on 14 September 2007, for a sale price of $871,000, plus adjustments. The purchase was funded principally by a loan from the National Australia Bank, although Mr Silvestri personally contributed $20,000 and later $184,777 from his own funds.[1] Some improvements were undertaken and general cleaning up inside and out were affected. The subject contract for sale and purchase entered into between the parties was executed on 22 January 2008 for a sale price of $1,350,017.00. The contract provided for a deposit of $100,000 and for settlement on 20 March 2008. It was drawn up on a standard form prepared by the Society for Auctioneers and Appraisers (SA) Inc, and contained no special conditions.[2]
[1] T51.12-.16
[2] Exhibit P1, V1, Tab 7
On the strength of the expectation of due settlement, Mr Silvestri purchased a large block of land in the nearby suburb of Kingswood for a sale price of $875,000, on 4 February 2008. Likewise this provided for no special conditions; more particularly settlement was not subject to the sale or the settlement of the Rutland Avenue property.[3] The National Australia Bank advanced seven hundred thousand dollars for the purchase of this land by way of an interest only loan.[4]
[3] Exhibit P1, V2, Tab 31
[4] Exhibit P1, Tab 31 & 32
Mr Oxlade paid only $50,000 of the $100,000 deposit on 25 February. Unsuccessful efforts were made on behalf of the plaintiff to try and secure the balance.[5] A notice of default was sent to him on 7 March 2008.[6] Mr Oxlade lodged a caveat over the title on 19 March 2008, no doubt with a view to preserving his interest in securing specific performance of the contract.[7] Even so he failed to settle on the due date, 20 March 2008. The vendor had in fact served notices to complete for settlement again on 31 March, 10 April and 23 April 2008. Mr Oxlade did not attend to settle on either subsequent day.
[5] T44.34-45.7
[6] Exhibit P9
[7] Exhibit P1, Tab 10
As a consequence Mr Silvestri terminated the contract on 2 May 2008, after taking legal advice. The Notice of Termination invoked clause 9.3 of the Sale and Purchase Agreement, entitling the vendor to give notice to complete upon the purchaser failing to settle.[8] This clause provides for vendor termination “without prejudice to the Vendor’s rights and entitlements at law”. There was expert evidence that as of this date, the value of the property had fallen due to current economic conditions and the sale environment, to $1.1 m.
[8] Exhibit P1, Tab 9
The legal proceedings
The plaintiff issued his proceedings for breach of contract on 23 May 2008 seeking relief by way of declarations and damages (unspecified). However no appearance, still less any defence was filed on behalf of the defendant. Then Mr Silvestri brought an interlocutory application for a default judgment, one granted by order of Master Rice of this court on 8 July 2008.[9] At the hearing thereof, the defendant was represented by Mr McNamara of Commercial and General Law. The court record shows there was an appearance before the Master on 2 July 2008 when Mr McNamara unsuccessfully sought further time in which to file a defence, although the Master adjourned the application for “a few days to see if the matter could resolve”. During the course of his reasons for entering judgment in default of a defence with damages to be assessed, the Master noted that “Mr McNamara cordially acknowledged that his client did not have a defence”.[10]
[9] Exhibit P5
[10] Reasons 8 July 2008 para [8]
The part deposit of $50,000 paid into the trust account of the real estate agents engaged by Mr Silvestri, Toop & Toop, on 25 February 2008, was paid into the suitor’s fund on 25 June 2008, by an order of Master Rice of 11 June 2008. The matter was set to come before the Master again in early October 2008 but was vacated as he was on leave at that time. There was no appearance by the defendant’s solicitors when rescheduled for 29 October 2008, and they were subsequently removed from the file by order of 10 December 2008.
There followed a listing appointment for 13 January 2009, when the action was set for trial on 6 April 2008 before Judge Burley. That hearing was vacated because the defendant indicated he was unaware this date had been set for trial – he thought it was only for mention. The defendant again failed to appear at a pre-trial conference on 8 April 2009. The file contains a note that he rang the Registry that morning to advise he would not attend and gave a telephone number and contact address. The trial was rescheduled for 9 June 2009 when again the defendant failed to appear, then adjourned to 11 June to enable him to obtain counsel. On that date it was again adjourned to 19 June, because the defendant’s then legal representative Effron & Co, solicitors of Melbourne indicated counsel had been engaged but was unable to attend on that day.
On 19 June a Melbourne solicitor, Mr Effron, appeared by telephone, advising he had only just been instructed. He indicated his preliminary enquiries revealed that an application may be brought to set aside the judgment in default and to file a defence on the basis that “the vendor entered into a subsequent agreement with the purchaser to sell the property” so that “there would be no damages”.[11] Because of this the court granted the indulgence of a further adjournment to 20 July 2009.
[11] T 19 June 2009, T3.9
On that day different solicitors, Piper Alderman of Adelaide, appeared as a matter of courtesy, anticipating instructions from the defendant, but at the same time seeking an adjournment in order to file a Notice to Act to 21 July, the following day. They appeared again the next day seeking to be excused, as they had not been instructed. In the meantime the plaintiff signed a contract on 9 June 2009 to sell the Property for $1,100,000.00; settlement there-under is scheduled for 31 August 2009 “or as mutually agreed if earlier”.[12]
[12] Exhibit P1, V2, Tab 33
The trial then proceeded in the absence of the defendant for the following reasons. The above history is sufficient enough to indicate that the defendant has not at any stage really contributed in a substantial way to the proceedings, except to make a brief appearance when Master Rice considered the application for default judgment. Even then, nothing of substance was put forward in relation to the merits. Thereafter there were attempts to obtain legal representation, but none came to anything. On the other hand the plaintiff was inconvenienced a number of times and in fact due to the adjournment granted in June, was forced to abort a planned overseas trip in July, to enable them to comply with the revised trial date.
Insofar as there is any suggestion of an irregularity in the manner of securing the default judgment, the appearance of Mr McNamara and what he told the Master clearly indicates that Mr Oxlade had full notice of those proceedings and what they were about. Indeed the indulgence granted by the Master for an adjournment of several days, simply underlines that fact.
This is not to say that in determining to hear the case in the absence of the defendant, the Court ignored the letter faxed to the Registry shortly before the resumed hearing on the morning of 21 July 2009. In that letter of some three pages, Mr Oxlade referred to several attempts to settle, including a telephone call in which he tried to engage Mr Silvestri directly in settlement discussions the evening before. In the letter he also referred to the difficulties of obtaining sufficient money to properly engage solicitors, and his desire to continue to make settlement offers.
He raised nothing however of substance in relation to the merits of the matter. Nor has he made any suggestion of procedural irregularity or other disadvantage, apart from the fact he could not obtain legal representation. After duly considering the letter the court declined to adjourn the matter any further and so proceeded in his absence. The defendant consciously elected not to attend, even though he was advised of the hearing date and even though he was served at the address provided by him with the papers comprised in Exhibit P1 and the plaintiff’s written submission. The latter furnished in considerable detail the type of damages sought and the estimated sum claimed under each head.
The court therefore determined to proceed with the hearing, to take evidence and to hear submissions by counsel for the plaintiff Ms K Clark. Apart from the history of chronic default, prompt resolution was manifestly in the interests of both parties. From the plaintiff’s point of view, the delay had been too long and there was a need to have a liquidated sum in order to enforce his remedies. From the defendant’s point of view, damages continue to climb on a daily basis.
As noted earlier, the claim for damages proceeds essentially on the basis of amounts due under specific terms of the contract and to other heads under general contract law, outside the terms of the contract. It is proposed to deal with these in the order in which they were agitated by Ms Clark.
Amounts due under the contract
Unpaid portion of the deposit
As noted the contract provided for a deposit of $100,000, of which only $50,000 was paid. Clause 9.4(b) entitled the vendor to retain the deposit upon termination by the vendor. In addition, clause 13.2 obliges the purchaser to pay interest to the vendor on any money due under the contract remaining unpaid from the date they first fell due, until the date of payment.
Here it is claimed that the balance of $50,000 remains unpaid from 25 January 2008 to the present time. Under the interpretation provisions there is a potentially complex formula for calculating the rate of default interest, however the vendor is entitled at his election to enforce payment at the “default rate “ of 10 per cent p.a., which he has done in these proceedings. At that rate $5,000 was due as of 25 January 2009. Calculated thereafter at $13.69 per day to 22 July 2009, when judgement was reserved, brings the claim to $7,452.05. As a further 23 days have elapsed since then, and as this is due under the contract, the total sum of $7,766.92 will be allowed under this head.
Default interest on purchase price
Here it is claimed that another contractual remedy in the hands of the vendor, entitles him to claim default interest under clause 9.4(d) on the whole of the purchase price ($1,350,017), from the date of the anticipated settlement under the contract, 20 March 2008 to the date of termination, 2 May 2008. Once again he elects for a rate of 10 per cent - p.a. The calculation for this is 43 days at $369.86 per day, which comes to $15,903.98.
Clause 9.4(d) provides for default interest on the “purchase price … after the date for settlement first agreed” to a later date “of actual settlement”, over the period of the “delay” if not occasioned by the vendor’s default. However this clause does not cater to the present situation. Since clause 13.2 does allow for interest on “unpaid” sums from the date they fall due until paid at the default rate, this claim succeeds, but only on the contract price less the $50,000, that is on the principal of $1.30m instead of $1.35m. This calculation produces a figure, from date settlement provided for under the contract (20 March 2008) to termination (2 May 2008) over 43 days at 10 per cent, at $356.16 per day, of $15,315.07.
Damages at large – general principles
These two items account for the damages claimed under the rubric of “amounts due under the contract”. From this point a number of other heads have been formulated in contract. These must be assessed according to the primary principle that damages are awarded for loss on the basis that the wronged party should be restored to the position he would have occupied if the wrong had not been committed, as nearly as possible as the court can do it. The failure to fulfil a promise to settle on the purchase of real property, provides a remedy in damages for breach of contract. Such damages are designed to place the plaintiff in the position he would have been if the contractual obligation to settle on the property and pay the contract price on the day specified therein, had been fulfilled: Gates v City Mutual Life Assurance Society Ltd.[13]
[13] (1986) 160 CLR 1 at [11-12]
The time at which the assessment must be made
The general principles governing the assessment of damages for breach of contract, usually call for an assessment at the time of breach, or at least the date upon which it can be said that the contract is definitely lost: Johnson v Perez.[14] This was the date of settlement originally proposed of 20 March 2008. However this is not a fixed or immutable rule.
[14] (1988) 166 CLR 351 at 367, and see Johnson v Agnew [1980] AC 367 at 401 and Jampco Pty Ltd v Cameron (No 2) (1985) 3 NSWLR 391
One instance calling for a different approach, can be where negotiations continue following breach, in an effort to resolve the breach, or to reinstate or secure performance of a contract. That was the situation in this matter.[15] Damages may therefore be assessed as of the date the offended party terminates: Luxer Holding Pty Ltd v Glentham Pty Ltd,[16] and Nelson v Bellamy.[17]In the circumstances of this case it is clear the plaintiff would be entitled to damages assessed no earlier than the termination of the contract on 2 May 2008, for those very reasons: Johnson v Agnew.[18]
[15] Exhibit P9
[16] [2007] WASCA 209 at [33]
[17] [2000] NSWSC 182 at [158]
[18] [1980] AC 367 at 400H-401E.
The plaintiff however drove his submission further than that. He strongly argued there was a sound basis to assess the losses right through to the second contract of 9 June 2009. The history of this particular matter has been recited at length above. It is evident from this history that the plaintiff initially tried to revive the contract. When that failed he moved swiftly to terminate and then to enforce whatever rights arose, by issuing proceedings on 23 May 2008. He then successfully moved to have the caveat withdrawn and shortly thereafter obtained the default judgment. The assessment of damages was set for trial in April and then vacated, essentially because of the defendant’s inaction and uncooperativeness in the trial process.
The intervening several months to trial passed as a concession and indulgence to the defendant to give him a chance to get his case in order, if he could. The inevitable conclusion to be reached from all of this is that the plaintiff has not delayed in any sense in trying to enforce his rights, whereas there has been consistent delay on the part of the defendant. When it comes to the proper time to assess damages, the determination is essentially discretionary, depending very much upon the particular facts of the particular case in hand: Laws v Collins Exposed Aggregate Pty Ltd.[19]
[19] (Unreported, NSWSC No.214 of 1992) BC9302251 at 8-9.
Counsel for the plaintiff relied in particular on the following statement of principle expressed by Mason CJ in Johnson v Perez:[20]
There is a general rule that damages for torts or breach of contract are assessed as at the date of breach or when the cause of action arises. But this rule is not universal; it must give way in particular cases to solutions best adapted to give and injured plaintiff that amount in damages which will most fairly compensate him for the wrong he has suffered.
The general rule that damages are assessed as at the date of breach or when the cause of action arose has been applied more uniformly in contract than in tort and for good reason. But even in contract cases courts depart from the general rule whenever it is necessary to do so in the interests of justice.
[20] Ibid at 355-356.
She pointed out that the matter could have been heard earlier, as it should have been. It is clear from the valuation evidence before the court that the property market has slowed significantly and the value of the subject property has progressively fallen. The subsequent events have more sharply crystallised the prospective losses, so the court is better placed to assess damages as of the date of trial, than it would have been earlier when it would have had to make projections of the likely course of events, which have now matured. This is especially so since the plaintiff has managed to secure a purchaser, a situation significantly favouring the defendant. As Latham CJ noted in Willis v The Commonwealth to:[21]
[W]here actual facts are known, speculation as to the probability of those facts occurring is surely an unnecessary second-best. Damages are awarded for injury actually suffered and for prospective injury. Prospective injury can only be estimated with more or less probability. But where the extent and character of what would at one time be described as prospective injury depends on the happening or non-happening of a particular event and that event has in fact happened, it is unnecessary to speculate as to whether or not this even might happen and, if so, when. In such a case prospective damage (or diminution of damage) has become actual.
[21] (1946) 73 CLR 105 at 109.
To substantially same effect are the remarks by Em Heenan AJA in Luxer Holding Pty Ltd v Glentham Pty Ltd: [22]
[A] retrospective assessment of damages conducted years later, and in the knowledge of what actually happened, allows findings to be made with greater confidence. It seems to me that in these circumstances the particular features of the market and the advantages of knowledge gained subsequently about the fate of these premises provides a far more reliable, and therefore preferable, basis for conducting assessment of the damages.
[22] (2007) 35 WAR 254 at [149] and see at [35] and [164]; [2007] WASCA 209
In the particular circumstances of this case, the court considers it should assess damages as of the time of trial because of the inconvenience and delay occasioned to the plaintiff due to no fault of his own and because the property has recently sold on the open market. These are facts rather than predictions that the court can seize upon with certainty in that process. Thus it is appropriate for the general rule to yield in the particular circumstances, because this provides a sounder means of assessing compensation: Johnson v Perez.[23] Once again it is proposed to consider these as they were argued by counsel.
[23] (1988) 166 CLR 351 at 367 per Wilson, Toohey and Gaudron JJ.
Expenses of aborted sale
For the purpose of proceeding to settlement on 20 March, the property conveyers Butchart & Co, were engaged. They prepared a settlement statement for the anticipated settlement, which did not proceed. It was rescheduled and again aborted twice. They charged $1,100 for attendances at the Lands Titles Office twice for settlement purposes.[24]
[24] Exhibit P1, Tab 16
The evidence of Mrs Silvestri was that this was not paid but it would be upon settlement in late August this year. Although one set of settlement costs would have been necessarily incurred had the contract proceeded, as Mr Silvestri will be required to pay settlement fees on the second sale, he has rendered himself liable for the costs of two aborted settlements as a direct consequence of the failure of the defendant to honour his side of the bargain, so the amount of $1,100 will be allowed.
Costs of re-sale
Mr Silvestri engaged Toop & Toop for the purposes of the first sale. Once it fell through he continued to retain them for a time. They attempted to sell it again on the open market. In the process they charged certain agency and advertising fees, although not a commission, of which only the “post-settlement” sums are sought, of $1,715.[25] As these costs would not have been incurred had the contract been fulfilled, they will be allowed.
[25] Exhibit P1, Tab 20
As Toop & Toop were unable to effect sale, Mr Silvestri engaged another land agent Cocks Auld, thus incurring further expenses in his attempts to effect sale, amounting in all to $5,408.[26] The evidence was that in this period they obtained one serious purchaser, who exercised the right of cooling off. In addition, as the Rutland Avenue property was purchased as an investment and was not the place of residence of the Silvestri family, they were advised and accepted that it would be more marketable if it had the appearance of being “lived in”. Thus for a time they rented furniture to make it more appealing to potential purchasers, for two months between 4 July 2008 and 31 August 2008. For this they were rendered two accounts totalling $2,400, which have been paid.[27] As these appear to be reasonable steps to take in order to effect sale and indeed in doing so to mitigate damage, that amount will be allowed.
[26] Exhibit P1, Tab 21
[27] Exhibit P1, Tab 23
However when these agents were unable to effect sale, the plaintiff engaged a third agent, Refined Real Estate. They eventually achieved the sale of June 2009 and consequently charged expenses and commission of $18,150, including a professional fee or commission.[28] As a commission would have been charged by Toop & Toop if the subject contract had proceeded based on a sale price of $1.35m or thereabouts, and as they did not charge a commission as the sale fell through, it cannot be shown that the $18,150 is an additional cost consequent on the failed transaction, so that will be disallowed. Ms Clark all but conceded this point.
[28] Exhibit 3, Second affidavit of Mr Velgush
Otherwise, as the other additional liabilities were incurred in attempts to find another buyer and would not have been but for Mr Oxlade's breach, they will be allowed. These add up to $12,143; $2,620 for Refined Real Estate plus the liabilities of $1,715, $5,408 and $2,400 referred to above.
Financing Costs
Original NAB loan
The plaintiff claims interest accrued on the NAB loan facility from the contracted date of settlement of 20 March 2008, until the proposed settlement under the second sale of 31 August 2009. No claim is made for bank fees during this period however. There is no guarantee that this new contract will settle then, although at the present time the plaintiff knows of no consideration that might affect that expectation. The plaintiff has elected to take his chances on the adverse contingency. Should settlement not proceed, that would only serve to increase his damages, so that assessing damages on this basis, can only be to the advantage of the defendant.
The evidence of Mr Silvestri was that he planned to first discharge the original NAB loan taken out for the purchase of the Rutland Avenue property. This evidence may be accepted as it makes sense. As the transaction failed, he continued to incur interest on that loan which he would not have if settlement was completed as scheduled. The NAB facility of $696,000 was acquired at a variable rate of 7.62 per cent in September 2007. By January 2008, it was 7.99 per cent p.a. The Exhibit P6, a letter from Mr Silvestri's personal banker, purports to calculate the interest actually paid to 22 July 2009, and predicts the likely total thereafter to 31 August 2009, a total of $53,926.43. As the precise calculations are quite complex, and as that sum derives from the interest actually paid to 22 July, and as the period for which the predication is made for the remaining period of just over five weeks on the basis of the current interest rate applicable to the loan, this seems a reasonably accurate sum. But as it involves a small element of uncertainty, it should be rounded down to $53,500.
Loan from sister G. Silvestri
There is a further claim under this head for interest the plaintiff paid on behalf of his sister, Ms G Silvestri, for the period between the failed settlement and the second contract. This comes about in a slightly complicated way. When Mr Silvestri first bought the Rutland Avenue property in 2007, he borrowed from his sister $449,543,[29] pursuant to a loan agreement executed on 6 November 2007.[30] This was advanced in consideration of her receiving upon the sale of that property “an amount equal to one half of the difference between the sale price of the land and the amount paid by [her] for the purchase of the land”
[29] Exhibit P1 Tab 3
[30] Exhibit P1, Tab 1
As events transpired, Ms Silvestri fell into financial difficulty, so she requested Mr Silvestri to repay her. In the result he managed to repay half on 28 August 2008, or $244,378.09 of that original loan.[31] The balance of the ANZ loan she took out to make the loan to him in the first place, continued to attract interest, which he agreed to meet in order to assist her. Accordingly he claims those interest payments subsequent to 20 March 2008 on the basis, as the evidence of both was, that had settlement proceeded on that day the proceeds would have been used to repay her advance, thus wiping out the obligation to meet continuing interest commitments. Indeed the terms of the written loan agreement between them obliged him to repay the loan once sale was affected.[32]
[31] Exhibit P1 Tab 5
[32] Clause 2 agreement 6 November 2007, Exhibit P1, Tab 1
These fixed interest payments were proved to be $1,873 per month, or 9.2 per cent p.a. for the period between 19 September 2008 and 20 July 2009.[33] One further payment is due on or about August 17th, before the settlement is due. This claim comes to an annual figure of $22,476.00, based on the monthly payments of $1,873. As judgment will be entered before the final monthly payment falls due, this head will be allowed at $20,603.
[33] Exhibits P4, P4a and P4b
This situation is in one sense no different from a loan in the same principal sum, being taken out with another bank or a private financier for that matter by Mr Silvestri. In the result he has assumed responsibility for the interest payments at a commercial albeit fixed rate, on a loan he would otherwise have had to raise and service elsewhere. The situation here is as pointed out in Hungerfords v Walker:[34]
Judged from a commercial viewpoint, the plaintiff sustains an economic loss if his damages are not paid promptly, just as he sustains such a loss when his debt is not paid on the due date. The loss may arise in the form of the investment cost of being deprived of money which could have been invested at interest or used to reduce an existing indebtedness. Or the loss may arise in the form of the borrowing cost, ie, interest payable on borrowed money or interest foregone because an existing investment is realized or reduced.
The requirement of foreseeability is no obstacle to the award of damages, calculated by reference to the appropriate interest rates, for loss of the use of money. Opportunity cost, more so than incurred expense, is a plainly foreseeable loss because, according to common understanding, it represents the market price of obtaining money. But, even in the case of incurred expense, it is at least strongly arguable that a plaintiff's loss or damage represented by this expense is not too remote on the score of foreseeability. In truth, it is an expense which represents loss or damage flowing naturally and directly from the defendant's wrongful act or omission, particularly when that act or omission results in the withholding of money from a plaintiff or causes the plaintiff to pay away money.
This being the unusual situation, it is nevertheless demonstrated that the finance costs of his sister’s loan are a direct consequence of the breached agreement, so this part of the claim is proven.
[34] (1989) 171 CLR 125 at 143-144 per Mason CJ and Wilson J.
Outgoings in respect of sale of property
Between the time settlement fell due, to the proposed settlement on the second sale, a number of outgoings were incurred in relation to the subject property. These would not have arisen had the first sale gone through, because they would then become the responsibility of the defendant as purchaser. Indeed under clause 5 of the sale and purchase agreement, the risk transferred to him immediately, so that responsibility for building insurance would have fallen to him upon execution of the contract.
These expenses included council rates of $1,914.05 per annum,[35] SA Water for water and sewerage supplies of $157.40 per annum and $993.60 per annum respectively (water use is not claimed),[36] and building insurance of $382.42 per annum,[37] $5,026.85 in all, over the period between the original settlement date and 31 August 2009, when settlement is due under the subsequent sale. Accordingly these items will be allowed at that sum.
[35] Exhibit P1, Tab 25.1
[36] Exhibit P1, V2 Tab 25.2
[37] Exhibit P1, Tab 26
Loss of bargain
Since the plaintiff contracted with the defendant to sell the property at $1,350,017.00, and contracted again by virtue of the second sale of 8 June 2009 for $1.1 m, one view of matters is to allow the difference of $200,017. That calculation would be based upon the difference between the respective contract prices (less $50,000 already received by way of half the initial deposit). This is a relatively straightforward calculation.
However the plaintiff points to the evidence of the valuer Ms Gaetjens, who values the property at $1m at the present time. The plaintiff therefore submits the proper level of damages for the plaintiff's loss of the bargain embodied in the contract, is the measure of the difference between the market value of the land and the contract price: Noble v Edwards.[38]
[38] (1877) 5 ChD 378 at 388
This submission cannot succeed in light of the stance taken by the plaintiff at his trial. Having persuaded the court to measure the appropriate level of damages as of the present time, he cannot consistently argue for loss based on market value when it is known that the property has actually sold for $1.1m. Although Ms Gaetjens might have considered this to be a higher price than she expected, even given the $50,000 or so of improvements, the fact remains that it sold for this price on the open market. This is the best evidence of value as of the present time. Accordingly the court assesses the proper level of damage under the rubric of lost bargain, to be $200,017.
Loss of use of monies
The plaintiff’s next claim is that having entered into the subject contract and having in anticipation of settlement thereon, purchased the block of vacant land at Kingswood, he thereby became committed to a second loan with the NAB of $700,000.[39] His evidence was that had the contract been performed, as it should have been, he would have immediately applied the $184,177.80 of his own funds initially used for the shortfall between the NAB loan and the purchase of the Unley Park property, together with a further $20,000 deposited on that property, to reduce the principal of that Kingswood loan by $204,177.80. As a consequence the interest would have been less, corresponding with the reduced principal sum.
[39] Exhibit P1, Tab 31
In addition he claims his share of the profit at the bargained sale price of $1.35 m would have realised in his hands $214,982, which for the same reasons would equally have been applied against the Kingswood loan, bringing a total reduction of the loan funds by $419,159.80.
Although not much evidence was given as to the plaintiff’s other business affairs, apart from the silver service restaurant business at Clarendon, or of his overall financial position, his evidence that he would have applied the proceeds of the Unley Park property to offset the loan for the Kingswood property, only stands to reason. The Kingswood block was bought with the idea of building a substantial upmarket home, having a swimming pool and tennis court. So far as vacant blocks of land go, this was relatively expensive. It was sitting idle (as it still is) due to the downturn in market conditions and the lack of funds to develop it.
The block was not therefore generating any income, whilst at the same time he was responsible for a substantial liability by way of the $700,000 loan, at bank interest rates. [40] It is simply a matter of common sense and business prudence that in those circumstances any available funds would be applied to reduce a liability of that extent and of that kind.
[40] Exhibit P1, Tab 31
The plaintiff’s counsel contended the calculation under this head of damage commenced with the contract price of $1.35m, deducting the original 2007 purchase price including the transaction costs of the Unley property of $920,053.00 (as revealed in the settlement statement),[41] leaving a profit according to her calculations of $429,947. Since the agreement with his sister was to share that profit, his half would have then been $214,982.00.
[41] Exhibit P1, Tab 8.1
Thus the submission was that on due settlement in March 2008, he would have had available funds to reduce the Kingswood loan to that extent, plus the $204,177.80 mentioned above, together coming to $419,159.80. The measure of damages then becomes the current interest rate of 5.28 per cent p.a. on that total, running from the failed settlement 20 March 2008, until judgment of which he would have otherwise been spared. Although this method does not yield a completely accurate figure as interest rates varied over this period, the 5.28 per cent rate relied on by the plaintiff is in fact historically the lowest over that period, so in calculating this in this way, is to the benefit of the defendant. The exercise then reduces to a simple calculation over 490 days to the date of hearing (22 July), at $60.63 per day, which comes out at $29,698.90, plus a further 23 days at $60.63 per day or $1,394.03, being $31,103.19 to judgment.
The question is whether these are expenses incurred or opportunity costs sustained, flowing from money paid away or withheld, based on the principle developed in Hungerfords v Walker.[42] Although there is no evidence the defendant knew of the Kingswood purchase, it would nevertheless have been in his contemplation or reasonably foreseeable that the proceeds of sale would have been applied by the plaintiff for some income producing purpose and certainly to discharge any extant mortgage. Considered in isolation, there would not appear to be any difficulty in awarding this sum on the basis suggested.
[42] (1989) 171 CLR 125
But is there a measure of double counting in light of the orders the court already proposes? The plaintiff has already been compensated for financial costs post termination and for the loss of the primary bargain. However the present claim relates to direct consequential losses occasioned by the breach, incurred by being kept out of the use of the money that would have otherwise been at his disposal. That being the case no question of double compensation arises.
Another related question is whether this sum should be allowed ignoring the taxation implications. The profit involved was $214,982.00. This on the face of things is assessable income in the hands of the plaintiff. The evidence of his accountant Mr Rossi was that in theory Mr Silvestri could potentially be income tax assessed at a rate of between 31.5 and 46.4 per cent of gross income, but that historically his average rate was 31 per cent.[43] However since it appears as if this part of the proposed award at least will be taxable, there is no basis for taking into account the likely incidence of taxation: Halsbury’s Laws of Australia paragraph [110-11385] and Carter & Ors Contract Law in Australia (5th Ed), Butterworths 2007 paragraph [336-23]. Therefore the sum claimed will be allowed of $31,092.93.
[43] T 92.32-93.35
Interest on unpaid portion of deposit
Under the subject contract of sale, interest is not payable on the $50,000 deposit actually paid. However the plaintiff claims interest on that sum because he was denied the use of it, until paid out of court to him in August 2008. It is to be recalled that the part deposit was initially paid into the Toop & Toop trust account and would ordinarily have become available for his use on settlement. Pursuant to the order of the Master referred to above, that was paid into court on 25 June 2008 and paid out pursuant to a subsequent order on 6 August 2008, with interest at $5,131.80. The plaintiff seeks interest for the period over which he was denied the use of this, that is from when settlement should have taken place to 6 August 2008, some four and a half months. As not that much is at stake here and as interest of $131 accrued for just over a month, counsel suggested a simple calculation was to multiply that by the period in question. On that footing this will be awarded at a lump sum of $600.
Mitigation
A further matter should be mentioned and that is the issue of mitigation. This was not agitated at length because there is no contradictor to the plaintiff’s case. The plaintiff and his wife nevertheless gave evidence to prove that he did everything in order to mitigate his loss. This included instructing and re-instructing various land agents to sell the property, taking their advice as to how best it could be marketed, as to an appropriate sale price (which turned out to be $100,000 better than the valuation), the advertising necessary to enhance the chances of sale, by facilitating numerous open inspections, the acceptance of an offer to purchase which fell through with the purchaser electing to cool off, moving into the property whilst abandoning their everyday home at Clarendon in order to give it a “lived-in” appearance, and by undertaking upwards of $50,000 on improvements both inside and out. The plaintiff made no claim particularly for that expenditure, and they were not proven as such, although the evidence of the Silvestri’s can be accepted that they incurred expenses on account of improvements of that order.
One further claim remains to be considered. The second contract was subject to the special conditions that:[44]
1. The big pine tree in the rear yard is to removed and stumped.
2. Rear fencing is to be paid for prior to settlement.
[44] Exhibit P1, Tab 33
The evidence of Mr Silvestri was that the second of these issues is under control and will be resolved.[45] He has a quote from JR Fencing that it will cost $2,772 in to order satisfy that condition.[46] I will return to this subject again in a moment.
[45] T57.2-.9
[46] Exhibit P7
The first special condition is not nearly so straightforward. The evidence about this was somewhat informal and in some respects second-hand, although it was admissible at least for the limited purpose of demonstrating Mr Silvestri’s subjective understanding and to explain why he has acted as he has. It was to the effect that the tree in question is of such a size or dimension (or both) that it requires Council approval to remove. It has apparently been declared to be a “significant tree”.[47]
[47] As defined in sections 4, 23, 39, 54A and 54B of the Development Act1993 (SA) and regulation 6A of the Development Regulations 2008
Once again the plaintiff has elected to proceed by taking his chances of Council approval, and once again as that can only be to the advantage of the defendant, the court proceeds on that footing. However he said that his understanding of the special condition was that if Council permission to remove that tree is not forthcoming, his contractual obligation becomes one to pay the purchaser the cost of removal even though the tree remains: in effect the purchaser pockets that money as “compensation” for approval being not forthcoming.
This condition is poorly drafted by legal standards and it is ambiguous. Objectively speaking it may not yield this interpretation, but of course the court is not privy to the discussions between the parties that may well throw more light on their mutual intention. He was given a verbal quotation from Active Tree Services that the cost of removal would be $4,500,[48] and then a written quotation of $4,950 plus a further $495 “if the tree stump requires grinding”.[49]
[48] T110.12-.33
[49] Exhibit P8
He claims both these as components of his damages claim. At first sight, these formed part of the sale package, presumably without which the purchaser would not have executed the contract, or perhaps not at the present price at least. His counsel points out that in the current market environment, his bargaining position was poor and because of the length of time this property was on the market, potential purchasers were in a strong bargaining position. That much may be accepted in general terms. Moreover it was reasonable to accede to these special terms as an act of mitigation in order to secure the sale.
However that may be, it remains impossible to separate these two items from the fact that the eventual contract price is the best evidence of market value. For all that is known the purchaser might have wanted the tree removed for quite subjective or idiosyncratic reasons. There are stronger grounds for understanding the removal and replacement of the fence, but even then it is not known precisely what moved the purchaser to insist on this as a special condition rather than to reduce the price, for instance. Considered in this way it is not possible to conclude on balance that these two items are proven to flow from the breach of contract by Mr Oxlade. In any case the mode of proof, particularly for the tree removal is insufficient, as the tree may never be permitted to be removed.
Conclusion and orders
In the result the respective awards the court proposes to enter in favour of the plaintiff assessed as of the date of judgment, tabulate as follows:
Interest on unpaid deposit
$7,766.92
Default interest on purchase price
$15,315.07
Expenses of aborted sale
$1,100.00
Costs of re-sale post termination
$12,143.00
Interest on sister’s loan
$20,603.00
Financing costs NAB
$53,500.00
Outgoings for sale of property
$5,026.85
Loss of bargain
$200,017.00
Walker v Hungerfords
$31,103.19
Interest on unpaid deposit
$600.00
It is proposed to enter judgment accordingly in the sum of $347,175.03. Before entering judgment the plaintiff is entitled to be heard as to interest (if any) and costs.
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