Silvestri v Oxlade (No 2) - [2009] SADC 99

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
SILVESTRI v OXLADE (No 2)
[2009] SADC 99
Judgment of His Honour Judge Tilmouth
15 September 2009
DAMAGES - MEASURE AND REMOTENESS OF DAMAGES IN ACTIONS FOR BREACH OF CONTRACT - REMOTENESS - LOSS OF PROFITS
Further consideration of assessment of damage for loss of bargain for breach of contract.
Noble v Edwards (1877) 5 ChD 378 at 388, referred to.
Kizbeau Pty Ltd v WG & B Pty Ltd (1995) 184 CLR 281 at 293, applied.
Hasanovic v Moloney No 14064 of 1982 4 July 1988-BC8801767, distinguished.

PROCEDURE - COSTS
Discussion as to when it is appropriate to order costs on an indemnity basis, when costs thrown away.
District Court Civil Rules 2006 6R 263(1), 6R 263(2)(d), 6R 264(4), 6R 264(5)(a)(b); Casley-Smith v F S Evans and Sons Pty Ltd (No 6) (1999) 148 LSJS 483; Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397; Preston & Preston [1981] 3 WLR 619; Ragatta Developments Pty Ltd v Westpac Banking Corporation (1993) 217 ALR 175; Patrick v Capital Finance Corp Pty Ltd (2004) 211 ALR 272, referred to.
Contractors Pty Ltd v Hardesty & Hanover International LLC (No 2) LLC (No 2) [2009] SASC 132, applied.

SILVESTRI v OXLADE (No 2)
[2009] SADC 99
Preliminary

The Court delivered reasons in this matter on 14 August 2009, proposing to enter judgment for the plaintiff in terms tabulated therein, but first giving the opportunity for further submissions as to the terms of final orders, and particularly as to interests and costs.[1] This judgment deals with a further submission by Ms Clark for the plaintiff as to the appropriate level of damages, the subject of costs and in relation to an application the plaintiff made and then withdrawn, for costs against the former solicitors for the defendant.
[1] Silvestri v Oxlade [2009] SADC 86
The principal judgment
In the principal judgment the Court made findings under various claimed heads of damage, assembled in a table at the conclusion of the judgment, coming to $347,175.03. In doing so the court noted the valuation evidence, valuing the subject property at $1,000,000.00 at the present time,[2] before proceeding to record “$50,000.00 … of improvements” were made to the property before the second sale.[3] On this basis damages for loss of bargain were assessed at $200,017.00.
[2] At [45]
[3] At [46]
Submission as to damages
It was submitted on behalf of the plaintiff that an additional allowance should be made under the rubric of the loss of bargain, to allow the $50,000.00 of improvements, before sale at $1,100,000.00 in late August 2009. Counsel pointed to the evidence of Mrs Silvestri to the effect that after moving into the property to give it a “lived in” appearance so as to enhance the chances of sale, that the front fence was painted, considerable landscaping was affected, floor boards were repolished, built-in furniture was removed, an original fireplace restored, kitchen cupboards were painted, the home was recarpeted and the walls and ceilings of an extension to the rear of the property (which had been in bad repair) were replaced. She also said the house was completely repainted inside and down lights were installed in the rear section. The total cost of the improvements before resale were in her estimate “approximately $50,000.00”.[4]
[4] T 38.5-39.12
The point made by the plaintiff is that such expenditure need not be proved or calculated as they might be if damages were claimed by proving the relevant invoices or receipts. Rather it was submitted the proper level of damages for the loss of bargain consequent upon the failure of the first sale to the defendant, was not adequately reflected by the second sale price of $1.1m, but by taking from the original contract sale price of $1,350,000.00, the market value of the land. This principle may be accepted: Noble v Edwards.[5] In other words, despite the fact that the plaintiff obtained a purchase price of $1,100,000.00 which is $100,000.00 more than valuation, according to principle the appropriate measure of the loss of bargain was $300,000, after allowing for the part deposit of $50,000.
[5] (1877) 5 ChD 378 at 388
Counsel referred to Hasanovic v Moloney[6] in support of the submission, a case arising out of a claim against a solicitor relating to a conveyancing transaction. Liability was admitted. When it came to assessing damages for the consequent loss of their bargain, McInerney J found “the plaintiffs had done a number of improvements which, in my view, must have increased the value of the land”.[7] His Honour reasoned:[8]
… no attempt has been made to quantify damages. If one takes the Purchase price of $44,750 and accept it had a value of $82,000 as at September, 1981, over that period there has been an increase of $34,250. …
There is considerable difficulty in endeavouring to assess accurately the loss of the bargain in this case and I believe it is impossible to do so with any degree of accuracy because there are so many imponderables. The valuation of property is only an estimate. …
In addition, some of the increase in value, were I to assess as at September, was due to the work done by the plaintiffs which I assess added approximately $5,000 to the value and I must take into account that in this judgment they will be receiving monies to reimburse them for their work and this is a reducing factor.
Further, as was pointed out by the defendant, there is no evidence as to outgoings and expenditure on the property such as interest payments, rates, taxes and maintenance over this period of occupancy. From the foregoing, it becomes clear it is impossible, in my view, for any accurate determination to be made. If one takes the period of the two years to September 1981 as a determinative period, the difference between the purchase price and the value as at September, 1981 is $34,250. If one subtracts from that the deposit paid, and makes an allowance for some $5,000 for which they have been reimbursed in this case, the figure one arrives at is $24,500.
…
I think a proper figure to allow for loss of bargain in these circumstances is $15,000.
[6]    No 14064 of 1982 4 July 1988- BC8801767
[7]    At BC p20
[8]    At BC pp23-24
The nature of the assessment in that case was predictive, one based on assessing future contingencies. Whereas in this case there was the known fact of the sale of the subject property on the open market for $1.1m. The extra expenditure referred to by Mrs Silvestri no doubt increased the value of the property. The valuation at $1m did not take account of those improvements. It follows that the valuation alone is not a valid basis for assessing damages. Moreover it is inescapable that the actual sale price (which did absorb the improvements) is the better evidence of value. As noted in Kizbeau Pty Ltd v WG & B Pty Ltd,[9] "where facts are available they are to be preferred to prophecies". The High Court there held that although damages arising from the purchase of a business are assessed by reference to the difference between the value of the business at the date of purchase and the price paid for the business, applying Gates v City Mutual Life Assurance Society Ltd,[10] the court must take account of relevant events occurring afterwards, in determining that value at the date of purchase. Hence the court concluded:[11]
In all of these cases, although the court has valued the assessed damages at the date when the plaintiff suffered the relevant loss, it has had to consider whether a subsequent event truly indicates or reflects the measure of the loss earlier suffered. Whether the subsequent event gives a reliable indication or reflection of the loss depends on all the circumstances.
[9] (1995) 184 CLR 281 at 293
[10] (1986) 160 CLR 1 at 12
[11] At 296
Therefore as the additional costs expended were absorbed into the actual price achieved, as that price is a better measure of true value than the valuation evidence, and as the valuation did not factor in those improvements, it remains inappropriate to award any higher level of damages than already proposed.
Costs
The next issue to consider is the question of costs. The defendant secured a number of adjournments invariably serving to delay and protract the proceedings. Such indulgences as were granted to him came to nothing. He made no effective contribution in furtherance of the litigation at any time. In most instances he failed to appear, either personally or through counsel. An order was therefore sought against the defendant for costs on an indemnity basis, thrown away as a consequence of such adjournments.
As a general rule costs on a party/party basis follow the event (6DCR 263(1)). However the general rule is subject to certain exceptions, one being “the costs of an adjournment arising from a parties default” (6DCR 263(2)(d)). Furthermore, the court may depart from the general rule to award costs on an indemnity, or on a solicitor and client basis (6R 264)(5)(a)(b)). In this particular case the trial, when it was reached, took effectively two days, 21 and 22 July 2009. It was originally set before Judge Burley on 6 April 2009, but was adjourned on the defendant’s application. The matter came on again on 10, 11, 19 June and 20 July 2009 because of various applications for adjournments by the defendant and consequential issues.
The power to award costs is discretionary. The exceptional power of awarding costs on an indemnity basis is one generally treated as appropriately invoked where “special and unusual features to justify” costs on that basis: Casley-Smith v F S Evans and Sons Pty Ltd,[12] Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd.[13] These quoted words derive from the decision in Preston & Preston.[14] As Shepherd J pointed out in Colgate-Palmolive Company v Cussons Pty Ltd:[15]
“The circumstances of the case must be such as to warrant the Court in parting from the usual case”
His Honour included as examples, “evidence of particular misconduct that causes loss of time to the Court and to other parties”. In Abigroup Contractors Pty Ltd v Hardesty & Hanover International LLC (No 2),[16] Anderson J accepted these principles and observed that 6DCR 264(4) “recognises that principle”. Such costs are appropriate when it is considered that party and party costs are inadequate to compensate the successful party: Ragatta Developments Pty Ltd v Westpac Banking Corporation,[17] but they should not bee seen as a punishment on that account: Patrick v Capital Finance Corp Pty Ltd.[18]
[12] (1999) 148 LSJS 483
[13] (1988) 81 ALR 397 at 400-401
[14] [1981] 3 WLR 619 at 637
[15] (1993) 46 FCR 225 at 233
[16] LLC 21 [2009] SASC 132 at [19]
[17] (1993) 217 ALR 175
[18] (2004) 211 ALR 272
In my view the defendant in this case adopted a series of delaying tactics designed to forestall the due and efficient resolution of the case. A number of attempts were made to engage lawyers. None came to fruition. On the four occasions when his lawyers appeared, nothing of substance was put forward or achieved.
In this case the plaintiff has been kept out of his due, from at least May this year, essentially because of postponements secured by the defendant. Although the matter was in all likelihood destined for an assessment because damages were not completely liquidated, most heads were susceptible of simplified proof. As the plaintiff was unnecessarily required to return to court on several occasions, it is completely appropriate to order costs in his favour on an indemnity basis for the attendances of an incidental to 6 April, 10, 11, 19 and 20 June 2009. Otherwise the plaintiff having substantially succeeded, should have costs on a party/party basis to be agreed or taxed.
Costs in relation to the defendant’s solicitor
There is one final matter to resolve. Following delivery of the principal judgment, the plaintiff filed a submission seeking costs against the solicitors, Commercial and General Law, because of what in effect was said to be their non-compliance with an order of Master Rice of 8 April, 2009. As it turns out the notice of trial set for June 2009, was posted personally to the defendant, but it was not posted to them, even though they had appeared before Master Rice seeking adjournments. In an affidavit filed on 5 November 2008, Mr Stephen McNamara deposed to being instructed in the matter by the defendant, to having attempted to contact him on a number of occasions seeking instructions, the last of which was by e-mail of 31 October 2008, and deposing to the fact that the defendant had not responded to any of his messages.
So far as Commercial and General’s involvement is concerned, the court file records appearances by them on behalf of the defendant on 11 June 2008 involving purely procedural matters, another on 2 July when the Master adjourned the plaintiff’s application for default judgment for 14 days “to give the defendant a few days to try and resolve it”, and on 8 July 2008 when the default judgment, in lieu of a defence was entered. On 29 October 2008, there was no appearance for the defence, however certain procedural orders were made and sent to Commercial and General Law. They appeared for the defendant again on 10 December 2008, when by consent an order was made removing them from the file. There was also an order that they were to “provide the District Court Registry with a contact address for the defendant”. A notice of ceasing to act was filed on 31 March 2009.
In my view this order was facultative, in the sense that it required Commercial and General Law to comply if it reasonably could. One cannot think the Master would oblige them to produce an address that they did not have, or could not reasonably obtain. Mr McNamara’s assertion in his affidavit and in open court that the defendant was totally non-responsive, is wholly consistent with the defendant’s conduct throughout. In that circumstance the order so construed, and in light of the fact Mr McNamara was never sent the notice of trial, the application for costs against the solicitors cannot be sustained. So much was recognised when it was withdrawn. In this situation costs should be awarded in favour of Commercial and General Law for two unnecessary appearances. Mr McNamara sought the exceedingly modest sum of $300, a sum not otherwise opposed by Ms Clark. Accordingly there will be an order for the payment of that sum by the plaintiff to Commercial and General Law, within 28 days.
Orders
On the above findings and those in the reasons published on 14 August 2009, judgment will be entered for the plaintiff against the defendant in the sum of $347,175.03. There will be an order that the plaintiff have costs of the action to be agreed or taxed and that he have costs on an indemnity basis for the appearances on and incidental to 6 April, 10, 11, 19 June and 20 July 2009. There will be an order that he pay within 28 days, the sum of $300 to Commercial and General Law. There will also be subsidiary orders permitting due service on the defendant by post at 94 Mitchell Street Millswood in the State of South Australia and referring the balance of the interlocutory application by the plaintiff filed on 24 August 2009 to the Master’s List.[19]
[19] FDN 26