Tonkin v Heilongjiang Feng Ao Agricultural and Animal Husbandry Group Co Pty Ltd
[2015] WASC 378
•8 OCTOBER 2015
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: TONKIN -v- HEILONGJIANG FENG AO AGRICULTURAL & ANIMAL HUSBANDRY GROUP CO PTY LTD [2015] WASC 378
CORAM: MASTER SANDERSON
HEARD: 18 - 22 & 29 MAY & 2 & 24 JUNE 2015
DELIVERED : 8 OCTOBER 2015
FILE NO/S: CIV 2352 of 2013
BETWEEN: IAN JAMES TONKIN
CAROLYN ANNE TONKIN
PlaintiffsAND
HEILONGJIANG FENG AO AGRICULTURAL & ANIMAL HUSBANDRY GROUP CO PTY LTD
Defendant
Catchwords:
Property - Sale of farm to buyer who failed to complete - Claim for specific performance - Turns on own facts
Legislation:
Foreign Acquisitions and Takeovers Act 1975 (Cth)
Result:
Specific performance ordered
Interest allowed with deduction for payment made
Damages claim fails
Category: B
Representation:
Counsel:
Plaintiffs: Mr J D Maclaurin & Mr P A Kyle
Defendant: Mr P Mendelow & Ms C Sluiter
Solicitors:
Plaintiffs: Kyle & Company
Defendant: Allion Legal
Case(s) referred to in judgment(s):
Wadsworth v Lydall [1981] 1 WLR 598
MASTER SANDERSON: This was the plaintiffs' action seeking specific performance of an agreement for the sale of certain agricultural property they entered into with the defendant. For the reasons which follow the plaintiffs are entitled to their order for specific performance. They are also entitled to interest on the purchase price between the date when the transaction should have settled and the date of issue of these proceedings. On both of these issues the defence was entirely without merit. The plaintiffs also claim damages which they say were occasioned by the defendant's failure to settle and the consequent effect upon the plaintiffs' farming operations. I have concluded the plaintiffs are not entitled to damages. This aspect of the case does pose certain problems.
These reasons start with the plaintiffs' pleaded case and follow with a statement of the relevant facts. This action was what is sometimes described as 'document heavy'. That is to say although evidence was given by witnesses for the parties that evidence, so far as it relates to the action for specific performance and the claim for interest, did not have any effect on the outcome of the action. The events which occurred can be traced through documents. These documents speak for themselves. Prior to the commencement of the hearing objections were taken by both parties to witness statements filed pursuant to programming orders. During the course of the hearing I indicated I would consider those objections during the course of preparing reasons. In the end I have not found it necessary to deal with any of the objections to evidence.
Amended statement of claim
The plaintiffs plead they were at all material times from 4 November 2011 the registered proprietors of certain farming property known as Irimple in the Shire of Lake Grace. The amended statement of claim refers to three particular lots. In the particulars the plaintiffs' plead they were at all material times actually registered as the proprietors of the lots referred to in pars 1(a) and (c) of the amended statement of claim. As to lot 2637 which is referred to in par 1(b) of the statement of claim the plaintiffs provide the following particulars:
(b)Prior to 10 December 2012 the Firstnamed Plaintiff was one of the registered proprietors of Lot 2637 and by an agreement in writing dated 4 November 2011 between the Firstnamed Plaintiff and his brother David Tonkin, who was the other registered proprietor of Lot 2637, David Tonkin, inter alia, agreed to transfer his interest in Lot 2637 to The Firstnamed Plaintiff
(c)On 4 November 2011 The Firstnamed Plaintiff and his brother David Tonkin executed a transfer in registrable form of David Tonkin's interest in Lot 2637 to the Firstnamed Plaintiff and the transfer remained in the possession of the Plaintiffs' solicitors thereafter until it was registered at Landgate on 10 December 2012;
(d)The Defendant, by its solicitors, by email dated 15 May 2012, agreed with the Plaintiffs' solicitors that the transfer of the interest of David Tonkin in Lot 2637 to the Firstnamed Plaintiff would be registered at the same time as the registration of the transfer of the property by the Plaintiffs to the Defendant.
(e)In any event, the transfer from David Tonkin to the Firstnamed Plaintiff was submitted to, and the registration made by, Landgate on or about 10 December 2012.
The plaintiffs' plead that by agreement in writing executed by the defendant on 21 September 2011 and by the plaintiffs on 5 November 2011 the plaintiffs agreed to sell and the defendant agreed to buy Irimple for a purchase price of $8 million. Paragraph 4 of the amended statement of claim pleads certain terms of the contract which the plaintiffs say are of particular relevance. The pleading reads as follows:
4.The Contract provided, inter alia, that:
a)It was subject to and conditional upon the Defendant, within 30 days of the date of execution of the Contract by the Plaintiffs, obtaining:
i)Approval of the Contract by the Commonwealth Treasurer pursuant to The Foreign Acquisitions and Takeovers Act 1975 (Clth);
ii)Any other approval required from any relevant authority or body under any relevant law to enter into the Contract and to complete the purchase;
b)It was subject to and conditional upon the Defendant, within 30 days of the date of execution of the Contract by the Plaintiffs, confirming in writing to the Plaintiffs via Landmark Realty WA Pty Ltd that the Defendant had obtained funding to enable it to complete the purchase of the Property,
c)The Defendant would pay to Landmark Realty WA Pty Ltd a non refundable deposit of $800,000.00 within 30 days of satisfaction of the conditions pleaded in Paragraph 4 (a) hereof;
d)The balance of the purchase price would be paid by the Defendant to the Plaintiffs in exchange for registrable transfers of the land comprising the Property in favour of the Defendant together with the duplicate certificates of title of the land on a date being 60 days after payment of the deposit in accordance with the term pleaded in Paragraph 4 (c) hereof ('the settlement date');
e)The Defendant would allow the Plaintiffs to reside in the homestead on the property and to have the use of the workshop shed on Lot 2317 for a period of one year from the settlement date;
f)The Defendant would be entitled to possession of the Property (subject to the term pleaded in Paragraph 4(e) hereof) on 1 March 2012 and the Plaintiffs would be entitled to possession and continued use of the property for farming purposes from the settlement date to 1 March 2012 on the terms set out in the Contract and in Annexure A to the Contract;
g)In the event that the purchase price was not paid by the Defendant to the Plaintiffs on the settlement date or within three business days thereafter, for any reason not attributable to the Plaintiffs, the Defendant would pay to the Plaintiff interest on the purchase price to the Plaintiffs at the rate of 9% per annum from the settlement date to the date of payment of the purchase price, calculated on a daily basis. (clause 4.1 of The 2011 General Conditions for the Sale of Land, incorporated into the Contract by clause 8 thereof).
By par 5 of the amended statement of claim the plaintiffs say that by notice in writing dated 14 November 2011 the defendant notified the plaintiffs that the conditions pleaded in par 4(a) and (b) had been satisfied. They further plead that by an addendum in writing to the contract signed by the plaintiffs on 16 December 2011 and by the defendant on 8 December 2011 the parties agreed that the date for payment of the deposit would be extended to 19 December 2011 and that the settlement date would be 30 days from the date of payment of the deposit rather than 60 days provided in the contract. Otherwise the contractual relationship remained unaltered.
The plaintiffs' plead the defendant has not paid the deposit or any part thereof pursuant to the contract and that settlement did not take place as anticipated or at all. They plead that at all material times they have been ready, willing and able to complete the sale within the terms of the contract. Further the plaintiffs' claim that by reason of the defendant's failure to settle they have suffered loss and damage. I will come back to this question of loss and damage later in these reasons as it forms a discrete head of the claim. For present purposes it is enough to note the plaintiffs' claim is in two parts - a claim for specific performance of the contract and a claim for damages consequent upon the defendant's failure to honour the contract. As an alternative the plaintiffs did seek in the amended statement of claim damages in the event an order for specific performance was not made. Those damages were expressed to be the difference between the value of the property and the price the defendant agreed to pay pursuant to the contract. The damages were said to be an amount of $3.5 million. Given the conclusion I have reached it is unnecessary for me to elaborate further on this alternative claim.
The facts
At the conclusion of the hearing counsel for both parties asked for an adjournment to prepare detailed written submissions. With some trepidation I agreed to that request. Subsequently counsel for the plaintiffs filed submissions which ran to 69 pages and 240 paragraphs. The defendant's submissions were somewhat shorter running only to 32 pages and 131 paragraphs. However the defendant then filed what they referred to as the 'defendant's schedule of observations in response to the plaintiffs' outline of closing submissions'. That document ran to another 25 pages and 240 paragraphs. These written submissions were supplemented by oral submissions. Whatever else may be said about this case it cannot be suggested counsel for both parties did not thoroughly examine both the facts and the law.
The plaintiffs' farm is divided into three separate lots as pleaded in the amended statement of claim. The first‑named plaintiff's brother, David Tonkin, was the registered proprietor of part of lot 2637. On 4 November 2011 the day before the plaintiffs' executed the contract David Tonkin signed a contract of sale of his interest in lot 2637 to the first‑named plaintiff, Ian Tonkin, and provided a transfer in registrable form (TB 1 ‑ 3).
The contract was for a purchase price of $8 million payable by a deposit of $800,000 and the balance on settlement. The contract provided by cl 23 and cl 24 that it was conditional upon the defendant within 30 days of the date of execution of the contract:
(a)obtaining the approval of the sale by the Commonwealth Treasurer under the Foreign Acquisitions and Takeovers Act 1975 (Cth); and
(b)confirming in writing to the plaintiffs that it had obtained funding for the completion of the purchase.
The deposit was payable within 30 days after those two conditions were satisfied with settlement due within 60 days thereafter. The contract provided by its annexures that the plaintiffs were entitled to remain in the homestead on the farm for 12 months after the settlement date and would only have to hand over possession of the rest of the farm on 1 March 2012.
The contract documents themselves are the 'Contract of Sale for Rural Land between the Plaintiffs and the Defendant (including Annexures A and B)' dated 5 November 2011, the 'REIWA Joint Form of General Conditions for the Sale of Land' which were incorporated in the contract for sale, and 'Annexure D Addendum to the Contract'. There is also a document referred to as 'Notification' which is the notice the defendant gave to the plaintiffs in relation to the conditions precedent to the agreement. All of these documents are found in vol 1 of the trial bundle. It is also worthy of note that by letter dated 28 September 2011 the Foreign Investment Review Board (FIRB) advised the defendant's solicitors, who have throughout this litigation been Allion Legal, that the defendant's purchase of the farm was exempt from examination under the Foreign Acquisitions and Takeovers Act (TB 475). It was subsequent to that letter that the notification was given. It was also further confirmed in a letter from Allion dated 6 December 2011 to the plaintiffs' then solicitors, Haynes Robinson, confirming that cl 23 and cl 24 of the contract had been satisfied (TB 485).
On 8 December 2011, Mr Harold Sim, on behalf of the defendant, signed annexure D to the contract which provided for the deposit to be paid by 19 December 2011 and for the time for settlement and payment of the balance of the purchase price be 30 days after payment of the deposit. On 16 December 2011 the plaintiffs signed annexure D. Annexure D actually shortened the time for settlement to on or before 18 January 2012 and in the plaintiffs' submission made the contract unequivocally unconditional. That really is a belt and braces submission. It is the plaintiffs' primary submission that the contract had already become unconditional by the defendant's notification and the Allion confirmation of the FIRB approval.
The defendant takes issue with this submission on behalf of the plaintiffs. They refer to cl 12 and cl 13 of the contract. This issue was pressed with some enthusiasm by counsel for the defendant and it is appropriate at this stage to quote the two relevant clauses. They read as follows:
12.This Contract is subject to and conditional upon the Sellers (at the Sellers' expense) providing the Buyer with a Certificate from a qualified electrical contractor that the residential premises on the Property comply with the Electricity Amendment Regulations 2009. The Sellers acknowledge that this may involve the installation of 2 Residential Current Devices (RCD's) in each premises prior to Settlement at the Sellers' expense.
13.This Contract is subject to and conditional upon the Sellers (at the Sellers' expense) providing the Buyer with a Certificate from a qualified electrical contractor that all the residential premises on the Property comply with the Local Government (Miscellaneous Provisions Act 1960) and s 9.60 of the Local Government Act 1995 and the Building Amendment Regulations 2009 prior to Settlement. The Sellers acknowledge that this may involve the installation of hard wired (or in some circumstances 10 year battery) Smoke Alarms in each residence prior to Settlement at the Sellers' expense.
The defendant did not pay the deposit under the contract by 19 December 2011 and indeed the deposit has never been paid. By letter dated 20 December 2011 (TB 491) the defendant wrote to Allion stating that 'there was no change to the defendant's commitment to purchase the [plaintiffs'] property and other properties'. It requested a further extension of time to pay the deposit and the stamp duty. It is perhaps worth acknowledging that at least in the initial stages of this dispute the defendant appeared anxious to settle the transaction. It was simply unable to access funds from China. Of course, the reasons why the defendant was unable to settle are irrelevant to this dispute.
By letter dated 5 January 2012 (TB 497) Allion informed Haynes Robinson of delays in the receipt of funds for settlement. On 9 March 2012 Mr Harold Sim, on behalf of the defendant, signed a document described as 'Annexure E' (TB 513). Pursuant to this document the defendant agreed to pay interest in the sum of $50,000 on the purchase price under the contract. Annexure E was never agreed to or signed by the plaintiffs. I mention annexure E only for the sake of completeness. It plays no part in this action.
By letter dated 2 April 2012 (TB 529) Allion wrote to Haynes Robinson enclosing transfers of land for the farm for execution by the plaintiffs. Haynes Robinson's email to Allion of 15 May 2012 (TB 548), noted that one of the transfers of land named David Tonkin as a transferor when he had actually sold his interest to Ian Tonkin. Because of the significance of this issue it is worth quoting the relevant part of the email in full. It was sent by Mr Peter Kyle (who has throughout this litigation handled the plaintiffs' affairs although he has from time to time changed firms) to Mr Joseph Gentile who was handling the settlement at Allion. Mr Kyle says:
I note that one of the transfers has David Tonkin as a transferor. The contract originally also named David Tonkin as a seller but that was amended before execution. The reason for that is that David had agreed to transfer his share in the land to Ian Tonkin. The transfer will have to be amended to reflect that change. Are you happy for us to amend it to strike out David Tonkin's name or would you prefer to have a fresh transfer signed by your client? The transfer of David Tonkin's share to Ian Tonkin will precede the sale but will probably be registered at the same time as the transfer to your client (TB 548).
That email provoked a response from Allion on 15 May 2012. The email from Mr Gentile reads as follows:
We expect that the Buyer will be in a position to settle the matter by the end of this month.
I am happy for you to amend the transfer for Lot 2637 on DP 210201 to strike out David Tonkin's name.
Please forward a copy of the amended Transfer together with a copy of the stamped Transfer from David to Ian Tonkin for review prior to settlement.
In the meantime should you have any queries, please contact me direct (TB 549).
By various exchanges of correspondence between May 2012 and November 2012 the defendant and its solicitors kept the plaintiffs and their solicitors informed of continuing delays in obtaining the funds to complete the purchase. The defendant also agreed to pay the plaintiffs' expenses in seeding crops on the farm and managing those crops.
By email dated 21 November 2011 (TB 669), Allion's Mr Michael Swift, who had taken over conduct of the file from Mr Gentile, informed Mr Kyle of the basis upon which the defendant would settle the purchase of the farm. By email dated 30 November 2012 (TB 670), Mr Kyle informed Mr Swift of the plaintiffs' requirements for settlement. These included the payment of interest for the delayed settlement. Mr Kyle also noted the plaintiffs were ready to finalise the registration of the transfer of David Tonkin's partial interest in one of the lots once the defendant confirmed that it had funds to settle the sale.
On 3 December 2012 (TB 671 ‑ 676) the FIRB emailed Mr Swift requesting that the defendant not proceed with the purchase of the plaintiffs' farm or any other property until it was determined whether the defendant was a foreign government related entity or not.
On 10 December 2012 the transfer of David Tonkin's interest in lot 2637 to Ian Tonkin was lodged at Landgate for registration. The certificate of title for that lot records the date of registration as 10 December 2012 (TB 89).
On 28 February 2013 (TB 752) the FIRB wrote to Allion stating it had no objection to the defendant's acquisition of the farming properties in Western Australia. This approval was on the condition the defendant complied with certain undertakings. By an email of the same day Mr Swift informed Mr Kyle of the FIRB's confirmation (TB 753). Mr Kyle replied to Mr Swift's email the same day by asking when the deposit would be paid and what the defendant's attitude to the payment of the plaintiffs' expenses for cropping was (TB 754).
By letter dated 7 March 2013 Allion gave notice to Haynes Robinson that the defendant was ready, willing and able to settle the contract (TB 763). It is worth noting two things about this letter. First, it was not a requirement of the contract that the defendant give a notice to the plaintiffs that it was ready, willing and able to settle. Mr Swift said during the course of his evidence that the giving of such notice was standard industry practice. But he acknowledged it was not done pursuant to any contractual or statutory requirement. Second, the notice makes no mention of the deposit. Up to this point there had been no suggestion the defendant was not required to pay the deposit until settlement. It had been in default for quite some time and Mr Swift's letter did not suggest that default would be remedied prior to settlement taking place.
By letter dated 12 March 2013 (TB 764), Mr Kyle wrote to Mr Swift pointing out the defendant had not paid the deposit and asking what the defendant's attitude to the reimbursement of the plaintiffs' expenses was. Allion responded by letter dated 20 March 2013 (TB 767). They acknowledged the deposit had not been paid and noted the plaintiffs had been entitled to terminate the contract but had not done so. Mr Swift said the cropping expenses were not part of the contract and that the defendant wanted a date for settlement. By email dated 20 March 2013 (TB 769) Mr Kyle responded that the parties were at odds about how much was payable at settlement. He asked for a meeting to discuss these issues. In fact on 10 April 2013 Mr Sim met with the plaintiffs and discussed what was owing. No agreement was reached.
By letter dated 16 April 2013 (TB 778) Allion told the plaintiffs' new solicitors, Latro Lawyers (Mr Kyle had changed firms), that the cropping expenses were not a matter which would delay settlement. Mr Kyle, by letter dated 19 April 2013 (TB 779), indicated the matter could be settled so long as that was done without prejudice to any rights the plaintiffs might have against either the defendant or a company associated with the defendant, being Vicstock Grain Pty Ltd. The letter made a claim for interest under the contract and noted that the defendant refused to pay interest. Reference was made to cl 4.6(c) of the General Conditions as the basis for the interest claim.
By email dated 29 April 2013 (TB 781), Mr Kyle foreshadowed the prospect of the plaintiffs issuing proceedings for specific performance. Mr Swift responded by letter dated 1 May 2013. Mr Swift denied the defendant was liable to pay interest. He put the position as follows:
As previously stated, no interest is payable by the Buyer. Pursuant to clause 4.4 of the General Conditions, the Seller is not entitled to interest if the Seller is not ready, willing and able to complete settlement.
The Seller was not able to settle, until at the earliest, 11 March 2013 (being the date of registration of the transfer of the whole of Lot 2637 on Deposited Plan 210201 being the whole of the land contained in certificate of title volume 1665 folio 859 into the name of Ian James Tonkin from the previous registered proprietors being Ian James Tonkin as to ¾ share and David Ross Tonkin as to ¼ share) (TB 782).
The letter concluded by asking Mr Kyle to confirm the seller would proceed to settlement and would provide a settlement statement. Mr Swift also asked for a settlement date.
By an exchange of correspondence on 8 May 2013 (TB 792 ‑ 794), the plaintiffs confirmed that they wished to proceed to settlement, that settlement would take place without prejudice to their right to claim their expenses, asked again for interest pursuant to cl 4.6 and proposed a date for settlement being 17 May 2013. The defendant confirmed the parties could proceed to settlement without prejudice to the plaintiffs' claims for expenses and asserted the plaintiffs were not entitled to interest but that this should not hold up settlement and proposed a settlement date of 13 May 2013.
Mr Swift sent Mr Kyle a further email on 10 May 2013. It was in the following terms:
Peter
Settlement will be on 17 May at 1pm at Allion's office.
Please provide the documents (when available but prior to settlement) referred to in my email of 8 May 2013.
As previously advised no interest is payable by the buyer and accordingly, the buyer will not be paying any interest into your trust account.
Please also confirm a date when the buyer can undertake a final inspection of the property prior to settlement (TB 799).
By letter dated 15 May 2013 (TB 802), Mr Kyle drew Mr Swift's attention to some 'practical issues following on from settlement but that need to be agreed before settlement'. This included the question of continued occupation of the farm as originally agreed under the contract. Allion did not respond to that letter. Mr Kyle wrote again on 31 May 2013 setting out in more detail the practical problems (TB 820). This letter also attached two electrical safety certificates. It is to be recalled these certificates were required to be provided by the plaintiffs prior to settlement.
By letter dated 5 June 2013 Mr Swift wrote to Mr Kyle proposing a teleconference between the parties and their solicitors on 11 June 2013 to discuss the 'practical issues that must be resolved prior to settlement' (TB 824). The letter also proposed the defendant lease back the farm to the plaintiffs from settlement to 31 December 2013 at a rent of $75 per hectare. The teleconference was held on 11 June 2013. On that same date Mr Kyle wrote to Mr Swift recording the outcome of the teleconference and commenting upon certain issues which were raised (TB 831).
By email dated 4 July 2013 (TB 835 ‑ 844), Mr Kyle provided Mr Swift with information that, at the teleconference, the plaintiffs had agreed would be supplied to the defendant. This included a summary of the rates of rent offered by the defendant to other farmers in the area, an offer as to the rent for the proposed lease, some plans relating to points of access to the farm and details of costs incurred by the plaintiffs.
Mr Swift responded by letter dated 8 August 2013 (TB 845 ‑ 871). By then the plaintiffs' solicitors were Kyle & Co. Mr Kyle was still handling the matter. In the letter the defendant demanded the return of all monies paid to the plaintiffs for cropping expenses and stated the terms upon which the defendant was prepared to settle. This included a lease of the farm. The letter required settlement on 10 September 2013 and threatened termination of the contract if settlement did not take place on the terms specified in the letter. The place nominated for the settlement meeting was Allion's offices (which was outside the Perth CBD). The letter concluded as follows:
27.In the event that your clients fail to attend Settlement as now nominated, in a position to transfer the Property in accordance with the Contract (subject only to the terms of the Lease, should your clients wish to enter into it), our client will consider your clients' failure to do so, coupled with their apparent delay in being ready, willing and able to settle to date (despite the statement in your letter of 31 May 2013), to constitute a material breach of the Contract, entitling our client to terminate.
28.Kindly confirm, by 4:00pm on 20 August 2013:
a.that your clients (and/or their authorised representative/s) will attend Settlement as nominated above;
b.whether your clients propose to present our client with a bank cheque for the sum of $660,000 in settlement of our client's claim for repayment under the 2012 Cropping Expenses agreement, or whether your clients wish to have that amount set off against the purchase price payable by our client to your clients for the Property;
c.whether your clients wish to enter into the Lease and if so, confirm that at Settlement they will provide us with:
i.an original signed Lease agreement;
ii.the bank guarantee; and
iii.the advance payment for the first month of rent (alternatively, advise if they wish to have this amount set off against the purchase price payable by our client to your clients for the Property) (TB 848).
Mr Kyle replied to Mr Swift by letter dated 20 August 2013 (TB 873 ‑ 875). Mr Kyle pointed out the plaintiffs' alleged liability to repay an amount of $660,000 contradicted the defendant's previous position that Vicstock Grain provided those funds. The letter also set out the terms for a proposed lease that would be acceptable to the plaintiffs, notwithstanding that annexure A to the contract envisaged and provided terms for the plaintiffs' continued possession of the farm post‑settlement. The letter concluded with the following:
Your assertion that my clients have been responsible for the delay in settlement is again denied. The history of this matter, including the fact that your client agreed to pay interest for delay in settlement as far back as March 2012 (see Annexure E) demonstrate that your client has been the cause of the extraordinary delay in settlement.
Upon your client's agreement to:
1.Pay the full purchase price on settlement;
2.Enter into a lease of the farm as proposed with the amendments I have indicated;
3.Agree to the use of the homestead with its driveway and workshop as proposed by my clients;
My clients will certainly attend settlement on 10 September 2013 at 10am at your office and complete the sale of the farm in accordance with the contract. They will, however, reserve their right to take action against your client for damages for the delay in settlement including interest
If your client will not agree to these terms or otherwise agree to complete the purchase in accordance with the contract on or before 10 September 2013, and give notice in writing of such agreement, to be received by me by email by Friday 23 August at 5pm, then my clients affirm the contract and will commence action for specific performance of the contract and for damages without further notice (TB 875).
The defendant's solicitors did not respond to Mr Kyle's letter of 20 August 2013. On 2 September 2013 the plaintiffs issued the writ of summons commencing this action and claiming specific performance. The writ was served on 4 September 2013. Not surprisingly the proposed settlement meeting on 10 September 2013 did not take place. Neither the plaintiffs nor their representatives attended the defendant's offices for settlement. There was no communication from the defendant's solicitors about the non‑attendance until the issue of default notice on 24 September 2013. This default notice was the subject of considerable debate between the parties and it is worth quoting in full (leaving out only the names of the parties and the signature clause):
BACKGROUND
A.By a Contract for Sale of Rural Land by Offer and Acceptance between Ian James Tonkin and Carolyn Anne Tonkin (Sellers) and Heilongjiang Feng AO Agricultural & Animal Husbandry Group Co Pty Ltd (Buyer) and executed by the Sellers on 5 November 2011 (Contract), the Sellers agreed to sell and the Buyer agreed to purchase all that property of the Sellers known as 'Irimple' in the Shire of Lake Grace and being more particularly:
(i)Lot 2317 on Deposited Plan 208593 being the whole of the land in Certificate of Title Volume 2076 Folio 60;
(ii)Lot 2637 on Deposited Plan 210201 being the whole of the land in Certificate of Title Volume 1665 Folio 859; and
(iii)Lot 21 on Deposited Plan 39638 being the whole of the land in Certificate of Title Volume 2556 Folio 767,
(Property).
B.The Contract is subject to and conditional on the Buyer, no later than 30 days of execution of the Contract by the Sellers:
(i)obtaining approvals required by law (paragraph 23); and
(ii)confirming in writing to the Sellers that the Buyer had obtained funding to enable it to complete the purchase of the Property (paragraph 24):
(Conditions Precedent).
C.The Conditions Precedent were not satisfied within 30 days of execution of the Contract by the Sellers.
D.Despite the fact that the Conditions Precedent were not satisfied within the requisite period, the Sellers affirmed the Contract.
E.By letter dated 7 March 2013, the Buyer issued the Sellers with a notice informing the Sellers that the Buyer was ready, willing and able to complete settlement (Buyer's Ready, Willing and Able Notice).
F.By letter dated 19 April 2013, the Sellers' Representative:
(a)asked the Buyer's Representative to specify a date, time and place for Settlement; and
(b)advised that the Sellers required that on Settlement, the Buyer pay interest claimed by the Sellers up to the date of Settlement to the Sellers' Representative.
G.By letter dated 1 May 2013, the Buyer's Representative:
(a)denied that any interest was payable to the Buyers;
(b)asked the Sellers' Representative to confirm that the Sellers would proceed to Settlement; and
(c)asked the Sellers' Representative to provide a settlement statement and confirm a settlement date.
H.By letter dated 3 May 2013, the Sellers' Representative advised that he had sought instructions from the Sellers [as to] whether they were prepared to settle without resolving the outstanding issues, being cropping expenses and interest.
I.By letter dated 7 May 2013, the Buyer's Representative confirmed that the Buyer remained in a position to settle.
J.By email dated 8 May 2013, the Sellers' Representative:
(a)confirmed that the Sellers would settle on whatever day, place and time that suited the Buyer's Representative;
(b)confirmed that the Buyers would settle on the basis that the whole purchase price is payable by the Buyer at Settlement; and
(c)advised that he did not consider a settlement statement to be required.
K.By return email on 8 May 2013, the Buyer's Representative:
(a)confirmed that the deposit and balance of the purchase price required to be paid under the Contract would be paid at Settlement;
(b)set out the reasons the Buyer's Representative had requested a settlement statement; and
(c)requested, in anticipation of Settlement:
(i)a settlement statement;
(ii)copies of amended transfers signed by the Sellers;
(iii)copies of the discharges [of] mortgage from BankWest, and
(iv)electrical contractors' certificates required to be provided by the Sellers pursuant to paragraphs 12 and 13 of the Contract.
L.By further email on 8 May 2013, the Sellers' Representative nominated 17 May 2013 for Settlement.
M.By email on 10 May 2013, the Buyer's Representative confirmed Settlement for 17 May 2013 and requested a date on which the Buyer could undertake a final inspection of the Property prior to Settlement.
N.By letter dated 15 May 2013, the Sellers' Representative advised that there were a number of 'practical issues' that the Sellers considered would need to be agreed prior to settlement, being:
(a)an extension to the Sellers' right of occupation of the house and sheds on the Property after Settlement, including an extension of that right to include exclusive use of the driveway on the Property;
(b)an additional period of time being allowed to the Sellers to vacate the Property and to remove all farm plant, machinery, equipment and sheep from the Property; and
(c)the payment by the Buyer to the Sellers of expenses the Sellers had incurred in planting a crop on the Property during the 2013 growing season.
O.By letter dated 23 May 2013, the Buyer's Representative:
(a)responded to the issues raised by the Sellers' Representative in the letter dated 15 May 2013; and
(b)requested the Sellers' Representative to advise when the Sellers expected to be in a position to settle on the terms as set out in the Contract.
P.By letter dated 31 May 2013, the Sellers' Representative:
(a)provided copies of the electrical contractors' certificates required by paragraphs 12 and 13 of the Contract;
(b)requested that the Buyer reconsider its refusal to grant the Sellers exclusive use of the driveway on the Property following Settlement; and
(c)advised that the Sellers required additional time in order to remove sheep from the Property.
Q.On 11 June 2013 the parties held a teleconference to discuss practical issues that the Sellers requested be resolved prior to Settlement. Arising from that teleconference, the parties agreed that the Buyer would provide the Sellers with a lease to overcome some of the practical issues to Settlement raised by the Sellers.
R.By letter dated 8 August 2013, the Buyer's Representative provided the Sellers' Representatives with the lease and advised that the Buyer required the Sellers to attend the offices of the Buyer's Representative at 10:00am on 10 September 2013 for Settlement, and be in a position to transfer the Property in accordance with the Contract, failing which the Buyer would consider the Sellers to have materially breached the Contract.
S.The Sellers refused to enter into the lease and failed to attend Settlement on that date at that time, or at all.
NOW TAKE NOTICE THAT:
1.The Sellers are in default under the terms of the Contract in that the Sellers have failed to attend Settlement in accordance with the Contract (Sellers' Default).
2.The Sellers are required to remedy the Default by attending Settlement at the offices of Allion legal on Monday, 14 October 2013 at 2:00pm, and being in a position to effect Settlement under the Contract.
3.If the Default is not remedied by the Sellers attending and being in a position to effect Settlement within the time specified above, the Buyer will have the right to exercise such rights and remedies to which it is entitled under the Contract as a result of the Sellers' Default which includes the right to terminate the Contract in accordance with clause 24.14(a)(2) and 24.15(c) of the General Conditions of the Contract (TB 51 ‑ 53).
Mr Kyle emailed Mr Swift on 3 October 2013 (TB 876). Mr Kyle denied the validity of the default notice on the basis that, inter alia, it stipulated a place for settlement outside the CBD as had Allion's letter of 8 August 2013 proposing a settlement meeting on 10 September 2013. Further negotiations were suggested if the defendant genuinely wanted to settle 'both in accordance with the contract and on terms that take account of the effects of the delay'. Mr Swift responded on the same day (TB 877). He maintained that the default notice was valid and pointed out in previous correspondence on 19 April, 8 May and 20 August 2013 the plaintiffs had indicated a willingness to attend Allion's office and raised no issue as to the office being outside the CBD. Mr Kyle responded by an email of 4 October 2013 (TB 876) contending that if a default notice is relying upon a failure to settle, the settlement required must be in accordance with the contract.
Between 3 October 2013 and 14 October 2013 further negotiations and communications took place by email. Of particular concern in these exchanges were the terms of the lease proposed by the defendant. The correspondence includes:
(a)Emails from Mr Swift expressing the defendant's expectation that vacant possession would be given at settlement 'subject only to' the plaintiffs continued occupation of the homestead and workshop in accordance with cl 26 of the contract and annexure B, and the plaintiffs' agreement to the lease annexed to his letter of 8 August 2013. Mr Swift also asked in an email whether the plaintiffs intended to sign the lease or deliver up vacant possession (TB 879 ‑ 909).
(b)An email from Mr Kyle dated 9 October 2013 confirming that the plaintiffs 'intend to sign the lease which your client requires to allow my clients to continue in occupation of the farm until 31 January 2014' but that the plaintiffs' 'agreement to complete the sale to your client on the terms required by your client, which are contrary to the terms of the contract of sale and which do not take any account of the damage suffered by my clients by your client's breaches of the contract, is, of course, without prejudice to their claims for specific performance and damages' (TB 910).
(c)Mr Kyle's email of 11 October 2013 indicating the plaintiffs had a problem with the bank guarantee as the bank 'requires about two weeks to produce it and it still has to agree to the quite unusual provision in the lease'. This email put an alternative proposal that the plaintiffs deposit $150,000 in Allion's trust account for the duration of the lease (TB 916). That proposal was reject by email later that day (TB 917).
(d)Mr Kyle's further email at 4.09 pm later that day concerning, inter alia, the question of the bank guarantee and the defendant's insistence upon it. Mr Kyle noted that '[i]t appears to me that you are trying to manufacture a situation in which settlement does not take place or alternatively your client becomes entitled to immediate possession despite the fact that my clients have incurred all of the costs of the crops this year and the harvest is due within the next three months' (TB 920).
(e)Mr Swift's email of 5.00 pm later that afternoon stating that '[w]e do not consider it productive to continue to debate the issues raised by your clients in respect of settlement at this late stage, given that our client's default notice was served ... on 24 September 2013' and that '[w]e note that the lease is not required by the terms of sale set out in the contact between our respective clients. Although our client was under no obligation to do so, the lease (in the form acceptable to our client) was provided to you on 8 August 2013 in an effort to address some of the "practical issues" which your clients raised in relation to settlement'. That email confirmed that the bank guarantee would be required and asked the plaintiffs to confirm whether they would deliver vacant possession of the property at settlement (TB 921).
(f)Various correspondence concerning arrangements in preparation for settlement such as dealing with the transfers and the exchange of settlement statements and the information regarding Shire rates and the like and asking about the lease and bank guarantee.
On 14 October 2013 Mr Kyle, the plaintiffs, a representative of the plaintiffs' bank and Mr Swift and Ms Sluiter from Allion representing the defendant attended what the parties described as the 'Landgate settlement meeting'. Whilst there are some minor variations in the witnesses recollections of the Landgate settlement meeting they are not material. The following matters in respect of the Landgate settlement meeting are not in dispute:
(a)the meeting was terminated by the defendant's representative giving as the reason that settlement would not and could not proceed at that time as the plaintiffs would not sign the defendant's proposed lease and did not have a bank guarantee;
(b)the absence of a bank guarantee was the principle reason the defendant would not proceed with the settlement and the sale did not settle on that day;
(c)this followed on from Mr Kyle and Mr Swift having a disagreement as to:
(i)whether the plaintiffs would sign the lease even though the defendant had not signed the lease and would not be in a position to sign the lease at the settlement meeting; and
(ii)the plaintiffs not attending the settlement with a bank guarantee in place and how easily a bank guarantee could have been obtained;
(d)the defendant's representatives did not raise the question of vacant possession nor did they ask Mr Kyle to produce the documents that the plaintiffs needed to produce at settlement to settle the contract; and
(e)the defendant's representatives did not give any indication that the plaintiffs had not remedied the default under the default notice nor did they indicate the contract would be terminated.
On 15 October 2013 Allion issued the termination notice on behalf of the defendant. It referred to the notice of default and characterises the unremedied default as:
The Sellers attended the Perth Cloisters office of Landgate on 14 October 2013 at 2:00pm but were not in a position to transfer the Property and effect Settlement in accordance with the Contract and thereby failed to remedy the Default within the time required under the Default Notice (Termination Notice, Recital G, TB 57).
The pleaded defence
In broad terms the defendant pleads three matters by way of defence. The first relates to the fact that until 11 March 2013 a part of lot 2637 was registered in the name of David Tonkin. (The transfer from David Tonkin to Ian Tonkin was lodged on 10 December 2012. The transfer was not actually effected until 11 March 2013. The date of transfer is shown on the title as being the date of lodgment - that is, 10 December 2012. The parties disagreed as to the relevant date. However, in my view, it makes no difference one way or the other.) What the defendant says is that because of the registration of part of lot 2637 in the name of David Tonkin the plaintiffs could not have been ready, willing and able to settle until at the earliest 11 March 2013.
The plea on this first issue is found in par 1 of the further re‑amended defence filed 7 May 2015. As part of that paragraph the defendant denies that there was any agreement between the plaintiffs and the defendant that the transfer of the interest of David Tonkin would be registered at the same time as the registration of the transfer of the property by the plaintiffs to the defendant. That is a matter raised in par 1(d) of the amended statement of claim. That is an issue which divides the parties and I will deal with it later in these reasons.
The second issue raised by the defendant has to do with the FIRB approval. The defence acknowledges that initial approval was obtained from the FIRB and the plaintiffs were advised accordingly. However they say that when the FIRB contacted the defendant and indicated approval was to be reconsidered that meant approval was not ultimately obtained until 28 February 2013. Although it is not entirely clear from the way the defence is pleaded my understanding of the defendant's case was that the failure to obtain the approval of the FIRB within the time stipulated in the contract meant the contract was at an end. But if that is not the position of the defendant it certainly does say the obligation to pay the deposit did not arise until after the second approval of the FIRB on 28 February 2013.
The third issue relates to the plaintiffs' alleged default in settling the transaction between the date of the defendant's ready, willing and able notice (7 March 2013) and the defendant's termination notice (15 October 2013). In summary the defendant says after the issue of the ready, willing and able notice the plaintiffs were in default because they did not do all things necessary to effect a settlement. That led to the default notice of 24 September 2013. The defendant says the defaults were not rectified and that justified the issue of a termination notice. By their counterclaim the defendant's seeks a declaration the contract has been terminated.
Disposition of the claim
Taking each of the defences in turn, cl 3.10 of the General Conditions deals with 'Seller obligation on Settlement'. Relevantly, it reads as follows:
(a)The Seller must at Settlement give the Buyer the following:
(1)subject to clause 3.11, the Duplicate Certificate of Title for the Land.
(2)the Transfer signed by the Seller.
(3)each other document, including:
(A)any transfer executed by a third party.
(B)every application, declaration and other document, necessary to enable the Buyer to become the registered proprietor of the Land free of any Encumbrances.
This clause clearly anticipates that at settlement a seller will deliver to a buyer a transfer from a third party which will allow the buyer to become the registered proprietor of all the land subject to the sale. The early exchanges between Mr Gentile and Mr Kyle clearly indicate Mr Gentile recognised the contractual position. It may well be that a prudent conveyancer would want all of the property the subject of the sale transferred into the name of the seller prior to any settlement taking place. But that is not what the contract contemplates. That means there was clearly no basis for the defendant to say up until either 10 December 2012 or 13 March 2013 the plaintiff was not ready, willing and able to settle. Under the terms of the contract they were.
The second point is the FIRB approval. In my view the initial approval from the FIRB resulting as it did in the 'Notification' was the end of the matter. The requirements of the contract were met. It is not necessary to go so far as to say the defendant had waived any right to rely upon those provisions of the contract. They had simply been satisfied.
It is no answer to say the FIRB looked again at the defendant's acquisition of the property and they could have blocked that acquisition so it is only from the later date interest would run. Leaving to one side the rather confused nature of the defendant's argument on this issue, if the FIRB had decided the defendant could not acquire the property then in my view specific performance would not have been available but there would have been no answer to the plaintiffs' claim for damages. It is perhaps worthy of note that amendments in relation to this subsequent investigation by the FIRB were introduced late in the day. The plaintiffs objected to the defence being amended. I suggested rather than deal with the matter in isolation it should be dealt with at trial. In the event the trial proceeded on the basis the amendments were allowed. In fact the amendments were effectively the withdrawal of an admission. They provide no answer in any respect to the plaintiffs' claim.
Finally, there is the question of the default notice and the subsequent notice of termination. In my view the defendant had no basis at all for issuing the default notice. Apart from anything else it was in default because it had not paid the deposit. Furthermore, pursuant to cl 3.4(c) of the General Conditions it was incumbent upon the defendant to specify a place for settlement within the CBD. By specifying the offices of Allion which are outside the CBD it imposed a condition inconsistent with the contract and breach of which could not give rise to any default. Third, the defendant was in breach of its obligations in relation to interest. There was a dispute between the parties as to the defendant's liability to pay interest. That is covered by cl 4.6 of the General Conditions. It may be argued that the plaintiffs did not serve an interest notice prior to settlement as is required by cl 4.6(b). But the solicitors for the defendant had made it plain no interest would be payable. Perhaps it is the case the parties agreed to put this issue to one side and the failure to pay interest may not be regarded as a default by the defendant. But even if that be the case the defendant was clearly in default with respect to the deposit and in demanding a settlement at a place outside the CBD. They therefore had no basis for a default notice.
Without a basis for the default notice there could be no basis for the termination notice. It is clear there were significant differences between the plaintiffs and the defendant in relation to the lease. I need not deal with those differences in any detail. What is important is that the termination notice purported to rely upon the default notice. The default notice was ineffective and the termination notice was ineffective. The contract continues on foot and the plaintiffs are entitled to an order for specific performance.
Interest
It is clear the defendant is in default under the terms of the contract and the plaintiffs are entitled to interest. There is nothing in the defendant's argument either with respect to the plaintiffs being ready, willing and able to settle or the subsequent FIRB approval. Settlement was due 30 days after 19 December 2011 in accordance with the provisions of annexure D. That would mean settlement was due on 18 January 2012.
By cl 4.7 of the General Conditions there is a restriction on the right to claim interest. That clause is in the following terms:
4.7Restriction on right in case of court proceedings.
(a)The right of a Party under this clause to interest or compensation will cease as at and with effect from and including the date on which court proceedings are instituted by a Party for:
(1)specific performance of the Contract; or
(2)a declaration that the Contract:
(A)has been terminated;
(B)remains valid and enforceable; or
(3)any other order or declaration to the same or similar effect to an order or declaration as specified in subclause (1) or (2); or
(4)other relief based on the Contract having been terminated.
(b)It is the intention of the Parties that where there is a delay in respect to Settlement:
(1)compensation should be paid; and
(2)interest payable at the Prescribed Rate for the period of the delay represents the best estimate that the Parties can give as to the damages sustained arising from the delay.
(c)Where court proceedings are instituted by a Party in accordance with subclause (a), nothing in this clause or in the Contract:
(1)restricts, limits or prejudices the entitlement of a Party to claim interest under an Act or by way of damages or compensation; or
(2)limits or otherwise affects the discretion of the court.
Consistent with that provision two points can be made. First, the plaintiffs' right to interest ceased as at the date proceedings were issued; that is, 2 September 2013. So the entitlement to interest runs from 18 January 2012 until 2 September 2013.
The second point to note is that cl 4.7(b) of the General Conditions eliminates any claim for damages during the period when interest is payable. That is not the basis upon which the plaintiffs put their claim. They put their claim on the basis they were entitled to damages from the date of default through until the date of trial. But that is clearly not the effect of the clause. Counsel for the plaintiffs attempted to argue the payment of interest was what is sometimes referred to as 'Hungerford damages'. That is to say a loss suffered by a party who does not have access to funds because of a default. In my view that is not the way in which the clause is worded. The interest payable is a genuine pre‑estimate of damages and the plaintiffs are not entitled to any damages up until 2 September 2013.
The plaintiffs' entitlement to damages
As part of their pleadings the plaintiffs provided a document entitled 'Substituted Further and Better Particulars of Paragraph 10 of the Amended Statement of Claim'. These particulars covered two years - 2012 and 2013. There was no claim for the 2014 year. As I have indicated given interest was payable pursuant to the contract no damages are payable for any breach prior to 2 September 2013. That raises a problem, which is not addressed by the particulars. The problem is explained in this way. The plaintiffs have broken down their loss into loss of income from cropping and loss of income from livestock. They have provided details for the 2012 and the 2013 seasons. In my view there is no basis for a claim for the 2012 season. But is there a basis for the claim for the 2013 season? The particulars offered for that season are as follows:
(2)Particulars of the 2013 cropping season
a)The optimum date for commencement of seeding wheat, barley and canola crops was 14 April 2013.
b)The preparation time required for seeding in order to arrange finance, labour, machinery and purchase of fertiliser was not less than 14 days;
c)The required date for commencement of preparation in order to commence seeding of crops on the optimum date was no later than 1 April 2013;
d)The circumstances at the required commencement date for preparation were as follows:
(i)The Defendant informed the Plaintiffs by letter from Allion Legal to Haynes Robinson dated 20 March 2013 that it wished to settle the purchase but at a meeting between the Plaintiffs and Harold Sim on 10 April 2013 the parties did not agree the terms of settlement.
(ii)At the optimum date for commencement of preparation for seeding the Plaintiffs and the Defendant had not agreed the terms of settlement.
e)The Plaintiffs commenced seeding crops on 1 May 2013.
f)Loss of income 2013
1) Anticipated value of harvest if seeding Occurred at the optimum time $1,233,705 2) Less value of actual harvest $829,898 3) Less increased cost of cropping if optimum harvest $122,745 4) Net loss of income by reason of delayed seeding $281,062
B.Loss of Income from Livestock
(i)The optimum and regular date for mating the Plaintiffs' ewes was November in each year.
(ii)The Plaintiffs did not mate their ewes in November 2011 and 2012 because settlement of the sale of their property to the Defendant was due when the ewes would have been pregnant.
(iii)It was the intention of the Plaintiffs to either sell or move their sheep flock to another property on completion of the sale of their property to the Defendant and pregnant ewes should not be transported from one property to another.
(iv)By reason of the fact that settlement has not taken place the Plaintiffs could have mated their ewes in both November 2011 and November 2012 but did not do so and therefore did not earn the income that would have resulted from the sale of lambs which would have been born if mating had occurred in November 2011 and 2012.
(1)Particulars as to 2012 Livestock programme
Total number of ewes 4183 Number of ewes mated 429 Number of lambs produced (89%) 381 Number of ewes unmated 3754 Loss of potential lambs (at 89%) 3207
Market value of lambs lost @ $84 per head $269,423 Less additional costs of additional sales $45,354 Net loss $224,069
(2)Particulars as to 2013 livestock programme
Total number of ewes 3531 Number of ewes mated 633 Number of lambs produced (90%) 569 Number of ewes unmated 2898 Loss of potential lambs (at 90%) 2476
Market value of lambs lost @ $54 per head $173,582 Less additional costs of additional sales $21,807 Net loss $151,775
Before looking at the evidence to support these claims I should briefly summarise the relevant legal principles. The plaintiffs put their entitlement to damages under one of two heads. Either damages for breach of contract or equitable compensation. Dealing first with common law damages it is axiomatic that where a party sustains a loss by reason of breach of contract they are, so far as money can do it, to be placed in the same situation with respect to damages as if the contract had been performed. The general principle governing the assessment of compensatory damages in both contract and tort is that the plaintiff should receive the monetary sum which, so far as money can, represents fair and adequate compensation for the loss or injury sustained by reason of the defendant's wrongful conduct. Often that involves a comparison between a hypothetical and an actual state of affairs. But it is a comparison that must be made.
The loss for which compensation is claimed must not be too remote. Damage is not too remote if it may fairly and reasonably be considered as either arising naturally according to the usual course of things or may have been in contemplation of the parties.
It is for the plaintiffs to establish their loss and they must affirmatively establish assessable damage, that is to say loss or injury which is capable of being measured in monetary terms.
The general rule is that damages are to be assessed at the date of breach of the contract but in particular cases allowance can be made for the particular circumstances so as to fairly compensate a party of the wrong suffered. To that end no rigid rules of universal application can be postulated. Each case is dependent on its circumstances.
Equitable compensation is awarded to do complete justice so far as equity considers it ought be done by supplementing with money any equitable remedy. Equity will order damages directed to losses incurred despite any ultimate performance. That allows for damages for delay in performance. Both general and specific damages may be awarded for loss arising from a failure to complete on a stipulated date: see Wadsworth v Lydall [1981] 1 WLR 598.
Turning to the evidence the plaintiffs rely upon the evidence of the first‑named plaintiff found at pars 56 ‑ 65, 67 ‑ 75, 79, 82 ‑ 89, 93 ‑ 101, 137 ‑ 139 and 136 ‑ 146 of his statement of evidence. They also rely on the expert report of Eric Nankivell dated 19 May 2014, and the joint memorandum of expert witnesses Eric Nankivell and Trent Kensett‑Smith signed on 4 May 2015.
A flavour of counsel for the plaintiffs' thrust on damages, based upon the first‑named plaintiff's evidence, can be demonstrated by quoting from his closing written submissions:
195.Ian Tonkin's evidence substantiates the allegations in the Statement of Claim and Further and Better Particulars of Claim that:
a)The Plaintiffs commenced their seeding programme in 2012 on 8 May 2012 which was 22 days later than the optimum time for commencement of the seeding;
b)The reasons for not commencing the seeding programme before 8 May 2012 were the uncertainty faced by the Plaintiffs regarding settlement of the Contract and whether it would take place before or after the harvesting of the crops, and the fact that until 5 May 2012 the Defendant had not agreed to reimburse the Plaintiffs the costs of the seeding programme;
c)The Plaintiffs commenced their seeding programme in 2013 on 1 May 2013 which was 17 days later than the optimum time for commencement of the seeding;
d)The reason for not commencing the seeding programme before 1 May 2013 was the continuing uncertainty faced by the Plaintiffs about whether settlement of the Contract would take place before or after harvest, particularly as, at 14 April 2013, the parties were not agreed on the terms of settlement and the Defendant was not agreeing to reimburse the Plaintiffs the cost of seeding as it had agreed to do in the previous year;
e)The Plaintiffs did not mate their ewes as they normally would have done in November 2011 and 2012 because that would have resulted in neither the pregnant ewes not the lambs being able to be transported either to sale or to another location if settlement had taken place and vacant possession of the farm had to be given to the Defendant within the period of the pregnancies of the ewes being 160 days after mating or when the lambs were only a few weeks old;
f)As the settlement and the giving of possession to the Defendant did not take place either when the Contract envisaged it in March 2012 or in or about March 2013 the Plaintiffs could not have mated their ewes in November 2012 and 2013 without any risk of having to transport them and their lambs when it was not permitted or not good and safe practice to do so;
g)In November 2012 the Plaintiffs had just become aware that the Defendant had received the funds to allow settlement to take place and it was therefore reasonable for them to presume that settlement might take place before March or April 2013 and that consequently it was appropriate not to mate their ewes in November 2012 (par 195).
I accept the first‑named plaintiff's evidence. He struck me as a careful, experienced, thoughtful farmer with a keen understanding of climatic conditions and their effect on his farming operations. I also accept the delays in seeding his crop in 2013 and his approach to livestock management were occasioned by uncertainty as to whether the agreement would settle. In all the first‑named plaintiff was a very impressive witness.
Mr Nankivell was called to give evidence as an expert. He is a director, consultant and licensed valuer with a rural consultancy known as Farmanco. His curriculum vitae appears as an attachment to his expert report prepared 19 May 2014. After initially challenging Mr Nankivell's expertise counsel for the defendant did concede that he was an appropriately qualified expert.
In his report of May 2014 Mr Nankivell undertakes an analysis of the performance of the plaintiffs' business and sets that off against what he believes would have been the outcome had the plaintiffs followed usual farming practices - that is to say had they run their business on the basis generally accepted in the industry and not affected by the uncertainty of the sale process. His report covers both 2012 and 2013. Mr Nankivell notes the first‑named plaintiff delayed in planting his crop. He says:
As a result, weeds from the summer rainfall sprayed late and this, along with a two‑week delay in the commencement of seeding, resulted in poor production and income in a very profitable year for most farms in the area (page 9).
Mr Nankivell then looks at the yields obtained by the plaintiffs and lists a range of yields achieved by three other growers in the region. He then considered four factors. They were:
1.GD & CP Tonkin & Sons eight‑year yield average.
2.Performance of other farming businesses.
3.Rainfall achieved.
4.Differences in soil types (page 9).
Based upon those factors and yields within the area he postulates what returns per hectare might have been achieved in the three crops - wheat, barley and canola. He then comes to the conclusion the plaintiffs have suffered a loss of $281,062 in the 2013 year.
In relation to the livestock losses Mr Nankivell accepts 'it was not appropriate to mate ewes in the normal fashion' (page 4). In other words Mr Nankivell proceeds on the basis that the summary of evidence provided by counsel in par 195(e) of his submissions was reasonable. Allowing for costs, expenses and all other related matters he then concludes the plaintiffs suffered a loss of $146,952, in the 2013 year.
Mr Nankivell's report is a comprehensive document. It has as attachments detailed financial records both of the plaintiffs' enterprise and comparable enterprises. He was subjected to cross‑examination and the further that cross‑examination went the more impressive Mr Nankivell was. I have no hesitation in accepting his report and the conclusions that he reached.
The defendant did not instruct an expert in the same way as the plaintiffs instructed Mr Nankivell. Rather Mr Kensett‑Smith was commissioned to perform a critique of Mr Nankivell's report. That he did and it threw up areas of disagreement. The experts met and discussed their differing views. Eventually they produced what is described as a Joint Memorandum of Expert Witnesses dated 7 May 2015. It was admitted as exhibit G. The report details the differences between the experts, the compromises each made taking into account the other's opinion and the matters on which there was agreement. So far as Mr Nankivell's conclusions as to the losses sustained for the 2013 season are concerned only one area of difference was left between the experts. This related to the item which the experts designated as 'Provision of Comparable Client Data in relation to cropping enterprise performance in 2012 and 2013'. The differences were expressed by the experts in this way:
Mr Nankivell has tended the comparable data of farmers in the area to establish the cropping enterprise losses. The analysis compares the cropping performance over the past ten years to clearly demonstrate the impact of the sale agreement.
Mr Kensett‑Smith contends that this is an invalid comparison on the basis that the three farms used in the comparison do not run any livestock. Mr Kensett‑Smith's contention here is that in his experience, when operating both a cropping and a livestock enterprise side by side there are consequences relating to the physical condition of some farms and compromises required by one or both enterprises that will affect the overall performance of one or both of these enterprises. However, when a singular enterprise is in operation, no such compromise need be considered.
We could not agree on this issue.
Having heard the evidence of the witnesses I accept the evidence of Mr Nankivell. He was questioned closely as to the basis upon which he used comparable data. I was satisfied he explained his position fully and that his comparison was not compromised by the fact the plaintiffs' enterprise was both cropping and livestock. Mr Nankivell seemed fully alive to the difficulties this might pose. Furthermore, Mr Kensett‑Smith did not offer an alternative. That is to say he did not offer other comparisons which demonstrated Mr Nankivell's methodology was faulty. I accept Mr Nankivell's position without hesitation.
It was the position of the defendant that the plaintiffs had no claim for damages. They based this submission on cl 8(b) and (d) of the contract of sale. Those conditions are in the following terms:
(b)Clause 6.1(b)(2) of the 2011 General Conditions is deleted and the Sellers are obligated to leave the Property in a neat and tidy condition in accordance with normal practice.
...
(d)Clause 9.1(e) of the 2011 General Conditions is deleted and the Sellers agree to operate the Property in normal manner until Settlement subject to seasonal conditions (TB 6).
The defendant maintained the plaintiffs were obliged to carry on normal farming activities and any losses they sustained as a consequence of having one eye on the possibility of settlement were not to the defendant's account.
It is worth of note the reference in cl 8(d) is to 'Settlement' suggesting a defined term. But the term is not defined in the contract itself or in the annexures. 'Possession Date' is defined in annexure A but that is in a different context. The only definition of 'Settlement' to be found is in the General Conditions where the term is said to mean 'the completion of the sale and purchase of the Property in accordance with clause 3'. In his closing written submissions counsel for the plaintiffs put the position as follows:
223.It would be an unreasonable reading of that that clause to:
(a)Hold that the obligation to operate the property in a normal manner extended to the requirement to prepare for seeding in the event of a breach of the Settlement Date provided under the Contract;
(b)To find that the obligations continue to apply notwithstanding a breach of the Contract and the time for settlement and the time for possession anticipated by Annexure A itself; as
(c)To so hold would involve placing onerous obligations upon a seller for an indeterminate period of time after the initial breach of contract which is at complete odds with a bargain that the seller has struck with the buyer (par 223).
In my view that submission ought be accepted. When the parties entered into this contract it was never anticipated settlement would take place some four years after the date originally agreed. If that had been anticipated doubtless there would have been extensive provisions in the contract to cover that eventuality. In my view cl 8(b) and (d) were formulated with a view to settlement being effected in early 2012 and the plaintiffs being obliged to maintain the property until that time. Any other interpretation of the provision ignores the defendant's breach of its contractual obligations and imposes on the plaintiffs an unreasonable burden. Accordingly I am not satisfied the plaintiffs' claim for damages is defeated by the provisions of the contract.
Having said all of that there is a difficulty with the plaintiffs' claim for damages for the 2013 year. Because proceedings were issued on 2 September 2013 interest is payable by the defendant up until that date. That means to look at the 2013 year and say losses have been sustained over the course of the year runs into the difficulty that for any losses sustained in two‑thirds of the year - that is up until 2 September 2013 - interest is the measure of the plaintiffs' loss. How then can the undoubted losses sustained by the plaintiffs be squared with their entitlement to interest for part of the year?
The first thing to note is the contract is silent on this question. So it is a matter of finding some other way to do justice between the parties. It would perhaps have been possible to say the plaintiffs' lost $432,837 over the whole year (being the aggregate of the crop losses and the stock losses) and as they clearly have an entitlement to damages for the last four months of the 2013 year they should then receive a third of that amount by way of damages. The problems with that approach are obvious. In relation to the crops, for instance, the damage was occasioned by the plaintiffs planting their crops late. That occurred during the period when the damages were covered by the interest payable. It would be entirely artificial to simply apportion the loss over part of the year.
During the course of preparing these reasons I examined a number of other possibilities in an attempt to find a formula which would accommodate the provisions of the contract and recognise the damage suffered by the plaintiffs. In the end I determined no allowance should be made for damages. It is perhaps worth noting for the 2013 year ending 2 September 2013 the plaintiffs will be entitled to interest in an amount of roughly $480,000. That should be put against losses they actually say they incurred of just over $432,000. Given the contract says the interest is payable as a genuine pre‑estimate of damages suffered by the plaintiffs the outcome does not seem to me to be either unreasonable or unfair.
Conclusion
For these reasons I am satisfied there should be an order for specific performance that the plaintiffs should have an award of interest from 17 January 2012 until 2 September 2013. The plaintiffs claim for damages fails.
There are three further issues which are to be considered. The first relates to a payment made by a company known as Vicstock Grain Pty Ltd to the plaintiffs on or about 13 November 2012. The particulars of damage provided by the plaintiffs refer at par 1(e) to the defendant's agreement to reimburse the plaintiffs for the costs of seeding the crops in the 2012 year. It was common ground between the parties that Vicstock Grain did actually pay to the plaintiffs an amount of $660,000. However the plaintiffs particulars do not give any credit for that payment. Paragraph 10 of the defendant's further re‑amended defence answers the plaintiffs' claim for damages. Paragraph 10(c) is in the following terms. It says
further, that on or about 13 November 2012 Vicstock Grain Pty Ltd (the company associated with the interests of the defendant) paid to the Plaintiffs the sum of $660,000 pending and in contemplation of completion of settlement in accordance with the Contract, in respect of costs alleged to have been incurred by the Plaintiffs in cropping the property during the 2012 cropping season.
Oddly enough the final version of the counterclaim removed from the prayer for relief a demand for repayment of the sum of $660,000. What to do with this payment did not receive much attention from the parties either during the course of the trial or in their submissions. There was no evidence as to the precise relationship between Vicstock Grain and the defendant. But the fact remains a payment was made albeit on a basis not contemplated by the contract. To do justice between the parties it seems to me the defendant should be given credit for that payment of $660,000.
The second issue has to do with an application by counsel for the defendant that I recuse myself. This application was made after I pointed out to counsel that the defendant's case faced certain difficulties. The exchange occurred after the plaintiffs had closed their case. In my view it was nothing more or less than a robust exchange between Bench and Bar. As I indicated earlier in these reasons documents determine this case. Before the trial commenced I had read the submissions of both parties and examined most of the relevant documents. After hearing the plaintiffs put their case I had a clear understanding of the issues and the difficulties facing the defendant. My comments did nothing more or less than express my then views. In my view no reasonable person could have concluded that I prejudged the issue.
The final matter has to do with the joint memorandum of the experts. Given that I have determined no damages are payable by the defendant to the plaintiffs it is not strictly speaking necessary for me to deal with this issue. But for the sake of completeness I will include in these reasons comments I made during the course of the trial.
It seems to me once experts have agreed certain matters it is not open to either party to challenge matters of expert evidence which have been agreed. That is what counsel for the defendant in this case attempted to do. Remarkably enough there appears to be no cases dealing with this issue. Meetings of experts are routinely ordered in this court and they serve a useful purpose. Even if complete agreement cannot be reached between the experts they at least (on most occasions) are able to narrow their differences. These meetings and subsequent agreement would serve no useful purpose if at trial either party was at liberty to reopen all matters which had been agreed.
What remains outstanding is the question of when settlement ought to take place. Doubtless the plaintiffs have planted a crop for 2015 and that crop would just about be ripe for harvest. A claim has been made for damages for the 2015 season but it is not possible, as yet, to quantify what the loss might be. All of this feeds into the question of when settlement ought now be ordered. There is also a question as to whether or not the plaintiffs have any right or entitlement to remain in this property as was envisaged under the original agreement. That will need to be the subject of further argument.
On publication of these reasons I will offer the parties the opportunity to propose further directions as to final resolution of all matters in issue between the parties.
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: TONKIN -v- HEILONGJIANG FENG AO AGRICULTURAL & ANIMAL HUSBANDRY GROUP CO PTY LTD [2015] WASC 378 (S)
CORAM: MASTER SANDERSON
HEARD: ON THE PAPERS
DELIVERED : 2 SEPTEMBER 2016
FILE NO/S: CIV 2352 of 2013
BETWEEN: IAN JAMES TONKIN
CAROLYN ANNE TONKIN
PlaintiffsAND
HEILONGJIANG FENG AO AGRICULTURAL & ANIMAL HUSBANDRY GROUP CO PTY LTD
Defendant
Catchwords:
Costs - Plaintiffs seeking special costs order - Defendant seeking costs after rejection of Calderbank offer - Turns on own facts
Legislation:
Legal Profession Act 2008 (WA)
Rules of the Supreme Court 1971 (WA)
Supreme Court Act 1935 (WA)
Result:
Costs order made
Category: B
Representation:
Counsel:
Plaintiffs: No appearance
Defendant: No appearance
Solicitors:
Plaintiffs: Pragma Legal
Defendant: Allion Legal
Case(s) referred to in judgment(s):
Calderbank v Calderbank [1975] 3 All ER 333
Doric Products Pty Ltd v Lockwood Security Products Pty Ltd [2002] FCA 282
Electricity Generation and Retail Corporation trading as Synergy v Woodside Energy Ltd [2014] WASC 469 (S)
Fagan v Morien [2008] WASC 54 (S)
Ford Motor Company of Australia Ltd v Lo Presti [2009] WASCA 115
Heartlink Ltd v Jones As Liquidator of HL Diagnostics Pty Ltd (in liq) [2007] WASC 254 (S)
McKay v Commissioner of Main Roads [No 7] [2011] WASC 223 (S)
Miwa Pty Ltd v Siantan Properties Pte Ltd [No 2] [2011] NSWCA 334
Naidoo v Williamson (2008) 37 WAR 516
Nikolaou v Papasavas, Phillips & Co (No 2) (1989) 166 CLR 394
Oshlack v Richmond River Council (1998) 193 CLR 72
Red Hill Iron Ltd v API Management Pty Ltd [2012] WASC 323 (S)
The Hancock Family Memorial Foundation Ltd v Fieldhouse [No 5] [2013] WASC 121 (S)
MASTER SANDERSON: These reasons deal with the question of costs following a trial of the action between the plaintiffs and the defendant. The plaintiffs are seeking a special costs order under s 280(2) of the Legal Profession Act 2008 (WA). The defendants are seeking an indemnity costs order based on the plaintiff's failure to accept a Calderbank offer made well before trial. The plaintiffs' application was made by chamber summons dated 5 February 2016. The defendant's application was made by chamber summons dated 9 December 2015. It is convenient to deal first with the plaintiffs' application.
The plaintiffs seek a special costs order on an apportioned basis for the following reasons. First, they say two out of the plaintiffs' three claims were successful at trial ‑ that being the specific performance claim and the interest claim. They acknowledge they failed on the damages claim and accordingly propose an apportionment of 65% of the costs to take this into account.
Second, they say the limits to items 6(b), 7(b), 10(a), 17, 20(a) and 20(c) the Legal Practitioners (Supreme Court) (Contentious Business) Reports and Determination 2012 and 2014 respectively are inadequate. Finally, they say that the action was of importance to the plaintiffs and was made difficult by reason of the defendant persisting with two defences in relation to the claims for specific performance and interest which in the reasons I described as 'without merit'.
In written submissions counsel for the plaintiffs analyses in some detail the legal principles in relation to costs generally and special costs orders in particular. I propose to summarise these principles which counsel set out with admirable clarity. It is pursuant to these principles that I have determined this application.
The court has the power to award costs by reason of s 37 of the Supreme Court Act 1935 (WA) and O 66 r 1(1) of the Rules of the Supreme Court 1971 (WA). Taken together these provisions confer on the court a discretion in relation to costs of and incidental to all proceedings. Order 66 r 1(1) embodies the general rule that costs will follow the event. The discretion conferred by the combination of the Act and the Rules is very wide but it must be 'exercised judicially': see Naidoo v Williamson (2008) 37 WAR 516 [38] ‑ [42].
The discretion must not be exercised 'arbitrarily, capriciously or so as to frustrate the legislative intent': see Oshlack v Richmond River Council (1998) 193 CLR 72 [22]. As McHugh J said in Oshlack at [66]:
… the most important factor which courts have viewed as guiding the exercise of the costs discretion is the result of the litigation.
A successful party may be ordered to pay costs of an issue or issues introduced by the successful party upon which the successful party fails: see O 66 r 1(3). This should not be done as a matter of course. Fairness and policy dictates a departure from the general rule should be limited. It is incumbent upon the unsuccessful party to satisfy the court that there are good reasons why it should not pay the other party's costs: see Nikolaou v Papasavas, Phillips & Co (No 2) (1989) 166 CLR 394, 407. Parties should not be dissuaded by the risks of costs from canvassing all issues which might be material to the matters before the court: see Doric Products Pty Ltd v Lockwood Security Products Pty Ltd [2002] FCA 282 [10].
Special costs orders are provided for in s 280(2) of the Legal Profession Act. That section is in the following terms:
(2)Despite subsection (1), if a court or judicial officer is of the opinion that the amount of costs allowable in respect of a matter under a costs determination is inadequate because of the unusual difficulty, complexity or importance of the matter, the court or officer may do all or any of the following ‑
(a)order the payment of costs above those fixed by the determination;
(b)fix higher limits of costs than those fixed in the determination;
(c)remove limits on costs fixed in the determination;
(d)make any order or give any direction for the purposes of enabling costs above those in the determination to be ordered or assessed.
An application pursuant to s 280(2) of the Act is to be determined by applying a two limb test that was enunciated in Heartlink Ltd v Jones As Liquidator of HL Diagnostics Pty Ltd (in liq) [2007] WASC 254 (S). The first limb of the test requires that there be a fairly arguable case to put before the taxing officer to the effect that the bill of costs should tax out as more than the limit which would be imposed by the relevant costs determination. The second limb of the test requires that the matter be of 'unusual difficulty' 'complexity' or 'importance'.
There must be a causal connection between the unusual difficulty, complexity or importance of the issue, dispute or controversy before the court and the inadequacy of the costs allowable under the relevant determination: see Electricity Generation and Retail Corporation trading as Synergy v Woodside Energy Ltd [2014] WASC 469 (S). The construction and application of s 280(2) of the Act is to be made 'as a matter of impression rather than as a matter of detailed evaluation' and 'taking into account the greater expertise of taxing officers in fixing the amount of costs properly and reasonably allowed'. These two statements of principle are found respectively in the Heartlink and the Woodside decisions.
In relation to the second limb it is only necessary to satisfy one of the factors. That is the action has to be either unusually difficult, complex or important. It does not have to be all three. The word 'unusual' only qualifies the word 'difficulty'. A matter may be unusually difficult if it is 'much more difficult than would ordinarily be expected in an application of '[its] kind': see Fagan v Morien [2008] WASC 54 (S) [19].
The word 'importance' connotes whether the work done was appropriate to the significance of the issues that arose in the litigation, including the significance of the issues to the parties. The test on whether a matter is important is a subjective test. Martin CJ in Heartlink put the position as follows at [18]:
… if it had been the intention of the legislature to require the court to give consideration to an issue of community or public importance then I think it would have been reasonable to expect the legislature to use the words that would connote that meaning such as the well-known phrase 'public importance' which is found in a number of other legislative provisions.
The factors of unusual difficulty, complexity or importance qualify the issue, dispute or controversy before the court rather than the work done or services provided in respect of each applicable item of the costs determination. The question which must be addressed is whether the costs allowable in respect of the work done are inadequate because of the particular characteristic or characteristics of the 'matter' which has or have enlivened the jurisdiction of the court, that is to say unusual difficulty, complexity or importance. In relation to rates the complexity or importance of a matter may make it reasonable and proper to engage solicitors and counsel at rates above those allowed in the scale: see Red Hill Iron Ltd v API Management Pty Ltd [2012] WASC 323 (S) [31].
Nothing that a court does in determining an application for a special costs order can in any way bind or impinge upon the decisions made by the taxing officer as to whether or not the work was appropriately and reasonably done or as to the proper amount to be allowed in respect of that work. The only effect of the order will be to free the taxing officer of the constraints which would otherwise be imposed by the scale. The function of the court is limited to setting the parameters within which the taxing officer will tax the relevant bill providing any specific directions which will assist the taxing officer to assess the quantum of costs to be allowed on taxation. These principles emerge from the Heartlink and Woodside decisions.
Finally there is the question of reserved costs. In TheHancock Family Memorial Foundation Ltd v Fieldhouse [No 5] [2013] WASC 121 (S) Le Miere J said at [9]:
When costs are reserved it is necessarily implied that there is reserved the question of the incident of those costs, quite apart from any question whether they are to be paid by the party who is ultimately successful in the litigation. Where the reserved costs have not been identified, the court is unable to determine whether the costs should be borne by the plaintiff, the second defendants or neither.
Against those legal principles the plaintiffs make the following submissions. They point out they were successful in two of the three claims at trial. In an affidavit of Tina McAulay sworn 5 February 2015 Ms McAulay estimates that approximately 35% of the time spent in preparing for trial and at trial related to the damages claim on which the plaintiff was unsuccessful. On that basis the plaintiffs say they should be entitled to 65% of their costs of the action.
In relation to the special costs order the plaintiffs say in relation to the first limb of the test the plaintiffs rely on [12], [13] and [15] of Ms McAulay's affidavit. In [13] reference is made to a draft bill of costs which is annexed to the affidavit. It shows costs on a party and party basis of $352,126.80. Ms McAulay says that six items in the scale are inadequate. These are the provision of further and better particulars of the statement of claim, discovery, the plaintiffs' application for discovery of specific documents, the plaintiffs' application for inspection and discovery, getting up and counsel fee on brief. The largest of these items is getting up. The scale maximum is $56,760 and the amount claimed in the bill is $138,355.80.
In relation to the second limb, it was submitted that this case satisfied all three requirements ‑ that is it was unusually difficult, it was complex and that it was important. In my view the case was not one of unusual difficulty and nor was it particularly complex. The claim for specific performance was relatively straightforward and based upon the available documents. The interest claimed was made pursuant to the contract. It too was relatively straightforward. The real question is whether or not the plaintiffs satisfy the importance test.
This is addressed by the first plaintiff in an affidavit sworn 3 February 2016 and filed in support of the application. The litigation concerned the plaintiffs' farm from which they derived their livelihood and which was their home. The first plaintiff says, and I accept, that he subjectively believed the trial was of 'great importance'.
The plaintiffs also sought costs reserved at a directions hearing on 30 June 2014 and a further directions hearing on 5 May 2015. The plaintiffs say the order made at the directions hearing on 30 June 2014 related to the plaintiffs' discovery application. Ultimately the defendant gave further discovery and accordingly costs ought follow the event. As to the directions hearing on 5 May 2015 the plaintiffs say that hearing concerned programming the action towards trial and as the plaintiffs were ultimately successful costs should follow the event.
The defendant's answer to the plaintiffs' claim is in large measure bound up with their submissions in relation to the Calderbank offer. The defendant begins by contrasting the result at trial with what was actually sought by the plaintiffs. They point out, correctly in my view, that the plaintiffs sought three things. First, settlement on the contract, second, interest pursuant to the contract on account of an alleged delay by the defendant in proceeding to settlement and thirdly, damages for the 2012, 2013 and 2015 farming years as compensation for the losses allegedly sustained in their farming business in those years as a result of the delay in settlement.
The defendant says the plaintiffs fell short of their claim. They did obtain an order for specific performance of a contract. They were awarded interest pursuant to the contract for the period limited from 18 January 2012 until 2 September 2013 ‑ an amount the defendant refers to as 'contractual interest'. They were permitted to remain on the property after settlement until 1 March 2016 and were required to pay rent to the defendant for the possession period at the rate of $520 per day. Their damages claim for 2012 and 2013 was dismissed. They were required to make an application for assessment of their damages claim for the 2015 farming year by 31 March 2016 in the event they wished to pursue any claim. Due to the timing of the harvest no evidence was led at trial as to the alleged losses for that year.
The amount awarded to the plaintiffs by way of contractual interest was calculated to be $1,173,698.63. That sum was credited to the value of $660,000 in favour of the defendant on the basis the plaintiffs had received the sum to that value in or around November 2012. That was to reimburse the costs they had incurred in the 2012 cropping season and hence their loss had been mitigated to that extent. The plaintiffs were required to pay the defendant by way of rent for the post‑settlement period an amount of $53,040.
On 21 February 2014 the defendant's solicitors sent an email to the plaintiffs' solicitors attaching a letter offering to compromise the action. The letter contained what all parties agree was a Calderbank offer: see Calderbank v Calderbank [1975] 3 All ER 333. The defendant summarised the substance of the Calderbank offer as follows:
(a)it was open for a period of seven days until 5.00 pm on 28 February 2014;
(b)settlement on the contract would proceed;
(c)at settlement the defendant would pay to the plaintiffs the sum of:
(i)$8,000,000 (being the purchase price of the property in accordance with a contract); plus
(ii)$500,000 (comprising contractual interest in the amount of $1,160,000 less the amount of $660,000 already paid to the plaintiffs);
(d)settlement would take place within five days of the acceptance of the offer (which would then have been in or around early March 2014);
(e)the plaintiffs would be entitled to a rent free post‑settlement possession period of up to 30 days (allowing the handing over of possession to be delayed until early April 2014); and
(f)the parties would each bear their own costs of the action.
The court's approach to a Calderbank offer has been the subject of numerous decisions both in this State and throughout the Commonwealth. In Ford Motor Company of Australia Ltd v Lo Presti [2009] WASCA 115 the relevant principles were considered. The court there held the test which must be applied in determining whether to award indemnity costs against a party who rejected a Calderbank offer is whether the rejection was unreasonable in the circumstances. The onus is on the offeree to demonstrate unreasonableness. The relevance of a Calderbank offer has recently been the subject of consideration by the New South Wales Court of Appeal in Miwa Pty Ltd v Siantan Properties Pte Ltd [No 2] [2011] NSWCA 334. Basten JA (McColl and Campbell JJA agreeing) said any offer may be viewed on the one hand as a basis for the court declining to make an award of costs in favour of a party that rejected (or failed to accept) a reasonable offer when that party might otherwise have expected to receive an award. Alternatively, the offer may be viewed as having changed the proper characterisation of the event (being the outcome of trial) such as the party that fails to accept a reasonable offer and obtains no better result in the judgment is treated from the date of the offer as the unsuccessful party.
So the question here to be determined is whether or not the plaintiffs' rejection of the defendant's offer was unreasonable.
The defendant says in comparing outcomes ‑ that is to say comparing the Calderbank offer with the outcome at trial ‑ there were two differences. First, the relatively longer and rent free post‑settlement possession period contemplated in the defendant's offer substantially outweighed the marginally greater net award of contractual interest achieved by the plaintiffs at trial when offset by the rent they were ordered to pay for the actual post‑settlement possession period. Second, had the plaintiffs accepted the defendant's offer their claim for damages for the 2015 farming year would never have arisen. On that basis the defendant says the outcome at trial was no more favourable to the plaintiffs than the outcome proposed in the defendant's offer.
The defendant submits that from the time of the rejection of the defendant's offer the real cause and occasion of the litigation was the desire on the part of the plaintiffs to pursue their claims for contractual interest and farming damages in excess of the compensation explicitly contemplated by the contract as completely satisfying any claim in respect of the delay in settlement. In these circumstances the defendant says to award the plaintiffs their costs of the action would be to ignore the significant body of authority that requires the court in such a case to have regard to the public and private costs of litigation and the proper incentive to encourage the early making of reasonable offers of compromise in an effort to minimise the burden on the courts, on private parties and on the public purse of unnecessary litigation.
In summary then the defendant makes three submissions. First, the defendant's offer was a reasonable one, made at an early stage of proceedings and which contemplated an outcome that would have in fact been more favourable to the plaintiffs than the outcome they achieved at trial. Second, that in view of the relative outcomes contemplated by the defendant's offer and as was achieved at trial the plaintiffs' failure to accept the defendant's offer unreasonably required the parties to proceed to a trial for a no more favourable outcome. Third, as a consequence, the plaintiffs' failure to accept the offer was an unreasonable one and ought disentitle the plaintiffs to an award of costs in their favour after the offer was made and entitling the defendant to an award of its costs from the date on which the offer was made.
Clearly the crucial question to be determined was whether or not the plaintiffs acted reasonably in rejecting the offer. In answering that question a range of factors need to be considered. Based on the Court of Appeal decision in Lo Presti and what was said by Beech J in McKay v Commissioner of Main Roads [No 7] [2011] WASC 223 (S) [120] the following factors are relevant:
(a)the stage of proceedings at which the offer was received;
(b)the time allowed to the offeree to consider the offer;
(c)the extent of the compromise offered;
(d)the offeree's prospects of success, assessed as at the date of the offer;
(e)the clarity with which the terms of the offer were made; and
(f)whether the offer foreshadowed an application for indemnity costs in the event of the offeree's rejection.
The question of reasonableness must be considered and determined objectively in the circumstances known to the parties at the time the relevant offer was made. Alternatively, those circumstances ought to have been reasonably anticipated by the parties had they properly turned their minds to them.
Looking at the criteria mentioned above the defendant's offer was made within six months of the commencement of the proceedings. At that time the parties had only recently attended an initial strategic conference in the action. They had been to mediation and each had filed just one amended pleading. The parties were about to commence the process of inspecting relevant documents and had yet to come into the protracted discovery dispute. Neither had embarked upon the costly process of obtaining expert witnesses. It is the defendant's position their offer was made at an appropriate time and in circumstances where the plaintiffs had sufficient information to make a decision.
In their written submissions the plaintiffs do not maintain the timing of the offer was the reason it was not accepted. It can be said with reasonable certainty that when the offer was made the plaintiffs must have been aware they stood a good chance of obtaining an order for specific performance and a sum of money for contractual interest. The damages claim was more problematic. Without the benefit of expert evidence they could not have been sure what any damages claim might be. On the other hand they were actively farming the property that was sold and they were in the best place to understand the effect the delay in settlement had on their farming operations.
On balance I am satisfied the timing of the offer is marginally in the defendant's favour. It was certainly not too soon to allow the plaintiffs to carefully consider their position in the light of the respective pleaded cases. Nor was it so late in the day as to make acceptance pointless because of the already incurred costs. In a perfect world the offer might have been made later ‑ that is to say after the pleadings had closed and perhaps after discovery. But nonetheless the timing of the offer is I think in the defendant's favour.
The offer remained open for seven days. In my view in a case such as this, that was probably too short a period. Perhaps 28 days would have been more appropriate. It would have given the plaintiffs time to consider in more detail the damages claim and perhaps to have obtained expert advice. The evidence filed on behalf of the plaintiffs does not develop this argument. But they do complain of the time given for consideration of the offer is too short and on balance I think that is correct. This consideration marginally favours the plaintiff.
As to the extent of the compromise offer offered the plaintiffs say the offer required them to hand over possession within 30 days of settlement. That they say was unreasonable because they operated a farm which included holding approximately 5,000 animals that were required to be moved or sold. They would also have had to arrange for the removal of the whole of the property on the farm ‑ the contents of houses and sheds ‑ and to wind up the farming business. Further, the plaintiffs would have needed to move from the district affecting their children's schooling.
In my view the time offered to vacate the property was very short and it is not difficult to understand the plaintiffs' reluctance to accept such an offer. The logistics of moving within the time proposed were clearly daunting. In my view this was a significant factor and provided grounds for rejecting the offer.
As at the date of the offer the plaintiffs' prospects of success were very good. Properly advised the defendant should have realised there was no hope of defending the claim for specific performance and no hope of avoiding the contractual damages. Really the issue between the parties came down to damages for breach of contract in relation to lost profits on the farming enterprise. The plaintiffs would have seen their case as rock solid. The strength of that position favoured rejection of the offer.
There can be no complaint about the clarity of the offer nor can there be any doubt that the defendant foreshadowed an application for indemnity costs if the offer was rejected.
It is a matter then of weighing all these factors in the balance. Having done so I am satisfied the plaintiffs were justified in rejecting the offer. The two decisive factors were the strength of the plaintiffs' case at the time the offer was made and the length of time provided by the offer for the plaintiffs to vacate the farm. These two factors with a little help from the short duration for which the offer was open weigh decisively in my view.
Accordingly, the failure to accept the offer does not remove the plaintiffs' right to costs.
Having reached that conclusion it seems to me that the costs claim by the plaintiffs is in all respects reasonable. The discount of 35% in relation to the damages question is about right. It could be slightly higher, it could be slightly lower; but in an imperfect world it is a reasonable approximation and it should be adopted.
There should also be a special costs order in the plaintiffs' favour. Both limbs of the test found in s 280(2) are satisfied. Of course in relation to the first limb, the taxing officer must be satisfied as to the amount claimed. But I think it is proper to give that jurisdiction to the taxing officer by removing the limits on the items referred to by the plaintiffs in their submissions. As to the second limb, I am satisfied as to the importance of this action. It was very important to the plaintiffs. I have already mentioned the plaintiffs' subjective views and they need not be repeated. It is also worthy of note this was a farm purchase by a foreign corporation who had paid a premium price for the property and who had failed to settle largely because they were unable to bring funds from overseas. This case was important in the sense of determining whether or not the contractual obligations would be enforced in those circumstances. Although the better view is that the word 'importance' does not denote 'public importance' the ramifications of the decision cannot be ignored.
In summary then I am satisfied the plaintiffs have made out their position in relation to costs. Subject to hearing further from the parties I would propose making orders in terms of the plaintiffs' chamber summons.
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