Vanmeld P/L & Ors v Cussen, R.E. & Ors Galsa P/L v Lawler, D.

[1994] FCA 206

VANMELD PTY LIMITED; POLTAZ PTY LIMITED and JALVOGUE PTY LIMITED v. RONALD
EDWARD CUSSEN; LORRAINE MARGARET CUSSEN; GALSA PTY LIMITED; GILFONU PTY
LIMITED; CUSSEN ENTERPRISES PTY LIMITED; JOHN ANTHONY JEANS and NOEL JAMES
BARRETT
GALSA PTY LIMITED v. DENNIS LAWLER; JUDY LAWLER and VANMELD PTY LIMITED
Nos. G853 and 899 of 1992
FED No. 206/94
Number of pages - 5
Equity - Damages
(1994) 121 ALR 619

COURT

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
EINFELD J

CATCHWORDS

Equity - entitlement to interest on moneys found to be owing - right of vendor to interest on purchase monies when delay in completion - no stipulation as to interest in contract - adjustments granting purchaser rents and profits from date of completion in contract

Damages - equitable damages in the form of interest in addition to order for specific performance

Davies v Littlejohn (1923) 34 CLR 174

Tennant, Mortlock v Walker (1941) 65 CLR 473

CSS Investments Pty Ltd v Lopiron Pty Ltd (1987) 16 FCR 15

Griffin v Mercantile Bank (1890) 11 LR (NSW) Eq 231

Madden v Kevereski (1983) 1 NSWLR 305

Bosaid v Andry (1963) VR 465

Brake v Boot (1991) 2 NZLR 757

Esdaile v Stephenson (1822) 1 Sim and St 123; 57 ER 49

Cowpe v Bakewell (1851) 13 Beav 421; 51 ER 162

Prothero v Phelps (1855) 7 De G M and G 722; 44 ER 280

Chinnock v Marchioness of Ely (1865) 34 LJ Ch 399

Bain v Fothergill (1874) LR 7 HL 158

Jacques v Millar (1877) 6 Ch D 153

Stonham: Vendor and Purchaser 1964 (Law Book Company of Australasia)

Meagher, Gummow and Lehane: Equity Doctrines and Remedies (1992) 3rd ed, para 2308

HEARING

SYDNEY, 6 April 1994
#DATE 21:4:1994

Counsel and solicitors for D.M.J. Bennett QC and
the applicants E. Strasser instructed

by Jennifer Darin

Counsel and solicitors for D.A. Cowdroy QC and
the respondents M.A. Ashurst

instructed by Brown and Rouch

JUDGE1

The issue for determination
EINFELD J On 18 March 1994 I delivered judgment in this matter (the principal judgment) granting, inter alia, orders for specific performance of two agreements for the sale of land in a land swap between the parties also involving other agreements which were settled on 15 November 1989. The first agreement which concerned a Noosa Heads home unit (Unit 207) was entered into between the second applicant (Poltaz) as vendor and the fifth respondent (Cussen Enterprises) as purchaser. The second agreement which concerned land adjoining the Magic Kingdom development at Lansvale (the adjoining land) was between the third respondent (Galsa) as vendor and the first applicant (Vanmeld) as purchaser. On 25 March 1994 the parties brought in minutes of orders reflecting my conclusions, the result being that $121,000 is agreed to be due by the respondents to the applicants as the balance of purchase monies owing. This situation exists because Unit 207 carried a significantly higher purchase price than the adjoining land. Certain other adjustments were also agreed on. The only disputed matter of substance now left unresolved between the parties is whether the applicants are entitled to interest on the $121,000 now to be paid by the respondents.

The deed
2. In the Deed of Variation entered into on about 3 November 1989 (the deed) the parties agreed that if the two agreements were not completed by 31 January 1990, either party may serve a notice in respect of either agreement requiring completion within 14 days from the date of service of such notice. The deed made no provision for interest on purchase monies in respect of either agreement. The deed also provided for the payment of all rentals and other income from the respective properties to the respective purchasers from 10 November 1989, the date then scheduled for settlement of these and the other agreements in the land swap. The applicants have received all income from the adjoining land and retained all income from Unit 207. They have also paid all outgoings in relation to both properties. However, agreed adjustments have now effectively granted the respondents as purchasers the rents and profits from Unit 207 in accordance with the deed. As, by agreement, settlement of the other agreements occurred on 15 November 1989, all adjustments of money now also commence from that date. The parties agree that the relevant date from which any interest should run is 31 January 1990.

Power to award damages in addition to grant of specific performance
3. It is agreed that as a court of equity this Court has jurisdiction to award interest in the form of equitable damages under New South Wales' reproduction of Lord Cairns' Act viz. section 68 of the Supreme Court Act 1970 (NSW):

Where the Court has power -

(a) .....

(b) to order the specific performance of any covenant, contract or agreement,

the Court may award damages to the party injured either in addition to or in substitution for the ..... specific performance.

1. This power must be exercised in accordance with established principle: Meagher, Gummow and Lehane, Equity Doctrines and Remedies (1992) 3rd ed, para 2308, but as Helsham CJ in Eq remarked in Madden v Kevereski (1983) 1 NSWLR 305 at 306:
   

..... the law in this area is in such a mess that it is time some court gave an authoritative decision about section 68.

1. It appears that no Australian decision has discussed what appears to be the principal English authority on the specific issue arising before me, Esdaile v Stephenson (1822) 1 Sim and St 123; 57 ER 49. Bearing this in mind, I have taken into account the more general words of Helsham CJ in Eq in Madden at 307:
   

The damages which the court may award under section 68 are sui generis; the power to award them is a power to enable the court to do complete justice so far as equity considers it ought to be done, by supplementing with money the equitable remedy, or attempting with money to substitute a remedy.

1. Although neither the application nor the statement of claim in this Court or in the proceedings cross vested from the Supreme Court claim interest, I do not think that it is necessary for the applicants to seek leave to amend the amended application to seek an award of equitable damages, as the authorities indicate that such a specific prayer is not necessary: Griffin v Mercantile Bank (1890) 11 LR (NSW) Eq 231 at 248, 258.

Relevant Principles
7. Damages for delay in completion

1. The first authority cited by the applicants is Sholl J in Bosaid v Andry (1963) VR 465 at 485, who referred to
   

..... cases where the Court grants specific performance and adds damages for such things as delay in completion: see for example Griffin v Mercantile Bank (1890), 11 LR (N.S.W.) Eq 231, at pp. 252-4 and 258-262. In those cases, the plaintiff asserts that the contract is on foot, but claims and obtains damages for the breach by the defendant of a term or terms, the breach of which he was not able to treat or has not elected to treat as going to the root of the contract. Even if time is of the essence, he may waive that stipulation as a condition going to the root of the contract by insisting on performance out of time. But in my opinion, he does not merely thereby waive the right to say that the defendant is liable to him in damages for such breach...such a claim is not a claim for common law damages at all...

1. This judgment was referred to by Justice Davies in CSS Investments Pty Limited v Lopiron Pty Limited (1987) 16 FCR 15 at 25 for the proposition that:
   

..... in appropriate circumstances the Court may, in addition to awarding specific performance of a contract for the sale of land, award damages for breach of a contractual term as to time.

1. The respondents submitted that the only means by which the applicants can establish a breach of the terms of the deed as to the time for completion of the contracts is to prove that the respondents were responsible for the failure to complete the deed on 31 January 1990. They said that they were not so responsible and have not breached any contractual term as neither side has served a notice to complete.

2. It was not necessary in the principal judgment to decide which party was responsible for the delay in completion. However, the failure of the applicants to provide the respondents with an executed copy of the deed until June 1990, despite numerous requests from the respondents that they do so, was noted. Although neither this delay nor the failure of the applicants to serve a notice to complete prevented an order for specific performance, these matters weigh against an award of damages against the respondents on the ground of delay.

3. In any event, I think it is clear that the cases to which Sholl J was referring were concerned with substantial consequential damage and not merely the question of whether interest was payable on purchase monies due. These cases refer to situations where special damage is shown to be reasonably likely to have followed the breach, for example where a delay caused the plaintiff to be unable to ply his trade and therefore to lose certain profits: Jacques v Millar (1877) 6 Ch D 153, or where land in the meantime deteriorated: eg Prothero v Phelps (1855) 7 De G M and G 722 at 734; 44 ER 280 at 285 discussed by a Full Court of the New South Wales Supreme Court in Griffin where a majority upheld an order for an inquiry into damages where the bank's failure to execute a release of debts in exchange for conveyance of the plaintiff's property rights for over a year was held reasonably likely to prejudice his financial position in respect of dealings with other lenders. In Griffin such damages were explained as distinct not only from those prohibited by Bain v Fothergill (1874) LR 7 HL 158 (as to which see Manning J at 260-261), but also from questions of interest. At 253 Foster J cited Chinnock v Marchioness of Ely (1865) 34 LJ Ch 399, a case in which Wood VC refused to order an inquiry into damages against a vendor who delayed completing because no "special damage" was shown. Foster J distinguished it on the basis that the case was one
   

..... where the defendant having kept the property, the plaintiff had retained the purchase money, the interest of which was looked upon as sufficient compensation for the loss of the property. (my emphasis)

1. Accordingly, in my opinion the cases referred to by Sholl J in Bosaid have no application to the vendor's entitlement to interest on purchase monies paid late. That entitlement is governed by separate equitable principles to which I shall now turn.

2. Vendor's entitlement to interest on purchase monies in equity where purchaser enjoys fruits of the contract before payment

3. In Davies v Littlejohn (1923) 34 CLR 174 at 185-186 Isaacs J noted that the "mutual rights to interest on the one hand and the rents and profits on the other" of vendor and purchaser are part of the "scheme of equitable adjustment of mutual rights and obligations applying, unless negatived, to every ordinary contract of sale of land". The principles are discussed in Stonham, The Law of Vendor and Purchaser 1964 (Law Book Company of Australasia). At paragraph 1160 the basic premise is stated:
   

In the absence of express stipulation, equity regulates the mutual rights of vendor and purchaser as to interest, rents and profits, and outgoings, on the principle that enjoyment of the fruits of the contract, i.e. possession or the rents and profits, should only be had by the purchaser subject to payment of the purchase money, or, if that is deferred, payment of interest thereon.

1. From this premise follow certain principles, including that "an agreement to give the purchaser possession or rents and profits implies an obligation to pay interest...recoverable as damages". The main principle, agreed by the parties to be applicable here is:
   

1164. Where a time is fixed for completion and there is no stipulation as to interest, the general rule is that the purchaser who completes after the date fixed, is treated as being in possession and from thence liable for interest, he taking the rents and profits.

1. Stonham cites Esdaile v Stephenson as authority. As earlier noted, the agreed adjustments have resulted in the respondents now in effect "taking the rents and profits". The applicants say that interest is therefore payable. However, the respondents say that Esdaile is based on the premise that the purchaser be responsible for the delay. They cite the following passage of Sir John Leach VC:
   

Where there is no stipulation as to interest, the general rule of the Court is that the purchaser, when he completes his contract after the time mentioned in the particular of sale, shall be considered as in possession from that time, and from thence pay interest at 4 per cent, taking the rents and profits. If, however, such interest is much more in amount than the rents and profits, and it is clearly made out that the delay in completing the contracts was occasioned by the vendor there, to give effect to the general rule would be to enable the vendor to profit from his own wrong, and the Court, therefor, gives the vendor no interest, but leaves him in possession of the interim rents and profits. (my emphasis)

1. I do not accept that it is "clearly" made out that the delay in completion was caused by the applicants as vendor although it certainly appears that they have not been blameless. Moreover, in Brake v Boot (1991) 2 NZLR 757 Holland J said that in most cases where the vendor has not been entitled to interest the vendor's delay has been found to be "wilful". I do not consider the vendor's delay to have been "wilful" in any relevant sense either. The vendor's entitlement to interest is therefore not displaced.

2. However that may be, Esdaile states that the applicants would still be entitled to keep the interim rents and profits if they were less in amount than the interest. Some cases even suggest that the purchaser is entitled to elect between giving up the rents and paying interest: eg Cowpe v Bakewell (1851) 13 Beav 421 at 422; 51 ER 162 at 163. On no scenario which I have read has the purchaser been held entitled to keep the rents and profits, as has occurred here, while not paying interest.

3. Accordingly I think that the applicants are entitled to interest in respect of the purchase monies for Unit 207.

The respondents' claim for interest as vendor of the adjoining land
21. The respondents have alleged that, as vendor of the adjoining land now subject to an order for specific performance, they are equally entitled to interest. The fact that the respondents have all along opposed an order of specific performance and maintained that the agreements were abandoned at first appeared to me to disentitle them to seeking equitable relief in the form of interest on the purchase monies for the adjoining land. However, in Meagher, Gummow and Lehane, Esdaile is referred to as an illustration of the equitable maxim that "he who seeks equity must do equity":

Where, in a contract of sale, time is fixed for completion and the contract is silent as to interest, as a general rule a purchaser who seeks specific performance after the date stipulated is treated as being in possession and must offer the vendor interest on the purchase price from the date so stipulated.

1. Accordingly, the applicants must as purchaser pay interest unless the general rule is displaced. I do not think it is. Rather, to reflect the fact that both parties have been responsible, I think that an award of interest on both sides assists the end of doing "complete justice" between them: Madden at 307; and see Brake v Boot at 767.

2. This finding in favour of the respondents means that, had the applicants sought interest on the entire sum agreed to be outstanding in respect of Unit 207, I would have in any event reduced it by the amount of interest on the sum due in respect of the adjoining land. The figures seem to show that this would have operated to the financial benefit of the applicants but as they have chosen only to seek interest on the agreed balance of $121,000, this is what will be awarded.

3. I am satisfied that I should award interest at a commercial rate: see In re Tennant, Mortlock v Walker (1941) 65 CLR 473; Brake v Boot; Stonham para 1166. I note that the form of declaration sought by the applicants in reply encompasses interest on outgoings and income. As, in their primary submissions, the applicants sought interest only on the balance of purchase monies, the respondents have not addressed this request. I am therefore not in a position to include interest on such components at this time. I note that the parties undertook to reach agreement on these matters in paragraphs 2(b) and 4(b) of the minutes of order of 25 March 1994. This agreement should be carried out, but if for some reason agreement cannot be reached, the matter may be resubmitted for decision by written argument within 7 days.

4. I declare that the applicants are entitled to interest on the amount of $121,000, being the balance of purchase monies due in respect of the agreements for sale of Unit 207 and the adjoining land, at the rate or rates from time to time adopted by the Court from 31 January 1990 to date of payment.