Votua Pty Ltd v Lineal Developments (No 2)
[2025] VCC 118
•18 February 2025
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
Case No. CI-21-02060
| Votua Pty Ltd as Trustee for the AM Senia Family Trust (ACN 005 580 674) | Plaintiff |
| v | |
| Lineal Developments Pty Ltd (ACN 622 508 472) | Defendant |
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JUDGE: | Her Honour Judge Burchell | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | Written submissions dated 24 May 2024, 20 December 2024 and 7 February 2025 | |
DATE OF RULING: | 18 February 2025 | |
CASE MAY BE CITED AS: | Votua Pty Ltd v Lineal Developments (No 2) | |
MEDIUM NEUTRAL CITATION: | [2025] VCC 118 | |
RULING
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Subject:DAMAGES
Catchwords: whether by reason of the defendant’s termination under the contract the plaintiff suffered loss and damage – whether the plaintiff lost the benefit of the use of the property – the quantum of the plaintiff’s loss
Cases Cited:Haines v Bendall (1991) 172 CLR 60; Leeda Projects Pty Ltd v Zeng [2020] VSCA 192; Hadley v Baxendale (1854) 9 Ex 341; Environmental Systems Pty Ltd v Peerless Holdings Pty Ltd [2008] VSCA 26
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | A Donald | Bowman & Knox |
| For the Defendant | L Stanistreet | MNG Lawyers Pty Ltd |
HER HONOUR:
Introduction
1On 29 October 2024, I gave judgment for the plaintiff (“Votua”) against the defendant (“Lineal”) that specific performance of the contract of sale for the off-the-plan purchase (“the contract”) of Lot 2 on proposed plan of subdivision PS 820509M located at Little Fyans Street, Geelong (“the property”) ought to be ordered. Following on from the successful outcome of an order for specific performance, Votua presses for its consequential losses against Lineal for breach of contract.
2The Court provided a timetable for the provision of updated particulars of loss and damage and fresh submissions in relation to the issue of damages for loss of rent on the property. Votua provided updated submissions and calculations. By email dated 14 February 2025, Lineal advised the Court that it would not be filing any further material in response.
3In my judgment, Votua is entitled to its loss of rental. My reasons are set out below.
4Accordingly, I order that the Lineal pay Votua the sum of $170,304.76 based on a completion date of 29 April 2021 to the expected settlement date of the property on 31 March 2025.
5I will invite the parties to prepare draft orders to give effect to these reasons and my previous decision in favour of specific performance of the contract.
Votua’s submissions
6Votua submits that, given it is entitled to an order for specific performance, then damages, being the loss of rent it would have received but for Lineal’s breach flows.
7Votua submits that the settled principle governing the assessment of compensatory damages, whether in actions of tort or contact, is that the injured party should receive compensation in a sum which, so far as money can do, will put that party in the same position as it would have been in if the contract had been performed or the tort had not been committed. Votua contends that compensation is the cardinal concept. It is the “one principle that is absolutely firm, and which must control all else”.[1]
[1] Haines v Bendall (1991) 172 CLR 60.
8Votua argues that the fundamental principles, for the determination of damages for breach of contract, are well established. It states that, essentially, damages are awarded to compensate the injured party for the loss and damage arising from the breach of contract. Thus, damages consist of the sum of money which will put the injured party in the same position as if the breach of contract had not occurred.
9Votua submits that, to determine the appropriate measure of damages in a particular case, it is necessary first to identify the kind of loss for which the injured party claims compensation. Votua contends that the loss, which is compensable in an action for breach of contract, is that which may fairly and reasonably be considered as arising naturally, that is, according to the usual course of things, from the breach of contract itself, or such as may be reasonably supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it.[2]
[2] Leeda Projects Pty Ltd v Zeng [2020] VSCA 192 at [12] (“Leeda Projects”).
10Votua concedes that the injured party bears the onus of proving the claim for damages on the balance of probabilities. It argues that to discharge that onus, the injured party must adduce sufficient evidence to establish the loss that is claimed to have been incurred, so as to enable the court to assess the damages which might be awarded in order to compensate that loss. However, Votua claims that the law recognises that not all kinds of loss and damage are susceptible of exact or precise proof. Votua submit that a mere difficulty in estimating damages does not relieve a Court from the responsibility of assessing them as best it can.[3]
[3] Leeda Projects at [13].
11Votua contends that the multiple purposes for which land may be owned make it hard to say that the measure of the loss of its use is ordinarily calculated by any one measure, including the amount which could have been obtained by renting it. Votua argues that measure may be appropriate, at least in contract, if the specific loss was caused by the breach and within the reasonable contemplation of the parties - as where, for example, the property is intended to be rented for reward.[4]
[4] Leeda Projects at [179].
12Votua states that, in this case, but for Lineal’s breach of contract, the completion of the contract would have occurred in April 2021. By reason of the breach, Votua was deprived of the opportunity of renting out the property, bearing in mind it was purchased as an income producing asset to provide financial security for Mr Senia upon his retirement and as he entered old age.
13Votua calculates the loss with two options based on the Preston Rowe Paterson Report dated 21 March 2024 is as follows:
“Option 1: Rent accrued in accordance with Sunset Clause in Contract of Sale (11.1) - 11 July 2020
Date:
Market Rent: 11 July 2020 to 10 July 2021 $41,000.00 exclusive of GST and Outgoings Letting costs $29,249.00
Market Rent: 11 July 2021 to 10 July 2022 $50,000.00 exclusive of GST and Outgoings Letting costs $34,495.00
Market Rent: 11 July 2022 to 10 July 2023 $52,000.00 exclusive of GST and Outgoings Letting costs $31.330.00
Market Rent: 11 July 2023 to 24 May 2024 $45,305.45 (not provided in Kent Report)
Market Rent Total $188,305.46 Letting costs = $95,074.00
Option 2: Rent accrued in accordance with Settlement Dates for Lot 1 and 3 65-67 Little Fyans Street
Date:
Market Rent: 29 April 2021 to 10 July 2021 $8,087.76 exclusive of GST and Outgoings (not provided in Kent Report)
Market Rent: 11 July 2021 to 10 July 2022 $50,000.00 exclusive of GST and Outgoings Letting costs $29.249.00
Market Rent: 11 July 2022 to 10 July 2023 $52,000.00 exclusive of GST and Outgoings Letting costs $34,495.00
Market Rent: 11 July 2023 to 24 May 2024 $45,305.46 (not provided in Kent Report)
Market Rent: Total $155,393.22 Letting costs = $63,744.00”.
Lineal’s submissions
14Lineal submits that, whilst Votua’s claim for damages based on the difference between the contract price and the current market value is axiomatically in the alternative to specific performance, its claim for damages based on lost rental (less “letting up costs”) is not.
15Lineal notes that, consistently with its expert evidence, the rental loss claimed is as follows:
“Market Rent – July 2020-2021 $41,000 exclusive of GST and Outgoings
Market Rent – July 2021-2022 $50,000 exclusive of GST and Outgoings
Market Rent – July 2022 to date $52,000 exclusive GST and Outgoings”.
16Lineal contends that, whether such a loss of profit claim arose “naturally” under the first limb of Hadley v Baxendale[5], or whether it was “consequential loss” that “may reasonably be supposed to have been in the contemplation of both parties at the time they made the contract” under the second limb, may not be straight-forward.[6]
[5] Hadley v Baxendale (1854) 9 Ex 341.
[6] Environmental Systems Pty Ltd v Peerless Holdings Pty Ltd [2008] VSCA 26 at [88].
17Lineal submits that the claim properly falls under the second limb, however, little turns on the distinction, as in either case Votua must contend with the fact that at the time the parties entered into the contract, they knew or ought to have known that:
(a) either party could terminate the contract under the Sunset Clause;
(b) Lineal could terminate the contract under special condition 8.2; and
(c) Votua could terminate the contract under special condition 17.
18Lineal claims that the enhanced element of risk in off-the-plan contracts generally, and the specific risks which Lineal accepted under the contract, militates heavily against any award of damages should liability be found. The rental loss claimed cannot sensibly be described as either naturally flowing from any breach by Lineal, nor can it be said to have been in the reasonable contemplation of the parties on executing the contract.
19Lineal further argues that the relevant conduct of the parties must be considered, in particular:
(a) Votua did not terminate the contract under the Sunset Clause; (as it could have);
(b) Votua did not seek to amend the contract to extend the Sunset Date;
(c) after the Sunset Date, Lineal continued to use its best endeavours to cause the submission of the plan of subdivision for registration (on 25 February 2021); and
(d) the expiry of the Barwon Water developer deed (through no fault of Lineal’s) was the principal impediment to the delay on the project from June 2020 and the main reason that submission of the plan for registration did not occur until February 2021.
20Lineal submits there is no basis for Votua to be awarded any damages, let alone from the Sunset Date.
Analysis
21Votua’s valuation expert, Mr Gareth Kent, and Mr Kent’s two reports were tendered by consent. It was uncontested and there is no basis to reject his evidence.
22In my view, nothing could have happened at the Sunset Clause date, as the earliest that Votua could have charged rent was the date of settlement and the property could then be occupied by a tenant. The Sunset Clause is an artificial date used as a trigger to impose an outcome and does not contemplate an opportunity cost that flows from that date. It does not mean that the property is available for rent on that date.
23In fact, the Sunset Clause date could not coincide with the availability for rent and as such, it could not operate as a trigger date. The property was not available for sale at the Sunset Clause date. The Sunset Clause was the latest date that the sale remains subject to a special condition for Lineal to cause the plan of subdivision to be submitted to the relevant Council and to the Registrar and to elect to retain the effect of the contract. It has nothing to do with rent. I, therefore, agree with Lineal that there is no basis for Votua to be awarded damages from the Sunset Clause date.
24Further, calculating the damages from the Sunset Clause date would be penalising Lineal for not completing the project within the 2-year period, whereby Votua could not have the property available for rent by that time as opposed to the actual date that the property was available for rent. Given my anterior finding that there was no breach of the best endeavours clause, I will not penalise Lineal, particularly since there was nothing to rent at that date and it was known to the parties that the property would not be available to rent as at the Sunset Clause date, in the context of the correspondence and communications between the parties.
25The earliest date that rent could start to flow was the date of settlement of the other units, being 29 April 2021. On and from 29 April 2024, the property was available for rent. Votua could have commenced a marketing campaign, had a rental agreement in place and had the property rented from that date.
26In my view, Votua did bear the specific risks of purchasing an off-the-plan contract in having to wait a further 10 months from the date of the Sunset Clause for settlement date. The fact that there is a heightened element of risk in off-the-plan contracts generally, does not mean that no damages should be awarded for breach of contract, nor that the rental loss claimed cannot sensibly be described as either naturally flowing from any breach by Lineal, nor that it was not in the reasonable contemplation of the parties on executing the contract.
27I, therefore, accept Votua’s submissions that, but for Lineal’s breach of contract, the completion of the contract would have occurred in April 2021. Further, by reason of that breach, Votua was deprived of the opportunity of renting out the property and I further accept that it was within the reasonable contemplation of the parties that the property was intended to be rented out for reward.[7] This is consistent with the evidence given at trial by Mr Senia that the property was purchased as an income producing asset for Mr Senia’s retirement plan.
[7] Leeda Projects at [179].
28I further accept the uncontradicted valuation evidence that there was, and remains, a market for leasing property of the type of the warehouse in dispute and that the market rent (exclusive of GST and outgoings) was:
(a) For the year July 2020 to 2021: $41,000.00;
(b) For the year July 2021 to 2022: $50,000.00; and
(c) For the year July 2022 to 10 July 2024: $52,000.00.
29In light of the above findings, the damages for loss of rent from 29 April 2021 to 31 March 2025 (being the expected settlement date of the property) is the sum of $170,304.76, calculated as follows:
(a) 29 April 2021 to 10 July 2021: $8,087.76 (pro rata);
(b) 11 July 2021 to 10 July 2022: $50,000.00;
(c) 11 July 2022 to 10 July 2023: $52,000.00;
(d) 11 July 2023 to 10 July 2024: $52,000.00;
(e) 11 July 2024 to 31 March 2025: $37,466.00 (pro rata); and
(f) Less letting costs: $29,249.00.
Conclusion
30Accordingly, for the foregoing reasons, I am satisfied that damages for breach the contract ought to be ordered.
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Certificate
I certify that these 8 pages are a true copy of the judgment of Her Honour Judge Burchell delivered on 18 February 2025.
Dated: 18 February 2025
Alexandria Peck
Associate to Her Honour Judge Burchell
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