Watts v Brophy - [2016] WADC 131

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL

LOCATION: PERTH

CITATION: WATTS -v- BROPHY [2016] WADC 131

CORAM: PETRUSA DCJ

HEARD: 23 MAY 2016

DELIVERED : 26 AUGUST 2016

FILE NO/S: APP 89 of 2015

BETWEEN: STEPHEN DALE WATTS
SABRINA MARIA WATTS
Appellants
AND
GERARD JOHN BROPHY
CARRIE MARIE BROPHY
Respondents

ON APPEAL FROM:
Jurisdiction              :  MAGISTRATES COURT OF WESTERN AUSTRALIA
Coram  :MAGISTRATE O'SULLIVAN
Citation  :KAL GCLM 689 OF 2013

Catchwords:

Practice and procedure - Appeal from magistrate's decision to award nominal damages - Evidence of loss - Turns on own facts

Legislation:

Magistrates Court (Civil Proceedings) Act 2004

Result:

Appeal upheld
Appellants' application dated 19 April 2016 to adduce additional evidence in the appeal dismissed
Respondents' application dated 18 April 2016 to adduce additional evidence in the appeal dismissed

Representation:

Counsel:

Appellants: Ms C A McKenzie
Respondents : In person

Solicitors:

Appellants: McKenzie and McKenzie
Respondents : Not applicable

Case(s) referred to in judgment(s):

Coal and Allied Operations Pty Ltd v Australian Industrial Relations Commission [2000] HCA 47; (2000) 203 CLR 194
Morrison v Town of Victoria Park [2007] WASCA 164
Re Warden P Roth; Ex parte Cazaly Iron Pty ltd [No 2] [2011] WASC 343

PETRUSA DCJ:

Introduction

The appellants and the respondents entered into a contract for the sale of a property at 7 Addis Street, Kalgoorlie on 20 August 2012. The contract was terminated for default on the part of the respondents (as purchaser). The appellants subsequently sold the property for $9,000 less than the contract price. A general procedural claim was filed on 23 December 2013 claiming liquidated damages in the sum of $24,842.30 plus interest.
The matter proceeded to trial in the Kalgoorlie Magistrates Court on 23 and 24 September 2015. On 28 October 2015 the magistrate found that the respondents had breached the contract of sale and were liable for damages. However, only nominal damages in the sum of $101 were awarded for the reasons that:
1.The evidence of the quantum of the loss suffered by the appellants was imprecise and uncertain; and
2.The appellants had failed to lead evidence as to the reasonableness of the amounts claimed by them in circumstances where they were obliged to mitigate their loss (ts 215).

Grounds of appeal

The appellants now seek to appeal the magistrate's decision to award nominal damages. The grounds of appeal are as follows:
1.The learned Magistrate erred in finding that the Appellants proved the fact of a loss but failed to adduce any evidence as to the amount of the loss. More particularly:
(a)The General Procedure Claim filed by the Appellants set out the amount and description of the loss claimed.
(b)The First Appellant adduced oral evidence as to the amount of the loss.
(c)The Respondents did not dispute the First Appellant's adduced evidence as to the amount of the loss during Cross Examination despite:
(i)Clear direction from the learned Magistrate to the Respondents that if the First Appellant's evidence was in dispute and it wasn't put to the First Appellant on Cross Examination, it is taken that the evidence is accepted.
(d)The Respondents failed to traverse the loss claimed by the Appellants in any documents filed with the Court.
2.The learned Magistrate erred in finding that there was no evidence adduced by the Appellants in relation to the amount of the loss suffered by the Appellants.
3.The learned Magistrate erred in not allowing documentation setting out the Appellants loss to be tendered as an exhibit. More particularly:
(a)Counsel for the Appellants sought to hand up documentation of loss incurred by the Appellants due to the default of the Respondents and pursuant to the evidence adduced by the First Appellant in Evidence in Chief.
(b)Counsel for the Appellants acknowledged oversight in failing to tender the documentation as an exhibit at the time of the First Appellant's Evidence in Chief and sought to tender the documentation.
(c)The Respondents did not object to the tendering of the documentation.
4.The learned Magistrate erred in not finding that the requests by Counsel for the Appellants to tender the documentation was a request to re-open.
5.The learned Magistrate failed to provide adequate reasons for the decision.
6.The learned Magistrate erred in assessing the elements of assessment of damages. More particularly:
(a)It was erroneously held that the onus was on the Appellants to demonstrate they acted reasonably in mitigating the loss suffered.
(b)The Respondents did not lead any evidence to affirmatively establish that the Appellants failed to take reasonable steps to mitigate loss or to demonstrate the extent to which there had been a failure by the Appellants to mitigate.
7.The learned Magistrate erred by failing to award damages by way of specifically recoverable expenses including selling fees; advertising costs and legal and conveyancing costs.
There is considerable overlap in the grounds of appeal, but the essence of the appellants' complaints, as distilled from their written submissions (particularly in respect of ground 7) and the submissions developed at the hearing of the appeal, is that:
1.The learned magistrate erred in law in holding that the onus was on the appellants to prove that they had acted reasonably in mitigating the loss.
2.The learned magistrate failed to properly consider or make a final decision as to:
(a)whether documents in support of the quantum of claim could be tendered after the close of the evidence;
(b)whether the appellants' case should be re-opened to adduce further evidence as to the quantum of loss in particular to facilitate the tender of documents in support of the damages sought;
3.The learned magistrate failed to afford the appellants procedural fairness because:
(a)he failed to give the appellants an opportunity to address the court in relation to the matters referred to in 2 above; and
(b)he made an adverse finding concerning the reliability of Stephen Watts on the issue of the quantum of damages (though it had not been contested by the respondents) without giving the appellants an opportunity to be heard.

Background

In order to understand the learned magistrate's reasons it is necessary to consider both the history of the matter and the way in which the trial unfolded.
At all times the appellants were legally represented with the trial being conducted by a junior practitioner. The respondents were unrepresented at trial and in most of the pre-trial appearances. It is evident, nevertheless, that they had had the benefit of some legal assistance, in particular when preparing the defence, when instituting the counterclaim (which was struck out) and immediately prior to trial when a document entitled 'Defendants' Outline of Submissions' was prepared.
The matter had a long history of applications, predominantly brought by the appellants for orders that the respondents comply with their procedural obligations to provide discovery and the like. The matter had been listed for trial on two previous occasions. Notwithstanding this history, when the matter came before the magistrate on 23 September, 2015 the issues remained unclear. The learned magistrate went to some lengths to have the parties identify the matters in dispute. Ultimately some agreement was reached and a statement of agreed facts was read.
The exchanges with the bench at the commencement of the trial related to whether there had been a breach of the contract of sale and, if so, whether it had been validly terminated. There was no discussion about the quantum of the claim. Whilst the statement of general procedure claim pleads particulars of loss, the statement of defence makes no reference at all to damages.
Apart from some brief evidence as to the quantum by the first-named appellant, the evidence at trial related to whether there had been a breach of contract and/or whether the contract had been properly terminated. The evidence of loss given by Mr Watts was as follows (ts 79 - 80):
You ended up selling 7 Addis Street, Mr Watts, could you explain to the court the details of the subsequent sale of 7 Addis Street? – We sold the property to another couple at a loss.
What was the sale price? – 289 if I remember rightly. It was – I have to double check the figures but, yes, 289.
Was there any further loss incurred apart from the difference in sale price? – Well, real estate agent's fees.
Do you recall roughly how much the real estate agent fees were? – 10 and a half, if I remember correctly.
In addition to the sale price and the real estate agent fees, any other loss? – Well, there have been lawyer fees on top of that.
Lawyer fees aside? – There would have been other costs from like settlement costs, that sort of thing.
The learned magistrate reminded the respondents before the cross‑examination of Mr Watts that this was their opportunity 'to ask him [Mr Watts] questions about the matter and put to him any propositions or any parts of his evidence that you do not agree with' (ts 81). There was no cross‑examination of Mr Watts in relation to his evidence of loss.
The issue of quantum was not raised again until the appellants' counsel had completed her closing submissions. At this point the following exchange took place (ts 188):
MAGISTRATE: All right. Anything further? If I decide the claimants should succeed, what do I do in terms of damages?
MITCHELL: Well, your Honour the damages are set out in the general procedure claim and put to Mr Watts on evidence about the nature of the costs that were incurred. I don't know if you want me to address you in relation to damages and costs today but the – we can certainly provide a statement of all the costs that were incurred pursuant to the evidence of Mr Watts yesterday to demonstrate the amount of claim. We say it's liquidated damages.
MAGISTRATE: All right. It's just that it wasn't done in the course of your case. There was a general reference to what it would cost. You're saying there would be a separate assessment of damages where those would all be itemised.
MITCHELL: We can – we will certainly itemise all the costs and provide statements for all the settlement costs and sales costs etc.
MAGISTRATE: Is it not usually the case that that would be led as evidence in your case?
MITCHELL: Your Honour, I did put to Mr Watts about the fact that there were costs incurred and I do apologise to the court if I should have taken that one step further and put the statement of claim to him. I have the statements available with me in court, your Honour. They're all available here. They've – we have got the offer and acceptance for 7 Addis Street which demonstrates the sale price. I have the settlement statement from the conveyancers that handled the settlement and that sets out effectively, the purchase price of the property, selling fees, everything is set out in that statement, your Honour.
MAGISTRATE: But that's not in evidence, is it?
MITCHELL: No, your Honour.
MAGISTRATE: So that's my question. I have got – if I decide the claimants succeed, I then have to decide if they do what they're entitled to but I – and that's what I'm saying is that I would have thought you would normally lead the evidence as part of your case, wouldn't you?
MITCHELL: I do apologise, your Honour, I did put it to Mr Watts but failed to have the settlement statement that he had referred to tendered as an exhibit.
MAGISTRATE: Well, I guess we will worry about that - - -
MITCHELL: But I have copies of them here, your Honour. I suppose it's too late now to try and tender it as an exhibit but we certainly have copies on the file of all the costs of the settlements and the final sale price of the property. So if the court would like me to hand those up now I am more than happy to do that.
MAGISTRATE: Well, the question is whether I could actually receive them.
MITCHELL: I'm not sure, sorry.
MAGISTRATE: Given that – let me see what Mr Watts said.
MITCHELL: I believe Mr Watts evidence was that he had incurred sales fees and settlement costs and he also - - he did actually stipulate the - - -
MAGISTRATE: He said - - -
MITCHELL: - - - sale price of the property.
MAGISTRATE: He said he sold the property at a loss because he sold it for 289,000 obviously. So he sold it for $10,000 less.
MITCHELL: Yes
MAGISTRATE: And he further lost real estate agent fees, which I got the impression was more of a guess because he said about ten and a half thousand dollars, and then he said lawyers' fees and settlement costs, which were never itemised.
MITCHELL: The selling fee was actually $10,150?
MAGISTRATE: 10,150.
MITCHELL: That's right. So the figure quoted by Mr Watts was very close to accurate.
MAGISTRATE: But that’s the only evidence I have. That's the point. But, anyway. So Ms Brophy - - -
There was no further discussion. There was no application to re‑open the appellants' case.
Counsel's reference to the quantum of the claim being 'liquidated damages' is clearly a reference to cl 24 in the contract of sale. Clause 24 sets out the rights of the parties in the event of default by the buyer. The rights and obligations of the seller upon default and proper termination are set out in cl 24.5 and cl 24.6 which read:
24.5Resale
If the seller re-sells the property in accordance with clause 24.3(c):
(a)the seller's not required to give notice of the re-sale to the buyer; and
(b)the seller has the discretion, acting reasonably, to determine the manner of re-sale and the terms and conditions applicable to the re-sale.
24.6Resale within 12 months
If:
(a)settlement of the re-sale of the property occurs within 12 months after the seller terminates the contract; and
(b)after taking into account the costs and expenses of the re‑sale and the amount of the deposit which has been forfeited,
the amount held by the seller:
(c)is less than the purchase price, the buyer must pay to the seller as liquidated damages, the difference between the amount held by the seller and the purchase price; or
(d)exceeds the purchase price, the excess belongs to the seller.
There was evidence that the re-sale occurred within 12 months of the contended termination of the contract. The difference between the contract price and the re-sale price could be inferred from Mr Watts' evidence. The associated claimed expenses were particularised and documented.
It is clear from the reasons delivered by the magistrate that the issue of the quantum of damages was a matter of concern to him. Ultimately he found that the appellants had failed to prove the amount of their loss as a consequence of the breach of contract and awarded only nominal damages for the reasons given at ts 215 to which I have referred.

Resolution of the appeal

An appeal from a decision of a magistrate to this court is by way of a re‑hearing. An appellate court hearing an appeal by way of a re-hearing, can exercise its appellate powers only if satisfied there was some legal, factual, or discretionary error on the part of the primary decision maker: Coal and Allied Operations Pty Ltd v Australian Industrial Relations Commission [2000] HCA 47; (2000) 203 CLR 194.
I find that the magistrate erred in law in finding that the onus was on the appellants to prove that they had acted reasonably in mitigating their loss.
Her Honour Wheeler J in Morrison v Town of Victoria Park [2007] WASCA 164 [37] (Pullin & Buss JJA) succinctly states the legal position [37]:
It is the case that a plaintiff who has suffered loss through a breach of contract by a defendant must act reasonably to endeavour to mitigate that loss. However, the standard is not a high one because the defendant is the wrongdoer. The onus rests on the defendant to prove that the plaintiff has not taken reasonable steps to mitigate its loss. (citations omitted)
The contract provided the measure of liquidated damages. There was no suggestion by the respondents that the appellants had acted unreasonably in re‑selling the property. If there was any dispute about the measure of the loss occasioned by the re-sale, the onus was on the respondents to prove that the appellants had failed to mitigate. At no time did the respondents raise such an issue.
The learned magistrate's error is plain from his reasons where he said:
The second difficulty and perhaps an even more fundamental one is that no evidence was led as to the reasonableness of the amount claimed. Even had the accounts been tendered through Mr Watts or handed up, had that course been permitted, it would not have enabled the court to determine if the amounts claimed were reasonable. As a consequence, for example, bearing in mind the obligation of the claimants to mitigate their loss, I have no way of knowing whether the price the property ultimately sold for was reasonable having regard to the prevailing market conditions at the time. (ts 215)
In addition, I find that there was a denial of procedural fairness. Procedural fairness is a practical concept. The purpose of the law of procedural fairness is to avoid practical injustice and a court in considering whether there has been a denial of procedural fairness must determine whether the decision-maker has departed from the requirements of procedural fairness by analysing all of the facts and circumstances relevant to this consideration viewed in the context of the statutory framework conferring the relevant power for the purposes of ascertaining whether there has been practical injustice in the particular circumstances: see Re Warden P Roth; Ex parte Cazaly Iron Pty ltd [No 2] [2011] WASC 343 [15].
It was, of course, incumbent on the appellants' counsel at trial to adduce in proper form the evidence relied upon to prove loss. Counsel had clearly failed to do so as the learned magistrate pointed out during her closing address. Counsel should have formally applied to re‑open when the deficiency in her case, which was clearly remediable at that stage, was made clear. Even so, her failure to do so, in my opinion, did not justify the course taken by the court below.
Counsel, presumably by reason of inexperience, did not appreciate the significance of the learned magistrate's observations on the state of the evidence. However, for the following reasons it was inappropriate for the learned magistrate to effectively disallow the claim for the reasons given.
At the close of proceedings on 24 September 2015 the magistrate was or should have been aware that:
1.A sum of liquidated damages was claimed pursuant to cl 24 of the contract of sale, together with re-sale associated expenses incurred by the appellants, as Mr Watts' said in evidence.
2.No issue had been taken with Mr Watts' evidence of loss, or otherwise with respect to quantum.
3.There was evidence that the respondents were aware of the quantum and in particular the value at which the property had been re-sold (ts120 ‑ 121).
4.There was evidence available to substantiate the quantum of the claim.
5.The failure by the appellants to tender any documentation in support of the quantum of their loss was the result of one or some of the following:
(a)an oversight on the part of counsel;
(b)a belief that the quantum of loss could be determined at a subsequent hearing once the substantive issue of the breach was determined;
(c)a belief that the quantum of the loss was not in issue and strict proof was not required.
6.The parties had not been heard and no final determination had been made as to whether:
(a)the documents could be tendered;
(b)the appellants could re-open their case to lead evidence about the quantum of their loss;
(c)a separate hearing would be held to ventilate the issue of loss should the appellant succeed on the issue of the breach of contract.
7.Any uncertainty as to the quantum of claim could have been resolved by:
(a)allowing the tender of the documents;
(b)allowing the appellants to re-open their case subject to the right of the respondents to cross-examine;
(c)indicating that the parties would be brought back once the issue of the breach of contract had been determined to hear evidence as to the quantum of the damages (should that prove necessary). This would have given the respondents an opportunity to specifically turn their minds to the issue of loss.
8.The magistrate's failure to resolve the issues relating to the deficiencies in the evidence as it related to the quantum of the loss amounted to a denial of procedural fairness. This is particularly the case as it is the court's duty to ensure matters are dealt with justly (see s 13 Magistrates Court (Civil Proceedings) Act 2004):
Court's duties in dealing with cases and making rules
(1)In dealing with cases and making rules of court the Court is to ensure that cases are dealt with justly.
(2)Ensuring that cases are dealt with justly includes ensuring —
(a)that cases are dealt with efficiently, economically and expeditiously; and
(b)so far as is practicable, that the parties are on an equal footing; and
(c)that the Court's judicial and administrative resources are used as efficiently as possible.

In my view, the magistrate could have readily put himself in a position to determine the quantum of the damages and to do so whilst doing justice between the parties. This could have been achieved by allowing the tender of the documents subject to the respondents' right to cross-examine Mr Watts who was present and available for cross‑examination. In the alternative, the magistrate could have adjourned the issue as to the quantum of the claim pending resolution of the issue of the breach of contract.
Each approach would have given each party an equal opportunity to be heard and to place all relevant material before the court.
In the circumstances I uphold the appeal.

Should damages be assessed?

Having determined that the appeal is to be upheld, I must now decide whether the quantum of the damages should be resolved by this court or remitted to the magistrate for his determination following evidence and submissions.
The appellants apply to adduce further evidence at the hearing of the appeal. The appellants seek to adduce evidence, being:
1.The contract of sale of land for 7 Addis Street, Kalgoorlie executed by the appellants on 27 July 2013.
2.The settlement statement for the sale of 7 Addis Street, Kalgoorlie dated 9 August 2013.
These were the documents referred by the appellants' counsel at the trial. It is submitted that this court should receive the evidence and determine the quantum, notwithstanding that the amount provable by the documents is $5,692.30 less than the amount sought. The appellants have indicated a willingness to forgo the additional amount in order to have an end to the proceedings.
At the hearing of the appeal the respondents indicated that they would seek to be heard on the issue of the quantum of damages.
Given the respondents' view, I consider that it would be a denial of procedural fairness by this court to deprive the respondents of an opportunity to challenge the quantum of the claim. The matter should be remitted for a trial of the issue of damages.

Other matters

The respondents sought to adduce evidence of a letter sent on 5 March 2014 indicating that they took issue generally with the claim. The application was unnecessary as this document was part of the court file produced to this court pursuant to r 52(3) District Court Rules 2005 and has been taken into account in my consideration of the merits.

Orders

1.I uphold the appellants' appeal.
2.Set aside the magistrate's award of nominal damages.
3.Remit the matter to the Magistrates Court for the resolution of the issue as to the quantum of the claim.
4.Appellants' application dated 19 April 2016 to adduce additional evidence in the appeal is dismissed.
5.Respondents' application dated 18 April 2016 to adduce additional evidence in the appeal is dismissed.