Wongala Holdings Pty Limited v Beynon

[2000] NSWSC 1187

CITATION:	Wongala Holdings Pty Limited v Beynon & anor [2000] NSWSC 1187
FILE NUMBER(S):	SC 5914/92
HEARING DATE(S):	27-28 July, 16 October 2000; (written submissions to 9 November 2000)
JUDGMENT DATE:	14 December 2000
PARTIES :	Wongala Holdings Pty Limited (Plaintiff) Ian Lloyd Beynon and Gwyenneth Elizabeth Beynon (First Defendants)
JUDGMENT OF:	Master McLaughlin

COUNSEL :	D. Higgs SC, S. Kaur-Bains (Plaintiff) K. Smark (First Defendants)
SOLICITORS:	Jackson Smith Solicitors (Plaintiff) Selby Anderson Attorneys & Consultants (First Defendants)
CATCHWORDS:	Assessment of damages - Failure of Defendants to complete contract to purchase rural property - Market value of property - Opinion evidence of valuers - Lifestyle characteristics of property - Asserted estoppel arising out of statement made by Counsel to Court of Appeal.
CASES CITED:	Gould v Vaggellas (1985) 157 CLR 215 KKJ Pastoral Company Pty Limited v Old Town Pty Limited (1990) 28 NSWLR 105 Carpenter v McGrath (1996) 40 NSWLR 39 Advance Commercial Finance Limited v Aarons (Cohen J, 14 February 1996, unreported) Commonwealth of Australia v Verwayen (1990) 170 CLR 394
DECISION:	See paragraph 50

SUPREME COURT OF
NEW SOUTH WALES
EQUITY DIVISION

MASTER McLAUGHLIN

Thursday, 14 December 2000

5914/92 WONGALA HOLDINGS PTY LIMITED -V- IAN LLOYD BEYNON AND ANOR

JUDGMENT

1    MASTER: This is an inquiry as to damages consequent upon orders of Mr Justice Cohen made on 11 December 1997. Those orders included the following:

1. The First Defendants [Ian Lloyd Beynon and Gwenith Elizabeth Beynon] pay the Plaintiff [Wongala Holdings Pty Limited] damages arising out of the failure by those Defendants to complete the contract for sale of the property known as Inglebar dated 7 November 1991 and arising out of the order for the repayment to the First Defendants of the deposit paid under that contract.

2. Assessment of those damages be referred to a Master, or, with the consent of the Plaintiff and the First Defendants, to a referee agreed upon by those parties or appointed by the Court.

2    Subsequently his Honour on 17 December 1997 made further orders, which included the following,

The matter be referred to the Master for assessment of damages...

3    At the outset of the hearing there was admitted into evidence a statement of agreed facts (Exhibit A). 4    The Plaintiff (to whom I shall also refer as “Wongala”), as the vendor, claims damages against the First Defendants (to whom I shall also refer as “the Defendants”), as purchaser for breach of the contract referred to in the foregoing order, made on 11 December 1997, pursuant to clause 9 (a) of the Standard Conditions of Sale. 5    In such a case as this the vendor is entitled to recover such damages for breach of contract as would place the vendor in the position in which it would have been had the contract been performed. The usual measure of damages is the contract price less the market value of the property at the contractual time for completion (see Butt, The Standard Contract for Sale of Land in New South Wales, 2 ed., paragraphs 9.192, 9.194; Gould v Vaggellas (1985) 157 CLR 215 at 220. There is no issue that this is the correct measure of damages in the instant case. 6 In assessing damages payable to the vendor for the purchaser’s default, the vendor must give credit for the amount of the forfeited deposit (KKJ Pastoral Company Pty Limited v Old Town Pty Limited (1990) 28 NSWLR 105 at 112; Carpenter v McGrath (1996) 40 NSWLR 39). In the instant case it is not disputed that the deposit has been repaid to the purchaser. Indeed, that repayment was the subject of an order in that regard, as recognised by order 1 made on 11 December 1997. In consequence, therefore, the amount of the deposit in the instant case is not deductable from the damages payable by the first defendant to the Plaintiff. 7 At the outset of the present inquiry as to damages, therefore, it is necessary firstly to determine the contract price. 8 It has been held that in determining the contract price, that price can either be the original price agreed upon by the parties, or a price subsequently arrived at as a result of an amendment to the original contract (see Advance Commercial Finance Limited v Aarons (Cohen J, 14 February 1996, unreported). The Plaintiff in the instant case asserts that the contract price is here arrived at as a result of an amendment to the contract. The Defendants admit that they agreed to vary the contract by the terms set forth in a letter dated 31 January 1992 (annexure V to statement of agreed facts). In consequence, therefore, in the instant case the original contract price of $1.29 million was varied by the terms of the letter of 31 January 1992. 9    The contract price was increased to take into account the following additional payments,

(a) Penalty interest which Wongala was liable to pay to its mortgagees for failure to complete the purchase by 31 January 1992 as set out in clause 1 of the letter dated 31 January 1992.

(b) All additional costs and charges incurred as a result of the Beynon’s failure to complete by the date specified in the notice to complete as set out in clause 3 of the letter dated 31 January 1992.

(c) Interest which would continue to accrue under clause 30 of the agreement for sale calculated from and including 16 January 1992, as set out in clause 5 (b) of the letter dated 31 January 1992.

10    The other additional expenses referred to in the letter dated 31 January 1992 are not claimed. 11    In his affidavit sworn 6 April 1998 Mr Geoffrey Cranney, a director of Wongala, said, at paragraph 2, that the sum of $10,356.43 was paid as penalty interest to the first mortgagee. That statement was not challenged by the Beynons. 12    In the same affidavit Mr Cranney said, at paragraph 3, that $493.78 was paid as additional statutory charges. That evidence was not challenged by the Beynons. 13    There was a suggestion made by the Defendants (to which I shall later in this judgment refer) that the Plaintiff had waived its rights to claim penalty interest, statutory costs and/or additional interest by reason of certain submissions made by Counsel for the Plaintiff during proceedings before the Court of Appeal. 14    It is appropriate here to record that the subject property, Inglebar, has a total area of 966 hectares, and is located near Corowa in southern New South Wales. A public road, Spring Drive, runs through the property. The homestead is located upon that part of the property which is south of the road. That part of the property has a frontage upon Lake Mulwala, which (as I understand it) is a body of water conjoined to the Murray River. 15    There was no issue that settlement of the property was required to take place by 28 February 1992, and therefore that the value of the property as at that date needed to be ascertained. The respective valuers for each of the parties placed a valuation upon the property as at 28 February 2000. 16    In his report dated 16 February 1998 David Charles Shuter, the valuer relied upon by Wongala, expressed his opinion that the market value of the land as at 28 February 1992 was $975,000. 17    If the evidence of Mr Shuter be accepted, then the market value of the property at the relevant date was $975,000. In consequence, therefore, the difference between the amended contract price of $1,326,042.30 and the market value of the property at the time settlement was required to take place, being $975,000, will be in the sum of $351,042. It was submitted on behalf of the Plaintiff that the damages to be awarded to Wongala would consist of that sum of $351,042, plus interest pursuant to the Supreme Court Act 1970, from 28 February 1992 to the date of judgment. The Defendants did not dispute that the damages to be awarded to the Plaintiff should include such a component for interest. 18 The valuer relied upon by the Defendants, Robert Charles Eastoe, said that as at 28 February 1992 the market value of the land was $1,250,000. If that evidence be accepted, then the Plaintiff would still succeed against the Defendants, in the sum of $76,042.30 (being the difference between the amended contract price of $1,326,042.30 and the said market value for the property, if accepted, of $1,250,000), plus interest pursuant to the Supreme Court Act from 28 February 1992 to the date of judgment. 19 Essentially, therefore, the dispute between the parties was as to the market value of the property at 28 February 1992. It is for the Court to resolve that dispute upon the evidence before it. 20 I have had the benefit of receiving written submissions from Counsel for the Plaintiff (28 August 2000), from Counsel for the Defendants (15 October 2000) and from Counsel for the Plaintiff in reply (9 November 2000). Those written submissions will be retained in the Court file. 21 For reasons which I shall proceed to set forth, I consider that the process by which Mr Eastoe arrived at a market value of the property at 28 February 1992 is seriously flawed, and that in a number of respects the factual bases assumed by him for his calculations, as well as the methodology by which he performed those calculations, are questionable. 22 The essential difference between the value attributed by the respective valuers results from the value placed by each upon what might be described as the “lifestyle” characteristics of the property (or, as they were described in the written submissions of Counsel for the Defendants, the “allowance for amenity” factor). 23 Those characteristics were regarded by Mr Eastoe, the valuer for the Defendants, as being of almost overriding significance. 24 It must in my view be emphasised that Inglebar was sold to the Defendants as a rural estate. There was no suggestion that the Plaintiff was intending to sell the property to the Defendants or that the Defendants were proposing to purchase the property as a “lifestyle” property. 25 Mr Eastoe referred to the fact that the homestead upon the property has a river frontage and a prospect upon a large lake, which he considered could be used by the proprietor for water skiing and indulgence in other recreational pursuits. Mr Eastoe said that he had in mind a purchaser who was a member of a profession and had an interest in agriculture, or perhaps a purchaser who was a farmer who would choose to have some participation in agriculture, whilst yet retaining leisure for recreational activities. 26 On the other hand Mr Shuter, the valuer for Wongala, valued the land primarily as a rural property, and paid regard essentially to the characteristics of the land for agricultural purposes. 27 There was no issue between the parties that the property should be valued as one parcel, as opposed to being valued on the basis that it was capable of being subdivided into, and marketed as, smaller separate allotments. There was evidence from Mr Eastoe as to the subdivisional capacity of the property. However, he acknowledges that the property would attract the best price if it was sold as one block, as had originally been agreed in the purchase by the Defendants. 28 Each of Mr Schuter and Mr Eastoe was cross-examined during the hearing. 29 I regarded the opinion evidence of Mr Easthoe, that opinion evidence being encapsulated in his evaluation and report being annexure B to his certificate of expert opinion filed on 27 July 2000, as having been very significantly undermined by his responses under cross-examination. For example, there were very considerable, and significant, differences between two sets of what might described as Mr Eastoe’s working papers, each being headed “valuation calculation” (Exhibit LL and Exhibit 3). Further, Mr Eastoe, although familiar with the area in which Inglebar is located for a period of about twenty years, did not in attributing a valuation of $2,500 a hectare, differentiate between wetlands and drylands (although in attributing a valuation to what was described as land south of the road (that road being Spring Drive), he appreciated that 59 hectares of the 123 hectares comprised in that area consisted of wetlands). He appears to have performed an exercise in averaging between wetlands and drylands, and stated that his conclusion was in fact a lump sum, rather than a valuation per hectare. Mr Eastoe also agreed that there was an inconsistency between what he had written in his working papers (where he appears to have adopted a rate per hectare) and the lump sum approach advanced in the witness box. 30 Further, I have considerable doubt as to the reliance which should be placed upon any part of the valuation of Mr Eastoe grounded upon the concept of comparable sales, since, firstly, there was no comparable sale at the relevant date, 28 February 1992; and, further, no precisely comparable sale in regard to the lifestyle factors relied upon by Mr Eastoe. 31 In regard to those lifestyle factors, also, I would observe that the water views so greatly relied upon by Mr Eastoe, stated by him to able to be enjoyed from the homestead, were, under cross-examination, described by him as “not substantial”, a description whose accuracy is supported by the photographs taken by Mr Eastoe (Exhibit 4). 32 It was the evidence of Mr Eastoe that he attributed to the area south of the road a value of $307,500, and that that area consisted of 123 hectares. During his evidence in chief (T.50) he expressed the view that if that area were in fact only 107 hectares rather than 123 hectares, it would make no difference to his value of $307,500. During cross-examination, however, he conceded that if the land south of the road was 16 hectares less than he had originally understood it to be, then that fact might reduce the price to $300,000, although he maintained that the most important factor was the water frontage (T.54). During cross-examination he also agreed that his working papers showed that he had arrived at the figure of $307,500 by reference to the area of the land (T.54). He then attempted to explain this apparent inconsistency, by stating that he applied a “lump sum” to the value of the wetlands and drylands south of the road. He then stated that in relation to his calculation of 123 hectares he had not in fact ascribed a value per hectare, but had applied an averaging between the wetlands and drylands, and admitted that his value of the property had nothing to do with the attribution of a value per hectare which was shown in his working papers (T.55). 33 Mr Eastoe also admitted that there were no comparable sales of any property the size of Inglebar (which had a total area of 966 hectares) the valuation of which could be achieved by reference to lifestyle. It became clear during cross-examination that the properties in Mulwala to which Mr Easthoe made reference in his report bore no resemblance to Inglebar. They were properties in the main town of Mulwala; they were properties with a water frontage onto the lake, which offered an opportunity for water skiing, and some of the properties had jetty facilities; and they were on what was described as the cleared part of the lake. 34 In contrast to the Mulwala properties, it should be observed that Inglebar was a farming property and not a residential property; it was not on the Mulwala foreshore; the view of the river from the homestead on Inglebar was very limited; the homestead was located a couple of hundred metres from Lake Mulwala; only a dinghy could get from the lake onto the Murray River, on account of the shallow depth of the lake in the vicinity of Inglebar. Further, the cleared part of the lake was located about fifteen kilometres from Inglebar, and thus water skiing near Inglebar was not particularly practicable. 35 Mr Eastoe placed considerable weight on a sale of a residential property in 1995 for $172,500 in the Mulwala area, to support his opinion that the factor of water proximity was one which enhanced the value of Inglebar. He persisted in this reliance even though the relevant valuation date for Inglebar was 28 February 1992, and even though Inglebar was a considerably larger rural property, and was located on a part of the lake that was not cleared, and thus was not suitable for water skiing. 36 It should also be recorded that Mr Eastoe in arriving at his valuation of Inglebar placed significance on the proposed sale of Inglebar to a Mrs Sarah Crawford in July 1992. However, that was a sale negotiated by a mortgagee, which, in any event, did not proceed. I do not consider that that proposed sale can have any bearing upon the valuation of Inglebar at 28 February 1992. No evidence was given by Mrs Crawford at the hearing as to why that proposed sale to her did not proceed, and the only inference to be drawn from the failure of the Defendants to proffer evidence from her is that her evidence would not have assisted the Defendants. I consider that evidence concerning that proposed sale is of no assistance in determining the value of Inglebar some five months earlier. 37 It should be appreciated that there was no dispute between the respective valuers (Mr Eastoe expressly agreed in this regard (T.57-T.58)) that at the valuation date, 28 February 1992, rural Australia was going through a bad time, and that interest rates were high in terms of money that could be earned as income from a farming property (T.58). 38 In regard to comparable sales, Mr Eastoe admitted that the highest comparable sale that he had found having any element of lifestyle was a property in Mulwala which had been sold on 27 February 1992 for $380,000 (T.57). However, it is obvious that that property could not be regarded as in any way a property comparable to Inglebar, since the Mulwala property had been operated as what was described as a “zoo-type property”, being subdivided into little paddocks inhabited by emus, ostriches and wombats, where tourists came and fondled those birds and animals. 39 I have no hesitation in expressing my preference for the opinion evidence of Mr Shuter rather than that of Mr Eastoe. Not only did Mr Shuter adopt a more realistic approach to the nature of what the property Inglebar actually was, but the basis of his evidence (for example reliance upon allegedly comparable sales, arithmetical calculations, and working papers, were not subject to the factual defects and criticisms of the nature already described, which infected the evidence of Mr Eastoe). 40 Mr Shuter engaged in the exercise of valuing the property upon the basis that it was a rural property, by inspecting the land to ascertain the state of the buildings and the different soil types on the property. Mr Shuter took into account the increased value of the land based on the location of the property to the lake as it affected the soil type. Indeed, Mr Shuter’s evidence as to the value which he placed upon the land upon the basis that it was a rural estate was not challenged. 41 I am satisfied that the market value of Inglebar at 28 February 1992 is that attributed to it by Mr Shuter, being $975,000. 42 It follows from the foregoing conclusion that the damages to be awarded to the Plaintiff will be in the sum of $351,042, plus interest pursuant to the Supreme Court Act from 28 February 1992 to the date of judgment. 43 It will be appreciated that it will be necessary for the Plaintiff to perform a calculation of interest. Accordingly, I propose to stand the matter over to a date to be fixed by arrangement with my Associate, for the purpose of bringing in of short minutes of order to reflect my conclusion that I assess the damages to which the Plaintiff is entitled in the sum of $351,042, and that the Plaintiff is entitled to interest on that sum from 28 February 1992 to the date hereof. 44 At the end of the hearing before me it was noted that the parties were desirous that I should not deal with the question of costs in my reasons for judgment, but that I should, in due course, hear submissions in that regard. It is appropriate that such argument as to costs should be heard on the occasion when the matter is listed for the bringing in of short minutes of order. 45 There is one further matter to which I should refer. That is the suggestion made by the Defendant that the Plaintiff had waived its rights to claim penalty interest, statutory costs and/or additional interest, by reason of certain submissions made on behalf of the Plaintiff during proceedings before the Court of Appeal 46 The transcript of a hearing before the Court of Appeal on Monday, 16 February 1998 was in evidence before me (Exhibit 5). That transcript relates to an application by the present Defendants for leave to appeal against the decision of Mr Justice Cohen. The Defendants now rely upon an exchange between Senior Counsel for the present Plaintiff (who was not the Senior Counsel who appeared at the hearing before me) and the Court. It was submitted on behalf of the Defendants that in consequence of that exchange the Plaintiff had expressly abandoned its claim to penalty interest, statutory costs and/or additional interest, and that the Plaintiff was thereafter unable to depart from that position. (In this regard the Defendant relied upon the decision of the High Court of Australia in Commonwealth of Australia v Verwayen (1990) 170 CLR 394 at 457-459, 471-473 and 481-484.) 47 The statement by Senior Counsel to the Court of Appeal that the Plaintiff “abandoned all the claims at the commencement of the hearing for all the exotic claims for crops and interest and the like” refers to what was abandoned at the hearing before Mr Justice Cohen. It would appear that before His Honour the statement of claim was amended. I do not read the statement made by Senior Counsel to the Court of Appeal as altering the position of the Plaintiff from what it had been at the time of the hearing before Mr Justice Cohen. But, in any event, I am not satisfied that the Defendants have established that the Plaintiff is estopped from claiming the additional amounts referred to in paragraphs 10 to 15 of the Plaintiff’s written submissions dated 28 August 2000. The principles enunciated in Verwayen, would require, for such an estoppel to arise, that there be reliance by the Defendants upon the comments made by Senior Counsel in the Court of Appeal, and that there be detriment suffered by the Defendants in consequence of those comments. There is no evidence of any such reliance or any such detriment. 48    In any event (even if I be wrong in my conclusions, firstly, that the statement made by Senior Counsel in the Court of Appeal did not alter the nature of the claim from what it had been before Mr Justice Cohen, and, further, that, in any event, the Defendants had not established, in accordance with the principles in Verwayen, that the Plaintiff was now estopped from claiming in respect to the amounts set forth in paragraphs 10 to 15 of the Plaintiff’s written submissions), I consider that I am precluded from going behind the terms of the orders of Mr Justice Cohen which I have already set forth at the commencement of these reasons for judgment. The task committed to me is the assessment of “damages arising out of the failure by those Defendants to complete the contract for sale of the property known as Inglebar dated 7 November 1991...”. 49    I do not consider that I am in any way constrained in performing that function by a statement made during the course of argument in the Court of Appeal, which statement in my view did no more than describe to the Court the nature of the assessment of damages which the Plaintiff was at that time desirous of pursuing, and which was no different from that which the Plaintiff had already outlined at the trial. 50    I stand the matter over to a date to be fixed by arrangement with my Associate, for the bringing in of short minutes of order and for argument as to costs.

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Last Modified: 01/22/2001