Bill v Clarke [2015] VCC 1721

1 Mr & Mrs Bill live at 1 Elm Court, Mt Eliza in what is popularly known as "the golden mile". Mr Bill said that he regarded his wife and himself as "a single unit". Nevertheless, for reasons that did not emerge in evidence, the family home is registered in the sole proprietorship of Mrs Bill.

2 Mr Bill was born in Switzerland and has had a long career in business and investment. He says that despite long-term residence in Australia, he still assesses the value of assets in terms of Swiss Francs. The Bills' residence, as befits a property in the golden mile, is constructed to a high standard. According to a report by expert valuer, Christopher Rann, 1 Elm Court:

"Comprises an architecturally designed residence sighted upon the land to ensure maximum water views of Port Phillip [Bay] and a private garden courtyard.

At some stage during construction circumstances dictated that progress stop. An Occupancy Permit has been issued however the property appears incomplete. (Plaintiff's Court Book (PCB) 63BR)

3 Mr Bill acted as owner/builder engaging the necessary contractors. In recent years, Mr Bill has been afflicted with a very serious illness. At times, it was unclear whether he would survive. He is now in reasonable health, having undergone a lung transplant, but his health requires constant monitoring by his specialist medical advisers.

4 It was presumably as a result of Mr Bill's very serious health problems that final completion of the house was not undertaken, even though an Occupancy Certificate was issued in 2009.

5 In 2009, 1 Elm Court was offered for sale with an asking price of in excess of $3 million. It will be recalled that the so-called Global Financial Crisis struck the world economy in the second half of 2008 and led to turmoil on world markets and an economic malaise from which world economies are yet to recover completely. This had a very serious effect on the market for prestige residences. No buyer, at a price acceptable to the Bills, was found in 2009, in 2010, or in 2011. Eventually, in January 2012, an agreement for the sale of the property by Mrs Bill to the defendant, Allan James Clarke, for a price of $2.5 million was entered into.

6 The contract required Mr Clarke, as purchaser, to pay a deposit of $250,000, viz 10 per cent of the purchase price, by 7 March 2012. This deposit was duly paid. The balance of the purchase price was payable at settlement, which was scheduled for 19 July 2012. Mr Clarke did not pay the balance of the purchase price on 19 July 2012.

7 According to Mr Bill, whom Mrs Bill said attends to all business matters in the family, an informal extension of the settlement date did not yield any result. On 21 August 2012, those acting for Mrs Bill served a notice under the terms of the contract stating that, unless the default in failure to pay the purchase price was remedied within 14 days of service, the contract would be terminated.

8 At this time, namely, late August 2012, Mr Bill was gravely ill and under treatment at the Alfred Hospital. Mr Clarke visited him at the hospital. According to Mr Bill, Mr Clarke assured him of his bona fides and intention to honour the contract. Mr Bill agreed to the contract being extended subject to an arrangement whereby Mrs Bill would be compensated for the consequences of the delay. Mr Bill was favourably impressed by Mr Clarke and accepted him as acting in good faith. They shook hands upon an arrangement which was documented by their relative legal advisers in a document entitled "Addendum to Contract of Sale of Real Estate Dated 10 January 2012...".

9 This agreement suspended the rescission notice which had been served on Mr Clarke "until close of business on 30 September 2012". In a further clause, the purchaser admitted the validity of the rescission notice. It was provided that, despite the extension arrangement, time would continue to be of the essence of the contract and the arrangement would not constitute a waiver of the rescission notice.

10 It seems that in light of the crisis affecting Mr Bill's health, he had decided that they should "down size" and he had entered into a contract to purchase a property at Fulton Road, Mt Eliza following the apparent sale of 1 Elm Court.

11 A sum of $88,000, which he had paid under that contract, was, because of the failure of Mr Clarke to settle on the due date, forfeited. Mr Clarke acknowledged that this was a loss suffered by "the vendor", viz Mrs Bill, and he acknowledged it "as a debt due, owing and payable by [him] to [Mrs Bill] as at the date of this Addendum".

12 The following clause of the Addendum provided for this $88,000 to be paid by an initial instalment of $25,000 with a balance of $63,000 "by no later than close of business on 30 September 2012". Payment of the first instalment of $25,000 was expressed to be "a condition precedent to give effect to this Addendum". Failure to pay the balance of $63,000 would render it "a debt due by [Mr Clarke] to [Mrs Bill] and that [Mrs Bill should] be entitled to independently sue for the recovery of this amount". Mr Clarke agreed to pay penalty interest at the rate of 12.5 per cent "on the amount due under the contract from 19 July 2012 until the date of settlement under the contract". Mr Clarke further agreed to pay Mrs Bill $15,000 "as and for [her] legal, conveyancing and other costs".

13 Mrs Bill was to be entitled to continue residing on the property under a licence arrangement until 15 January 2013, subject to Mr Clarke having access to the premises to commence pool and landscaping work. This agreement was signed by the parties on 5 September 2012. (PCB 98-100).

14 Despite these elaborate arrangements, Mr Clarke did not settle on or before 30 September and Mrs Bill treated the contract as terminated.

15 On 25 July 2013, solicitors acting for Mrs Bill commenced this proceeding seeking recovery from Mr Clarke of certain monies and damages.

16 In her Amended Statement of Claim, Mrs Bill recited the sale of 1 Elm Court under the Contract of Sale dated 10 January 2012, the initial failure to settle, and the extension of time constituted by the Addendum and the service of the rescission notice.

17 According to the Amended Statement of Claim, the initial contract provided for payment of interest on monies due but unpaid under the contract at a rate being two per cent per annum above the rate fixed under the Penalty Interest Rates Act 1983. It was said the contract provided that time was to be of the essence and that the contract could be ended in the case of default by the other party serving a notice stating that the contract would be terminated unless the default was remedied within the time limited in the notice. The claim noted the vendor's entitlement to forfeit a deposit up to 10 per cent of the purchase price if the contract was terminated by her, and also to retain the property and sue for damages for breach of contract or resell the property and recover any deficiency in price by way of liquidated damages.

18 According to the claim, in the events which have already been described, the contract was terminated on 5 September 2013 and Mrs Bill forfeited the deposit of $250,000 as she was entitled to do.

19 Next, it was alleged that she suffered loss and damage. The particulars of that loss and damage were "updated" in a document handed up at the commencement of the trial headed "Plaintiff's Loss & Damage". The claim, as so particularised, was for $380,350.23, consisting of some three components.

20 The first component was constituted by a damages claim for $259,970.53, calculated on the basis of the purchase price of $2.5 million minus the forfeited deposit of $250,000 and minus the value of the property as at the date of termination - $2.1 million - as assessed by expert valuer, Mr Rann. To this figure was to be added a claim for "loss of use of money damages of $109,970.53", part of which was said to be based upon the decision of the High Court of Australia in Hungerfords v Walker [1989] HCA 8; (1989) 171 CLR 125.

21 The first component of this part of the claim was $65,258.70, which was said to accrue at the rate of $113.10 per day from 30 September 2012 until 30 April 2014 (being the date of a previously scheduled trial). The premise for this claim was said to be an intention by Mrs Bill to invest in low risk savings accounts the sum of $1,032,000, being the remains of the sum payable to her at settlement after payment of the balance of purchase price of $792,000 for completion of the purchase of the Fulton Road property and $426,000 to discharge a mortgage in favour of National Australia Bank which, at all material times in 2012, affected the Elm Court property and which would need to be discharged for Mrs Bill to make title at settlement. Since settlement did not take place, this investment could not be made and the daily rate was calculated on the basis of the application of a four per cent interest rate to that figure. It was said that four per cent represented a fair average of the rates which were available to investors for bank deposits over the period.

22 The second component of the plaintiff's claim was $44,711.83, which was interest paid under the National Bank of Australia mortgage from 30 September 2012 until 30 April 2014 when it was discharged upon a refinancing with the Bank of Melbourne. Mrs Bill produced bank statements to show interest debits and the final clearing of the balance of principal interest owing to the National Australia Bank upon the refinancing.

23 The final component of the claim was for $120,379.70, which was said to be the total of a number of debts owing by Mr Clarke to Mrs Bill. $78,000 represented a debt owing under the Addendum, it was said, being the total of the amount of $63,000, the unpaid balance of the loss suffered on the Fulton Road property, and a further $15,000 being compensation for legal, conveyancing and other costs provided for in the agreement.

24 Mr Clarke's defence went through multiple revisions. At the close of the evidence I granted leave for the filing and service of a second Further Amended Defence.

25 Mr Clarke did not deny the existence of the contract, his default thereunder, or the lawful termination of the contract by Mrs Bill.

26 As to the Addendum, Mr Clarke alleged first that it was subject to a condition precedent, namely, payment by him to Mrs Bill of $88,000, which condition was not met, and "therefore the addendum agreement was of no force and effect". Further, it was said that since the Addendum was to be treated as part of the original Contract of Sale:

"Any amount due under the addendum must comprise part of the damages claimed by the plaintiff in respect of which the forfeited deposit must be brought into account."

Alternatively, the breach by the defendant resulted in the plaintiff obtaining a permit to sub-divide the land into a two lot plan of sub-division and the benefit thereby derived, being the sum of $475,000, should be set off against any liability to pay the balance owed under the Addendum Agreement.

27 According to the defence, the appropriate date to assess damages was not the date of termination of the contract but rather the date of trial, at which time the subject land should be regarded as having a value of $2,975,000, representing $2 million for a proposed allotment on which the house was located and $975,000 for a second allotment representing surplus land. The consequence of acceptance of these contentions would be a finding that Mrs Bill had not suffered any loss or damage.

28 If the court were to find that damages should be assessed as at September 2012, it was said, then the value of the land should be regarded either as $2.4 million as a single lot or, on the basis of the two lot plan of sub-division, the house allotment valued at $2 million and the surplus land (being lot 2, 1,047 square metres) valued at $800,000. In any event, according to the defence, any damages claimed would have to be set off against the forfeited deposit.

29 As to the claim for ongoing interest under the National Australia Bank mortgage, the defence contended that it was "irrecoverable as any such loss was not in the ordinary contemplation of the parties at the time the contract of sale was entered into [and] in the absence of special knowledge by the defendant". The defendant denied being so informed by the plaintiff at the time of the entry into the contract that such loss would be suffered. Further, it was said that the interest accrued because of Mrs Bill's decision "to retain the land".

30 As to the claim for interest under the Hungerfords v Walker principle, it was said that this claim "was not maintainable" for the same reasons as were said to preclude recovery of the interest paid to National Australia Bank. In any event, any such claim would be "subsumed by the plaintiff's right to claim damages under Clause 28 of the contract".

31 Finally, it was said that when calculating any loss, the plaintiff had to:

"Bring into account the increase[d] value of the property and the benefit that the plaintiff has derived from the use of the property as her place of residence."

32 It was said that, insofar as Mrs Bill made a claim for interest under Clause 26 of the contract, that clause was "superseded by Clause 7 of the (A)ddendum (A)greement". In any event, there was no entitlement for interest under Clause 26 of the contract:

"As this clause imposed an obligation on the defendant as purchaser to pay interest during the period of default being the period between the date of the payment of the balance of the purchase price due under the contract and the settlement date. Upon the rescission of the contract the obligation to pay the balance of the purchase price ceased and the defendant became liable to a claim for damages under Clause 28 of the contract."

33 Further, the forfeited deposit had to be brought to account.

34 Similarly, it was said that under the provision of Clause 7 of the Addendum, the payment of interest ceased upon the termination of the contract "and was subsumed into the obligation to pay damages pursuant to Clause 28 of the contract".

35 Finally, insofar as it was said that specific compensation was provided for in the Addendum agreement, since those amounts might have been recovered as damages under the original contract, there was an obligation upon Mrs Bill to give credit against those amounts for the forfeited deposit.

36 Earlier versions of the defence challenged the validity of the plaintiff's termination of the contract. The plaintiff filed a Reply dated 28 March 2014 responding to these matters. Subsequent versions of the defence deleted the challenge to the validity of the plaintiff's termination of the contract. The Reply therefore seems now to be inoperative.

37 1 Elm Court was subject to a restrictive covenant to be found in Transfer Number 240481 10, which was referred to by one of the expert valuers who gave evidence, Mr Hugh McLean, as the "Grimwade Covenant". It was constituted by a transfer of land by Harold Thornton Grimwade, John Frederick Thornton Grimwade and Agnes Gwendolen Manifold of certain land to Dame Mabel Brookes dated 15 May 1951. The operative part of the covenant was:

"That no building other than one private dwelling house and other usual and necessary outbuildings shall be built or erected or caused or permitted to be built or erected on each lot hereby transferred". (PCB 77-78)

38 The covenant, however, did not extend to the whole of the allotment on which 1 Elm Court is erected. A review application relative to a proposed sub-division conducted at the Victorian Civil & Administrative Tribunal (VCAT) (proceeding P2301/2013) found that a sub-division proposal made in the name of Mrs Bill was:

"Clear of the restrictive covenants on the land. This includes the covenant that prohibits more than one dwelling on the land, because that covenant covers just a part of Lot 1 with the existing dwelling." (Defendant's Court Book (DCB) 24, paragraph 4).

39 Following the termination of the contract Mr Bill said he "had discussions with the agent and at that time the conclusion was there were no willing buyers to - she couldn't find any willing buyers offering more than $2 million." (Transcript (T) 242, Lines (L) 14-19). Mr Bill said he did not seek to "test the market". (T273, L26-27) In fact, Mr Bill was in poor health at the time. It will be recalled that the meeting which he had with Mr Clarke in August of 2012 was at Mr Bill's hospital bedside.

40 Mr Isles submitted on behalf of the defendant that the post-default conversation which Mr Bill described between himself and the selling agent did not take place. He relied on answers given by Mr Bill (at T264), in which Mr Bill agreed that when the contract with the defendant went off, the property was not put back on the market. Mr Isles then asked, "You didn't have any further dealings with the real estate agent after that?" Mr Bill said, "Correct". In my view, there is no necessary inconsistency between the two answers. As I recollect, the alleged inconsistency between answers was not directly put to Mr Bill. In any event, a short conversation in which the agent expressed her views as to the availability of buyers for the house at a price of $2 million or more could easily have been regarded by Mr Bill as too perfunctory to constitute a further dealing.

41 A planner acting for the Bill family lodged an application for a permit to sub-divide 1 Elm Court with Mornington Peninsula Shire Council on 21 December 2012. (DCB 24, paragraph 5) According to the reasons given by VCAT upon a review application:

"The application propose[d] to retain the existing double storey dwelling (Dwelling 1) which has a Brookwood Drive [access], and to construct a new double storey dwelling fronting Elm Court with associated vegetation removal, to accommodate the proposed new dwelling (Dwelling 2). It [was] proposed to subdivide the land into two lots of 1690m2 (for the current dwelling) and 1047m2 (for the new dwelling) in a battle axe configuration off Elm Court with no common property."

42 In due course, council determined to grant the permit, (DCB 25, paragraph 8) but a neighbour, Dr Nicholas Diamond, sought a review of that determination from VCAT. (DCB 21) At the hearing, Dr Diamond, the objector, appeared in person and the proponent, Eliza Designs Pty Ltd, (acting for the Bill family) was represented by Mr Luke Dowdle, a consultant town planner from Nepean Planning. (DCB 22) The Tribunal dismissed the review application and confirmed council's determination to grant the permit to sub-divide (DCB 21) on 19 March 2014.

43 Counsel for Mr Clarke, Mr Isles, asked Mr Bill, "At what point did you decide to go down the path of sub-dividing the property?" Mr Bill replied, "I haven't decided yet to sub-divide it. I have decided to apply for it and I still haven't decided whether I will go ahead with it." (T277, L4-7)

44 This proceeding has been fixed for trial on a number of occasions and "went off" for a variety of reasons. Most recently, a trial date earlier this year was vacated because the defendant discovered that the plaintiff had obtained a determination from VCAT confirming a determination by the Mornington Peninsula Shire Council to issue a permit for a two lot plan of sub-division of the subject property. This led the defendant to obtain further expert valuation reports which, amongst other things, canvassed the value of the subject property if sold in two lots rather than as a single entity.

45 The plaintiff was represented at trial by Mr Klotz of counsel. She gave evidence herself, as did her husband. She also relied upon expert evidence from valuers, Mr McLean and Mr Rann.

46 The defendant was represented by Mr Isles of counsel who, apart from putting in various items of documentary evidence, called expert valuer, Mr Biggs. The defendant, himself, appeared neither in the witness box nor, upon my observation, in the well of the court at any time during the trial.

47 It is astonishing that so straightforward a dispute as the present one was able to generate so many perplexing questions of fact and law. One might have expected that this kind of proceeding would be well-trodden ground which would yield at least clear legal principles.

48 I turn to the various elements of the plaintiff's claim.

49 Clause 28.4 of the general conditions of the Contract of Sale of the subject property provides, inter alia:

"If the contract ends by a default notice given by the vendor:

(a) the deposit of up to 10 per cent of the price is forfeited to the vendor as the vendor's absolute property, whether the deposit has been paid or not;..."

50 The contract did terminate as a result of the default notice given by the plaintiff as vendor. The forfeiture of the deposit of $250,000 is not challenged by the defendant. The declaratory relief sought to that effect by the plaintiff should be granted.

51 The plaintiff claimed interest on the unpaid balance of the purchase price according to Mr Klotz' written outline, "For the period between default [viz the date on which settlement should have taken place 19 July] and termination [viz 4 September 2012] totalling $42,379.70".

52 Clause 25 of the general conditions of the Contract of Sale provided:

"A party who breaches this contract must pay to the other party on demand:

(a) compensation for any reasonably foreseeable loss to the other party resulting from the breach; and

(b) any interest due under this contract as a result of the breach."

53 Clause 26 provided that the interest was to be at the rate of two per cent per annum plus the rate fixed from time-to-time under s2 of the Penalty Interest Rates Act, with such interest "payable on any money owing under the contract during the period of default, without affecting any other rights of the offended party".

54 Mr Klotz referred to and relied upon the decision of the Trial Division of the Supreme Court in Portbury Development Co Pty Ltd v Mackali [2011] VSC 69. In that case, the plaintiff sold a country property to the defendant for a price of $1.6 million with a deposit of $60,000, with the balance of purchase price payable on a nominated date. The defendant failed to complete and the plaintiff terminated the contract pursuant to a notice styled "Notice of Default and Rescission", which required completion of the contract by a nominated date (which completion did not occur).

55 The court accepted that the plaintiff's termination was valid. The plaintiff's claim included damages being the difference between the contract price and the value of the property at the time of termination, agent's commission and fees, legal fees, unpaid security under a particular clause and "interest between default and rescission". The condition requiring payment of interest was not materially different from the clauses in the present case. The court awarded the amount of interest claimed to the plaintiff, noting that such interest was under the terms of the condition payable on demand and remarking:

"By the notice of rescission the plaintiff made an appropriate demand for that interest. Accordingly, the plaintiff is entitled to judgment against the defendant for the sum of interest claimed by it." [27]

56 Mr Klotz also relied upon another decision of the Trial Division in Pettiona v Whitbourne [2013] VSC 205. The facts were generally similar to those in the Portbury case. This time, the subject of the sale was what would appear to have been a prestige property in Brighton with a price of $5.85 million. The purchaser failed to pay the balance of purchase price on the date nominated for settlement. A notice of default was served and the contract was terminated. The plaintiff claimed, amongst other things, "interest on the unpaid balance for the period of default totalling $39,507".

"Mr Whitbourne [the defendant] does not dispute that Ms Pettiona [the plaintiff] is entitled to interest on the balance of $5.85 million for 17 days from 4 July 2011 to 21 July 2011 at 4.5 per cent in accordance with the general condition 26 of the contract as amended..."

58 A claim for a set off against rent received by the vendor was dismissed.

59 Mr Isles submitted, however, that these authorities were incorrect. He contended that, once the Contract of Sale was terminated, the obligation to pay the balance of the purchase price was retrospectively cancelled because the purchase price was payable only upon conveyance of the subject land and buildings to the defendant. He relied upon a decision of the New South Wales Court of Appeal in Carpenter v McGrath (1996) 40 NSWLR 39.

60 In considering these submissions, it is necessary to go to some fundamental principles of the law of vendor and purchaser and one of Sir Owen Dixon's most celebrated judgments in private law in McDonald v Dennys Lascelles Limited [1933] HCA 25; (1933) 48 CLR 457. The facts in that case were somewhat complicated by the existence of assignments and sub-purchases. In substance, however, the question for determination by the High Court was whether a guarantor of the obligations of a purchaser under a terms contract was liable following the termination of the terms contract by the vendor for the purchaser's default for an unpaid instalment of the purchase price.

61 The guarantors contended, first, that upon the termination by the vendor of the contract of sale, the contract was cancelled in futuro. Since there would be no transfer or conveyance of the subject real property, the obligation to pay the outstanding instalment of the purchase price came to an end. Next, they contended that their obligation as guarantors was secondary, only, and the termination of the purchaser's obligation to pay the instalment, likewise, terminated the guarantors' obligation. Their Honours accepted both of these contentions (Evatt J dissenting).

62 In analysing the legal situation, Sir Owen Dixon said:

"The sale of land is in this respect similar to the sale of goods.

In the case of goods sold and delivered, and of goods bargained and sold, the property in each case having passed to the buyer, the seller's remedy is to sue for the price. But if under any executory contract the buyer wrongfully refuses to accept the goods the seller's only remedy is an action for damages. The general rule, however, that in an executory contract for the sale of land the vendor cannot sue for the price, is excluded whenever a contrary intention is shown by the express terms of the contract. And it seems established by authority that a contrary intention is sufficiently shown in all cases in which by the express terms of the contract the purchase money or any part thereof is made payable on a fixed day, not being the agreed day for the completion of the contract by conveyance. In all such cases the purchase money or such part thereof becomes, on the day so fixed for its payment, a debt immediately recoverable by the vendor irrespective of the question whether a conveyance has been executed and notwithstanding the fact that the purchaser may have repudiated his contract. Notwithstanding such repudiation the vendor is not bound to sue for damages or specific performance, but may recover the agreed purchase money " (Ritddenklau v. Charlesworth (1925) N.Z.L.R. 161, at pp. 164, 165). In Reynolds v. Fury ((1921) V.L.R., at p. 17; 42 A.L.T., at p.123), the Full Court of Victoria, after a very full examination of the authorities, decided that instalments of purchase money, which, by the conditions of a contract of sale of land are payable at fixed times before conveyance, become immediately recoverable as debts or liquidated demands, notwithstanding that the sale has not yet been completed by conveyance.

...

When a party to a simple contract, upon a breach by the other contracting party of a condition of the contract, elects to treat the contract as no longer binding upon him, the contract is not rescinded as from the beginning. Both parties are discharged from the further performance of the contract, but rights are not divested or discharged which have already been unconditionally acquired. Rights and obligations which arise from the partial execution of the contract and causes of action which have accrued from its breach alike continue unaffected. When a contract is rescinded because of matters which affect its formation, as in the case of fraud, the parties are to be rehabilitated and restored, so far as may be, to the position they occupied before the contract was made. But when a contract, which is not void or voidable at law, or liable to be set aside in equity, is dissolved at the election of one party because the other has not observed an essential condition or has committed a breach going to its root, the contract is determined so far as it is executory only and the party in default is liable for damages for its breach. (See Boston Deep Sea Fishing and Ice Co v Ansell (1888) 39 Ch. D. 339, per Bowen L.J., at p.365; Hirji Mulji v. Cheong Yue Steamship Co. (1926) A.C. 497, per Lord Sumner at p.503; Cornwall v. Henson (1899) 2 Ch. 710, at p. 715 (reversed, C.A., (1900) 2 Ch. 298); Salmond and Winfield, Law of Contracts, (1927), pp. 284-289; Morison, Principles of Rescission of Contracts (1916 pp. 179, 180.) It does not, however, necessarily follow from these principles that when, under an executory contract for the sale of property, the price or part of it is paid or payable in advance, the .seller may both retain what he has received, or recover overdue instalments, and at the same time treat himself as relieved from the obligation of transferring the property to the buyer. When a contract stipulates for payment of part of the purchase money in advance, the purchaser relying only on the vendor's promise to give him a conveyance, the vendor is entitled to enforce payment before the time has arrived for conveying the land; yet his title to retain the money has been considered not to be absolute but conditional upon the subsequent completion of the contract. " The very idea of payment falls to the ground when both have treated the bargain as at an end ; and from that moment the vendor holds the money advanced to the use of the purchaser " (Palmer v. Temple (1839) 9 Ad. & E. at pp. 520, 521 ; 112 E.R., at p. 1309. ). In Laird v. Pirn (1841) 7 M. & \V., at p. 478 ; 151 E.R., at p. 854., Parke B. says : "It is clear he cannot have the land and its value too " ; the case, however, was one in which conveyance and payment were contemporaneous conditions (see Laird v. Pirn (1841) 7 M. & W., at p.480; 151 E.R., at p.855). It is now beyond question that instalments already paid may be recovered by a defaulting purchaser when the vendor elects to discharge the contract (Mayson v. Clouet (1924) A.C. 980). Although the parties might by express agreement give the vendor an absolute right at law to retain the instalments in the event of the contract going off, yet in equity such a contract is considered to involve a forfeiture from which the purchaser is entitled to be relieved (see the judgment of Long Innes J. in Pitt v. Curotta [1931] NSWStRp 30; (1931) 31 S.R. (N.S.W.) 477 at pp 480-482). The view adopted in Dagenham (Thames) Dock Co.; Ex parte Hulse ( (1873) L.R. 8 Ch. 1022) seems to have been that relief should be granted, not against the forfeiture of the instalments, but against the forfeiture of the estate under a contract which involved the retention of the purchase money ; and this may have been the ground upon which Lord Moulton proceeded in Kilmer v. British Columbia Orchard Lands Ltd. ((1913) A.C. 319), notwithstanding the explanation of that case given in Steedman v. Drinkle ((1916) 1 A.C. 275) and Brickies v. Snell ((1916) 2 A.C. 599). However, these cases establish the purchaser's right to recover the instalments, other than the deposit, although the contract is not carried into execution. If a vendor under a contract containing an express power to forfeit instalments at first determined the contract and retained the instalments but afterwards resiled from his former election to treat the contract as discharged and insisted that, if the purchaser was unwilling to forfeit his instalments according to the tenor of the agreement, he should at least carry out the sale, perhaps the purchaser as a term of equitable relief against forfeiture would be required to carry out his contract. But, where there is no express agreement excluding the implication made at law, by which the instalments become repayable upon the discharge of the obligation to convey and the purchaser has a legal right to the return of the purchase money already paid which makes it needless to resort to equity and submit to equity as a condition of obtaining relief, the vendor appears to be unable to deduct from the amount of the instalments the amount of his loss occasioned by the purchaser's abandonment of the contract. A vendor may, of course, counter-claim for damages in the action in which the purchaser seeks to recover the instalments."

63 In Carpenter v McGrath, McGrath sold land at Mangrove Mountain to Mr & Mrs Carpenter. The Carpenters failed to complete, seeking to justify the non-completion based upon a number of matters, including an allegation that a shed on the land had been erected without the necessary permit. The effectiveness of the termination notice was challenged and, further, it was said there had been an election not to terminate the contract.

64 A District Court Judge awarded damages of $24,383.61 in favour of the McGraths after having deducted from the amount of their loss and damage a forfeited deposit of $35,000. The Carpenters appealed.

65 On appeal, the Court of Appeal disallowed a number of the heads of damage allowed by the trial judge, with the result that the plaintiffs' damages did not exceed the forfeited deposit and the Court of Appeal by majority entered judgment in favour of the defendants (the purchasers).

66 The Court of Appeal disallowed the claim for interest from default until termination. Sheller JA noted:

"The appellants submitted that on rescission of the contract, the respondents were no longer entitled to the purchase price and thus could not be entitled to interest on the purchase price." (1996) 40 NSWLR 39, 59

"Interest was a component of the purchase price payable on completion and as such to be taken into account in assessing the damages to be awarded for the loss of the bargain. In consequence it was no more appropriate for the respondents to recover separately for interest on the balance of the purchase price up to the date fixed for completion than it was for the respondents to recover or retain the whole or any part of the purchase price. In my opinion, the amount of interest calculated under cl 24(b) cannot be isolated and awarded as a head of damage. On this part of the appeal the appellants succeed."

"In principle the interest would not, in my opinion, be allowable. Once the contract had been rescinded the respondents could not have sued for the contract price. They were relegated to a claim in damages for loss of their bargain and consequential expenses. The interest payable under cl 24(b) operates to increase the amount payable on completion and, as the whole of the purchase money is not claimable, it is difficult to see upon what basis the interest payable on the purchase money could be claimable. (1996) 40 NSWLR 39, 45

69 On the following page his Honour said of the claim for interest:

"The loss claimed in this case would, arguably, have been claimable only if the respondents had sought to recover a deficiency on re-sale. If that had occurred the respondents may have been entitled to treat the purchase price as constituted both by the amount shown in the contract and the interest payable under cl 24(b) for the purpose of determining the efficiency on re-sale. That only means that, for the purposes of calculating the purchase price payable under the contract, it is permissible to treat the interest as part of the price payable. This is a contentious question and it is unnecessary to decide whether it is correct. In the circumstances, as there was no re-sale and as the respondents are seeking to put forward a claim which could only be justified upon the basis of the continued existence of the contract, that claim should be rejected."

70 In Real Estate Securities Limited v Kew Golf Links Estate Pty Ltd [1935] VicLawRp 23; [1935] VLR 114, Lowe J considered an application for relief against forfeiture of monies paid by a purchaser under a terms contract of a sale of vacant sub-divided allotments. The purchaser company had made default and the vendor had terminated the contract. His Honour said:

"No point has been made by the parties that an occupation rent should be charged against the plaintiff, since it is conceded that that item is balanced by the interest on outstanding monies provided for in the contract. This involves, I think, that interest in arrear at the time of rescission is an element in the damage suffered by the defendants." [1935] 114, 123

71 In other words, his Honour would have considered awarding the amount of interest instalment by way of relief against forfeiture but regarded them as balanced off by the fact that the purchasers had possession of the land.

73 The decisions of the Trial Division of the Supreme Court in Portbury and Pettiona clearly support the award of interest under the relevant special condition to the plaintiff. Yet, general principle flowing from the analysis in McDonald v Dennys Lascelles Limited points away from such an award being made.

74 In situations such as the present, where the vendor did not resell the property but rather retained it, the Court of Appeal of New South Wales has determined that no interest between default and termination should be awarded. Yet, acceptance of that view would be in the teeth of recent Victorian authorities to the contrary.

75 In CAL No 14 Pty Ltd v Motor Accidents Board [2009] HCA 47; (2009) 239 CLR 390, 411-13 [48]-[51], Gummow, Heydon and Crennan JJ held that the Full Court of the Supreme Court of Tasmania should have followed an earlier decision of the New South Wales Court of Appeal on a point of principle in the law of negligence. According to their Honours, where a considered decision of an intermediate Court of Appeal has been given on a point of the common law, other intermediate Courts of Appeal in Australia should follow that determination unless of the view that it is plainly wrong. According to their Honours, there was a similar duty resting upon a trial judge. ((2009) [2009] HCA 47; 239 CLR 390, 412 [49])

76 This would suggest that I should follow the New South Wales Court of Appeal in Carpenter v McGrath. I am not sure whether, as a trial judge, the obligation to follow a determination of an interstate intermediate Court of Appeal has a proviso that it need not be followed if I judge it to be "plainly wrong". If there were such a proviso, I am inclined to the view that Carpenter v McGrath, far from being plainly wrong, accords with the general principles emerging from the analysis in McDonald v Dennys Lascelles Limited.

77 To put it in a nutshell, how can interest be awarded upon an alleged principal sum that ultimately was never payable?

78 Mr Klotz submitted that the interest under the present contract was "payable on demand". A demand had been made and that rendered the liability to pay the interest and accrued liability which survived the termination of the contract.

79 The interest in Carpenter v McGrath was also payable on demand, but that consideration did not weigh with the New South Wales Court of Appeal. Ultimately, it is the liability to pay the balance of the purchase price to which the interest is appurtenant which creates the liability. It is merely perfected by the making of the demand.

80 I also note that in Portbury, the defendant was self-represented. At times, he was not even present during the trial. In Pettiona, whilst the defendant was represented, there was no challenge to the claim for interest as paragraph [28] of the judgment indicates.

81 For completeness, I should note a clause in paragraph [7] of the Addendum to the contract executed by the parties on 5 September 2012, which states:

"The Purchaser agrees and undertakes that he will pay penalty interest at the rate of 12.5 per centum on the amount due under the Contract from 19 July 2012 until the date of settlement under the Contract and this amount shall be adjusted in favour of the Vendor at settlement."

82 Mr Klotz did not place any independent reliance upon this covenant. He said it should be regarded as a "reaffirmation" of the obligation to pay interest under the general conditions of the contract.

84 The damages claim by the plaintiff was made under general condition Clause 28.4 of the Contract of Sale and the plaintiff's common law entitlement to sue for damages for loss of the bargain. Clause 28.4 provides, inter alia:

"If the contract ends by a default notice given by the vendor:

...

(b) the vendor is entitled to possession of the property; and

(c) in addition to any other remedy, the vendor may within one year of the contract ending either:

(i) retain the property and sue for damages for breach of contract; or

(ii) resell the property in any manner and recover any deficiency in the price on the resale and any resulting expenses by way of liquidated damages; and

(d) the vendor may retain any part of the price paid until the vendor's damages have been determined and may apply that money towards these damages; and

(e) any determination of the vendor's damages must take into account the amount forfeited to the vendor."

85 This vendor/plaintiff has elected to retain the property and sue for damages for breach of contract and therefore the provisions as to resale are not engaged. In Real Estate Securities Limited v Kew Golf Links Estate Pty Ltd [123], Lowe J stated the quantum of an agreed vendor in these circumstances was:

"The difference between the balance unpaid of the contract price and the value of the land sold and not transferred by the defendants pursuant to the contract at the time of rescission."

86 Beyond the obvious questions of fact to be resolved, there are implicit questions of law which direct the factual enquiry, such as the date at which the value of the un-transferred land is to be assessed for the purpose of the calculation. In this case, the question of whether this assessment should be made on the basis of the land being sold as an undivided whole on the one hand or as two allotments in accordance with the permit granted for sub-division but not, it seems, acted upon at this stage.

87 As the authorities show, the operation of the legal rules as to these latter points in a particular case depends crucially upon the general factual situation.

88 The plaintiff contended that the assessment of value should be made as at the date of termination [viz September 2012]. For that purpose, she relied upon the evidence of valuers Mr McLean and Mr Rann. Mr McLean provided an expert report by way of letter dated 21 November 2013 to the plaintiff's solicitors. (PCB 34-63) He assessed the subject property as being valued at $2,180,000 "as at 4 September 2012".

89 Mr Rann provided a report dated 1 October 2014 (PCB 63BF-63DV), valuing the property as at the same date. He assessed the value of the property as at that date at $2,136,000, which he rounded to the nearest hundred thousand dollars [viz $2,100,000]. (PCB 63CC-63CD)

90 In paragraph 11.1 of his report headed "Market Overview - Retrospective" (PCB 63BV), Mr Rann said:

"The residential property market has been subdued over the past eighteen months, due largely to a decline in consumer confidence which has been impacted by the global economic environment and ongoing European Debt Crisis. Buyers are still apprehensive to purchase residential property, which has subsequently softened demand levels and resulted in reportedly the largest falls in capital value experienced in Melbourne in over a decade for the year to March 2012. [Footnote: CBRE MarketView Victoria Residential, Second Quarter 2012] A market clearly in favour of the buyer prevails.

Prestige residential property is characteristically more volatile than the broader residential market, experiencing highly pronounced swings in value. In comparison, premium properties have a relatively shallow pool of buyers and therefore require longer selling periods during "bust" periods. This is illustrated in the current economic climate in the wake of the Global Financial Crisis. RP Data reported a 7% decline in premium house and apartment values nationally in 2011, compared with a drop in more affordable homes of 2.2% over the same period."

91 Mr Klotz submitted that I should accept Mr Rann's assessment of value for the purposes of calculating his client's damages.

92 The defendant called a single valuer, Mr Biggs, who provided two reports. His first report was dated 24 April 2014 (PCB 63P-63AX). He assessed the property as at that date as being valued at $2.45 million. As at 4 September 2012 he placed the value at $2.4 million. Mr Biggs provided a second report dated 11 June 2015. This report furnished valuations on different bases and as at different times.

93 On the basis that the property was sub-divided in the manner provided for in the permit issued at the direction of VCAT in 2014, as at September 2012, Mr Biggs assessed the value of the second (vacant) allotment at $800,000 and the value of the allotment with the residence at $2 million. As at September 2012, Mr Biggs assessed the value of the subject property offered as a single allotment at $2.4 million. As at June 2013 the proposed vacant lot on the proposed two lot plan of sub-division was valued by Mr Biggs at $900,000. The allotment with the house was assessed by Mr Biggs at $2 million on land of 1,690 square metres. At the same date, offered as a single site, Mr Biggs assessed the value of the subject property at $2.25 million. As at April 2015 the vacant lot sub-divided was valued by Mr Biggs at $975,000 and the part of the subject land with the house was valued at $2 million. As at the same date, he assessed the value of the allotment with the house at $2.4 million.

94 All valuers made reference to a substantial number of sales of prestige homes in the Mt Eliza area. Likewise, all of them agreed that for one reason or another none of the items of sale evidence was strictly comparable with this subject property. What seemed to me to be striking was that whilst the experts were prepared to make general commentaries upon market trends, there was little or no attempt to place the particular valuations which they offered as experts into the context of an overall market. Granted that for the reasons given by Mr Rann, the prestige market in Mt Eliza is a market unto itself which has the capacity to demonstrate greater volatility than the general residential market in metropolitan Melbourne, this lack of relationship to overall market trends was striking.

95 The values which Mr Biggs ascribes to the property, whether in its present or sub-divided state, varied over time, but his reports do not offer an explanation as to why these variations have occurred. The essence of the damages claim by the plaintiff is that the asset which was left on the plaintiff's hands after the contract was lawfully terminated by her was less valuable than it was when the sale was contracted. Nothing was suggested particular to this property which would have led to the significant fall in value which the plaintiff alleges [viz from $2.5 million in January 2012 to $2.1 million in September 2012].

96 All experts proceeded upon the basis that the sale contracted in 2012 was a proper reflection of market value, that is, that it was a fair and reasonable price. The valuers gave their evidence concurrently. During the course of that process, I put a number of questions to Mr Rann. At T136 I said:

"So insofar as you have described a value significantly less than that later in the year [viz 2012], at the end of September or the beginning of October of $2.1 million, this is really - you have concluded that there has been a significant decline in the value of the property. Can you tell me what are the matters that have led you to the conviction, despite what RP [a real estate consultancy which publishes periodic bulletins on the state of the real estate market] may have said, that there was a decline in market value for this property over that period of months in 2012?"

"Yes, your Honour. The prestige market, in the good areas of Melbourne, anecdotally, was soft at that time. It was before the Chinese or Asian buyers came into the market, which was not long after that, but nonetheless they were not in the market at that time. There have been several mortgagee sales, which is often a sign of a poor market." (L5-20)

98 There was a short digression on the subject of mortgagee auctions. I then continued:

"Just to refocus, I think you've made some observations about an anecdotal softness in the prestige market in 2012, in the Melbourne area. You've spoken of the absence of Asian buyers in 2012. Can you identify for us factors that would set the market in September 2012 out as different and lower and softer than it was in January 2012? What changed, in effect?"

"I can't answer that, you Honour. Nothing is springing to mind." (T137, L6-15)

100 In the face of that evidence, I asked myself: How is it contended on behalf of the plaintiff that the property she was left with in September 2012 was less valuable than the one which she sold in January 2012?

101 I took this up with Mr Klotz in final submissions. He said that the effect of Mr Rann's evidence was that he valued as at a particular time, and did not pay attention to percentage movements in the market, generally, or in particular markets.

102 The questions which I put, which are set out above, were specifically directed to Mr Rann. This was, however, in the process of concurrent evidence, a process in which the other experts are invited to "chip in" if they have anything to add. Neither of the other two experts drew my attention to any factors which indicated a fall in the market from January 2012 to September 2012.

103 Given the first answer which Mr Rann gave, which indicated a willingness on his part to offer opinions as to the movement of the market, generally, or sectors of the market over time, and the paragraph relative to market overview which I quoted earlier in these reasons, it is difficult to accept that he is simply indifferent to percentage movements in the market. In land valuation cases resort to percentage market changes is frequently had in analysing the effect of sales. So, a sale which is not entirely contemporary to the date at which a valuation must be made may be adjusted by either increasing it or decreasing it, having regard to evidence of movements in the market, generally.

104 In Aldi Foods Pty Ltd v Brimbank City Council [2013] VSC 294, Emerton J considered an application for leave to appeal for a determination of VCAT. The subject property was in Derrimut. The contention made by the objector to the valuation of the site for rating purposes was that there had been a 10-15 per cent decrease in the value of industrial land to the west of Melbourne after the Global Financial Crisis in 2008. Her Honour granted leave to appeal but dismissed the appeal.

105 Both counsel agreed that since all valuers accepted the $2.5 million price contracted in January 2012 as being a fair value for the subject property, it would be wrong to approach this proceeding upon the basis that the sale price of $2.5 million was a sale at a premium, which would command premium damages for the loss of the bargain. (T390, L16 - T391, L7)

106 If I put that hypothetical analysis to one side, despite being of the view, based on the evidence that I heard, there was much to be said for it, on what basis can it be contended that the land and house in September 2012 were worth less than they were in January 2012? There is no evidence of a movement in the market nor is there any evidence of any particular event which would affect the value of the building either, for instance, a significant enhancement by way of renovation or addition, or damages or deterioration.

107 In those circumstances, I believe I should accept the valuation of $2.4 million by Mr Biggs, which shows the smallest decrease in value supported by any expert, since no basis for any fall in value has been demonstrated more generally.

108 For completeness, I should say something as to the criticisms made by respective counsel of the valuers appearing on the opposite side.

109 Mr Klotz criticised Mr Biggs for failing to explain in his reports why the valuations which he offered as at various dates moved up or down. In one sense, the valuers called on his client's behalf were not susceptible to that criticism because they offered valuations only as at a single date, namely, September 2012. On the other hand, implicit in the valuations which they offered was the view that there had been a significant fall in value from the date on which the sale to the defendant was contracted in January 2012.

110 There was no explanation given by either of them as to why that should be and Mr Rann was unable, on direct questioning, to offer any explanation. Mr McLean, as a witness giving evidence concurrently, had the opportunity to furnish an explanation if he wished to do so and did not take up the opportunity.

111 Mr Biggs and Mr Isles were critical of the valuations made by Mr McLean and Mr Rann upon the basis that, as they saw it, those valuations attributed a lower value per square metre to what they said was a high quality structure on the subject property. A value more appropriate to a "project" home than to a high quality or prestige home such as the present one.

112 This sort of analysis seemed to me to place an unrealistic emphasis upon matters of hard calculation per square metre where emotional matters of impression and so forth play a far larger role in the fixation of the value of prestige residential (as distinct from commercial) properties.

113 I turn next to the question as to whether an alternative date different from the date of termination of contract should be employed for the purpose of calculating the damages.

114 This question was dealt with by Macaulay J in his recent judgment in Vouzas v Bleake House Pty Ltd [2013] VSC 534, where his Honour, having examined the leading authorities on the subject, said at paragraph [219]:

"From the authorities I have mentioned the principles I apply are as follows:

• The guiding principle is that damages are awarded to place the injured party in the same situation, with respect to damages, as if the contract had been performed;
• The usual rule is that the damages are assessed at the date of the breach;
• The rule is not to be applied rigidly, but may be modified if necessary to do justice to the parties, consistently with underlying principles, having regard to the injured party's intentions and the surrounding circumstances; and
• In addition to the guiding principle as stated, the 'underlying principles' include other established principles with respect to damages, including those in relation to the burden of proof, causation and remoteness."

115 Mr Isles submitted that I should adopt a date in 2015, as assessed by Mr Biggs, to give full effect to the consequences of the effectuation of a sub-division for which a permit was issued in 2014.

116 Mr Isles referred to a number of authorities which he said favoured that view. He referred to C&P Syndicate Pty Ltd v Reddy [2013] NSWSC [102-107] per Lindsay J; Lords v Von Thomann [No 2] [2014] WASC 320 per Beech J [159]-[172] and Ng v Filmlock Pty Ltd [2014] NSWCA 389 [14-30].

117 These authorities generally bear out the same summary statement of the position as rendered by Macaulay J in the Bleake House case. Since each case turns on its own fact, there cannot be an exhaustive statement of the circumstances in which it is proper to choose a date other than the date of termination of contract in a case such as this for the assessment of damages. Guidance may be had, however, by a consideration of the factual situations in cases where the rule has been departed from.

118 Mr Klotz submitted that the cases where the general rule has been departed from have usually been ones in which a disappointed vendor has sought to resell the subject property and, despite bona fide efforts, has either failed to resell at all or has managed to obtain a resale only at a relatively remote date from termination.

119 He submits that this vendor, who elected not to attempt to resell and did not put the property back on the market at all, is not affected by the considerations which have led to putting back the date of assessment of damages to a later date.

120 In addition to the cases relied upon by Mr Isles, Macaulay J in the Bleake House case, referred to the decision of Sir Robert Megarry in Wroth v Tyler [1974] Ch 30. His Lordship awarded additional damages to allow for the fact that a purchaser, who was deprived of the benefit of a contract to buy a property by the vendor's default, should be awarded higher damages so as to be provided with a sum sufficient to buy a comparable property to the one which had been lost on the then rapidly inflating property market.

121 In Lords v Von Thomann [2014] WASC 320, Beech J assessed damages at a later date upon the following basis:

"In my opinion, both principle and this review of the authorities support the proposition that where a buyer of land defaults and the seller terminates and puts the property on the market, if, despite the seller taking all reasonable steps to sell, no resale is effected until a substantial period later, even years, the seller's loss will generally be represented and reflected by the difference between the two contract prices." [172]

122 Beech J referred to a judgment of Dabuney J in the Supreme Court of Queensland in South Sky Investments Pty Ltd v Luppi [2012] QSC 27. At paragraphs [18] and [19], his Honour referred to the general principle that damages should be assessed at the date of breach and continued:

"Given the history of this matter, the duration of the defendants' breach and the repeated failures by the defendants to observe their obligations under the contract, it seems to me that the appropriate date for the assessment of damages is as at the date of hearing before me on 7 February 2012."

123 It is difficult to see what significance should be attached to this case as an authority on the general principle. The proceeding before his Honour seems to have been conducted on a summary basis. It was heard by his Honour on 7 February 2012 with judgment delivered on the 20th of that month. The notice to complete, which led to the termination of the contract by the vendor, was served as recently as 15 November 2011 and required settlement on 15 December 2011. It was the defendants' failure to settle on 15 December 2011 that led to the application before his Honour for assessment of damages on a default basis. The defendants were not in attendance. Given that the Christmas/New Year period is, one would suppose in Queensland no less than Victoria - a period of minimal activity on the real estate market - an assessment of damages in February 2012, as against December 2011, would represent a distinction without difference.

124 The decision of the New South Wales Court of Appeal in Ng v Filmlock [2014] NSWCA 389 seems to point away from departing from the general rule that damages are assessed as at the date of termination of a sale contract in circumstances such as the present.

125 A purchaser defaulted under contract for the purchase of real estate and the vendor, as it was entitled to do, terminated the contract and sued the purchaser and guarantors for damages.

126 At trial, the plaintiff vendors did not adduce any evidence as to the value of the land as at the date of termination. The only evidence offered was the price attained in a resale taking place 13 months after the date of termination. The relevant contract provided, as did the contract in this case, that liquidated damages could be recovered by reference to the deficiency upon the sale if the resale took place within 12 months. The resale in Ng's case was not a relevant sale for the purposes of that liquidated damages clause. Gleeson JA said, at [59]:

"It needs to be emphasised that the departure from the general rule is not a matter of discretion...A vendor claiming damages assessed at a date later than 'the date of breach' must demonstrate that there are particular reasons on the facts which would make it unjust to apply the prima facie or 'usual' measure of damages."

127 The trial judge's determination was set aside and the proceeding was remitted to enable the parties to put on evidence as to the value of the land at the "date of breach". [41]

128 Similarly, the judgment of Lindsay J in C&P Syndicate Pty Ltd v Reddy [2013] NSWSC 643, where his Honour undertook an analysis to similar effect as the analysis to be found in Bleake House by Macaulay J. His Honour noted at [197] that there was room for debate as to whether the date of termination of the relevant contract was 15 June 2011 or 19 July 2011. He was of the view nevertheless that there was little to choose between the two dates and at [199] he said he was "content to proceed, as the parties have done, on the basis of the valuation evidence directed to 15 June 2011". He found that the loss sustained by the plaintiff was to be calculated at $575,000 as at 19 July 2011.

129 In Hooper v Oates [2014] Ch 287, the vendors agreed to sell their property to a purchaser for $605,000 in 2008. The purchaser defaulted. The vendors attempted to resell but failed, despite a marketing campaign lasting 14 months. They put in tenants, who vacated in late 2010, and a further attempt to sell failed. They then resumed occupation of the property themselves. The valuation evidence put the property as being valued at $600,000 at the time of termination of contract but, by 2010, the value had fallen to $495,000. The trial judge assessed damages by reference to the later and lower value. The defendant purchaser appealed to the English Court of Appeal. Lloyd LJ said, at [2014] Ch 287, 299-300 [38]:

"It seems to me that the breach date is the right date for assessment of damages only where there is an immediately available market for the sale of the relevant assets or, in the converse case, for the purchase of an equivalent asset. This is most unlikely to be the case where the asset in question is land. If the defaulting party is the buyer, much will depend on what the seller does in response to the breach, as is suggesting in Chitty on Contracts, 31st ed, para 26-014...If he resells, the buyer may be able to show that, in so doing, the seller failed to take reasonable steps to mitigate his loss, for example by taking too long, or failing to follow proper professional advice, or in some other way. Absent any feature of that kind, the eventual resale price is likely to be the figure to be set against the contract price for assessment of the damages, not because it represents the market value at the date of the breach, but because it shows what loss the seller has suffered, uncomplicated by issues of remoteness or failure to mitigate. If the property market has declined during that time, it is of no avail for the defaulting buyer to say that this should not be laid at his door. If he completed the contract, he would have suffered that decline in value, so this is part of the loss for which the seller needs to be compensated."

130 The appeal was dismissed. Leveson and Toulson LJJ concurred. This case was quite different from the present. It is an example of innocent vendors who did their level best to sell and, despite their best efforts, failed. Further, it is an instance similar to Wroth v Tyler [1974] Ch 30, where a very marked movement in the real estate market between termination of contract and trial would have led to an innocent purchaser being grossly under-compensated if the ordinary time for assessment is date of termination of contract or date of breach were adopted.

131 Hooper v Oates is quite different from the present case. First, because this plaintiff vendor took an immediate decision to retain the property and did not attempt to resell. Secondly, because there has been no gross movement in value which would lead to a distortion if the prima facie rule, that damages are to be assessed as at the date of breach or termination, were adopted.

132 This examination of the cases to which I have referred indicates that there is no "open slather" to choose whatever date for the assessment of damages might seem convenient. The emphatic statement by Gleeson JA in Ng's case, shows that departure from the prima facie usual rule requires a distinct and good reason. Delays in resale sometimes, but not always, provide that justification. They did not in Ng's case. No such consideration applies here, as Mr Klotz correctly submitted. There is no question of the absence of an available market in September 2012. The sales evidence of the valuers showed sales of prestige Mr Eliza properties in that timeframe. Lowe J in the Kew Gold Links Estate case used the date of termination for the assessment of damages even although the relevant market had ceased to function as it was in the depths of the Great Depression.

133 I accept the general contention made on behalf of Mr Isles that an award of damages which failed to take account of the benefit accruing to a plaintiff as a result of the same events which were found to constitute the breach of contract would represent an over-compensation. He relied upon a decision of Robb J in the Supreme Court of New South Wales in Harold R Finger & Co Pty Ltd v Karellas Investments Pty Ltd [2015] NSWSC 354 for this proposition.

134 Mr Klotz contended that this case provided no analogy whatsoever insofar as the matter in dispute was the loss of advantage sustained by a lessor who terminated a lease with some years to run and sought loss of bargain damages from the lessee.

135 Mr Klotz submitted that a case which dealt with the release of obligations which the parties would have owed one another for years into the future was quite different from a cash contract of sale which provided for a once and for all conveyance of a single asset.

136 I accept that the context of the Harold R Finger case is quite different from the present. Nevertheless, I agree that a benefit accruing as a result of the facts constituting the breach of contract and leading to the contract's termination are properly to be brought to account in assessing the damages recoverable by the innocent party.

137 Has there been any benefit bestowed upon the plaintiff in this case?

138 Such a finding would depend upon acceptance of the evidence of Mr Biggs as to the ability, for instance this year, to sell the two proposed sub-divided allotments which together would constitute the subject property for $2.9 million. Rejection of that hypothesis would necessarily exclude the possibility that there is any countervailing benefit for which Mrs Bill should give credit to Mr Clarke.

139 In my view, no countervailing benefit accruing to Mrs Bill has been demonstrated to exist. The plaintiff's valuers were of the view that the highest and best use for this property was sale in a single unit in its present form. Mr Biggs, in making his initial assessment, was prepared to proceed upon the same footing.

140 Certain it is that one or more, or perhaps all of the valuers, proceeded on that basis because of a mistaken view, based upon the "Grimwade Covenant" that sub-division was legally impermissible.

141 The determination of VCAT gives lie to that. Nevertheless, this clarification did not lead either of the plaintiff's experts to modify their opinions and accept that sub-division was the highest and best use. If a piece of land has sub-division potential, whether it has in fact been sub-divided or not, and whether a permit for sub-division has been granted or not, that potential should be reflected in the value ascribed to the land in accordance with classic valuation principles.

142 In the famous case of Spencer v The Commonwealth [1907] HCA 82; (1907) 5 CLR 418, 441, Isaacs J, as he then was, said:

"To arrive at the value of the land [at the relevant date], we have, as I conceive, to suppose it sold then, not by means of a forced sale, but by voluntary bargaining between the plaintiff and a purchaser, willing to trade, but neither of them so anxious to do so that he would overlook any ordinary business consideration. We must further suppose both to be perfectly acquainted with the land and cognizant of all circumstances which might affect its value, either advantageously or prejudicially, including its situation, character, quality, proximity to conveniences or inconveniences, its surrounding features, the then present demand for land, and the likelihood, as then appearing to persons best capable of forming an opinion, of a rise or fall for what reason soever in the amount which one would otherwise be willing to fix as to the value of the property."

143 In the other landmark Australian case on land valuation, namely, Turner v The Minister of Public Instruction [1956] HCA 7; (1956) 95 CLR 245, the High Court proceeded upon the footing that the compensation payable for the resumption of a single piece of land should reflect the potential for its sub-division even although no sub-division had in fact been undertaken and no permission from the local authority for the sub-division had been provided, subject to the allowance by way of reduction of the costs of the sub-division.

144 Dixon CJ said, as to the situation of the subject land at the date that the valuation was to take place:

"It was necessary to survey it, to prepare plans for sub-division, to obtain the consent of the local authority, to make streets or roads and then place it upon the market. As the land stood it was incapable of sale and sub-division and it was necessary to make improvements or alterations in its physical condition before the sub-divisional prices could be obtained." [1956] HCA 7; (1956) 95 CLR 245, 269 [emphasis added]

145 Reflection of this land's sub-divisional value did not have to await a date in 2015. In accordance with the principles in Spencer's and Turner's cases, that potential either existed or did not exist in September 2012, depending upon the view one took as to what was the highest and best use of the land at that time.

146 In accordance with the principles in Turner's case and Spencer's case, a valuer valuing in September 2012 would be expected to allow for the possibility of the sub-division for which a permit has now been granted. That potential should lead to an increase in price if sub-division represented the highest and best use as at that date.

147 None of the valuers who valued the property proceeded on that basis. It was only when the fact of the sub-division permit came to the attention of the defendant and his advisers that Mr Biggs was asked to go back and revalue on a different basis.

148 In my view, the highest and best use of this property remains its sale as a prestige residence on a single allotment. Having regard to the lack of progress made in selling the property in the period 2009 to 2012, I believe the suggestion that the "rump" of the property with the residence erected upon it commanded a price of $2 million, either in 2012 or 2015, is unrealistic. I therefore put the sub-division issue to one side. Once one does this, there is absolutely no reason to seek to assess damages other than as at the date of the contract termination.

149 It will be recalled that the plaintiff seeks to recover $65,258.70 at a rate of $113.10 per day from 30 September 2012 to 30 April 2014. This award of interest is said to be authorised by the decision of the High Court of Australia in Hungerfords v Walker. It represents what the Plaintiff claims would have been earned upon the investment of the balance of purchase price of the subject property at settlement after having paid out the mortgage registered on title at $426,000 and $792,000 being the balance of purchase price for a "down sized" residence which Mr Bill had contracted to purchase elsewhere in Mt Eliza.

150 The rate of interest nominated for the calculation was four per cent, which was said to be a fair average of the rates available to investors on bank deposits over the period 2012-2014.

151 In Hungerfords v Walker, the defendant accountancy firm had been retained to prepare partnership and individual tax returns for the plaintiffs for the income years 30 June 1974 to 30 June 1981. The returns were defective in that they miscalculated the deductions allowable for depreciation. The result was that the partnership returned a greater quantum of assessable income than was proper in accordance with the Income Tax Assessment Act 1936, and each of the partners therefore paid excessive tax upon his or her share.

152 Some of the overpayments could be recovered but those beyond the previous three year period were, by statute, immune from being re-opened. It was found that the plaintiffs overpaid their income tax for the financial years ended 30 June 1975, 1976 and 1977 in a total of $47,469.62.

153 The Full Court of the Supreme Court of South Australia, on appeal from the trial judge, awarded interest on the amount of the overpayment of tax at a compound rate of 20 per cent per annum, having regard to the commercial rates which the partnership was required in the relevant years to pay upon its borrowings. The accountants then appealed to the High Court of Australia.

154 Before the High Court it was contended that statutory provisions in the South Australian Supreme Court Act 1935 for the payment, in certain circumstances, of interest upon debts and unliquidated damages. These provisions did not authorise the award of compound interest. It was submitted that these provisions exhaustively stated the entitlement of a plaintiff to recover interest on damages as part of his, her or its judgment against a tortfeasor or contract breaker.

155 The High Court of Australia dismissed the appeal. Dawson J dissented. The principal judgment was delivered by Mason CJ and Wilson J. They noted that in 1893 the House of Lords in the case of London, Chatham & Dover Railway Co v South Eastern Railway Co (1893) AC 429 gave a decision which was regarded as establishing that:

"In the absence of any agreement or statutory provision for the payment of interest, a court has no power to award interest, simply or compound, as compensation for the late payment of a debt". [1989] HCA 8; (1989) 171 CLR 125, 138.

156 Their Honours conducted a lengthy analysis of the common law authorities on the subject over the century, as well as examining the precedents in Admiralty on the subject. They concluded that independently of statute, it was open to a court in appropriate circumstances to award interest as part of a damages or debt judgment to allow for the plaintiff being "out of his money" with respect either to a judgment for a debt or damages. Their Honours said:

"We see no reason for allowing the reluctance of the common law to extend to cases where the defendant's breach of contract or negligence has caused the plaintiff to pay away or the defendant to withhold money and, as a result, the plaintiff has been deprived of the use of the money so paid away or withheld. The recovery of compensation for the loss may be ascribed to the operation of the second limb in Hadley v Baxendale. However, we would prefer to put it on the footing that it is a foreseeable loss, necessarily within the contemplation of the parties, which is directly related to the defendant's breach of contract or tort." [1989] HCA 8; (1989) 171 CLR 125, 149

157 It will be seen that the rule exemplified in Hungerfords v Walker's case authorises the award of interest simple or compound in augmentation of the basic component of a judgment for debt or damages as does statutory interest and augmentation of the basic judgment amount calculated by reference to that basic judgment amount. The basic amount of the judgment is the "principal sum" upon which the interest awarded is calculated.

158 Once analysed in that way, it can be seen that the Hungerfords principle has no application to, and cannot directly justify, the award of interest which is sought here. The "principal sum" for the calculation of interest in this claim is not the amount of damages or debt which would be awarded in the judgment, but rather the balance of purchase price after deduction of a number or liabilities which the plaintiff would necessarily have had to meet. This "principal sum" is, for reasons explained relative to the claim for interest under the terms of the Contract of Sale, a sum derived from the purchase price of the subject property.

159 The deposit aside, this purchase price was payable as a concurrent obligation upon the transfer of title to the subject property. That conveyance did not take place and, as a result of the termination of the Contract of Sale in September 2015, it will never take place. This purchase price never became unconditionally payable. From and after 30 September, it was not even conditionally payable because the contract had been terminated. Hungerfords v Walker provides no support for the award of interest on this amount.

160 The award of the interest claimed would not only be without support from any precedent but also in the teeth of the compensatory principle which underlies the award of damages. The strategy which the plaintiff intended to implement had her family "downsizing" to a more modest residence in the same area and deriving income from the surplus derived by disposal of their much larger house (the subject property), which would provide an income cushion when her husband was in ill-health and apparently unable to resume gainful employment in the business and investment world.

161 The price for obtaining that buffer was the disposal of the subject property. Award of the amounts claimed would provide the plaintiff with the income buffer without her having disposed of the big house. She would be allowed to eat her cake and still have it. The claim allegedly brought under the principle of Hungerfords v Walker fails.

162 The plaintiff claims the balance of two amounts said to be owing under the Addendum Agreement: $63,000 being the complement of the $88,000 compensation for a forfeited deposit on the Fulton Road property after deduction of the $25,000 already paid, and $15,000 for legal and other costs.

163 As to the status of the Addendum Agreement, I accept the submission of Mr Isles for the defendant that it should be regarded as, in substance, a variation to the principal contract. He took me to the definition of the word "addendum" in the New Oxford Dictionary as being:

"noun (pl. addenda) 1 an item of additional material added at the end of a book or other publication. Origin: late 17th century: that which is to be added, gerundive of addere."

The sense of a gerundive in Latin is "requiring to be" or "fit to be".

164 Mr Isles submitted that in the events that occurred the Addendum Agreement never came into force. He relied on the terms of paragraph 5, which states:

"The Purchaser irrevocably agrees to pay the sum of $88,000 to the Vendor as and for the vendor's damage in respect of the Rescission of the Fulton Road property, the payment to be made by way of either a Bank Cheque in favour of the Vendor or cleared funds for the credit of Lardner-White Pty Ltd Law Practice Trust Account in the amount of $25,000 with the balance of $63,000 to be paid in likewise manner by no later than close of business on 30 September 2012. The parties agree that payment of the aforesaid sum by the Purchaser to the Vendor is a condition precedent to give effect to this Addendum and the failure by the Purchaser to make payment of this sum by close of business on 4 September 2012, will render this Addendum to be of no force and effect and the Vendor's rights under the Rescission Notice already issued will remain unaffected."

165 Mr Isles submitted that since the $88,000 had not been paid, rather only the $25,000 first instalment, the condition precedent to liability under the indemnity agreement never took effect.

166 This interpretation entails construing the words "aforesaid sum" in the second half of the clause as referring to the payment of the entire $88,000. The clause, as its terms show, provides for that amount to be paid in two instalments. The condition precedent is said to be satisfied by the purchasers making payment of "this sum [viz the aforesaid sum] by close of business on 4 September 2012...".

167 The wording of the clause is regrettably obscure but the words just quoted ultimately make it clear that the "aforesaid sum" referred to is the $25,000, not the entire $88,000. The condition precedent has been satisfied.

168 Mr Klotz relied on Clause 4 of the agreement which also deals with the $88,000 in the following terms:

"The Purchaser acknowledges that the Vendor has suffered damages in an amount of $88,000 in respect of the purchase of a property in Fulton Road, Mt Eliza, which amount the Purchaser acknowledges is a debt due, owing and payable by the Purchaser to the Vendor as at the date of this Addendum."

169 Mr Klotz submitted that the balance of the $88,000 [viz $63,000] was a "debt" and as such was not properly to be regarded as liable to offset against the amount of the forfeited deposit.

170 It will be recalled that Clause 28.4 of the general terms of the contract provides:

"(e) Any determination of the vendor's damages must take into account the amount forfeited to the vendor."

171 The majority of the New South Wales Court of Appeal in Carpenter v McGrath found that damages awarded under the contract of sale must necessarily be offset against the amount of any forfeited deposit.

172 Mr Klotz submitted that his contention that "debts" were not required to be deducted from the deposit was in accordance with a decision of the Trial Division of the Supreme Court in Portbury v Mackali; but the decision is, on this point, equivocal because the whole of the deposit had been subsumed in an offset against a deficiency in value of the property at termination as against the original sale price.

173 Professor Butt, in his work for Standard Contract for Sale of Land in New South Wales, 2nd Edition (1998), deals with these issues. At page 522 [9.213] he said:

"However, the deposit is set off only against those damages which, in accordance with the general Hadley v Baxendale principles...may be said to flow from the purchaser's breach. It is not set off against amounts recovered from the purchaser under claims under the contract which have nothing to do with the purchaser's breach [he referred to Carpenter v McGrath] since the obligation to pay those amounts does not flow from the breach. Examples are: occupation fees payable under a special provision in the contract, and the costs of repairing damage to the premises under clause 18 [of the standard contract for sale of land in New South Wales]."

174 It is clear that the $88,000 is an amount which, other things being equal, would have been recoverable by the plaintiff under the terms of Hadley v Baxendale subject only to the complication that the plaintiff vendor is Mrs Bill, and the purchaser under the forfeited contract for Fulton Road was Mr Bill - a point which I did not understand Mr Isles to rely upon.

175 In the following paragraph, the professor stated:

"The parties to a contract may agree that the deposit is not to be set off against the damages recoverable by the vendor. Such an agreement would take effect according to its terms (subject to the court's power to relieve against forfeiture, or to order a refund [of the deposit] under s55 (2A) of the Conveyancing Act 1919), allowing the vendor both deposit and damages."

176 He then proceeded to consider whether Clause 9 of the standard contract would amount to such an agreement and concluded on the basis of Carpenter v McGrath that probably it was not.

177 With some hesitation, I conclude that the Addendum Agreement is to be regarded as `an agreement to the contrary' and to remove the obligation to offset the $63,000 balance against the forfeited deposit. Ideally, the matter could have been made absolutely plain by stating that conclusion in terms in the agreement. Regrettably, the matter is not so clear.

178 On the other hand, what is plain is that the parties contemplated that the sale would proceed to settlement on or before 30 September and, in addition to the purchaser's paying the balance of the purchase price, he would also pay the balance of the $88,000 [viz $63,000]. The $63,000 was therefore rendered payable whether there was a further default or not. This, and the characterisation of it as a debt due and payable, in my view, severs the nexus which it would otherwise have with the deposit as an earnest of good faith in performance of the contract. The $63,000 is recoverable and is not to be offset against the forfeited deposit. An alternative analysis leading to the same conclusion is to see the effect of the Addendum Agreement on this point to be to render the $88,000 payable by the purchaser, Mr Clarke, independent of any further default.

179 The other amount said to be owing under the Addendum Agreement was the sum of $15,000, which was provided for in Clause 8 in the Addendum in the following terms:

"The Purchaser agrees to pay the sum of $15,000 as and for the Vendor's legal, conveyancing and other costs, which amount will be adjusted in favour of the Vendor at settlement."

180 Generally, the same considerations which have led me to the view that the $63,000 ought not be offset against the forfeited deposit would seem to lead to the same conclusions relative to the $15,000.

181 Mr Isles has observed, however, that in contrast to the provision in Clause 4 relative to the $88,000, Clause 8 does not render it a "debt payable". Again, however, it is an amount which is to be paid even if the contract is performed without further default by the purchaser and, in my view, the nexus between it and the deposit is therefore severed and no set off is required or authorised.

Interest under National Australia Bank mortgage

182 It will be recalled that the plaintiff sought an award of $44,711.83 being interest paid by her under a loan from National Australia Bank for the period 30 September 2012 (the termination of the contract) until 30 April 2014 (which was the first scheduled trial date). The basis for this claim was stated to be:

"The defendant's failure to complete the purchase on 30 September 2012 resulted in the loss of use by the plaintiff of the sum of $426,000. This sum was the balance outstanding on the NAB mortgage loan and would have been applied to discharge that loan. This would have resulted in no further interest having to be paid."

183 The court book contained bank statements for the relevant account which showed total interest in the sum claimed for the relevant period.

184 In his closing submissions, Mr Isles submitted that the defendant was under no liability for this interest amount, though the foregoing paragraphs in his written outline appeared to be directed solely to the claim for interest arising under the condition in the contract, which I have dealt with earlier.

185 The defence contends that this claim for interest was recoverable, if at all, as special damages under the second limb of Hadley v Baxendale and was irrecoverable because Mr Clarke, "denied being...informed by the plaintiff at the time of the entry into the contract that such loss would be suffered". Alternatively, it was said that the payment of the interest did not arise from the breach of contract, "but was incurred in consequence of the plaintiff's decision to retain the land".

186 A similar claim for mortgage interest was unsuccessful at trial in the District Court in Carpenter v McGrath. On appeal Clarke JA said:

"The claim for interest paid by the respondents to their mortgagee did not arise because of the breach of contract. The obligation to continue paying the interest followed the decision of the respondents not to sell the property. It is wrong in principle to regard an obligation which arises because a vendor makes a commercial decision to retain a property as flowing from the breach of contract by the purchaser." (1996) 40 NSWLR 39, 44

187 Cole JA noted that by way of cross-appeal, the plaintiff vendors challenged the trial judge's rejection of a claim for monies which they paid the Commonwealth Bank as interest under a mortgage over the sale property "after the sale fell through". His Honour remarked:

"Although the claim made was only to the date of trial, in principle the vendor's claim appears to be a claim in perpetuity whilst ever they retain Mangrove Mountain. In my opinion this claim is unsustainable. The vendors had the property subject to the mortgage. Had they sold the property they would have discharged the mortgage. However, once the transaction fell through, they retained possession of the property and had the benefit of it. One could not claim as damages the moneys payable under a mortgage on the property without bringing into account the advantages or benefits of occupation of and earnings from the property. No endeavour was made to establish that loss. Continued payments of mortgage interest on a property retained after termination of a contract for default cannot in usual circumstances be regarded as a loss flowing from breach. This claim fails." (1996) 40 NSWLR 39, 72-3

188 For the reasons given by Cole JA in Carpenter v McGrath, I believe this claim fails.

189 Within 14 days of the date of these reasons the parties must bring in short Minutes to give effect to them and to deal with the question of costs. Should the parties be unable to agree, it will be necessary for them to make arrangements with my Associate for a further hearing. In the meantime, the costs of trial are reserved.