72 The Acting Master viewed the cross claim as indicating "the defendants' willingness to complete but not necessarily a willingness to abandon any claim for damages".
73 Assuming in the purchaser's favour that it was reasonable to construe the cross claim as claiming damages in addition to specific performance, the issue remains whether it was reasonable for the matter to have been left as it was during the critical period. As indicated, the mitigation issue needs to be addressed in the context of accepting that the purchaser was the wronged party but recognising that it had a "duty" to be reasonable in avoiding or mitigating its damages. On this hypothesis, the vendors had no right to damages for late completion, let alone loss of bargain. And for what it is worth, Mr Lahoud never said that he calculated the $942,750 figure on any such basis.
74 On the evidence, there were no communications on the issue during the currency of the proceedings that culminated in Windeyer J's judgment on 26 February 2002. The parties simply retreated to their corners, coming out fighting at the hearing on 13 February 2002. In these circumstances, I do not consider it to have been reasonable, in the context of mitigating the very loss now sought to be recovered, for the purchaser not to have offered to submit to specific performance simpliciter or even to have raised with the vendors whether they were pressing damages in addition to specific performance. What is clear is that the damages would then have been vastly less than the $585,500 calculated by the purchaser in June 2003. Even more to the point, I agree with Palmer J who said (at [36]):
36 I do not think that Fekala's Cross Claim for damages in addition to specific performance of the contract could have had much impact on the mind of a reasonable person in considering whether to proceed with the purchase of the Eastwood Property or forego entirely the profits which might be derived from that venture. Clearly, when Fekala filed its Cross Claim on 28 September 2001, Mr Lahoud himself did not give consideration to the matter but a reasonable person, properly advised, would have realised that as at 28 September 2001 Fekala's claim for damages, if good, would have been relatively insignificant in the scale of the transaction. Fekala could not claim damages as from 9 August or 29 August for Castle's delay in failing to complete the contract because Fekala itself was not able to complete until 12 September. If Castle had completed the contract on 28 September, when Fekala filed its Cross Claim, and paid any damages, if it were found liable, those damages could only have been to compensate Fekala for the delay in settlement between 12 and 28 September, that is, sixteen days. If the profits to be foregone by Castle in not proceeding with the purchase were truly in the order of $3.5M, damages for sixteen days' delay would have been an extremely small price to pay in exchange for such a profit. It would have been unreasonable to pass up the opportunity to earn that profit at such a small added cost.
75 The purchaser decided that its interests lay in not proceeding with the Eastwood property and this was the reason why it took the opportunity to terminate. The evidence is all one way and this conclusion is supported by all of the findings of Palmer J on causation. The vendors embrace these findings, albeit that they invoke them in the context of mitigation. From 29 August 2001 onwards, the purchaser set its face against the Eastwood venture, turning its eyes to Cammeray, but being blocked from entering into a contract to purchase Cammeray because the Eastwood vendors refused to release the deposit and continued to press the completion of the Eastwood contract. The vendors contend, with justification, that this tends to undermine Mr Lahoud's stance that he genuinely and reasonably held back from going on with Eastwood because of the pendency of the vendors' claim for damages.
76 The other matter referred to by Berecry AM was Mr Lahoud's fear of litigation by the disgruntled mortgagor. Indeed, this arguably was the critical matter, having regard to the Acting Master's statement (at [62]) that in his opinion, but for the threatened litigation, there would have been no reasonable basis for the plaintiff not to have completed the purchase.
77 I do not consider this to have been a reasonable ground for declining to complete. For one thing, the mortgagor's threats had fallen silent by 12 August 2001 at the latest. There is nothing to show that the mortgagor ever learnt that the purchaser's termination of the contract had been put in issue. In any event, the threat was to hold up completion of the contract itself. It follows that, if the contract was completed pursuant to a consensual Supreme Court decree for specific performance, then the very deed that Mr Lahoud says he fears might be blocked would be done before the mortgagor could interfere.
78 There is no suggestion that the purchaser was complicit in the putative wrongdoing of the mortgagees/vendors. In those circumstances the disaffected mortgagor would have had to approach the Court before completion and doubtless would have had to justify any delay on its part. The risk to the purchaser was never more than that completion would be prevented (see generally Forsyth v Blundell (1972) 129 CLR 477). There was no question of the purchaser losing any right to recover damages against the vendors if completion was blocked by intervention on the mortgagor's part. The rule in Bain v Fothergill (1874) LR 7 HL 158 has been abolished in this State (Conveyancing Act 1919, s54B).
79 There is no reasonable explanation for the purchaser's unwillingness to submit to or even explore completion, the very step said to be the only thing impeding realisation of a massive profit in early 2002. After all, this was a commercial contract and the bottom line was always money (cf Payzu at 589 per Scrutton LJ).
80 Payzu involved a plaintiff's failure to accept a reasonable offer from the defendant made at a time when the defendant's breach was causing loss and/or had the potential to increase the plaintiff's loss unless remedied.
81 The "Soholt" shows that an innocent plaintiff may act unreasonably in not taking the initiative by making an offer to the defendant to accept late delivery of the contractual product at the original price. In that case, the purchaser duly cancelled a contract for the sale of a ship because the seller failed to tender the vessel in time. The purchaser suffered a loss of $US500,000 in consequence of the breach. As Sir John Donaldson MR pointed out (at 608) no question of mitigation arose at the termination stage. But the damages were not awarded because the purchaser was found subsequently to have unreasonably failed to mitigate its loss. This finding was based on the conclusion (at 609) that the vendor would have accepted an offer by the purchaser to purchase the vessel at the original price subject to any claim it might have had for the delay. The Master of the Rolls had earlier pointed out (at 608, emphasis in original) that:
As a matter of causation, [the loss of $US500,00] unless avoidable by some reasonable further action was directly attributable to the sellers' breach of contract. The learned Judge held that it was in fact avoidable by further action and that such further action would have been reasonable. It is nothing to the point that this further action might , in effect, have reversed the cancellation of the old contract. We say might because the new contract which the learned Judge held that the buyers could and should have made might not have been on the same terms as to price although, on the evidence, he held that it would have been.
Whether a loss is avoidable by reasonable action on the part of the plaintiff is a question of fact not law.