G W Sinclair & Company Pty Ltd v Cocks [2001] VSCA 47 - VSCA 2001 case summary — Zoe

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G W Sinclair & Company Pty Ltd v Cocks [2001] VSCA 47

[2001] VSCA 47

Court of Appeal (Vic)|2001-04-26|Before: BROOKING, CHARLES & BUCHANAN, JJ.A.

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At a glance

Source facts

Court

Court of Appeal (Vic)

Decision date

2001-04-26

Before

BROOKING, CHARLES & BUCHANAN, JJ.A.

Source

Original judgment source is linked above.

Judgment (91 paragraphs)

[1]

[2001] VSCA 47

[2]

Damages - Assessment - Sale of land - Deprivation of commercial opportunity - Future or potential events - Likelihood of occurrence - Prospect of benefit to be established on balance of probabilities - Relevance to measure of damages - Calculation of value of loss - Costs of proceedings against third party -Whether recoverable as damages.

[3]

John Robert Cocks and his wife, Robyn Cocks (the respondents) brought proceedings as plaintiffs in the County Court against the first defendant, Matlock & Associates Pty. Ltd. ("Matlock") claiming payment of the balance of a deposit payable under a rescinded contract for sale of the Cocks's home at 40 Monomeath Avenue, Canterbury. In September 1995 the respondents joined their estate agent, the appellant ("Sinclair & Co."), as a second defendant claiming damages for misleading and deceptive conduct, and also damages for breach of the terms of Sinclair & Co.'s retainer as real estate agent in connection with the sale of the property. In June 1996 Sinclair & Co. commenced a second action against Mr and Mrs Cocks in the Magistrates' Court for the balance of its commission and marketing expenses it claimed were owed as a result of the sale of the property by the respondents to Matlock. That second matter was later uplifted to the County Court and in June 1998 was consolidated with the proceeding brought by Mr and Mrs Cocks and thereafter was treated as a counterclaim.

[29]

"In presenting that [contract note] without explanation in clear terms as to that difference and in particular without drawing attention to the omission of these two terms, I believe Sinclair & Co. was acting not in accordance with its instructions. In any event it was not acting in what I believe on the evidence, especially of Mr Courtney but also of Mr Pratt, was the path which in the same circumstances would have been taken by the reasonably careful estate agent. When he draws the contract differently from the one which is part of his instructions, the agent assumes the duty of fully informing his principal as to what the differences are and why they are made. In failing so to inform Sinclair & Co. was in breach of its duty. The agent failed properly to point out to the principal the risk to the principal presented by special condition 1 ["the special condition"]. The agent gave confusing, if not contradictory, explanations of special condition 1. The agent failed to point out that the contract note did not include guarantees and the risk which that presented to the vendor. The agent recommended that the principal accept an offer of $880,000 supported for three months by a part deposit of only slightly more than 1% of the price and failed to point out the risk to the vendor, thereby assuaging Mr Cocks' own expressed concern. Had the agent properly drawn attention to the differences between the contract note and the D.M.B. contract, I am satisfied that the Cocks would not have signed the contract note without taking the advice of their solicitors. Such advice in turn would have probably resulted in their not signing the note at all. Accordingly, I am satisfied that the agent's breach of duty was a cause of the damage complained of. In my view the Cocks are entitled to compensation consisting of the expenses which were wasted by reason of their having entered into the contract plus the value of the lost chance of marketing and possibly selling their property in the four months before 10th March 1995. I do not accept the argument that no damage flowed from the agent's breach of duty. Causation seems to me to be established. The Cocks wanted to sell, they were in no particular hurry, but they did want to sell. They eventually sold at the end of 1995 for $805,000. Settlement was in April 1996. The evidence indicates that up to February or March 1995 the market in the area was relatively steady and that thereafter it declined. Their chance of selling before March was real and therefore not worthless."

[43]

On the other hand Mr Jones stated several times his opinion that in the period from October 1994 to February 1995, the market value of 40 Monomeath Avenue was between $850,000 and $880,000. His evidence was that he was very familiar with the area. He had indeed been contacted by Mr Sinclair after Matlock made its offer of $880,000 for the property, and had expressed his view to Mr Sinclair that it was a "pretty good offer". During his evidence he stated his opinion as to the real estate market in general and specifically in relation to 40 Monomeath Avenue that in 1995, the market started to turn downwards for a variety of reasons, such as the coming of a Federal election and the fact that the general economy in Australia had flattened out, but he said that from October 1994 to early 1995, the market was healthier in that period. Asked whether there was any reason why the property would not have sold for approximately its market value had it remained on the market between October and February 1995, Mr Jones replied "I can't see why it wouldn't have, there was a long enough time to find another buyer." When his attention was drawn to the fact that it had been proposed to withdraw the property from auction in October because of the seeming unlikelihood of the property selling, he gave evidence that properties do sell after auction, that was a known fact, and repeated his evidence that there was "I would say a better than 50% chance" of a sale of the property being achieved at approximately the market value of the property. Earlier in his evidence, Mr Jones had spoken of persons who had shown no interest at auction often buying properties, and said that whereas 75% of properties sell at auction, another 20% sell within four weeks after auction. Pressed vigorously in cross-examination by counsel for Sinclair & Co., Mr Jones repeated his evidence that the market value of the property in October 1994 to February 1995 was anywhere between $850,000 and $880,000, that the principal drop in price occurred in 1995, that the market generally diminished in value from February 1995 to December 1995 while he was marketing the property, and repeated his evidence that there had been a better than 50% chance of selling 40 Monomeath Avenue over the period from October 1994 to February 1995.

[46]

Counsel for the appellant argued that there was clear evidence that throughout the period from 27 October 1994 to 10 March 1995 the respondents would not have been prepared to sell the land for less than $880,000. The argument was as follows. Mr Cocks had given evidence that if he and his wife had not sold the land to Matlock, they would have cancelled the auction. They would then have waited to see what happened with the planning issues. Two other properties in Monomeath Avenue were on the market for sale over the period and neither sold. There had been no other offer made for 40 Monomeath Avenue, and Mr Sinclair had advised the respondents that the auction should be cancelled, which advice they had accepted. The offer made by Matlock was the only offer that had been received during the marketing period prior to 29 October 1994. Mr and Mrs Cocks had both agreed in evidence that they were in no hurry to sell. Each had a belief that their property was worth no less than $890,000, and that, without good cause, such as advice from Mr Sinclair who would have remained their agent at least until the end of November 1994, they would not have accepted less. Mr Jones also had expressed his opinion that the property would sell in the early to mid-$900,000 range. Furthermore emphasis was placed on the evidence given by Mr Jones that he had commenced marketing the property in February 1995, and that he had received no offer above $800,000 until the offer of $805,000 was made and accepted by the respondents in December 1995. All of this, so it was said, confirmed that there had been no opportunity lost during the period October 1994 to March 1995 resulting from the failure to market the property over that period. The submission continued that it was irrelevant that there may have been a 40% chance of selling the land at a price of $862,000 when the fact was that the respondents would not have exploited that chance. The existence of the loss of a chance had, therefore, not been established on the balance of probabilities.

[53]

I have already mentioned the appellant's next argument that far from losing the chance of selling the property, Mr and Mrs Cocks made their own informed decision to pursue Matlock for an over-market price premium, and that, having done so, they could not later say that any loss of a chance was caused by the negligence of the appellant. Their decision to pursue the greater price at an above-market value could not be put against the appellant. I do not accept this argument. The judge's findings show that the appellant's breaches of contract and negligence had placed Mr and Mrs Cocks in a very difficult situation. Sinclair & Co. had first given the respondents advice as to the value of 40 Monomeath Avenue which doubtless encouraged them to place an estimate on its worth which was somewhat higher than the real market value of the property. Sinclair & Co then urged them to enter into a contract for a price less than the minimum figure at which it had assessed the property's value, on a contract which did not contain a number of important terms which DMB had recommended, with a purchaser from whom ultimately they were unable to recover damages, and on a contract the terms of which the judge found were open to serious legal question. The contract was, however, found to be enforceable and damages of more than $200,000 were awarded against Matlock. To the argument that the plaintiffs had made an informed choice, the answer given by the judge, accepting the evidence of a most experienced solicitor, Mr Geoffrey Gibson, was that had the plaintiffs not pursued the purchase of Matlock, they would have exposed themselves to an attack by the appellant on the basis of failure to pursue the person primarily liable. In my view the judge was perfectly entitled to accept this evidence and to conclude as he did that the choice to pursue Matlock provided no answer to the claimed loss of a chance. It surely does not lie in the mouth of this appellant to complain that the respondents made an "informed decision to pursue Matlock for an over-market price premium". The appellant had itself encouraged the respondents to expect a price over $900,000. The evidence of its own valuer at trial was that had the property continued to be marketed after 3 January 1995, the respondents should have been able to obtain a price similar to $880,000 at that time. Mr Jones had given evidence that this price was "full but fair" and close to the market price. In my view there is no substance in the appellant's argument that the respondents should be held to have gone on at their own risk in pursuit of a "bigger prize", that is, an over-market price premium.

[56]

"When liability has been established and a common law court has to assess damages, its approach to events that allegedly would have occurred, but cannot now occur, or that allegedly might occur, is different from its approach to events which allegedly have occurred. A common law court determines on the balance of probabilities whether an event has occurred. If the probability of the event having occurred is greater than it not having occurred, the occurrence of the event is treated as certain; if the probability of it having occurred is less than it not having occurred, it is treated as not having occurred. Hence, in respect of events which have or have not occurred, damages are assessed on an all or nothing approach. But in the case of an event which it is alleged would or would not have occurred, or might or might not yet occur, the approach of the court is different. The future may be predicted and the hypothetical may be conjectured. But questions as to the future or hypothetical effect of physical injury or degeneration are not commonly susceptible of scientific demonstration or proof. If the law is to take account of future or hypothetical events in assessing damages, it can only do so in terms of the degree of probability of those events occurring. The probability may be very high - 99.9% - or very low - 0.1%. But unless the chance is so low as to be regarded as speculative - say less than 1% - or so high as to be practically certain - say over 99% - the court will take that chance into account in assessing the damages. Where proof is necessarily unattainable, it would be unfair to treat as certain a prediction which has a 51% probability of occurring, but to ignore altogether a prediction which has a 49% probability of occurring. Thus the court assesses the degree of probability that an event would have occurred, or might occur, and adjusts its award of damages to reflect the degree of probability. The adjustment may increase or decrease the amount of damages otherwise to be awarded ... The approach is the same whether it is alleged that the event would have occurred before or might occur after the assessment of damages takes place."

[63]

Furthermore, the appellant's argument assumed a fall in market value and price on a declining scale of something like mathematical precision. There was little warrant for this in the evidence. Mr Jones had stated his belief that the market had generally diminished in value from February 1995 to December 1995 while he was marketing the property. The figure of 1 to 2% per month came from Mr Bourke and his evidence of a continuing decline in value of this nature had been based only on his knowledge of two unnamed properties where a reduction in value had occurred in 1995. Although the judge accepted Mr Bourke's assessment of the market value of the property in October 1994 as at $862,000, this was of course no more than consistent with the evidence of Mr Jones. His Honour plainly did not accept Mr Bourke's evidence of a mathematical decline, since he also pointed out that, if this were accurate, it should have produced the result that Mr and Mrs Cocks would only have received a price in December 1995 of $749,940. Having regard to Mr Jones' evidence, an assessment that by the end of May the value of the property had only fallen to $832,000 also seems generous to the appellant. Furthermore there was the evidence of Mr Sinclair himself to consider. On 3 March 1995, one week before the contract for sale of the property had been rescinded Amendment L44 to the Camberwell Planning Scheme had been approved by the Minister for Planning, creating a single dwelling covenant as a planning overlay in respect of most properties in Monomeath Avenue, including the Cocks property. Mr Sinclair's evidence was that the effect of the Minister's action was, at that time, to devalue the market for properties in Monomeath Avenue 10 to 15 per cent. Mr Sinclair explained in detail his reasoning for this decline in value, all of which suggested that the decline in value would have been immediate rather than gradual. A 10 per cent decline in value at the start of March 1995 would have accounted for virtually the whole difference between the sale price actually agreed with Matlock, as against the later sale at $805,000 in December 1995.