HEARSE & ANOR v PALLISTER & ORS

HEARSE & ANOR v PALLISTER & ORS - [2008] NSWSC 504 - NSWSC 2007 case summary — Zoe

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(c) Affidavit of Phillip Baden Hearse sworn on 23 January 2007. 4 Certain of the primary facts were established by the affidavit of the plaintiffs' solicitor, Peter Jonathan Lander, sworn 16 January 2007. Mr Lander originally acted for the plaintiffs when they purchased the property at 83 Cutler Road, Clontarf in 2002. 5 On 13 December 2004, Mr Lander received a sales advice notice from estate agent, Lionel Busquets, which advised that the property had been sold on that date. There was only one purchaser referred to in the notice, Vanessa Joan Pallister, the second defendant. 6 On 13 December 2004, Mr Lander also sent a draft contract in respect of the sale to Mr Dennis Staunton, solicitor, of Staunton & Thompson, lawyers of Manly. The letter referred to the fact that his clients were anxious to exchange as soon as possible and accordingly requested that the purchasers treat the matter as urgent. 7 On 16 December 2004, Mr Staunton wrote to Mr Lander advising that he was ready to exchange subject to three matters. The third was:- "3. Purchaser: Vanessa Joan Pallister will probably be added as a joint purchaser pursuant to s.18(3) of the Duties Act prior to completion." 8 A handwritten note on the letter recorded "2 & 3 All Agreed". The document with the notation was faxed back to Staunton & Thompson. 9 On 16 December 2004, a facsimile recorded that "contracts have now been exchanged". 10 A purchasers' solicitors certificate dated 16 December 2004 given by Mr Staunton pursuant to s.66W of the Conveyancing Act 1919 recorded that Mr Staunton had explained to the first defendant, Mark James Pallister, the effect of the certificate for the purchase of the property and that there was no cooling off period in relation to the contract. 11 On 17 December 2004, Mr Staunton sent the purchasers' signed contract. The contract for sale of land was dated 16 December 2004. The name of Vanessa Joan Pallister was ruled through in the nature of a deletion and the name Mark James Pallister handwritten in by way of substitution, the changes being initialled. The purchase price was recorded as $3,800,000, the deposit as $50,000 and the balance, $3,750,000. The date for completion was recorded as 20 February 2005. 12 On 19 January 2005, Staunton & Thompson wrote to Mr Lander enclosing an unstamped Transfer for execution by the vendors and requesting it be returned for stamping purposes. The letter added:- "Please note that we have added Mrs Pallister as a joint purchaser pursuant to s.18(3) of the Duties Act 1997. Please amend the counterpart contract accordingly." 13 The history of events whereby Mrs Pallister was added to the contract of sale has been outlined having regard to the defence and first cross-claim by her wherein she disputed that Staunton & Thompson had authority to act as her solicitor and, in particular, to add her name to the contract as purchaser. 14 On 7 February 2005, Staunton & Thompson sent a facsimile to Mr Lander enclosing draft figures for settlement scheduled for Monday 21 February 2005 and requesting cheque details. The "Settlement Adjustment Sheet" recorded the amount due on settlement as $3,751,059.64. 15 On 16 February 2005, Mr Lander confirmed the appointment to settle on Monday 21 February 2005 at 12 noon at National Australia Bank, Level 1, corner of King and Elizabeth Streets, Sydney. The letter advised cheque details. 16 In the affidavit of Robin Hearse sworn on 23 January 2007, Mrs Hearse stated:-

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• He was going to pursue the question of bridging finance. 18 In an email from Mrs Hearse to Mr Pallister, she advised that the plaintiffs had arrived in Perth with no accommodation as a purchase of property in Perth had not completed on time. 19 On 22 February 2005, Staunton & Thompson wrote to Mr Lander as follows:- "Our clients have informed us by e-mail that their Perth solicitors are experiencing difficulties settling the sale of some properties in Perth which are required in order to effect settlement of the above purchase. Mr Pallister is in the process of arranging bridging finance if the settlements do not occur and in case it is needed. We shall contact you when we have received further information from our clients." 20 On 22 February 2005, Mr Lander wrote to Staunton & Thompson serving a Notice to Complete addressed to Mr and Mrs Pallister. The letter advised that interest was required pursuant to Condition 2(b) of the contract. The notice appointed 12 noon, Wednesday 9 March 2005 for completion of the contract, time being expressed to be of the essence of the contract. 21 On 22 February 2005, Mr Pallister sent an e-mail to Busquets, agents, in which he referred to the delay in settling on two properties which were required to complete the purchase. He apologised for the delay which he said "was not of our making". 22 Mr Lander wrote again on 25 February to Staunton & Thompson. In the letter it was stated:- "… It appears from your client's email of this morning that he is prepared to make a significant payment of funds immediately to our clients, to assist them in meeting their own commitments in Western Australia. Kindly advise whether your client will do so and the amount of such further payment of deposit. Any further payment will be accepted by our clients entirely without prejudice to our clients' Notice to Complete served earlier this week and also without prejudice to our clients' claim for interest. …" 23 On 28 February 2005, Mr Lander wrote a without prejudice letter to Staunton & Thompson in the following terms:- "As indicated in our last telephone discussion, our clients are in urgent need of funds with which to meet certain commitments in Western Australia as soon as possible. Our clients have therefore instructed us to advise that they are prepared to extend the period of their Notice to Complete until 31 March 2005 on the following conditions:- 1. Your clients to pay balance of deposit of $330,000 to us on our clients' behalf by Wednesday 2 March.

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Failure by the defendants to appear at the hearing 32 As earlier stated, on 7 November 2007, there was no appearance by or on behalf of the defendants when the proceedings were called on for hearing. The first and second defendants were called outside the Court. Again, there was no appearance. 33 As noted above, the proceedings had been set down for hearing well prior to the Notice of Ceasing to Act being filed on 25 September 2007. 34 Mr J C Thompson of counsel, who appeared for the plaintiffs, advised that Mr Lander sent by ordinary post on 30 October 2007 a letter to Mrs Pallister at the address 2 Dunara Gardens, Point Piper. He said there had been no response to the letter and that his instructions were that it had not been returned. 35 Mr G Curtin of counsel, who appeared for the third to fifth defendants, advised that his solicitor had also served a notice to produce on both the first and second defendants on or about 8 October 2007 at the same address. The letter to Mr Pallister was returned to sender "Not at this address". Mrs Pallister had produced documents in response to the notice. 36 The above address, Mr Curtin advised, was the address provided by Mr Pallister to ASIC as his address when appointed a director of a company, Prestige Publishing Pty Limited. He was so appointed on 24 August 2006. Mr Curtin advised that his information was that Mr Pallister had been a director of a large number of companies and he had given various addresses, most, if not all, being in Western Australia, except for the above Point Piper address. 37 Mr Curtin further advised that the former solicitors for the defendants had confirmed that they had sent an email to Mr Pallister on 22 June 2007 informing him, amongst other matters, of the hearing dates. I note this was two days after the Court set the matters down for hearing. There had been no response to the email. 38 Mr Thompson drew attention to the fact that two affidavits sworn respectively on 6 February 2007 and 7 March 2007 filed for the defendants each referred to the Point Piper address. 39 Mr Thompson also advised that two letters dated 27 September 2007 (Marked MFI 1) were sent to each of the defendants enclosing a chronology as required by the Court Rules and a draft schedule of damages and issues. Neither of the documents or the abovementioned letter of 30 October 2007 had been returned. 40 The hearing was adjourned during the course of the morning of 7 November 2007 in order that the plaintiffs could file affidavit evidence concerning notification to the defendants of the hearing dates (transcript p.9). 41 On the resumed hearing, the plaintiffs read the affidavit of Peter Jonathon Lander sworn on 7 November 2007 and of Alexander Boyd Haslam also sworn on 7 November 2007. On the basis of the evidence in the affidavits, I was satisfied that the first and second defendants had been informed by their former solicitors of the dates for the hearing. A separate judgment was given on that aspect.

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47 Special Condition 2(b) was in the following terms:- "(b) If the purchaser shall fail to complete this contract by the completion date for any reason other than default by the vendor in respect of any obligation within the vendor's control then the purchaser shall pay interest on the balance of the purchase price and any other moneys owing pursuant to this contract computed at the rate of 10% per centum per annum from the completion date until the date that completion shall actually take place (without prejudice to all and any other rights of the vendor pursuant to this contract)… The purchaser acknowledges that it is an essential condition of this contract that interest as provided by this clause be paid to the vendor on completion." 48 Clause 9.3 of the contract provided a choice following a failed sale and subsequent resale. In accordance with its provisions, the plaintiffs/ vendors could elect to avail themselves of the "totality of the special collection of alternative rights stipulated by the contract" (thus making a claim for liquidated damages under clause 9.3.1) or they could elect to claim on the basis of "the totality of common law rights" (thus making a claim for unliquidated damages at common law under clause 9.3.2): Zografakis v McCarthy (2007) 13 BPR 24,365, [2007] NSWSC 144 at [17]; Cox v Parker (1987) 5 BPR 11,208, BC 8700930; Peter Butt, The Standard Contract for Sale of Land in New South Wales (1998, 2nd ed) at 482. Once a vendor has elected to proceed under one of the limbs of clause 9.3 (whether clause 9.3.1 or clause 9.3.2), then the vendor cannot resile from his or her decision: Jampco Pty Ltd v Cameron (No 2) (1986) NSW ConvR 55,275. 49 Whilst the further amended statement of claim of the plaintiffs, filed on 6 July 2006, pleaded clauses 9.3.1 and 9.3.2 of the contract in the alternative, the claim and submissions at hearing, Plaintiffs' submissions on quantum" (paragraph 1), were made upon the basis of clause 9.3.1. Accordingly, the plaintiffs thereby elected to claim liquidated damages in respect of the abovementioned particularised items in accordance with clause 9.3.1 and to which I now turn. 50 As to the items of claim identified in paragraph [42]:-

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(c) Interest at the statutory rate on the contract monies unpaid to the date of resale 56 The plaintiffs claimed statutory interest on the balance of purchase monies that were owing under the contract, namely, $3,750,000 and on the above interest entitlement of $18,493 totalling $3,768,493 from the date of termination up the date of resale. 57 The plaintiffs argued in this respect that there was loss of money in that amount that had been due under the contract. Mr Thompson of counsel relied upon the decisions in Cox v Parker (supra) and Webster v Havyn Pty Limited [2007] NSWSC 958; BC200707214 (unreported 31 August 2007) McLaughlin AsJ in support of the claim for interest based on the above amount of $3,768,493. 58 It is fundamental in relation to this issue that, as earlier discussed, an election was made by the plaintiffs to claim damages from the defendants on a liquidated damages basis. That was not the position in Cox v Parker. As Kearney J observed in that case (at p.7), whilst the plaintiff had set upon the course of claiming liquidated damages pursuant to the relevant clause in the contract, before reaching the point of an irrevocable election to pursue that course, he altered course to render his claim one for unliquidated damages. Accordingly, interest in that case was permitted by reference to the loss of monies (up to the date of resale) that had been denied to the plaintiff by reason of the purchasers' default in respect of a claim that proceeded upon a basis that was quite different to that in the present case. 59 The plaintiff in Webster (supra) brought his claim for damages not under clause 9.3.1 but under clause 9.3.2 of the contract which provided that he was entitled to "receive damages for breach of contract". McLaughlin AsJ, accordingly, stated that it was not necessary for him to consider clause 9.3.1. The award of interest to the date of resale based upon the deprivation of the outstanding balance of the purchase price was, accordingly, made in accordance with common law principles that do not, in the circumstances earlier explained, apply in this case. 60 Accordingly, the plaintiffs' claim for interest to the date of resale should, in my opinion, be allowed only upon the basis that was applied by Hamilton J in Zografakis (supra) at [36], namely, upon the basis of the amount of the deficiency resulting on resale and upon the special interest of $18,493, a total of $418,493 from the date of termination to the date of judgment. 61 In relation to the inclusion of the special interest component in the basis for calculating interest, I note that in Zografakis (supra), Hamilton J at [30] observed that, in general terms, the law did not recognise an entitlement of interest on interest: Civil Procedure Act, s.100(3)(a); Degman Pty Limited (in liq) v Wright [1983] 2 NSWLR 601. Hamilton J went on to observe:- "… however, this sum is not awarded to the plaintiff as interest calculated upon some other item of the claim. It is awarded as an amount which would have been payable on completion of the contract on the date of termination, if completion had occurred on that day. It is recovered as part of the deficiency on re-sale … Interest may be awarded where the interest recovered is really part of the damages: Bushwall Properties Limited v Vortex Limited [1975] 1 WLR 1649. In the circumstances, it is appropriate to award s.100 interest upon this element as well as upon the sum which represents the difference in actual price less the amount of the retained deposit when refunded." 62 Interest is, accordingly, allowed on the basis stated above calculated in accordance with the variations in the prescribed rates.

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(d) The deficiency on resale 63 The difference between the sale price of $3,800,000 and the resale price of $3,350,000 is $450,000. 64 In calculating the deficiency on resale, the relevant authorities establish that the original sale price (against which the resale price must be deducted) comprises both the original contract price and any special condition interest recoverable: Zografakis (supra) at [21]; Carpenter (supra) BC9604107 at 12 (per Clarke JA). As explained by Hamilton J in Zografakis, had the contract been completed on the date on which it was in fact terminated, the plaintiffs would have received the balance of the purchase price as well as the special condition interest. Accordingly, the special condition interest forms part of the original sale price used to calculate the deficiency. 65 The question remains, however, as to whether, in calculating the deficiency on resale, the net sale and resale prices of the property are employed (after taking into account the agent's commission) or whether the gross sale and resale prices are employed. 66 Mr Thompson outlined the alternative possible ways of calculating the deficiency depending upon whether or not agent's commission is brought into account in both the sale and resale prices or not. He stated in that regard:- "20. There appear to be two logical ways of computing the deficiency on resale - (i) The difference between the sale and resale prices without adjustment, here $418,493 less deposit of $50,000 - $368,493. That was the course adopted by: Rolfe J in CFA Group Services Pty Ltd v Mars Trading Pty Ltd (2001) BC200100717 at [98], [100], [121] and [164]: Hamilton J in Zografakis at [18]; and Fryberg J in Dovaenda Pty Ltd v Pagliari (2007) BC200706841 (unreported; SCQ, 22.8.2007) at [16] and [34]; but see White J in Buchanan v Dunstan at [65] or (ii) The difference between the sale price ($3,818,493) reduced by the commission which would have been payable ($62,700) being $3,755,793, and the resale price ($3,350,000) reduced by the commission paid ($55,275) being $3,294,7256, here $461,068, less the deposit of $50,000 - $401,068. However, White J in Buchanan v Dunstan at [64] saw that, having regard to the second limb of Cl. 9.3.1, that construction could not be adopted." 67 I note that, in relation to calculations in 20(i) above, there is an error of calculation. The figure of $368,493 is incorrect as the deposit of $50,000 was applied to derive the figure of $418,493. That latter figure represents the difference between the sale and resale prices having already taken into account the deposit. 68 In relation to calculation in 20(ii) above, the amount of $401,068 is incorrect and should read $411,068. 69 I accept as Mr Thompson contended, arithmetic errors notwithstanding, that the first of the two courses should be followed. On that basis, the deficiency on resale is the amount of $418,493.11.

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Pre-judgment interest payable on costs and expenses: agent's commission 89 The costs and expenses of resale to be allowed includes the agent's commission of $55,275. Clause 9.3.1 by its terms includes those reasonable costs and expenses "arising out of the purchasers' non-compliance with the contract or the notice of termination and of resale". On one view, that provides a benefit to vendors who would have been liable for agent's commission on the original sale if completed. 90 In awarding interest on the costs and expenses of the resale, I have considered whether it is appropriate to take a different approach in the exercise of the discretion to award interest in relation to agent's commission to the other costs and expenses. The agent's commission was deducted and paid from the proceeds of sale subsequent to completion in December 2005. That might be said to be sufficient to support an award of interest. On the other hand, the operation of clause 9.3.1 produces the result that the plaintiffs are to be fully compensated for the deficiency on resale and expenses thereby putting them back in the position they were in before the defendants' default. 91 The plaintiffs will, under the judgment in these proceedings, recoup the cost of agent's commission and will then effectively have sold the property at no cost to them so far as agent's commission is concerned. 92 Given that beneficial outcome, the question is whether the agent's commission as an "expense" of resale should also carry a liability for interest or more particularly warrant the exercise of the discretion to award interest on it. 93 I consider that, as the plaintiffs/vendors would in the ordinary course, but for the default, have had to incur a deduction from the proceeds of sale for agent's commission, that as a matter of fairness and in the exercise of my discretion, pre-judgment interest should not be allowed on the amount of the commission claimed in the proceedings ($55,275). 94 I set out in the schedule below the damages to be included in the judgment to be entered in favour of the plaintiffs. Schedule Loss on resale $3,800,000.00 $3,350,000.00 $450,000.00 1 Less deposit paid $50,000.00 $418,493.00 $400,000.00 Plus interest on $3,750,000 at 10% from scheduled completion date to termination date - 18 days $18,493.00 2 Agent's commission $55,275.00 $55,275.00 Marketing expenses $18,312.00 Advertising $6,433.90 3 Designer Boys $185.00 $25,480.90 Floorplanners $550.00 Photography: Susan Murray Legal costs and disbursements $825.00

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