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[2001] TASSC 29
plaintiff. The plaintiff was entitled to recover $1,100,408 in liquidated damages, including the resale deficiency, specified expenses and interest. The Court also declared that the plaintiff was entitled to...
When a purchaser defaults and the contract lets the vendor resell and claim a shortfall, the vendor must resell reasonably. The standard is commercial prudence, including reasonable consideration of price, timing and sale method. It is not a fiduciary duty, and a breach does not necessarily remove every remedy. The purchaser must prove unreasonable conduct. Here, the defendants did not establish that Boags' conduct was unreasonable, so Boags recovered the contractual deficiency and specified expenses.
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2,350 words · generated 02/10/2026
J Boag & Son Brewing Ltd decided in 1995 to divest itself of hotel properties and adopted a staged marketing strategy intended to avoid depressing their value by bringing too many properties to market at once [1]. The Beach Hotel was sold to Bridon Investments Pty Ltd under an agreement dated 5 February 1997. The agreed price was $1,910,000, excluding trading stock. Gough and Downs guaranteed the purchaser's obligations [1].
No linked legislation citations have been extracted yet.
Clause 17 dealt with purchaser default. If the purchaser failed to pay or otherwise comply with the agreement, the clause allowed the vendor to rescind, resume possession and resell the property. It further provided that any deficiency on resale, together with resale expenses, would be paid by the purchaser and recoverable as liquidated damages [2]. The clause also stated that money already paid would be forfeited to the vendor [2].
Bridon did not complete. Following negotiations and a notice to complete, Boags' solicitors wrote on 28 July 1997 that the purchaser had repudiated the agreement and Boags accepted that repudiation [4]. Boags later confined its damages claim to the liquidated damages mechanism in clause 17, rather than claiming damages at large [3].
The property was eventually resold to Rossim Pty Ltd for $865,000. For the assessment, the Court accepted that Rossim had made an effective offer, subject to formal contract, on 14 December 1999 [9]. The resale figure was substantially below the contract price. Boags claimed the $1,020,000 difference after deducting the $865,000 resale price and $25,000 forfeited deposit, together with legal expenses, commission, advertising expenses and interest [5]. The defendants disputed recovery, contending that the resale had not occurred within a reasonable time and that the delay and other aspects of Boags' conduct breached an implied obligation [6].
The commercial evidence mattered. Trading figures showed a decline in sales and gross profit from 1995 to 1999 [40]. The Court heard evidence that local economic conditions had worsened, including the closure of the Tioxide factory, reduced employment at the pulp mill and population decline in the North-West Coast region [41]. The hotel was kept operating, and a valuer considered its December 1999 value to be within $840,000 to $900,000 [50]. The Court accepted the relevant evidence from the agent, company officers and valuer [50].
Slicer J treated the dispute as one about the extent of the contractual remedy, not whether Bridon had defaulted. The Court had already dealt with the liability background in earlier proceedings, and the present judgment assessed the claim under clause 17 [1], [8]. It first rejected the suggestion that the defence could not be raised at this stage: the alleged implied term was relevant to damages and the contractual measure of recovery [8].
The central issue was how to characterise the vendor's obligation when reselling. The Court reviewed the two possible implications discussed in Cooper v Ungar: one might make reasonable-time resale a condition of the power, so that delay ended the power to recover a deficiency; another might impose a contractual obligation to resell within a reasonable time, with breach exposing the vendor to damages [10]. The High Court in Cooper had not decided between those possibilities, because on the facts before it there had been no breach if such a condition or obligation existed [12].
Slicer J adopted a more qualified approach. Clause 17 carried an implied term that the resale be conducted reasonably. That obligation covered the price, time and method of sale, and was measured by commercial prudence in light of matters such as valuation, market conditions, locality and prospective purchasers [24]. But the term was not a condition precedent to recovery. A breach would govern the extent of the remedy, rather than necessarily extinguishing it altogether [23]-[24].
The Court also declined to characterise the vendor's obligation as fiduciary. It reasoned that an unpaid vendor's interest was not identical to a mortgagee's, and that the purchaser had no equity of redemption or other equitable interest of the kind relevant to a fiduciary relationship [23]. The vendor nevertheless had to avoid conducting a resale so as to increase the loss caused by the purchaser's default [24]. The resulting standard was not a strict trustee-like duty. Nor did the Court impose extraordinary obligations on the vendor, since the purchaser remained the party in default [24].
The Court regarded time as relevant principally because a delay could affect market value. In this case, the liquidated damages claim did not include interest pending resale, so time was relevant to the movement in market price rather than an independent ground for barring recovery [24]. That distinction framed the detailed factual assessment: the question was not simply whether more time had passed than the defendants considered reasonable, but whether the vendor's decisions were commercially reasonable and increased the loss.
The defendants criticised the $1.95 million asking price, the absence of more aggressive interstate marketing, the handling of earlier offers, and the failure to undertake capital works or secure gaming machines [45]. The Court accepted that the asking price was unrealistic by 1998, but considered it in context. Bridon maintained its position that it had not been required to complete, while the dispute proceeded through appellate stages. Boags feared that lowering its asking price might prejudice its claim. It permitted its agent to tell prospective purchasers that it would consider lower offers, and there was no evidence that the advertised figure deterred inquiries [46].
The evidence also showed that Boags did market the hotel, accepted professional advice, and did not arbitrarily reject offers. The Court accepted that an interstate campaign might have been more vigorous, but the defendants did not show that another strategy would or might have produced an earlier or higher offer [47]. Some offers were uncertain or composite, and the February 1999 offer of $900,000 was only $35,000 above the eventual price and subject to finance [48]. The hotel's trading decline was linked to external economic conditions rather than mismanagement, and the evidence did not establish that lapsed gaming licences caused the lack of offers [41], [49].
The defendants bore the onus of proving unreasonable conduct [24(12)]. The Court ultimately found that they had not discharged it. Although hindsight suggested that a slightly higher price might have been achieved by accepting the $900,000 offer, the Court assessed the decisions in their contemporary commercial context, not by hindsight alone [48], [52].
This judgment addressed a question left open in Cooper v Ungar. Cooper identified two possible forms of implication concerning resale after purchaser default, but did not decide which applied because the facts did not require that decision [10], [12]. Slicer J treated Cooper as supporting the need for an implied standard governing the resale, while rejecting the defendants' proposed consequence that any breach necessarily destroyed the right to recover [23]-[24].
The judgment also addressed a division in the authorities about whether the vendor's obligation should be treated as analogous to a mortgagee's duties or as an aspect of mitigation. It discussed authorities including Loughridge v Lavery and Bullion Sales International Pty Ltd v Fitzgerald, which had treated the vendor as subject to obligations associated with a mortgagee's power of sale [15]. It also considered Jampco Pty Ltd v Cameron (No 2), which questioned the basis for importing a mortgagee-like duty and considered mitigation sufficient in its setting [22].
Slicer J's resolution was not to adopt a fiduciary or strict mortgagee standard. Instead, the Court derived the relevant obligation from the agreement itself: the contractual resale power carried an implied requirement of reasonable conduct [23]-[24]. Some aspects of that requirement could overlap with mitigation, but the source and measure of the claim remained the contract's liquidated damages provision [23]-[24].
The judgment states the result of that reasoning for this assessment, rather than laying down a general rule that every resale clause has identical wording or consequences. Its accepted propositions expressly concern the Agreement in this case [24]. It also recognises that contract terms, including a specified resale period, may affect how loss is proved or quantified [11], [21]. The judgment does not provide a survey of later cases or report subsequent appellate treatment; no claim about later treatment can be drawn from the supplied judgment alone.
At [24], the Court states: “The remedy and its extent is determined by reference to the terms of the Agreement.” In plain English, the contractual clause controls the kind and measure of recovery being claimed. The vendor could not simply treat the clause as irrelevant and claim any amount it considered appropriate.
At [24], the Court says the agreement contains “an implied term that the vendor will exercise the power of resale in a reasonable manner.” The contract did not spell out every required step, but the Court read in a standard governing how the resale power could be used. The standard included price, timing and sale method [24].
The Court further states that the implied term “is not a condition to the right of recovery, but governs the extent of remedy” [24]. This is important to the defendants' argument. Even if a vendor failed to meet the standard, that failure would not necessarily erase the entire claim. Its consequence would depend on the breach and its effect on the remedy.
The Court said the vendor's duty “is not fiduciary in nature” and imposed “No extraordinary duties” [24]. This means the vendor was not treated as owing the purchaser the strict obligations associated with a trustee or a fiduciary merely because the contract permitted resale. The standard remained one of reasonable commercial conduct.
Finally, the Court said that “The person claiming breach of the term bears the onus of proof” [24(12)]. Here, that meant the defendants had to establish that Boags' resale conduct was unreasonable. The Court considered their criticisms but found that they did not prove an alternative strategy would have changed the result [47], [52].
The judgment is most relevant to a contractual resale dispute in which a purchaser defaults, the agreement authorises resale, and the vendor claims a deficiency or other liquidated amount calculated under that provision. Clause 17 in this case expressly linked the deficiency and resale expenses to the contractual resale mechanism [2]. The judgment's reasoning is consequently tied to the existence and wording of such a contractual power.
It is also relevant where the purchaser argues that the vendor delayed, selected an unreasonable price, failed to market adequately, rejected a better offer, or otherwise increased the deficiency. The decision shows that those allegations are assessed as matters of commercial prudence, with evidence about the relevant market, property condition, valuation, offers and marketing strategy being important [24], [45]-[52].
The case does not establish that a two-and-a-half-year delay is always reasonable, or that a particular asking price or marketing approach will satisfy the implied term in another dispute. The Court assessed the evidence specific to the Beach Hotel, including declining trade, regional economic pressures, the vendor's ongoing marketing and the pending dispute about the original contract [35]-[50]. The judgment itself emphasises that reasonableness is a question of fact [14].
The decision also matters where parties dispute who must prove unreasonable resale conduct. On the Court's stated approach, the party alleging breach carries that onus [24(12)]. The finding here depended in part on the defendants' failure to adduce evidence showing that an alternative marketing strategy would or might have produced a different result [47].
The supplied judgment is dated 16 March 2001 and does not discuss any later cases applying, distinguishing, approving or rejecting its own reasoning. It therefore does not provide a basis to state how later courts have treated this decision.
The judgment does discuss authorities that pre-date it. It considers Cooper v Ungar as leaving open the form and effect of an implied resale obligation [10], [12], [23]. It refers to Loughridge v Lavery and Bullion Sales International Pty Ltd v Fitzgerald in its discussion of mortgagee-like duties [15], and to Jampco Pty Ltd v Cameron (No 2) in considering the competing approach based on mitigation [22]. It also relies on Goldburg v Shell Oil Co of Australia Ltd for the proposition that the party alleging breach bears the onus [24(12), 52]. Those are the relationships described by this judgment; they are not evidence of later treatment of Boag itself.
The judgment's reasoning leaves the application of “reasonable” resale conduct dependent on the contract and evidence in each case. It does not set a fixed period within which resale must occur. It explains that timing is relevant to market movement where the claim is for liquidated damages and does not include interest pending sale [24], but does not establish a universal time limit.
The decision also does not specify a single marketing method that a vendor must use. It accepts that more vigorous marketing was possible in this case, while finding that the defendants had not proved it would have produced a better outcome [47]. Questions about the appropriate balance between advertising expenditure, sale timing, asking price and market exposure therefore remain fact-sensitive.
Another question is how an implied reasonableness term affects the calculation where unreasonable conduct is proved. The Court states that breach does not necessarily preclude all recovery and governs the extent of the remedy [24], but this assessment did not require it to quantify a reduction for proven unreasonable conduct. The judgment consequently supplies a framework, not a detailed method for calculating such a reduction.
Finally, the relationship between the implied contractual term and mitigation principles may depend on whether the claim is for general damages or a contractual liquidated sum [19], [23]. The Court's conclusion is that the agreement controls this liquidated damages claim, but it does not attempt to resolve every possible variation in contractual wording or remedy.
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CITATION: J Boag & Son Brewing Ltd v Bridon Investments Pty Ltd & Ors [2001] TASSC 29
PARTIES: J BOAG & SON BREWING LTD ACN 009 573 899
Conveyancing - Relationship of vendor and purchaser - Breach of contract - Breach by the purchaser - Remedies of vendor - Forfeiture of instalments paid - Resale - Recovery of deficiency as liquidated sum - Duty of vendor on resale - Whether duty depends on mitigation or implied term.
Cooper v Ungar [1958] HCA 9; (1958) 100 CLR 510; Jampco Pty Ltd v Cameron (No 2) (1985) 3 NSWLR 391, considered.
Bullion Sales International Pty Ltd v Fitzgerald [1983] Qd R 215; Loughridge v Lavery [1969] VicRp 112; [1969] VR 912; Goldburg v Shell Oil Co of Australia Ltd (1990) 95 ALR 711, followed.
Judgment Number: [2001] TASSC 29
J BOAG & SON BREWING LTD v BRIDON INVESTMENTS PTY LTD & ORS
1 In 1995 the plaintiff resolved to divest itself of ownership of hotels operated in Queensland and Tasmania and in July negotiated with an estate agent ("Knight Frank") to develop a strategy to market its hotels over a period of time so as not to depreciate their value. The hotel ("the Beach Hotel"), which is the subject of this assessment of damages, was to be included in the second stage of the marketing exercise. The strategy was implemented, and on 5 February 1997, Boags entered into a contract with the first defendant ("Bridon") as purchaser and the second and third defendants as guarantors, for the sale of the Beach Hotel at a price of $1,910,000, exclusive of trading stock. Bridon was unable to complete the purchase in circumstances which have been stated in the judgment leading to this assessment (J Boag & Son Brewing Ltd v Bridon Investments Pty Ltd & Anor [1999] TASSC 48, Cox CJ) and in the reasons for judgment of the members of the Full Court in the subsequent appeal (J Boag & Son Brewing Ltd v Bridon Investments Pty Ltd & Anor [1999] TASSC 118).
2 Clause 17.1 of the Agreement ("the Agreement") of 5 February 1997 states:
"17.1 If the Purchaser shall fail to pay the balance of the Purchase Price or interest or any other moneys payable under this Agreement or any part of such money at the respective times appointed for payment or shall fail or neglect to comply with any of the conditions of this Agreement in any other respect or if the Vendor exercises its right of re-entry under the Lease, then:
(a) the whole of the balance of the Purchase Price money then owing shall immediately become due and payable by the Purchaser;
(b) all moneys actually paid by the Purchaser shall be absolutely forfeited to the Vendor;
(e) the Vendor or its nominee shall have an option to purchase the merchantable Stock for a value agreed between the parties and failing agreement for a value determined by the Australian Liquor Marketers Pty Ltd whose decision shall be final and binding;
(d) the Purchaser shall transfer the business name 'Beach Hotel' back to the Vendor or its nominee; and
(e) the Vendor may rescind this Agreement and resume and take or retain possession of the Property,
whereupon the vendor may either to [sic] hold the Property as of his former estate and interest or resell it either by public auction or private contract in such manner and subject to such conditions as the Vendor shall think fit. If there is any deficiency arising on any such resale, such deficiency together with all expenses attending the resale, shall be paid and borne by the Purchaser and if such monies shall not be paid, the whole of such moneys shall be recoverable by the Vendor from the Purchaser as and for liquidated damages."
3 Originally the plaintiff sought damages at large for breach of contract, but at trial accepted that its claim was confined to one of liquidated damages as prescribed by the Agreement, cl 17.
4 Following the failure of Bridon to complete the Agreement, there occurred a series of fruitless negotiations culminating in notification by Boag's solicitors by letter dated 28 July 1997 that:
"Since the purchaser did not complete the settlement on the 11th of July 1997 in accordance with the Notice to Complete, the purchaser has repudiated the Sale Agreement and the vendor elects to accept that repudiation.
The vendor will now be seeking damages from the purchaser."
5 The plaintiff's claim is stated in its Further Amended Particulars of Damage in the following terms:
6 Interest in the nature of damages on liquidated damages from 25.2.00 resulting from the plaintiffs loss of use of these funds to reduce its bank bill debt. Calculated from first refinance after 25.2.00
The calculations are not in dispute and with a minor exception, the incurring of the expenses is conceded.
6 The defendants deny that the plaintiff is entitled to recover damages since it did not effect the resale of the hotel within a reasonable time from the date of the acceptance of repudiation. By their amended defence they plead:
"30 The right conferred by the contract of sale between plaintiff and- first defendant and enjoyed and purported to have been exercised by the plaintiff to resell the Beach Hotel, Burnie and to recover from the first defendant the deficiency, if any, arising on such resale as and for liquidated damages was subject to the implication of a condition that the resale shall be made only within a reasonable time from the plaintiffs acceptance of the alleged repudiation of the said contract by the first defendant.
31 Alternatively to 30, the right conferred by the contract of sale between the plaintiff and the first defendant enjoyed and exercised by the plaintiff to resell the Beach Hotel, Burnie and to recover from the first defendant the deficiency, if any, arising on such resale as and- for liquidated damages was subject to the implication binding the plaintiff that the plaintiff acting under the provision to sell and to sell within a reasonable time from the plaintiff's acceptance of the alleged repudiation of the said contract by the first defendant under which the plaintiff had to sell within such reasonable time.
32 The defendants deny that the resale of the Beach Hotel, Burnie was made within a reasonable time from the said acceptance by the plaintiff which occurred on 28 July 1997 and in the premises the power of sale and to recover any deficiency under Clause 17 of the agreement for sale determined and nothing is recoverable by the plaintiff from the defendant by way of liquidated damages.
33 The said resale occurred some two and a half years after the said acceptance by the plaintiff.
34 The said resale was in breach of the terms of the plaintiff's power to sell.
35 The said resale was at such a time after the right arose as to be reasonable and the amount recovered by the resale was less than it would have been had the plaintiff exercises its power of resale promptly and timeoulsy [sic]."
7 A preliminary question arises as to whether the plea is one which goes to liability rather than damages and as such ought to have been pleaded on the action. The defendants claim that the Agreement, cl 17, contains an implied term that resale must be effected within a reasonable time and breach of that term by the plaintiff precludes it from remedy. The contention is derived from a decision of the High Court in Cooper v Ungar [1958] HCA 9; (1958) 100 CLR 510. The preliminary point arises out of a statement made by that court when, in considering the issues of the implied term, it stated in a joint judgment:
'The defendant's counsel took the position that an implication did exist ... If the defendant's counsel's contention were right the implication would of course have supplied a defence to the action provided that the essential facts were made out, namely that when the sale did take place, more than a reasonable time had elapsed." (Dixon CJ, McTiernan, Williams, Fullagar and Taylor JJ at 515)
8 The plea is relevant to the claim for damages. The defendants are liable to the plaintiff for damages, entitlement to which is governed by the Agreement, cl 17. The plaintiff claims entitlement to the forfeiture of the deposit irrespective of any argument predicated on a requirement for sale within a reasonable time. Entitlement to expenses might be upheld, irrespective of the issue of loss of sale price, and the tenor of the argument of implied term is that of consequence of liability, rather than liability itself. The plea is not precluded by the determination of liability.
9 The Beach Hotel was resold to Rossim Pty Ltd on 2 March 2000 for the sum of $865,000. For the purpose of this assessment, it will be accepted that Rossim Pty Ltd had made an effective offer, subject to formal contract, on 14 December 1999.
10 The defendants contend that contained within the Agreement, cl 17, is an implied term that any resale of property must be made within a reasonable time. The plaintiff concedes that an unsatisfied vendor has obligations to a defaulting purchaser, but that the principles governing those obligations are those of mitigation of loss. The defendants rely, as authority, on the decision of the High Court in Cooper v Ungar (supra), where the proposition was stated in the following terms, at 515:
"It is argued, as it was argued at the trial, that in cl. 14 there is to be implied a term that the sale for which the latter part of cl. 14 provides shall take place within a reasonable time. There are two possible versions of such an implication if it were to be made. On the one hand the proposed implication might take the form of a condition governing the exercise of the power given by cl. 14 to sell with a view of recovering the deficiency from the defaulting purchaser. It would mean that the power of sale which is thereby given could be exercised only within a reasonable time; time must not be allowed to run on indefinitely. That would be a condition of the power upon which its existence may depend. If it were broken it would lead to the determination of the power to sell and recover the deficiency under the last words of the clause. But that would not mean any breach of obligation on the part of the vendor.
Another implication, however, is suggested, namely an implication binding the vendor who is acting under the provision to sell and to sell within a reasonable time, so that if he does not sell within a reasonable time he has done more than lose the power which he otherwise would have possessed if he had broken the contract; he has exposed himself to a liability to the purchaser for a breach of contract sounding in damages." (Dixon CJ, McTiernan, Williams, Fullagar and Taylor JJ at 515)
11 The implications of the proposition have been considered in detail by a number of academic writers (Standard Contract for Sale of Land in New South Wales, Butt 1985 ed, at 534 - 535, Vourmard, The Sale of Land, 1995 5 ed, at [12 250], Moss, Sale of Land in New South Wales, 1973 ed, at 428 - 429, The Standard Land Contract in Queensland, W D Duncan, H A Weld 3 ed at 334) and was, in all probability, the origin of resale time clauses being included in contracts governed by the Transfer of Land Act 1958 (Vic), Table A, cl 6(3), the Transfer of Land Act 1893 - 1959 (WA) (Sch26, Condition 6), and the Standard Contract adopted by the Law Society of New South Wales, cl 9 (Butt (supra) at lxxvii (Butterworths Conveyancing Service 10250)). It is said that those enactments or adoptions reinforce the validity of the proposition as stated by the High Court in Cooper v Ungar (supra) and that the time frame adopted in those enactments or adoptions (12 - 24 months) provide an appropriate test of reasonableness.
12 Care should be taken in the evaluation of obiter stated in a decision and its elevation through proper academic discourse, into a binding principle (Johnson v Agnew [1980] AC 367 at 390). The High Court articulated the propositions relied upon, but declined to either affirm or reject them, stating, at 516:
"We can, I think, pass by the controversy which I have thus briefly described, for the reason that in our view on the facts there was no breach of such a condition, if it ever existed in either sense."
13 The difference as to whether the term is to be implied within the contract itself or forms part of a duty to mitigate loss is significant. On the defendants' case, the breach of the term would disentitle the vendor to any compensation, whilst a mitigatory duty might permit partial recompense. Further significance lies with the extent of the duty which might be more strict if the implied term is the governing factor (Hoskins v Rule [1952] NZLR 827).
14 It is clear that on the basis of either principle, an unsatisfied vendor has some obligation towards a defaulting purchaser and that the question of reasonableness of conduct is a question of fact. The dilemma facing a vendor is as stated in Cooper v Ungar at 514:
"One can see that a vendor acting under a provision such as the last part of cl. 14 may be rather in a dilemma. If he sells hastily at the price which is obtainable from the first purchaser he finds for it, he may throw the sale open to an objection from the purchaser who must pay the difference, on the ground that it has been made too promptly and without sufficient care and inquiry into the possibility of obtaining a higher price. If, on the other hand, the vendor delays for a very long time he may, of course, lay himself open to the objection that he waited too long, until in fact there has been a fall in prices."
15 Depreciation in value occasioned by an unreasonable failure to realise the asset has long been regarded as a basis for permitting a vendor from recouping some or all of the loss from the defaulting party (Keck v Faber (1915) 60 SJ 253). In Loughridge v Lavery [1969] VicRp 112; [1969] VR 912 at 929, Adam J equated the duties of a vendor exercising power of resale to that owed by a mortgagee in that the requirement was:
"... to act in good faith and not recklessly in disregard of the [purchaser's] interests"
"... the strict duties owed by trustees to their beneficiaries."
an approach followed in Beal and Sheehy v D B Stott Pty Ltd [1971] WAR 69. In Bullion Sales International Pty Ltd v Fitzgerald [1983] Qd R 215, Connelly J adopted the proposition that a vendor's responsibility upon resale was governed by the principles which relate to a mortgagee's power of sale, rather than those which govern mitigation of damages, stating, at 220:
"It would follow that the plaintiff was obliged to act in good faith and not wilfully or recklessly to sacrifice the interests of the defaulting purchaser. It may be assumed for present purposes that the obligation of the plaintiff was to take reasonable steps to obtain market value.
In my judgment the plaintiff is right in saying that the case is governed by the principles which relate to the exercise of the mortgagee's power of sale rather than those which govern mitigation of damages. The plaintiff in a situation such as this is not claiming damages for breach. He is seeking the payment of a liquidated sum payable under the contract upon an event provided for by the contract."
16 This failure to pursue a higher price from another prospective purchaser might afford reason to set aside a sale by a mortgagee or limit the amount of liquidated damages recoverable by reference to the higher price (Australia and New Zealand Banking Group v Bangadilly Pastoral Co Pty Limited [1978] HCA 21; (1978) 139 CLR 195).
17 Butt (supra), in discussing the Australian position, expresses the opinion at 544:
"In view of the less than satisfactory aspects of the analogy when pressed to its full extent, it is thought that a preferable principle might be one requiring the reselling vendor to conduct the resale in a manner so as not to take advantage of the purchaser's position by improperly inflating the deficiency on resale. This 'duty' would be analogous to a common law duty to mitigate damages, although probably would not be a duty to mitigate strictly so-called, because the contract provides a formula for computing the 'liquidated damages' to which the vendor is entitled upon resale."
18 If the principles of mitigation are applied, the test would be one of prudence (Dawes v The War Service Homes Commissioner (1923) 44 ALT 130, the purchaser would bear the onus of proving lack of reasonableness (TC Industrial Plant Pty Ltd v Roberts Queensland Pty Ltd (1963) 150 CLR 144), but the duty would not be high since damage was caused by a wrong requiring an obligation to act in the ordinary course of business (Sacher Investment Pty Ltd v Forma Stereo Consultants Pty Ltd [1976] 1 NSWLR 5).
19 The difference in principle might depend on whether the damages claimed are at large because of breach of contract or whether of the nature of liquidated damages provided for in the document evidencing the contract. If the latter, then the duty is provided for in the terms formulated on the basis of liquidated damages. In Talley and Another v Wolsey-Neech (1978) 38 P & CR 45, the Court of Appeal gave consideration to a contract clause determining the rights of an unpaid vendor which included the term:
"4 ... (c) if on any such resale contracted within one year from the date fixed for completion the vendor incurs a loss, the purchaser shall pay to the vendor as liquidated damages the amount of such loss ...".
"... condition 19 (4) (c) does not add anything to the common law rights of the seller; it merely removes some of the difficulties of establishing the seller's damages at common law by removing the need for him to tender a conveyance and providing that the price on a resale within a year shall be taken to represent the market value without the need to prove what in fact the market value was. He says that it is only a matter of mechanics. He says that the pre-estimate represented by the liquidated damages is directed not to the breach of contract but to the loss."
The submission was rejected and Brown LJ, having set out the various bases for election, stated, at 52 - 53:
"... if he chooses to exercise his rights and remedies under condition 19 (4) (c), he can, in my view, only do so in accordance with and within the limits of the provisions of this condition.
When the phrase 'liquidated damages' is used, one immediately asks: 'liquidated damages for what?' The only answer in this case seems to me to be: 'liquidated damages for the breach of contract of the defendant in failing to complete his purchase.' Mr Reid has emphasised that there was only this one breach of contract. If, as Mr Prebble suggests, the effect of condition 19 (4) (c) were merely to provide machinery for the simple quantification of one element in the damages at common law, it could and would have been very differently worded. It seems to me that the words 'liquidated damages' are conclusive.
In my judgment, the plaintiffs, having chosen to exercise their rights and remedies under condition 19 (4) (c), are only entitled to recover the 'liquidated damages' defined by that condition ...".
That approach was followed in the subsequent decision of Wallace-Turner v Cole (1982) 46 P & CR 164.
21 Nevertheless, the inclusion of a time clause (as in other Australian jurisdictions) might facilitate proof of the amount of loss since the time specified for resale or at least quantification of loss by reference to market price, since in ordinary circumstances change in market values would be minimal. The requirement that the vendor make an election (Kinleyside v Irwin [1961] WAR 169, Coates v Sarch [1964] WAR 2) itself implies that different remedies have different consequences. As Hale J observed in the latter case at 13:
"Probably a vendor must decide with reasonable promptitude what course he will take, and probably having actually embarked on a selected course he must adhere to it, and often when making his choice he will have to accept a certain gamble as to whether it will turn out after all to have been the best choice from his point of view."
22 The different remedies, dependent upon election, might result in general principles of duty to mitigate loss being inappropriate in a case of liquidated damages, and require recourse to the terms, actual or implied, in the Agreement which determine the extent of recovery by way of liquidated damages. That does not necessarily result in a different test as to the "reasonableness" of conduct by an unpaid vendor. In Jampco Pty Ltd v Cameron (No 2) (1985) 3 NSWLR 391, Young J rejected the proposition that the duty was akin to that of a mortgagee and declined to follow Loughridge, Beal and Bullion Sales (supra). He expressed his reasoning in the following terms at 396 - 397:
"There are authorities in Victoria, Queensland and Western Australia, to the effect that the vendor under a clause such as cl 16 of the 1972 edition of the standard form, has, not only a duty to mitigate against loss, but also a fiduciary duty akin to that owed by a mortgagee: see Loughridge v Lavery [1969] VicRp 112; [1969] VR 912 at 929; Beal v D B Stott Pty Ltd at 71; C Little v Ryland (Hoare J, Supreme Court of Queensland, 21 March 1978, unreported) and Bullion Sales International Pty Ltd v Fitzgerald (at 220). I myself took that view in my Contract for the Sale of Land, 2nd ed (1985)at 80.
However, upon hearing the submissions of both counsel, and upon studying the argument against the existence of such a duty so forcefully presented by Associate Professor Butt (at 543-544) in his book, Standard Contract for Sale of Land in New South Wales (1985) it seems to me, with respect to those who hold the view, that it is erroneous. Indeed, tracing the history of the principle through seems to me to be a classic exercise in showing how a piece of obiter dicta has by frequent reference been converted into a proposition of law. If one looks at Loughridge v Lavery (at 929), the judge had found for the defendants on the claim, and then said that in deference to the submissions of counsel he would add some further observations, one of which was that:
'I would have been disposed to treat the defendants as being under a duty similar to that imposed on mortgages exercising their powers of sale',
had the judge come to the conclusion that there was a resale in exercise of the power conferred by the contract. The writer of the headnote properly prefaces the proposition with the word 'semble'. In Beal's case, Virtue SPJ said (at 70) that his tentative view that there was such a duty was reinforced by Adam J's remarks in Loughridge's case, but on the facts of Beal's case, he found that there was no breach of any duty in any event. At 27 of the transcript of judgment of Hoare J in Little v Ryland, it appears clear that neither counsel disputed the proposition, so the judge did not have to turn his mind to the problems inherent in it. In the Bullion Sales' case, it is recorded (at 220) that the plaintiff conceded the point. The only other relevant case of which I am aware is Finance Brokers (WA) Pty Ltd v Pizzlno [1981] WAR 263. In that case (at 268) the judge said:
'... The condition, as it seems to me, equates the position of the vendor re-selling against a defaulting purchaser with that of a mortgagee selling against a mortgagor placing him under a similar duty and with like consequences: see Loughridge v Lavery [1969] VicRp 112; [1969] VR 912 at 929 ...'
The Full Court heard an appeal from that decision, the judgment being delivered on 21 October 1981. It is not reported but I have a transcript of the judgments. Wickham J was prepared to allow the appeal, the other two judges upheld the Chief Justice's judgment, but neither of them said anything about the point now in question. The High Court affirmed the decision reported: sub nom Piggins v Finance Brokers (WA) Pty Ltd (1982) 56 ALJR. Only the Chief Justice referred to Loughridge's case (at 845) and then on a different point.
Accordingly, the merits of the mortgagee type duty have never really been ventilated before a court. It seems to me that it is quite unnecessary to impose such a duty, because the mitigation of damages principle sufficiently covers the field, and equity is usually loath to apply its special rules where there is no need to do so. Furthermore, as Professor Butt points out in his book (at 544), for New South Wales at least to read in such a duty gives no semantic significance to the words 'as owner' in the clause.
Without recourse to any fiduciary obligation the court would not permit the vendor to resell at substantially less than the market value and then claim the price in the resale contract should bind the court: see eg Sakkas v Donford Ltd (1982) 46 P & CR 290. Again without recourse to fiduciary principles if a vendor has been unreasonable in his use of the property, the court, when ascertaining the amount to be allowed for costs and expenses of the resale or the default of the purchaser, will take that matter into account."
23 Resolution of the competing propositions can be had if separate consideration is given to general damages from that afforded liquidated damages. General damages are subject to the ordinary principles of mitigation of loss, whilst liquidated damages afford remedy defined by the Agreement. That some remedies or consequences might coincide does not obviate the difference. The rights of an unpaid vendor to take possession of property and to effect resale are given by the terms of the deed or agreement, in the same way as those afforded a mortgagee. However, the legal interests of the two are not identical and there being no equity of redemption or other equitable interest, it cannot be said that an unpaid vendor is placed in a fiduciary relationship. But the document itself provides the grant of power. To that extent the proposition advanced in Cooper is valid and it is necessary to imply a term of reasonableness of conduct in the resale of the property. But the effect of any implied term does not necessarily operate as an absolute bar to remedy. That consequence, advanced on behalf of the defendants, even if foreshadowed by the High Court in Cooper, would run counter to the general principles of damages stated by the same court in Codelfa Construction Pty Ltd v State Rail Authority of NSW [1982] HCA 24; (1982) 149 CLR 337. The term of an agreement providing a right of resale is one intended to be for the benefit of the vendor (Holland v Wiltshire [1954] HCA 42; (1954) 90 CLR 409).
24 The following propositions are accepted for the purpose of this assessment:
(1) The remedy and its extent is determined by reference to the terms of the Agreement.
(2) The terms contain an implied term that the vendor will exercise the power of resale in a reasonable manner.
(3) The term "reasonable manner" includes price, time of sale and conduct in the form of method of sale.
(4) Given that the claim for liquidated damages precludes a claim for interest pending sale, the question of time of sale is relevant to the movement of market price, rather than on its own right.
(5) The implied term is not a condition to the right of recovery, but governs the extent of remedy. Breach of the term does not necessarily preclude all remedy.
(6) The duty imposed on the unpaid vendor is not fiduciary in nature.
(7) No extraordinary duties are imposed on the unpaid vendor. The defaulting purchaser remains a wrongdoer.
(8) The term imposes a duty defined by commercial prudence referable to valuation, market, locality, form and method of sale, and the existence or otherwise of intending purchasers.
(9) The existence of genuine offers to purchase at a fair market value are factors relevant to commercial prudence. An unpaid vendor who rejects such an offer might be confined in remedy.
(10) The unpaid vendor has a duty not to conduct the resale in such a manner as to increase the loss occasioned by the purchaser's default.
(11) Some requirements imposed by the implied term are identical to those required in the mitigation of damage.
(12) The person claiming breach of the term bears the onus of proof (Goldburg v Shell Oil Co of Australia Ltd (1990) 95 ALR 711, cf Australian & New Zealand Banking Group v Bangadilly Pastoral Co Pty Ltd (supra), Aitken J at 228).
25 In the circumstances of this case, Boags exercised its right of sale immediately upon acceptance of repudiation. That acceptance did not obviate any further duty.
26 Boags arranged for the sale of its hotels in mid-1995. It engaged Knight Frank as sole agent and requested advice as to a marketing strategy and estimates of value for the relevant property. On 2 October, Knight Frank advised as to its estimate of values of the properties to be first placed on the market and a comparison with those estimates and the eventual dates and prices of sales are relevant indicators to the circumstances surrounding the sale and resale of the Beach Hotel.
27 The newspaper advertising campaign was restricted to the three Tasmanian daily newspapers, but included the provision of brochures and their distribution. In the opinion of the agent:
"Advertising should be concentrated to the Tasmanian market rather than by an expensive campaign interstate.
We fully believe they will be sold to local buyers. This is supported by the fact that our last 30 hotels have all been sold to Tasmanians. Some of these have had a fair bit of exposure through interstate newspapers and brochures but very few inspections were forthcoming.
The Tasmanian market for hotels is no cheaper than any other State and we are finding that across the board people are coming here for lifestyle reasons and then buying property rather than specifically wishing to purchase in Tasmania."
28 In December 1995, the agent provided advice in relation to the remaining hotels intended to be placed on the market during stage 2 of the exercise. A similar comparison discloses the following:
29 The advertising campaign for those hotels was extended interstate with advertisements being placed in the Australian and Financial Review newspapers and various trade magazines In its report, Knight Frank noted that at that stage the Beach Hotel was ranked 78 in the State, a figure based on liquor licence fees, but noted that:
"We believe that this property is at its optimum of profitability and could suffer to a minor extent following the refurbishment of the Regent Hotel nearby. It should also be noted that as at today there is some uncertainty within the Industrial Market whereby Tioxide ... has announced the impending closure of this factory and the retrenchment of some 200 workers."
30 The estimate of the market value of an hotel is based in part on the trading figures, gross profit margin and trading mix of the enterprise. Relevant figures for the Beach Hotel at the time the property was first placed on the market were:
The profitability of the hotel depended mainly on accommodation, bar trade and the provision of meals.
31 On 22 May 1996, the agent noted that the trading figures for the 10 month period ending April 1996 had decreased by $91,700 and advised that:
"We have no doubt that our previously recommended price bracket of $2.3 million to $2.5 million is way too high."
"Once we have carried out our inspection we will provide you with an updated value."
32 No local inquiries had been made of the agent as of 11 June 1996, although two had been received by 12 July. On 30 July 1996, Boags accepted an offer of purchase, subject to finance, of $1.75 million (without stock). However, in November 1996, the agent advised that the intending purchaser had been unable to obtain finance and was still $200,000 short of the offered price. Negotiations were conducted with another possible purchaser but nothing eventuated. The agent proposed re-advertising interstate. On 28 November, the agent received a further offer of purchase for $1.4 million (plus stock at valuations), a figure said to be based on the altered trading figures of the hotel. That offer was rejected.
33 On 29 November 1996, Knight Frank had received a "conjunction agreement" offer from a Queensland agent offering to assist in the sale of the hotel. On 4 December 1996, Knight Frank advised of the terms of sale at a price of $1.910 million, plus stock. A contract with the defendant was prepared and executed on 5 February 1997. On 3 April, the agent advised Boags in the following terms:
"We contacted the Purchaser's Solicitor yesterday and it appears that he will now formally advise your Solicitor that the contract is at an end. They are resigned to losing their deposit and wanted to know what other action, if any, that the Brewery might take. We advised that in our opinion the Brewery would seek to cover the difference between the eventual sale price and the contracted price, plus loss of the deposit.
By taking this stance the Purchasers will probably still endeavour to raise the finance and if the hotel was still available they could re-contract at a later date. Otherwise they are faced with a considerable loss.
As part of their forfeiture we will need clearance to fully market and publicly advertise the hotel."
"... the sale prices on the remaining hotels are confirmed as follows:-
It is important from a legal sense to continue to publicly market the Beach Hotel at a price the same as or more than the contracted price.
The only way these hotels are going to sell in the short term is if they are actively marketed, ie, publicly advertised. With the Beach Hotel deposit of $25,000, there are plenty of funds to embark on a campaign for the next four weeks, both locally and interstate."
34 The agent set out the marketing strategy, encompassing three hotels, costing some $13,000 which included advertising in local and interstate newspapers and the preparation and distribution of brochures to "local hoteliers, moteliers, accountants and solicitors, plus our interstate Tourism and Leisure mailing list". The memorandum concluded:
"The main aim of a public campaign is to maximise the enquiry level so that competition for the hotels will hopefully result in good sale prices. If we continue the policy of no active marketing (as we have done in the last six months) then activity will be slow and low prices will be offered.
For our campaign to start on 10 April we will need your approval and alterations by tomorrow."
35 Criticism is made of the plaintiff for not instructing the agent to proceed with this campaign. The criticism is unfounded as of April 1997. Negotiations continued with the defendants, a notice to complete was forwarded on 26 June and election to accept repudiation notified by letter dated 28 July. The respective positions of the parties and the steps taken by each are set out in the original judgment (J Boag & Son Brewing Ltd v Bridon Investments Pty Ltd & Anor [1999] TASSC 48). The plaintiff was entitled to wait to see if the contract could be completed, the formal requirements fulfilled and to consider its election. Moreover, the agent had prepared updated property reports which included updated trading figures, copies of which were available to persons expressing interest. Following confirmation of repudiation in July, the plaintiff instructed the agent to again place the hotel on the market. It decided not to undertake an interstate advertising campaign and, on advice, maintained an asking price of $1.95 million. That latter step was taken in order to protect its rights as against the defendants. It was faced with the dilemma stated in Cooper. If it advertised at a lower price, it feared that it could be met with a claim by Bridon that it had invited and caused a loss on resale. It also feared, consistent with professional opinion, that repetitious advertising created uncertainty for staff and sent a pessimistic message to intending purchasers. It met the former dilemma with advice to the agent that interested persons be told that it would consider offers from interested parties. The company officer responsible for the resale stated:
"Now at any stage after July 1997 was it a determination made by the Board to adjust that price? ... No, but we continued to market the hotel - well at that price but even in the early days it was advised by the agents that the Brewery would accept offers or would be keen to accept any offers for the hotel.
So could we just put that in terms of how Boag instructed its agents to market the hotel. Were there any specific instructions to the agents as to what they should put to prospective purchasers? ... Yes, that the Brewery would be receptive to offers on the hotel."
That course did not in the opinion of the agent prejudice the prospects of sale as the following exchange with counsel indicates:
"Yes. That, you agree, was an inhibiting factor on a sale? ... Offering it at the higher price - not at all.
No, offering it at the One point nine five? ... No, not at all, because we encouraged offers. Every property that is put on the market by us, even if it's advertised at a price, we always encourage offers."
36 On 21 August 1997, the agent advised Boags that no interest had been shown in the hotel and reported:
"As you are aware, no active advertising is being carried out at present. Marketing consists of regular monthly update newsletters to all accountants in Tasmania plus our 'in-house' brochures which are widely circulated.
We recommend that the best marketing time for hotels is September and October as the Purchaser will have the opportunity to settle prior to Christmas. Thus consideration should be given to an advertising program both locally and interstate. A budget of $10,000 may be necessary to adequately provide the required exposure."
In relation to the intended sale price, Knight Frank advised:
"The 1997 figures show a 'business net profit' of $468,026, which represents a net return of 24% against the purchase price of $1,950,000. No doubt the Brewery are aware the contracted price of $1,910,000 exceeds current market value. However, from a legal sense we may not be able to actively advertise the hotel below this amount - please confirm."
37 In September the agent advised the son of the third defendant that an available option was the resubmission of another offer (Butt (supra) at 545 n75), but no alternative offer was made.
38 In August 1997, Knight Frank received an offer for the purchase of three hotels, the Beach, the Bridge and the Formby, for a total sum of $3 million. On the basis of estimates realistic at the time, the value of the properties together was in excess of $4 million. The offer was rejected but Boags indicated through the agent that it was prepared "to negotiate on the total asking price of $4.3 million for the three hotels". The solicitor representing the interested parties replied with an offer of $2.2 million for two hotels, including the Beach. At that time the estimated market value of the second hotel was between $1.35 million and $1.55 million and was eventually sold in September 1999 for the sum of $1.075 million.
39 Between October 1997 and May 1998, three persons made contact with Knight Frank but no offers were made. During that period, the marketing campaign consisted of the distribution of brochures to all inquirers for hotel purchases above $1 million, monthly circular to 105 accountants and the provision of the market report to interested persons. There can be no suggestion but that the officers of the company were anxious to dispose of the property and no question that the failure to sell was a consequence of a desire to enhance its position at the expense of the defendants. The trading figures for the Beach Hotel had declined from $1.825 million in 1996 to $1.688 million in 1997. Comparable figures for other hotels and their relationship with the "asking price" were:
40 The trading figures of the Beach Hotel show a serious decline in the operation:
41 Each component of the trading activities of the hotel shows a consistent decline. The downturn is said to have resulted from:
* a general decline reflected throughout Tasmania, but more marked in rural areas;
* a decline in the population of the North-West Coast.
The margin (reflected in the business net profit figures) indicates that the problem was not caused by internal mismanagement, but was a consequence of external economic factors. The decline impacted both on the market value of the property and the attractiveness of the concern to a prospective investor.
42 In July 1998, a valuation was obtained from the valuation/consultancy manager of Knight Frank, which indicated a market assessment of $1.16 million. Responsibility for the resale of the hotel was transferred by the plaintiff to Mr Riley the then General Manager of Finance and Administration of the company.
43 Knight Frank continued to market the property in the same manner as before. During the period 10 June 1996 to 17 October 1997, some 16 approaches were made to the agent. On 5 February 1999, the agent informed Mr Riley that the hotel was worth between $1.15 million and $1.2 million and recommended that:
"Our property report should be updated, new brochures printed and the hotel placed on the market at a set price. Initially advertising should concentrate on the local market with advertisements in all three of our regional newspapers. A budget of $2,000 is necessary for a three month campaign."
"It is our opinion the property is worth a minimum of $1.2 Million. It certainly is not in the Brewery's interest to sell this hotel as we doubt a figure of $1.2 Million plus would be readily achievable."
44 That enigmatic advice illustrates the commercial dilemma. The market was quiet, yet its prices were less than valuation. In order to sell, the plaintiff was required to accept less. The advice was subsequently accepted in that advertisements were placed in a local newspaper in the following April. On 25 February 1999, an experienced investor offered $900,000 for the hotel. The offer was rejected. In March 1999, Knight Frank suggested a further marketing campaign, including advertising in local newspapers, the preparation of new brochures and new circulation to all Tasmanian hotels, motels, solicitors and accountants, the local tourism/leisure list and the interstate offices of Knight Frank. This was agreed to and advertisements duly appeared in April. In July 1999, the agent reported that seven parties, three of whom were from interstate, had expressed interest in the property. At that time the agent recommended that Boags attempt to obtain the re-issue of gaming licences (which had previously lapsed at about the time of the sale to Bridon) as a means of enhancing the prospects of sale. That step was undertaken. In December 1999, the ultimate purchaser offered the sum of $865,000 for the property, a figure which was ultimately accepted.
45 The defendants contend that the conduct of the plaintiff was unreasonable and advance four significant matters to show that the decision, or lack thereof, was detrimental to them and constituted a clear breach of the duty of the plaintiff. These matters can be summarised as:
(1) The maintenance of an advertised sum of $1.95 million, a figure likely to discourage any expression of interest.
(2) Failure to aggressively market the property, especially by interstate exposure.
(4) Failure to enhance the prospects of sale by capital works, appropriate management and the installation of gaming machines.
46 The maintenance of a stated price of $1.95 million was unrealistic. By 1998, it was clear from the lack of interest and comparable figures relative to other hotels that the market would not support the figure. The figure was maintained because of the belief that its alteration would prejudice the position of the plaintiff in relation to its claim against Bridon. The decision ought be seen in the context of the proceedings between the parties. Bridon maintained that it had not been obliged to complete the contract because the condition precedent of finance had not been fulfilled. It maintained that position, at least until the date of judgment of the Full Court on 8 November 1999 and probably until the date of its unsuccessful appeal to the High Court. The plaintiff was entitled to be cautious. It met the dilemma by permitting its agent to indicate to interested parties that it would seriously consider lesser offers. There is no evidence to suggest that the maintenance of a stated price caused interested parties from making inquiry. Further, the plaintiff was entitled, at least in the short term, to regard the offer made by Bridon as an appropriate market figure. When it became apparent that the figure was unrealistic, it accepted that it was required to revalue the property and it did so.
47 It is clear that the plaintiff could have pursued a more vigorous marketing strategy, especially through an interstate campaign. It is not clear that such action would have produced an earlier or higher offer than that actually made or the one eventually accepted. It accepted advice that excessive marketing could be counterproductive and affect the morale of staff and the management of the asset. It is true that it might have been more advantageous had the plaintiff followed the advice of the agent in August 1997, but it was entitled to pay regard to the economics of such a move. A submission made by counsel for the defendants in relation to the claim for the payment of advertising expenses illustrates the point. Counsel contended that since the plaintiff had not proved that the ultimate purchaser had responded to the advertisements that it could not show that the cost of advertising related to the cost of resale. The logic in relation to causation is correct, but it ignores commercial reality. The plaintiff has shown that it continued to actively market the property and did not capriciously reject offers. The defendants did not adduce evidence to show that an alternative strategy would or might have produced a different result. Bridon was the wrongdoer and bears the evidentiary burden of producing material, either through cross-examination or its own evidence, of showing that the conduct of the plaintiff was unreasonable.
48 The plaintiff did reject, or decline to pursue, various offers made between August 1997 and December 1999. It would be attractive to identify the highest offer and give the benefit of the difference between that and the ultimate price to the defendants. To do so would be to make a judgment retrospectively and ignore the commercial options available at the time. Some of the offers were no more than statements for negotiation. The offers made in September 1997 required an assessment of the market value of other hotels since the offer was composite. The offer of $900,000 made in February 1999 was only some $35,000 in excess of the ultimate sale price and, in any event, was subject to finance. That the plaintiff attempted to obtain the best price for the Beach Hotel can be shown by its conduct in relation to the Bridge Hotel which remained unsold from 1996 until September 1999. The plaintiff was not responsible for the economic conditions which led to a decline in the trading figures or the market value of the hotel. It might have had reason to doubt the ability of the defendant to pay full compensation (see material in exhibits P40, 41 and 44) but, in any event, it was entitled to accept professional advice and pay regard to the vagaries of the market.
49 The margin figures of the hotel show a trend consistent with proper management. Apart from some minor maintenance works required at the end of 1999, there is no evidence that the condition of the building was allowed to deteriorate. It was kept as a going concern. Before the sale to Bridon, the plaintiff had obtained gaming licences and undertaken work for the appropriate accommodation of the machines. The licences would have been available to Bridon. The licences lapsed, partly because of the plaintiff's perception of their lack of viability and partly because of a review of government policy. In 1999, Boags again sought and obtained, in principle, a licence in order to enhance the sale of the hotel. The absence of a licence has not been shown, on the evidence, to be a factor in the paucity of offers.
50 The plaintiff adduced evidence from the agent of Knight Frank responsible for the marketing and sale of the hotel at all relevant times and two officers of the company who had, at varying times, the conduct of its disposition, and a valuer. Their evidence is accepted. Bernard Smith, an experienced valuer, inspected the property in December 1999 and had access to the trading records of the hotel. He had provided some advice to the plaintiff in July 1998. That opinion remained following his December inspection. In his opinion, a market assessment of $1.16 million was a fair figure as of July 1998, a figure then accepted by the plaintiff. His opinion was that as of December 1999 the value of the property was within the range of $840,000 to $900,000, the variations depending upon the capitalisation rate chosen for the calculation. His opinion reinforces the conclusion that the plaintiff acted in accordance with good commercial judgment and was entitled to look for an offer higher than that made in January 1997.
51 The contention that the plaintiff is not entitled to claim the cost of advertising incurred in 1997 is rejected. The plaintiff has not shown that the eventual purchase was influenced by the particular advertising campaign and the evidence suggests that it did not. Yet, the plaintiff was criticised for its earlier failure to employ such a device. The advertising campaign was reasonable and favours an expenditure incurred during resale.
52 The defendants contend that the plaintiff has not proved that it acted reasonably or responsibly and has not shown that it complied with the term implied in the Agreement, cl 17. The Court is satisfied that it has demonstrated compliance, albeit that with the benefit of hindsight it would have obtained a slightly higher price had it accepted the offer of $900,000 made in January 1999, in any event. Further, it was for the defendants to show that its conduct had been unreasonable. The plaintiff was entitled to have its claim for liquidated damages assessed. The defendants claimed that it had breached an implied term of the contract as to disentitle it from (or at least reduce) its claim. They have the onus of proof in relation to this issue (Goldburg (supra)). They have not shown, on the evidence, that the conduct was unreasonable.
53 The plaintiff is entitled to recover as liquidated damages the following amounts:
Interest from 25 February 2000 until 22 December 2000
54 The plaintiff is also entitled to a declaration that it was entitled to the retention of the deposit of $25,000.
J Boag & Son Brewing Ltd
Bridon Investments Pty Ltd & Ors [2001] TASSC 29
(1958) 100 CLR 510
(1985) 3 NSWLR 391
(1990) 95 ALR 711
(1978) 139 CLR 195
(1963) 150 CLR 144
(1982) 149 CLR 337
(1954) 90 CLR 409
The plaintiff was entitled to recover $1,100,408 in liquidated damages, including the resale deficiency, specified expenses and interest. The Court also declared that the plaintiff was entitled to retain the $25,000 deposit (paragraphs 53–54).