KL Aussie Pty Ltd v Lien Hoa Women Buddhist Mediation Centre [2023] NSWSC 404 | Case summary | Zoe

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KL Aussie Pty Ltd v Lien Hoa Women Buddhist Mediation Centre [2023] NSWSC 404 | Case summary | Zoe

Judgment

On 18 May 2022, Darke J gave judgment in favour of the plaintiff for possession of land at 595 Canterbury Road in Canterbury, New South Wales. His Honour held that the contract pursuant to which the plaintiff had purchased that property clearly required the defendant vendor to give vacant possession on completion. Completion occurred on 28 August 2020. The defendant had remained in possession, in breach of contract. His Honour granted leave to the plaintiff to issue a writ of possession forthwith and ordered that the question of any damages be deferred to be determined separately, after the plaintiff had recovered possession of the property: KL Aussie Pty Ltd v Lien Hoa Women Buddhist Meditation Centre (Chua Lien Hoa) Incorporated [2022] NSWSC 614.
The plaintiff recovered possession of the property on 8 June 2022.
These reasons concern the plaintiff's claim for damages that it claims to have suffered as a result of the defendant's failure to deliver up vacant possession of the property, in breach of the contract for sale of land, during the period between 28 August 2020 and 8 June 2022 (the relevant period).
The plaintiff claims: 1. damages for loss of rental income that it contends it would have earned from the property during the relevant period if the defendant had given up possession on completion of the contract; 2. damages for refinancing costs that it contends it would not have incurred if the defendant had not continued in possession of the property and refused to allow the plaintiff, or any valuer acting on the instructions of a prospective financier to the plaintiff, to enter the property for the purposes of undertaking a valuation; and 3. damages for the cost of repairing physical damage to the property resulting from the defendant's failure to maintain the property during its wrongful occupation.
The defendant admits that it is liable for the plaintiff's loss of rental income but disputes the quantum of $72,000 claimed by the plaintiff.
The plaintiff adduced evidence that it entered into a signed rental agreement on 14 September 2020 to lease the property to a Ms Cindy Ho for $800 per week for a period of 52 weeks commencing on 21 September 2020. The claim of $72,000 is calculated on the basis of lost rental income of $800 per week for that 52 week period (being a total amount of $41,600) and continuing thereafter until 8 June 2022 (being a further amount totalling $30,400).
The plaintiff asks the Court to infer that the rental arrangement would have continued, or alternatively that the plaintiff would have entered into a new rental agreement with a different tenant for the same weekly rental amount in the period between 21 September 2021 and 8 June 2022. In relation to the alternative scenario, the plaintiff relied on rental advertisements downloaded from realestate.com.au on 26 July 2021 for a variety of styles of four bedroom properties in the suburbs of Belmore, Roselands, Clemton Park, Croydon Park, Campsie, Greenacre, and Kingsgrove. None of those advertised rental properties were in the suburb of Canterbury, but I note that all of the suburbs in which the properties lie are within reasonably close proximity to Canterbury, and most fall within the Canterbury-Bankstown local government area. The advertised weekly rentals for houses ranged from between $430 per week for a four bedroom house with one bathroom and one car space in Campsie and $925 per week for a four bedroom house with two bathrooms and two car spaces in Croydon Park. Ms Pham, who gave evidence on behalf of the plaintiff, described the advertised properties as "similar" to the subject property, but I ascribe no weight to that opinion as there was no evidence of any basis for it. The plaintiff did not adduce any evidence of a valuer about the market rent for the property in the period after 21 September 2021.
It was submitted on behalf of the defendant that the rental advertisements referred to above do relate to properties that are comparable or similar to the subject property, and that this demonstrates that the weekly rental of $800 specified in the rental agreement dated 14 September 2020 was in excess of the market value. As I have already observed above in relation to Ms Pham's evidence, there is no basis for the assertion that the advertised properties were comparable to the subject property.
On the basis of the defendant's admission that it is liable for the plaintiff's loss of rental income during the relevant period, and the evidence of the signed rental agreement for the period from 21 September 2020 to 21 September 2021 at a rent of $800 per week, I find that the plaintiff is entitled to damages in the sum of $41,600 in respect of that period. It is irrelevant whether the weekly rent of $800 exceeded the market rental value of the property. There is no evidence that the rental agreement was a sham, and the plaintiff is entitled to damages assessed on the basis that it would have received the rent to which it was contractually entitled from the tenant under that agreement during its term.
By reason of s 18 and Part 5 of the Residential Tenancies Act 2010 (NSW), the tenancy created by the rental agreement would have continued as a periodic tenancy after 21 September 2021, unless and until terminated by the plaintiff landlord on 30 days' written notice or by the tenant on 14 days' written notice. As there is no basis for finding that the rental agreement would have been terminated by either the landlord or the tenant, I proceed on the basis that it would probably have continued as a periodic agreement under which the plaintiff would have received $800 per week. It follows that the plaintiff is entitled to a further amount of $30,400 as damages for loss of rental income in the period from 21 September 2021 to 8 June 2022.
The plaintiff adduced evidence that it completed its purchase of the property, and the two adjacent properties, from the defendant with a combination of funds drawn from a short-term finance facility provided by Capital Securities and under finance from the defendant. On 20 October 2020, the Capital Securities facility was refinanced by a loan from SFA002 Pty Ltd for a term of six months, secured against the three properties and one additional property. Ms Pham gave evidence that the plaintiff intended at that time that it would refinance the SFA002 facility by entering into a longer term facility with a bank or alternative financier.
The SFA002 facility expired on or about 20 May 2021 and was refinanced by a further SFA002 facility for a further term of six months. There is no evidence that the plaintiff applied prior to 20 May 2021 for a loan from any alternative lender to refinance the SFA002 facility on terms more favourable to the plaintiff, including for a longer term and/or lower fees. On or about 17 May 2021, the plaintiff paid a renewal fee of $24,850 and a brokerage fee of $12,425 in connection with the second SFA002 facility.
There is evidence that the plaintiff made applications to RAMS Home Loans and Prime Capital in June 2021 and September 2021 for a loan to discharge the second SFA002 facility that would expire in October 2021. There is evidence of communications from both of those lenders or brokers to the effect that the plaintiff's application could not be considered or progressed unless prospective lenders were able to access the property at 595 Canterbury Road for the purpose of undertaking a valuation. That property was one of the proposed securities for the loan sought by the plaintiff. The defendant admits that it refused to allow the plaintiff, or any prospective lender or its valuer, to enter the property. Indeed, there is evidence that the defendant refused to allow the plaintiff to access the property for any purpose.
In those circumstances, the plaintiff failed to arrange alternative finance and rolled over the second SFA002 loan for a further term of six months, commencing in October 2021. On or about 17 December 2021, the plaintiff paid a renewal fee of $31,063 and legal fees of $20,513 in connection with the third SFA002 loan.
The defendant admits that it continued to refuse to allow the plaintiff or any prospective lender or valuer to have access to the property in the period after October 2021. In those circumstances, the plaintiff again failed to arrange alternative finance and rolled over the third SFA002 loan for a further term. On or about 27 June 2022, the plaintiff paid a renewal fee of $34,010, a brokerage fee of $8,515, and legal fees of $4,180 in connection with the fourth SFA002 loan.
The plaintiff claims that it incurred these renewal fees, brokerage fees, and legal fees totalling $135,64 in the period between May 2021 and June 2022 by reason of the defendant's continuing failure to give the plaintiff vacant possession of the subject property in breach of contract. The plaintiff claims that, if it had been in possession of the property, or if the defendant had at least permitted prospective financiers and their valuers to enter the property, the plaintiff would have obtained alternative finance.
I reject those claims. There is no evidence capable of supporting a finding on the balance of probabilities that, in the counterfactual scenario where the prospective financiers were able to assess the value of the subject property, one or more of those financiers would have offered to make a loan to the plaintiff in an amount sufficient to refinance the whole or part of the SFA002 facility. Nor is there any evidence that would provide a basis for the Court to make findings about the likely terms of any such offer of finance, including the fees payable to establish any loan and the duration of the loan. It follows that there is no evidence to support a finding that the plaintiff has suffered any loss in respect of refinancing costs as a result of the defendant's breach of contract.
Counsel for the plaintiff very properly acknowledged these shortcomings in the plaintiff's evidence and conceded that the plaintiff could have adduced expert evidence of a valuer concerning the value of the subject property in the period after October 2020, and expert evidence of a finance broker (or person with similar experience and qualifications) as to the prospects of the plaintiff securing alternative finance and the likely terms of any such finance. The plaintiff did not adduce that evidence. It was submitted (without evidence) that the plaintiff did not do so by reason of the costs involved in doing so. Assuming that to be correct, it does not justify the Court speculating in the plaintiff's favour that it would have obtained alternative finance on better terms in the counter-factual scenario.
Counsel for the plaintiff suggested during oral submissions that these difficulties might be overcome by the Court taking notice that RAMS Home Loans was in the business of providing loans for terms longer than six months and for lesser fees than those charged for the SFA002 loan. That suggestion was made without enthusiasm and, to the extent that it was pressed as a submission, I reject it. I do not accept that the terms on which RAMS Home Loans typically provides loans (if, indeed, one can speak of 'typical' loan terms at all) is knowledge that it is not reasonably open to question. [1] Even if it were, this would simply beg the question as to whether and on what terms RAMS Home Loans might have provided a loan to the plaintiff, having regard to all of the plaintiff's circumstances relevant to a lender's assessment of its creditworthiness, the security offered for the proposed loan, and the risk associated with any such loan.
For those reasons, the evidence does not prove that the defendant's breach of contract caused the plaintiff to pay a greater amount in finance fees than it would otherwise have paid, let alone establish a rational foundation for the Court to make an estimate of any difference between the fees paid and the fees that would have been paid if the defendant had given the plaintiff vacant possession of the property on completion of the contract. [2] The plaintiff has failed to prove the second element of its damages claim.
The defendant accepts that it is liable for the amount of $13,145 claimed by the plaintiff as damages for the cost of repairing physical damage to the property.
For all of the reasons above, the plaintiff is entitled to damages in the amount of $72,000 in respect of loss of rental income and $13,145 in respect of property damage.
The plaintiff made no claim for interest under s 100 of the Civil Procedure Act 2005 (NSW).
Darke J made orders in relation to the costs of the proceedings up to the date of the judgment for possession on 18 May 2022. It remains to consider the costs of the proceedings thereafter. The plaintiff has succeeded in respect of two of the three heads of its claims for damages. I am not aware of any reason why costs should not follow the event, such that the defendant would pay the plaintiff's costs of the proceedings after 18 May 2022 on the ordinary basis. However, I will hear the parties in relation to costs if either of them contends for a different costs order.
For the foregoing reasons, the orders of the Court are as follows: 1. Judgment for the plaintiff in the sum of $85,145. 2. Order that the plaintiff's claims for damages in the Amended Summons filed on 17 April 2023 are otherwise dismissed. 3. Direct that any party seeking an order in respect of the costs of the proceedings in the period since 18 May 2022, other than an order requiring the defendant pay the plaintiff's costs of the proceedings incurred during that period on the ordinary basis, as agreed or assessed, is to file and serve written submissions of not more than 3 pages in support of the costs order sought by 4:00pm on 28 April 2023. 4. Reserve the question of costs for determination on the papers.