For the reasons already given, the plaintiffs have not established breach and therefore the question of damages need not be determined. If I am wrong on this, then I deal with the claim for damages below.
The total amount claimed against the defendant by the plaintiffs is $633,758.50. These amounts are calculated as follows:
[2]
The first item is the deficiency in the purchase price, which is claimed at $350,000, representing the difference between the contract price of $1,100,000 less the price obtained upon resale of $775,000.
By contract dated 2 July 2018, the plaintiffs agreed to sell the land to a third party, Mr Lawless, for $750,000. This sum did not include any amount attributable to the business. That contract was entered into within 12 months of the heads of agreement coming to an end by the default notice. This contract was replaced by a further contract of sale dated 18 February 2019. This was done at the request of the purchaser who sought amendments which were agreed to by the plaintiffs. The replacement contract was in respect to the same land for the same purchase price. The purchase price was apportioned as between the six titles to the farm and certain cheesemaking chattels.
The defendant contends that the plaintiffs are not entitled to damages because the plaintiffs failed to resell within a year or to issue proceedings within a year and therefore has no contractual right to claim damages. The defendant further asserts that the plaintiffs cannot show a diminution in the value of the farm, merely a difference between the original sale price and resale price.
The plaintiffs' answer to this is that the contract of sale was executed by Mr Lawless within the 12-month period. On 28 June 2018, Mr Lawless paid the 10 per cent deposit and moved onto the farm. The contemporaneous correspondence passing between the solicitors for the vendor (the plaintiffs) and the purchaser (Mr Lawless), confirms that the parties considered themselves bound by the contract dated 2 July 2018.
But even if the land had not been resold within a year, the plaintiffs still had rights under common law. The plaintiffs referred to clause 19(d) of the deed of variation which made it clear that the contractual remedies were in addition to any other remedies.
The plaintiffs say the difference in price is recoverable from the defendant by way of liquidated damages. The same measure of damage would apply at common law, being the difference in the market value when the farm was resold.
The plaintiffs describe the market value of the farm variously as the price that a willing and knowledgeable but not anxious purchaser would pay a willing and knowledgeable but not anxious vendor in an arm's length transaction,[26] and the price actually attainable in a market sale.[27] They suggest they took reasonable steps to obtain the best market price for the farm, and note that there is no suggestion that there were any inadequacies in the marketing strategy which was employed, but that it simply transpired the only interested purchaser was Mr Lawless. The sale price - $750,000 - represented the best price attainable in a market sale and was therefore reasonable.
The evidence shows that attempts by the plaintiffs to resell the property initially proved unsuccessful. It has not been suggested or proved that the sale to Mr Lawless was in effect a fire sale or at a price well-below the market value. It was not incumbent upon the plaintiffs to call expert evidence about diminution in value as argued by the defendant. If the value of the resale price was sought to be challenged, such evidence might have been adduced by the defendant.
As to the question of the failure to resell within time, this point ultimately goes nowhere because even if the defendant was right and the property was not sold within 12 months, the plaintiffs still retained rights at common law to sue for breach of contract and claim damages. I am satisfied that the claim for damages was not precluded under contract or at common law and that the amount claimed under this head is reasonable in all the circumstances.
The plaintiffs claim they are entitled to the amount of the forfeited deposit of $30,000, which is subtracted from the total sum claimed in the table of damages.
Clause 19(a) of the deed of variation provided that if the heads of agreement ended by default notice given by the plaintiffs, the deposit monies were forfeited to the plaintiffs as the plaintiffs' absolute property. The defendant denies that this sum is forfeited as she claims that she was under no obligation to enter into the contract of sale. An alternative argument raised was that the deposit was not recoverable because it was a penalty.
The plaintiffs submit the forfeiture of a reasonable deposit does not attract the jurisdiction of a court of equity to relieve against penalties. However, the doctrine will be attracted where the vendor attempts to exceed the customary deposit of 10 per cent of the purchase price unless special circumstances can be shown.[28]
The plaintiffs note that in the present case, the deposit represented less than 3 per cent of the proposed purchase price for the farm. In such circumstances, forfeiture of the $30,000 deposit does not constitute a penalty. I agree with the plaintiffs' submission and find that the deposit sum was not a penalty.
As for the loss of value of the business, the plaintiffs contend that upon re-entering the land there was no cheese business left in a form which would have been capable of resumption and/or resale. All the cheese stocks had been taken away by the defendant, as had all wraps, cultures and labels. Most of the plaintiffs' dairy cows had been purchased by the defendant. Items of plant or equipment were missing and customers of the business had been notified previously of the sale of the business to the defendant. The business then was not capable of being resold and therefore, the entire value of the business had been lost. It was appropriate to assess the damages representing the value of the business at $200,000. In circumstances where the farm was in a parlous state upon re-entry and the cheesemaking business was no longer capable of being run, I am satisfied there was no operative business which was capable of being on-sold. Accordingly, the plaintiffs would have been entitled to recover the loss of the value of the business listed as $200,000 in the heads of agreement.
The plaintiffs claim interest by way of damages on the unpaid contract price for the land and business of $1.3 million. The interest calculations are set out in paragraph 136 of the plaintiffs' closing submissions.
The interest calculations are as follows:
Interest on $1,300,000 (19.1.2018 - 2.7.2018) $32,290.82
Interest on $550,000 (3.7.2018 - 19.11.2019) $41,932.69
Interest on $550,000 (20.11.2019 - 13.12.2019) (omitted from statement of claim) $1,975.40
The heads of agreement provided that vendor finance would be advanced by the plaintiffs after settlement at a rate of 1 per cent greater than the rate set by NAB for fixed rate home loans, which was stated to be "currently 4.69%": heads of agreement, Annexure A, clause 4(d). The rate of 4.69 per cent per annum has been adopted, compounding daily as per the computation of interest under an ordinary bank home loan.
The plaintiffs also claim loss relating to plant and equipment being repair and maintenance costs. Clause 21(a) of the Deed of Variation imposed an obligation on the defendant to meet the costs of repairs and maintenance of all equipment on the property. The items claimed are as follows:
[3]
Condensing unit ($6,402.00): The second plaintiff's evidence was that, in May 2017, the milk vat in the dairy had been turned on permanently (with a couple of hundred of litres of milk in it), rather than being switched to automatic, which resulted in the contents of the vat freezing and the compressor failing. The plaintiffs produced an invoice dated 13 March 2018 ("remove faulty compressor on bottom unit. Supply & fit new compressor...") in support of this claim.
Pulsation system ($1,067.00): The second plaintiff's evidence was that, in November 2016, when the defendant and Mr Sandles moved in, Mr Sandles and his worker Chris had altered the pulsation systems in the dairy and in the milk machines, which led to problems down the track. On re-entry, the master unit had to be rewired. The plaintiffs produced an invoice dated 2 February 2018 ("manufacture new pulsating wiring loom. Fit new pulsating wiring loom") in support of this claim.
Effluent pump ($6,000.00): The second plaintiff's evidence was that the effluent pump at the bottom of the dairy yard was not cleaned out while in the defendant's possession. The effluent pump was not working and, as a result, effluent was running into the creek. The second plaintiff deposes to the costs incurred in repairing the effluent pump.
Pasteuriser ($3,064.60): the second plaintiff's evidence was, on re-entry, there was a sticker on the pasteuriser which stated that it had failed the calibration in July 2017. The plaintiffs produced an invoice dated 28 February 2018 ("pasteurised upgrade and calibrations; digital recorder for panel mounting") in support of this claim.
Refrigeration units ($1,254.99): the second plaintiff's evidence was one of the refrigeration units was not working and parts had to be replaced. The plaintiffs have produced an invoice dated 25 June 2017 in support of this claim.
Repairs to the dairy and yard ($1,144.00): the second plaintiff gave evidence as to the repair work that needed to be done to the dairy and yard. This work is described in an invoice produced in support of this claim.
Cleaning and rubbish removal ($1,408.00): the second plaintiff gave evidence as to the state of the land upon re-entry: the machinery shed was strewn with rubbish; there were used milk bottles in bags throughout the shed; feed supplements were riddled with rats and mice; and rubbish had been left lying around. The clean-up work is described in an invoice produced in support of this claim.
[4]
Plant and equipment - items missing or damaged beyond repair but not replaced
[5]
Upon the plaintiffs' re-entry onto the land, items of plant and equipment were found to be missing or damaged beyond repair but not replaced. The plaintiffs claim the replacement cost of those items as follows:
[6]
(a) Fence panels (2 @ $180 = $360.00): the second plaintiff's evidence was, on re-entry, two fence panels with an approximate value of $180 each were missing. The plaintiffs rely on a written sale listing price for cattle yard fence panels to substantiate this claim (2 @ $180 = $360).
(b) Inverter ($499.00): the second plaintiff's evidence was, on re-entry, an inverter was missing. The second plaintiff gave evidence from his own knowledge as to the original purchase price of the inverter ($499.00).
(c) 12V battery ($246.00): this battery was missing. the second plaintiff gave evidence from his own knowledge as to the original purchase price of the 12V battery ($246.00).
(d) English peg mill ($1,000.00): the second plaintiff's evidence was, on re-entry, the English peg mill was missing. The second plaintiff gave evidence from his own knowledge as to the original purchase price of the English peg mill ($1,000.00).
(e) Air compressor ($299.00): the second plaintiff's evidence was, on re-entry, the air compressor was missing. The second plaintiff gave evidence from his own knowledge as to the original purchase price of the air compressor ($299.00).
(f) Market tent ($400.00): the second plaintiff's evidence was, on re-entry, one of the two market tents was missing. The second plaintiff gave evidence from his own knowledge as to the original purchase price of the market tent ($400.00).
(g) Belarus 4WD 90 HP motor 590 tractor ($9,900.00): the second plaintiff's evidence was the tractor was old but because it was a front-end loader it had certain value. It was as good as useless when the plaintiffs returned to the factory. The plaintiffs rely on a written sale listing price for a comparable (old) tractor to substantiate this claim.
(h) Honda 205cc quad bike ($3300): the second plaintiff's evidence was, within a few months of the defendant being in possession of the farm, the quad bike had been run into the ground and needed to be repaired or replaced. The plaintiffs rely on a written sale listing price for a comparable quad bike to substantiate this claim.
[7]
Finally, the plaintiffs also seek an amount of $825, being the legal costs incurred in relation to the appropriation of a formal contract and vendor statement. It was said that these costs flow naturally from the defendant's breach of the heads of agreement whereby she refused to execute those documents. It was said that those costs were reasonable and should be allowed.
[8]
Summary of findings on plaintiffs' claim for damages
[9]
Had it been necessary to award damages, I would have been satisfied that the plaintiffs were entitled to the difference claimed following the resale of the farm which was $350,000. I would also have been satisfied that the loss of the value of the business in the sum of $200,000 was established.
As for the interest claimed by way of damages, I would not have been persuaded that the plaintiffs are entitled to claim interest on vendors finance in circumstances where no funds were advanced by them to the defendant because the transaction did not proceed. They would have been entitled to claim interest had they advanced the finance to the defendant at the rate claimed but this did not happen. Damages are compensatory in nature. The claim for vendors finance interest, if allowed, would have resulted in an impermissible windfall for the plaintiffs, in my view.
As for the various repairs and maintenance costs, I would have allowed the items claimed because there was evidence that these costs were incurred by the plaintiffs after they re-entered in December 2017 and were done to restore the property. The amounts appear to be reasonable in nature.
I would not have allowed the costs sought for the various replacement costs as I was not persuaded the plaintiffs suffered any actual loss on these items. They did not purchase the replacement items in question. They did not run the business after they retook possession in December 2017. The farm was held by the plaintiffs until Mr Lawless moved in around June 2018. He purchased the farm and a number of cheesemaking chattels which were identified in his contract of sale with the plaintiffs. The chattels purchased by Mr Lawless included the tractor which the plaintiffs claim as a replacement item in this proceeding in the sum of $9,000. The plaintiffs are not entitled to this sum given the tractor was on sold by them. I was also not persuaded on the state of the evidence that the plaintiffs were entitled to the cost of a replacement quad bike as claimed. Overall, I considered the replacement costs sought were speculative. I was not satisfied the plaintiffs discharged their onus of proof on these items.
I would have allowed the sum of $825 claimed for legal costs for the preparation of the contract of sale and vendors statement.
[10]
I will order that the plaintiffs' claim be dismissed.
Unless the parties can point to any reason why costs should not follow the event, I propose ordering the plaintiffs pay the defendant's costs of the proceeding, including any reserved costs, on the standard basis to be taxed in default of agreement.
[11]
I certify that these 41 pages are a true copy of the Reasons for Judgment of Her Honour Judge A Ryan delivered on 8 August 2022.
[2] The amended statement of claim and a subsequent deed of variation refer to the heads of agreement being entered into on 19 January 2017 but the parties agreed at trial that the correct date was mid-February 2017
[14]
[3] Paragraph 46 of the first plaintiff's affidavit sworn 5 October 2020 describes the state of affairs at the farm as at June 2017 when the plaintiffs retook possession. The first plaintiff also took various photos depicting the farm in June and December 2017 which were in the Court Book.
[15]
[4] This date appears as 7 December in the chronology and in handwriting on the CB, but as 5 December at various points in the SMS messages.
[28]Workers Trust and Merchant Bank Ltd v Dojap Investments Ltd[1993] AC 573, 579-579, cited with apparent approval by Gleeson CJ, Gummow, Heydon, Crennan and Kiefel JJ in Federal Commission of Taxation v Reliance Carpet Co Pty Ltd[2008] HCA 22; (2008) 236 CLR 342, [26]. See also Heydon, JD, Leeming, MJ & Turner, PJ Meagher Gummow & Lehane's Equity Doctrines and Remedies (5th ed.) LexisNexis Butterworths (2015), [18-120].
Parties
Applicant/Plaintiff:
McGorlick
Respondent/Defendant:
Palmer [2022] VCC 1229
Cases Cited (22)
bin/LawCite?cit=%282001%29%20109%20FCR%20207 "View LawCiteRecord"); Molongo Group (Australia) Pty Ltd v Cahill[2018] VSCA 147; Sinclair, Scott & Co Ltd v Naughton[1929] HCA 34; (1929) 43 CLR 310; Sindel v Georgiou(1983) 154 CLR 661; Smith v Lush(1952) 52 SR (NSW) 207; Spencer v Commonwealth (1907) 5 CLR 418; The Edge Development Group Pty Ltd v Jack Road Investments Pty Ltd[2018] VSC 326; Workers Trust and Merchant Bank Ltd v Dojap Investments Ltd[1993] AC 573; Yimin Zhang v Shanghai Wool and Jute Textile Co Ltd[2006] VSCA 133
"... there is in reality a fourth class of case additional to the three mentioned in Masters v Cameron as recognised by Knox CJ and Ridge J and Dixon J in Sinclair Scott & Co v Naughton[1929] HCA 34; (129) [1929] HCA 34; 43 CLR 310 at 317 namely 'one in which the parties were content to be bound immediately and exclusively by the terms which they had agreed upon whilst expecting to make a further contract and substitution for the first contract containing, by consent, additional terms. Their Honours referred to the speech of Lord Lorbun in Love & StewartvInstone & Co(1917) 33 TLR 475 at 476, where his Lordship said that: 'It was quite lawful to make a bargain containing certain terms with which one was content with dealing with what one regarded as essentials, and at the same time to say that one would have a formal document drawn up with the full expectation that one would by consent insert in it a number of further terms. If that were the intention of the parties, then a bargain had been made, nonetheless that both parties felt quite sure that the formal document could comprise more than was contained in the preliminary bargain'."
2, In NSW the "usual method of selling real estate...is by means of the signing and exchange of contracts in the form approved by the Real Estate Institute of New South Wales" (Allen v Carbone[1975] HCA 14; (1975) 132 CLR 528 at 533);
'Accordingly, even though the parties agree in writing that real estate is sold for a specified price, the presumption [in NSW] is that no binding contract exists until 'contracts' are exchanged" (per McHugh JA in GR Securities citing Smith v Lush(1952) 52 SR (NSW) 207 at 212; see also the cases referred to by Stone J in McDonald v Commissioner of Taxation[2001] FCA 305; (2001) 109 FCR 207 at [18]);
This was described by the High Court in Allen v Carbone as a "first consideration" (at 533). In Lezabar Pty Ltd v Hogan(1989) NSW ConvR 55-468 at 58-387 to 58-388, Gleeson CJ said that:
Nonetheless, it is possible for a contract of sale of land in NSW to be effected otherwise than by exchange of contracts (for example, per Stone J in McDonald at [20]);
The "decisive issue is always the intention of the parties which must be objectively ascertained from the terms of the document when read in the light of the surrounding circumstances" (per McHugh JA in GR Securities at 634, citing Godecke v Kirwan[1973] HCA 38; (1973) 129 CLR 629 at 638 and Air Great Lakes Pty Ltd v KS Easter (Holdings) Pty Ltd(1985) 2 NSWLR 309 at 332 to 334 and 337);
If "the terms of a document indicate that the parties intended to be bound immediately, effect must be given to that intention irrespective of the subject matter, magnitude or complexity of the transaction" (per McHugh JA in GR Securities at 634_);_
It may be that, upon the proper construction of the document, it will appear that "the parties were content to be bound immediately and exclusively by the terms which they had agreed upon whilst expecting to make a further contract in substitution for the first contract, containing, by consent, additional terms": Sinclair, Scott & Co v Naughton at 317. This is the familiar "fourth class of case" additional to the three mentioned in Masters v Cameron[1954] HCA 72; (1954) 91 CLR 353 (described by McLelland J in Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd(1986) 40 NSWLR 622 at 628); and
Nonetheless, the practice in NSW of proceeding by exchange of contracts is "so entrenched that a party contending for an intention to proceed other than in accordance with the established procedure will need clear evidence to support the contention" (per Stone J in McDonald at [21] citing Bryson J in (1999) ANZ ConvR 429 at 431)."
"The common assumption and intention in agreements for the sale of land in New South Wales is that it is intended that there shall be no binding agreement until contracts are exchanged. In other words such contracts fall within the third limb of Masters v Cameron[1954] HCA 72; (1954) 91 CLR 353."
The defendant pleads that she left the property in reliance on the representation contained in those SMS messages, in particular the sections highlighted in bold.[20] She pleads that the plaintiffs waived their rights, or alternatively are estopped, from relying on the formal transaction documents and the default notice.
The plaintiffs submit that neither waiver nor estoppel is made out on the facts in this case. They say this particular exchange ought be understood in the wider context of the communications between the parties and their representatives also outlined above. The plaintiffs submit they merely drew the defendant's attention to her various options, rather than conveying to her that if she elected not to sign the transaction documents, the plaintiffs would abandon their rights under the default notice.
The plaintiffs also submit that the defendant's contention that the plaintiffs waived any reliance on any further claim for damages either pursuant to the deed of variation or the heads of agreement travels beyond the defendant's pleaded case, which is confined to reliance on the default notice (not on the heads of agreement (as varied)).[21] The plaintiffs claim that on no possible reading of the text messages could it be said that they had abandoned all rights that they had under the heads of agreement or deed of variation. In particular, the text messages cannot possibly be understood as constituting an unequivocal abandonment of the plaintiffs' rights to enforce the defendant's contractual obligation to repair and maintain plant and equipment at the farm.
The doctrines of breach and waiver are not easily distinguished.[22] Each doctrine is underpinned by the notion that equity precludes relief in cases where the enforcement of rights would be unconscionable.[23] In general, waiver is constituted by the deliberate, intentional and unequivocal release or abandonment of the right that is later sought to be enforced.[24]
The defendant submits that her pleading of waiver is made out in two main ways. First, she submits that by the plaintiffs' delay, both in reselling the land 15 months after the heads of agreement had come to an end, and in commencing proceedings more than two years later, they waived their rights to sue under the heads of agreement.
Secondly, she submits the plaintiffs, by the text message exchanges identified above, waived their rights to claim damages for her alleged breach of the heads of agreement, because the plaintiffs were prepared to continue to negotiate with the defendant provided they were paid a further sum of $10,000 to remain on the premises until termination of the lease. The defendant claims that the plaintiffs elected to require the defendant to leave the property rather than remain and have the last month of her lease or be sued for damages.
(1985) 2 NSWLR 309
(1986) 40 NSWLR 622
(2004) 217 CLR 640
(1954) 91 CLR 353
(1929) 43 CLR 310
(1983) 154 CLR 661
(2006) 201 FLR 178
(1990) 170 CLR 394
(2008) 236 CLR 342
(2001) 109 FCR 207
(1907) 5 CLR 418
(1986) 40 NSWLR 631
(1975) 132 CLR 528
(2002) 209 CLR 95
(1973) 129 CLR 629
Dowdle v Inverell Shire Council
A similar position was taken by Windeyer J in 161 Castlereagh Street Pty Ltd v Citadel Property Group,[18] where his Honour said at paragraph 29(b):
I am not persuaded that the plaintiffs waived reliance on the terms of the formal transaction documents by way of the text messages sent to the defendant. On a plain reading of the text messages, they do not rise to the level of a waiver of the plaintiffs' rights under the heads of agreement as varied by the deed of variation. The first plaintiff merely indicates to the defendant by these messages that she ought to make a decision in relation to the default notice and plans regarding her continued possession of the farm and business. The texts also do not support the defendant's contention that the plaintiffs agreed to waive their entitlement to claim damages under the heads of agreement or otherwise.
While the defendant pleaded estoppel in the alternative to waiver in her defence,[25] her counsel did not initially make submissions on this topic other than to note the finding of Keane JA in Ace Property Holdings Pty Ltd v Australian Postal Corporation[2010] QCA 55; [2011] 1 Qd R 504 at [149] that: