McLennan & Bisko v Dannaoui [2024] VCC 1786

County Court of Victoria|2024-11-13

This matter was only faintly pressed by the vendor's counsel, Mr Virgona.
I can deal with it shortly.
The vendors argue that such interest is provided for as reasonably foreseeable loss for breach of the contract under SC11.3. This submission is misconceived. The terms of SC11.3 do not refer to damage of this kind.
A claim such is this is in substance a claim for interest under Hungerfords v Walker.[24]
In such cases damages are claimed for the loss of use of money that should have been paid to the plaintiff at an earlier date. Sometimes it may be based on the fact that the plaintiff had a loan which it can demonstrate would have been paid down, thus saving it the contractual interest it had to pay. Sometimes it is on the assumed basis that the plaintiff could have deployed the funds in such a way as to have earned some return.
However, in all such cases evidence must be advanced to substantiate the loss suffered in this way.
In this case vendors advanced no such evidence and merely seek 5% on the relevant sum.
Without evidence to substantiate how they have lost 5% on the relevant sum this claim must fail.

(a) The vendors are entitled to interest in the sum of $384,125.48 for the period from 7 November 2022 to the date of rescission of the contract (being 22 March 2023) (137 days at 14% on $7.31m).

Subject to any matters that the parties bring to my attention on the question of costs, I propose to order that the defendant pay the plaintiffs' costs of the proceeding (including reserved costs) on the standard basis, in default of agreement.
The parties should submit draft orders to my chambers to reflect these reasons within 7 days of today's date.
Should there be any matters that require the Court's further attention (including in respect of costs) they should correspond with my chambers within 7 days.

I certify that these 24 pages are a true copy of the judgment of His Honour Judge Wise delivered on 13 November 2024.

[1] They did so pursuant to a power of attorney. Their mother has since died and they were both appointed executors of her estate. The plaintiffs were substituted as plaintiffs and the court heading was amended by Order dated 24 October 2024.

[2] I have slightly modified the wording to accommodate for the manner in which submissions were made at trial.

[3] Special Condition 11.3 set out a number of matters agreed to form foreseeable loss and damage that the vendor may suffer upon the purchaser's breach. These are not directly relevant to the dispute.

[4] [2015] HCA 37; (2015) 256 CLR 104 per French CJ, Nettle and Gordon JJ.

[5] I note that this is the effect of the findings in Ironbridge Holdings Pty Ltd (admin apptd)(rec and mgr apptd) v O'Grady [2020] VSC 344 at [376] where Ginnane J said this:

I consider that Mrs O'Grady's claim to interest succeeds, as it was a debt independent of any obligation to convey title and was not contingent on completion of the Contract. The interest was compensation to her for Ironbridge's delay in making payments that that were due and for her and Mr O'Grady's forbearance. Those circumstances can give [rise] to an agreement for interest which is independent from any obligation to convey title. That category of agreement for interest was recognised by Cole JA in his dissenting judgment on this issue in Carpenter v McGrath and by Powell J in Taylor v Raglan Developments. I do not read the judgments of Clarke JA and Sheller JA in in Carpenter v McGrath to deny that such an agreement could be made. In my opinion, that decision does not require me to dismiss Mrs O'Grady's claim. (footnotes omitted)

I do not accept the purchaser's submission that Ironbridge is distinguishable from the case before me merely because, in that case, the interest payable was stated in a series of deeds separate to the contract of sale. The effect of clause GC33 in the contract of sale before me is the same.

[6] As well as Carpenter v McGrath (1996) 40 NSWLR 39. Except to distinguish it, I do not deal separately with Carpenter v McGrath in these reasons as it is adequately dealt in Tymstock and Ironbridge.

[7] Purchaser's Written submissions - unnumbered paragraph appearing after paragraph 15.

[14] The issue is dealt with at [47] - [50].

[18] I note that the vendors dealt with the argument on the basis that the question was whether the second tranche was or was not a penalty: written submissions [50]-[51].

[22] Dunlop [1914] UKHL 1; [1915] AC 79, 86-8 (citations omitted).

[23] See paragraph 78.

Interest Rates Act 1983

The purchaser's case on this issue was simple. Mr Jones, Counsel for the purchaser, submitted that the clear words of the text of GC33 meant that the liability of a defaulting purchaser to pay interest to the vendor during the period of the default was conditional upon a settlement of the sale actually occurring. He submitted that if, at the end of a period in which the purchaser was in default but the contract was not yet terminated, the purchaser decided not to complete the contract and the contract was terminated by the vendor, as no settlement had taken place, there was no liability upon the purchaser to pay interest.
He submitted that so much was clear from the use of the words "payable at settlement" in GC33.
In support of his argument Mr Jones principally relied on a decision of Judge Macnamara of this Court in Bill v Clarke [2015] VCC 1721 as well as Galafassi v Kelly (2014) 87 NSWLR 39.
I reject Mr Jones's construction of GC33. I also find that neither Bill v Clarke nor Galafassi is of any real assistance in determining this question.
For the following reasons I would construe GC33 as imposing on a defaulting purchaser an independent obligation to pay interest to the vendor during the period commencing on the default - in this case the missed contractual settlement date - and ending on the termination of the contract 14 days after service of the notice of rescission.
The principles relevant to the task of construction of commercial contracts was set out in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd[4] as follows:
1. The rights and liabilities of parties under a provision of a contract are determined objectively, by reference to its text, context (the entire text of the contract as well as any contract, document or statutory provision referred to in the text of the contract) and purpose.
2. In determining the meaning of the terms of a commercial contract, it is necessary to ask what a reasonable businessperson would have understood those terms to mean. That inquiry will require consideration of the language used by the parties in the contract, the circumstances addressed by the contract and the commercial purpose or objects to be secured by the contract.
3. Ordinarily, this process of construction is possible by reference to the contract alone. Indeed, if an expression in a contract is unambiguous or susceptible of only one meaning, evidence of surrounding circumstances (events, circumstances and things external to the contract) cannot be adduced to contradict its plain meaning.

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