[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]
[2]
Judgment
EMMETT JA: This appeal is concerned with the quantification of damages payable by a purchaser to a vendor under a contract for the sale and purchase of land following the repudiation of the contract by the purchaser. The particular question raised in the appeal is the extent to which the price realised on the sale of the land 13 months after the repudiation is relevant to the assessment of the loss suffered by the vendor. The underlying facts concerning the contract for sale in question and its termination by the vendor for breach are not in dispute. However, there is some dispute as to the legal principles to be applied in assessing damages payable to the innocent vendor.
[3]
Factual Background
On 21 November 2005, the respondents, Filmlock Pty Ltd, Jakesam Developments Pty Ltd, Pearse Property Group Pty Ltd and JGT Investments Pty Ltd (together, the Vendors) entered into a deed of option (the Option Deed) with Nissi Investments Pty Ltd (the Purchaser) and Messrs Samuel Ng and Soni Tanuwidjaja (together, the Guarantors). By the Option Deed, the Vendors granted to the Purchaser the option to buy a parcel of land situated at Jindabyne, New South Wales (the Subject Land). At that time, it was proposed that the Subject Land would be subdivided into 100 lots.
On the same day as the Option Deed was executed, the Guarantors executed a guarantee and indemnity in favour of the Vendors (the Guarantee and Indemnity), by which they irrevocably and unconditionally guaranteed to the Vendors that the Purchaser would pay all money that the Purchaser is or may at any time be liable to pay to the Vendor under or in connection with the Option Deed or any contract for sale entered into upon exercise of the option, and that the Purchaser would comply on time with its obligations under the Option Deed. As an additional obligation, the Guarantors irrevocably and unconditionally indemnified the Vendors against, and undertook, as principal debtor, to pay to the Vendors on demand a sum equal to, all liability, loss, penalties, costs, charges and expenses directly or indirectly arising from or incurred in connection with the Purchaser not complying on time with the Purchaser's obligations under the Option Deed or any such contract for sale.
On 13 August 2007, the Purchaser exercised the option granted by the Option Deed, and the Vendors and the Purchaser thereupon entered into a contract for the sale and purchase of the Subject Land for a purchase price of $7,000,000 (the Sale Contract). That price was subject to cl 43.4 of the Sale Contract, which provided that, if more than 100 lots were yielded within the Subject Property, then the purchase price would be increased by $70,000 for each lot in excess of 100. After adjustment for three extra lots, the purchase price became $7,210,000. On 14 April 2008, the Vendors gave to the Purchaser a notice to complete the Sale Contract, making time of the essence and requiring completion by 2 May 2008. The Purchaser did not complete by 2 May 2008 and on 5 May 2008, the Vendors terminated the Sale Contract on the basis of repudiation of the Sale Contract by the Purchaser.
On 3 June 2009, the Vendors entered into a contract for the sale of land situated at Jindabyne (the Highview Estate) to Pearse Property Group Pty Ltd, Village Style Retirement Services Pty Ltd and Wytown Pty Ltd (the Resale Contract). The Highview Estate includes the Subject Land. Under the Resale Contract, Village Style Retirement Services Pty Ltd acquired an undivided one-quarter interest and Wytown Pty Ltd acquired an undivided one-half interest in the Highview Estate. Pearse Property Group Pty Ltd, as one of the Vendors, retained its undivided one-quarter share in the Highview Estate. The price for the purchase of an undivided three-quarter interest in the Highview Estate under the Resale Contract was the sum of $3,300,000, thereby valuing the whole of the Highview Estate at $4,400,000. The Resale Contract was completed on 20 August 2009. By that time, the Subject Land had been subdivided into 122 lots.
The Vendors thereafter commenced proceedings in the Equity Division of the Supreme Court against the Purchaser and the Guarantors. They claimed damages from the Purchaser by reason of the Purchaser's failure to complete the Sale Contract. They sued the Guarantors under the Guarantee and Indemnity.
When the proceedings came on for hearing before the primary judge on 8 July 2013, Mr Ng appeared and sought an adjournment on behalf of the defendants, being the Purchaser and the Guarantors. The adjournment was refused and the proceedings continued without any further participation by the defendants.
The primary judge was satisfied that the Vendors were entitled to recover damages from the Purchaser for breach of the Sale Contract. His Honour concluded that the measure of the Vendors' loss was the difference between the purchase price payable under the Sale Contract and the net amount received under the Resale Contract that was attributable to the Subject Land. The uncontradicted evidence before his Honour was that, as at 3 June 2009, $3,100,000 of the purchase price payable under the Resale Contract was attributable to the Subject Land. His Honour concluded that that sum represented the fair value of the Subject Land "at the time". That appears to be a finding as to the fair value of the Subject Land as at the date of the Resale Contract.
The primary judge concluded that the base figure for the Vendors' loss at the date of termination of the Sale Contract was $3,760,000, calculated as follows:
Purchase price payable under the Sale Contract: $7,210,000
Less deposit paid by the Purchaser: $350,000
Less proceeds of the sale of the Subject Land: $3,100,000
Balance: $3,760,000
His Honour then calculated interest up to the date of judgment. Accordingly, on 12 August 2013, the primary judge gave judgment for the Vendors against the Purchaser in the sum of $5,662,023. His Honour ordered the Purchaser to pay the Vendors' costs.
In addition, the primary judge gave judgment against each of the Guarantors in the sum of $5,799,725. His Honour found that the Vendors had made valid demands on the Guarantors to pay the moneys owing by the Purchaser and that, in breach of their obligations under the Guarantee and Indemnity, they had not paid that money. His Honour concluded that there was no good defence by the Guarantors and no reason why the Vendors should not be entitled to judgment against each of them. His Honour also found that, under the terms of the Guarantee and Indemnity, the Guarantors were liable to indemnify the Vendors for the costs and expenses of the proceedings. That explains the difference in the amounts of the judgments against the Purchaser and the Guarantors.
[4]
The Appeal
By notice of appeal filed on 8 November 2013, Mr Ng and the Purchaser have appealed to this Court from the orders made by the primary judge on 12 August 2013. Mr Tanuwidjaja is not an appellant. However, following the grant of leave during the hearing of the appeal, an amended notice of appeal was filed on 26 August 2014 joining him as respondent. That amended notice of appeal was served on Mr Tanuwidjaja. Although he was given an opportunity to file an appearance and make submissions in the appeal, Mr Tanuwidjaja did not do so. The Court therefore proceeded on the basis that he does not wish to participate in the appeal.
The grounds of appeal are that the primary judge erred in finding that the measure of the Vendors' loss was the difference between the price payable under the Sale Contract and the net amount attributable to the re-sale of the Subject Land under the Resale Contract. The appellants complain that his Honour erred in failing to find that the only damages to which the Vendors may have been entitled was the difference between the price payable under the Sale Contract, of $7,210,000, and the true value of the Subject Land as at the date of termination of the Sale Contract, namely, 5 May 2008. They say that there was no evidence as to that true value as at 5 May 2008.
Mr Ng also complains that his Honour erred in finding that he was liable in the amount for which judgment was entered against him. That complaint is the same as the complaint made on behalf of the Purchaser.
The general rule is that damages for breach of a contract for sale of land are assessed as at the date of the breach of contract. That question is usually addressed by comparing the contract price with the value of the relevant land at the time of the purchaser's breach. If the value is greater than the contract price, the vendor has suffered no damage. However, if the value is less than the contract price, it may be inferred that that discrepancy is an element of the vendor's loss. [1]
The Vendors did not adduce any evidence of the value of the Subject Land as at 5 May 2008. The only evidence of the value of the Subject Land was the value attributable to it under the Resale Contract. Therefore, the primary judge had no evidence before him of the value of the Subject Land at the relevant date, namely, the date of termination of the Sale Contract.
The Purchaser says that the primary judge erred in treating as the value of the Subject Land, as at the date of the breach, the purchase price attributable to the Subject Land under the Resale Contract. They contend that there was no basis for his Honour to conclude that the price attributable to the Subject Land under the Resale Contract bore any resemblance to the value of the Subject Land as at 5 May 2008. In particular, the Purchaser points out that, between those dates, the onset of the global financial crisis occurred and that the Court can and should take judicial notice of the potential for the global financial crisis to have an impact on the value of land. [2]
The Vendors, on the other hand, contend that the Purchaser's contentions ignore the evidence of Mr Curtis Field, a licensed real estate agent, whose statement dated 8 February 2012 was admitted into evidence by the primary judge. There was no objection to the statement, because the defendants had, at that stage, ceased to participate in the proceedings.
As I have said, the Subject Land formed part of the Highview Estate. The whole of the Highview Estate was ultimately subdivided into 207 lots. The Subject Land consisted of 122 of those lots. The subject matter of the Resale Contract was the whole of the 207 lots, including the 122 lots of the Subject Land. The total purchase price attributable to the whole of the Highview Estate, of $4,400,000, was the subject of apportionment between the 122 lots of the Subject Land and the balance of 85 lots of the Highview Estate. There has been no complaint by the Purchaser about that apportionment. That apportionment resulted in the attribution of the sum of $3,100,000 to the 122 lots of the Subject Land.
Mr Field said that, in February or early March 2008, he was contacted by Mr Adam Pearse, a director of one of the Vendors, and asked to act as agent for the sale of the whole of the Highview Estate. Mr Field prepared an estimate of between $11,000,000 and $13,000,000 as the possible sale price for the whole of the Highview Estate. He formed the view that the best method of sale would be by way of expression of interest, which, he said, allows or encourages sales by methods other than simply through straight purchase. For example, it would enable a prospective purchaser to indicate interest in buying part of the Highview Estate, or purchase by structured settlements, or delayed settlement.
Mr Field said that the real estate market generally was very difficult at that time and that, in his experience at that time, access to debt funding was "almost stifling". He intended to target purchasers with cash, or purchasers with funds available immediately or over a reasonable time. He said that, in his experience at that time, which he said was the height of the global financial crisis, banks were interested only in low-gearing finance for subdivision land and did not want long-term exposure. He said that subdivisions inevitably involved long-term financial exposure.
Mr Field's statement described the advertising campaign that he undertook to seek expressions of interest. Mr Field said that he also made several telephone calls to companies that he assessed may be interested in the project. No expressions of interest were received by the closing date of 6 June 2008. Mr Field made further telephone calls after that time to companies assessed by him as prospective purchasers, but was unable to obtain any expression of interest. Mr Field said that he was confident that the Highview Estate had been exposed in an appropriate way to "the potential market". Mr Field received some 31 enquiries in total, which he regarded, in his experience, as a good result for a regional location such as Jindabyne and "given the state of the economy".
Mr Field said that, by July 2008, the point had been reached at which, in his opinion, all reasonable prospects of sale had been exhausted. He said that the only offers received were "at very low price points". However, he gave no evidence as to the actual offers that were received. He said that he then had a conversation with Mr Pearse, in which Mr Pearse said that he was not going to sell "for a ridiculously low price" and that he might as well do it himself. Mr Field's response was that that was probably the best outcome, since Mr Pearse "knew the property and had put money into it". Mr Pearse then commenced negotiations with other business associates concerning the possible sale of the Highview Estate, leading to the Resale Contract on 3 June 2009.
The Vendors accept that, where a vendor has elected to terminate a contract for the sale of land by reason of breach by the purchaser and to retain the land, the prima facie measure of damages is the difference between the contract price and the value of the land at the date of breach. They accept that the measure of damages involves a comparison between the purchase price and the price that the innocent vendor could obtain under a substitute contract at that time. Thus, they say, the normal measure is the contract price less the market price at the time of breach, namely, the time fixed for completion. Accordingly, the availability of a market is a critical factor.
However, the Vendors say, where there is no available market at the time of breach, the prima facie rule must give way if the application of the rule would produce injustice, in so far as it would not be a true measure of the vendor's loss. The Vendors contend that, in the circumstances of this case, it was open to the primary judge to assess the damages as at 3 June 2009 and that his Honour made no error in doing so. That contention is advanced on the basis that Mr Field's statement demonstrates that, at the time of termination of the Sale Contract, there was no available market for the Subject Land.
The Vendors rely upon a number of propositions said to be derived from the decision of the English Court of Appeal in Hooper v Oates [2014] Ch 287, as follows:
The correct date for assessment of damages for breach of contract is the date of breach only where there is an immediately available market for the subject matter of the sale.
That is unlikely to be the case where the subject matter in question is land: if the defaulting party is the buyer, much will depend on what the seller does in response to the breach.
If the buyer is unable to show that the seller had failed to take reasonable steps to mitigate his loss (such as by taking too long to re-market the property), the eventual price realised on resale is likely to be the figure to be set against the contract price, because it shows what loss the seller had suffered, uncomplicated by issues of remoteness or failure to mitigate, and not because it represents the market value at the date of breach.
If the property market has declined during that time, it is of no avail for a defaulting buyer to say that that should not be laid at his door: if the buyer had completed the contract, he would have suffered that decline in value, so that is part of the loss for which the seller needs to be compensated.
The English Court of Appeal did not explain what was meant by an "immediately available market" for the sale of land. While a sale of land might take longer than the sale of other types of assets, it does not follow that there should be a departure from the general rule, which focuses on the value of the land as at the date of termination of the contract. There is good reason for that approach where the damages sought by the innocent seller are loss of bargain damages. The critical date is when the bargain was lost. In the present case, that is the date when the Vendors, as the innocent party, exercised the right of terminating for breach, namely, 5 May 2008.
Further, the English Court of Appeal did not explain what was meant by "eventual resale price". A resale at any date is such a variable factor that it should not be the necessary basis for assessment. The English Court of Appeal relied, in the case before it, on the value of the relevant property at the date when the vendor "finally decided to retain the property", after the vendor had taken reasonable, but ultimately unsuccessful, steps to find a new buyer. That is an unsatisfactory formulation of the date for determining the measure of the loss of a vendor. An unacceptable degree of uncertainty would be created by the adoption of a date that is, in reality, dependent on an arbitrary decision by the vendor, notwithstanding that its attempts to re-market the property may have been reasonable. However, it is not necessary to express a final view as to whether there may be circumstances in which it is appropriate to depart from the general rule.
The Sale Contract was in the standard form used in New South Wales, which restricts the use of the resale price as an element in the quantification of loss to a resale within 12 months of termination. Clause 9 of the Sale Contract provided that, if the Purchaser did not comply with the Sale Contract in an essential respect, the Vendors could terminate it by serving a notice. Clause 9.3 then provided that, after termination, the Vendors could sue the Purchaser, and set out two possibilities. The first was that, where the Vendors re-sold the Subject Land under a contract made within 12 months after the termination, the Vendors were to be entitled to sue to recover the deficiency on resale and the reasonable costs and expenses arising out of the Purchaser's non-compliance with the Sale Contract. Otherwise, the Vendors were to be entitled to sue to recover damages for breach of contract. That must be taken to refer to a claim for damages under the general law. That throws the parties back to the general rule stated above.
Clause 9 therefore imposed a specific 12-month time limit upon the recovery of damages based on any deficiency on re-sale. If there was no re-sale within that period of 12 months, the claim would be limited to one for damages under the general law, namely, the difference between the contract price and the value of the relevant land at the date of breach. The effect of the decision of the primary judge was to allow the Vendors to rely on the arbitrary measure of damages contemplated by cl 9, notwithstanding that the period of 12 months had elapsed. In the present case, of course, the resale of the Subject Land did not take place within 12 months of the termination of the Sale Contract.
It was a term of the Sale Contract that the deposit be 5 percent of the purchase price and that, in any event entitling the Vendors to terminate and recover the deposit, the Purchaser must immediately upon demand pay a further amount to increase the deposit to 10 percent of the purchase price and after termination by the Vendors, the Vendors would be entitled to keep or recover the deposit;
On 13 May 2008, the Vendors informed the Purchaser that they had forfeited the deposit of $350,000 and made demand that the Purchaser immediately pay a further amount to the Vendors to increase the deposit to 10 percent of the purchase price;
In breach of the Sale Contract, the Purchaser has failed to pay the further amount to increase the deposit;
By reason of the Purchaser's failure to comply with that demand, the Vendors have suffered loss and damage, being the further amount due of $371,000;
Despite reasonable efforts, the Vendors were unable to resell the Subject Land until 3 June 2009;
On 3 June 2009, the Vendors entered into the Resale Contract, which was completed on 20 August 2009;
By reason of the Purchaser's failure to complete in breach of the Sale Contract, the Vendors have suffered loss and damage as follows:
* as at 5 May 2008, the market value of the Subject Land was less than $7,210,000;
* alternatively, loss suffered upon re-sale of the Subject Land.
Significantly, there was no allegation that the market value of the Subject Land as at 5 May 2008 was the amount attributable to it in the Resale Contract.
In its defence, the Purchaser admitted that the Vendors had forfeited the deposit and had made demand for the payment of the further amount to increase the deposit and that the Purchaser had failed to pay the further amount. In response to the allegation that the Vendors had suffered loss and damage as particularised, the Purchaser did not admit the allegation and asserted further that the Vendors had failed to take any or any reasonable steps to mitigate any loss and damage suffered, by reason of which they are not entitled to recover the loss and damage claimed. Failure to mitigate was not pursued in the appeal.
Further, the contentions advanced to this Court by the Vendors as to the basis upon which the assessment of damages by the primary judge could be supported were not advanced to the primary judge himself. As I have said, neither the Purchaser, nor Mr Ng, participated in the trial and no objection was therefore advanced against the assessment of damages on the basis upon which his Honour proceeded.
The conduct of the Purchaser and the Guarantors in the proceedings has been somewhat unsatisfactory. The proceedings were set down for a four-day trial to commence on 1 September 2012 before Sackar J. On Friday, 29 August 2012, the Vendors' solicitors received notice that an adjournment application was to be made on the following Monday, 1 September 2012. Sackar J granted the application on the basis that the lawyers who had been acting for the Purchaser and the Guarantors had ceased to act on 24 July 2012. The proceedings came before the primary judge briefly on 19 October 2012 and were stood over to November 2012. On 5 April 2013, the primary judge extended the time for the Purchaser and the Guarantors to serve any lay and expert evidence on which they intended to rely to 17 May 2013. Nothing was filed. At one point, a direction was given that there be a conclave of experts. The Vendors' solicitors wrote on two or three occasions in an endeavour to organise such a conclave. The requests came to nothing.
The Purchaser and the Guarantors had served an expert valuation report on 29 March 2012. However, it appears that they did not wish to proceed with that evidence. On 8 July 2013, Mr Ng appeared in person and sought an adjournment of the hearing. He asserted that he needed to be given sufficient time to defend the case because it was so complex. He asserted that he had not had enough time to retain new valuers. When asked about serving valuation evidence of a Mr Davies on 28 March 2012, Mr Ng said that he was not going to answer any more questions and that if an adjournment was not given, he wanted to be excused because he could not stay. The primary judge noted that Mr Ng refused to answer any more questions whatsoever on any topic. His Honour then refused the adjournment. Mr Ng said that he did not wish to participate and his Honour then proceeded to hear the case in his absence.
The Vendors also rely on a notice of contention filed on 11 April 2014. They say that the primary judge could have held that damages could be assessed on the basis of the price payable under the Resale Contract by reason of the evidence of an expert valuer that he had been advised by Council officers that, as at 1 July 2008, the land value assessed by the Valuer-General for rating and taxing purposes was $850,000. The Vendors tendered a valuation report of Mr Michael Dick, in which Mr Dick expressed the opinion that the market value of the Subject Land was $3,100,000 as at 3 June 2009. Significantly, he expressed no opinion as to the value as at 5 May 2008. In the course of his report, Mr Dick indicated that he had been advised by Council officers that, as at 1 July 2008, the land value assessed by the Department of the Valuer-General for rating and taxing purposes was $850,000. The Vendors contended that that was evidence that would support a valuation as at 5 May 2008 of the Subject Land as having a value of no greater than $3,100,000. However, that contention was never advanced to the primary judge.
[5]
Conclusion
The primary judge erred, albeit because he was led into error by the Vendors, in concluding that the difference between the price payable under the Sale Contract and the price realised under the Resale Contract represented the appropriate measure of damages. The measure of damages could not be calculated without evidence as to the market value of the Subject Land as at 5 May 2008. However, had there been an objection to the assessment of damages on the basis now advanced on behalf of the Purchaser, it may well have been open to the Vendors to adduce additional evidence as to the value of the Subject Land as at 5 May 2008.
In the circumstances, the appropriate course is to allow the appeal and set aside the orders made by the primary judge. The matter should be remitted to his Honour for the purpose of entertaining any application that the parties, either the Vendors or the Purchaser, wish to make to adduce evidence as to the value of the Subject Land as at 5 May 2008. The necessity for a further hearing has been occasioned by the failure of the present appellants to participate in the trial before the primary judge. In the circumstances, there should be no order as to the costs of the appeal. However, the costs of the proceedings at first instance will be a matter for the primary judge.
Accordingly, I propose the following orders:
1. Appeal allowed.
2. Set aside the orders made by Pembroke J on 12 August 2013.
3. Remit the matter to Pembroke J for the purpose of entertaining any application that a party may wish to make to adduce evidence as to the value of the land the subject of the deed of option entered into on 21 November 2005.
4. No order as to the costs of the appeal.
5. Costs of the proceedings at first instance to be determined by Pembroke J.
GLEESON JA: I agree with the orders proposed by Emmett JA and with his Honour's reasons, but would add the following brief observations in relation to one aspect of the matter.
These comments concern the argument sought to be relied upon by the vendors on appeal, but not raised below, that it was open to the primary judge to assess the damages by reference to the contract price on resale 13 months after the contract was terminated, rather than the market value at "the date of breach" (or more accurately, where loss of bargain damages are claimed, the date at which the contract is terminated for breach).
It is to be noted that, in this case, nothing turns upon whether the value of the subject land as at "the date of breach" is relevantly the date when completion should have occurred (2 May 2008), rather than the date upon which the vendors elected to accept the purchasers' repudiatory conduct as putting an end to the contract (5 May 2008): see Castle Constructions Pty Ltd v Fekala Pty Ltd [2006] NSWCA 133 at 11 (Mason P; Beazley JA agreeing); C&P Syndicate Pty Ltd v Reddy [2013] NSWSC 643 at [197] (Lindsay J).
Because there was no resale by the vendors within 12 months after termination, the vendors in the present case had no entitlement under cl 9.3.1 of the contract to sue to recover the deficiency on resale (and associated costs and expenses). Rather, the vendors' entitlement, under cl 9.3.2 of the contract, was to sue to recover damages for breach of contract. As Emmett JA has stated, this must be taken to refer to a claim for damages under the general law.
The vendors contended on appeal, relying upon the decision of the English Court of Appeal in Hooper v Oates [2014] Ch 287, that where there is no available market at the time of breach, the prima facie rule is inapplicable and the vendors' damages are to be assessed by reference to the eventual resale price. Here the subject land had declined significantly in value by the time of resale on 3 June 2009, compared to the contract price under the earlier sale contract.
For the reasons given by Emmett JA, at [33]-[37], I agree that the vendors should not be permitted to rely upon this argument on appeal to support the primary judge's assessment of damages as at 3 June 2009.
In these circumstances, it is unnecessary to express any view on whether the approach in Hooper v Oates (which was recently referred to with approval by Beech J in Lords v Von Thomann (No 2) [2014] WASC 320 at [168]-[170]) is consistent with authority in Australia, or whether the same result might have been reached in Australia on similar facts but by slightly different reasoning. It is also unnecessary to consider the possible tension in Hooper v Oates between the finding that there was no available market at the date of breach, and the seemingly unchallenged expert evidence concerning the value of the subject land at that date.
However, something further should be said in relation to the vendors' argument generally. The fact that a vendor has proceeded, with due diligence but delay, to effect a resale of the subject land in a falling market does not, of itself, displace the "usual" measure of a vendor's damages. Prima facie this is the difference, if any, between the contract price and the market value of the land at the time the bargain was lost, with consequential adjustments as may be required on the facts of the particular case: Castle Constructions Pty Ltd v Fekala Pty Ltd at [11]; Statewide Developments Pty Ltd v Higgins [2011] NSWCA 35; 15 BPR 29,195 affirming Higgins v Statewide Developments Pty Ltd [2010] NSWSC 183; 14 BPR 27,293 at [96]-[102] (Barrett J, as his Honour then was).
As Keane J explained in Clark v Macourt [2013] HCA 56 at [110], the date of breach rule serves the important end of bringing finality and certainty to commercial dealings.
However the general rule that damage is assessed at the date of breach of contract is not inflexible. Johnson v Perez [1988] HCA 64; 166 CLR 351 at 367 recognises that the general rule will yield if "in the particular circumstances, some other date is necessary to provide adequate compensation". See generally: 355-356, 371 and 386.
In Vieira v O'Shea [2012] NSWCA 21 at [45] Basten and Meagher JJA identified a number of circumstances in which the general rule must give way, in the interests of justice, because another approach is necessary to give the plaintiff an amount of damages which will appropriately compensate for the breach of contract.
One such circumstance identified by their Honours is where the plaintiff has acquired an asset which would not otherwise have been acquired and the asset is not readily marketable at the time of acquisition. The rationale for a later date of assessment of loss is that, in these circumstances, the plaintiff may not have acted unreasonably in retaining the asset.
The date of breach rule assumes that there is a market in which the innocent party can resell the subject matter of the sale in question (or buy a replacement as the case may be). Where there is no such market, a later date may be appropriate to give the plaintiff an amount of damages which will compensate for the breach of contract: Johnson v Perez at 357; Wenham v Ella [1972] 127 CLR 454 at 467; and Tabcorp Holdings Ltd v Bowen Investments Pty Ltd [2009] HCA 8; 236 CLR 272 at [13].
Accordingly, I would not exclude the possibility that, in an appropriate case, the interests of justice may require that "the date of breach" rule should not apply and damages may be assessed by reference to a later date, such as the contract price on resale.
Two further matters should be mentioned. First, under the standard form of contract for sale of land in New South Wales, provided that the vendor has resold the property within 12 months after the termination, cl 9.3.1 entitles the vendor to recover the deficiency on resale and the reasonable costs and expenses arising out of the purchaser's non-compliance with the contract. In this circumstance, there is no need to resort to any argument concerning the date of breach rule.
Secondly, whether a market value may be assessed in the case of land as at "the date of breach" is ultimately a question of fact. Of necessity, the sale of land will generally require a period to elapse for proper marketing. Unsuccessful attempts by a vendor to resell the property are not determinative as to whether there is no market for the land. Much will depend on the usual method of sale for the land in question having regard to its location, particular characteristics, the range of likely interested purchasers, and the time usually required for proper marketing of land of that type. Expert valuation evidence is likely to have a significant role.
It needs to be emphasised that departure from the general rule is not a matter of discretion: Clark v Macourt at [109] (Keane J). A vendor claiming damages assessed at a date later than "the date of breach" must demonstrate that there are particular reasons on the facts which would make it unjust to apply the prima facie or "usual" measure of damages.
TOBIAS AJA: I agree with the orders proposed by Emmett JA for the reasons he has expressed. I also agree with the additional observations of Gleeson JA.
[6]
Endnotes
Laird v Pim (1841) 151 ER 852 at 854 and Vitek v Estate Homes Pty Ltd [2010] NSWSC 237 at [179].
See s 144 of the Evidence Act 1995 (NSW).
Carpenter v McGrath (1996) 40 NSWLR 39 at 58-59.
HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd [2004] HCA 54; 217 CLR 640 at 657 [37].
See Professors Andrews, Clarke, Tettenborn and Virgo, Contractual Duties: Performance, Breach, Termination and Remedies (Sweet & Maxwell, 2011) at [21-088].
Goodridge v Macquarie Bank Ltd [2010] FCA 67; 265 ALR 170 at [220]-[222].
[7]
Amendments
17 June 2015 - [14]: "Purchaser" changed to "purchaser".
[19]: "Mr Pearse" in the second sentence changed to "Mr Field".
[37]: "no" changed to "not" in the sixth sentence
[49]: "Lords v " added at the beginning of the "Von Thomann (No 2)" citation
[52]: "the" added before "particular" in the quote from Johnson v Perez.
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Decision last updated: 17 June 2015
In appropriate circumstances, it may be possible to draw an inference that the price at which property is sold some 13 months after the date for assessment of damages is the value of that property at the relevant time. However, that is not what the primary judge purported to do. His Honour did not make a finding that the value of the Subject Land as at 5 May 2008 was the value attributable to it under the Resale Contract.
The Vendors contend that the normal measure for the assessment of damages in a case such as the present is the contract price less the market price at the contractual time fixed for completion, or the full contract price less the net market value of the property left in the vendor's hands, that is to say, the amount at which the resale has been, or could be, made. [3] The key factor, they say, is market price, which refers to prices actually obtainable in market sales. [4]
Thus, the Vendors say, the assessment of damages by reference to the breach date is based, relevantly for present purposes, on the assumption that the innocent party can, at that time, take steps to mitigate its loss. They say that the "time of breach" rule dovetails, to some extent, with the rule of mitigation, under which the innocent party is expected to go into the market as soon as reasonably possible on breach, with the consequences of failure to do so being at his own risk. [5] While the prima facie rule is that damages should be assessed on the date at which the innocent party would reasonably be expected to mitigate damages by seeking an alternative to the performance of the contract, there is no inflexible rule that fixes a date for such assessment. [6] The Vendors say that, by about July 2008, they had exhausted all reasonable prospects of sale.
Even if, as the Vendors contend, there was no available market for the Subject Land as at May and June 2008, there was no such finding by his Honour. Further, that was not the case pleaded by the Vendors. The Vendors did not assert that the value of the Subject Land as at 5 May 2008 was the price attributable to the Subject Land in the Resale Contract. In their amended statement of claim filed on 2 October 2012, the Vendors made the following relevant allegations:
Clearly, that evidence would not have been admissible if objected to. However, as I have said, neither the Purchaser, nor the Guarantors, participated in the trial. In any event, little weight should be given to such evidence. That was not a matter that was put to the primary judge. It was not a basis upon which the damages were particularised in the statement of claim. The discrepancy between the Valuer-General's valuation and the price payable under the Resale Contract casts considerable doubt on the reliability of the evidence. It cannot be relied upon to support a market value of the Subject Land as at 5 May 2008 of no more than $3,100,000. The land value as at 1 July 2008 for rating and taxing purposes is not evidence of the market value as at 5 May 2008. The contention must be rejected.