Nolan v MBF Investments Pty Ltd

2 The Court delivered its reasons for judgment on the question of liability on 18 June 2009. Subsequently, the parties were heard further on 28 July 2009 on the question of the form of the relief which should be granted to the Plaintiff, Mr Nolan. During the course of argument, Mr Nolan gave instructions to his counsel and legal advisers to apply for an amendment to plead aggravated and/or exemplary damages arising from the findings made by the Court in its reasons for judgment. I gave directions that the Plaintiff file and serve a draft of an amended statement of claim pleading aggravated and/or exemplary damages arising from the findings made by the Court in its reasons for judgment delivered 18 June 2009, and that the proceeding be relisted for a hearing to determine whether or not the amendment should be permitted, whether aggravated and/or exemplary damages should be awarded, and the quantum of any such award. It is to be noted that, pursuant to r.13.07(3) of the Supreme Court (General Civil Procedure) Rules 2005 exemplary damages must be specifically pleaded, together with the facts on which the party pleading relies.

3 The Plaintiff filed and served a proposed further amended statement of claim dated 13 August 2009. This proposed pleading did not plead aggravated and/or exemplary damages. It proposed two amendments to the following effect: by the first of the proposed amendments, the Plaintiff sought to rely on exhibit P1. By the second amendment, Mr Nolan sought to plead a new damages claim for "vexatious physical inconvenience, stress and discomfort." The Plaintiff confirmed that he did not wish to press a case for aggravated and/or exemplary damages against the Defendant. The amendments were to the particulars of loss and damage claimed by the Plaintiff sub-joined to paragraph 23 of his amended statement of claim by the addition of new sub-paragraphs (k) and (l) in the following form:

(l) The Plaintiff claims damages for vexatious physical inconvenience, stress and discomfort

4 The Defendant opposed both amendments. The parties were in agreement, however, that I should deal with the application to amend 'on the papers' taking into account the written submissions submitted by the parties.

5 As to the first of the amendments seeking to rely on exhibit P1, that exhibit was tendered at the trial through Mr Nolan, who adopted the statement as a statement of his loss and damage on the second day of the trial. The exhibit was tendered by consent on the basis that it contained Mr Nolan's calculation of his losses and the factual basis upon which those calculations were undertaken.

6 There being no prejudice claimed by the Defendant resulting from the incorporation of exhibit P1 into the Plaintiff's particulars of loss in his statement of claim, I will permit the amendment by the addition of sub-paragraph 23(k).

7 The Defendant opposed the amendment to introduce sub-paragraph 23(l) (the "New Claim") into the particulars of damage on four bases, namely: the New Claim is not sustainable in law; second, Mr Nolan's pleading in support of the New Claim is deficient and the Court should not allow the proposed further amended statement of claim to stand as an amended pleading; third, it would be unfair to MBF to allow Mr Nolan to bring the New Claim against it at this advanced stage of the proceeding; and, fourth, it would be contrary to the principles of law governing the amendment of pleadings for the Court to allow Nolan to introduce the New Claim after the Court has heard all the evidence, the parties have made closing submissions, and the Court has made and published its findings on liability.

Whether the 'New Claim' is Sustainable at law

8 The proposed claim for damages for physical inconvenience, stress and discomfort does not fall within the accepted exceptions for claims for damages which exist under the law of contract.

9 In Baltic Shipping Co v Dillon[3], the High Court examined the traditional rule that damages for distress are not awarded for breach of contract reflected in the seminal ruling in Hamlin v Great Northern Railway Co[4]. Deane and Dawson JJ stated the rule in the following terms:[5]

One of the general rules relating to the assessment of compensatory damages for breach of contract which has been accorded the status of settled principle, is the rule that a plaintiff is not entitled to recover damages for the "disappointment of mind", distress and injured feelings "occasioned by the breach of contract" ((145) Hamlin v. Great Northern Railway Co. (1856) 1 H. and N. 408, at p 411 [1856] EngR 918; (156 ER 1261, at p 1262); and see, e.g., Addis v. Gramophone Co. Ltd. [1909] UKHL 1; (1909) AC 488). That rule, where applicable, represents an essentially pragmatic and judicially imposed assumption which is to be made for the purposes of the application of the second limb of the rule in Hadley v. Baxendale ((146) [1854] EngR 296; (1854) 9 EX 341 (156 ER 145)), that is to say, it is to be assumed that disappointment or distress flowing from the breach of contract would not have been in the contemplation of the parties, at the time they made the contract, as a likely result of breach.

10 However, in Baltic, an exception was applied. The plaintiff, Mrs Dillon, sued for breach of contract on the part of the defendant , which was a shipping company "Baltic"). Baltic agreed to provide a 14 day holiday cruise for the plaintiff on board its cruise vessel, the "Mikhail Lermontov". Disastrously, on 16 February 1986, the vessel struck a shoal off Cape Jackson, on the north-eastern tip of the South Island of New Zealand, was fatally holed and sank. Mrs Dillon, having been shipwrecked, sued the shipping company for damages. The plaintiff was held to be entitled to an award of damages for distress and disappointment because the contract for the holiday cruise contained an implied promise to provide the plaintiff with relaxation and enjoyment. As Brennan J observed:[6]

If a contract contains a promise, express or implied, that the promisor will not cause the promisee, or will protect the promisee from, disappointment of mind, it cannot be said that disappointment of mind resulting from breach of the promise is too remote. Such a promise is expressed or implied in many contracts the object of which is to provide a service or facility conducive to peace of mind, tranquillity of environment or ease of living ((112) Branchett v. Beaney (1992) 3 ALL ER 910), at p 916; Bliss v. South East Thames Regional Health Authority (1987) ICR 700, at p 718) and damages have been awarded accordingly.

In the present case, the plaintiff was promised a holiday cruise, an interlude to relax the mind and refresh the spirits. Or, at the least, the defendant promised to exercise all reasonable care to provide such a cruise. In breach of the contract, she was shipwrecked: an event provoking severe tension of mind and depression of spirit. The damage inevitably and directly consequent on the breach of the implied promise to carry her safely (or to use all reasonable care to carry her safely) to her destination was not simply a non-performance of the carriage but an exposure of the plaintiff to danger and an infliction of mental distress. The "disappointment and distress" in respect of which the trial judge awarded an amount of damages was a result of the shipwreck that occurred in breach of the defendant's contractual obligation. It was such an inevitable and direct result of that breach that it is proper to hold that it flowed naturally from the breach. An award of damages for "disappointment and distress" was therefore right in principle.

12 Deane and Dawson JJ agreed,[8] citing with approval the comment of Bingham LJ in Watts v. Morrow[9]:

Where the very object of a contract is to provide pleasure, relaxation, peace of mind or freedom from molestation, damages will be awarded if the fruit of the contract is not provided or if the contrary result is procured instead. If the law did not cater for this exceptional category of case it would be defective.

13 Other exceptions to the general rule that damages will not be recoverable for breach of contract in respect of inconvenience, disappointment and distress are conveniently summarised by Mason CJ in Baltic:[10]

First, damages for injured feelings were recoverable in the action for damages for breach of promise of marriage.

Secondly, it is beyond question that a plaintiff can recover damages for pain and suffering, including mental suffering and anxiety, where the defendant's breach of contract causes physical injury to the plaintiff. Damages for pain and suffering consequent upon physical injury caused by breach of contract may be awarded: Godley v. Perry (1960) 1 WLR 9, at p 13; and damages for pain and suffering may include compensation for injured feelings. The class of physical injury for which damages are available includes nervous shock: Mount Isa Mines Ltd. v. Pusey [1970] HCA 60; (1970) 125 CLR 383.

Thirdly, there are cases in which damages for breach of contract have included compensation for the physical inconvenience suffered by the plaintiff in certain circumstances. They include the physical inconvenience suffered by a plaintiff when the defendant's train did not carry him to the stipulated destination: Hobbs v. London and South Western Railway Co. (but cf. Hamlin v. Great Northern Railway Company); and that suffered by a plaintiff who purchased property with defects not revealed in the surveyor's report upon which the plaintiff relied (Perry v. Sidney Phillips and Son (1982) 1 WLR 1297; Watts v. Morrow [1991] EWCA Civ 9; (1991) 1 WLR 1421).

Fourthly, courts have included compensation for an element of subjective mental suffering where the plaintiff has sustained physical inconvenience as a result of the defendant's breach of contract and the mental suffering is directly related to that physical inconvenience _(Hobbs v. London and South Western Railway Co. (_1875) LR 10 QB, per Cockburn C.J. at p 116; Archibald J. at p 124; Bailey v. Bullock (1950) 2 ALL ER 1167, at pp 1171-1172; Athens-MacDonald Travel Service Pty. Ltd. v. Kazis (1970) SASR 264, per Zelling J. at pp 274- 275; and see Watts v. Morrow (1991) 1 WLR, per Ralph Gibson LJ. at pp 1439-1440; Bingham LJ. at p 1445).

Finally, there are other cases in which the plaintiff has recovered damages for distress, vexation and frustration where the very object of the contract has been to provide pleasure, relaxation or freedom from molestation. So, in Heywood v. Wellers ((82) [1975] EWCA Civ 11; (1976) QB 446), where the plaintiff instructed a solicitor to obtain an injunction to protect the client from molestation and the solicitor negligently failed to do so, the client recovered damages for the mental distress she suffered in consequence of being molested. The contract between the client and the solicitor had as its object the protection of the client from molestation of the kind which occurred ((83) ibid., per Lord Denning M.R. at pp 458-459; James L.J. at pp 461-462; Bridge L.J. at pp 463-464). Likewise, plaintiffs have recovered damages for disappointment and distress caused by the breach of a contract to provide a stipulated holiday, entertainment or enjoyment, the object of the contract being to provide pleasure or relaxation (Jarvis v. Swans Tours Ltd. [1972] EWCA Civ 8; (1973) QB 233, per Lord Denning M.R. at pp 237-238; Edmund Davies LJ. at pp 238-240; Jackson v. Horizon Holidays Ltd. [1974] EWCA Civ 12; (1975) 1 WLR 1468).

14 To this list may be added cases where the damage consists of a general loss of reputation as a result of the direct breach of a contract,[11] and cases where a party to a construction contract, most commonly in respect of a domestic building project [12], can demonstrate substantial physical inconvenience or discomfort caused by a contractor's breach.[13] In such cases, a plaintiff will be entitled to recover general damages notwithstanding the absence of any pecuniary loss.

15 However, the Plaintiff's case is not framed as a breach of contract. It is best characterised as a claim for damages arising from the tort of breach of statutory duty which flows from the contravention of s. 77(1) TLA. Sub-s. 77(4) expressly provides for damages to be awarded in respect of a breach of s. 77(1). It relevantly provides that "any person thereby damnified [by an improper or irregular exercise of the power of sale] shall have his remedy in damages against the person exercising the power".

16 Brennan J in Baltic drew a distinction between non-pecuniary damages in contract in respect of inconvenience, disappointment, distress and the like, and that which applies in tort. His Honour observed in this regard:[14]

The rights infringed by a wrongdoer [in tort] are not acquired by bargain but are imposed by law in order to keep an innocent party secure from the consequences of proscribed acts or omissions. Unlike a party entering into a contract who negotiates to protect himself from a risk of injury, the wrongdoer's victim has no opportunity to negotiate protection ((111) Per Lord Reid in C. Czarnikow Ltd. v. Koufos (1969) AC, at p 386). The policy of the law would fail if the wrongdoer were to be exempt from liability for "resentment, disappointment and the loss of esteem" suffered by the innocent party in consequence of the wrong done.

17 Accordingly, the constraints of Hamlin v Great Northern Railway Co[15], which apply as a general rule in contract, have no application to damages claimed for a tort.

18 The principles governing a private right of action in respect of a breach of statutory duty, were articulated by Kitto J in Sovar v Henry Lane Pty Ltd[16] where his Honour said:[17]

In the case of an enactment ... prescribing conduct to be observed by described persons in the interests of others who, whether described or not, are indicated by the nature of a peril against which the prescribed conduct is calculated to protect them, the prima facie inference is generally considered to be that every person whose individual interests are thus protected is intended to have a personal right to the due observance of the conduct, and consequently a personal right to sue for damages if he be injured by a contravention...

The legitimate endeavour of the courts is to determine what inference really arises, on a balance of considerations, from the nature, scope and terms of the statute, including the nature of the evil against which it is directed, the nature of the conduct prescribed, the pre-existing state of the law, and, generally, the whole range of circumstances relevant upon a question of statutory interpretation ...

19 To like effect were the observations of Brennan CJ, Dawson and Toohey JJ in Byrne v Australian Airlines,[18] where it was stated:[19]

A cause of action for damages for breach of statutory duty arises where a statute which imposes an obligation for the protection or benefit of a particular class of persons is, upon its proper construction, intended to provide a ground of civil liability when the breach of the obligation causes injury or damage of a kind against which the statute was designed to afford protection.

20 Section 77(1) TLA does not provide for any criminal sanction. It does not, therefore, suffer from a construction which might arise on application of the principle expressio unius est exclusio alterius, such construction being that in the event of a contravention, the remedy which is specifically provided for, namely the imposition of a criminal penalty, was intended by the Legislature to be the only remedy.[20]

21 The question as to whether damages for breach of the statutory duty in this case may include a measure of compensation for physical inconvenience, stress and discomfort caused by the sale of the Property, turns on whether this kind of damage is within the class which the legislation is intended to remedy by an award of damages. Alternatively, applying the formulation used by the majority in Byrne v Australian Airlines,[21] does breach of the obligation cause injury or damage of a kind against which the statute was designed to afford protection?

22 Damages for non-economic loss are well entrenched in the common law in torts such as defamation and as a component of general damages for personal injury. Damages in an action for false imprisonment are generally awarded not for pecuniary loss, for rarely will there be any but for loss of dignity, mental suffering, disgrace and humiliation.[22]

23 An example of damages of this character being awarded in respect of the tort of breach of statutory duty, is Jane Doe v ABC & Ors[23]. In this case Judge Hampel found that the ABC was liable to pay non-pecuniary damages to 'Jane Doe' because it had reported her real name as part of a radio news item about the sentencing of her husband, who was convicted of her rape. On 6 March 2001, the plaintiff, 'Jane Doe', was attacked and raped by her estranged husband, YZ. YZ was charged with rape and various other offences and presented for trial in the County Court at Melbourne. He was convicted by a jury of two counts of rape. On 21 March 2002 he was sentenced on the two counts of rape, and one further count of common assault to which he pleaded guilty. He was imprisoned for a total effective sentence of four years and six months, with a non-parole period of two years and three months. In its 4.00 pm, 5.00 pm and 6.00 pm news bulletins on the day sentence was passed, ABC radio news reported on the sentencing of YZ. In the 4.00 pm and 6.00 pm bulletins, YZ was identified by name, and the offences of which he was convicted were described as rapes within marriage. The broadcast reports also revealed the offences had occurred in 'Jane Doe's' home, named the suburb, and described the part of Melbourne where that suburb was. The five o'clock bulletin, in addition to this information, referred to 'Jane Doe' by name, and identified her as the victim. She had, after the rape, reverted to her maiden name, and it was that name which was broadcast.

24 'Jane Doe' brought an action against the ABC on the grounds of breach of statutory duty, negligence, breach of confidence and invasion of privacy. She succeeded on all grounds. The ABC's statutory duty to 'Jane Doe' was based on s. 4(1A) of the Judicial Proceedings Reports Act 1958 (Vic), which prohibits the publishing of information which identifies a person as the victim of a sexual assault. Her Honour found that the ABC's breach of this law also made the ABC civilly liable to 'Jane Doe' for the injury she suffered as a result of the breach.

25 Judge Hampel found that it was established that the broadcast had a significant effect on 'Jane Doe's' recovery from her trauma, inducing post traumatic stress disorder. It was found that Mrs Doe had clearly suffered hurt, distress, embarrassment, humiliation, shame and guilt as a result of the broadcasts. On the expert evidence, those responses were found to be commonly experienced by victims of sexual assault, and, according to the expert evidence, the broadcasts significantly compounded those injuries. The Judge fixed an amount of $25,000 as compensation for the hurt, distress, embarrassment, humiliation, shame and guilt experienced by 'Jane Doe' as a result of the broadcasts.

26 In international law, a facility for the payment of damages is provided under the European Convention on Human Rights[24]. Article 50 of the Convention provides:

If the Court finds that a decision or a measure taken by a legal authority or any other authority of a High Contracting Party, is completely or partially in conflict with the obligations arising from the present convention, and if the internal law of the said Party allows only partial reparation to be made for the consequences of this decision or measure, the decision of the Court shall, if necessary, afford just satisfaction to the injured party.

27 Article 50 compensation has been applied in cases involving a contravention of the right to respect for the home, in contravention of Article 8. This Article provides:

8 (1) Everyone has the right to respect for his private and family life, his home and his correspondence.

(2) There shall be no interference by a public authority with the exercise of this right except such as is in accordance with the law and is necessary in a democratic society in the interests of national security, public safety or the economic well-being of the country, for the prevention of disorder or crime, for the protection of health or morals, or for the protection of the rights and freedoms of others.

28 An example of non-pecuniary damages being awarded for loss of a home is Connors v United Kingdom[25]. Briefly, the facts were as follows: the applicant and his family, who were gypsies, settled in a site at Cottingley Springs in Leeds where they had lived permanently for about 14 to 15 years, save for a short absence, until they were evicted by the local City Council in early 2000. The applicant and his family had difficulty finding an alternative location for their caravans. The family in effect was rendered homeless. The central issue in the case was whether the legal framework which existed at the time provided the applicant with sufficient procedural protection of his rights under Article 8. The facility for summary eviction of the applicant and his family, without the provision of reasons and without evaluation by an independent tribunal, was held to be in breach of Article 8 of the Convention. The European Court of Human Rights concluded that, in addition to pecuniary loss, the applicant also suffered damage "through feelings of frustration and injustice". The Court concluded that "the applicant sustained some non-pecuniary damage which is not sufficiently compensated by the finding of a violation of the Convention". The applicant was awarded the sum of €14,000.[26]

29 In my opinion, the legislation comprised in s. 77 TLA, as construed in its contemporary context, is intended to include a facility for compensation in respect of injury for physical inconvenience, stress and discomfort where such injury has been proven to have been caused by the breach of duty alleged. Such a claim may be made in a case such as the present where the result has been the eviction of the Plaintiff from his family home. In my opinion, a person suffering consequential injury of the type claimed in sub-paragraph 23(l) of the proposed particulars falls within the purview of the broadly expressed phrase "any person thereby damnified" found in s. 77(4) TLA, thus entitling that person to "have his remedy in damages against the person exercising the power."

Whether Pleading in support of the New Claim Deficient

30 As to the pleading proposed by the new sub-paragraph 23(l), this is deficient in my view.

31 In particular, reference is made to the plea claiming damages in respect of what is said to be "vexatious physical inconvenience". No particulars of the allegation of 'vexatious' conduct are supplied. In my opinion, at the very least, particulars of an allegation of this kind should be supplied if the plea is to be pressed.

32 Further, in this case, given the extreme lateness of the application for the proposed amendment, detailed particulars of the allegations should have been provided to give the Defendant proper notice of the new case to be advanced by the Plaintiff. The Defendant is entitled to such particulars in order for it to determine how it will address the new allegations and meet the new case at the present stage of the litigation.

33 In my opinion, it would be unfair to MBF for the Court to allow Nolan to introduce the New Claim after the trial has been completed, in which both the issues of liability and quantum were dealt with. I accept that MBF completed its discovery, conducted its cross-examination, adduced its evidence, and presented its case on the basis that Mr Nolan was seeking damages against it for a breach of s. 77(1) of the TLA as that claim for damages was pleaded in the amended statement of claim.

34 The Plaintiff did not adduce any evidence at the trial as to any physical inconvenience, stress and discomfort caused by the sale of the Property and the subsequent eviction of the Plaintiff and his family from their home. Although some level of suffering of this nature may be inferred, in the absence of any case advanced on this basis, it is not possible to quantify its degree or extent or undertake any reasonable assessment of the alleged injury. This in itself is a reason for rejecting the Plaintiff's application.[27]

35 Further, as Mr Nolan has not sought to re-open his case to adduce evidence on the new sub-paragraph 23(l), MBF has been denied any opportunity have Mr Nolan cross-examined on the issues raised.

Whether Contrary to the Principles of Law Governing the Amendment of Pleadings

36 Permitting the proposed amendment at this point in the trial, on necessary terms that would enable the Plaintiff to re-open his case, provide further discovery and submit himself and any further witnesses he wished to call to cross-examination, would be inconsistent with the principles enunciated by the High Court in Aon Risk Services Australia Ltd v Australian National University.[28]

37 In their joint reasons for judgment, Gummow, Hayne, Crennan, Kiefel, and Bell JJ, stated:[29]

An application for leave to amend a pleading should not be approached on the basis that a party is entitled to raise an arguable claim, subject to payment of costs by way of compensation. There is no such entitlement. All matters relevant to the exercise of the power to permit amendment should be weighed. The fact of substantial delay and wasted costs, the concerns of case management, will assume importance on an application for leave to amend. Statements in JL Holdings which suggest only a limited application for case management do not rest upon a principle which has been carefully worked out in a significant succession of cases......... A party has the right to bring proceedings. Parties have choices as to what claims are to be made and how they are to be framed. But limits will be placed upon their ability to effect changes to their pleadings, particularly if litigation is advanced. That is why, in seeking the just resolution of the dispute, reference is made to the parties having a sufficient opportunity to identify the issues they seek to agitate......... In the past it has been left largely to the parties to prepare for trial and to seek the court's assistance as required. Those times are long gone. The allocation of power, between litigants and the courts arises from tradition and from principle and policy. It is recognised by the courts that the resolution of disputes serves the public as a whole, not merely the parties to the proceedings.

38 The Plaintiff's application is simply too late. It comes at the final hour of the trial litigation. As Senior Counsel for the Plaintiff said in submissions made to the Court on 28 July 2009: "....we closed our case and called the evidence which we wished to call on damages." Although the Plaintiff may well have had a case for claiming damages in respect of physical inconvenience, stress and discomfort, he did not advance this at the trial through his pleadings, his evidence or the submissions made on his behalf.

39 In my opinion, it would not be in the interests of justice to permit the amendment as foreshadowed in the new particulars proposed to be added by paragraph 23(l). The reasons may be shortly stated: First, trial has been completed. The Plaintiff's case on both liability and damages has been closed. Second, Mr Nolan has not explained the substantial delay in applying for leave to amend his pleading. Third, I am satisfied that, unless leave is granted to the Plaintiff to re-open his case, to provide further discovery, to call further evidence and permit MBF to cross-examine any such further witness or witnesses, there would be no sufficient evidence for the Court to make any assessment of the alleged physical inconvenience, stress and discomfort on the basis of the evidence adduced at the trial. The result is that, founded on the evidence called by the Plaintiff at the trial, there is no rational basis for a proper estimate of damages in respect of the matters which are the subject of the proposed amendment reflected in the draft sub-paragraph 23(l). In these circumstances, even if the amendment was allowed, I would have declined to make an order for damages under this head, on the basis of the evidence adduced.[30] Fourth, MBF would suffer prejudice in relation to the claim, if the amendment was to be permitted and the case re-opened. That prejudice may be remedied to some extent by an award of costs against Mr Nolan, however, the fundamental unfairness in proceeding in this way cannot be remedied by the award of costs.

40 I will allow the Plaintiff's proposed amendment by the addition of sub-paragraph 23(k) to his amended statement of claim but refuse the proposed amendment by the addition of sub-paragraph 23(l).

41 I shall deal with each of the heads of damage claimed by the Plaintiff which is the subject of evidence adduced at the trial.

42 Damages for deprivation of land to which a person is entitled may be recoverable, assessed by reference to the value of the land as at the date of the deprivation: Spencer v Registrar of Titles.[31]

43 However, in the present case, although the Plaintiff has been deprived of the Property in a physical sense, his equity in the land was converted into money and distributed to him. There is no question that the sale price achieved on the day of the sale on 18 August 2001 of $915,000, was not fair market value, and no question has been raised that Mr Nolan did not receive his proper share of the proceeds of sale from the mortgagee.

44 Accordingly, Mr Nolan did not suffer any pecuniary loss by the wrongful deprivation of his property.

Damages for Loss of Increase in Value of Property

45 I accept the thrust of the evidence of Mr Robert Papaleo, a property market analyst called by the Plaintiff. Mr Papaleo undertook an assessment of the change in house prices in the suburb of Kew in the period 2001 to 2009. He concluded that house prices grew strongly during the period in all segments of the Kew housing market.

46 The most widely accepted indicator of change in house prices in suburbs is the change in median house price. This represents the mid-point in all sales activity within a suburb in a given year. The median house price in Kew for 2001 was $561,000. This grew to $1,215,000 by 2008 which was equivalent to an average growth of 11.7% per annum.

47 Mr Papaleo was also able to calculate the growth rate for houses in the suburb of Kew in what he described as "the high value segment of the market". Within this part of the market the average annual price growth was stronger than the change in the median house price. Mr Papaleo concluded that high value houses, such as the subject Property in the suburb of Kew, increased in value in the period between 2001 and 2008 by an average annual growth rate of about 13%.

48 Further, and significantly for the 2 year period between 2001 to 2003, Mr Papaleo was of the opinion, based on his market analysis, that the annual growth rate in value for a house in Kew valued at $915,000 in 2001 increased markedly, by 17.5% in 2002 (to $1,074,000) and by 20.9% in 2003 (to $1,300,000). I accept, based on this evidence, that the Property could have increased in value between 2001 and 2003 by as much as $385,000.

49 The trend for growth was broadly in accordance with the valuation undertaken by Mr Gerard Browne, who was a qualified valuer. He valued the Property as at 23 February 2009 on the basis of the land and improvements being in a similar condition to that which existed as at the date of the auction sale on 18 August 2001. The value he arrived at was $1,750,000. Mr Browne noted in his report that he considered the Walmer Street location "could command a premium above other property values in the locality".

50 However, a precise comparison between Mr Browne's analysis and that of Mr Papaleo is not possible because they measured against differing indices. Mr Papaleo did not undertake a valuation of the property. His exercise was to estimate movements in value for properties of the kind represented by the Property within the suburb of Kew in Victoria.

51 Further, the valuation of Mr Browne as at 23 February 2009, which was $1,750,000, and the calculation undertaken by Mr Papaleo which pointed to a value of $2,230,000 for a house of the type represented by the Property in 2008, suggests that a downward adjustment of the figures produced by Mr Papaleo is warranted. However, the need for a downward adjustment is counterbalanced to some extent by the fact that Mr Browne recorded a very large slide in the median house prices for the suburb of Kew from its peak in March 2008 at $1,550,000 to December 2008 at a little above $1,050,000. This movement in prices suggests that his valuation of the Property at $1,750,000 in February 2009 reflected that significant downward trend in value at that time.

52 Doing the best I can on the available evidence, and allowing for vagaries in the market and differences between individual properties, I consider that a reduction in the estimated house price figure of $1,300,000 provided by Mr Papaleo for higher valued properties in Kew for the 2003 year by 10% is appropriate. This produces a likely achievable sales figure of $1,170,000 for the property by the end of 2003, which approximates a growth rate of about 13% over the two year period. This in turn results in a capital gain on the $915,000 market value achieved in 2001 of $255,000, which I assess as the loss of growth in value of the Property to Mr Nolan over the 2 year period between 2001 and 2003.

53 The period of two years has been selected because, although I have found that at the conclusion of the 2 year period of the Rhoden loan it was likely that a loan on similar terms would have been available to Mr Nolan, I am not in a position on the evidence before me to determine on precisely on what terms, including the applicable interest rates, any such further loan or loans may have been offered to Mr Nolan. Accordingly, it would involve a high degree of speculation as to whether or not Mr Nolan would have been in a financial position to accept any further loans, beyond the Rhoden loan which was for 2 years, which may subsequently have been offered to him.

54 Further, having reviewed the evidence in consideration of these reasons on quantum, it appears that Mr Nolan would have been at risk of not meeting all of the interest payments required to service the Rhodan loan. On close analysis of exhibit P1, it appears that rental payments amounting to $750 per week or $3250 per month were not paid from income derived by Mr and Mrs Nolan, but rather were paid from the capital of the surplus funds derived from the auction sales of Lots 1, 2 and 3, which had been paid into Court following entry into terms of settlement dated 15 November 2001 between MBF Investments Pty Ltd, Geoffrey Malcolm Collie, and Mr Nolan (the "Court Deposit").

55 On the assumption that Mr Nolan retained Lot 1, being the Property, his sources of funds to pay interest on the Rhoden loan were limited. The only evidence of income available to the Nolan family from earnings was that derived by Mrs Nolan. In 2001 she worked as a school teacher and was paid a pre-tax salary of approximately $53,000. To this must be added the income derived from the Court Deposit. This yielded interest at the rate of 3% on the funds deposited. The total amount of income derived from this source for Mr Nolan over the 2 year period, after the payment of tax as analysed below, was $36,304 or approximately $18,152 per annum.

56 This income would have placed Mr Nolan under some financial strain if he was to meet the payments of interest required under the Rhoden loan. If he had retained the Property, on his own estimates, some $5,000 per annum would have been expended on rates and taxes, and approximately the same amount expended on repairs and maintenance. As I have found, in 2001 the two youngest children in the Nolan family were both undertaking their year 12 schooling, and, I infer, were both living at home with their parents and being supported by them.

57 However, I am satisfied that there would have been some surplus monies available from the Rhodan loan to assist with the payment of interest on that loan, at least for the first year of the loan. Mr Nolan had $450,000 available on offer to be borrowed under this loan. Accepting that three items of funding were not available to Mr Nolan as at 15 November 2001, as submitted by the Defendant, (namely certain costs to be recovered from Mr Collie, costs to be recovered from Mr Nolan's solicitors and a component of capitalised interest on the MBF mortgage), when these sums are taken into account and added back into the calculation, and considered along with the amount necessary to pay out Mr Collie, a total of about $421,000 is arrived at. To this should be added a sum representing the costs of putting the Rhoden loan in place, such as a valuation fee, legal costs and stamp duty on the mortgage. Although no figure was put in cross examination as to what these costs would be, an allowance of $2,500 may reasonably be made. To this should be added the legal costs involved in obtaining the approval of the Court to the Rhoden loan and to payment out of Mr Collie. An allowance of $2,000 may reasonably be made for this item of cost. In addition an application fee of 1% of the sum borrowed was required under the terms of the Rhoden loan. This would have been a one off payment of $4,500. Thus, some $430,000 was payable by Mr Nolan out of a loan facility available to him of $450,000, leaving him a surplus of approximately $20,000. These funds could have been applied to assist in the payment of interest under the Rhodan loan.

58 As to the payment of interest under the Rhoden loan, on the assumption it had been taken up in the terms offered to Mr Nolan, interest for the 2 year period was fixed at 7.5% per annum, with a default interest rate at 12.5% per annum. The default interest rate was said in the Rhoden loan letter of offer to Mr Nolan to be payable as follows: "In the event of default being made in payment of interest after three days from the due date for payment of same the default interest being 12.50% per annum will be applied". Based on the sum borrowed being $450,000, the total interest at the lower rate would have been $33,750 per annum. To this must be added the 5% collection fee on the interest payable each quarter under the terms of the Rhodan loan as offered to Mr Nolan, amounting to some $422 per quarter, or $1,688 per annum. Accordingly, the annual interest and collection fees which Mr Nolan would have been obliged to pay under the Rhodan loan at the lower interest rate would have been $35,438 (represented by $33,750 for interest at the lower rate and a total annual sum of $1,688 for the quarterly collection fees).

59 With the benefit of the use of the sum of $20,000 available from the Rhodan loan, I am satisfied that at least for the first year of the Rhodan loan Mr Nolan would have been in a position to service it without incurring the default interest rate. However, more than likely, he would have fallen into default during early in the second year, based on the evidence presented at the trial as to his available sources of income.

60 I am satisfied that, more than likely, default in the payment of interest under the Rhoden loan after the first year would have resulted in the default interest being capitalised for the second year prior to the Property possibly being re-financed or, failing re-finance, sold. I have arrived at this conclusion based on two primary considerations. First, the Property would have enjoyed a marked increase in value during the period of the first year of the Rhoden loan. Mr Papaleo calculated the increase in value would have been as high as 17.5%, resulting in a value in 2002 at $1,074,000. The increase in value continued through the second year, with growth calculated by Mr Papaleo at being in the vicinity of 20.9%, resulting in a value in 2003 at $1,300,000. Even if these values had not been achieved for the property, Mr. Papaleo's estimates provide an indicator of exceptionally strong growth in the value for the property. The Rhoden loan would therefore have been more than amply secured, and increasingly so in a very strong market. Second, as Mr Rhodan said in relation to his loan fund: "...we are equity lenders. The serviceability is not a huge issue." Serviceability was therefore not likely to have been a dominant issue for the lender in the second year, when capitalisation of interest at the default interest rate of 12.5% would have been a commercial advantage pending a possible re-financing of the Property, alternatively its sale, at the end of the year.

61 Default interest for one year at 12.5% if paid on the borrowed funds of $450,000 would have amounted to $56,250. This sum should be deducted from the capital gain which would have been enjoyed by Mr Nolan on the increase in the value of the Property over the two year period to allow for the risk of Mr Nolan not being in a position to service the Rhodan loan and being forced to capitalise the default interest charged from early in the 2003 year.

62 A further sum which needs to be deducted from the gross capital loss suffered by Mr Nolan is the interest which he was able to derive from the deposit of funds pursuant to the Court Deposit. The account statement produced in relation to those funds reveals that income derived from the account at the rate of 3% per annum was $13,605.30 credited on 3 June 2002 and $27,888.36 credited on 2 June 2003, a total of $41,493.66. In exhibit P1 Mr Nolan calculated the total income derived for the 2 year period between 17 December 2001 to 23 November 2003 at $49,829. From this Mr Nolan seeks to deduct what is described as 'Notional Tax on Earnings". However, there is no evidence that Mr Nolan was in fact personally earning an income beyond the income reflected in the account statement in respect of the Court Deposit, and there is no evidence as to what taxation liability Mr Nolan had in respect of the interest earned on those funds. In the absence of any explanatory evidence on the matter, I am not prepared to allow for a credit in respect of income tax claimed to have been 'notionally' payable by him, beyond the income tax recorded as payable in the account statement prepared by the Senior Master's Office for the Court Deposit. These sums for "Trust Assessed Tax" were $6,598 in respect of the 2001 - 2002 tax year and $6,927 in respect of the 2002 - 2003 tax year. When these sums are deducted from the income earned over the 2 year period, the sum of $36,304 is produced.

63 Accordingly, the sum of $36,304 should be deducted from the gross capital loss sustained by Mr Nolan.

64 Finally, a sum in respect of sale costs for the Property should be deducted from the gross capital loss claimed in order to adjust for the cost of realisation of the capital value and converting it into liquid funds. The costs of sale for Lot 2 would be within a similar range to the costs of sale of Lot 1 of the Property if it was put on the market at the end of 2003 or early in 2004. A charge of 2% on a sale price of $1,235,000 was rendered in respect of the sale of Lot 2 in August 2001, and a charge of a little over $15,000 was rendered in respect of advertising costs. Using these figures as a yardstick, I allow the sum of $23,400 for commission and $15,000 for advertising, based on a sale price for the property of $1,170,000, making total sale costs of $38,400 if the Lot 1 of the Property had been put on the market at the end of 2003 or early 2004.

65 Mr Nolan would have paid $35,438 per annum in interest at the lower rate under the Rhodan loan if he had taken up that loan. On the other hand he paid $3,250 per month for rent, or $39,000 per annum.

66 Then again, Mr Nolan calculates in exhibit P1 that he would have paid approximately $5,000 per annum on repairs and maintenance and the same amount on rates if he had retained his house property.

67 Accordingly, I am not satisfied that any loss was suffered by the Plaintiff by having to rent an alternative dwelling house, as opposed to retaining the house situated on the Property.

68 Mr Nolan claimed in exhibit P1, stamp duty on acquisition of an alternative dwelling, being $96,250 and "legals" on acquisition, being $5,000.

69 It transpired that Mr Nolan never bought an alternative dwelling house.

72 I accept that a figure of about this sum was reasonable and that it was incurred directly as a consequence of having to vacate his home following settlement of the sale of the Property by MBF.

73 The Plaintiff has achieved vindication of his position that the Defendant engaged in conduct in breach of its duty pursuant to s. 77(1) TLA to have regard to his interest in his family home in the course of conducting the mortgagee's auction sale.

74 Mr Nolan has sustained pecuniary loss as I have assessed it. Built into the assessment is an allowance, based on the evidence, for the real risk that Mr Nolan would not have been in a position to meet the interest payments payable under the Rhoden loan during the second year. In summary, the pecuniary loss suffered by Mr Nolan is assessed as follows:

Loss of capital growth in Lot 1 between 2001 and 2003:

Less after tax interest derived from funds invested in Court (17 November 2001 to 23 November 2003):

75 The Defendant had a statutory duty to a Plaintiff to prevent the occurrence of damage of the kind which occurred in this case. The Defendant's breach of duty being a cause of that damage, and the damage which I have found being within the scope of the risk which the Defendant was required to avoid, the Defendant is consequently liable to make good the loss.

76 There will be judgment for the Plaintiff in the sum of $129,046 together with the interest pursuant to the Supreme Court Act 1986 and costs.

[1] Nolan v MBF Investments Pty Ltd [2009] VSC 244.

[2] Nolan v MBF Investments Pty Ltd (No 2) [2009] VSC 340.

[3] [1993] HCA 4; (1993) 176 CLR 344.

[4] (1856) 1 H. and N. 408, at p 411 [1856] EngR 918; (156 ER 1261, at p 1262).

[9] [1991] EWCA Civ 9; (1991) 1 WLR 1421, at p 1445.

[11] Baltic Shipping Co v Dillon, Ibid per Brennan J at 370.

[12] Hutchinson v Harris (1978) 10 BLR 19.

[13] Bailey v Bullock [1950] 2 All ER 1167; Athens MacDonald Travel Service Pty Ltd v Kazis [1970] SASR 264; D Galambos & Sons Pty Ltd v McIntyre (1974) 5 ACTR 10; Burke v Lunn [1976] VicRp 22; [1976] VR 268; Perry v Sidney Phillips & Son [1982] 3 All ER 705.

[16] [1967] HCA 31; (1967) 116 CLR 397.

[18] [1995] HCA 24; (1995) 185 CLR 410.

[22] Myer Stores Ltd v Soo [1991] VicRp 97; [1991] 2 VR 597, at 603 (per Murphy J).

[23] [ 2007] VCC 281.

[27] See: J.L.W. (Vic.) Pty Ltd v Tsiloglou & Ors [1994] VicRp 16; [1994] 1 V.R. 237 per Brooking J at 241 - 246; Schindler Lifts Australia Pty Ltd v Debelak [1989] FCA 311; (1989) 89 A.L.R. 275 per Pincus J at 319.

[28] [2009] HCA 27 at [113] per Gummow, Hayne, Crennan, Kiefel and Bell JJ.

[30] See: J.L.W. (Vic.) Pty Ltd v Tsiloglou & Ors [1994] VicRp 16; [1994] 1 V.R. 237 per Brooking J at 241 - 246; Schindler Lifts Australia Pty Ltd v Debelak [1989] FCA 311; (1989) 89 A.L.R. 275 per Pincus J at 319.

[31] (1910) 103 LT 647 (PC).