Plaintiff v Defendants

1 The defendants appeal from the judgment and orders made by Gardiner AsJ in June 2012 in the sum of $3,683,382.07 with interest of $378,837.05 on the plaintiff's summons for summary judgment dated 10 November 2011. The defendants were also ordered to pay the plaintiff's costs, including indemnity costs, in relation to the preparation of the plaintiff's reply submissions dated 24 January 2012, but his Honour stayed the execution of the orders in favour of the plaintiff for a limited period of time. His Honour also heard an application by the defendants for leave to file a third party notice which his Honour dismissed. The defendants appeal against the judgment and all of the orders made, although they did not pursue their application to file a third party notice.

2 An appeal from an Associate Judge under r 77.06(7) of the Supreme Court (General Civil Procedure) Rules 2005 (Vic) ("the Rules") is by way of a rehearing de novo upon the evidence which had been before the Associate Judge. An application was made by the defendants to rely upon additional affidavits which I decided against the defendants on 10 August 2012 and published reasons on 27 August 2012.[1] The appeal from the orders of Gardiner AsJ was then heard on 27 and 28 August 2012. The plaintiff, which had the carriage of the proceeding, relied upon the detailed submissions which had been made to Gardiner AsJ supplemented by oral submissions and some additional written submissions. The defendants conducted the proceeding on the appeal differently from the way it had been conducted before the Associate Judge.

3 The facts in the disputes between the parties have been recorded in other decisions of this Court,[2] but it may be convenient to state some of the background to provide context. The plaintiff ("Portbury") and the first defendant ("Ottedin") had contracted in 2008 for the sale of a property but their contract was not completed. It will be necessary later to say something about the contract, its variation and about the guarantors connected with the contract and its variation. For the moment it will be sufficient to note that the contract was not completed on the varied date appointed for its completion. Ottedin had, before the date for completion, lodged a caveat as purchaser but subsequently maintained that it had lawfully avoided the contract by exercising rights on 17 January 2011 under s 29O(2) of the Sale of Land Act 1962 (Vic). It then sought the repayment of the deposit which it had paid, withdrew the caveat it had lodged claiming the interest as purchaser and replaced it, on 7 March 2011, with another caveat claiming an equitable interest by way of lien, noting as the grounds of the claim in that caveat to be to secure the repayment of the deposit paid under the contract with Portbury which was said to have been terminated by Ottedin on or about 17 January 2011. Ottedin then commenced proceedings against Portbury seeking, relevantly, the repayment of monies which had been paid under the contract. Portbury made a successful application for the summary dismissal of that proceeding which led to the removal of the caveat.[3] I will refer to that proceeding as "the caveat proceeding" although it was commenced by Ottedin to obtain repayment of the monies paid under the contract.

4 Portbury subsequently resold the property to Parklea Estates Pty Ltd ("Parklea") and received upon the resale much less than Ottedin had initially contracted to pay. Portbury then commenced this proceeding to recover the shortfall from Ottedin and from the three other defendants in various capacities. The second defendant ("Goldcare") had been nominated by Ottedin as substitute purchaser on 27 March 2009. The third and fourth defendants ("Messrs Ottewell and Kosta" respectively) were sued as guarantors of the obligations alleged by Portbury against Ottedin and Goldcare. Goldcare, Ottewell and Kosta were not formally parties to the caveat proceedings decided by Dixon J in favour of Portbury and they seek to raise issues in this proceeding about whether they are bound by that decision.

5 On 10 November 2011 the plaintiff sought summary judgment against the defendants in this proceeding pursuant to Order 22 of the Rules and, or alternatively, s 63 of the Civil Procedure Act 2010 (Vic). The plaintiff's summons also sought, in the alternative, orders pursuant to rr 23.01 and 23.02 of the Rules for the defendants' pleading either to be struck out with judgment or to be struck out with leave to amend. The plaintiff filed, and relied upon, three affidavits in its application. The first two were sworn on 27 October 2011 and made by Ms Kelly and Mr Lynch respectively. The third was sworn 13 December 2011 by Mr Portbury. Ms Kelly was employed by Portbury as its business manager at the time relevant to the dispute. Mr Lynch is a legal practitioner and director of the company Nodco Pty Ltd ("Nodco") trading in legal practice under the name "Nicholas O'Donohue & Co", being the firm which had acted for Portbury in relation to the contract of sale of the property to Ottedin. Ottedin relied upon two affidavits affirmed by Mr Warren on 9 and 13 December 2011 respectively. The application was heard by Gardiner AsJ on 14 December 2011 and judgment for Portbury was given on 21 June 2012.

6 Portbury's claim against the four defendants is that they are liable for the shortfall suffered as a result of the property having been resold to Parklea at less than Ottedin had agreed to pay, and, in the case of the guarantors, less than the amount they had warranted, that Ottedin would pay. At the centre of Portbury's entitlement against the defendants is the defendants' contention in defence that the resale of the property was in breach of Portbury's duty as vendor to the defendants (as purchasers and guarantors respectively).

7 Portbury pleaded in this proceeding that it resold the property to Parklea for a sum of $2,100,000, leaving a shortfall on resale of $4,400,000. Its particulars to this allegation is the fact of the resale to Parklea and the Contract of Sale between Portbury and Parklea. Portbury also pleaded the individual expenses said to have been incurred by reason of the default and the joint and several indebtedness or liability of the four defendants, but otherwise (understandably) it does not plead anything concerning the process of sale. Ottedin pleaded in its Defence and Counterclaim (both as originally filed and as subsequently amended) that the resale had occurred in breach of Portbury's obligations arising from the relevant contract (or as varied) or (in relation to Messrs Ottewell and Kosta) from the guarantees.

8 Paragraph 44 of the Defence and Counterclaim, both as originally filed and as subsequently amended, contained detailed particulars upon which the alleged breach was based, namely:

(a) At the time Portbury purported to exercise the right to resell the Property it, or its agent Knight Frank was or ought to have been aware of the following matters:

(i) Portbury, alternatively, Portbury's financier, National Australia Bank, had received valuations for the Property well in excess of the resale price of $2.1m;

(ii) Portbury had mortgaged the Property to the National Australia Bank for well in excess of the resale price of $2.1m;

(iii) On 18 December 2008, Ottedin agreed to purchase the Property for $6.5 million, which although then zoned for agricultural purposes, was subject to a rezoning application to allow the Property to be developed for mixed residential and business purposes;

(iv) The relevant Council, Cardinia Council, were confident that the Property would be rezoned, and that upon its rezoning, a permit would be issued to develop the Property including a minimum of 150 apartments occupying 15,000 square metres for which Goldcare had plans for 300 apartments and with the balance of 66,000 square metres for multiple uses and were supportive of proposals to develop the Property more intensively;

(v) In December 2010, Goldcare engaged Knight Frank to on-sell the Property;

(vi) At that time Mr Kosta explained to Mr Leigh Morris of Knight Frank, the potential of the Property, and his confidence that a developer with access to finance could make a profit in the order of $21 million from the Property, and gave him a detailed explanation as to how he had arrived at his opinion;

(vii) In December 2010, Mr Kosta and Mr Morris approached potential purchasers, some of whom expressed an interest in purchasing the Property, and the executives of which, including a Mr Pelicano, expressed interested [sic] in purchasing the Property at a price of $6.5 million, but all of whom stated that they could not buy the Property in January 2011 as it would leave them insufficient time to do their due diligence, feasibility studies and/or to arrange finance;

(viii) On 15 December 2010 Goldcare received a valuation for the Property for $8.1m;

(ix) Portbury engaged Knight Frank to resell the Property;

(x) Portbury first attempted to resell the Property by tender closing 12 May 2011 "either in one line or separately" as part of an information memorandum relating to the Property and 4 other properties;

(xi) In or about May 2011, Mr Ottewell informed Mr Portbury, a director of Portbury, that he had a sworn valuation for the property in December 2010 for $8.1m;

(xii) On 29 June 2011, the Property was auctioned by Knight Frank, and was passed in. The only bids were one from Andrew Facey for $1.8m, and a vendor bid of $2.2m;

(xiii) On 29 June 2011, Mr Ottewell approached Sue Kelly, a representative of Portbury, and informed her that he was able to introduce to Portbury a buyer willing to pay far more than $2.2m for the Property and that he would need 3 days to organise the introduction;

(xiv) Sue Kelly informed Mr Ottewell that because of pressure by the National Australia Bank on Portbury it was forced to sell the Property within 24 hours, and that he should present his information about potential purchasers to the auctioneer, Ken Smirk of Knight Frank;

(xv) During the evening of 29 June 2011 or the morning of 30 June 2011 Mr Ottewell spoke to Ken Smirk the auctioneer and asked him to provide him with a copy of the s.32 statement for the Property. In his conversation, Mr Ottewell told Ken Smirk that he had a buyer willing to pay substantially more than $2.5m for the Property, and that this buyer had other large holdings locally;

(xvi) Mr Ottewell gave to Ken Smirk the details of the potential buyer, a Mr Khay Taing, including his mobile number and email address;

(xvii) On 30 June 2011, Ken Smirk sent Mr Ottewell an email attaching the s.32 vendor's statement for the Property;

(b) Ken Smirk failed to contact Mr Taing on 30 June 2011 or at all for the purpose of reselling the Property on behalf of Portbury;

(c) Portbury failed to make enquiries of any of the defendants about the existence of potential purchaser and as to the best way to market the Property at the time of or before reselling the Property;

(d) On 30 June 2011, Portbury resold the Property to Parklea for $2.1m plus GST (if any);

(e) On or about 30 June 2011, the Property was worth well in excess of the resale price.

(i) Goldcare was able to arrange conditional finance for the Property on 2 December 2010 in the sum of $5.8m notwithstanding that the sum of $1.325m had already paid under the Varied Contract of Sale;

(ii) Goldcare received an offer to purchase the Property from Assets Australia in March 2011 for $4.5 million;

(iii) Goldcare had received a valuation of the Property in December 2010 for $8.1 million;

(iv) The defendants otherwise refer to the matters contained in these particulars.

(f) Within a short time of Parklea Estates Pty Ltd purchasing the Property, Ken Smirk of Knight Frank commenced acting for Parklea Estates Pty Ltd in relation to its on-sale of the Property, and introduced its director, Andrew Facey to Mr Khay Taing, and within a short time thereafter, interests associated with Mr Taing made an offer to purchase the property for $3 million;

(g) Subsequently, Parklea Estates Pty Ltd sold the property to interests associated with Mr Taing for $6 million, including an allowance of $0.5m for civil works, making the effective purchase price $5.5 million;

(h) The sale from Parklea Estates Pty Ltd to interests associated with Mr Taing could have been achieved by Portbury on or about 30 June 2011 had it exercised reasonable endeavours or exercised commercial prudence;

(i) Portbury failed to adequately market the Property for the purposes of resale.

(i) A sale by tender of the Property along with 4 other properties was an inappropriate method to market and sell the Property, in all the circumstances, particularly given the short marketing period, and the limited information contained in the information memorandum about the Property and the confusion and/or dampened demand generated by Portbury marketing the Property along with 4 other properties;

(ii) A sale by auction was an inappropriate method to market and sell the Property, in all the circumstances, particularly given the short marketing period;

(iii) Further particulars will be provided after the plaintiff's discovery.

(j) Although the sale of the Property was not by a mortgagee, Portbury preferred the interests of the mortgagee, the National Australia Bank, and wilfully or recklessly disregarded those of the defendants by selling the Property with undue haste to satisfy the demands of the mortgagee for a sale of the Property by 30 June 2011.

Portbury has not replied to the Amended Defence and Counterclaim and has not otherwise pleaded in reply to para 44 of the Amended Defence and Counterclaim or pleaded facts in opposition to those in the particulars to para 44 of the Amended Defence and Counterclaim.

9 The defendants rely upon the facts in the particulars to para 44 in resisting the application for summary judgment. They maintained before Gardiner AsJ, and before me, that on an application for summary judgment it was not necessary for a defendant to verify by non hearsay evidence the facts alleged in a pleading. The defendants submitted that it was sufficient in response to a plaintiff's application for summary judgment for a solicitor, Mr Warren in this case, to make an affidavit which referred to the particulars in para 44 of the defendants' Amended Defence and Counterclaim and depose that he was "informed by [Mr] Ottewell and verily believe[d] that the facts pleaded [in para 44] are true and correct". Portbury contended before Gardiner AsJ, and before me, that this was insufficient to satisfy a defendant's obligation to show cause under r 22.04 of the Rules or the Civil Procedure Act 2010 (Vic), but did not otherwise controvert the facts in the particulars. It did, however, through the evidence it filed, give evidence concerning the process of resale from which it maintained an entitlement to summary judgment.

10 It may be useful to record something of the course of dealings between the parties from the date of contract to the ultimate resale before turning to the competing claims for and against summary judgment. Portbury and Ottedin entered into the contract for the sale of the land at 20 Lecky Road, Officer in the State of Victoria on 18 December 2008. The deposit of $325,000 was paid on 18 December 2008 and Ottedin lodged a caveat to protect its interest as purchaser. The contract provided for the payment of a purchase price of $6,500,000 of which $325,000 was to be paid as deposit on the day of sale and the balance of $6,175,000 was to be paid at settlement, which was originally agreed to be twelve months later, namely on 18 December 2009. Mr Ottewell gave a guarantee and indemnity in support of that contract. The affidavit of Mr Lynch exhibited a copy of the Contract of Sale and a copy of a Guarantee and Indemnity as two separate exhibits. The defendants submitted that the separate tender of the two documents was not sufficient to prove the guarantee and indemnity as being that given in support of the Contract of Sale. The submission was based on the fact that the document tendered as the Guarantee and Indemnity was in generic language and did not (as a separate document) identify the subject matter of the guarantee unless it was attached to, and read as one with, the Contract of Sale as it had been in the original. It is, however, clear from Mr Lynch's affidavit that what was exhibited as Mr Ottewell's guarantee was the Guarantee and Indemnity given by him in respect of the Contract of Sale between Portbury and Ottedin as entered into. That is confirmed by an examination of the documents themselves and, if need be, from the obvious inferences to be drawn from them, including the same execution date, of 18 December 2008, appearing on both documents, and the evidence concerning them given by Mr Lynch. I am, therefore, not able to accept Ottedin's contention that the guarantees were not proven for the purposes of this application.

11 The Contract of Sale contained the usual terms found in such contracts, including a term making time of the essence. It also contained a nomination clause by which a substitute or additional purchaser could be nominated by Ottedin. Clause 18 provided as follows:

The purchaser may nominate a substitute or additional purchaser, but the named purchaser remains personally liable for the due performance of all the purchaser's obligations under this contract.

A clause in such terms, if exercised, has the effect described in Salter v Gilbertson,[4] namely, of directing a vendor at settlement to transfer to a person other than to the contracting purchaser but otherwise keeping on foot the contract as between the original parties.[5]

12 On 27 March 2009 Ottedin nominated Goldcare to take the transfer of the property in lieu of Ottedin. The nomination contained an acknowledgement from Ottedin and Goldcare that they would both henceforth be "jointly and severally" liable for the due performance of the obligations of Ottedin under the contract and for the payment of any expenses resulting from the nomination. That was consistent with cl 18 of the Contract of Sale which provided that Ottedin would remain personally liable for the due performance of all of its obligations under the contract if it nominated a substitute or additional purchaser. Mr Ottewell, who had given the guarantee, was the sole director of Ottedin and was also a director of Goldcare.

13 On 18 December 2009 Portbury's solicitors wrote to Ottedin's then solicitors with two options to vary the contract. The correspondence between solicitors also considered the possibility that the proposed variation could result in the creation of a "terms contract" for the purposes of the Sale of Land Act 1962 (Vic) and, on that issue, Ottedin's lawyers expressed the view that the variation proposed in correspondence on 21 December 2009 (and agreed to) would not create a terms contract if there was only to be "effectively a deposit and a final payment". That issue was considered and determined by Dixon J in the caveat proceedings between Portbury and Ottedin but the defendants contended before Gardiner AsJ that the decision by Dixon J on that point bound only the parties to that proceeding.

14 By 23 December 2009 the parties had agreed to vary their contract and the variation was formalised in a Deed of Variation made between Portbury (as vendor), Ottedin (as purchaser) and Goldcare (as nominee). The operative provision of the Deed of Variation provided:

That in consideration of the above land the Parties agree that the Contract be varied as hereinafter appearing but that in all other respects the terms of the Contract shall continue to apply and to be of full force and effect.

1. The Payment and Settlement Particulars of Sale will be deleted and the following particulars will be inserted:

Payment Price $6,500,000.00

Deposit $1,325,000.00 ($325,000 due on the Day of Sale and the balance of the Deposit due by no later than 31 January 2010)

Interim Payment $3,675,000.00 payable the earlier of 150 days after rezoning (defined as the day of the Gazetting of the Cardinia Employment Structure Rezoning Plan) or settlement

Balance $1,500,000.00 payable at settlement

Settlement Is due 18 December 2010

1. The following Special Condition will be inserted into the Contract:

Special Condition 1

The Parties agree that any and all liability for payment of the Growth Areas Infrastructure Contribution payable as a result of this Contract or due after settlement will be met by the Purchaser and/or Nominee.

Special Condition 2

2.1 The Purchaser and Nominee agree and acknowledge that the Interim Payment will be released to the Vendor's mortgagee to pay down the mortgage relating to Mortgage No. AF558272M.

2.2 The Vendor agrees and acknowledges that upon release of the balance of the Deposit and the Interim Payment they will only be paid to their mortgagee to pay down their mortgage and they have instructed their solicitor accordingly.

The Deed of Variation was executed by Ottedin by its sole director (Mr Ottewell) and was executed by Goldcare by the signature of its two directors (Mr Kosta and Mr Ottewell). On the same day a fresh Deed of Guarantee was given by both Mr Ottewell and Mr Kosta in respect of the varied Contract of Sale. Mr Kosta was a director of Goldcare but not of Ottedin.

15 Ottedin also contended that the new guarantee was not proved in the proceeding before me because the Deed of Variation and the fresh Deed of Guarantee were exhibited as separate exhibits and that it was not possible to conclude that the Deed of Guarantee exhibited was part of the Deed of Variation or given in respect of that agreement. The basis of the contention was the same as that previously advanced in respect of the first guarantee and I reject it for the same reasons. It is clear from the evidence of Mr Lynch that the fresh Deed of Guarantee was given by the guarantors in respect of, and as one with, the Deed of Variation. Mr Lynch deposed to the fact that at 12.32pm on 23 December 2009 Ottedin's solicitors sent documents to Portbury's solicitors attaching, amongst other things, a Deed of Variation of Contract and a Deed of Guarantee. It is each of those documents to which the affidavit refers and then identifies as separate exhibits in the very statement in which Mr Lynch deposed to receipt of the executed documents. Amongst the documents also sent to Portbury was a statement given under s 27 of the Sale of Land Act 1962 (Vic) referring to Portbury's mortgage over the property and authorizing the release of the deposit by the vendor's solicitor. The amount secured by the mortgage over the land was shown as $5,199,879. The fresh Deed of Guarantee was shown as having been given by Mr Ottewell and Mr Kosta in consideration for the vendor selling the property to the purchaser and nominee for the price and upon the terms and conditions set out in the contract and the Deed of Variation. The document of Guarantee and Indemnity given by each of them included an obligation to guarantee the due and punctual payment, performance and observance by the purchaser of all of its liabilities and obligations to the vendor under the contract and Deed of Variation, present or future, actual or contingent. It also contained an acknowledgement by the guarantors that their obligations and liabilities were continuous, absolute, unconditional and irrevocable, and would not be affected by such matters as the act or omission of delays or the grant of any time or other concessions by the vendor. It was executed as a deed on 23 December 2009 by each of Mr Ottewell and Mr Kosta.

16 The additional $1,000,000 deposit required by the varied terms of Contract was paid by bank cheque on 2 February 2010. Settlement of the purchase was then due to take place on 18 December 2010 but on 17 November 2010 the purchaser sought a further extension of the settlement date. A short extension to 20 December 2010 was agreed to by Portbury after correspondence between the respective solicitors. On 20 December 2010, however, the solicitors for the purchasers notified Portbury's solicitors that settlement could not be effected on that day and requested another extension until around 17 January 2011. The offices of Portbury's solicitors were closed between 22 December 2010 and 10 January 2011. On 12 January 2011 Portbury's solicitors wrote to the purchaser's solicitors stating that Portbury had agreed to settle the transaction on Monday 17 January 2011 subject to conditions that were discussed between them on the days after 12 January 2011.

17 Portbury's solicitors attended at the premises of the mortgagee, the National Australia Bank, at 3.30pm on 17 January 2011 to effect the settlement of the transaction but no representative of Ottedin or Goldcare attended, with the consequence that the settlement could not occur. At 4.51pm on that day the solicitors for the purchasers sent an email and fax to Portbury's solicitors maintaining that their clients were entitled to avoid the contract because the contract was a terms contract for the purposes of the Sale of Land Act 1962 and that Portbury had not discharged its mortgage to National Australia Bank within 90 days after the Contract of Sale.

18 On 17 January 2011 there was, therefore, from Portbury's point of view, a default entitling it to issue a rescission notice. Mr Portbury, the plaintiff's sole director, authorised a rescission notice to be served which was thought at the time to have been served around 18 January 2011. However, a concern arose in late March 2011 amongst those acting for Portbury about whether the rescission notice had been served. That led Ms Kelly to instruct Portbury's solicitors to serve a second rescission notice. The second notice was served on 31 March 2011. Each notice was in the same terms and required, consistently with cl 27.2 of the contract, that the default be remedied within 14 days. It was subsequently found that the first notice of default had been served but the facts surrounding the recission notices has given rise to an issue about the impact upon the basis of Portbury's claim against Ottedin (as decided by Dixon J) in light of the contractual term that time was of the essence.

19 Ottedin then commenced what I have called the caveat proceeding. On 19 April 2011 a writ and statement of claim were filed and served on Portbury's solicitors seeking declarations of an entitlement (a) to have repaid the monies which it had paid under the contract and (b) to maintain the new caveat it had lodged on the title in support of its claim of a lien to secure repayment of the deposit. Paragraph 16 of Ottedin's statement of claim in that proceeding pleaded that it had terminated the contract pursuant to s 29O(2) of the Sale of Land Act 1962 (Vic) on 17 January 2011. By the time of Ottedin's proceedings it had lodged the substitute caveat claiming a equitable lien over the property to secure the repayment of the monies paid under the contract. Portbury did not plead in that proceeding but issued a summons on 6 May 2011 seeking summary dismissal of Ottedin's claim. The summons was heard by Dixon J on 13 May 2011 and on 27 May 2011 his Honour dismissed Ottedin's proceeding. There has been no appeal from that decision.

20 The decision in favour of Portbury in the caveat proceeding enabled Portbury's resale of the property to proceed. In May 2011 the property was first offered for sale by tender as part of a larger site comprising five adjoining lots of land totalling approximately 49.2 hectares. Portbury's agent for the sale was Knight Frank Australia Pty Ltd ("Knight Frank") which prepared and published an Information Memorandum for the sale of the larger site. The sale was advertised in The Age, the Financial Review, and in web-based advertising sites. Site signage was placed in various locations. The marketing schedule included three weeks of advertisements with the tender for the sale closing on 12 May 2011. Portbury received no offers to purchase the site.

21 Portbury was, however, under pressure from its financier to reduce its debt and was required by the National Australia Bank to reduce its debt by between $3,000,000 to $4,000,000 by 30 June 2011. Ms Kelly deposed to discussions with the bank to the effect that the bank would itself sell the property which had been the subject of the Contract of Sale to Ottedin if Portbury did not sell it prior to 30 June 2011. Portbury then decided to put that property back onto the market as a separate block for auction on 29 June 2011 at 12 noon. A new, but shorter and somewhat different, marketing schedule was prepared by Knight Frank on behalf of Portbury. It included advertisements in The Age and the Pakenham Gazette but not in the Financial Review. It also included advertisement production including the placement of advertisements on a web-based property sales site, advertising signboards and brochures.

22 The property did not sell at the auction. Ms Kelly deposed to there having been a good crowd in attendance at the auction but that only one bid was received. The property was passed in at auction but was sold to the sole bidder, Parklea, the following day for $2,100,000 after further negotiations and, as Ms Kelly deposed, "under pressure to sell from the National Australia Bank".

23 None of the deponents of the affidavits filed on behalf of Portbury deal with, or contradict, the facts asserted in the particulars in para 44 of the defendants' Amended Defence and Counterclaim. What the particulars indicate (if it be permissible to take them into account in an application for summary judgment) is that Portbury had been informed after the failed auction, but before the sale to Parklea, that there was an interested purchaser (a Mr Taing) who might be willing to offer more for the property than $2,200,000. The particulars also indicate that Mr Taing was not approached before Portbury's sale to Parklea, but that he subsequently did purchase the land from Parklea soon after its sale by Portbury to Parklea for significantly more than Portbury had obtained from Parklea.

24 The plaintiff has the burden of satisfying a court that it is appropriate to give summary judgment whether that is sought under s 63 of the Civil Procedure Act 2010 (Vic) or under Order 22 of the Rules. The relevant principles were considered by Dixon J in Ottedin Investments Pty Ltd v Portbury Development Co Pty Ltd[6] in which his Honour said:

1. In moving for summary dismissal, a party may rely on r 23.01 of the Rules, s 63 of the Civil Procedure Act 2010, and/or the court's inherent jurisdiction.
2. By civil procedure reform introduced by the Act, the operative effect of the principles governing applications for summary dismissal is now less stringent. The policy background to the reform is identified in the Victorian Law Reform Commission's Civil Justice Review Report (March 2008) and in the explanatory memorandum to the Civil Procedure Bill 2010. The reform is part of a wider trend towards relaxation of summary dismissal rules in the interests of the proper administration of justice. This is evident in s 31A(2) and (3) of the Federal Court of Australia Act 1976 (Cth), r 292 of the Uniform Civil Procedure Rules 1999 (Qld) and the test now applicable under r 24.2 of the Civil Procedure Rules in the United Kingdom.
3. The new test is evident in the plain language of Part 4.4 of the Civil Procedure Act 2010. Section 62 permits a defendant in a civil proceeding to apply to the court for summary judgment on the ground that a plaintiff's claim or part of that claim has no real prospect of success. Section 63 provides:

63 Summary judgment if no real prospect of success

(1) Subject to section 64, a court may give summary judgment in any civil proceeding if satisfied that a claim, a defence or a counterclaim or part of the claim, defence or counterclaim, as the case requires, has no real prospect of success.

(2) A court may give summary judgment in any civil proceeding under subsection (1) -

(a) on the application of a plaintiff in a civil proceeding;

(b) on the application of a defendant in a civil proceeding;

(c) on the court's own motion, if satisfied that it is desirable to summarily dispose of the civil proceeding.

It will be recalled that in explaining the test used prior to the Act, a variety of expressions describing that test could be found in the cases. The expression now identified by Parliament is in plain language: "no real prospect of success".

1. This expression follows a British precedent, originating in the well known Access to Justice report of Lord Woolf in 1996. The precise expression used in the English Rules, "no real prospect of succeeding on the claim or issue", was described by Lord Woolf MR in Swain v Hillman as a phrase speaking for itself, not requiring further amplification. The critical qualifying word "real" directs the court to "the need to see whether there is a realistic, as opposed to a fanciful, prospect of success".
2. In two other respects, the provisions of the Act ought be borne in mind when exercising the discretion to summarily dismiss. First, the court must seek to give effect to the overarching purpose of the Act and the Rules in exercising, or interpreting, the statutory power to summarily dismiss. This overarching purpose is "to facilitate the just, efficient, timely and cost effective resolution of the real issues in dispute". The court is directed to further the overarching purpose by having regard to the objects and matters articulated in s 9 of the Act. The manner in which the court will consider these objects and matters will depend on the nature and circumstances of the application before it. On this application, I bear in mind the following objects (s 9(1)):

(a) the just determination of the civil proceeding;

(c) the efficient conduct of the business of the court;

(d) the efficient use of judicial and administrative resources;

(f) the timely determination of the civil proceeding; and

(g) dealing with a civil proceeding in a manner proportionate to -

(i) the complexity or importance of the issues in dispute; and

(ii) the amount in dispute:

and I have regard to the following matters (s 9(2)):

(f) any prejudice that may be suffered by a party as a consequence of any order proposed to be made or direction proposed to be given by the court;

(g) the public importance of the issues in dispute, and the desirability of a judicial determination of those issues; and

(h) the extent to which the parties have had the benefit of legal advice and representation.

1. Second, the discretionary nature of the power to summarily dismiss is exercisable having regard to s 64 of the Act. That section provides:

64 Court may allow a matter to proceed to trial

Despite anything to the contrary in this Part or any rules of court, a court may order that a civil proceeding proceed to trial if the court is satisfied that, despite there being no real prospect of success the civil proceeding should not be disposed of summarily because -

(a) it is not in the interests of justice to do so; or

(b) the dispute is of such a nature that only a full hearing on the merits is appropriate.

The section affirms the court's broad discretion, exercised judicially, whether to summarily dismiss a proceeding or a claim, which was the basis upon which the previous test was applied. The circumstances in which the court might consider the dispute to be of such a nature that only a full hearing on the merits is appropriate is equally wide in its compass and plainly to be considered in the circumstances of each case.[7]

His Honour went on to note the observations of French CJ and Gummow J in Spencer v Commonwealth of Australia[8] that the exercise of powers to terminate proceedings summarily must always be attended with caution.[9] In Karam v Palmone Shoes Pty Ltd[10], decided since the coming into force of s 63 of the Civil Procedure Act 2010 (Vic), it was observed that "the power to order summary judgment is [still] to be exercised sparingly and not 'unless it is clear that there is no real question to be tried' ".[11]

25 Counsel for Portbury contended that there was no evidence to support any of the facts asserted in the particulars in para 44 of the Amended Defence and Counterclaim except for the statement by Mr Warren in his affidavit of 9 December 2011 referring to the particulars and saying that he had been informed by Mr Ottewell and verily believed that the facts pleaded therein were true and correct. Rule 22.03 of the Rules requires an application for judgment to be supported by an affidavit verifying the facts on which the claim is based. Rule 22.04 of the Rules, in contrast, permits a defendant to show cause against an application "by affidavit or otherwise to the satisfaction of the Court". How the defendant may show cause will depend upon the circumstances of each case. In Hausman v Abigroup Contractors Pty Ltd[12] the Court of Appeal said:

1. [...] Assuming the plaintiff's application is properly made, there will be judgment for the plaintiff unless the defendant shows cause against the application to the satisfaction of the court. The Rule provides that the defendant can show such cause "by affidavit or otherwise".
2. The defendant must satisfy the court that, in respect of the claim to which the application for judgment relates, a question ought to be tried, or there ought for some other reason to be a trial of that claim. The court, if so satisfied, will give the defendant leave to defend and the proceeding will continue to trial in the ordinary way. The court will normally require an affidavit by, or on behalf of, the defendant before it will be satisfied that the defendant is entitled to leave to defend. The standard of diligence required of the defendant in preparing a case in opposition to the application, especially if under pressure of time, is perhaps not as high as that required in preparing for trial.
3. None the less, the defendant is required to use reasonable diligence to put before the court, albeit in a summary form, all the evidence relied on in the defence. In that regard, it would generally be regarded as an injustice to the plaintiff to allow the defendant to introduce for the first time, on appeal, evidence which was readily available for the hearing of the application, but was not produced. An affidavit filed by the defendant may contain a statement of fact based on information and belief.
4. The authorities suggest that an affidavit in opposition to an application for summary judgment must provide sufficient particulars to enable the defence case to be properly understood. A bald denial that the defendant is indebted to the plaintiff will not suffice. The affidavit should, so far as practicable, deal specifically with the plaintiff's claim and the facts set out in the supporting affidavit to establish that claim. It should state clearly and concisely what the defence is, and identify the facts relied upon in support of that defence.
5. There is a helpful discussion in Williams as to the position where the defendant alleges fraud in answer to the claim for summary judgment. A mere statement that fraud has been committed is not sufficient. The affidavit must give particulars of the fraud alleged. If, at the time of the application for judgment, there is no basis for supposing that evidence of fraud exists, leave to defend will not be granted merely so that the defendant can use discovery in the hope of eliciting such evidence.[13]

The rules do not require a defendant to show cause in response to a plaintiff's application for summary judgment by giving direct evidence upon affidavit. Nor would it be desirable to require such a course in all cases in which a defendant may need to resist a plaintiff's application for summary judgment. Such applications are not to be used as a substitute for trial or as the means by which the party moving for summary judgment obtains a collateral forensic advantage by forcing witnesses to give evidence before trial. In some cases a defendant may decide to defend an application for summary judgment by giving direct evidence on oath and, indeed, in some cases that may be either desirable or necessary. In this case it might have been necessary for the defendant to give direct evidence of the matters particularised in para 44 of the Amended Defence and Counterclaim if there had been direct evidence contrary to that of Mr Warren's hearsay evidence such that his hearsay evidence could not have been sufficient to disclose the basis of a case for the defendants requiring a trial. Even then it might not be sufficient to discount the particulars in the pleadings relied upon to show cause where, perhaps, a deponent such as Mr Warren had not been cross-examined and shown to have given unreliable evidence.

26 The use to which particulars of the kind found in para 44 of the defendants' Amended Defence and Counterclaim may be put must also be judged by reference to their status as facts in pleadings signed by independent counsel with duties to the court. The particulars in para 44 of the Amended Defence and Counterclaim first appeared in the pleading dated 28 September 2011 signed by junior counsel and they appeared in relevantly the same terms in the Amended Defence and Counterclaim dated 27 October 2011 signed by both senior counsel and junior counsel. The signing of pleadings is not without significance. Rule 13.01(3) of the Rules requires the signature of counsel to a pleading settled by counsel. The signature has been said to be a voucher that the case is not a mere fiction.[14] The Civil Procedure Act 2010 now places obligations upon legal practitioners to ensure, amongst other things, that a person does not make a claim or a response to a claim that does not have a proper basis on the factual and legal material available to the person upon whom the overarching obligation applies.[15] These obligations fall directly and personally upon the legal practitioners acting for a party as well as upon the party.[16] Rules of practice and conduct applicable to legal practitioners similarly impose obligations upon what they settle in pleadings.

27 The defendants in this case were entitled to rely upon the facts in the particulars to para 44 of their Amended Defence and Counterclaim in showing cause for the purposes of r 22.04 of the Rules and s 63 of the Civil Procedure Act 2010 (Vic), and in seeking to have a favourable exercise at the court's discretion under s 64 of the Civil Procedure Act 2010. The pleadings were settled by counsel and signed by them. The pleading was filed in the court with a certificate, signed by a legal practitioner, of compliance with the overarching obligations. The certificate was signed by Mr Warren pursuant to s 42 of the Civil Procedure Act 2010 (Vic) and, relevantly, certified that "each allegation of fact in the document has a proper basis". The particulars given in this case were specific and clear: they condescended "upon particulars" (to use the language in Cloverdell Lumber Co Pty Ltd v Abbot).[17] They did provide detail of the kind from which a judge could conclude that there might be reasonable grounds for what had been contended.

28 Those particulars were also supported by the affidavit of Mr Warren who affirmed his belief that what was set out there was true and correct and gave the source of that belief. In Hartwell Trent (Australia) Pty Ltd v Tefal Societe Anonyme,[18] Pape J said, in the context of the need for verification of facts by an applicant:

It cannot be too strongly emphasised that although it is permissible for a solicitor to make an affidavit on information and belief, he must, if he does so, state facts which he believes to exist, and the source of his information, and those facts must show the existence of the cause of action. There is much less risk of incomplete verification when the plaintiff himself makes the affidavit.[19]

The importance of stating the basis and source of hearsay evidence was explained in Westpoint Management Pty Ltd v Goakes[20] where Wheeler J said:

It reveals the original source of the hearsay information and provides some opportunity to an opponent to counter or to challenge it and it enables prosecution for perjury in a proper case if necessary. Further, in a case such as the present, where a judge or a master hearing such an application may refuse to accept an assertion in an affidavit if it appears inherently incredible or inconsistent with contemporary documents or for a number of other reasons which are well understood, then sources of information and belief assist in the determination of whether the assertion should be accepted. It is not, therefore, a requirement of the Rules which may be ignored in the preparation of such an affidavit.[21]

The affidavit of Mr Warren set out the basis and source of his belief of the matters which he said he believed to be true and correct. The source relied upon by Mr Warren indicates that he was told had some basis, foundation and probative value. Whether or not the facts sufficiently showed cause in establishing a defence in law is another question, but they are to be taken into account as relevant facts in the absence of some reason to displace them.

29 The defendants are also entitled to resist the claim for summary judgment by relying upon the material filed by Portbury. Fancourt v Mercantile Credits Ltd[22] was a case in which a party to an application for summary judgment was held to have been able to rely upon opposing material[23] as well as the pleadings.[24] The plaintiff's material did not controvert the facts in the particulars to para 44 of the Amended Defence and Counterclaim, but it did contain evidence supporting the defendants' claim that the resale process may have been in breach of duties owed to them. The initial Contract of Sale between Portbury and Ottedin had been to sell the property for $6,500,000. The contract was varied a year later but the price was not reduced. A statement given by Portbury to Ottedin under s 27 of the Sale of Land Act 1962 (Vic) disclosed that a mortgagee had the property as security for $5,199,879. Ms Kelly exhibited the exclusive auction authority given by Portbury to Knight Frank to sell the property. It was dated 8 June 2011 and given in respect of the sale made that month after the failed auction. The exclusive auction authority contained an agent's estimate given under s 47A of the Estate Agents Act 1980 (Vic) of the selling price of the property. That section requires an agent to give an estimate of the amount which that person "believes, on the basis of his or her experience, skills and knowledge, that a willing but not anxious buyer would pay for the real estate, or in the case of a price range, the range within which that amount is likely to fall".[25] The estimate for the property given in the exclusive agent authority, and which was given in the same month as the actual sale of the property, was an estimate of between $5,500,000 and $6,000,000. The advertising schedules put in evidence through Ms Kelly revealed that the promotion for the property as a single lot was for a shorter period than had been the proposed sale of the five lots together. Different and potentially competing inferences may perhaps be drawn from the different marketing schedules, but one inference that may be made is that the marketing schedule for the property as a single lot was less than desirable for its sale, and that it had not been advertised as widely as might have been desirable.

30 It was contended for Portbury that the matters pleaded in, and through, para 44 of the Amended Defence and Counterclaim (including the particulars) was not sufficient to establish a defence against a claim for liquidated damages under the Contract of Sale, or to establish a defence by the guarantors under the guarantees. Clause 28.4 of the Contract of Sale permitted Portbury to resell the property within one year of the contract ending. The clause relevantly provided:

28.4 If the contract ends by a default notice given by the vendor:

[ ... ]

(c) in addition to any other remedy, the vendor may within one year of the contract ending either:

(i) retain the property and sue for damages for breach of contract; or

(ii) resell the property in any manner and recover any deficiency in the price on the resale and any resulting expenses by way of liquidated damages; [ ... ]

Under this clause, therefore, Portbury had one year from the end of the contract by the default notice to resell the property and then recover any deficiency "by way of liquidated damages".

31 Portbury contended that the defendants could not in law defeat its claim for liquidated damages by pointing to other conduct which it could have taken to reduce its loss. In that context Portbury relied upon the passage from Banco de Portugal v Waterlow & Sons Ltd[26] in which Lord Macmillan observed:

The law is satisfied if the party placed in a difficult situation by reason of the breach of a duty owed to him has acted reasonably in the adoption of remedial measures, and he will not be held disentitled to recover the cost of such measures merely because the party in breach can suggest that other measures less burdensome to him might have been taken.[27]

Portbury also contended that it had acted reasonably in the resale of the land and relied upon the affidavits of Ms Kelly, Mr Lynch and Mr Portbury to establish that its conduct upon the resale was reasonable.

32 An essential aspect of Portbury's claim for summary judgment is that Portbury, as vendor under a contract, had no duty to the purchaser or the guarantors. Both parties relied upon the decision in J Boag & Son Brewing Ltd v Bridon Investments Pty Ltd[28] in which Slicer J considered a similar issue. In that case his Honour considered, amongst other things, whether a vendor under a clause such as that in the contract between Portbury and Ottedin required a vendor to exercise its right with a duty to mitigate any loss. His Honour concluded, in contrast to observations made in the decision of this court in Loughridge v Lavery,[29] that a vendor exercising a contractual right of resale has no duty to mitigate. His Honour said:

The different remedies, dependent upon election, might result in general principles of duty to mitigate loss being inappropriate in a case of liquidated damages, and require recourse to the terms, actual or implied, in the Agreement which determine the extent of recovery by way of liquidated damages. That does not necessarily result in a different test as to the "reasonableness" of conduct by an unpaid vendor. In Jampco Pty Ltd v Cameron (No 2) (1985) 3 NSWLR 391, Young J rejected the proposition that the duty was akin to that of a mortgagee and declined to follow Loughridge, Beal and Bullion Sales (supra).[30]

His Honour, however, was prepared to imply a term of reasonableness into the contract between vendor and purchaser in relation to the conduct of the vendor exercising the contractual right of resale of the property.[31] The defendants' plea in this case is at least in part for the implication of a similar term, namely an implied contractual term that Portbury would act reasonably in the exercise of its rights of resale under the Contract of Sale as between vendor and purchaser. Other duties are also pleaded for the purchasers, and other duties are pleaded in respect of the guarantees, but an implied term of reasonableness in the exercise of the right of resale as between vendor and purchaser is expressly found in the pleading which is said by para 44 to have been breached by the conduct set out in the particulars or from the conduct found in Portbury's evidence and relied upon by the defendants. That plea, in this case, is arguable as a matter of law upon the material relied upon by the defendants. It is an issue which should be determined at trial and not by application for summary judgment.

33 The evidence on an interlocutory basis reveals a real dispute about whether the resale was unreasonable in light of the material tendered by Portbury concerning the value of the land and its determination that it be sold by 30 June 2011 at the National Australia Bank's insistence, despite an approach from Mr Ottewell with a lead for a potential buyer at a higher price. For this purpose it is not relevant to consider the fact that Parklea sold the property for an effective price of $5,500,000 soon after Portbury had sold it to Parklea for $2,100,000. Nor, for this purpose, does it matter that the person purchasing the land from Parklea was the very person identified by Mr Ottewell on the evening before Portbury's resale to Portbury's agent, nor that it was Portbury's agent who effected the subsequent sale from Parklea to the person identified by Mr Ottewell before Portbury's sale to Parklea. Assuming all other issues in favour of Portbury, there is a question about whether the resale of the property by Portbury to Parklea was at undervalue and whether the amount calculated as the difference between (a) the contract price between Portbury and Ottedin and (b) the resale price by Portbury to Parklea might not be claimed against either Ottedin or Goldcare, as purchasers, or Mr Ottewell or Mr Kosta, as guarantors.

34 Summary judgment is not appropriate where there is a real dispute properly to be resolved by hearing evidence at trial.[32] The caution against granting summary judgment "unless it is clear that there is no real question to be tried"[33] focuses attention upon the nature of the dispute said to exist and an evaluation of it as one requiring determination at trial. An issue sought to be engaged may be complex but may be without any prospect of success even though it may require "argument, perhaps even of an extensive kind",[34] to demonstrate that it has no real prospect of succeeding.[35] Even then, as s 64 of the Civil Procedure Act 2010 makes clear, it may not be appropriate to proceed by way of summary judgment if the dispute is of such a nature that only a full hearing on the merits is appropriate. The nature of the dispute in this case requires a consideration of the legal arguments concerning the terms of the contract with Ottedin and of the guarantees, and an exploration of the facts concerning the sale to Parklea. These are not just complex questions which may be shown to have no prospects of success after argument (even of an extensive kind) but matters of substance to be determined at trial.

35 In any event, the observations in Loughridge v Lavery[36] have not expressly been disapproved in this court and the state of the authorities in relation to the dicta in Loughridge makes the defendants' plea at least arguable independently of their reliance upon an implied term. In that case Adam J had said:

Had I concluded that the resale was in exercise of the power conferred by condition 5, I would have been disposed to treat the defendants as being under a duty similar to that imposed on mortgagees exercising their powers of sale, because, like mortgagors, the plaintiffs would have had an interest in the price to be obtained on a resale. This would be so not only because under condition 5 the amount of damages was to be measured by the deficiency in the price on a resale, but under that condition they were entitled to any surplus in price arising on a resale.

The duty imposed on the defendants in the circumstances would have been to act in good faith and not recklessly in disregard of the plaintiffs' interests. Although no doubt there were further steps which the defendants might have taken, by advertisements and the like, to ensure that the best price obtainable was got for the property, I would not on the evidence have been prepared to conclude that they had failed to discharge such limited duty as they owed to the plaintiffs in this matter. They were certainly not under the strict duties owed by trustees to their beneficiaries. But be this as it may, the plaintiffs, before they could have obtained damages arising from the resale to Pocklingtons, would have had to satisfy me that if they had taken such further steps as might have been appropriate to obtain a higher price on the resale, there would have resulted any surplus in price to which they would have been entitled. At best for the plaintiffs it might be assumed that the price would have accorded with the true value of the property.[37]

These observations were considered in Jampco Pty Ltd v Cameron (No 2)[38] where Young J said:

The next question is whether there is any set-off against this interest of $57,165.53. There are authorities in Victoria, Queensland and Western Australia, to the effect that the vendor under a clause such as cl 16 of the 1972 edition of the standard form, has not only a duty to mitigate against loss, but also a fiduciary duty akin to that owed by a mortgagee: see Loughridge v Lavery [1969] VicRp 112; [1969] VR 912 at 929; Beal v D B Stott Pty Ltd at 71; Little v Ryland (Hoare J, Supreme Court of Queensland, 21 March 1978, unreported) and Bullion Sales International Pty Ltd v Fitzgerald (at 220). I myself took that view in my Contract for the Sale of Land, 2nd ed (1985) at 80.

However, upon hearing the submissions of both counsel, and upon studying the argument against the existence of such a duty so forcefully presented by Associate Professor Butt (at 543-544) in his book, Standard Contract for Sale of Land in New South Wales (1985) it seems to me, with respect to those who hold the view, that it is erroneous. Indeed, tracing the history of the principle through seems to me to be a classic exercise in showing how a piece of obiter dicta has by frequent reference been converted into a proposition of law. If one looks at Loughridge v Lavery (at 929), the judge had found for the defendants on the claim, and then said that in deference to the submissions of counsel he would add some further observations, one of which was that:

"I would have been disposed to treat the defendants as being under a duty similar to that imposed on mortgagees exercising their powers of sale",

had the judge come to the conclusion that there was a resale in exercise of the power conferred by the contract. The writer of the headnote properly prefaces the proposition with the word "semble". In Beal's case, Virtue SPJ said (at 70) that his tentative view that there was such a duty was reinforced by Adam J's remarks in Loughridge's case, but on the facts of Beal's case, he found that there was no breach of any duty in any event. At 27 of the transcript of judgment of Hoare J in Little v Ryland, it appears clear that neither counsel disputed the proposition, so the judge did not have to turn his mind to the problems inherent in it. In the Bullion Sales' case, it is recorded (at 220) that the plaintiff conceded the point. The only other relevant case of which I am aware is Finance Brokers (WA) Pty Ltd v Pizzino [1981] WAR 263. In that case (at 268) the judge said:

"... The condition, as it seems to me, equates the position of the vendor re-selling against a defaulting purchaser with that of a mortgagee selling against a mortgagor placing him under a similar duty and with like consequences: see Loughridge v Lavery [1969] VicRp 112; [1969] VR 912 at 929. ..."

The Full Court heard an appeal from that decision, the judgment being delivered on 21 October 1981. It is not reported but I have a transcript of the judgments. Wickham J was prepared to allow the appeal, the other two judges upheld the Chief Justice's judgment, but neither of them said anything about the point now in question. The High Court affirmed the decision reported: sub nom Piggins v Finance Brokers (W A) Pty Ltd (1982) 56 ALJR 843. Only the Chief Justice referred to Loughridge's case (at 845) and then on a different point.

Accordingly, the merits of the mortgagee type duty have never really been ventilated before a court. It seems to me that it is quite unnecessary to impose such a duty, because the mitigation of damages principle sufficiently covers the field, and equity is usually loath to apply its special rules where there is no need to do so. Furthermore, as Professor Butt points out in his book (at 544), for New South Wales at least to read in such a duty gives no semantic significance to the words "as owner" in the clause.[39]

More recently Hammerschlag J in Bydand Holdings Pty Ltd v Pineland Property Holdings Pty Ltd[40] said:

In support of the implied term contended for, the defendants relied on what was said by Slicer J in the Supreme Court of Tasmania in J Boag & Son Brewing Ltd v Bridon Investments Pty Ltd & Ors [2001] TASSC 29; (2001) 10 Tas R 26. His Honour was dealing with a contract which contained a provision not materially different from clause 9.3.1 of the Contract. At [41] His Honour held as follows:

"The following propositions are accepted for the purpose of this assessment:

(1) The remedy and its extent is determined by reference to the terms of the Agreement.

(2) The terms contain an implied term that the vendor will exercise the power of resale in a reasonable manner.

(3) The term "reasonable manner" includes price, time of sale and conduct in the form of method of sale.

(4) Given that the claim for liquidated damages precludes a claim for interest pending sale, the question of time of sale is relevant to the movement of market price, rather than on its own right.

(5) The implied term is not a condition to the right of recovery, but governs the extent of remedy. Breach of the term does not necessarily preclude all remedy.

(6) The duty imposed on the unpaid vendor is not fiduciary in nature.

(7) No extraordinary duties are imposed on the unpaid vendor. The defaulting purchaser remains a wrongdoer.

(8) The term imposes a duty defined by commercial prudence referable to valuation, market, locality, form and method of sale, and the existence or otherwise of intending purchasers.

(9) The existence of genuine offers to purchase at a fair market value are factors relevant to commercial prudence. An unpaid vendor who rejects such an offer might be confined in remedy.

(10) The unpaid vendor has a duty not to conduct the resale in such a manner as to increase the loss occasioned by the purchaser's default.

(11) Some requirements imposed by the implied term are identical to those required in the mitigation of damage.

(12) The person claiming breach of the term bears the onus of proof (Goldburg v Shell Oil Co of Australia Ltd (1990) 95 ALR 711, cf Australia and New Zealand Banking Group v Bangadilly Pastoral Co Pty Limited [1978] HCA 21; (1978) 139 CLR 195, Aitken J at 228)."

The defendants referred to the decision of White J in Hansmar Investments Pty Ltd v Perpetual Trustee Co Ltd [2007] NSWSC 103 in which at [45] His Honour said:

"...the better view of the authorities is that the duty on a vendor on exercising his power of re-sale under the clause is not strictly characterised as a duty to mitigate damages, or as a duty analogous to that of a mortgagee exercising the power of sale, but arises under an implied contractual term that the vendor act reasonably, which duty is "akin to the common law duty to mitigate loss" (Butt, The Standard Contract for Sale of Land in New South Wales, 2 ed, para 9.174 ff)."[41]

In that case his Honour did not need to resolve the competing issues concerning the dicta from Loughridge because of his conclusion that, in any event, the defendants had not discharged the onus of establishing that the plaintiff had failed to act reasonably in the resale of the property or that it had been sold at undervalue or that if different steps had been taken the outcome would have been different.[42]

36 In my view the defendants have shown cause against the application for summary judgment, and the plaintiff has not discharged the onus upon them under either r 22.02 of the Rules or s 63 of the Civil Procedure Act 2010.

37 In any event, I would allow the matter to proceed to trial under s 64 of the Civil Procedure Act 2010. The decision of Dixon J in the caveat proceeding did not, and could not, have resolved the issues between the parties arising from the resale of the property which occurred only after (and which was facilitated in substantial part because of) his Honour's decision. The fundamental issue in this proceeding is the quantum of the shortfall which Portbury may recover from the purchaser(s) and the guarantor(s). That question depends upon the availability of the defence sought to be raised jointly and severally by the purchaser(s) and the guarantor(s) going to the quantum of the claim. The defences available to the guarantors are not the same as those of the purchasers (assuming the position of Ottedin and Goldcare to be indistinguishable) in relation to the claim by Portbury. In Buckeridge v Mercantile Credits Ltd[43] Brennan J said:

In a case where the act of a creditor does not discharge a surety, but the creditor has nonetheless sacrificed or impaired a security, or by his neglect or default allowed it to be lost or diminished, the surety is entitled in equity to be credited with the deficiency in reduction of his liability.[44]

The guarantors, through the particulars in para 44 of the Amended Defence and Counterclaim, and, both in addition to those particulars and separately from them, in reliance upon the material tendered by Portbury, contend that their liability has been discharged or substantially reduced. Portbury's answer to this claim is essentially that the process of resale was reasonable. Whether that conclusion be justified depends upon an evaluation of all relevant and probative facts bearing upon the conclusion. The particulars to para 44 given in evidence through the affidavit of Mr Warren disclose an arguable defence at least as against the guarantors. In my view Portbury's case against the guarantors is not appropriate for summary judgment and, in that event, I would allow the entire proceeding to proceed to trial under s 64 because the facts and issues affecting the liability of the defendants in relation to the resale, although different in some respects, are sufficiently common and interdependent that they should all be explored and determined at trial.

38 Furthermore, it is arguable, as the defendants contended, that Portbury's right was not for termination under cl 28.4 of the Contract of Sale but for termination at common law. If so, its claim would require them to prove damages.[45] Portbury's claim against it depends, as I have said, upon its entitlement under cl 28.4 of the Contract of Sale to liquidated damages for the deficiency in the price on the resale. The issue in this respect arises from the consequence of the confusion which had existed about whether the first notice of rescission had been served on or around 18 January 2011. Dixon J held in the caveat proceedings that the second notice of termination purportedly given under cl 28.4 of the Contract of Sale was effective:

In my view there is no need for a trial to resolve this proceeding. The plaintiff's prospects of success are fanciful. A full hearing on the merits is not appropriate. The just, efficient, timely and cost effective resolution of the real issues in dispute between the parties can be facilitated by determining whether, on the undisputed facts, the contract of sale was avoided by Ottedin or rescinded by Portbury. The latter consequence will be the correct interpretation of events unless Ottedin had, prior to its failure to remedy the default specified under Portbury's notice of default and rescission, avoided the contract. Mr Lloyd did not contend otherwise and it is clear that if the contract had not been already avoided, Portbury was entitled under the contract to serve the notice. Ottedin was in default as particularised in the notice. The validity of the notice was not challenged and the default was not remedied, Ottedin contending that it was not in default as it had earlier validly avoided the contract.[46]

His Honour's conclusion that the 31 March 2011 notice was effective may require the conclusion that it was effective at common law to reinstate time as of the essence of the contract and to rescind the contract in consequence of a failure to rectify the specified default within a reasonable period specified in the latter notice rather than upon the default which had permitted the earlier notice.[47]

39 My conclusion that the proceeding should not be disposed by way of summary judgment makes it unnecessary to consider a number of other issues which were raised both before Gardiner AsJ and before me. They all involved questions of law which, if maintained, may need to be determined at trial. The parties were in dispute about such matters as whether the decision of Dixon J in the caveat proceeding bound Goldcare or the guarantors. It may be desirable for those matters to be determined as separate or preliminary points but I think it undesirable to express a view upon those matters if not determinative of the proceeding before me. The expression of a view about legal arguments that is unnecessary to decide the issues in the summons and which will not bind the parties, in the context of this dispute, is unlikely to produce benefits to outweigh unforeseen difficulties.[48]

40 Accordingly, I propose to set aside the judgment given in favour of the plaintiff on 21 June 2012 and will hear the parties briefly about any costs orders to be made.

[1] Portbury Development Pty Ltd v Ottedin Investments Pty Ltd [2012] VSC 362 (Pagone J).

[2] Ottedin Investments Pty Ltd v Portbury Developments Co Pty Ltd [2011] VSC 222 (Dixon J); Portbury Development Co Pty Ltd v Ottedin Investments Pty Ltd [2012] VSC 274 (Gardiner AsJ).

[3] Ottedin Investments Pty Ltd v Portbury Developments Co Pty Ltd [2011] VSC 222.

[4] [2003] VSCA 1; (2003) 6 VR 466.

[6] [2011] VSC 222; see also JBS Southern Aust Pty Ltd v Westcity Group Holdings Pty Ltd [2011] VSC 476, [36]-[50] (Croft J).

[7] [2011] VSC 222 [7]-[12] (citations omitted).

[8] [2010] HCA 28; (2010) 241 CLR 118.

[9] Ottedin Investments Pty Ltd v Portbury Developments Co Pty Ltd [2011] VSC 222, [15] (Dixon J).

[10] [2012] VSCA 97; see also Fancourt v Mercantile Credits Ltd [1983] HCA 25; (1983) 154 CLR 87, 99 (Mason, Murphy, Wilson, Deane and Dawson JJ).

[11] Karam v Palmone Shoes Pty Ltd [2012] VSCA 97, [28] (Nettle and Osborn JJA); see also Ticco Pty Ltd v Complete Family Healthcare Services Pty Ltd [2005] VSCA 221, [20]-[21] (Hollingworth AJA), [36]-[37] (Charles JA).

[12] [2009] VSCA 288; (2009) 29 VR 213.

[13] Ibid 225-6, [62]-[66] (Weinberg and Bongiorno JJA and Williams AJA) (citations omitted).

[14] Great Australian Gold Mining Co v Martin (1877) L.R. 5 Ch D1, 10 (James LJ).

[15] Civil Procedure Act 2010 (Vic) s 18(d).

[16] Civil Procedure Act 2010 (Vic) s 10(1).

[17] [1924] HCA 4; (1924) 34 CLR 122, 128 (Knox CJ, Gavan Duffy J).

[18] [1968] VicRp 1; [1968] VR 3.

[20] [2002] WASCA 317.

[22] [1983] HCA 25; (1983) 154 CLR 87.

[23] Ibid 98 (Mason, Murphy, Wilson, Deane and Dawson JJ).

[24] Ibid 99 (Mason, Murphy, Wilson, Deane and Dawson JJ).

[25] Estate Agents Act 1980 (Vic) s 47A(2)(b).

[26] [1932] UKHL 1; [1932] AC 452.

[27] Ibid 506; King v Yurisich [2006] FCAFC 136; (2006) 153 FCR 78, 103 [93] (Sundberg, Weinberg and Rares JJ).

[28] [2001] TASSC 29; (2001) 10 Tas R 26.

[29] [1969] VicRp 112; [1969] VR 912.

[30] [2001] TASSC 29; (2001) 10 Tas R 26, [22] (Slicer J).

[32] Karam v Palmone Shoes Pty Ltd [2012] VSCA 97, [28] (Nettle, Osborn JJA); Ticco Pty Ltd v Complete Family Healthcare Services Pty Ltd [2005] VSCA 221, [20]-[21] (Hollingworth AJA), [36]-[37] (Charles JA).

[33] Fancourt v Mercantile Credits Ltd [1983] HCA 25; (1983) 154 CLR 87, 99 (Mason, Murphy, Wilson, Deane and Dawson JJ); Karam v Palmone Shoes Pty Ltd [2012] VSCA 97, [28] (Nettle, Osborn JJA).

[34] General Steel Industries Inc v Commissioner for Railways [1964] HCA 69; (1964) 112 CLR 125, 130 (Barwick CJ).

[35] Ottedin Investments Pty Ltd v Portbury Developments Co Pty Ltd [2011] VSC 222, [16] (Dixon J).

[36] [1969] VicRp 112; [1969] VR 912.

[38] (1985) 3 NSWLR 391.

[40] [2009] NSWSC 1159.

[43] [1981] HCA 62; (1981) 147 CLR 654.

[44] Ibid 675; see also Williams v Frayne [1937] HCA 16; (1937) 58 CLR 710, 738 (Dixon J).

[45] Victorian Economic Development Corporation v Cloverdale Pty Ltd [1992] VicRp 40; [1992] 1 VR 596.

[46] Ottedin Investments Pty Ltd v Portbury Developments Co Pty Ltd [2011] VSC 222, [62].

[47] Greydae Pty Ltd v Malilane Pty Ltd [2003] VSCA 27; Nund v McWaters [1982] VicRp 60; [1982] VR 575, 583 (Brooking J); Uniting Church in Australia Property Trust (Vic) v Nadajamoorthy [2010] VSC 290.

[48] St George Bank Limited v Commissioner of Taxation [2008] FCA 453; (2008) 69 ATR 634, 659-660 [99] (Allsop J) .