POWERCELL PTY. LIMITED v. ROSARIO GRASSO AND 5 OTHERS [1999] NSWSC 1190

Powercell Pty. Limited (Plaintiff) PARTIES : Rosario Grasso, Santo Grasso, Sandra Cannizzaro and Graziella Giacca (First Defendants) Cuzeno Pty. Limited (ACN 001 291 738) (Second Defendant) George Jabbour (Third Defendant) JUDGMENT OF : Smart AJ at 1

COUNSEL : C. Harris (Plaintiff) J. Armfield (Defendants) SOLICITORS : Willis & Bowring (Plaintiff) Nesci & Romano (Defendants) CATCHWORDS : Measure of damages for anticipatory breach of contract for sale of land; mitigation DECISION : Extension of time in which to appeal and seek leave to apeal refused on the ground that the appeal has no merits; Leave to appeal to the extent that it is necessary is refused on the same basis; Application to set aside the statutory demand dismissed; Powercell is to pay the costs of the first defendants of the proceedings in this court. (For costs purposes it is noted that the proceedings inthis court on the hearing of the matters took 2½ hours on 2 December 1999); These orders not to be entered for 7 days

9 IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

POWERCELL PTY. LIMITED v. ROSARIO GRASSO AND 5 OTHERS

JUDGMENT 1 Powercell Pty. Limited seeks an extension of time and leave to appeal against the decision of a magistrate on 13 September 1999 awarding the four first defendants $40,000.00 for damages for breach of contract. Powercell also seeks to set aside a statutory demand served upon it by the four first defendants. So far as the appeal raises questions of law alone Powercell, if granted an extension of time, proposes to appeal on those. See s.104 of the Justices Act 1902. 2 At the interlocutory hearing on 12 November 1999 I fixed the hearing date of the summons and all motions for 2 December 1999 and directed the parties, without objection, that they should be ready to argue the merits of the appeal as well as the various motions. 3 By a contract bearing date 18 April 1996 Powercell agreed to sell to Rosario Grasso, Santo Grasso, Sandra Cannizzaro and Graziella Giacca (the purchasers) and they agreed to purchase for $170,000.00 Unit 8, 2-4 Cairo Street, Rockdale, (a top floor unit) in a building then in the course of construction. It was a purchase "off the plan". This unit was well situated for convenience, being about 500 metres from the Rockdale Shopping Centre and Railway Station. At the time contracts were exchanged Powercell did not have title to the unit. The land stood in the name of Cuzeno Pty. Limited (Cuzeno) the fifth defendant. Powercell was responsible for building the units and was to obtain title by a deed of partition. The contract was not conditional upon Powercell obtaining title to the unit from Cuzeno. 4 By letter of 1 August 1996 Powercell's solicitors advised that prior to the contract it had contracted with the registered proprietor of the land (Cuzeno) to purchase a one half share of the land. The solicitors wrote that they were "now instructed that the sale to our client of the one half share in the land will not proceed" … "and consequently will not be able to transfer title to the lot to your clients". The letter concluded: "Accordingly, our client therefore wishes to rescind the Agreement as it will not be able to perform its obligations." 5 It was common ground that the purchasers accepted the repudiation about 12 August 1996. From that time the purchasers sought to persuade Cuzeno to enter into a contract with them for the sale and purchase of the unit for $170,000.00. Their solicitors wrote letters and made telephone calls to the estate agent and the solicitors for Cuzeno and they were given to understand that a fresh contract would be sent to them. By letter of 25 November 1996 the purchasers' solicitors wrote to Powercell's solicitors that despite repeated attempts to obtain an exchange of contracts with the new vendor, Cuzeno, no contract had been forthcoming and that they intended to commence proceedings against Powercell and the guarantors for breach of contract and damages. An urgent reply was sought. 6 One of the purchasers gave evidence, namely, Mrs. Cannizzaro. She was a housewife. The other purchasers were her two brothers and a sister. She did not know a great deal about what had taken place. She had a limited understanding and command of English. Her brother Ross (Rosario) was the moving spirit. She stated that they first started looking for a substitute unit before Christmas 1996. They thought and talked about one. They looked in the local papers and magazines the estate agents supplied and "things like that". The magazines were probably the catalogues or booklets produced by the Estate Agents Co-operative of places for sale. 7 She said that they actually started physically inspecting units about the end of January-early February 1997. She had been looking after her children during the school holidays. Mid-December to mid-January is normally a fairly quiet period for real estate sales. She recalled that they looked at a unit off the plan in Miranda. They thought it was too expensive. They looked at units in Rockdale. It does not appear whether these were completed units or units in the course of construction or wholly off the plan. About the end of March beginning of April 1997 they located another unit which was sold off the plan. They entered into a contract to purchase that unit about 2 May 1997. It was in Cairo Street, Rockdale and almost directly opposite the block in which unit 8 was situated. Unit 8 was purchased for investment purposes. 8 Mrs. Cannizzaro agreed that the streets around Cairo Street have many blocks of home units which are fairly new. There have been units built after she entered into the contract with Powercell and she thought that some of the units had been built before she entered into the contract. 9 The magistrate had the detailed valuation report of Mr. Valuer B.L. Russ of 10 June 1998 to the effect that the current market value of Unit 8 was $170,000.00 at 18 April 1996 and 1 August 1996 and $215,000.00 as at 18 and 23 April 1997 and 2 May 1997. These values were supported by the comparable sales. 10 Special Condition 1 provided that the building in which Lot 8 was situated should be constructed by the vendor in a proper and workmanlike manner in accordance with the Council approved plans and registration of the strata plan. The condition contained this proviso: "… provided that if the Strata Plan is not registered on or before the expiration of twelve (12) months from the date hereof [18 April 1996] then either party may by notice in writing to the other rescind this contract whereupon all moneys paid by the purchaser hereunder shall be refunded to the purchaser and thereafter neither party shall have any action claim or demand against the other arising out of this contract or its rescission." 11 Some reliance was placed upon this clause by Powercell because the strata plan was registered on 2 June 1997. However, the repudiation of the contract by Powercell and the acceptance by the purchasers meant that the clause never came into operation and ceased to have effect as from such acceptance about 12 August 1996. 12 There were essentially two issues before the magistrate. Firstly, what was the correct date at which the damages should be assessed. Should it be August 1996 being the date of the breach and the acceptance of the repudiation or the date of intended completion, namely, April 1997 or some other date in late 1996 or February-March 1997? Powercell submitted that the correct date was August 1996 and the purchasers submitted that it was March-April 1997. Secondly, if the correct date were March/April 1997 had the purchasers failed to mitigate their damage by purchasing another unit promptly, that is, before Christmas 1996? 13 In his reasons the magistrate did not in terms refer to the aspect of mitigation. After finding that Powercell was in breach of its contract the magistrate reviewed the course of events after the breach. The magistrate found: "The effect of the evidence given by the solicitor for the plaintiffs, the purchasers under the contract of sale, was that it was indicated that a contract would be forthcoming in which Cuzeno would agree to sell the same unit to the same purchasers for the same price. Those negotiations broke down and certainly broke down as at 25 November 1996. Those discussions and negotiations that were not carried on without prejudice nor, in my view, was there any reason for them to do so. It was, in my view, reasonable on the evidence for the solicitors acting for the purchasers to proceed with the negotiations through the agents and with the solicitors for Cuzeno Pty. Limited, in the hope that a contract would be forthcoming from that company. It being the company registered as the registered proprietor. If that contract had been forthcoming, no doubt, we would not be here today." 14 The magistrate further found "There is no evidence that there was any delay or lack of attention on the part of the solicitors for the plaintiffs (the purchasers) and I am satisfied that that was a reasonable course of action. That would take it up until about 25 November." 15 The magistrate next found: "The evidence on behalf of the plaintiff is that the plaintiffs then started to look in papers and magazines and documents from the agents before Christmas. And that towards the end of January, February, they had looked at a unit at Miranda and as it turns out and on the evidence, they entered into a contract for the purchase of another property on 2 May 1997, the purchase price being $210,000. The contract of sale was for a unit 13, 3-5 Cairo Street, Rockdale and therefore, in the same street as the property which the plaintiffs wished to purchase from Powercell, would seem perhaps, directly opposite. It is also for a two-bedroom unit and as I understand the evidence, although it may well not have been specifically stated, is a comparable unit to that which the plaintiffs wish to purchase from Powercell Pty. Limited. That contract was entered into on 2 May and there was therefore some delay, even from when they start looking at the end of January, early February, to when they enter into the contract." 16 The findings quoted were well open on the evidence. The magistrate was obviously assessing the reasonableness of the conduct of the purchasers and the steps which they had taken to obtain another property. That was the way they chose to mitigate their damage. They could have taken other reasonable courses. The magistrate was concerned about the delay to 2 May 1997 but in the event that did not matter. He said: "However, I am of the view that the better evidence of the loss suffered by the plaintiffs is that the very unit which they had intended to and had contracted to purchase under the contract, dated 18 April 1996, was sold under a contract dated 14 March 1997 for $215,000. A difference of $45,000." 17 It was common ground that the magistrate could not award more than $40,000 for damages for breach of contract. That is why no one troubled about the costs and expenses thrown away by the purchasers on unit 8. It is reasonably clear from the magistrate's reasons that he was paying close attention to the issue of mitigation. That was one reason for reviewing the evidence as he did. 18 As to the assessment of damages the magistrate applied these principles:

(a) The overriding test was what approach and amount most fairly compensates the plaintiffs for the wrongs which they have suffered.

(b) The date for assessment is usually the date of the breach or that when the cause of action arose.

(c) This is but a prima facie guide and damages will be assessed at the date necessary to adequately compensate the plaintiff for the loss suffered. 19 The magistrate concluded: "I am satisfied that the measure of damages is fixed by the resale of the same unit on 24 March 1997 at $215,000. I am satisfied that the plaintiffs have suffered a loss of $40,000 and I propose to enter judgment for them in that amount." 20 Counsel for the parties apparently argued the case before the magistrate on the basis of the principles state in Johnson & Ors v. Perez 166 CLR 351. That was a case in which solicitors were sued for damages for professional negligence and breach of contract, the solicitors not having prosecuted the plaintiff's actions for damages for personal injuries diligently. His actions were dismissed for want of prosecution. 21 All Justices agreed that the general rule was that damages for tort or for breach of contract were assessed at the date of the breach but that in each case the courts had to work out a solution best adapted to giving the wronged party that amount in damages which will mostly fairly compensate that party for the wrong suffered. A plaintiff who has suffered damage as a result of a defendant's tort or breach of contract is entitled to such a sum as will, as far as possible, put him in the same position as he would have been in but for the tort or breach of contract. 22 Mason CJ pointed out at 356 that the general rule had been applied more uniformly in contract than in tort for good reason. He added "But even in contract cases courts depart from the general rule whenever it is necessary to do so in the interests of justice". The Chief Justice embarked upon a review of a number of areas of the law and cases. At 360 he remarked: "As the cases to which I have referred reveal, the principles governing the assessment of damages do not permit the application of rigid rules based on categories of actions. Instead the injured party's intentions must be considered in the light of the underlying principles in order to do justice between the parties. Where mitigation is possible an early date for assessment may be appropriate." 23 At 387 Dawson J explained that one category where the general rule is not applied is where damages are awarded in lieu of specific performance with the value of the property being assessed at the date of judgment. Another is where a plaintiff does not immediately carry out repairs or mitigate his loss, but it is not unreasonable for him to delay doing so. In such cases damages may be assessed at an appropriate date later than that of the wrong. In contract cases dealing with the sale of land much may depend on the availability of properties suitable to the plaintiff and at an acceptable price. There are many factors that bear upon whether an alternate property is suitable and this is so even where the property is purchased for investment purposes. 24 In Radford v. De Froberville [1977] 1 WLR 1262 Oliver J said at 1286: "… Wroth v. Tyler establishes that, at least where damages are awarded in lieu of specific performance, an appropriate date of assessment may be the date of judgment, but if the function of an award is to put the plaintiff in as good a position as if the contract had been performed, I do not see why, in principle the same should not equally apply in an appropriate case of a breach of contract which cannot be specifically performed. The practical difference no doubt in most cases lies in the duty to mitigate …"

In both Wroth v. Tyler (1974) Ch 30 and Radford the court was conscious that if the defendant had not been in breach the plaintiff would have received land which had increased in value. Damages as a substitute for what the plaintiff was entitled to would have had to compensate him for that. 25 The magistrate having dealt with the reasonableness of the plaintiff's conduct and the question of delay in a permissible way and one which does not reveal error, selected March 1997 as the appropriate month at which to assess the damages. The selection of the purchase price of unit 8 in that month reveals no error and, if I may add, was correct. 26 During argument I raised with counsel whether it was correct to approach this case wholly on the basis of the principles stated in Johnson. I referred counsel to McGregor on Damages, 16 Ed. 1997, paras. 963 and 964 which states that where the purchaser sues for damages, a course commonly pursued where the vendor has no title to convey, the normal measure of damages is the market value of the property at the contractual time for completion less the contract price. Counsel were referred to the cases there cited. 27 In Hoffman v. Cali (1985) 1 Qld R 253 the Queensland Full Court considered the correct measure of damages where there has been an anticipatory repudiation by the vendor of an executory contract for the sale of land. That was a case of the purchase of a unit off the plan. The vendor failed to proceed with the construction of the home unit block. It advised the purchaser that it could not proceed as it could not obtain finance. The vendor sold the building site to a company. The purchaser sued for damages. McPherson J with whom Andrews SPJ concurred, said at 264: "In the present case there are no special features that would displace the general rule laid down in Frost v. Knight (1872) L.R. 7 Ex. 111,113, as applicable to cases of anticipatory breach, namely that a plaintiff who accepts such a repudiation is entitled to such damages as would have arisen from non-performance of the contract at the appointed time; nor is there any reason for displacing the principle stated by McGregor and adopted in Ella v. Wenham [1972] Qld. R. 90, namely that damages for breach of a contract for the sale of land are ordinarily to be measured by the difference between market value and contract price at the contractual date for completion." 28 I do not regard this statement of principle as inconsistent with Johnson. Rather, it is a recognition of an exception to the general rule based on the special considerations which apply in the circumstances now under review. If April 1997 were taken as the contractual date for completion that would yield judgment in the same amount, namely $40,000.00. Again allowing by way of mitigation for some delay that would shift the date back to March 1997 and again to judgment in the same amount of $40,000.00. Thus, for practical purposes, in the present case, it does not matter which approach is taken. My view is that in the present case the principles propounded by McPherson J in the passage quoted are apt. I would uphold the magistrate's decision. 29 There is no basis upon which the court could set aside the Statutory Demand served upon Powercell. It had a final judgment and that has been upheld. 30 As to the motion to extend the time in which to appeal and seek leave to appeal, I would extend the time. Powercell advised of its intention to appeal immediately after the magistrate gave his decision. It was waiting for the transcript before preparing its summons and grounds of appeal. It should not have done so. It was about ten days late in filing the summons and only did so after it had been served with a statutory demand. The delay is relatively slight and it has been explained as due to a mistaken belief as to the correct course to be taken. The applications have been heard and the merits of the appeal have been determined within 3 months of the magistrate's decision which is far quicker than most cases. If I had thought that the appeal had merits I would have extended the time. On the basis that the appeal has no merits I would neither extend the time to appeal nor grant leave to appeal. I propose to allow Powercell a short period to comply with the statutory demand. 31 I make the following orders:

1. Extension of time in which to appeal and seek leave to appeal refused on the ground that the appeal has no merits.

2. Leave to appeal to the extent that it is necessary is refused on the same basis.

3. Application to set aside the statutory demand dismissed.

4. Powercell is to pay the costs of the first defendants of the proceedings in this court. (For costs purposes it is noted that the proceedings in this court on the hearing of the matters took about 2½ hours on 2 December 1999.)

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