In November last year the Court gave judgment for the plaintiffs against the defendants for damages to be assessed: Thomson v CW2 Pty Ltd (unpublished, 2 November 2023, Peden J). In this judgment I assess those damages.
The contract in question was a contract for the sale of a residential property at Vaucluse in Sydney's Eastern Suburbs. The plaintiffs were the vendors. The first defendant was the purchaser. The second defendant guaranteed the purchaser's liabilities under the contract.
Evidence in support of the plaintiffs' claim for damages was given by Mr Thomson, the second plaintiff. The defendants had earlier been represented in the proceedings, but their solicitors withdrew. There was no appearance at today's hearing for them.
The contract for the sale of land which is the subject of the plaintiffs' claim was dated 23 November 2022. It was in standard Law Society form (2019 edition) with additional special conditions. The contract price was $22.888 million with a deposit of $1.717 million (figures in these reasons for judgment are rounded to the nearest thousand dollars). The contract was entered into pursuant to an earlier put and call option agreement between the parties. It is not necessary to go into the terms of that agreement.
The contract provided for completion to take place on 16 December 2022. Completion did not occur on that date. On 19 December, the solicitors for the Thomsons issued a notice to complete. A point was taken about the validity of the notice, based on a failure to serve all the documents required before completion could take place. The Thomsons' solicitors served the necessary documents on 23 December, which resulted in completion being able to take place from 7 January last year.
Completion did not however occur. The matter dragged on until late March when a final notice to complete was issued which required completion by 12 April. Completion still did not occur on that date. On 17 April, the solicitors for the Thomsons issued a notice of termination.
The Thomsons then moved to resell the property. They retained the agent who had previously been retained. That agent conducted a marketing campaign, which is described in Mr Thomson's evidence. The campaign resulted in the resale of the property for a substantially lesser figure, $17 million. The resale contract was entered into on 20 May. It was completed earlier this month.
Standard cl 9.3 of the earlier contract dealt with the vendor's claim for damages in the event that the purchaser failed to complete. It provided:
9 Purchaser's default
If the purchaser does not comply with this contract (or a notice under or relating to it) in an essential respect, the vendor can terminate by serving a notice. After the termination the vendor can -
…
9.3 sue the purchaser either -
9.3.1 where the vendor has resold the property under a contract made within 12 months after the termination, to recover -
the deficiency on resale (with credit for any of the deposit kept or recovered and after allowance for any capital gains tax or goods and services tax payable on anything recovered under this clause); and
the reasonable costs and expenses arising out of the purchaser's non-compliance with this contract or the notice and of resale and any attempted resale; or
9.3.2 to recover damages for breach of contract.
Counsel presented the Thomsons' claim by reference to the decision of Darke J in ST Investments Pty Ltd v Geng [2020] NSWSC 329. That case was similar to this one in that it involved a claim by a vendor for damages against a purchaser who had failed to complete. The vendor's claim in those proceedings was also based on cl 9.3 of the 2019 Law Society standard form contract. His Honour analysed the relevant authorities. I have followed the same approach as his Honour in this judgment.
Clause 9.3.1 provides for an award of liquidated damages. Clause 9.3.2 allows the vendor, at the vendor's election, to proceed with claiming damages in accordance with general law principles. In ST Investments, the vendor ultimately elected to claim damages in accordance with general law principles. The same position was taken by the Thomsons in the present case.
His Honour dealt with the general damages assessment at [41] and following of his judgment. Damages are assessed at the date of breach and are to be calculated upon the general principle that the vendor is to be placed in the same position as if the contract had been performed by the purchaser. In the present case, the date of termination was 17 April last year and, accordingly, loss of bargain damages are to be assessed as at that date.
The first component in calculating the financial position that the Thomsons would have been in had the contract been performed is to determine the remaining sum payable on completion. That is the contract price less the deposit, which is $21.171 million.
In ST Investments the vendor was entitled, upon the purchaser's failure to complete, to interest at a contractual rate of 10% per annum. The same provision is made in the present case in cl 44 of the special conditions.
Counsel calculated the interest for the period from 7 January (the date from which completion could first have occurred) to 17 April (the date of termination). The date of completion under the final notice to complete was actually 12 April, but I am satisfied that calculation up to the date of termination is proper. During that period, the purchaser had repudiated the contract but it was still on foot because that repudiation had not been accepted. If the purchaser had repented and complied with its contractual obligations by rescheduling the settlement it would, at that settlement, have been required to pay interest up to the date of that settlement.
Accordingly, I think that the period nominated by counsel for the calculation of interest is correct. Interest calculated at the applicable rate is $586,000.
In ST Investments, it was argued on behalf of the purchaser that the 10% interest rate represented a penalty. Darke J rejected that argument. No such argument was raised in the present case, and I note that market interest rates have, in any event, increased significantly from where they were in 2020 when ST Investments was decided.
The next component of the calculation is the value of the property as left in the Thomsons' hands upon termination. In S T Investments, his Honour was prepared to infer that the price subsequently achieved (about five weeks later) represented the value of the property at termination. The period of time between termination and resale in the present case is similar, indeed, I think slightly shorter, and I will draw the same inference. Thus, there must be deducted from the amount due on settlement the sum of $17 million, representing the value of the property as at the date of termination.
The next item to be considered is the costs of resale. In the present case the agent did not charge another commission fee but did charge for marketing and styling of the property. The total amount was $31,000. In addition, the sum of $2,000 was incurred in maintaining the garden at the property. Legal fees, which covered not only the resale contract but some expenses associated with termination, were $18,000. The total is $51,000.
In ST Investments, Darke J deducted the resale costs from the value of the property as at the date of termination, thus effectively adding them back on to the plaintiff's claim. One feature of these costs in the present case is that, apart from the legal costs associated with termination, they were all incurred after termination. At first glance, one might ask why they are recoverable if damages are to be assessed as at the date of termination when they had not been incurred. But the answer is that, strictly speaking, they are not part of the Thomsons' loss of bargain damages. Rather, they are additional costs flowing from the purchaser's breach, or costs which were incurred by the Thomsons to mitigate their loss of bargain damages. As such, they are therefore separately recoverable when incurred, even if they had not been incurred as at the date of termination. Adding the figure of $51,000 back, the total amount of damages comes to $4.808 million.
Finally, there was a claim for interest on the damages under s 100 of the Civil Procedure Act 2005. Interest was claimed from the date of termination, and this gave rise to a calculation issue.
The damages were almost entirely incurred at or before the date of termination. But, for reasons I have just explained, some of the $51,000 in resale costs could only carry interest from the dates upon which they were incurred. For reasons which will become clear in a moment, it was not, in the end, necessary to partition the $51,000 and calculate interest on each component of it from the date on which that component was incurred. Deducting the whole of the $51,000 from the principal amount of damages for the purposes of the interest calculation yields an interest figure of $359,000. When this figure is added to the principal amount, the figure is $5.167 million.
Initially, counsel for the Thomsons invited me to enter judgment in a sum calculated to the nearest dollar, but I do not think that it is appropriate to do so in a case such as the present. The assessment is one of general damages. Many of the components in the claim are capable of precise calculation, but not all of them are. In particular, the valuation of the property as at the date of termination involves an inference. In the ordinary case, that value would be proved by expert evidence which would no doubt be expressed as a midpoint in a range. The variations in that range would likely be, at least, an order of magnitude greater than some of the other components of the calculation.
In these circumstances, I think the proper course is for the Court to enter judgment for a figure which has been rounded in a way which reflects the imprecisions in the process and, in particular, the imprecisions in valuing the property as at the date of termination. In my view, this is best reflected by rounding the amount awarded to the nearest $100,000. Accordingly, I assess the damages at $5.2 million.
The orders of the Court are:
1. Judgment for the plaintiffs against the defendants in the sum of $5.2 million.
2. Order that the defendants pay the plaintiffs' costs of the assessment of damages.
[2]
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.
Decision last updated: 04 April 2024