Van Dyke v Sidhu

Judgment 1HIS HONOUR: On 1 July 2013 the Court of Appeal made orders in this matter. The Court of Appeal allowed an appeal from Ward J (as her Honour then was) in the Equity Division, and made the following orders, amongst others: "3. Order in lieu thereof as follows: (a) That the defendant pay to the plaintiff by way of equitable compensation a sum to be determined in accordance with the decision of the Court of Appeal. (b) That the defendant pay the plaintiff's costs of the proceedings. 4. Remit the matter to the Equity Division for determination of the quantum of equitable compensation in accordance with the decision of this Court on the basis of further submissions and, if the court so determines, additional evidence." 2The Court of Appeal found, in substance, that the equitable compensation to which the plaintiff is entitled should be measured by reference to the value of the expectation that the plaintiff was induced to adopt in reliance on the defendant's representations. Barrett JA, who gave the leading judgment, said (at [141], [142] and [143]): "[141] There was evidence before the primary judge of the value of the property as agreed by valuer witnesses retained by the parties. Elements of speculation arose from the fact that the Oaks Cottage building had been destroyed by fire. Alternative dates and alternative assumptions (for, example, that the Oaks Cottage building still existed, that a new project home was built and that a relocatable cottage was installed) were put to the valuers and they were instructed to make alternative assessments accordingly. [142] In my opinion, however, that valuation evidence does not indicate the appropriate outcome. The appropriate measure is whichever is the smallest of (a) today's open market value of Lot 4 in the plan of subdivision approved in October 2005 determined as if that lot was a subdivided lot capable of being transferred and as if the Oaks Cottage building destroyed by fire in February 2006 was still standing; (b) the aggregate of, first, today's open market value of that Lot 4 determined as if that lot was a subdivided lot capable of being transferred and as if it were unimproved vacant land and, second, the amount of the insurance proceeds received as a result of the destruction of the Oaks Cottage building in February 2006 (plus interest at a commercial rate on the amount of the insurance proceeds from 1 August 2006 to the date of judgment); (c) the open market value of Lot 4 as at 31 July 2006 determined as if that lot was a subdivided lot capable of being transferred and also as if the Oaks Cottage building destroyed by fire in February 2006 had been standing at 31 July 2006, plus interest at a commercial rate on that value from 1 August 2006 to the date of judgment; and (d) the aggregate of, first, the open market value of Lot 4 as at 31 July 2006 determined as if that lot was a subdivided lot capable of being transferred and also as if it were unimproved vacant land and, second, the amount of the insurance proceeds received as a result of the destruction of the Oaks Cottage building in February 2006 (plus interest at a commercial rate on that aggregate from 1 August 2006 to the date of judgment). [143] This court is not in a position to assess that sum. The appropriate course (corresponding with that in Giumelli v Giumelli) is to remit the matter to the Equity Division so that the quantum of equitable compensation can be determined on the basis of further submissions and, if the court so determines, additional evidence." 3An appeal by the defendant to the High Court was dismissed. I am now asked to assess the amount of equitable compensation to which the plaintiff is entitled in accordance with the reasons of the Court of Appeal. The task is to identify which measure of value in paragraphs (a), (b), (c) or (d) of para [142] is the smallest value. The plaintiff has read an affidavit of a valuer, Mr Mark Trew. He gives evidence that the open market value as at 1 July 2013 of Lot 4 in the plan of subdivision, determined as if that Lot were a subdivided lot capable of being transferred, and as if the Oaks Cottage building, destroyed by fire in February 2006, was still standing as at 1 July 2013, as being the amount of $550,000. He supported that opinion by reference to what he evidently considers to be comparable sales. This valuation produces the smallest measure of compensation. 4Mr Trew is of the opinion that if the valuation were approached applying the method in para of the Court of Appeal's judgment, the open market value of the Lot, if it were unimproved, vacant land as at 1 July 2013, would be $380,000. The insurance proceeds were $156,000 (not $175,000 referred to at [14] of the Court of Appeal's judgment). Those sums total $536,000. Applying commercial interest rates based on the Reserve Bank's advice as to bank interest rates on three-year term deposits, the amount of interest on the insurance proceeds would total $66,878. The total of the three amounts would be $602,878. 5There may be some debate as to what is the appropriate interest rate to use which falls within the description of a "commercial rate", but whatever rate is used will make no difference. Counsel for the plaintiff correctly submits that for an average interest rate over the relevant period to yield a figure of less than $550,000 for scenario (b) the rate would have to be less than about 1.3 per cent on average over that period. The interest rates are substantially more than that. 6Likewise, scenarios (c) and (d) in para [142] yield higher measures of compensation. This is because the value of the Lot, on the assumption that the Oaks Cottage was still standing as at 31 July 2006, is assessed as being $500,000. When interest is added to that amount the measure of compensation would be $714,352. 7If compensation were assessed in accordance with subparagraph (d) the total to be arrived at would be $680,063. That is because the value of the Lot as at 31 July 2006, if it were unimproved vacant land, according to Mr Trew's evidence, is $320,000. The insurance proceeds are $156,000. Interest on the aggregate amount of $476,000 at the rate applicable to three-year term deposits would be $204,063. 8On any view the smallest measure of compensation is that provided by scenario (a). The plaintiff is entitled to judgment in that sum. But that is a sum struck as at 1 July 2013. The plaintiff is also entitled to interest on that amount pursuant to s 100 of the Civil Procedure Act 2005 (NSW) from 1 July 2013 to today. 9There has been no appearance at today's hearing by the defendant. On 16 September 2014 the defendant applied to me to vacate the hearing date. The hearing date had been fixed by the Chief Judge on 1 August 2014. The principal ground on which the defendant sought vacation of the hearing date was that he had not obtained valuation evidence in response to the evidence of Mr Trew. For reasons which I then gave I refused the defendant's application to vacate today's hearing. 10The matters that the defendant raised in support of the application to vacate the hearing date were all matters of which he was aware as at 1 August 2014 when the hearing date was fixed. He had had the opportunity, if he had wished to take it, to adduce any evidence in response to the plaintiff's evidence for the hearing today. 11My Associate received a courteous submission yesterday afternoon from the defendant in which he took issue with my decision not to grant an adjournment of the hearing. I do not propose to deal with the matters that were raised by the defendant in that submission. There has been no material change of circumstances between 16 September 2014 and today which would justify my altering the decision that I made on 16 September. Even if the matter were to be considered afresh I do not think that an adjournment would be justified. 12In the course of his oral submissions on 16 September in support of the application to vacate the hearing date the defendant said that: "The value which was done by Mr Trew back then was when the property was at its peak, now it is at its bottom. Mr Trew has ignored it. It is more of an issue of something like $100,000 worth that could make a difference rather than making a technical point and delaying the matter". 13I apprehend that the defendant would say that the valuation upon which equitable compensation should be assessed is a valuation of the property in today's conditions and not as at 1 July 2013. There is of course no evidence of any material change in values between 1 July 2013 and today, but even if there were, that would not be relevant to the task at hand. 14The Court of Appeal directed that equitable compensation be assessed relevantly by reference to, "today's open market value of [the lot] ... as if the Oaks Cottage building destroyed by fire in February 2006 was still standing". 15The reference in the Court of Appeal's decision to "today's" open market value was to the open market value on the day on which judgment was given, that is, 1 July 2013. In my view, the intention of the Court of Appeal was that the plaintiff should be put in the position as if her entitlement to equitable compensation was determined and judgment was given as at the day of the Court of Appeal's orders. The consequence would be that any change in value of the property, whether upwards or downwards, would not affect the compensation to which the plaintiff was entitled. 16In my view, the basis upon which Mr Trew valued the property, namely, by considering its open market value as at 1 July 2013, was the correct basis. It also follows that the plaintiff should be put in the position as if she had obtained judgment for the equitable compensation calculated in accordance with para [142] of the Court of Appeal's reasons on 1 July 2013. Accordingly, pre-judgment interest is appropriate to compensate her for being out of pocket from that date. 17The rates of interest that ordinarily apply to the determination of pre-judgment interest pursuant to s 100 of the Civil Procedure Act, consistently with r 6.12(8), is 6.75 per cent for the six months from 1 July to 31 December 2013 and 6.5 per cent per annum from 1 January 2014 to date. The amount of interest payable at those rates on the principal sum of $550,000 is $44,028.25. 18For these reasons, I give judgment for the plaintiff against the defendant in the sum of $594,028.25. 19The Court of Appeal has made an order that the defendant pay the plaintiff's costs of the proceedings. Lest there be any doubt about it, I will order that the defendant pay the plaintiff's costs of the application to assess the quantum of equitable compensation. 20I order that the defendant pay the plaintiff's costs of the proceeding to determine the quantum of equitable compensation. 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: 03 October 2014