New South WalesSupreme Court CITATION : HEARSE & ANOR v...

New South Wales
Supreme Court






CITATION : HEARSE & ANOR v PALLISTER & ORS [2008] NSWSC 504
This decision has been amended. Please see the end of the judgment for a list of the amendments.


HEARING DATE(S) : 7, 8 November 2007

JUDGMENT DATE :
27 May 2008


JURISDICTION : Common Law


JUDGMENT OF : Hall J at 1


DECISION : Judgment to be entered for the plaintiffs, subject only to the form of orders to be determined on a date to be fixed.



CATCHWORDS : CONVEYANCING - Contract for sale - Purchaser failed to complete - Property resold - Liquidated damages claim under clause 9.3.1 of contract - Recovery of deficiency on resale - Recovery of reasonable costs and expenses - Awards of statutory interest on deficiency on resale and reasonable expenses recovered


LEGISLATION CITED : Civil Procedure Act 2005
Conveyancing Act 1919
Uniform Civil Procedur Rules 2005


CATEGORY : Principal judgment


CASES CITED : Advance Commercial Finance Limited v Aarons (1996) 7 BPR 14,523, BC9600180
Buchanan v Dunstan [2007] NSWSC 248
Carpenter v McGrath (1996) 40 NSWLR 39
Cox v Parker (1987) BPR 11,208, BC8700930
Degman Pty Limited (in liq) v Wright [1983] 2 NSWLR 601
Donnellan v Garlick [2006] NSWSC 132
Eighth SRJ v Merity (1997) 7 BPR 15,189, BC 9701110
Gogard Pty Limited v Satnaq Pty Limited (1999) 9 BPR 17,171, BC9908521
Jampco Pty Limited v Cameron (No 2) (1986) NSW ConvR 55,275
Rossco Developments Pty Ltd v O’Halloran (1980) 29 ACTR 1
Zografakis v McCarthy (2007) NSWSC 144


TEXTS CITED : Peter Butt: The Standard Contract for Sale of Land in NSW (1988, 2nd ed) at 482


PARTIES : Phillip Baden HEARSE & ANOR v
Mark James PALLISTER & ORS


FILE NUMBER(S) : SC No 12574 of 2006


COUNSEL : P: J C Thompson
1-2D: No appearance
3-5D: G Curtin


SOLICITORS : P: Lander & Lander
1-2D: No appearance
3-5D: Henry Davis York








IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION


HALL J


TUESDAY 27 MAY 2008


No. 12574 of 2006


PHILLIP BADEN HEARSE & ANOR v MARK JAMES PALLISTER & ORS


JUDGMENT


1 HIS HONOUR: The plaintiffs in the amended statement of claim filed on 6 July 2006 claim from the first and second defendants, damages in the amount of $790,680.82 together with interest at the rate prescribed pursuant to s.100 of the Civil Procedure Act 2005 in respect of the defendants’ failure to complete a contract of sale of land at Clontarf, Sydney. A document entitled “Pallister Claim” set out the items of claim amounting in all to the above amount. The document is MFI 2 in the present proceedings.
2 The defendants were, until 25 September 2007, represented by Somerville & Co, lawyers. Those solicitors ceased to act for them by Notice of Ceasing to Act filed on 25 September 2007. When the proceedings were listed for hearing on 7 November 2007, there was no appearance by the defendants. The hearing was adjourned on that date for a period to permit inquiries and, as necessary, evidence in order to confirm that the defendants had been informed of the hearing dates. By judgment given on the same date, I determined that the hearing should proceed on an undefended basis. I will refer to the evidence relied upon in this respect later in this judgment.

The facts

3 The following affidavits were read in support of the plaintiff’s case:-

(a) Affidavit of Peter Jonathan Lander sworn 16 January 2007.

(b) Affidavit of Robin Mignon Hayes Hears sworn on 22 January 2007.

(c) Affidavit of Phillip Baden Hearse sworn on 23 January 2007.

4 Certain of the primary facts were established by the affidavit of the plaintiffs’ solicitor, Peter Jonathan Lander, sworn 16 January 2007. Mr Lander originally acted for the plaintiffs when they purchased the property at 83 Cutler Road, Clontarf in 2002.
5 On 13 December 2004, Mr Lander received a sales advice notice from estate agent, Lionel Busquets, which advised that the property had been sold on that date. There was only one purchaser referred to in the notice, Vanessa Joan Pallister, the second defendant.
6 On 13 December 2004, Mr Lander also sent a draft contract in respect of the sale to Mr Dennis Staunton, solicitor, of Staunton & Thompson, lawyers of Manly. The letter referred to the fact that his clients were anxious to exchange as soon as possible and accordingly requested that the purchasers treat the matter as urgent.
7 On 16 December 2004, Mr Staunton wrote to Mr Lander advising that he was ready to exchange subject to three matters. The third was:-
“3. Purchaser: Vanessa Joan Pallister will probably be added as a joint purchaser pursuant to s.18(3) of the Duties Act prior to completion.”
8 A handwritten note on the letter recorded “2 & 3 All Agreed”. The document with the notation was faxed back to Staunton & Thompson.
9 On 16 December 2004, a facsimile recorded that “contracts have now been exchanged”.
10 A purchasers’ solicitors certificate dated 16 December 2004 given by Mr Staunton pursuant to s.66W of the Conveyancing Act 1919 recorded that Mr Staunton had explained to the first defendant, Mark James Pallister, the effect of the certificate for the purchase of the property and that there was no cooling off period in relation to the contract.
11 On 17 December 2004, Mr Staunton sent the purchasers’ signed contract. The contract for sale of land was dated 16 December 2004. The name of Vanessa Joan Pallister was ruled through in the nature of a deletion and the name Mark James Pallister handwritten in by way of substitution, the changes being initialled. The purchase price was recorded as $3,800,000, the deposit as $50,000 and the balance, $3,750,000. The date for completion was recorded as 20 February 2005.
12 On 19 January 2005, Staunton & Thompson wrote to Mr Lander enclosing an unstamped Transfer for execution by the vendors and requesting it be returned for stamping purposes. The letter added:-
“Please note that we have added Mrs Pallister as a joint purchaser pursuant to s.18(3) of the Duties Act 1997. Please amend the counterpart contract accordingly.”
13 The history of events whereby Mrs Pallister was added to the contract of sale has been outlined having regard to the defence and first cross-claim by her wherein she disputed that Staunton & Thompson had authority to act as her solicitor and, in particular, to add her name to the contract as purchaser.
14 On 7 February 2005, Staunton & Thompson sent a facsimile to Mr Lander enclosing draft figures for settlement scheduled for Monday 21 February 2005 and requesting cheque details. The “Settlement Adjustment Sheet” recorded the amount due on settlement as $3,751,059.64.
15 On 16 February 2005, Mr Lander confirmed the appointment to settle on Monday 21 February 2005 at 12 noon at National Australia Bank, Level 1, corner of King and Elizabeth Streets, Sydney. The letter advised cheque details.
16 In the affidavit of Robin Hearse sworn on 23 January 2007, Mrs Hearse stated:-

• That she and her husband had completely vacated the property at noon on Monday 21 February 2005.

• That the property was vacant between noon on 21 February 2005 to 9 March 2005.

17 Mrs Hearse attached to her last-mentioned affidavit a copy of an email from Mr Pallister dated 22 February 2005 advising:-

• That in order to settle the purchasers, needed to settle the sale of two properties that had been sold in Perth, settlement having been delayed almost nine days.

• That, had he known that that was going to happen, he would have arranged bridging finance.

• He was going to pursue the question of bridging finance.

18 In an email from Mrs Hearse to Mr Pallister, she advised that the plaintiffs had arrived in Perth with no accommodation as a purchase of property in Perth had not completed on time.
19 On 22 February 2005, Staunton & Thompson wrote to Mr Lander as follows:-
“Our clients have informed us by e-mail that their Perth solicitors are experiencing difficulties settling the sale of some properties in Perth which are required in order to effect settlement of the above purchase.
Mr Pallister is in the process of arranging bridging finance if the settlements do not occur and in case it is needed.
We shall contact you when we have received further information from our clients.”
20 On 22 February 2005, Mr Lander wrote to Staunton & Thompson serving a Notice to Complete addressed to Mr and Mrs Pallister. The letter advised that interest was required pursuant to Condition 2(b) of the contract. The notice appointed 12 noon, Wednesday 9 March 2005 for completion of the contract, time being expressed to be of the essence of the contract.
21 On 22 February 2005, Mr Pallister sent an e-mail to Busquets, agents, in which he referred to the delay in settling on two properties which were required to complete the purchase. He apologised for the delay which he said “was not of our making”.
22 Mr Lander wrote again on 25 February to Staunton & Thompson. In the letter it was stated:-
“…
It appears from your client’s email of this morning that he is prepared to make a significant payment of funds immediately to our clients, to assist them in meeting their own commitments in Western Australia.
Kindly advise whether your client will do so and the amount of such further payment of deposit.
Any further payment will be accepted by our clients entirely without prejudice to our clients’ Notice to Complete served earlier this week and also without prejudice to our clients’ claim for interest.
…”
23 On 28 February 2005, Mr Lander wrote a without prejudice letter to Staunton & Thompson in the following terms:-
“As indicated in our last telephone discussion, our clients are in urgent need of funds with which to meet certain commitments in Western Australia as soon as possible.
Our clients have therefore instructed us to advise that they are prepared to extend the period of their Notice to Complete until 31 March 2005 on the following conditions:-
1. Your clients to pay balance of deposit of $330,000 to us on our clients’ behalf by Wednesday 2 March.

2. Entire deposit funds may then be released by us to our clients for their immediate use.

3. Your clients to pay $35,000 on account of interest also by Wednesday 2 March.
Would you kindly seek instructions and respond.”

24 On 8 March 2005, Mr Lander wrote to Staunton & Thompson in the following terms:-
“We refer to our clients’ Notice to Complete in this matter and note having received no response from you on behalf of your clients.
Our clients remain ready, willing and able to complete the contract tomorrow in accordance with their Notice to Complete.
Kindly confirm that your clients will comply with our clients’ notice by completing the contract at the time and place specified therein.
Kindly furnish your calculation of amount payable on settlement, taking into account interest to be calculated in accordance with special condition 2(b) of the contract.
If we do not have your telephone or written response by 3 p.m. today, we will take it that your clients do not intend to comply with our clients’ Notice to Complete.
We also take this opportunity to note email correspondence between our respective clients over the past week from which it is clear that your clients to not intend to comply with their contractual obligations to our clients.”
25 On 9 March 2005, Staunton & Thompson replied in the following terms (the letter at times referred to their “client” and to their “clients”):-
“We refer to your facsimile letter dated 8 March and your clients’ Notice to Complete expiring today 9 March 2005.
In order to formally record our client’s position we advise as follows:-
1. Settlement of your clients’ property was not effected as expected because of difficulties and delays in the settlement of the sale of other properties owned by our client. Your clients were aware of these difficulties from email exchanges with our client.

2. As advised on 22 February 2005 Mr Pallister was arranging bridging finance to complete your clients’ purchase.

3. On 22 February 2005 you issued the Notice to Complete expiring 9 March 2005.

4. On 24 February 2005 Mr Pallister offered to pay a further amount as required by Mr & Mrs Hearse to complete their purchase in consideration of the settlement date being extended by 60 days and continuing to pay interest on the balance up until such extended date.

5. On 25 February 2005 you advised us the minimum amount required to be paid by our clients was $339,000.00 but this would be without prejudice to the Notice to Complete.

6. We contend that the Notice to Complete is not a valid notice because inter alia it is not in good form, is premature and unreasonable by not allowing sufficient time for completion to take place in all of the circumstances of the matter.

7. Our client is ready and willing to pay your clients the sum of $339,000.00 plus interest on the balance outstanding subject to allowing a period of 60 days from the agreed settlement date so that completion would take place on 20 April 2005.

8. Given that our client’s predicament is outside his control we believe this offer is and was reasonable. Further it gives your clients the opportunity to recover the full sale price and not be out of pocket, whereas any proposed re-sale of the property might not achieve this and would also exacerbate the position of the parties resultant from litigation.
We would ask that your clients carefully consider the above proposal at this stage before taking any further action.
Our client reserves his right to rely on this latter in relation to any issues as to costs.”
26 On 9 March 2005, Mr Lander responded in a “without prejudice” letter in the following terms:-
“We acknowledge your fax of today on which we have taken instructions from our clients.
Our clients are prepared to extend their Notice to Complete to 20 April 2005 on the following conditions:-
1. Your clients to pay balance of 10% deposit amounting to $330,000 direct to our clients’ bank account detailed below by 5 p.m. (WA time) tomorrow 10 instant.

2. Your clients to pay $16,000 on account of interest to our clients’ account by the same time.

3. Interest to continue to accrue in accordance with special condition 2(b) of the contract with credit for the amount of $16,000 mentioned above.
Payment of total of $346,000 should be made to the following account:
…
We are instructed to emphasise that if the above required payments are not made by the time stipulated, this offer is withdrawn and our clients will proceed to exercise their rights consequent upon your clients’ failure to complete the contract today.
Our clients further stipulate that payments made as prescribed above, must be on a ‘cleared funds’ basis.”
27 On 11 March 2005, Mr Lander again wrote to Staunton & Thompson as follows:-
“We have been instructed to advise that the vendors have elected to terminate contract dated 16 December 2004 for the sale of the above property because of the purchasers’ failure to complete the sale on or before Wednesday 9 March 2005 in accordance with a Notice to Complete served on 22 February 2005, being the breach of an essential term of the contract.”
28 As earlier noted, Mrs Hearse, in her affidavit sworn 23 January 2007, stated that she and the first plaintiff had completely vacated the premises prior to noon on Monday 21 February 2005 and that the property remained vacant after that up to 9 March 2005.

The re-sale

29 Contracts for the re-sale of the property were exchanged on 10 September 2005 following an auction conducted on that date with the purchasers, Mr and Mrs A Reeve. The purchase price was $3,350,000 ($450,000 less than the contract price of $3,800,00 under the contract dated 16 December 2004). The contract was completed on 5 December 2005.
30 The contract provided for a deposit of $167,500 and for a balance of purchase price of $3,182,500.
31 The plaintiffs’ solicitors costs on the re-sale amounted to $5,605 which were paid from the proceeds of sale.

Failure by the defendants to appear at the hearing

32 As earlier stated, on 7 November 2007, there was no appearance by or on behalf of the defendants when the proceedings were called on for hearing. The first and second defendants were called outside the Court. Again, there was no appearance.
33 As noted above, the proceedings had been set down for hearing well prior to the Notice of Ceasing to Act being filed on 25 September 2007.
34 Mr J C Thompson of counsel, who appeared for the plaintiffs, advised that Mr Lander sent by ordinary post on 30 October 2007 a letter to Mrs Pallister at the address 2 Dunara Gardens, Point Piper. He said there had been no response to the letter and that his instructions were that it had not been returned.
35 Mr G Curtin of counsel, who appeared for the third to fifth defendants, advised that his solicitor had also served a notice to produce on both the first and second defendants on or about 8 October 2007 at the same address. The letter to Mr Pallister was returned to sender “Not at this address”. Mrs Pallister had produced documents in response to the notice.
36 The above address, Mr Curtin advised, was the address provided by Mr Pallister to ASIC as his address when appointed a director of a company, Prestige Publishing Pty Limited. He was so appointed on 24 August 2006. Mr Curtin advised that his information was that Mr Pallister had been a director of a large number of companies and he had given various addresses, most, if not all, being in Western Australia, except for the above Point Piper address.
37 Mr Curtin further advised that the former solicitors for the defendants had confirmed that they had sent an email to Mr Pallister on 22 June 2007 informing him, amongst other matters, of the hearing dates. I note this was two days after the Court set the matters down for hearing. There had been no response to the email.
38 Mr Thompson drew attention to the fact that two affidavits sworn respectively on 6 February 2007 and 7 March 2007 filed for the defendants each referred to the Point Piper address.
39 Mr Thompson also advised that two letters dated 27 September 2007 (Marked MFI 1) were sent to each of the defendants enclosing a chronology as required by the Court Rules and a draft schedule of damages and issues. Neither of the documents or the abovementioned letter of 30 October 2007 had been returned.
40 The hearing was adjourned during the course of the morning of 7 November 2007 in order that the plaintiffs could file affidavit evidence concerning notification to the defendants of the hearing dates (transcript p.9).
41 On the resumed hearing, the plaintiffs read the affidavit of Peter Jonathon Lander sworn on 7 November 2007 and of Alexander Boyd Haslam also sworn on 7 November 2007. On the basis of the evidence in the affidavits, I was satisfied that the first and second defendants had been informed by their former solicitors of the dates for the hearing. A separate judgment was given on that aspect.

The items of claim

42 The plaintiffs claimed recovery or retention of the following items:-

(a) The deposit of $50,000.00. That amount was forfeited and paid to the plaintiffs.

(b) Interest at the contract rate on the balance of the purchase monies ($3,750,000) up to the date of termination: Special Condition 2(b) prescribed a rate for this purpose of 10%.

(c) Interest at the statutory rate (s.100) on the contract monies unpaid up to the date of resale.

(d) The deficiency on resale.

(e) The reasonable costs and expenses arising out of:-

(i) the purchasers’ non-compliance with the contract,

(ii) the notice of termination and resale; and

(iii) the resale: Gogard Pty Limited v Satnaq Pty Limited (1999) 9 BPR 17,171, BC9908521;

(f) Interest at the statutory rate (s.100) from the date of resale to judgment on all monies owing under the contract at the date of resale.

43 The claim itemised in MFI 2 is in the following terms:-
1 LOSS ON RESALE

Pallister contract
Resale price


Less deposit paid $3,800,000.00
$3,350,000.00
$450,000.00
$50,000.00 $400,000.00
2 INTEREST

Special condition 2(b) – on balance of $3,750,000.00 at 10% - 287 days from 21.02.05 to 05.12.05 $294,863.00
3 AGENT’S COMMISSION

L. Busquets – invoice 2005.3009

Hooker & L. Busquets invoice on resale $10,000.00

$55,275.00 $64,275.00
4 MARKETING EXPENSES

Advertising
Designer Boys
Floorplanners
Susan Murray – photography $19,950.00
$6,433.90
$185.00
$550.00 $27,118.90
5 LEGAL COSTS & DISBURSEMENTS

Costs on preparation, issue and service of Notice to Complete and letter terminating contract

Costs and disbursements on resale $825.00



$4,780.00 $5,605.00
6 RATES, CHARGES, INSURANCE

Manly Council rates 21.2.05 – 5.12.05

Sydney Water rates 21.2.05 – 5.12.05

Insurance – 21.2.05 – 5.12.05 $2,608.19


$344.03


$1,721.61 $4,673.83
7 PROPERTY MAINTENANCE AND REPAIRS

Plumbing

Electrolux – refrigerator repairs

Energy Australia - gas

- electricity

Pool Centre - maintenance

J Searle – garden maintenance

Floriade Horticultural Services – garden maintenance

Constructive Designs – miscellaneous building repairs

Kleenco – interior cleaning





LESS occupation fee paid by purchasers Reeve $1,047.00

$104.00

$294.97

$1,909.84

$2,297.85

$181.00

$340.50


$1,336.43


$1,633.50 $9,145.09

$9,145.09

$806,680.82

$16,000.00

$790,680.82

44 The plaintiffs’ entitlement to each of the above items will be discussed later in this judgment. It is first necessary to examine the nature of the claim under the contract and the relevant terms of the contract.

The terms of the Contract

45 The plaintiffs’ claim at hearing was one for liquidated damages based on the contractual provisions in clause 9 and Special Condition 2(b) of the contract and for interest after the date of termination pursuant to the Civil Procedure Act 2005, s.100.
46 Clause 9 provided as follows:-

“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 –

9.1 keep or recover the deposit (to a maximum of 10% of the price);

…
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 -
• deficiency on resale (with credit for any of the deposit kept or recovered and after allowance 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 of termination and of resale and any attempted resale; or
9.3.2 to recover damages for breach of contract.”


47 Special Condition 2(b) was in the following terms:-
“(b) If the purchaser shall fail to complete this contract by the completion date for any reason other than default by the vendor in respect of any obligation within the vendor’s control then the purchaser shall pay interest on the balance of the purchase price and any other moneys owing pursuant to this contract computed at the rate of 10% per centum per annum from the completion date until the date that completion shall actually take place (without prejudice to all and any other rights of the vendor pursuant to this contract)… The purchaser acknowledges that it is an essential condition of this contract that interest as provided by this clause be paid to the vendor on completion.”
48 Clause 9.3 of the contract provided a choice following a failed sale and subsequent resale. In accordance with its provisions, the plaintiffs/ vendors could elect to avail themselves of the “totality of the special collection of alternative rights stipulated by the contract” (thus making a claim for liquidated damages under clause 9.3.1) or they could elect to claim on the basis of “the totality of common law rights” (thus making a claim for unliquidated damages at common law under clause 9.3.2): Zografakis v McCarthy (2007) 13 BPR 24,365, [2007] NSWSC 144 at [17]; Cox v Parker (1987) 5 BPR 11,208, BC 8700930; Peter Butt, The Standard Contract for Sale of Land in New South Wales (1998, 2nd ed) at 482. Once a vendor has elected to proceed under one of the limbs of clause 9.3 (whether clause 9.3.1 or clause 9.3.2), then the vendor cannot resile from his or her decision: Jampco Pty Ltd v Cameron (No 2) (1986) NSW ConvR 55,275.
49 Whilst the further amended statement of claim of the plaintiffs, filed on 6 July 2006, pleaded clauses 9.3.1 and 9.3.2 of the contract in the alternative, the claim and submissions at hearing, Plaintiffs’ submissions on quantum” (paragraph 1), were made upon the basis of clause 9.3.1. Accordingly, the plaintiffs thereby elected to claim liquidated damages in respect of the abovementioned particularised items in accordance with clause 9.3.1 and to which I now turn.
50 As to the items of claim identified in paragraph [42]:-

(a) The deposit of $50,000.00

51 Clause 9.1 of the contract provided for the retention of the deposit by the vendors in the event of the purchaser’s default. The plaintiffs, accordingly, were entitled to exercise their contractual right to retain the deposit of $50,000.00. As discussed below, the retention of the deposit is taken into account in calculating liquidated damages payable by the defendants under clause 9.3.1 in respect of the deficiency on resale.

(b) Interest at the Contract Rate on Unpaid Purchase Monies up to Termination

52 In the event that the purchasers failed to complete the sale by the stipulated completion date, special condition 2(b) prescribed the rate of interest to be paid by the purchaser on the outstanding balance and any other monies owing under the contract (10%), with this interest being computed from the required date of completion until completion actually took place.
53 Although, of course, the contract was not completed, the provisions of clause 2(b) applied as if “termination” were substituted for completion: Cox v Parker (1987) 5 BPR 11,208; Butt, The Standard Contract for Sale of Land in New South Wales (1998) at p.517, footnote 749.
54 Relevant authority establishes that “special condition interest”, as I shall term it, forms part of the calculation of the deficiency on resale that is recoverable: see Hamilton J in Zografakis v McCarthy (2007) 13 BPR 24,365, [2007] NSWSC 144 at [20]-[21] reviewing Advance Commercial Finance Ltd v Aarons (1996) 7 BPR 14,523, BC9600180 and Carpenter v McGrath (1996) 40 NSWLR 39, BC9604107.
55 The interest payable by the defendants calculated from the required date of completion, 21 February 2005, to the date of termination of the contract, 11 March 2005 (18 days), at the prescribed rate of 10% is the amount of $18,493. The plaintiffs’ entitlement to that amount will be brought into account in the calculation of the deficiency on resale (see below).

(c) Interest at the statutory rate on the contract monies unpaid to the date of resale

56 The plaintiffs claimed statutory interest on the balance of purchase monies that were owing under the contract, namely, $3,750,000 and on the above interest entitlement of $18,493 totalling $3,768,493 from the date of termination up the date of resale.
57 The plaintiffs argued in this respect that there was loss of money in that amount that had been due under the contract. Mr Thompson of counsel relied upon the decisions in Cox v Parker (supra) and Webster v Havyn Pty Limited [2007] NSWSC 958; BC200707214 (unreported 31 August 2007) McLaughlin AsJ in support of the claim for interest based on the above amount of $3,768,493.
58 It is fundamental in relation to this issue that, as earlier discussed, an election was made by the plaintiffs to claim damages from the defendants on a liquidated damages basis. That was not the position in Cox v Parker. As Kearney J observed in that case (at p.7), whilst the plaintiff had set upon the course of claiming liquidated damages pursuant to the relevant clause in the contract, before reaching the point of an irrevocable election to pursue that course, he altered course to render his claim one for unliquidated damages. Accordingly, interest in that case was permitted by reference to the loss of monies (up to the date of resale) that had been denied to the plaintiff by reason of the purchasers’ default in respect of a claim that proceeded upon a basis that was quite different to that in the present case.
59 The plaintiff in Webster (supra) brought his claim for damages not under clause 9.3.1 but under clause 9.3.2 of the contract which provided that he was entitled to “receive damages for breach of contract”. McLaughlin AsJ, accordingly, stated that it was not necessary for him to consider clause 9.3.1. The award of interest to the date of resale based upon the deprivation of the outstanding balance of the purchase price was, accordingly, made in accordance with common law principles that do not, in the circumstances earlier explained, apply in this case.
60 Accordingly, the plaintiffs’ claim for interest to the date of resale should, in my opinion, be allowed only upon the basis that was applied by Hamilton J in Zografakis (supra) at [36], namely, upon the basis of the amount of the deficiency resulting on resale and upon the special interest of $18,493, a total of $418,493 from the date of termination to the date of judgment.
61 In relation to the inclusion of the special interest component in the basis for calculating interest, I note that in Zografakis (supra), Hamilton J at [30] observed that, in general terms, the law did not recognise an entitlement of interest on interest: Civil Procedure Act, s.100(3)(a); Degman Pty Limited (in liq) v Wright [1983] 2 NSWLR 601. Hamilton J went on to observe:-
“… however, this sum is not awarded to the plaintiff as interest calculated upon some other item of the claim. It is awarded as an amount which would have been payable on completion of the contract on the date of termination, if completion had occurred on that day. It is recovered as part of the deficiency on re-sale … Interest may be awarded where the interest recovered is really part of the damages: Bushwall Properties Limited v Vortex Limited [1975] 1 WLR 1649. In the circumstances, it is appropriate to award s.100 interest upon this element as well as upon the sum which represents the difference in actual price less the amount of the retained deposit when refunded.”
62 Interest is, accordingly, allowed on the basis stated above calculated in accordance with the variations in the prescribed rates.

(d) The deficiency on resale

63 The difference between the sale price of $3,800,000 and the resale price of $3,350,000 is $450,000.
64 In calculating the deficiency on resale, the relevant authorities establish that the original sale price (against which the resale price must be deducted) comprises both the original contract price and any special condition interest recoverable: Zografakis (supra) at [21]; Carpenter (supra) BC9604107 at 12 (per Clarke JA). As explained by Hamilton J in Zografakis, had the contract been completed on the date on which it was in fact terminated, the plaintiffs would have received the balance of the purchase price as well as the special condition interest. Accordingly, the special condition interest forms part of the original sale price used to calculate the deficiency.
65 The question remains, however, as to whether, in calculating the deficiency on resale, the net sale and resale prices of the property are employed (after taking into account the agent’s commission) or whether the gross sale and resale prices are employed.
66 Mr Thompson outlined the alternative possible ways of calculating the deficiency depending upon whether or not agent’s commission is brought into account in both the sale and resale prices or not. He stated in that regard:-
“20. There appear to be two logical ways of computing the deficiency on resale –
(i) The difference between the sale and resale prices without adjustment, here $418,493 less deposit of $50,000 - $368,493. That was the course adopted by: Rolfe J in CFA Group Services Pty Ltd v Mars Trading Pty Ltd (2001) BC200100717 at [98], [100], [121] and [164]: Hamilton J in Zografakis at [18]; and Fryberg J in Dovaenda Pty Ltd v Pagliari (2007) BC200706841 (unreported; SCQ, 22.8.2007) at [16] and [34]; but see White J in Buchanan v Dunstan at [65]
or
(ii) The difference between the sale price ($3,818,493) reduced by the commission which would have been payable ($62,700) being $3,755,793, and the resale price ($3,350,000) reduced by the commission paid ($55,275) being $3,294,7256, here $461,068, less the deposit of $50,000 - $401,068. However, White J in Buchanan v Dunstan at [64] saw that, having regard to the second limb of Cl. 9.3.1, that construction could not be adopted.”
67 I note that, in relation to calculations in 20(i) above, there is an error of calculation. The figure of $368,493 is incorrect as the deposit of $50,000 was applied to derive the figure of $418,493. That latter figure represents the difference between the sale and resale prices having already taken into account the deposit.
68 In relation to calculation in 20(ii) above, the amount of $401,068 is incorrect and should read $411,068.
69 I accept as Mr Thompson contended, arithmetic errors notwithstanding, that the first of the two courses should be followed. On that basis, the deficiency on resale is the amount of $418,493.11.

(e) The reasonable costs and expenses arising out of the plaintiff’s non-compliance with the contract, out of the Notice of Termination and out of the resale

70 The plaintiffs claimed recovery for a number of costs and expenses, said to fall within the terms of the second limb of clause 9.3.1. These were itemised in MFI 2. Set out below is a summary of the costs and expenses claimed. I note that corrections have been made with respect to advertising costs of $18,312 in lieu of $19,950 as claimed and plumbing of $603 in lieu of $1,047 as claimed and there has been a reallocation of management fees as an expense item, rather than as a commission fee on sale.
SUMMARY OF COSTS AND EXPENSES CLAIMED (as corrected)
3 AGENT’S COMMISSION

Hooker & L Busquets invoice on resale $55,275.00 $55,275.00
4 MARKETING EXPENSES

Advertising
Designer Boys
Floorplanners
Susan Murray – photography $18,312.00
$6,433.90
$185.00
$550.00 $25,480.90
5 LEGAL COSTS & DISBURSEMENTS

Costs on preparation, issue and service of Notice to Complete and letter terminating contract

Costs and disbursements on resale $825.00



$4,780.00 $5,605.00
6 RATES, CHARGES, INSURANCE

Manly Council rates 21.2.05 – 5.12.05

Sydney Water rates 21.2.05 – 5.12.05

Insurance – 21.2.05 – 5.12.05 $2,608.19


$344.03


$1,721.61 $4,673.83
7 PROPERTY MAINTENANCE AND REPAIRS

Plumbing

Electrolux – refrigerator repairs

Energy Australia - gas

- electricity

Pool Centre - maintenance

J Searle – garden maintenance

Floriade Horticultural Services – garden maintenance

Constructive Designs – miscellaneous building repairs

Kleenco – interior cleaning

L Busquets – invoice 2005.3009 – maintenance, supervision


LESS occupation fee paid by purchasers Reeve $603.00

$104.00

$294.97

$1,909.84

$2,297.85

$181.00

$340.50


$1,336.43


$1,633.50

$10,000.00 $18,701.09


$109,735.82

$16,000.00

$93,735.82

71 I will examine each of these items of claim below.

Estate agent’s commission on resale (Item 3 in MFI 2)

72 The plaintiffs sought recovery of the estate agent’s commission paid on resale, namely, the amount of $55,275, on the basis that the commission was a cost or expense arising out of the purchasers’ non-compliance with the contract.
73 In their written submissions, the plaintiffs relied on the decision in Buchanan v Dunstan [2007] NSWSC 248 at [66] to support their claim for recovery of the agent’s commission on resale. The plaintiffs relied, inter alia, upon the statement of White J in that case: “it is no answer to a claim under cl 9.3.1 that in a particular case, a vendor might be over-compensated”’: Buchanan (supra) at [42]. In this respect, it is noted that there is no authority that holds that clause 9.3.1 in any respect can be said to impose a penalty.
74 In Buchanan, White J stated:-
“Accordingly, assuming that the clause is a genuine pre-estimate of loss and is not a penalty (notwithstanding that the clause also provides an alternative remedy of general damages) it is no answer to a claim under clause 9.3.1 that in a particular case, a vendor might be over-compensated. This clause, or a similar clause, providing for an election between liquidated and unliquidated damages has been included in the standard contract for sale for decades without being challenged as a penalty. No such challenge was made in this case.”
75 There having been no appearance by or on behalf of the defendants, there has, of course, been no challenge to the operation of clause 9.3.1 in relation to the recoverability of agent’s commission in the present case.

76 I have decided that I should follow the decision of Buchanan (supra) and allow for recovery of the agent’s commission paid on resale. In doing so, I have also had regard to the approach of Young J in Jampco (supra). In that case, the vendors were held to be entitled to recovery of the estate agent’s commission on resale. Whilst the claim in that case was made at general law, Young J determined that it was “proper to allow the reasonable expenses of the resale including... the estate agent’s commission”: Jampco (supra) at 56,582. On this point, I can see no difference between the approach of Young J taken in accordance with general law principles and the approach required of this Court in determining the recovery of items claimed under the second limb of clause 9.3.1. Furthermore, at a later point in the judgment, his Honour stated that had the claim been one of liquidated damages (under the then clause 16), he similarly would have allowed recovery of this item: Jampco (supra).

77 Accordingly, the plaintiffs are entitled to recover the estate agent’s commission on resale - $55,275 – as either a cost or expense arising out of the purchasers’ non-compliance with the contract, or as a cost or expense of resale.

Marketing Expenses for the Resale (Item 4 in MFI 2)

78 The plaintiffs also sought recovery of the marketing expenses incurred in advertising the property following the failed sale and until resale. These marketing expenses are properly characterised as either costs or expenses arising out of the purchasers’ non-compliance with the contract or as costs or expenses of the resale: Donnellan v Garlick [2006] NSWSC 132 at [12]; Jampco (supra) at 56,582-56,583, 56,586. Accordingly, the plaintiffs are entitled to recover the amount of $25,480.90 (arithmetical correction having been made, Mr Thompson having corrected advertising costs of $19,950 as claimed to $18,312 as the expense in fact incurred in respect thereto – transcript, 8 November 2007, p.13).

Legal Costs and Expenses (Item 5 in MFI 2)

79 The plaintiffs also sought recovery of the legal costs incurred in issuing the notice to complete and terminating the original contract as well as those legal costs on the resale. The legal costs as claimed fall within the second limb of clause 9.3.1 and accordingly, the plaintiffs are entitled to recover the amount of $5,605 as claimed: Zografakis (supra) at [25]; Buchanan (supra) at [66]; Jampco (supra) at 56,582, 56,586.

Rates, insurance and charges (Item 6 in MFI 2)

80 The plaintiffs claimed recovery of the council rates and water rates incurred between the prescribed date of completion of the original contract (21 February 2005) and the completion date of the resale (5 December 2005). The rates and charges are recoverable under the second limb of clause 9.3.1: Buchanan (supra) at [66]. Accordingly, the plaintiffs are entitled to the amount of $2,952.22.
81 The plaintiffs also claimed recovery of the insurance premiums incurred during the same period. In Donnellan (supra), Windeyer J considered this an expense arising from the purchaser’s non-compliance. I am similarly of the opinion that the plaintiffs are entitled to claim for the cost of insurance, that being the amount of $1,721.61.

Property maintenance and repair costs (Item 7 in MFI 2)

82 The plaintiffs claimed recovery for costs incurred in maintaining the property and undertaking repairs during the intervening period between the failed sale and the resale. These costs included pool and gardening maintenance costs, general property repair costs, interior cleaning costs, plumbing costs (arithmetic corrected) and costs for refrigerator repairs ($8,701.09).

83 The plaintiffs also claimed a management fee of L Busquets in the amount of $10,000 for the management of the property by Mr Busquets who, pending resale managed the vacant premises in the plaintiffs’ absence. The total of the claim in these respects is, accordingly, $18,701.09.
84 The claim for recovery of these costs relies upon the decision in Rossco Developments Pty Ltd v O’Halloran (1980) 29 ACTR 1.

85 In this matter, the plaintiffs had resided in the property prior to the original (failed) sale. In their submissions, however, the plaintiffs emphasised that they had moved interstate in anticipation of completion of the sale by the defendants (with correspondence from the plaintiffs to the defendants making reference to their interstate departure). The defendants’ failure to complete, the plaintiffs submitted, necessitated the maintenance and management of the property by third parties, including Mr Busquets. At the hearing, counsel for the plaintiffs emphasised the nature of the property – a four-storey house ‘with substantial grounds’ – and the need to maintain it in a saleable condition.
86 The invoice of L Busquets Prestige dated 30 September 2005 is not confined to management of the property. Included within the invoice are items expressed in very general terms relating to matters of “assessment” and “advice”. There is no evidence as to the basis on which the amount of $10,000 has been derived as a matter of calculation nor as to the reasonableness of such costs. Doing the best one can on the available evidence, I consider that an amount of $5,000 or 50% of the management fee of $10,000 should be allowed.

87 In these circumstances, the property management fee and repair costs are recoverable under the second limb of clause 9.3.1. The plaintiffs are entitled to recover the amount $13,701.09.

88 The above expenses with which I have dealt were incurred during the intervening period between the failed sale and completion of the resale. During this period the plaintiffs received a licence fee of $16,000 from the incoming purchaser (of the resale). Consequently, the plaintiffs must set off against the damages recovered the amount of the licence fee received.

Pre-judgment interest payable on costs and expenses: agent’s commission

89 The costs and expenses of resale to be allowed includes the agent’s commission of $55,275. Clause 9.3.1 by its terms includes those reasonable costs and expenses “arising out of the purchasers’ non-compliance with the contract or the notice of termination and of resale”. On one view, that provides a benefit to vendors who would have been liable for agent’s commission on the original sale if completed.
90 In awarding interest on the costs and expenses of the resale, I have considered whether it is appropriate to take a different approach in the exercise of the discretion to award interest in relation to agent’s commission to the other costs and expenses. The agent’s commission was deducted and paid from the proceeds of sale subsequent to completion in December 2005. That might be said to be sufficient to support an award of interest. On the other hand, the operation of clause 9.3.1 produces the result that the plaintiffs are to be fully compensated for the deficiency on resale and expenses thereby putting them back in the position they were in before the defendants’ default.
91 The plaintiffs will, under the judgment in these proceedings, recoup the cost of agent’s commission and will then effectively have sold the property at no cost to them so far as agent’s commission is concerned.
92 Given that beneficial outcome, the question is whether the agent’s commission as an “expense” of resale should also carry a liability for interest or more particularly warrant the exercise of the discretion to award interest on it.
93 I consider that, as the plaintiffs/vendors would in the ordinary course, but for the default, have had to incur a deduction from the proceeds of sale for agent’s commission, that as a matter of fairness and in the exercise of my discretion, pre-judgment interest should not be allowed on the amount of the commission claimed in the proceedings ($55,275).
94 I set out in the schedule below the damages to be included in the judgment to be entered in favour of the plaintiffs.
Schedule
1 Loss on resale



Less deposit paid

Plus interest on $3,750,000 at 10% from scheduled completion date to termination date – 18 days $3,800,000.00
$3,350,000.00
$450,000.00
$50,000.00
$400,000.00

$18,493.00 $418,493.00
2 Agent’s commission $55,275.00 $55,275.00
3 Marketing expenses
Advertising
Designer Boys
Floorplanners
Photography: Susan Murray $18,312.00
$6,433.90
$185.00
$550.00 $25,480.90
4 Legal costs and disbursements

Costs on preparation, issue and service of notice to Complete and letter terminating contract

Cost and disbursements on resale $825.00




$4,780.00 $5,605.00
5 Rates, charges, insurance

Manly Council rates (21.2.05 to 5.12.05)

Sydney Water rates (21.2.05 to 5.12.05)

Insurance (21.2.05 to 5.12.05) $2,608.19


$344.03


$1,721.61 $4,673.83
6 Property maintenance and repairs

Plumbing

Electrolux – refrigerator repairs

Energy Australia - gas
- electricity

Pool Centre - maintenance

J Searle – garden maintenance

Floriade Horticultural Services – garden maintenance

Constructive Designs – miscellaneous building repairs

Kleenco – interior cleaning


L Busquets – invoice 2005.3009 – maintenance, supervision



Less occupation fee paid by purchasers Reeve $603.00

$104.00

$294.97
$1,909.84

$2,297.85

$181.00

$340.50


$1,336.43

$1,633.50

$5,000.00 $13,701.09

$523,228.82


$16,000.00

$507,228.82

95 I propose to allow interest on the basis set out earlier. In respect of the deficiency on resale, the statutory interest is calculated as follows:-
Statutory interest on $418,493 (the deficiency on resale including the special condition interest under Special Condition 2(b)) at prescribed rates calculated from the date of termination until the date of judgment:-

(a) interest calculated on $418,493 at 9% from 11 March 2005 to 31 December 2006
(b) interest calculated on $418,493 at 10% from 1 January 2007 to 27 May 2008 $68,105.43


$58,703.68
$126,809.11



96 In respect of statutory interest calculated from dates of payment of the itemised costs and expenses, I propose to allow interest at the prescribed rates in respect of:-

(a) Marketing expenses

(b) Legal costs and disbursements
(c) Rates, charges, insurance
(d) Property maintenance and repairs

97 I request the parties to produce a schedule of calculations of interest in respect of each item referred to in [96] calculated from the dates upon which each expense was paid.

Judgment and orders

98 At the hearing, counsel for the plaintiffs and counsel for the third to fifth defendants agreed that they would defer seeking orders concerning the third to fifth defendants until judgment was entered against the first and second defendants.
99 I will re-list the proceedings for 9.30 am on a date suitable to the parties for the purpose of dealing with the following matters:-

(a) Entry of judgment for the plaintiffs.

(b) Determining the plaintiffs’ costs.

(c) The making of orders in respect of the proceedings concerning the third, fourth and fifth defendants.

(d) Determining what, if any, orders should be made with respect to the cross-claims or whether further notice to the defendants in respect of the orders sought on the cross-claims is necessary: In this respect, I note Uniform Civil Procedure Rules 2005, Part 29 Rule 7.


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Amendments
02/07/2008 - [2] - Amend "Staunton & Thompson" to read "Somerville & Co" [41] - "Paul Jonathon Lander" should read "Peter Jonathon Lander" - Paragraph(s) [2], [41]



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