Australia Sunrise Development Pty Ltd v Zhang [2021] QDC 225

DISTRICT COURT OF QUEENSLAND CITATION: Australia Sunrise Development Pty Ltd v Zhang [2021] QDC 225 PARTIES: AUSTRALIA SUNRISE DEVELOPMENT PTY LTD ACN 168 603 110 (Applicant) v JIAHE ZHANG (Respondent) FILE NO: 1909/20 DIVISION: Civil PROCEEDING: Trial ORIGINATING COURT: District Court, Brisbane DELIVERED ON: 16 September 2021 DELIVERED AT: District Court, Maroochydore HEARING DATE: 17 August 2021 JUDGE: Byrne QC DCJ ORDERS: 1. In respect of the contract of sale entered into by the applicant and the respondent on 22 October 2015 (Lot 1604), damages are assessed in the sum of $167,860.06, including interest to the date of judgment. 2. In respect of the contract of sale entered into by the applicant and the respondent on 4 November 2015 (Lot 1906), damages are assessed in the sum of $95,734.80, including interest to the date of judgment. 3. The respondent pay the applicant’s costs of the proceeding, including all reserved costs. CATCHWORDS: REAL PROPERTY – TERMINATION AFTER BREACH OF CONTRACT – DAMAGES – ASSESSMENT OF DAMAGES – where the respondent entered into two “off the plan” contracts for sale of residential lots with the applicant – where the respondent paid a deposit on the purchase price for each lot under the contracts – where the respondent breached each contract by failing to attend settlement and not paying the balance of the purchase price under each contract – where the applicant elected to affirm the contracts – where the respondent communicated an express repudiation of the contracts in -- 1 of 11 -- 2 LEGISLATION: CASES: COUNSEL: SOLICITORS: response to the applicant’s election to affirm – where in reliance on the respondent’s repudiation and continued breach, the applicant terminated the contracts – where neither of the lots the subject of the contracts have been resold – where the applicant claims damages for the loss of sale value on the lots and the holdings costs associated with continued ownership of the lots after termination – whether the damages claimed by the applicant accurately reflect the position it would have been in had the contracts been performed CONTRACT LAW – ENTITLEMENT TO INTEREST – DAMAGES – ASSESSMENT OF DAMAGES – where the applicant claims interest on the settlement sums payable under the contracts from settlement date until the date of termination at the contractually prescribed rate – where the applicant claims interest on the damages accrued in respect of each lot from the date of termination to the date of judgment at the contractually prescribed rate –– whether the applicant is entitled to interest on the unpaid settlement sums at the contractually agreed rate – whether the applicant is entitled to interest on the damages accrued in respect of each contract from the termination date until judgment date at the contractually agreed rate – whether the applicant is entitled to interest on the unpaid judgment sums at the contractually prescribed rate as opposed to the rate prescribed by the Court Uniform Civil Procedure Rules 1999 (Qld) Australia Sunrise Development Pty Ltd v Shi, Brisbane District Court No 1845 of 2020, 30 April 2021, Jarro DCJ unpublished Castlemaine Tooheys Ltd v Carlton United Breweries Ltd (1987) 10 NSWLR 468 Clambake Pty Ltd v Tipperary Projects Pty Ltd (No 7) [2009] WASC 390 Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64 Johnson v Agnew [1980] AC 367 Mann v Paterson Constructions Pty Ltd (2019) 267 CLR 560 Orchid Avenue Pty Ltd v Parniczky [2015] QSC 207 Riggall & Anor v Thompson [2010] QCA 144 Robinson v Harman (1848) 1 Ex 850 South Sky Investments Pty Ltd v Luppi [2012] QSC 27 Mr. J.P. Morris for the applicant. No appearance for the respondent. HTW Legal Group for the applicant. No appearance for the respondent. -- 2 of 11 -- 3 Introduction [1] In late 2015 the respondent entered into two separate “off the plan” contracts to purchase two units in a residential complex in Fortitude Valley that the applicant was then developing. The applicant complains that the respondent failed to complete the contracts. Proceedings were commenced by way of Originating Application on 2 July 2020. Following an amendment of the Originating Application, Barlow QC DCJ on 8 October 2020 ordered that, in respect of each contract, judgment be entered for the applicant against the respondent for damages of not more than $750,000 to be assessed by this Court on a date to be fixed. The effect of that order is that it was a conditional judgment.1 [2] Following further orders made on 10 June 2021 for the filing of material, the hearing for the assessment of damages was heard by me. Factual summary [3] The relevant details of the two contracts are: • By way of written agreement dated 22 October 2015, the respondent agreed to purchase Lot 1604 for the sum of $659,000 (“the Lot 1604 Contract”). The $65,900 deposit was paid on 5 November 2015; and • By way of written agreement dated 4 November 2015, the respondent agreed to purchase Lot 1906 for a price of $652,000 (“the Lot 1906 Contract”). The $65,200 deposit was paid on 23 November 2015. [4] Each contract was essentially in identical terms, including clause 15, which relevantly stated: “Clause 15 – Breach of the Contract 15.1 You breach the Contract if: (a) you fail to comply with any of your obligations under the contract … 15.2 If you breach the contract, we may affirm or terminate the contract. … 15.4 If we terminate the contract we may: 1 Rule 507 UCPR. -- 3 of 11 -- 4 (a) declare any part of the deposit paid by you forfeited and/or sue you for breach; or (b) declare any part of the deposit paid by you forfeited and/or re-sell the lot, and any deficiency in the price on a resale and the expenses arising from the resale shall be recoverable by us from you as liquidated damages, … 15.5 Our rights under this clause are in addition to any other rights which we may have at law or in equity. 15.6 If you fail to pay on the due date any money payable by you under the contract, you must pay interest at 15% per annum on the amount outstanding from (and including) the due date until (and including) the date of actual payment. Interest will be calculated and payable by you at the same rate on the amount of any judgement we obtain against you, from the date of judgement until the date of actual payment. All interest will be paid by you on the settlement date or, if settlement does not occur, on demand.” [5] The settlement date for both Contracts was 2 March 20202 at which time the respondent failed to attend and settle.3 Subsequently, the applicant elected to affirm the Contracts and require settlement and payment of interest from 3 March 2020 in accordance with clause 15.6 of both Contracts. Specifically interest was sought “on the Settlement Sum up to and including completion of the contract.”4 [6] On 2 July 2020 the applicant filed the abovementioned Originating Application.5 On 29 September 2020, the respondent deposed that due to his employment status and financial situation, it would not be possible for him to complete the contracts.6 On 7 October 2020, solicitors for the applicant wrote to the solicitors for the respondent terminating both contracts in reliance on the respondent’s repudiation and continued breach and declaring the whole of both deposits to be forfeited.7 [7] The properties the subject of this assessment have not been resold nor have any offers been made for their purchase.8 2 Clause 8.2 of the Contracts. 3 Affidavit of Liguo Sun sworn 30 June 2020, paragraphs 21 and 40. 4 Affidavit of Liguo Sun sworn 30 June 2020, paragraphs 27 and 46, attachments LS-20 at page 363 and LS- 35 at page 716. 5 Court doc 1. 6 Affidavit of Jiahe Zhang affirmed 25 September 2020, paragraph 28. 7 Affidavit of Lawrence Kong sworn 8 October 2020, at exhibit LK-5, page 7. 8 Affidavit of Liguo Sun sworn 9 July 2021 at paragraphs 32 and 44. -- 4 of 11 -- 5 Natural Justice and Opposition to the Assessment [8] The respondent did not appear at the assessment hearing, nor file any material, and so I must consider whether he was properly notified of the hearing, and hence afforded natural justice. [9] The respondent had, until relatively recently, been legally represented. At the time of be consent judgment granted by Barlow QC DCJ, the respondent was legally represented. The application for directions concerning this assessment hearing was served on those legal representatives, who acknowledged receipt of it, but notified an intention to withdraw. Shortly thereafter, on 8 June 2021, the respondent filed a Notice of Acting in Person. The next day the application and supporting material was then served on the respondent by way of e-mail.9 [10] On 10 June 2021, Sheridan DCJ made orders which set out directions for the Assessment of Damages hearing. The respondent did not attend that hearing, either actually or virtually. [11] Having considered all the material, I accept that: • the respondent is aware of the proceedings and consented to the judgment ordered by Barlow QC DCJ on 8 October 2020; • the applicant complied with the requirements of rule 509 of the UCPR; and • the respondent has been served with all relevant orders and material. [12] I am satisfied that the respondent has been afforded sufficient and appropriate opportunity to be heard on the assessment hearing, but has elected not to do so. The consequence is that the assessment must occur on the basis of the applicant’s unchallenged evidence. Consideration [13] The principle governing an award of damages for breach of contract was enunciated by Parke B in Robinson v Harman10 in the following terms: “Where a party sustains a loss by reason of breach of contract, he is, so far as money can do it, to be placed in the same situation, with respect to damages, as if the contract had been performed.” [14] In light of clause 15.5 of both contracts, the applicant correctly contends that damages “are to be assessed in accordance with the common law and as provided for under the contracts.”11 Clear words are required to rebut the presumption that a contracting party does not intend to abandon any remedies for a breach of contract arising by operation of 9 Affidavit of Lawrence Kong sworn 9 June 2021, exhibit LK-2. 10 Robinson v Harman (1848) 1 Ex 850; at 855; 154 ER 363; at 365. 11 Applicant’s outline paragraph 13. -- 5 of 11 -- 6 law,12 and there has been no express rebuttal of the presumption by the applicant. I am therefore satisfied the applicant is entitled to all its rights arising out of the breach both at law and under the contract for the purposes of this assessment. Loss of Sale Value and Resale Expenses [15] The damages sought is the amount of the full contract price less the amount at which a resale has or could be made, after allowance for other costs reasonably and justifiably incurred. Those costs can include holding costs which will include body corporate fees and other costs associated with continuing ownership, incurred as a result of termination.13 [16] Although a matter for my discretion, I consider the appropriate point in time for the purposes of the loss of sale calculations are from the date of termination of the contract,14 namely 7 October 2020. This is consistent with the applicant’s submissions. Holding costs are payable to the date of assessment of damages, but not beyond.15 Loss of sale value [17] The uncontested and updated expert evidence is that the market value of Lot 1604 as at 7 October 2020 (i.e. the date of termination of the contract by the applicant) was $510,00016 and the market value of Lot 1906 as at the same date was $570,000. 17 The same valuations apply as at 8 July 2021.18 Allowing for the deposits received, this component of the damages is calculated as follows: Lot 1604: Contracted price $659,000.00 Less deposit received $ 65,900.00 Less current market value $510,000.00 Total $ 83,100.00 Lot 1906: Contracted price $652,000.00 Less deposit received $ 65,200.00 Less current market value $570,000.00 Total $ 16,800.00 12 Castlemaine Tooheys Ltd v Carlton United Breweries Ltd (1987) 10 NSWLR 468 at 487 per Hope JA; Riggall & Anor v Thompson [2010] QCA 144, [9]-[13]. 13 Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64, per Mason CJ at [25]; Riggall & Anor v Thompson, supra at [25], [39]. 14 Johnson v Agnew [1980] AC 367, 400-401. 15 South Sky Investments Pty Ltd v Luppi [2012] QSC 27, [24]. 16 Affidavit of Sicheng Gai sworn 12 July 2021, attachment SG3 page 54. 17 Affidavit of Sicheng Gai sworn 12 July 2021, attachment SG3 page 41. 18 ibid. -- 6 of 11 -- 7 Past commission fees paid and future commission fees to be paid [18] In reliance on clause 15.4(b) above, the applicant in its submissions makes allowance for both its costs of the uncompleted sale and any future sale. [19] The applicant utilised an agency FM 21 Real Estate Pty Ltd for the purposes of facilitating the parties entering into the contract. It was engaged by the applicant on the basis of a 6% commission, of which half was paid on entering into the contracts, and the balance payable on settlement.19 Had the contracts settled, the full 6% commission would have been payable which equates to $39,540 on Lot 1604 and $39,120 on Lot 1906, resulting in outstanding amounts due on completion of the contracts of $19,770 and $19,560 respectively. [20] A different agency has been engaged for the purposes of the resale of the two Lots. A sliding scale of commission has been agreed depending on the conditions of sale, ranging between 7.7% and 3.3 %. The applicant contends that a middle figure of 5.5% should be used to calculate these costs. That equates to $28,050 for Lot 1604 and $31,350 based on the present market values. [21] In Riggall & Anor v Thompson20 the Court had occasion to consider the effect of a clause (there numbered 9.4) of the same import as the present clause 15.4. The Court held that the then clause 9.4(1)(b), in so far as it permitted recovery of costs of the original sale as well as any resale was a penalty and unenforceable.21 I can see no reason to find differently in the present matter. [22] The Court in Riggall determined the appropriate approach was to order recovery of the costs of the resale, but not the costs of the first sale as they would have been incurred regardless of the termination of the contract.22 The effect of that is to put the parties as close to being in the position they would have been had the first sale settled.23 That is the approach I adopt here. [23] However it must be remembered that the applicant has not paid all of the past deposit. To put it in a close a position as possible to what it would have been in had the contracts settled, those outstanding amounts need to be accounted for as though they had been paid. It is convenient to make that adjustment to the component of future commission fees. [24] I reject the applicant’s submissions that regard should be had at all to the commission fees already paid. Further, I consider that the applicant has erroneously submitted that the future commission fees should be deducted from the value of the property. To do so deprives the applicant of an allocation of damages for future fees, which allocation is 19 Affidavit of Liguo Sun sworn 9 July 2021 at paragraphs 21 and 23. 20 supra. 21 Riggall & Anor v Thompson, supra at [34]. 22 Riggall & Anor v Thompson, supra at [39]. 23 See paragraph 13 herein. -- 7 of 11 -- 8 designed to put the applicant in the place it would have been, as far as is possible, had the settlement gone ahead. The calculation of claimable commission fees is: Lot 1604: ($510,000 x 5.5%) - $19,770 = $8,280.00 Lot 1906: ($570,000 x 5.5%) – 19,560 = $11,790.00 Holding Costs [25] Pursuant to clause 14.1(b) of the contract, the respondent is liable for payment for all outgoings on the Lots from the date of registration, namely 14 February 2020. They are recoverable as they would not have been incurred by the applicant had the respondent settled on both properties on the settlement date.24 [26] The holding costs have been particularised in the unchallenged evidence as:25 Lot 1604: Rates $2,259.76 Water and Sewerage $1,201.66 Body Corporate $5,391.20 Total $8,852.62 Lot 1906: Rates $2,259.76 Water and Sewerage $1,120.56 Body Corporate $5,542.50 Total $8,922.82 They are the appropriate amounts to order in respect of this component of the damages. Interest payable [27] The applicant relies on clause 15.6 of the contract to assert a right to payment of interest, which it says the respondent was contractually bound to pay at the rate of 15% per annum even if settlement did not occur. A demand for payment of interest on the settlement sum “to and including the completion of the contract” was made on 5 June 2020.26 [28] There are three periods of time which must be considered in terms of whether interest can or should be awarded at the contractually agreed rate. They are, first, the period between the date of the intended settlement and the termination of the contract (“the contractual interest period”), secondly the period between the termination of the contract and the assessment of damages (“the pre-judgment period”) and lastly, the period after the judgment assessing damages and the payment of the judgment debt (“the post- judgment period”). 24 See fn 13 and 15 herein. 25 Affidavit of Liguo Sun sworn 9 July 2021 at paragraphs 18-20 and 39-41. 26 Affidavit of Liguo Sun sworn 30 June 2020 at paragraphs 45 and 46, attachment LS-35 page 716. -- 8 of 11 -- 9 The contractual interest period [29] Payment of interest at the contract rate for the contractual interest period is relatively uncontentious, given that an award in that amount is doing nothing more than giving effect to the express terms of a contract whilst it remained on foot.27 [30] The interest is payable in respect of the settlement sums due. In respect of Lot 1604 that figure was $594,430.6928 and in respect of Lot 1906 that figure was $588,158.08.29 The contractual interest period is 219 days.30 I calculate this component of the interest to be awarded as follows: Lot 1604: $594,430.69 x 15% x 219/365 = $53,498.76. Lot 1906: $588,158.08 x 15% x 219/365 = $52,934.22. The pre-judgment period [31] In reliance on clause 15.6 of the contract, the applicant submits that interest should be payable at the contractually agreed rate from the date of termination to at least the date of assessment of damages. In South Sky Investments Pty Ltd v Luppi,31 and Orchid Avenue Pty Ltd v Parniczky32 similarly worded clauses were held to entitle the plaintiffs to interest at the contractually agreed rate during the pre-judgment period. That is the approach I will adopt here. [32] Under that clause, the interest is payable on the amount outstanding. That requires calculation of the damages for the loss of the sale to be awarded as at the date of termination. They are: Lot 1604: Loss of sale component $ 83,100.00 Plus future commission fees $ 8,280.00 Plus holding costs $ 8,852.62 Total Damages Unit 1604 $100,232.62 Lot 1906: Loss of sale component $16,800.00 Plus future commission fees $11,790.00 Holding costs $ 8,922.82 Total Damages Unit 1906 $37,512.82 27 Mann v Paterson Constructions Pty Ltd (2019) 267 CLR 560, [164]-[165]; Australia Sunrise Development Pty Ltd v Shi, Brisbane District Court No 1845 of 2020, 30 April 2021, Jarro DCJ unpublished at page 9, line 34. 28 Affidavit of Liguo Sun sworn 9 July 2021 at paragraphs 13 and 14, attachment LS-3 page 350. 29 Affidavit of Liguo Sun sworn 9 July 2021 at paragraphs 34 and 35, attachment LS-11 page 413. 30 3 March 2020 to 7 October 2020. 31 [2012] QSC 27, [23] 32 [2015] QSC 207, [23] -- 9 of 11 -- 10 [33] The pre-judgment interest period is 343 days.33 I assess this component of the interest claimed as follows: Lot 1604: $100,232.62 x 15% x 343/365 = $14,128.68. Lot 1906: $37,512.82 x 15% x 343/365 = $5,287.76. The post-judgment period. [34] The applicant seeks interest on the judgment sum at the rate of 15% per annum, contending that such an approach is permitted by section 59(3) of the Civil Proceedings Act 2011 as a rate of interest otherwise ordered by the Court, and further contending that, although a discretion is vested in the Court as to whether any other rate of interest should be ordered, “the court ought honour the bargain struck by the parties”. [35] Clause 15.6 is worded in a way that the period it contemplates may include a period post- judgment, but it does not expressly include that period. [36] In Clambake Pty Ltd v Tipperary Projects Pty Ltd (No 7)34 EM Heenan J considered the exercise of what was essentially the same discretion under the Western Australian legislation. His Honour noted that contractual terms which provided for a higher rate of judgment on moneys owing merged in any judgment given in the action unless the contract specifically provided that any judgment should carry interest at the higher rate until payment is made in full “and that this should form part of the judgment”. The current clause does not, in my view, contain sufficient specificity to justify interest being awarded at the higher rate after the time of the judgment, and thereby avoid the doctrine of merger. [37] I have reached this conclusion with some caution noting that my approach differs from that of Daubney J in South Sky Investments Pty Ltd v Luppi35. However I do note that his Honour was not apparently required to consider the issues raised in Clambake. I also note on the other hand that in Orchid Avenue Pty Ltd v Parniczky36 Burns J declined to order interest post-judgment at the higher rate, although again he was not apparently asked to consider the issues raised by EM Heenan J. [38] There is a further matter which, in my view, is relevant but was not considered in Clambake, although it was raised in argument. If interest at the higher rate – which is quite a high rate in today’s economic environment – were allowed on the total award in the judgment, the applicant would be receiving an entitlement to effectively compounding interest. That is, 15% interest would be accruing on all of the judgment, including the significant portions at which interest had already been assessed at 15%. True it is that the prescribed amount would also have this compounding effect, but the 33 8 October 2020 to 16 September 2021. 34 [2009] WASC 390, [105]-[110]. 35 supra. 36 supra. -- 10 of 11 -- 11 lesser rate alleviates at least some of that unfairness, which is in any event allowed for by legislation as the usual position. [39] Interest post-judgment should accrue at the prescribed rate. Calculations [40] Damages are assessed as follows: Lot 1604: Damages $100,232.62 Plus interest to date of termination $ 53,498.76 Plus interest from termination date to the date of judgment $ 14,128.68 Total Damages including interest to date of judgment $167,860.06 Lot 1906: Damages $37,512.82 Plus interest to date of termination $52,934.22 Plus interest from termination date to the date of judgment $ 5,287.76 Total Damages including interest to date of judgment $95,734.80 Costs [41] The applicant seeks its costs, including costs reserved on previous occasions. There is no reason why they should not be granted in accordance with the usual practice. Orders [42] My orders are as follows: 1. In respect of the contract of sale entered into by the applicant and the respondent on 22 October 2015 (Lot 1604), damages are assessed in the sum of $167,860.06, including interest to the date of judgment. 2. In respect of the contract of sale entered into by the applicant and the respondent on 4 November 2015 (Lot 1906), damages are assessed in the sum of $95,734.80, including interest to the date of judgment. 3. The respondent pay the applicants costs of the proceeding, including all reserved costs. -- 11 of 11 --