AHR Constructions Pty Ltd v Maloney [1991] QSCFC 68 [1994] 1 Qd R 460

1 o9 V IN THE SUPREME COURT OF QUEENSLAND ; FULL COURT ! BEFORE: Mr. Justice Demack | Mr. Justice Thomas | Mr. Justice Mackenzie j ! BRISBANE, 28 JUNE 1991 /' C No. 5903 of 1982 "revised COPIES ISSUED I Court Reporting Bureau | Date. f 9 / j (Copyright in this transcript is vested in the Crown. Copies thereof must not be made or sold without the written authority of the Chief Court Reporter , Court Reporting Bureau.) i BETWEEN: A.H.R. CONSTRUCTIONS PTY . (Plaintiff) LTD. Respondent i i i -and- j 30 1 C.G. & M. PTY. LTD. (First Defendant) First Appellant | -and- ; CYRIL GARDNER MALONEY and MARGARET MARY CUSSAN (Second Defendants) Second Appellant No. 5904 of 1982 d° ; BETWEEN : A.H.R. CONSTRUCTIONS PTY. LTD. (In liquidation) (Receivers and managers appointed) (Plaintiff) Respondent -and- C.G. MALONEY PTY. LTD. (First Defendant) First Appellant -and- CYRIL GARDNER MALONEY (Second Defendant) Second Appellant 60 ■Govt. Printer, Qld. 1 [1991] QSCFC 68 -- 1 of 25 -- JUDGMENT MR. JUSTICE DEMACK: In this appeal I have reduced my reasons to writing which I now publish. In my opinion, the appeal should be dismissed with costs. MR. JUSTICE THOMAS: I agree with the proposed order. I publish my reasons. MR. JUSTICE MACKENZIE: I agree that the appeal should be dismissed with costs. I agree with the reasons of my brother Thomas . MR. JUSTICE DEMACK: The order of the court is that the appeal i,s dismissed with costs. ■Govt. Printer, Qld. 2 -- 2 of 25 -- fc ^t/ *9 ' v* IN THE SUPREME COURT OF QUEENSLAND FULL COURT Writ No. 5903 of 1982 BETWEEN: AND: A.H.R. CONSTRUCTIONS PTY. LTD. (Plaintiff) Respondent C.G. & M. PTY. LTD. (First Defendant) First Appellant AND: BETWEEN : AND: AND: CYRIL GARDNER MALONEY and MARGARET MARY CUSSAN (Second Defendants) Second Appellants Writ No. 5904 of 1982 A.H.R. CONSTRUCTIONS PTY. LTD. (Plaintiff) Respondent C.G. & M. PTY. LTD. (First Defendant) First Appellant CYRIL GARDNER MALONEY Second Appellant (Second Defendant) -- 3 of 25 -- DEMACKJ THOMAS J MACKENZIE J Reasons for judgment delivered by Demack J and Thomas J on the 28th June, 1991. Mackenzie J concurring with the reasons of Thomas J. All concurring as to the orders. "APPEALS DISMISSED WITH COSTS. II -- 4 of 25 -- IN THE SUPREME COURT OF QUEENSLAND FULL COURT Before the Full Court Mr. Justice Demack Mr. Justice Thomas Mr. Justice Mackenzie No. 5903 of 1982 BETWEEN: A.H.R. CONSTRUCTIONS PTY. LTD. (Plaintiff) Respondent AND: C.G. & M. PTY. LTD. (First Defendant) First Appellant AND: CYRIL GARDNER MALONEY and MARGARET MARY CUSSAN ( Second Defendants ) Second Appellants BETWEEN: No. 5904 of 1982 A.H.R. CONSTRUCTIONS PTY. LTD. (Plaintiff) Respondent AND: C.G. & M. PTY. LTD. (First Defendant) First Appellant AND : CYRIL GARDNER MALONEY (Second Defendant) Second Appellant REASONS FOR JUDGMENT - THOMAS J. Delivered the 28th day of June, 1991. CATCHWORDS: Vendor and purchaser - R.E.I.Q. contract clause 6 - Sale by vendor after default by purchaser - Nature of vendor's duty in effecting resale - Louahridoe v . Laverv (1969) V.R. 912, 929 and Bullion Sales v. Fitzgerald (1983) 1 Qd.R. 215, 220 doubted and not followed - Duty of mortgagee on resale not regarded as appropriate test - Preference for decision based upon duty of plaintiff to mitigate loss - Absence of evidence concerning care, good faith or circumstances of resale - Onus of proof . Counsel: L.D. Bowden for appellant (Maloney) P.R. Dutney Q.C. and A.J. Morris for respondent Solicitors: Linda Phelps & Co. for appellant MacGillivray & Co. for respondent Hearing date: 13th June, 1991. -- 5 of 25 -- IN THE SUPREME COURT OF QUEENSLAND FULL COURT BETWEEN: AND: AND: No. 5903 of 1982 A.H.R. CONSTRUCTIONS PTY. LTD. (Plaintiff) Respondent C.G. & M. PTY. LTD. (First Defendant) First Appellant CYRIL GARDNER MALONEY and MARGARET MARY CUSSAN ( Second Defendants ) Second Appellants BETWEEN: No. 5904 of 1982 A.H.R. CONSTRUCTIONS PTY. LTD. (Plaintiff) Respondent AND: C.G. & M. PTY. LTD. (First Defendant) First Appellant AND : CYRIL GARDNER MALONEY (Second Defendant) Second Appellant REASONS FOR JUDGMENT - THOMAS J. Delivered the 28th day of June, 1991. This appeal turns on the duties arising under a clause in a contract giving a vendor the right to sell in the event of default, and to claim the deficit and certain expenses as -- 6 of 25 -- 2 liquidated damages. It also raises questions concerning what a vendor-plaintiff has to prove when he asserts his rights under such a clause. It will be convenient to refer to the appellant as the purchaser and to the respondents as the vendors. There were three contracts, each for the sale of a separate unit (lot 48, lot 52 and lot 57) on a proposed building unit plan in relation to property at the Gold Coast. The purchaser defaulted. It was common ground that the vendors purported to exercise the right to resell contained in cl. 6 of each of the contracts. That clause states "DEFAULT 6. If the purchaser fails to comply with the conditions of sale herein set out or any of them (in addition to any other remedy available to the Vendor) the Vendor may:- (a) Forfeit to the Vendor the moneys paid on account of the purchase price by the Purchaser; Without notice to the Purchaser cancel this Contract and resume possession of the said unit; Without notice to the Purchaser resell the said unit by public auction or by private contract with power to vary or rescind any contract for sale and to buy in at any auction and the deficiency in price on such resale and the expense of an incidental to repossession and to the present sale and such resale and any abortive attempt to resell together with all rates taxes and other outgoings accrued due in respect of the said unit at the date of resale thereof which were payable by the Purchaser under the terms of this Agreement shall be paid to the Vendor by the present Purchaser and shall be recoverable as liquidating (sic) damages . Do all or any of the above things at its option. " (b) (c) -- 7 of 25 -- 3 It may be mentioned that although the vendors pleaded rescission the action was conducted on the footing that the claim was made pursuant to the vendors' rights under cl. 6, and not as a common law claim for damages for breach of contract. The present case is a good instance of the need to maintain the distinction between such claims , adverted to by Fitzgerald J. in Tipladv v. Gold Coast Carlton (1984) 54 A.L.R. 337, 375 and by Young J. in Jampco Ptv. Ltd, v. Cameron (No. 2) (1985) 3 N.S.W.L.R. 391. On the appeal both counsel submitted that the duty owed by a vendor exercising a power pursuant to cl. 6 was that stated by Adam J. in Louqhridae v. Laverv (1969) V.R. 912, 929 as follows "The duty imposed on the (vendors) in the circumstances would have been to act in good faith and not recklessly in disregard of the (purchasers') interests." Such a formulation, which was an obiter dictum, was based upon a perceived analogy with the position of a mortgagee exercising the power of sale. A similar view was taken by Connolly J. in Bullion Sales International Ptv. Ltd. v. Fitzgerald (1983) Qd.R. 215, 220. This approach was seriously questioned by Young J. in Jampco Ptv. Ltd, v. Cameron (No. 2) (1985) 3 N.S.W.L.R. 391, 396-397. There has been a fairly wide following of Adam J.'s view ( Beal v. D.B. Stott Ptv. Ltd. (1971) W.A.R. 69, 71; Little v. Rvland (1978) A.C.L.D. (per Hoare J.); Finance Brokers (W.A.) Ptv. Ltd, v. Pizzino (1981) W.A.R. 263, 268; Bullion Sales International Ptv. Ltd, v. Fitzgerald (1983) 1 Qd.R. 215, 220). However I agree with Young J.'s identification of those -- 8 of 25 -- 4 cases as a classic exercise in showing how an obiter dictum "has by frequent reference been converted into a proposition of law" ( Jampco . p. 396). I also agree with His Honour's conclusion that the justification for importing a fiduciary duty akin to that owed by a mortgagee as distinct from the ordinary duty to mitigate against loss has never properly been ventilated before a court (p. 397). Unfortunately the fact that in the present case both counsel were content to deal with the matter on the footing of the test stated in Louqhridae v . Laverv means that the merits of the principle have not been ventilated before this Court either. There is a difficulty in deciding questions of onus of proof and the nature of evidence that needs to be led upon a principle the nature and validity of which may be seriously doubted. I am reluctant however in the absence of proper adversarial argument to express a concluded view on the point. I therefore propose to express a provisional view upon the correct principle to apply to the present clause, and will proceed to ascertain whether a different result follows in this particular case according to which view is to be preferred. Very little evidence was called in relation to the effecting of the resales and this no doubt explains why questions have arisen in relation to the onus of proof. In each instance default was proved on the part of the purchaser as was the fact of subsequent resale of the unit by the vendor. But the circumstances of such resales are almost entirely absent. It may be inferred from the settlement -- 9 of 25 -- 5 statements that a real estate agent was engaged by the vendors at least with respect to unit 52 and penthouse unit 57. Apart from details as to the actual prices obtained and relevant expenses, the only other evidence called was from two valuers, one called by the vendors and the other by the purchaser. The case is of course one of a purchase made in 1981 on a buoyant market at the Gold Coast, of subsequent default, and of resales in 1983 in a depressed and still falling market. The following is a short summary of the main facts in relation to each unit. (a) Unit 48 Purchase price under original contract $182,500.00. Resale price on 8th August, 1983 $110,000.00. Valuer Jorgenson estimates market value "as at 1983" to be $115,000.00. Valuer Brosnan estimates market value at date of resale to be $120,000.00. On the evidence accepted by His Honour, after reference to sales of other units, His Honour considered that the value of this unit was probably about $5,000.00 less than that of unit 52, that is to say that the objective data in the case "suggested a value somewhere between $100,000.00 and $110,000.00" at the relevant time. (b) Unit 52 Original contract price in 1981 - $189,500.00. Resale price on 26th April, 1983 - $110,000.00. Valuer Jorgenson ' s estimate of market value during 1983 - $120,000.00. -- 10 of 25 -- 6 Valuer Brosnan 1s estimate of market value as at date of resale - $125,000.00. His Honour concluded that sales of other units suggested a value somewhere between $105,000.00 and $115,000.00 at the relevant time. (c) Penthouse Unit 57 Original contract price in 1981 - $700,000.00. Resale price on 26th October, 1983 - $485,000.00. Valuer Jorgenson's estimate of market value during 1983 - $550,000.00. Valuer Brosnan found it impossible to value as at that time. His Honour regarded the task as "virtually impossible" and seems to have rejected Mr. Jorgenson's estimate. There was no evidence affirmatively suggesting bad faith, lack of care, or any particular failure on the plaintiff's part. Neither was there any evidence affirmatively suggesting good faith or the exercise of care. To the extent to which the purchaser attempted to establish that the prices obtained were significantly below appropriate market value, this seems to have failed on the view of the evidence taken by His Honour in relation to lots 48 and 52; and of course there is no acceptable evidence whether the price obtained for the penthouse was below market value or not. Perhaps it should be mentioned that Mr. Brosnan mentioned that he was not aware of any advertising having taken place in relation to the resale of the penthouse, but the evidence does not show that he would be expected to have known of any such advertising, and his -- 11 of 25 -- 7 final statement was "I'm just not aware of whether there was or there wasn't". What result then follows in this state of the evidence? To answer this it is necessary to examine the legal duty incumbent upon the vendors in effecting the resales. The contending views may be expressed as recognition of a duty similar to that imposed on mortgagees exercising their powers of sale; and a duty akin to that of mitigation of damage. As mentioned above, there is a body of authority supporting the first view as expressed in Louahridge v. Laverv. The point has never been directly raised in an Australian case. None of the cases explains why the equitable approach towards protecting the interest of mortgagors was imported into common law cases where the essential claim is money due under contract, where such claim has a strong resemblance to one for damages for breach of contract. In my experience in the majority of cases the result is the same whether the plaintiff pursues his remedy in common law damages or for money due under the clause. The only basis for its importation seems to have been that the situation seems similar to that of a mortgagee exercising power of sale, but with respect I find this difficult to accept. The proposition was rejected by the New Zealand Court of Appeal in Sullivan v. Parkin (1986) 1 N.Z.L.R. 214. The substantial differences between a sale by a vendor whose purchaser defaults and a sale by a mortgagee upon default by the mortgagor were noted (pp. 218, 222). The court concluded that the case should be decided by applying the terms of the -- 12 of 25 -- 8 contract and the ordinary contractual duty to mitigate loss (pp. 219, 223). It may be noted in that case the relevant clause in the contract expressly required any resale to be "bona tide" but that does not detract from the basis of the decision which was a rejection of the mortgagee's duty in favour of a reference to the contract itself and to the principles of mitigation of damage. The question was subjected to cogent analysis by Professor Butt in his " Standard Contract for Sale of Land in New South Wales " 1985 at pp. 534-544. The obligations expressed by courts of equity in mortgagee sales were fashioned to protect the mortgagor's proprietary interest, namely the equity of redemption. As Professor Butt observes the position of a defaulting purchaser is quite different. There is no proprietary interest to be protected. The position is underlined by the fact that a vendor who exercises the contractual right to resell does so as owner. The right to resell under a clause such as cl. 6 has been construed as conferring an additional right upon the vendors to resell irrespective of whether the contract has been otherwise terminated (A.M.G.A. Ptv. Ltd, v. Michie (No. 2) (1978) 1 B.P.R. 9566). It has also been held that there is no need to elect between the contractual right and the common law right ( Taylor v. Raglan Developments Ptv. Ltd. (1981) 2 N.S.W.L.R. 117). There is much to be said for Young J.'s conclusion in Jampco Ptv. Ltd, v. Cameron (No. 2) (above), rejecting the importation of the equitable duty. "It seems to me that it is quite unnecessary to impose such a duty, because the mitigation of -- 13 of 25 -- 9 damages principle sufficiently covers the field, and equity is usually loath to apply its special rules where there is no need to do so." This also is the view preferred by Professor Butt (op. cit.) at pp. 544-545. At the same time he recognises the difficulty of entirely equating the duty with the common law duty to mitigate damages, because the exercise is one in computing so-called "liquidated damages", whilst the duty of mitigation of damages is usually regarded as arising in cases where damages are at large (cf. Bullion Sales International Ptv. Ltd, v. Fitzgerald (above) at pp. 219-220). I would venture to query the suggestion that the ordinary principle of mitigation of loss cannot directly apply to an assessment of damages under a clause such as cl. 6. In the first place it may be doubted whether such damages are correctly described as "liquidated damages" because no pre-estimate has been made. There has merely been a prescription of the procedure that is to follow and the process by which the calculation is to be made in due course. The principle underlying the general duty of mitigation of damages (both in contract and tort) is that a plaintiff may not recover for loss that was reasonably avoidable by him (cf. MacGregor on Damages. 14th ed. para. 209). "The fundamental basis is thus compensation for pecuniary loss naturally flowing from the breach; but this first principle is qualified by a second, which imposes on a plaintiff the duty of taking all reasonable steps to mitigate the loss consequent on the breach, and debars him from claiming any part of the damage which is due to his neglect to take such steps." ( British Westinghouse Electric and Manufacturing Co. Ltd. v. Underground Electric Railways Co. of London Ltd. (1912) A.C. 673, 689 per Viscount Haldane L.C.) -- 14 of 25 -- 10 It may well be that to show an exercise by a vendor of the power of resale which yields something substantially less than the market value of the property would itself be prima facie evidence of failure to mitigate his loss, or alternatively it might provide a ground upon which the court could decline to accept that the loss was proved ( Sakkas v . Donford Limited (1982) 46 P. & C.R. 290 although the actual basis of this decision is obscure). It is not here necessary to canvass the potential application of the principles of mitigation of damage at greater length. Suffice it to say that they provide a workable framework for preventing unjust results in the enforcement of rights under clauses such cl. 6. It is not in my view necessary to introduce analogous principles from a special area of equity in order to deal with such a situation. The difficulty of knowing where to stop in the application of such analogous equitable principles is itself a problem and is adverted to by Professor Butt at pp. 535-543. For example the learned trial judge in the present case expressed the view that the duty arose as a form of prevention of "fraud on the power" rather than from the proper construction of the contract or the implication of a term to that effect. There are considerable problems inherent in the introduction by analogy of an ill-defined part of an equitable doctrine that has itself been the subject of an unresolved academic battle for the past 100 years ( Barns v. Queensland National Bank Ltd. (1906) 3 C.L.R. 925, 942; Pendelburv v . Colonial Mutual Life Assurance Society Ltd. (1912) 13 C.L.R. 676, 680, 694-695, 700; Forsvth v. Blundell 129 C.L.R. 477, -- 15 of 25 -- 11 493, 506; Australia and New Zealand Banking Group Limited v. Banqadillv Pastoral Co. Ptv. Ltd. (1978) 139 C.L.R. 195; National Australia Bank Ltd, v. Sproule (1989) 98 A.L.R. 570, 575; Commercial and General Acceptance Ltd, v. Nixon (1981) 56 A.L.J.R. 130 where Gibbs J. described the authorities as "irreconcilable"). The question whether the test requires exercise of reasonable care or is limited to the duty to act bona fide has been settled in Queensland by legislation, namely s. 85 of the Property Law Act 1974. However the importation of an equitable doctrine hardly imports the statutory solution, and if the origin of the duty is the equitable doctrine, there must be serious doubt as to whether Adam J.'s choice of the "bona fides" test is the correct one. In my view these points merely highlight the inappropriateness of a solution based on the reasoning in Louqhridae v. Laverv . Bullion Sales International v. Fitzgerald and other cases in that line. Without purporting to express a concluded view upon the subject, I express a preference for the view of Young J. in Jampco Ptv. Ltd, v. Cameron (No. 2) . It is unnecessary to impose a duty by analogy with equity. The mitigation of damages principle sufficiently covers the field. The authorities in relation to onus of proof on questions of mitigation of damage are familiar and clear. If the plaintiff shows a prima facie case of damage the defendant has the onus of proving that the plaintiff failed to take reasonable steps to mitigate the loss ( T.C. Industrial Plant Ptv. Ltd, v. Roberts Queensland Ptv. Ltd. (1963) 37 A.L.J.R. -- 16 of 25 -- 12 289, 292; Roper v . Johnson (1873) L.R. 8 C.P. 167; Garnac Grain Co. Inc, v. H.M.F. Faure and Fairclouqh Ltd. (1968) A.C. (note) 1130, 1140; Metal Fabrications (Vic.) Ptv. Ltd, v. Kelcev (1986) V.R. 507, 519; cf. MacGregor on Damages. 14th ed. paras. 213, 216). This was expressed in Sullivan v. Parkin (above at p. 223) as involving that "the purchaser under a contract such as that in the present case may impeach the steps taken by the vendor as not being reasonable." The authorities recognise that the burden of introducing evidence (as distinct from the ultimate burden to establish an issue) may shift constantly during a case according to one scale of evidence or the other preponderates ( Purkess v. Crittenden (1965) 114 C.L.R. 164; Currie v . Dempsey (1967) 2 N.S.W.R. 532, 539). In the present case there was sufficient evidence to demonstrate a prima facie entitlement to deunages based upon the prices actually obtained upon resale . The evidence does not on its face raise any basis for the view that the vendors unreasonably failed to mitigate such loss. The question whether the vendors have failed properly to mitigate the loss is not to be "weighed in nice scales". It has been observed that in such situations "it is often easy after an emergency has passed to criticise the steps which have been taken to meet it" and that a plaintiff "will not be held disentitled to recover the cost of such measures merely because the party in breach can suggest that other measures less burdensome to him might have been taken" (Banco De Portugal v. Waterlow and Sons Ltd. (1932) A.C. 452, 506; Sullivan v. Parkin (above p. 223); -- 17 of 25 -- 13 Sacher Investments Ptv. Ltd, v. Forma Stereo Consultants Ptv. Ltd. (1976) 1 N.S.W.L.R. 5, 9). On the evidence in this matter the purchaser fails to discharge its onus in this respect . I turn now to the basis upon which counsel presented the case at trial and on appeal. On this footing the vendors must be held to have been under a duty, in effecting the resales, to act in good faith, and not recklessly in disregard of the purchaser's interests ( Louqhridae v . Laverv (above) at 929). Counsel for the purchaser submitted that once such a duty is established, the good faith of the resale is an element of the plaintiff's cause of action; and that unless the plaintiff affirmatively proves good faith and absence of recklessness it must fail. He reinforced the submission with the consideration that bona fides of a party is a matter peculiarly within the knowledge of that party, or at least more within his knowledge than that of his opponent. On the other hand counsel for the vendors submitted that the absence of breach of such a duty was not a condition precedent to his right to maintain an action, but was rather an "avoidance" of a claim, citing Currie v. Dempsey (1967) 2 N.S.W.R. 532, 539. In that case Walsh J.A. stated the position thus: "In my opinion, the burden of proof in the first sense lies on a plaintiff, if the fact alleged (whether affirmative or negative in form) is an essential element in his cause of action, e.g. if its existence is a condition precedent to his right to maintain the action. The onus is on the defendant, if the allegation is not a denial of an essential ingredient in the cause of action, but is one which, if established, will constitute a good defence, that is, an 'avoidance' of the claim which, prima facie, the plaintiff has." -- 18 of 25 -- 14 Odgers observes:- "Where everything has happened which would at common law prima facie entitle a man to a certain sum of money, or vest in him a certain right of action, and yet in this particular case there is something further to be done, or something more must happen before he is entitled to sue ... this something more is called a condition precedent. It is not of the essence of such a cause of action; but it has been made essential. It is an additional formality superimposed on what otherwise would have been valid." ( Principles of Pleading and Practice in Civil Actions 22nd ed. p. 105). There is no authority respecting the onus of proof of observance or non-observance of such a duty, or whether good faith is an essential ingredient of this particular cause of action. Counsel were driven to base their submissions upon analogy. This is perhaps hardly surprising because the principle itself is said to arise by analogy. Counsel for the vendors conceded that in claims such as quantum meruit it was an essential part of the plaintiff's cause of action to show not only that the work was done, but also that it was properly done ( Riverside Motors Ptv. Ltd, v. Abrahams (1945) V.L.R. 45, 52, 55). However he submitted that the present cause of action more closely resembles the rights of a mortgagee exercising power of sale, and that such authority as there is suggests that the onus of showing breach of such a duty lies on the mortgagor ( Forthsvth v. Blundell (1972-1973) 129 C.L.R. 477, 499; McKean v . Malonev (1988) 1 Qd.R. 628, 636; Waring v. London and Manchester Assurance Co. (1935) Ch. 310, 319). With some hesitation I conclude that the onus of persuading the court that the sale was in breach of such a duty would be upon the defendant purchasers, and that the -- 19 of 25 -- 15 learned trial judge was correct in characterising it as an issue that would arise by way of avoidance. Having regard to the evidence it cannot be said that such an onus was discharged with respect to the resales of any of the units. There is therefore no basis for interfering with the judgment. The appeal should be dismissed with costs. -- 20 of 25 -- IN THE SUPREME COURT OF QUEENSLAND FULL COURT No. Before the Full Court Mr. Justice Demack Mr. Justice Thomas Mr. Justice Mackenzie BETWEEN : A.H.R. CONSTRUCTIONS PTY. LTD. (Plaintiff) - and - C.G. & M. PTY. LTD. (First Defendant) - and - CYRIL GARDNER MALONEY and MARGARET MARY CUSSAN (Second Defendants) No. BETWEEN: A.H.R. CONSTRUCTIONS PTY. LTD. (Plaintiff) - and - C.G. MALONEY PTY. LTD. (First Defendant) - and - CYRIL GARDNER MALONEY (Second Defendant) JUDGMENT - DEMACK J. 5903 of 1982 Respondent First Appellant Second Appellants 5904 of 1982 Respondent First Appellant Second Appellant Delivered the 28th day of June, 1991 -- 21 of 25 -- 2 CATCHWORDS : Vendor and purchaser - Purchaser's default - Vendor exercising contractual right to resell - Deficiency plus expenses measure of liquidated damages - Nature of vendor's duty on sale - Sufficiency of evidence Counsel : Mr. Mr. Solicitors : Hearing date: L. Bowden for appellant Dutney Q.C. with A.J. Morris for respondent Linda Phelps & Co. for appellant MacGillivray & Co. for respondent 13th June, 1991 -- 22 of 25 -- IN THE SUPREME COURT OF QUEENSLAND FULL COURT No. 5903 of 1982 BETWEEN: A.H.R. CONSTRUCTIONS PTY. LTD. (Plaintiff) Respondent - and - C.G. & M. PTY. LTD. (First Defendant) First Appellant - and - CYRIL GARDNER MALONEY and MARGARET MARY CUSSAN (Second Defendants) Second Appellants No. 5904 of 1982 BETWEEN: A.H.R. CONSTRUCTIONS PTY. LTD. (Plaintiff) Respondent - and - C.G. MALONEY PTY. LTD. (First Defendant) First Appellant - and - CYRIL GARDNER MALONEY (Second Defendant) Second Appellant JUDGMENT - DEMACK J. Delivered the 28th day of June, 1991 I have had the opportunity of reading the reasons of Thomas J. I agree with him that the appeal should be dismissed. -- 23 of 25 -- 2 As Thomas J. has noted, both counsel before Dowsett J. and on the hearing of the appeal were content to accept the formulation of the relevant duty stated by Adam J. in Loughridge v . Laverv (1969) V.R. 912, at p. 929. For my part I prefer the approach suggested by Thomas J. which seems to me to be in accord with the assessment of damages for breach of contract. According to this approach, the vendor, who exercises his contractual right to sell the property upon the default of the purchaser, has the duty to mitigate any loss. The onus of proving that the vendor has failed to mitigate lies upon the purchaser, as Thomas J. has demonstrated. However, this attractive solution to the issues is not open because of the way the action was argued. I sun not able to accept Dowsett J.'s formulation of the issue before him that, "if it is for the plaintiff to establish performance of its duty, then the plaintiff has clearly failed". There are two pieces of evidence to which Thomas J. has referred, namely, the fact that at least two of the properties were placed in the hands of real estate agents (exs. 11 and 12), and the valuation opinions, which, in my view, discharge the onus that fell on the plaintiff. In the absence of evidence to the contrary, placing the sale of the properties in the hands of real estate agents put the vendor at arm's length from the purchaser, and that seems to me to be evidence of good faith in the sale. Dowsett J. accepted evidence from valuers which showed that, in respect of two properties, the sale price was close to the market valuation. In respect of the third property, the penthouse, no valid valuation could be undertaken. The penthouse sale was negotiated by a real estate agent. The valuations show -- 24 of 25 -- 3 there was no reckless disregard of the defendants' interests. Where no valid Valuation could be made, the fact that the agent was selling on commission tends to show that the best price was obtained. I prefer to resolve the issues the parties left to the trial Judge upon this basis, rather than to seek for analogies. Order 22, r. 12 of the Supreme Court Rules casts a duty on the defendant to plead unfulfilled conditions precedent. A similar provision was found in the former English 0. 19 r. 15. The relevant annotation in the 1991 Annual Practice (18/7/10) contains the following passage which has been in the same terms at least since 1961:- "When a condition precedent is properly pleaded, the burden of proving its due performance or the waiver of its due performance still rests on the plaintiff." It seems to me that this must be correct. There is an obligation on the defendant to put the matter in issue but the burden of proof remains upon the plaintiff. It seems to me that this is one of those cases where the evidence of good faith was scant, but as there was no evidence putting the matter in doubt, the issue was sufficiently proved. In my opinion the appeal should be dismissed with costs. -- 25 of 25 --