AHR Constructions Pty Ltd v C G & M Pty Ltd & Ors [1990] QSC 450

10 20 30 40 50 60 IN THE SUPREME COURT OF QUEENSLAND CIVIL JURISDICTION BEFORE MR. JUSTICE DOWSETT BRISBANE, 16 NOVEMBER 1990 BETWEEN: (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.) A.H.R.CONSTRUCTIONS PTY. LTD. - and - C.G. & M. PTY. LTD. - and - CYRIL GARDNER MALONEY and MARGARET MARY CUSSAN C.G. & M. PTY. LTD. - and - A.H.R.CONSTRUCTIONS PTY. LTD. no.5903 of 1982 Plaintiff First Defendant Second Defendants No.5539 of 1982 Plaintiff Defendant No.5904 of 1982 A.H.R. CONSTRUCTIONS PTY. LTD. - and - Plaintiff C.G. MALONEY PTY. LTD. - and - CYRIL GARDNER MALONEY and SYLVIA JEAN BULLIVANT First Defendant Second Defendants No.6248 of 1982 A- H. R. CONSTRUCTIONS PTY. LTD. Plaintiff - and - C.G. MALONEY PTY.LTD. 1 First Defendant 10 20 30 40 50 60 -- 1 of 13 -- 10 20 30 40 50 60 CYRIL GARDNER MALONEY and SYLVIA JEAN BULLIVANT C.G. MALONEY PTY. LTD. - and - Second Defendants No.5540 of 1982 Plaintiff A.H.R. CONSTRUCTIONS PTY. LTD. Defendant JUDGMENT HIS HONOUR: By contract dated 13 July 1981 A.H.R. Constructions Pty. Ltd. (the plaintiff) agreed to s~ll Lot No. 48 on a proposed building unit plan to C.G.Maloney Pty. Ltd. as purchaser. Bya second contract dated 13 July 1981 the plaintiff agreed to sell Lot 52 on the same plan to C.G.M. Pty. Ltd. By contract dated 15 July 1981 the plaintiff agreed to sell Lot 57 to C.G.Maloney Pty. Ltd. The purchaser are hereinafter: referred to as th~ d~fendants. The obligations of the various defendant companies were guaranteed by Cyril Gardner Maloney and Sylvia Jean Bullivant in the case of Lots 48 and 57, and in the case of Lot 52 by Cyril Maloney and Margaret Mary CuSsan. Sylvia Jean Bullivant has since diec. The action against her is not presently before the court. The other two guarantors will hereinafter: be referred to as the defendant guarantors. The purchasers under the various contracts defaulted,and 10 20 30 40 it is not dis:ruted that the plaintiff purported to exercise the ri ht ~o resell contained in Clause 6 of each of the contract~ •. I say" this because some of the cases point tO the need to characterise the action taken by a vendor after default as being an exercise of this power, rather than an exercise of the general power to rescind and resell. It has not bee 2 50 60 -- 2 of 13 -- 10 20 30 40 50 suggested before me that the resale ·was other than in purported exercise of the right conferred by Clause 6. In each case,the plaintiff recovered substantially less than the contract price and sues pursuant to. Clause :-.6 in each case for the difference, together with various expenses. Although a number of matters were raised by way of defence before me, submissions and evidence on behalf of the defendant, including the defendant guarantors, have been limited to the question of the duty owed by a vendor exercising a power pursuant to a clause such as Clause 6 and the discharge of tha duty in this case. In Loughridge v. Lavery (1969) V.R. 912 Adam~ observed at o.929 as follows:- " ... I would have been disposed to treat the defendants as being under a duty similar to that imposed on mortgagees exercising their powers of sale, because, like mortgagors, the plaintiffs would have had an interest in the price to be obtained on a resale. '~he duly imposed on the defendants in the circumstances would have been to act in good faith and not recklessly in disregard of the plaintiffs' interests." I should say that His Honour was speaking of a duty upon a vendor in circumstances similar to those which obtained in the present case. Mr. Justice Connolly apparently took a similar view in B~llion Sales International Pty. Ltd. v. Fitzgerald (1983) 1 Qd.R. 215 at pp.219/220. It would seem that this has been a fairly common view of the position of the vendor pursuant to such a c_lau.se, "'"'.al though note that Mr. Justice Young in Janko v. Cameron (1982) 85 N.S.W.L.R.391 appears to hav~ taken a contrary view. Before me both counsel were content to accept the law as 60 prescribed in Lougll.ridge v. Lavery,- and for -mi· part I -~~-- 3 10 20 30 40 50 60 -- 3 of 13 -- 10 20 30 40 50 60 consider that the view expressed in that. I.decision and by Mr. Justice Connolly in Bullion Sales International ~supra) is to preferred :·tto that expressed by Mr. Justice Young in the New South W~les case to which I have referred.· The parties have led very little evidence going to the specific circumstances surrounding the resales, and this peculiar fact is apparently the product of a dispute as to where the onus lies in this case, or at least that is superfic~ally the reason. I suspect that there is more to it than that. The defendants submit that it is for the plaintiff to establish the extent of the defendants' indebtedness,and that to so do the plaintiff must show that it has discharged the duty upon it in exercising the powers conferred by Clause 6. The plaintiff submits that it need only establish the amount calculated in accordance with Clause 6, such amount being liquidated damages, and that it does so by establishing the various items of expenditure incurred as a result of the default and resale and the amount of the purchase price on resale. The nlaintiff further submits that if the defendant raises the question of failure to comply with the duty imposed upon the vendor pursuant to Clause 6, then it is for the defendant to establish such breach of duty. The evidence in this case is such that there is no direct evidence. of a breach of duty, by which I mean direct evidence ofa~~rticular specific failure in the course of donduct adopted. by the plaintiff. The defendants point to the sale prices obtained by the plaintiff in the resale procedure and subcit that such prices are si~nificantly below appropriate valuations of the various units at the relevant times. The defendants also point out that their valuer, Mr. Brosnan, was 4 10 20 30 40 50 60 -- 4 of 13 -- 10 20 30 40 50 60 told that the units had not been put on the market to the knowledge of a person who might be taken to have had some knowledge of what was going on with respect to such units at the relevant time. The defendants say that they know little more about the matter and that they cannot be asked to take th matter any further. The difficulties of resolving this matter in the light of that evidence will be immediately apparent, and it will also b apparent that the question really resolves itself into a question as to who bears the onus. If the plaintiff is correc in saying that it need only show the difference between the amount recouped on resale and the purchase price,and that it i for the defendant to prove the breach of duty, then the defendant has clearly failed. On the other hand, if it is for the plaintiff to establish performance of its duty, then the plaintiff has clearly failed. The matter seems to me to fall to be resolved by a proper construction of Clause 6. The relevant part is as follows:- "!£ 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) (b) (c) 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 the expense of and incidental to re2oss_ession 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 damages." 5 10 20 30 40 50 60 -- 5 of 13 -- 10 20 The reference to "liquidating damages" should obviously be a reference to the ~iquidated damages". There can be no doubt in my view that the plaintiff's· claim is for liquidated damages calculated in accordance with Clause 6 (c) . In order to calculate the amount,::i t is necessary to calculate the deficiency in price which is derived by deducting the new price from the old, and by then adding on the various expenses prescribed as payable. The clause does not itself impose a duty to act in any particular way. It may well be asked what is the source of the duty upon-a vendor· in this si tua b.ion, which duty has been so freely conceded to exist. consider that there are two possible approaches to this question. One would be to imply a term; ; however, I do not think it possible to argue that it is necessary in order to give business efficacy to this contractjto imply ~ I 10 20 30 30 40 so 60 term requi:i;ing the mortgagee to proc~ed _in a_:"':.c_i~\r·tai~ .. way. The· alternative approach would be to consider any act of bad faith -by the vendor as being, in,,~ffect, a fraud on the· 1.. power, and it seems likely that this is the proper '\- characterisation of the source of the· !'diity''-~ I suppos~ it_is al~~_possible to find some' -· ... ', of;":' -il'c:f{i6T;;,:r·yJ:-d11-ty ,.. , ~,.- -- the fact that the defaulting purchaser will, in the event of a surplus, have st in-the proceeds. In any event, I consider that if a plaintiff/vendor establishes resale and· a deficiency, tog~bher with the costs in6iderital to the resale, he has made out a cause of action pursuant to Clause 6(c). I think that any question of breach of duty in exercise of resale is a matter pleaded, as it were, by way of confessio and avoidance, to use the language adopted bv the Victorian ·-:-·• ":- Old. 6 40 50 60 -- 6 of 13 -- 10 20 30 40 50 60 ' Full Court in Riverside Motors Pty. Ltd. v. Abrahams (1945) V.L.R. 45 at p.54. It would be for the defendant to raise such a matter and to assert a breach of duty, and I think, too, that the onus of establishing the breach must be seen as being upon the defendant. The position is otherwise in the circumstances which were considered ?Y :the Victorian•Full Court in Riverside Motors v. Abrahams-1supra); The~e it was incumbent upon the plaintiff to establish that it had done the work stipulated for by its contract in order to entitle it to recover the price of that work. I think that the observations made ~y O'Brien and Martin J~ should be seen in that context. In the present ·case I consider that the onus was on :each_~_ defendant to establish a· breach of duty, _and I do not consider that this onus has been discharged. I should say something about the valuation evidence in case this matter goes further. I did not find either of the value~s particularly impressive, but I should add that having considered their evidence, I think that this is because of great difficulty experienced by them in trying to make sense out of a fairly hectic and volatile unit market, which seems to have been the situation which prevailed in 1983. In so far as I had any pr~ference, I thought that Mr. Brosnan(who was called foi the defendan~'~as better able to explain the process by which he developed his valuation than w~s Mr. Jorgensen, who gave evidence for the plaintiff. However, in the end I am.•.not.:sure that either valuer really satisfied me that the valuation advanced by him should be accepted. Mr. Jorgensen valued Unit 48 at $115,000, and Mr. Brosnan valued it at $120~000. Unit 52 was valued by Mr. Jorgensen at $120~000, .and by Mr. Brosnan at $125,000. Unit 57/ a penthouse - -Govt. Pdoter Ql_d, 7 10 20 30 40 50 60 -- 7 of 13 -- 10 unit, was valued by Mr. Jorgensen at $550,000, and Mr. Brosnan was unable to value it. HIS HONOUR: I should say that I am referring to these as unit numbers. In fact the numbers are lot numbers. · • • • •✓ I am satisfied that with respect to Unit 57, the penthouse, it is virtually impossible at this stage to place a valuation upon it. I accept the evidence of Mr. Brosnan 10 20 20 that the units are all highly individual and that the ability to sell them really depends upon one of a fairly small cat.egory of purchaser being in the market at the relevant time I do not think that it is possible to come to any conclusion as to the value of that unit at the relevant time on the 30 30 40 ' , J 'l \ 60 evidence which is before me. I must say that I was less than impressed by the attempts made by Mr.Jorgensen to draw parallels between the sale of the penthouse which was Lot 56, and Lot 57. Lot 57 seems to me to be a quite different pDopositioh by virtue of the fact that it Tuas.asso6i~ted with it the use of t:he whole of the :roof of the building, which' qu;te substantial.additional I think that Mr. Jorg~nsen's difficulty ·,, ~ ' - unit on a higher level, Level 18, was sold at on27.June'1983, some three months after the sale of Lot 52. He said, and I 40 think it is com.rnon sense, that the higher the level: of the unit 60 8 -- 8 of 13 -- '1 10 20 30 50 60 'the higher the price, and he attributed an increment of about $2,000. per. flooL He_ said that the. rnark~_t _W9-S falling ih : 1983 ; .. ·.and this conclusion seems to be justified by the figures. On 26 September 1983 a unit on Level 16, which was similar to Lot 52, was sold for $103,000. This was some six months the sale of Lot 52. It is reasonable to infer, I think, at,. Harch 1983 1 Unit 17 would be worthrrore tliah T:Jnit 16 as at Sept , 1983, ooth by virtue .of it_s being_ on_.a higher floor and by virtue of prices being higher earlier in 1983 than they were later in the year. As to the sale of the unit on Level 18 in June 1983, it is reasonable to infer tha~ all things being equal, Lot 52 would be worth less than that lot, but it is also reasonable to infer that the price as at June 1983 was lower than it would have been in March 1983. These things seem to suggest a price somewhere between $105,000 and $115,000, but it is not possible to be any more specific than that. . . Mr. Brosnan _said that type\ A units, of 'which one, £~tched ~omething like $5,000 less than type which Lot' 52 thought that'thiswas a not ~nreasonable appro~ch to th~ problem~and I ~ould relatively speaking, that gives some guide to the value of Lot 48. Turning now to the three lots and to the variou~ figures which appear in the evidence representing the expenses incidintal to res~le and other associated figures, I will deal first with Lot 48. In respect of Lot 48 the purchaser is C.G.Maloney Pty. Ltd. and the only relevant guarantor is Cyril Gardner Maloney. The contract price was $182,500 and the deposit was $18,250. Interest is calculated on the -Govt ..,,,"If>" C>ld. 9 r 20 30 50 60 -- 9 of 13 -- 10 20 30 50 60 outstanding balance at $15,623.98, but a credit is also given for interest on the deposit. The proceeds of sale pursuant to the resale tot?lled $109,000. Expenses incurred as a result o the default ·and resale were: - ~ .. " •,,,.,., ~ Rates Body Corporate Levies Solicitors' Costs $316.52 1038.04 852.00 Those figures have not been challenged before me, therefore the amount payable pursuant to Clause 6 of that contract can be calculated as follows:- Contract Price Interest Total Less Deposit on original sale (including interest) Balance Less proceeds of resale Total Plus Expenses on resale: 316.52 I turn now to Lot 52. The purchaser in $182,500.00 15,623.98 $198,123.98 21,563.97 $176,560.01 109,000.00 $ 67,560.01 C.G.M.. Pty.Ltd. and. the guarantors are Cyril Maloney and. Margaret M.ary Cussan. The calculations provided are as follmv's: 10 10 20 30 50 60 -- 10 of 13 -- 1 ( 10 20 30 50 60 Contract Price 189,500.00 Interest· 7,700.43 Total $197,200.43 Less deposit on original 22,391.09 sale (including interest) Total $174.809.34 Less proceeds of resale 109.506.28 Balance $ 65,303.06 Plus expenses on resale: 139.77 Maintenance Levy 402.41 Solicitors 1 Costs 852.00 Tot.al additions 1,394.18 TOTAL $66,697.24 I turn to Lot 57. The purchaser in this case is C.G.Maloney Pty. Ltd. The only relevant guarantor is Cyril Gardner Maloney.The calculations in this regard are as follows:- 700,000.00 original 82,998.50. interest) Balance $654,836.01 Less proceeds of resale 468,850.60 Balance $185,985.41 Plus expenses on resale: Rates 383.12 Body Corporate Levies 2,076.08 Solicitors' costs 1,608.00 Total additions 4,067.20 TOTAL $ 1 9 0 , 0 5 2 . 61 ,' ' 11 10 20 30 40 50 60 -- 11 of 13 -- 10 HIS HONOUR: In action 5903 there will be judgment for the plaintiff against C.G.M. Pty. Ltd., Cyril Gardner Maloney and Margaret Mary Cussan in the amount of $66,697.24. In the other action, action 5904 of 1982, there will be judgment for the plaintiff against C.G.Maloney Pty. Ltd:·.oand Cyril Gardner Maloney in the sum of $259,819~18. Interest is sought in each case. The actions were commenced in 1982 and I am told that these are cases which were affected by the amending legislation which was passed by 10 20 20 30 the Parliament in 1983. That may or may not be s~but it is certainly the case that there has been a substantial amount of difficulty associated with home unit contracts as a result of the legislation, and I have little doubt that part of the delay in bringing the matter to t~ial is associated with that. I always find some difficulty in arbitrating between .plaintiffs and defendants on questions oi interest wh~re there . . .. . .. .. . ,has been \tib~t~~t.lal -delay. when shown tO· be'justified in the action, a.s. kept out of his money .for a subsiantial peiiod of against this ·consideration it is not appropriate, I think, that the·court be seen to be sanctioning substantial/ delay in the conduct of litigation. It is true in this case, too, that there was a counterclaim~~nd I suppose the defendants had the running on the counterclaim. Although it seems to me the eventual outcome of this action, at least 30 50 60 60 12 -- 12 of 13 -- 10 20 30 50 60 after 1983, was fairly easy to predict, in the circumstances I think that the interes~ of justice will best be served if I allow interest on each of the judgments in the amount of 16 per cent per annum for a period of three years. All counterclaims are dismissed. I order that the moneys in court to the credit of both actions be paid out to the solicitors for the plaintiff, whose receipt for same shall be sufficient discharge therefor. Such payment will not be in partial satisfaction of the judgments as the amounts have been otherwise taken into account. In action 5903 of 1982 I ordet ttie defendant C.G.M.Pty. Ltd. and the defendants Cyril Gardner Maloney and Margaret Mary Cussan to pay the plaintiff's costs of the action. In action 5904 of 1982 I order C.G.Maloney Pty.Ltd. and Cyril Gardner Maloney to pay the plaintiff's costs of the actiono 13 10 20 30 50 60 -- 13 of 13 --