Lopiron Pty Limited v Css Investments Pty Limited [1988] ACTSC 61 (27 October 1988)

SUPREME COURT OF THE ACT

LOPIRON PTY LIMITED v. C.S.S. INVESTMENTS PTY LIMITED
S.C. Nos. 401 and 418 of 1986
Contract for Sale of Land

COURT

IN THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Kelly J.(1)

CATCHWORDS

Contract for sale of land - Decree for specific performance - Claim additionally for damages - Whether claim sustainable - Claim for fees by trustee as part of damages - Whether sustainable.

Canning v. Temby [1905] HCA 45; (1906) 3 CLR 419

Griffin v. Mercantile Bank (1890) 11 NSWR (Eq) 231

Bosaid v. Andry (1963) VR 465

Raineri v. Miles (1981) AC 1050

Louinder v. Leis [1982] HCA 28; (1982) 149 CLR 509

Fritz v. Hobson (1880) 14 ChD 542

Harold Wood Brick Company, Limited v. Ferris (1935) 2 KB 198

Davis v. Dougall (1889) 15 VLR 424.

Bain v. Fothergill (1874) LR 7 HL 158.

In re Bridal Centre Co Pty Ltd and the Companies Ordinance 1962 (1985) 59 ACTR 1

Stonham on Vendor and Purchaser, 1st Edn., at p 746

HEARING

CANBERRA
27:10:1988

ORDER

The plaintiff have leave to amend its statement of claim to include a claim for interest.

Upon such amendment there be judgment for the plaintiff for $46,623.21 for damages.

The defendant pay the plaintiff's costs of and incidental to its claim for damages, those costs to be taxed.

DECISION

On 24 December 1986 I made a declaration that, upon the true construction of a written agreement dated 26 September 1985 for the sale by the defendant to the plaintiff for the sum of $2,415,000 of all the residue unexpired of the leases in respect of all the units in Units Plan No. 392 erected on Block 2, Section 65, Weston in the Australian Capital Territory and in the events which had happened, the defendant was not entitled to rescind the agreement as it had purported to do. Thereupon I decreed specific performance of the agreement and ordered in addition that there be judgment for the plaintiff for damages for breach of contract to be assessed. The defendant appealed against the declaration and the decree for specific performance. The appeal was unsuccessful but the Full Court of the Federal Court ordered that the judgment for the plaintiff for damages be set aside and that the issue of damages should be remitted for further hearing.

2. Completion of the agreement took place on 18 November 1987.

3. The first question posed on the remitter is whether there ought to have been judgment for damages at all. As I understand the reasons for judgment of the Federal Court and, in particular, those of Davies J with whom Gallop J agreed, it was in some doubt as to whether there should have been such a judgment. Indeed, there are indications in the judgment of Davies J that he thought that the judgment was wrong. Nevertheless, the Court expressed no concluded opinion and I have therefore to consider the question of damages afresh.

4. The question turns, in my opinion, on whether there was a breach by the defendant of the agreement which gave rise to an action for damages as well as to the decree for specific performance.
"The Courts of Equity never held that a party

who had made default in performance of his
contract was not liable for damages for the
breach, but they treated the stipulation as
to time not as a condition, but as an
independent term of the contract, the breach
of which might be compensated for by
damages. Of course, a party asking specific
performance of a contract, notwithstanding
that he was himself in default, could only
obtain that relief on doing what was fair to
compensate the other party for any loss by
reason of his default. When time was not
originally of essence of the contract, either
party desiring to fix a definite time for
completion, so as to entitle himself to
rescind the contract on failure to complete
within the time, was required to give notice
to the other party to complete by a named
day, which was required to be reasonable,
i.e., at not too short an interval. The
effect of this notice, however, was not to
confer an offensive right or complete a cause
of action but to confer a defensive right in
equity as well as at law to take advantage of
the other party's default. I do not think,
therefore, that the plaintiff's failure to
give a notice appointing a day for payment of
the purchase money is material to a claim for
damages for breach of contract except so far
as such a notice, if given and not attended
to, would have been an element in considering
whether the purchaser had failed to perform
his contract within a reasonable time."

Canning v. Temby [1905] HCA 45; (1906) 3 CLR 419 at p 426 per Griffith C.J. See also Griffin v. Mercantile Bank (1890) 11 NSWR (Eq.) 231, Bosaid v. Andry (1963) VR 465, Raineri v. Miles (1981) AC 1050 particularly at pp 1090-1 and Louinder v. Leis [1982] HCA 28; (1982) 149 CLR 509 at p 525.

5. Of course, a difficulty arises in this case because damages are sought in respect of the period up to the date of completion which was long after the original judgment. But I think Griffin v. Mercantile Bank (supra) at pp 253 and 258-262 and Fritz v. Hobson (1880) 14 ChD 542 at p 537 are authorities for the proposition that in an appropriate case damages may be so assessed.

6. It follows, in my opinion, that where in an agreement for sale of land there is a provision that the agreement should be completed by a certain day and as a result of the failure by a party to the agreement to complete by that day reasonably foreseeable damage which was within the contemplation of the parties is caused to the other party, there may be judgment for damages although specific performance has been decreed as well and this notwithstanding that the decree depended upon another date for completion fixed according to equitable rules.

7. There must always be a question whether, upon the true construction of the agreement, damages which might flow from a breach in respect of completion by the time fixed by it were within the contemplation of the parties. But where, as here, they are dealing with a considerable commercial property, it seems to me to be beyond doubt that it will be within their contemplation that damages will flow for breach in relation to completion by the fixed or ascertainable date.

8. In his affidavit sworn 2 September 1988 Andrew John Pickering, a director of the plaintiff, deposed that the plaintiff had made known to the defendant that the plaintiff would be obtaining finance from a financial institution (this appears from the agreement of sale as well although a different mortgagee from that named in the agreement eventually provided the finance) and that in accordance with normal commercial lending terms that financial institution required a holding fee which the plaintiff had to pay.

9. The date for completion set by the agreement was, "within 14 days of notification to the Buyer of registration of the Units Plan". The date fixed for registration of the Units Plan was 31 January 1986. No date for notification after the registration was fixed. It must therefore be taken to have been agreed between the parties that there should be notification to the buyer of the registration within a reasonable time after it had been effected.

10. Registration of the Units Plan did not, for reasons which I set out in my reasons for the decree for specific performance, take place until 7 February 1986, a Friday. On 10 February 1986 Mr Wayne Barker, then the solicitor for the defendant, telephoned Mr Chris Macphillamy, then the solicitor for the plaintiff, to say that the Units Plan had been registered on the previous Friday.

11. The agreement did not provide for any method of giving notification to the buyer and I am therefore satisfied that the telephoned advice given by Mr Barker to Mr Macphillamy on 10 February 1986 constituted sufficient notification of the registration of the Units Plan.

12. I am satisfied also that, in the circumstances, it was given within a reasonable time. Having regard to the findings earlier made, it seems to me that the registration might have been dealt with in one sense as having been effected notionally on 31 January 1986, also a Friday. There was no submission made as to what would have been a reasonable time within which notification of the registration of the Units Plan might have been given had registration in fact taken place on 31 January 1986. In the context of the negotiations one would have expected that the notification ought in that case to have been given sometime during the following week. Nevertheless, whether one takes the registration to have been effected notionally on 31 January or on 7 February 1986 when it actually was, it seems to me that the date of notification in respect of a non-essential term would not have been so far outside the date which the parties had in mind when they entered into the agreement as to mean that it was unreasonable and unacceptable. That means, as I see it, that the base date from which the date for completion was to be ascertained was in fact fixed on any view at 10 February. The date for settlement, therefore, would have been not later than 24 February 1986.

13. Counsel for the defendant submitted that because the date for completion could only be ascertained by reference to the happening of another event which was to take place on an uncertain day, there could be no date fixed by the agreement for completion. I reject this submission. The event from which the period during which completion was to occur was to be calculated took place on 10 February 1986. The fact that completion was to take place within 14 days means only, and I find, that the date for completion fixed under the contract was, in the events which happened, 24 February 1986 but of course that date was not of the essence of the contract.

14. In Harold Wood Brick Company, Limited v. Ferris (1935) 2 KB 198 the agreement for sale in question fixed 31 August 1933 as the date for completion but provided that should completion be delayed beyond that date it should take place in any event not later than 15 September. The Court of Appeal treated the contract as one which required completion by 15 September although completion might have taken place earlier. 15 September 1933 was treated as the date fixed for completion. In the circumstances of that case completion by that date was of the essence of the contract. See also Davis v. Dougall (1889) 15 VLR 424.

15. In my opinion there was no need for the plaintiff to give a notice to complete before suing for damages in this case. As Griffiths CJ said in the passage from his judgment in Canning v. Temby quoted above:-

"The effect of this notice, however, was not
to confer an offensive right or complete a
cause of action but to confer a defensive
right in equity as well as at law to take
advantage of the other party's default. I do
not think, therefore, that the plaintiff's
failure to give a notice appointing a day for
payment of the purchase money is material to
a claim for damages for breach of contract
except so far as such a notice, if given and
not attended to, would have been an element
in considering whether the purchaser had
failed to perform his contract within a
reasonable time."

He made it clear, I think, that the giving of a notice to complete is not a necessary condition precedent for an action for damages for breach of a contract for sale of land in respect of which specific performance is sought.

16. In Stonham on Vendor and Purchaser, 1st Edn., at p 746 the learned author put the situation in this way:-

"The object and purpose of the notice . . . was
to enable the innocent party to exercise his
common law rights of rescission, under
circumstances which provided the innocent
party with a defence to any claim, by the
defaulting party, for equitable relief, by
way of specific performance of the contract
and an injunction against rescission at
common law by the innocent party. The notice
removed an equitable bar to a common law
rescission being recognised in equity, and
strictly speaking, it did not confer a new
right of rescission at common law.
Having regard to the foregoing object, notice
to complete is not necessary where the
prospective giver does not intend to rescind,
but intends to sue for specific performance
or for an injunction or other equitable
relief."

17. By notice given on 14 February 1986 the defendant purported to rescind the contract. Since, as I have found, the date for completion of the contract ascertainable by reference to the events that happened was fixed at 24 February 1986, the defendant had, by invalidly attempting to rescind, committed an anticipatory breach. That breach was compounded by the action which it commenced on 12 March 1986 (S.C.418 of 1986) seeking, inter alia, a declaration that it had rescinded the agreement. There can be no doubt, in my opinion, that the plaintiff was entitled to sue in respect of that breach. It did not in fact do so until after the date for completion, commencing its action on 11 March 1986.

18. I think, therefore, that the plaintiff is entitled to recover damages from the defendant in respect of the breach provided those damages were reasonably foreseeable.

19. The plaintiff claimed damages under a number of headings but abandoned one at the hearing. Those remaining were:-

(a) loss of interest on deposit;
(b) finance holding fee;
(c) body corporate compliance fees;
(d) professional fees unnecessarily incurred due to
delay in settling the contract;
(e) trust financial statements and tax returns for
1987.

I will deal with these in turn.
Loss of interest on deposit.

20. The agreement provided that the deposit should be invested at interest with both parties sharing in the interest up until completion. The interest earned on the deposit from the time of exchange of contracts on 20 September 1985 until 14 February 1986 was $4,560.27. The interest which accrued from 14 February 1986 to the date of settlement, 18 November 1987, was $31,904.59. The plaintiff received $18,232.43 or exactly one half of the interest earned from the date of exchange until completion. It has therefore received all that it was entitled to under the specific terms of the contract but it claims that it ought to receive a further sum of $15,952.30, representing half the interest earned between 14 February 1986 and the date of completion.

21. In claiming this amount it concedes that the defendant is entitled to half the interest earned between the date of exchange and 14 February 1986. But it says that, because it did not have any rents and profits from the property between February 1986 and 18 November 1987, it should receive the balance of the interest as a set-off or an amount in the nature of a set-off against what it would have received had it entered into receipt of those rents and profits. But the plaintiff did not make any claim on account of lost rents and profits and no evidence was put before me to enable me to establish that there had been any such loss in fact. There are annexed to the agreement for sale schedules which set out the rents which were payable in respect of the various units which made up the property sold but there is no evidence as to the outgoings and nothing to indicate that the plaintiff would in fact have made a profit in the period between 24 February 1986 and 18 November 1987 although it might well have done so. In the circumstances, I cannot be satisfied that the claim under this heading has been made out.
Finance Holding Fee

22. I think the plaintiff succeeds in its claim for the finance holding fee. The evidence given by Mr Pickering was unchallenged and the plaintiff's right to the sum claimed, assuming that it was entitled to judgment for damages, was but faintly challenged. Of course, an adjustment will have to be made to allow for the fact that the legal date of completion was, as I have found, 24 February 1986 and not 14 February 1986 as the plaintiff claims. This adjustment lessens the amount due to the plaintiff under this head by $683.49, leaving a total payable of $41,002.54.
Body Corporate Compliance Fees

23. The amount claimed for Body Corporate compliance fees is said to be damage sustained as a result of the failure of the defendant to comply with the statutory requirements for a Body Corporate under the Units Plan which was registered on 7 February 1986. The plaintiff complains, and I accept, that the defendant, despite the fact that it was the proprietor of the property, did not comply with the statutory requirements concerning the Body Corporate under the new Units Plan. Not until after settlement in November 1987 were these requirements complied with and then by the plaintiff. But I think that, had settlement taken place by 24 February 1986, the plaintiff would have been required to comply with those requirements because by that date the defendant had done all that was required of it under the contract and its failure to comply with the statutory requirements in respect of the Body Corporate by that date would not have been unreasonable. The plaintiff would have been required to expend the moneys which it actually expended in that regard, a total of $200. I do not think this amount can fairly be claimed as damages.
Professional Fees
(a) Charged by Accountant/s.

24. The amount claimed in respect of professional fees is said to be due as damages because they were incurred as a direct consequence of the defendant's delay. The total claimed, $11,619.00, is made up of two components. One, in the sum of $2,010.00, is for fees said to be due to Messrs Macphillamy & Co., solicitors for the plaintiff. The other, in the sum of $9,609.00, is said to be due for fees charged first by Mr Pickering, when practising on his own account as an accountant for services rendered to the plaintiff, and secondly by Mr Pickering and his partner, after the partnership had been formed, for such services.

25. The memoranda of fees disclosed an apparent agreement that the fees were not to be payable until after the discharge of the first mortgage by the plaintiff over the property in question.

26. Counsel for the defendant took a preliminary objection to the claim. He said that Mr Pickering was a trustee and was not entitled to make a profit out of the trust. In his affidavit of 1 April 1986 Mr Pickering deposed:-

"I am a director of the abovenamed defendant
company (Lopiron Pty Limited) which acts as
trustee for the Alpha Commercial Trust. I am
a unit holder in the said Trust."

27. The evidence disclosed that there had been no meeting of the plaintiff which agreed to the charges or the basis of the charges made by Mr Pickering. He said that the charges were in lieu of directors' fees which neither he nor his fellow director, Mr Norton, charged. Of course the ordinary rule concerning directors' fees is that they must be agreed to by a company in general meeting. How the amount of the directors' fees is thereafter shared amongst the directors is a matter for them but the approval by the company in general meeting of the total amount of the fees is usually a condition precedent to their payment.

28. I do not think it can be doubted that a beneficiary company when appropriately advised can properly agree to pay fees to a trustee upon whatever basis the parties think appropriate. But since it was not done in this case the rule that a trustee must not make a profit out of his trust operates. The matter is discussed at some length in In re Bridal Centre Co Pty Ltd and the Companies Ordinance 1962 (1985) 59 ACTR 1 at pp 10-14. Although in this case Mr Pickering was not the trustee appointed for the Alpha Commercial Trust and the plaintiff was, the plaintiff acted through him in the performance of its duties as trustee. It was not suggested that he was not, in the circumstances, a trustee. It seems to me, therefore, that the rule that he can not make a profit out of the trust applies.

29. Counsel for the plaintiff have submitted that the Court should start with the presumption expressed in the maxim "omnia praesumuntur rite et solemniter esse acta". There is, they submit, no trust deed in evidence. That is true. But I am aware beyond doubt that there was no agreement by the plaintiff to the charges or to the basis of the charges made by Mr Pickering. The Court has inherent jurisdiction to allow remuneration in a suitable case but this does not seem to me to be such a case. The position of a provisional liquidator and his entitlement to remuneration is, it seems to me, different. See In re Bridal Centre Co Pty Ltd and the Companies Ordinance 1962 (1985) 59 ACTR 1. That case seems to me to be otherwise completely distinguishable from this one.

30. Accordingly, I think that the preliminary point against the plaintiff's claim for damages in respect of the fees claimed by Mr Pickering or his firm succeeds.

31. Additionally, it seems to me, that work which the plaintiff and Mr Norton might have performed as directors following upon the purported rescission of the agreement for sale ought to be dealt with as work of directors and remunerated accordingly, not as work professionally performed by one of those directors or his partner.

32. But, in any event, I am not satisfied that the amounts claimed as due to Mr Pickering or his firm are properly due as damages. As an example, even if one accepts that it was necessary that Mr Pickering should photocopy 5,450 pages of relevant documents and travel 3,615 kilometres in and about the affairs of the plaintiff after 24 February 1986, I cannot see how this could be fairly foreseeable as damages. Neither am I satisfied on the balance of probabilities that the claims made by Mr Pickering for professional time spent and disbursements were made out. He was unable to produce any documentation to support them and there was only one document produced in support of the rest of his claims. His evidence in this regard was generally unsatisfactory.
(b) Charged by Solicitor.

33. An account prepared by Messrs Macphillamy & Co and dated 2 September 1988 was tendered. The account was prepared in response to a request that those solicitors should isolate from their previous account those items of a non-litigious nature and render a separate account in respect of them. The memorandum of account is in broad terms and no details of how the charge made was made up are provided.

34. The majority of the items referred to in the account do not seem to me to fall within the heading of possible damages caused by the breach of contract. When those items are taken out of the account only a few are left for consideration as possible damages. The few seem to me to fall into the category of those expenses incurred in respect of a breach of contract for the sale of real estate which would be recoverable as damages. See Bain v. Fothergill (1874) LR 7 HL 158.

35. Under this heading I would include the receipt of instructions for and preparation and lodgment of a single caveat, necessary correspondence and attendance in connection therewith and general care skill and attention in that connection. I would also include the costs of withdrawal of such a caveat in due course to enable settlement to be effected.

36. There is no precise quantification of the costs involved in that work but that does not excuse me from making an assessment of the damages incurred by the plaintiff in connection therewith. I assess the sum of $200 (including Titles Office charges of $61.00) as appropriate in the circumstances.

37. As to the rest, I am unable to see on the evidence that the balance of the account flows as damages from the breach. In any event, I am in no position to quantify such part of it as might, on closer inspection and with the assistance of more detailed evidence, qualify in that regard.

38. I should add that the fact that Mr Macphillamy was secretary of the plaintiff company does not in my opinion make him a trustee of the company. Even if he were, the rule in Cradock v. Piper (1850) 1 Mac & G 664: 41 ER 1422, would operate to enable him to charge his fees as a solicitor even though a solicitor/trustee.
Trust Financial Statements and Tax Returns for 1987

39. I do not see how the fees charged in respect of the preparation of financial statements and tax returns for the trust for the year 1987 can be classified as damages flowing from the defendant's breach of contract. The mere fact that the defendant was aware, as Mr Pickering deposes, that the plaintiff was acting as a trustee company set up specifically for the purpose of the commercial venture involving purchase of the defendant's property does not carry with it knowledge that the trustee company would be wound up before the close of the financial year ending 30 June 1986 nor am I satisfied that, even had the contract been completed on 24 February 1986, the trust would have been wound up by 30 June of that year.

40. I think the damages, if any, are too remote and disallow the claim in this regard.

41. Applying the criteria earlier set out, I think there must be judgment for the plaintiff for damages.
Interest

42. The plaintiff did not originally claim interest in its action. However, when the question of damages was argued, it did. Section 53A of the Australian Capital Territory Supreme Court Act 1933 provides by sub-s.(1) that:-

"In any proceedings for the recovery of any
money (including any debt or damages or the
value of any goods) the Supreme Court or the
Judge shall, upon application, unless good
cause is shown to the contrary, either -
(a) order that there be included in the sum
for which judgment is given interest at
such rate as the Court or the Judge, as
the case may be, things fit on the whole
or any part of the money for the whole
or any part of the period between the
date when the cause of action arose and
the date as of which the judgment is
entered; or
(b) without proceeding to calculate interest
in accordance with paragraph (a), order
that there be included in the sum for
which judgment is given a lump sum in
lieu of any such interest."

So far as is relevant, sub-s.(3) provides that:-

"Where the sum for which judgment is given
(in this sub-section referred to as the
'relevant sum') includes, where the Court or
the Judge in its or his absolute discretion
determines that the relevant sum includes,
any amount for -
. . .
(b) compensation for loss or damage to be
incurred or suffered after the date on
which judgment is given;
. . .
interest, or a sum in lieu of interest shall
not be given under sub-section (1) in respect
of any such amount or in respect of so much
of the relevant sum as in the opinion of the
Court or the Judge represents any such
amount."

43. I am satisfied that, in the circumstances of this case and in the events that have happened, the judgment in respect of damages is to be taken as having been entered today. Sub-section (3) does not therefore apply.

44. By a practice direction delivered on 11 March 1985 (60 ACTR 28) the Court directed that in the future the words "upon application" should be construed as meaning that applications for interest on a sum for which judgment is given should be made in the pleadings themselves rather than at the hearing.

45. The rule cannot, I think, be taken as restricting the meaning of the words "upon application" where used in the section but merely as indicating that the rule of practice is that a claim for interest should be made in the pleadings. Normally this would be done before the close of pleadings but when it is not done an application to amend the statement of claim may be made at any time.

46. I can see no reason in this case why the plaintiff is not entitled to interest on any damages properly payable and, the application for interest having been made, grant leave to amend the statement of claim to incorporate such a claim.

47. I allow $5,420.67 interest at 14% on $41,202.54 from 18 November 1987 to date.

48. Subject to the amendment, in accordance with the Rules, of the statement of claim, there will be judgment for the plaintiff for $46,623.21.