Paul Richard Tarling and Shirley Anne Tarling v Mogdon Investments Pty Limited [1990] ACTSC 49 (4 December 1990)

SUPREME COURT OF THE ACT

PAUL RICHARD TARLING and SHIRLEY ANNE TARLING v. MOGDON INVESTMENTS PTY
LIMITED
S.C. No. 1560 of 1986
Contract

COURT

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

CATCHWORDS

Contract - sale of land - purchasers' notice to terminate in reliance upon vendor's sale to third party - vendor's defence of prior termination pursuant to purchasers' failure to complete - no new statement of principle.

HEARING

CANBERRA
4:12:1990

Counsel for the Plaintiffs: Mr. T. Johnstone

Solicitors for the Plaintiffs: O'Connor Harris

Counsel for the Defendant: Mr. B. Meagher

Solicitors for the Defendant: Vanderberg Reid Pappas and McDonald

ORDER

There be judgment for the plaintiffs in the sum of $2,565.60

DECISION

The plaintiffs' claim arises out of the alleged breach by the defendant of its obligations under a contract for the sale of land and construction of a dwelling.

2. The contract was dated 22 November 1985. The plaintiffs were the buyer and the defendant was the seller and builder.

3. On 31 July 1986 the defendant entered into a contract to sell the land and completed dwelling to a third party. Completion of that sale took place on 8 August 1986. On 11 September 1986 the plaintiffs gave the defendant a notice of termination of the agreement, relying upon the sale by the defendant to the third party. The plaintiffs now claim the return of the deposit paid to a stakeholder pursuant to the agreement, damages for breach of contract, and interest. In addition they seek a declaration that the notice of termination of 11 September 1986 was valid.

4. The defence is that the defendant had previously terminated the contract with the plaintiffs by notice in writing dated 20 June 1986 which notice of termination was itself given in pursuance of the alleged failure of the plaintiffs to comply with a notice to complete which expired on 4 June 1986. Further, the defendant relies in part on an alleged issue estoppel arising out of declarations made by me in previous proceedings between the same parties on the same contract. Those proceedings were heard by me on 1 August 1986 and findings were handed down and published on 11 September 1986 when the parties were given liberty to apply to bring in short minutes to give effect to the findings. The parties did not bring in the short minutes for some very considerable time and the formal pronouncement of declarations was made on 12 February 1990 in the following terms:
1. The plaintiffs are entitled to damages for

breach by the defendant of its obligation to
complete construction of the building in
accordance with the plans annexed to a written
agreement between the plaintiffs and the
defendant dated 22 November 1985.
2. The plaintiffs are obliged to comply with the
defendant's notice to complete dated the 16th
day of May 1986 subject to the amount of
damages being agreed or assessed as an
appropriate deduction from the balance of
purchase money.

5. The defendant's case, insofar as there is reliance on the alleged issue estoppel, is that the plaintiffs failed to discharge their obligation as it was declared to be in the second of the declarations formally made on 12 February 1990, and were therefore in breach of their obligations under the contract and disentitled to give a notice of termination.

6. The history of the dealings between the parties so far as they were then known to me were set out in my reasons for decision published on 11 September 1986. The relevant provisions of the contract were set out in those reasons. It is not necessary to repeat any of that except to say that at the heart of the dispute between the parties as it was litigated before me up until that stage was the fact that the dwelling house that the defendant had constructed in pursuance of the agreement was slightly smaller than that provided in the plans and specifications annexed to the agreement. Two of the bedrooms were slightly narrower than provided for in the plans, resulting in a loss of floor area in each room of less than one square metre.

7. Despite the lengthy argument over two days in this latest forensic encounter between the parties, I think that the essential point to be decided is a narrow one and may be disposed of briefly. The plaintiffs' obligation to comply with the notice to complete of 16 May 1986 was a qualified obligation. The plaintiffs were obliged to tender at the time and date nominated for completion not the whole of the purchase price but only the balance of the purchase price less the damages to which the plaintiffs were entitled. However the defendant insisted upon the payment of the full purchase price on completion without adjustment for the damages to which the plaintiffs were entitled. In my view, the plaintiffs are to be excused for not having completed the purchase because the defendant's solicitors had indicated in the letter accompanying the notice to complete on 16 May 1986 that the purchase price would not be adjusted and that a previous offer of compensation by the defendant of $2,000 was withdrawn.

8. The effect of the findings made and published in my reasons for decision handed down on 11 September 1986 and expressed in the declarations formally pronounced on 12 February 1990 is that the plaintiffs' obligation to complete the purchase was dependent upon the defendant's acceptance at completion of payment of the balance of the adjusted purchase price. The defendant had indicated through its solicitors on 16 May 1986 that it was not prepared to accept the balance of the purchase price so adjusted. The finding handed down on 11 September 1986 put the defendant in the position where, but for one factor, it might have indicated to the plaintiffs that it had changed its position as previously expressed and would accept the adjusted balance of purchase price. The factor that has prevented it from doing so is of course that it entered into a contract to sell the property to a third party on 31 July 1986 and completed that sale on 8 August 1986. The defendant, unknown to the plaintiffs and unknown to the Court, on the day before the hearing on 1 August 1986 had already contracted to dispense of the property and by the time of the decision on 11 September 1986 had completely disposed of the property, thus putting the completion of the sale out of the control of the plaintiffs.

9. Whether and what effect disclosure to the plaintiffs or to the Court of the sale to the third party would have had on the outcome of the previous proceedings, is unnecessary to decide. It is also unnecessary, in my view, to decide now whether the declarations ultimately made on 12 February 1990 should be set aside for fraud. It was submitted by counsel for the plaintiffs that those declarations should be so set aside, and a long line of authorities was cited in support. It is also unnecessary, in my view, to decide whether the defendant was not entitled to give the notice to complete on 20 June 1986 because of the breach by the defendant at that stage of its obligations under the contract or whether that notice was valid or invalid. I have already embodied my rulings on those aspects in the reasons handed down on 11 September 1986 and it is not appropriate to elaborate on them further. The point is not whether the notice was valid or invalid but whether the purchaser was bound to complete the purchase and pay the whole of the balance of the purchase price. My ruling was and remains that the purchasers' obligation to complete the purchase was subject to deduction from the balance of the purchase price of the damages to which the purchasers were entitled. The defendant had made it clear that it would not accept any adjustment of the purchase price and so the plaintiffs should, in my view, not be regarded as in breach of their obligation. As the plaintiffs were therefore not in breach of their obligation, the defendant was not entitled to sell the property to the third party. The sale to the third party was a repudiation of the contract with the plaintiffs. The plaintiffs were entitled to give the notice of termination on 11 September 1986.

10. It was not disputed that under Clause 20(5) of the Agreement that should the plaintiffs terminate the agreement by reason of default on the part of the defendant, the plaintiffs should be entitled to a refund of the deposit without prejudice to their right to damages. Nor was it in dispute that the ordinary principles relating to damages for breach of contract apply, namely that the party in breach is liable to compensate the other party for any loss within the reasonable contemplation of the parties at the time of contract. Mrs. Tarling, one of the plaintiffs, gave evidence, which I accept, that the plaintiffs had lost $262.60 paid to a building society in respect of a proposed loan for the purchase of the property, a further sum of $1,253 for various items installed in the dwelling of which the defendant has had the benefit and $300 paid to their solicitors in respect of the aborted purchase. In addition, the plaintiffs claim the cost of rent at $630.75 per month from January 1986 to February 1987. The plaintiffs had sold a previous dwelling in July 1985 in anticipation of buying another. They moved into rented premises at the end of October 1985 and remained there until January 1986 when they moved to other rented premises where they remained until February 1987. At that stage they bought another house. I am not satisfied that they suffered any pecuniary loss in respect of the rent paid. It is clear that they had to borrow in order to finance the purchase of the land from the defendant and the construction of the dwelling on it by the defendant. The interest payments which they would have been obliged to pay if the purchase had been completed are not the subject of any evidence. A certificate of compliance did not issue from the ACT Building Controller until 4 March 1986 and I do not think that the sale would have been completed in the ordinary course of events much before the end of March 1986. In any event, there was no failure by the defendant to complete until it repudiated the contract by selling to the third party on 31 July 1986. I am satisfied that the plaintiffs were still ready, willing and able to purchase at that stage, but I do not think that on any view they can claim any loss for being kept out of possession of the premises. In my view, the damages should be restricted to the three heads of damages to which I have referred and which total $1,815.60. Interest is claimed in accordance with s.53A of the ACT Supreme Court Act 1933. In the exercise of discretion, because of the smallness of the sum and in lieu of interest I award $750 in addition to the damages, a total of $2,565.60. There is also the question of the outstanding deposit. Unless the parties wish to be heard I think the appropriate order in that respect is that the defendant within 7 days authorise the stakeholder, Reg Daly Real Estate, to release the deposit of $4,300 to the plaintiffs or their solicitors as the plaintiffs may direct, with liberty to apply.

11. There will be judgment for the plaintiffs for $2,565.60 and an order as indicated. Unless the parties wish to be heard I propose to order the defendant to pay the plaintiffs' costs.