Nikola Ostojic and Lidya Ostojic v Lee Fang Chu [1995] ACTSC 70 (12 July 1995)

SUPREME COURT OF THE ACT

NIKOLA OSTOJIC and LIDYA OSTOJIC v. LEE FANG CHU
No. SC861 of 1994
Number of pages - 6
Summary Judgment

COURT

IN THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
MASTER A. HOGAN

CATCHWORDS

Summary Judgment - Contract - Agreement for Sale of Land - Default - Termination of Agreement - Damages - Liquidated Damages - Time Limit - ACT Law Society's Standard Contract - Unit Title - Clause 22.

HEARING

CANBERRA, 5 May 1995
12:7:1995

Counsel for the Plaintiff: Mr Harris

Instructing Solicitors: Hanstein and Co

Counsel for the Defendant: Mr G. Lunney

Instructing Solicitors: Higgins Solicitors

ORDER

THE COURT ORDERS THAT:
1. The defendant's application for summary judgment is dismissed.
2. The defendant pay the plaintiff's costs of the application.

DECISION

MASTER A. HOGAN This is an application by a defendant under O17 r.1, for summary judgment on the ground that the defendant has a good defence on the merits.

2. The Writ was issued on 15 December 1994. The Statement of Claim endorsed on it contained, in effect, the following allegations:
(1) On 9 October 1992 the plaintiffs entered into a written

agreement for the sale to one Guo May-Yu of a home unit at Isaacs
at a price of $345,000.
(2) In March 1993 by mutual agreement, the agreement for sale was
amended so that the defendant was substituted for Guo May-Yu as
buyer.
(3) By clauses 21 and 22 of the Agreement the parties agreed upon
terms for the giving of default notices, and for the termination
of the agreement for a default in performance.
(4) Completion was not effected in accordance with the agreement.
(5) On 24 September 1993 the plaintiffs gave to the defendant a
Notice making time of the essence and requiring the defendant to
complete within 14 days.
(6) The defendant failed to appoint a time for completion or to
complete the agreement.
(7) The plaintiffs elected to terminate for breach by Notice given
on 19 October 1993.
(8) On 2 November 1993 the stakeholder released the deposit of
$34,500 to the plaintiffs.
(9) On 17 December 1993 the plaintiffs sold the property at the
best price reasonably obtainable, namely $260,000.
(10) The plaintiff claimed to be entitled to forfeit the deposit
and to recover damages.

3. The defence admitted the making of the agreement and its terms, and the service of the Notice of 24 September 1993. The validity or claimed effect of the Notice was denied. The failure to appoint a time for completion was admitted, but the defence denied that the failure was in breach of the agreement. The defence then denied the plaintiff's entitlement to terminate, and put damage in issue. Alternatively, it alleged that the plaintiffs failed to take reasonable steps to mitigate their loss, in failing to ensure that a fair market value was received for the property on resale.

4. The Defence next raised the issue that clause 22(2) of the agreement required proceedings to be commenced within 12 months of termination, and proceedings had not been commenced within that time.

5. There was also a counterclaim, which is not relevant to this particular application.

6. The Reply relevantly put in issue the alleged effect of clause 22(2).

7. A copy of the Agreement for Sale is in evidence. The relevant clauses are those contained in the standard Agreement for Sale (Unit Title) published by the ACT Law Society, 1977 Edition, with two alterations to the time limits in subclauses 21(3)(a) and 24(4).

8. As amended, clauses 21 and 22 of the agreement are as follows:

"21. Default Notices:
(1) Subclause (2) applies only if a date for completion is fixed
in Schedule Item 14.
(2) If completion of this agreement is not effected in accordance
with subclause 2(3), either party may on the date fixed for
completion or at any time thereafter (unless in the meantime the
agreement has been rescinded or has become void) give to the other
party notice in writing to complete the transaction in accordance
with this clause but such notice shall only be effective if the
party giving the same at the time the notice is sent is either
ready, willing and able to complete or is not so ready, willing
and able by reason only of the default or omission of the other
party to this agreement.
(3) Upon service of an effective notice under subclause (2) the
parties agree it shall thereupon be an express term of this
agreement:
(a) that the party to whom the notice is given shall complete the
sale within 14 days after the day of service of the notice
(excluding the day of service),
(b) that the party to whom the notice is given shall appoint a
time during business hours and a date within the specified period
and a place within Canberra convenient to the other party and
complete the sale, and
(c) in respect of the period in paragraph (a) time shall be of the
essence of the agreement but without prejudice to any intervening
right of rescission by either party.

(4) Unless this agreement provides otherwise the Seller shall give
written notice to the Buyer of any alleged default in the
observance or performance of any obligation imposed upon the
Buyer under or by virtue of this agreement (other than failure
to complete) in consequence of which the Seller claims to be
entitled to take action under clause 22. Such notice shall specify
the alleged default and shall call upon the Buyer to rectify the
default within 7 days or such longer period as the Seller allows
in the notice and shall inform the Buyer that the Seller intends
to take action for default in the event of non-compliance.
(5) Upon service of an effective notice under subclause (4) the
parties agree that it shall be an express term of this agreement
that the Buyer shall rectify the default within the time stated
in subclause (4) or such longer period as the Seller allows in
the notice after the day of service of the notice (excluding the
day of service) and in respect of such period time shall be of
the essence of this agreement but without prejudice to any
intervening right of rescission by either party.
(6) If the Buyer does not comply with the terms of an effective
notice served by the Seller under this clause then the provisions
of clause 22 shall apply.
(7) If the Seller does not comply with the terms of effective
notice served by the Buyer under this clause then the Buyer may
elect either:
(a) to enforce against the Seller without any further or other
notice under the agreement such rights and remedies as may be
available to the Buyer, or
(b) without prejudice to any right of the Buyer to damages, to give
notice in writing to the Seller forthwith to repay to the Buyer
any deposit and any money paid on account of the Total Purchase
Price but on compliance with the notice the Buyer shall no longer
be entitled to any right to specific performance of the agreement
and shall return forthwith all papers in his possession belonging
to the Seller.
(8) The party serving a notice under this clause may at the request
or with the consent of the other party extend the term of the
notice for one or more specifically stated periods of time and
thereupon the term of the notice shall be deemed to expire on the
last day of such extended period or periods and the notice shall
operate as though this clause stipulated such extended period of
notice in lieu of that stated above and time shall be of the
essence of the agreement accordingly.

22. Termination of Agreement:
(1) Subject to the provisions of clause 21, if the Buyer defaults in
the observance or performance of any obligation imposed on him
under or by virtue of this agreement the Seller may forfeit the
deposit paid by the Buyer, except so much of it as exceeds 10% of
the total Purchase Price, the Seller may terminate this agreement
and thereafter may either:
(a) sue the Buyer for breach of contract, or
(b) resell the Unit and Goods (if any) as owner.
(2) In the event that the Seller elects to resell pursuant to
paragraph (1)(b) the deficiency (if any) arising on such resale and
all expenses of and incidental to such resale or attempted resale
and the Buyer's default shall be recoverable by the Seller from
the Buyer as liquidated damages provided that proceedings for the
recovery thereof be commenced within 12 months of the termination
of this agreement.
(3) The Seller may retain any money paid by the Buyer on account of
the sale, other than the deposit forfeited under this clause, as
security for any damages liquidated or otherwise awarded to him for
the Buyer's default provided that proceedings for recovery of such
damages are commenced within 12 months of the termination of this
agreement.
(4) If the Seller terminates the agreement under this clause the
Seller or his solicitor may notify the Stakeholder by letter
accordingly and the Stakeholder shall thereupon be authorised to
pay the deposit referred to in Schedule Item 8(4) to the Seller or
his solicitor as stated in that letter."

9. The case for the defendant applicant is that the plaintiffs have clearly elected to exercise their rights under clause 22(1)(b). Their own case was that they terminated the agreement by notice on 19 October 1993. It was therefore necessary for them to bring proceedings before 20 October 1994. The Writ was not issued until 15 December 1994. The plaintiff's response is that subclause (2) of clause 22 does not exclusively set out the rights of a seller who has made an election under 22(1)(b). Counsel pointed out that they have not sued for an amount calculated in accordance with clause 22(2) as liquidated damages, but have sued for damages simpliciter, which is acknowledged by the paragraph in the defence which raises the issue whether the price obtained on resale was the best reasonably obtainable.

10. I think that there is much force in that submission. I note in passing that subclause 22(3) gives to a seller a right to retain moneys paid on account of the sale as security for any damages liquidated or otherwise (emphasis added) awarded to him for the buyer's default.

11. As a general rule, on failure of a purchaser to complete an executory contract for the purchase of land, the vendor is merely entitled to sue for specific performance or for damages for the loss of his bargain.

"The true measure of damages is the injury sustained by the
plaintiff by reason of the purchaser not having performed his
contract and the question is, how much worse off is the vendor by
the diminution in the value of the land, or the loss of the
purchase money, in consequence of the non-performance of the
contract. Where a party sustains a loss by reason of a 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. The vendor not having executed any conveyance of
the land is only entitled to sue for the loss actually sustained,
i.e., usually the difference between the value of the land at the
date of the breach (emphasis added) and the price agreed to be
paid, together with the expenses incurred in preparing to complete
the sale, less anything received by the vendor under the
Agreement." (Stonham, Vendor and Purchaser, para.1395.)

12. Further, at para.1835, Stonham continues:

"Remedy in Damages.
In such a case, the vendor's remedy (unless he has actually
conveyed the estate to the purchaser) is not to recover the price,
but is only for unliquidated damages, and it is nothing to the
point that the vendor remains ready and willing to deliver the
property and refuses to treat the purchaser's rejection of the
contract as discharging the vendor from it, but on the contrary
keeps the contract open. He can, at common law, only recover
unliquidated damages, and is limited to the loss which he has
actually sustained; namely, the difference, if any, between the
price and the value of the land as remaining in his hands at the
date of the breach, and considered as a security for realising
the deficiency in the sum which the purchaser contracted to pay;
for it would be unjust that the vendor should have both purchase
money and estate."

13. The additional right given to a vendor by clause 22(2) is a valuable one. It relieves the vendor from the need to prove the value of the land at the date of the breach.

14. The damages are liquidated, calculated by reference to two easily ascertained figures, namely the contract price and the price realised on resale. That price may or may not be quite different from the value at the date of termination for breach. The price that a vendor must pay for such a valuable right is that the land must be sold promptly, and action commenced within a year of the termination. The giving of that additional right in the contract does not take away the right of the vendor to sue for unliquidated damages, which may be done within the normal limitation period.

15. Even if I should be mistaken in my analysis of the terms of the contract, the contentions of counsel for the plaintiff are so obviously arguable that this is not a proper case for the entry of summary judgment for the defendant.

16. The application is dismissed. I order the defendant to pay the plaintiff's costs of the application.