New South Wales Supreme Court CITATION : Whipp v Cochrane [2001] NSWSC 454 revised - 5/06/2001 CURRENT JURISDICTION: Administrative Law FILE NUMBER(S) : SC 30070/2000 HEARING DATE(S) : 30 May 2001 JUDGMENT DATE : 5 June 2001 Edward John Whipp (Plaintiff) PARTIES : Gary Cochrane (Defendant) JUDGMENT OF : Master Harrison LOWER COURT Local Court JURISDICTION : LOWER COURT 61 of 1999 FILE NUMBER(S) : LOWER COURT Magistrate D O'Connor JUDICIAL OFFICER : Mr A Enright (Plaintiff) COUNSEL : Mr E Petersen (Defendant) Griffiths Tierney of Bega (Plaintiff) SOLICITORS : Sautelle & White of Merimbula (Defendant) CATCHWORDS : Appeal decision of Local Court Magistrate Local Courts (Civil Claims) Act 1970 (NSW) LEGISLATION CITED : Supreme Court Rules Cheshire & Fifoot (Law of Contract 7th Aust ed.) Allen v Kerr & Anor (1995) Aust Torts Reports 81-354 Azzopardi v Tasman UEB Industries Ltd (1985) 4 NSWLR 139 Luna Park (NSW) Ltd v Tramways Advertising Pty Ltd (1938) 61 CLR 286 Baume v Commonwealth (1906) 4 CLR 97 Dyke v McLeish Estates Ltd (1927) 27 SR (NSW) 74 CASES CITED : Huppert v Stock Options of Australia Pty Ltd (1965) 112 CLR 414 Berger v Boyles [1971] VR 321 Biotechnology Australia Pty Ltd v Pace (1988) 15 NSWLR 130 Cell Tech Communications Pty Ltd v Nokia Mobile Phones (UK) Ltd (1995) 136 ALR 733 "The Mediana" v "The Comet" (1900) AC 113 The Owners of No 2 Steam Sand Pump Dredger v The Owners of SS "Greta Holme" [1897] AC 596 Bradshaw v Lancashire and Yorkshire Ry Co (1875) LR 10 CP 189 DECISION : (1) The decision of Magistrate O'Connor of 6 September 2000 is set aside; (2) The matter is to be remitted to the Magistrate for determination of damages; (3) The defendant is to pay the plaintiff's costs as agreed or assessed. 12 THE SUPREME COURT OF NEW SOUTH WALES ADMINISTRATIVE LAW DIVISION MASTER HARRISON TUESDAY, 5 JUNE 2001 30070/2000 - EDWARD JOHN WHIPP v GARY COCHRANE JUDGMENT (Appeal decision of Local Court Magistrate) 1 MASTER: By summons filed 4 October 2000 the plaintiff seeks to appeal the decision of Local Court Magistrate D O'Connor dated 6 September 2000. The plaintiff seeks an order setting aside the verdict and judgment for the defendant and that a verdict and judgment be entered for the plaintiff in the sum of $20,000 plus interest and costs. In the alternative that the matter be remitted to the Magistrate to reassess the plaintiff's damages. 2 At the outset, it may be helpful to make some brief comments concerning the remedy pursued by the plaintiff. Section 69(2) of the Local Courts (Civil Claims) Act 1970 (NSW) permits a party who is dissatisfied with a judgment as being erroneous in point of law to appeal to this Court. The onus lies on the plaintiff to demonstrate that there has been an error of law. What is a question of law (as opposed to a question of fact) was considered, inter alia, in Allen v Kerr & Anor (1995) Aust Torts Reports 81-354 and Azzopardi v Tasman UEB Industries Ltd (1985) 4 NSWLR 139 at 155-156. 3 No leave is required pursuant to Part 51B r 5(5) of the Supreme Court Rules (SCR) for leave to appeal the decision which was made on 6 September 2000. The summons was filed 4 October 2000. The appeal was filed within time. Grounds of appeal 4 The plaintiff submitted that firstly, the Magistrate erred in giving verdict and judgment for the defendant in circumstances where the defendant admitted a breach of contract, leaving only the quantum of damages to be assessed; secondly that the Magistrate erred in finding in the circumstances that the plaintiff suffered no loss as a consequence of the respondent's breach of contract; thirdly, that the Magistrate erred in finding in the circumstances that the plaintiff had not mitigated his loss; and fourthly that the Magistrate erred in failing to give a verdict for the plaintiff in the sum of $20,000 plus interest and costs. Background facts (1) On 28 May 1999 the plaintiff filed a statement of claim in the Local Court at Bega for breach of an implied term of an agreement pursuant to which the defendant was required to construct a driveway at the plaintiff's house at Pambula Beach. The plaintiff alleged that the defendant had failed to construct the driveway in an appropriate manner as a result of which it started to crack and needed to be repaired or replaced. (2) In late December 1999 the plaintiff put the property on the market with an asking price of $485,000. (3) In December 1999, the purchaser Mrs Lindsay, gave evidence that she inspected the property and because it was raining she did not notice the cracking on the path. She offered $465,000. The plaintiff accepted this offer and the sale was completed on 28 April 2000. 5 Hence liability was admitted and the matter proceeded on the issue of quantum before the Local Court Magistrate on 6 September 2000. The reasons for judgment 6 The Magistrate in his extempore judgment stated: "The plaintiff was the owner of a residential property at 56 Jingerra Parade, Pambula Beach. In 1993 and 1994 the plaintiff contracted with the defendant, who is a licensed concreter, to lay concrete driveways over an extended area exceeding 500 square metres. The paved areas were to have a imitation brick finish known as faux brick. The plaintiff had inspected similar concreting jobs finished with a faux brick finish carried out by the defendant and a contract was entered into. Soon after completion of the work cracks developed. The cracks continued to develop for some time and they are depicted in the photographs that have been put into evidence, exhibit 1. In May of '99, five years or more after the initial job, the plaintiff commenced proceedings against the defendant claiming $44,500 as the cost of rectification work abandoning the excess to bring the claim within the $40,000 jurisdictional limit of this Court. The claim was based on a number of experts who had given opinions as to the cost of rectifying the concrete work. But that never took place. In March 2000 the plaintiff sold the property. The asking price at that time of $485,000, was the listed price. The plaintiff accepted an offer of $465,000 from Mrs Lindsay. He is claiming that as his asking price was $485,000 and he accepted $465,000, $20,000 less than his asking price. That reduction was because of the condition of the concrete driveways and he is today reducing his claim to $20,000 as an amount of actual loss on the sale." 7 An engineer, Christopher Edwards (Ex B) uncontested evidence was that the cost of repair would have been somewhere in the vicinity of $45,000. The learned Magistrate summarised the three alternate bases that Colin Ferguson (Ex B), valuer, assessed damages, the first being based upon the sale price of other properties in the area Mr Ferguson placed a possible valuation of $490,000 on the property. He then reduced the value by 50% of the replacement cost of the driveways, arriving at a reduced value of $23,000. The second basis is called a lost opportunity of sale method. Mr Ferguson arrived at a delay in sale of perhaps a ten month period because prospective buyers might be put off by the aesthetic appearance or the condition of the driveways. That second basis of valuation is the interest on the sale of proceeds of $490,000, the full price at an interest rate of 6%, giving a reduced value, because of the lost opportunity of sale, of $24,500. The third basis of valuation relied upon the hypothetical prudent or discerning purchaser who Mr Ferguson suggested would consider the likelihood of the need to replace earlier than normal the paving and also the aesthetic effect might be displeasing and therefore might discount the purchase price by 5% or $24,5000. A valuation by Mr C A Ferguson was tendered (Ex 4, 11.10) Mr Ferguson was of the opinion that the unaffected value of the property was $490,000. But due to the cracking there was a loss in the value of $23,000. The defendant did not tender any evidence of an engineer or a valuer. 8 The learned Magistrate then stated: "All of these bases of valuations are entirely hypothetical. One can only give an opinion as to what a prospective purchaser might do, but in this matter we are not dealing with a hypothetical prospective purchaser. We are dealing with a real purchaser for value, Mrs Lindsay, who purchased the property for $465,000. The defendant has put into evidence Mrs Lindsay. She purchased the property after one short cursory inspection during rain. She inspected the inside of the property for about twenty minutes and at that time says she made a decision to buy the property. She made that decision as soon as she walked inside. She didn't notice any cracking of the concrete paved areas, nor did she find out about any defects prior to the time of settlement. Her immediate offer to the plaintiff, who was offering the property for sale at $485,000, was to put in a counter offer of $465,000 which was accepted without any further negotiation. Mrs Lindsay's evidence is that the cracked driveways made absolutely no difference to the price she offered and the price that she did offer as a counter offer was accepted by the vendor. So, we have a situation where the plaintiff has been prepared to accept Mrs Lindsay's offer for the property, he says, on the basis that he believed that the state of the paved areas might have had some effect on the amount that Mrs Lindsay was offering, or he was prepared to let the property go $20,000 cheaper than his listed price, because of his understanding of the reduced value because of the problems with the paved areas. But the fact is that the plaintiff sold the property with the defect to a purchaser who was unaware of the defect and that defect made absolutely no difference to the purchaser's decision to purchase the property or the price she offered and that was accepted. The purchaser did indicate that she might have been prepared to negotiate further had the plaintiff not immediately accepted her first offer, but of course, that is hypothetical too. The plaintiff accepted the first offer or the counter offer given to him by the purchaser. The plaintiff now claims that in his mind he did that because he felt the property was reduced in value by $20,000. The plaintiff has an obligation to mitigate his losses. The problem I see with the plaintiff's case here is that the plaintiff never made any enquiry of the purchaser as to whether her counter offer was brought about by the cracked driveways, whether she would have been prepared to pay more for the property. He simply, without any further negotiation, without any question, accepted the price that she offered. I feel that in a situation like this surely it was incumbent upon the plaintiff discharging his duty to mitigate his own loss to at least reject the initial offer and try and negotiate a higher price. It may be that the plaintiff could have achieved the price that he says he was seeking, his list price, had he entered into negotiations with Mrs Lindsay. The driveways made absolutely no difference to her desire to own the property or to the price she offered. On the one hand there was a diminution in the value of the property and this situation would have been quite different had the plaintiff retained the property. But, in my view, he successfully sold the property with a defect to the purchaser who was unaware of the defect. I am of the view and make a finding that the plaintiff has not satisfied this Court that the reduction in the sale price from $485,000 to $465,000 was brought about because of the defective workmanship, or the defect in the property brought about by defective workmanship of the defendant. Alternatively he has not mitigated or made any attempt to mitigate his loss in the matter." 9 The Magistrate entered judgment in favour of the defendant. 10 The plaintiff submitted that even if the Magistrate was right and the plaintiff, for reasons given by the Magistrate, was not entitled to compensatory damages, the defendant admitted the liability. In such a case the plaintiff should have been awarded at least nominal damages. The defendant's counsel sought distinguish these each of the first three cases and submitted that the above proposition was not a universal one and did not apply to contract. 11 The plaintiff referred to Cheshire and Fifoot, (Law of Contract, 7th Australian edition at 773) where at the commencement of Chapter 23 the learned authors say: "A party who has breached a contract is liable to pay at least nominal damages, even if no loss has been caused." 12 The authorities cited for this proposition in the text are Luna Park (NSW) Ltd v Tramways Advertising Pty Ltd (1938) 61 CLR 286; Baume v Commonwealth (1906) 4 CLR 97 at 116-17; Dyke v McLeish Estates Ltd (1927) 27 SR (NSW) 74; Huppert v Stock Options of Australia Pty Ltd (1965) 112 CLR 414 at 424, 431; Berger v Boyles [1971] VR 321; Biotechnology Australia Pty Ltd v Pace (1988) 15 NSWLR 130 at 156; Cell Tech Communications Pty Ltd v Nokia Mobile Phones (UK) Ltd (1995) 136 ALR 733. 13 In Baume, Griffith CJ referred to a passage by Lord Halsbury LC in "The Mediana" v "The Comet" (1900) AC 113 at 116 where the distinction between nominal and real damage was discussed. The celebrated passage from "The Mediana" is as follows: "The distinction between nominal and real damages was pointed out very clearly by Lord Halsbury L.C. in the " The Mediana" v "The Comet" : " The Mediana" cited by Mr Knox. He said:- "I wish, with reference to what has been suggested at the bar, to remark upon the difference between damages and nominal damages. 'Nominal damages' is a technical phrase which means that you have negatived anything like real damages, but that you are affirming by your nominal damages that there is an infraction of a legal right which, though it gives you no right to any real damages at all, yet gives you a right to the verdict or judgment because your legal right has been infringed. But the term 'nominal damages' does not mean small damages. The extent to which a person has a person has a right to recover what is called by the compendious phrase damages, but may be also represented as compensation for the use of something that belongs to him, depends upon a variety of circumstances, and it certainly does not in the smallest degree suggest that because they are small they are necessarily nominal damages." 14 Lord Halsbury in turn referred to The Owners of No 2 Steam Sand Pump Dredger v The Owners of SS "Greta Holme" [1897] AC 596 in which Lord Herschell laid down a broader principle other than Lord Halsbury. However, neither Lord Herschell or Lord Halsbury sought to confine this broad principle exclusively to tort. In The "Greta Holme" Lord Halsbury in turn referred to Bradshaw v Lancashire and Yorkshire Ry Co (1875) LR 10 CP 189 where the question arose whether an executrix might recover, in an action for breach of contract against the railway company, the damage to the testator's personal estate arising in his lifetime for medical expenses and loss occasioned by his inability to attend to business, it was held without doubt that damages for the loss of not being able to attend to business were recoverable. The question there arose in a manner which rendered it peculiarly necessary to determine whether the damage sought to be recovered was the natural and direct consequence of the breach. Lord Halsbury commented that the distinction between "tort" and "contract" though pertinent in that case, is immaterial here. 15 In Dyke the plaintiffs has a problem with rabbits on their property. The defendants agreed to keep boundary fences in repair so as to keep the rabbits out but failed to do so. It was held that the plaintiffs were entitled to bring an action prior to completion of the contract even though by so doing they might be unable to prove more than nominal damages. At 76 Street CJ stated that: "Until completion they might or might not be in a difficulty in proving any actual damage, but a breach of contract always gives the injured party a right of action for damages without proof of actual damage. If he cannot prove any actual loss he recovers nominal damages, and a defendant cannot be heard to complain of an action because it is brought in circumstances in which only nominal damages can be recovered." 16 Luna Park was a claim for breach of contract. The High Court at 305 held that: "It follows that the defendant, having rightfully determined the contract, was entitled to claim damages for the non-performance by the plaintiff of the contract for the third season. Damages claimed in respect of that season must depend upon an estimate of the difference between what the defendant was bound to pay for that season, namely £20 per week, and the benefit which the defendant would have obtained from the proper performance of the contract. That estimate would measure the loss suffered by the defendant by reason of non-performance of the contract. But no evidence whatever was given with respect to this subject, and there is therefore no basis upon which other than nominal damages can be estimated in respect of the third season. Accordingly in the cross-action there should be judgment for the defendant for one shilling as nominal damages, without costs." 17 As stated in the above cases, where there has been a breach of contract, there has been an infraction of a legal right which gives rises to a verdict or judgment. If the plaintiff cannot prove any actual loss, he or she recovers nominal damages. In this case liability had been admitted. The defendant had admitted that it breached his contract with the plaintiff. That being so the plaintiff is entitled to a verdict and at least nominal damages. 18 It is my view that the Magistrate, in finding a verdict in favour of the defendant, erred in law. The decision of the Magistrate of 6 September 2000 should be set aside and the matter remitted to the Magistrate for determination of damages according to law. It would be preferable for this court to finally determine this matter. However this court is not in a position to do so. The Magistrate did not seem to accept the plaintiff's uncontested evidence that he agreed to a lesser than advertised price for the sale of his home because of the concreting problem. The Magistrate did not articulate his reason for this approach. It may have been the plaintiff's demeanour in the witness box but it is not for this court to speculate. 19 Costs are discretionary. Costs should follow the event. The defendant is to pay the plaintiff's costs as agreed or assessed. 20 I make the following orders: (1) The decision of Magistrate O'Connor of 6 September 2000 is set aside. (2) The matter is to be remitted to the Magistrate for determination of damages. (3) The defendant is to pay the plaintiff's costs as agreed or assessed. ********** Last Modified: 06/06/2001 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.