Parkin v Pagliuca [2008] NSWSC 827

New South Wales Supreme Court

CITATION : Parkin v Pagliuca [2008] NSWSC 827

HEARING DATE(S) : 11/08/2008

JUDGMENT DATE : 11 August 2008

JURISDICTION : EQUITY

JUDGMENT OF : Bryson AJ

DECISION : Order that in addition to costs payable under Orders 4 and 9 of my Orders of 7 March 2008 interest is payable pursuant to s 101 of the Civil Procedure Act from 7 March 2008 until the date or dates of payment.

CATCHWORDS : DAMAGES - solicitor's negligence - not effectuating valid exchange of contracts - not advising Vendors of invalidity when they had an opportunity to re-negotiate - assessment of damages in [2008] NSWSC 168 decision on facts.

LEGISLATION CITED : Trade Practices Act

PARTIES : Antonio Pagliuca, Domenique Pagliuca - Cross-claimants in Second Cross-claim Peter Williams - Cross-defendant in Second Cross-claim

FILE NUMBER(S) : SC 2068/2006

COUNSEL : C Harris SC - Cross-claimants G Curtin - Cross-defendant

SOLICITORS : Willis & Bowring - Cross-claimants Colin Biggers & Paisley - Cross-defendant

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

BRYSON AJ

MONDAY 11 AUGUST 2008

2068/06 DONNA MARY PARKIN v ANTONIO PAGLIUCA & ANOR JUDGMENT 1 HIS HONOUR : On 7 March [2008] NSWSC 168 I gave judgment on the Second Cross-claim for the cross-claimants the Pagliucas for damages to be assessed, and awarded costs against the cross-defendant Mr Williams, solicitor. Today I have heard argument on the assessment of damages. 2 The cross-claimants contend that damages should be assessed as follows. The contract price on the sale to the plaintiff Ms Parkin of Unit 5 was $585,000. The cross-defendants were unable to compel completion of that sale and ultimately sold Unit 5 for $400,000. Their principal claim therefore is for loss on re-sale, $185,000. They also claim interest, which they contend should be calculated from 4 November 2005, the date by which, if the Contract for Sale of Unit 5 had been enforceable, completion should have taken place, calculated from when the strata plan was registered. 3 In my earlier reasons I made some observations at paragraph 45, which among other things dealt prospectively with matters which I then saw as involved in the assessment of damages. Mr Williams' negligence referred to in paragraph 45 was negligence in bringing about the exchange of contracts: he had not noticed the discrepancies between the two counterparts. 4 I found that if Mr Williams had "taken a complete counterpart back to Ms Parkin for her approval it is highly probable, indeed fairly certain, that she would have accepted his view about what it was appropriate for her contract to contain." I went on to find that if Mr Williams had conducted the business properly "the vendors would have enforceable contractual rights against Ms Parkin for the sale of Unit 5 for $585,000. Her evidence showed she had resources including finance with which she could have completed that purchase." 5 In the judgment I did not express the detail of other particulars of negligence which had been the subject of claims in this cross-claim and of some reference during the hearing and argument, although they were not put forward as prominently as with hindsight appears appropriate. Mr Williams was also charged with negligence in failing to advise Mr and Mrs Pagliuca, particularly Mr Pagliuca who conducted their communications, to enter into a contract with Ms Parkin for the sale of Unit 1 as soon as it was possible to do so. He was also charged with negligence in failing to ensure that an enforceable agreement for the sale of Unit 1 came into existence for Unit 1 as soon as possible after the Pagliucas and Ms Parkin made an arrangement about Unit 1. The reference to ensuring a result is an overstatement of his duty, but generally the particular is relevant. Mr William should have taken reasonable steps to bring about an enforceable agreement for the sale of Unit 1. 6 If attention is confined to the particular of negligence to which I gave most attention in my earlier reasons, that is failing to bring about an exchange of contracts in enforceable form by having the two counterparts agree, there are in my opinion real difficulties for awarding the damages claimed. 7 When the Pagliucas set about attempting to enforce the agreement for the sale of Unit 5, they gave Ms Parkin notice to complete for 10 February 2006; but on that date they were not in a position to complete themselves as they had not complied with additional condition 50, which required special works to be done to Unit 5. These events meant that if there had been a contract the Pagliucas would have lost any entitlement to specific performance or other enforcement. 8 They also face intermediate difficulties in this claim to which I gave some attention at paragraph 25 of my earlier reasons. Ms Parkin had a case to put that she had been induced into the contract by misrepresentation. I did not rule on that case on 7 March. It is not at all clear that misrepresentation would have availed either to answer or to modify what would otherwise be any liability Ms Parkin incurred to the Pagliucas. As a contractual claim it faces formidable difficulties from several terms which were (or should have been) in the contract which in the understanding of the Pagliucas had been entered into. These terms provided to the effect (additional condition 41) that she relied on her own inspection and not on other information; (additional condition 31) that the Pagliucas were entitled to enforce the contract notwithstanding discrepancies in the size of rooms and (printed clause 10.1.5) for restricting the rights of the purchaser to make claims in respect of any promise, representation or statement not set out or referred to in the contract. She also would have encountered difficulties of fact in that it was not part of the basis on which she had asserted rights either in her solicitors' letters before action or indeed in her principal affidavit in the proceedings that any misrepresentation had been made to her. Notwithstanding these difficulties I accepted her evidence about a misrepresentation by Mr King the estate agent about the size of the bedroom which Unit 5, then still to be built, would contain. This misrepresentation may well have led to some remedy under the Trade Practices Act relating to misleading and deceptive conduct, but a successful outcome cannot be regarded as a certainly and cannot be equated to entitlement to escape from liability to complete the contract. 9 If the Pagliucas' claim under the first heading of negligence against Mr Williams is viewed as I feel it probably should be as a claim for loss of chance to obtain completion by Ms Parkin of the contract, the effect of misrepresentation would come under consideration in evaluating the chance of completion but in my judgment would not dominate the outcome, because supervening events show that the chance would not have had a favourable realisation. I say this because the Pagliucas, if they had an entitlement to completion, lost it when they gave notice to complete but were not in a position to complete themselves. 10 I turn to consider the entitlement of the Pagliucas on the second and third particulars of negligence. Although Ms Parkin voiced with some forcefulness her dissatisfaction with the size of the bedroom as constructed, and was able when at a relatively late stage the subject became part of her case to put forward what I found to be convincing material about a representation made by Mr King, it was not she who brought the size of the bedroom to the forefront in discussion with Mr Pagliuca. It would seem that when Mr Pagliuca saw the bedroom as constructed he recognised that its small size was likely to lead to trouble, because early in 2005, about February, he opened discussion with Ms Parkin about whatever problems that might give rise to, and the discussion led to consideration by them both of an arrangement in which Ms Parkin would buy Unit 1 and not Unit 5. As had been the case with Unit 5, Ms Parkin had particular and detailed special arrangements which she required if she were to buy Unit 1, somewhat similar to the tableau of special requirements which had led to inclusion of Additional Condition 50 in the purported Contract for Unit 5. 11 These were under discussion, it would seem for months, but the discussions never reached completion in that one issue remained outstanding in September 2005 when the deterioration in the relationship began to show itself. What was not agreed on was that Ms Parkin required Mr Pagliuca to bear the cost of alterations she required (and needed) to the bathroom of Unit 1. No agreement was ever reached on this. It seems that the negotiations broke off in or about September when both sides took their instructions away from Mr Williams and consulted separate solicitors of their own. 12 Mr Williams had earlier, by July, prepared documents which if they had been given effect would have had the result that the agreement for sale of Unit 5 was rescinded and a new agreement for the sale of Unit 1 was entered into. Ms Parkin approved these documents up to a point and went so far as to sign them, but did not authorise Mr Williams to exchange contracts with the Pagliucas, while the Pugliucas did not go so far as to sign them at all. 13 The burden of the complaint in the second particular depends upon the assumption that if he had been acting reasonably Mr Williams would have known that the previous agreement for the sale of lot 5 was ineffective and could not be enforced. Once that understanding is attributed to him (and in my opinion it should be) it becomes clear and obvious that it was his duty when advising the Pagliucas to point out how very much depended on coming to agreement on Unit 1 and doing so expeditiously. This was his duty to the Pagliucas: no less so because he had aother client and may have had another and conflicting duty to her. 14 Evidence elicited from Ms Parkin shows that one basis of her discontent, by no means the only one, was a view that the value of the property late in 2005 was less than she had agreed to pay the previous year. If she knew this, Mr Pagliuca was in a much better position to know it, because he had a number of units to sell. It seems to me that if the full position about the vulnerability of the agreement to sell Unit 5 had informed Mr Williams' advice to Mr Pagliuca and if Mr Pagliuca had been told the position in any clear way, he would have been unlikely to let the cost of altering a bathroom stand in the way of getting a sale. 15 The third particular, which I interpret as failing to take reasonable steps to bring about an enforceable sale of Unit 1, is really ancillary to the second. They both come back to Mr Williams not clearly knowing what the predicament was and not pointing it out to Mr Pagliuca. 16 On an address to the probabilities of what would have happened in the hypothetical situation that Mr Pagliuca had been told the real need to disentangle himself from the sale of Unit 5 and make a sale of Unit 1 it is highly likely that he would have smoothed over any difficulties relating to work on the bathroom or any other condition, and he would have proceeded to sell Unit 1 to Ms Parkin, who until a very late stage continued to wish to live in one of the units. 17 In those hypothetical events it is extremely unlikely that there would not have been completion of Unit 1 at the sale price formerly agreed for Unit 5; Ms Parkin was ready and willing to buy, and she was also able as she had finance approved. Timely advice would have brought about a successful sale, before she set solicitors in motion looking for grounds on which she could escape from the sale of Unit 5, which after several months they found. 18 No difficulties of the kind relating to misrepresentation to which I earlier referred would have been encountered, because Unit 1 was there for her to look at and come to a view about whether the size of the rooms was satisfactory. It is very unlikely that Mr Pagliuca would have failed to carry out the special conditions which she would have required for a sale of Unit 1. If Mr Williams had not conducted business negligently as referred to in the second and third particulars, the Pagliucas would have sold and completed the sale of Unit 1, recovered $585,000 on the sale, incurred expense in doing so which would only have been a negligibly different to the expense which they would have incurred in completing the sale of Unit 5 in good circumstances, but instead of that all they got was $400,000 on the sale of Unit 5. 19 It is probable that sale of Unit 1 would have been settled on much the same time scale as had been contemplated earlier, that is in a business-like way relatively soon after registration of strata plan. For this reason I adopt 4 November 2005 as the date on which it should be taken that the loss was incurred and interest should be calculated. The calculations are not contentious. 20 I make this order. Upon the inquiry as to damages directed by order 7 of the orders of 7 March 2008 I find that the cross-claimant's damages amount to $185,000. I award interest at court rates calculated from 4 November 2005. Interest on that basis to 31 July 2007 is $79,480. 21 The costs of the inquiry are part of the costs of the second cross-claim which have I already awarded to the cross-claimant. I have been asked to make a further order as to costs. 1 - 2 - 22 HIS HONOUR: It will be recalled that on 7 March 2008 I ordered that the defendants the Pagliucas pay the plaintiff's Ms Parkin's costs of the proceedings. 23 I am now asked to make an order in the nature of a Bullock order that the cross-defendant Mr Williams pay to the cross-claimants the Pagliucas the costs which they were so ordered to pay to Ms Parkin. I was referred to case law in relation to Bullock orders. The present situation does not exactly reproduce the situation in which Bullock orders are commonly encountered in which a plaintiff sues, for example, two defendants being in doubt or having a well arguable case against each of them, but succeeds only against one. 24 The order of events here was that Parkin sued the Pagliucas quite soon after the controversy arose to recover her deposit. The deposit of $29,250 proved to be a relatively small part of the controversy. The Pagliucas sued Mr Williams in a cross claim in the same proceedings for their damages which I have just assessed and Ms Parkin brought a third cross-claim also against Mr Williams. This might be thought to heap a mountain of complexity on a $29,250 deposit. 25 I made some observations earlier which showed my view that Miss Parkin had a very strong claim to get her deposit back. 26 In relation to costs, I think it is important to keep in view that the Pagliucas also had a very strong claim against Mr Williams for negligence in respect of the purported formation of the contract for Unit 5 and also the later conduct of their affairs. In my opinion they were not in a position, when acting reasonably, to admit Ms Parkin's claim or to send back her deposit without encountering possible adverse consequences in their litigation with Mr Williams, who maintained at all times the position that Ms Parkin was not entitled to the refund of the deposit and until a late stage in the hearing maintained that the contract was enforceable. 27 The present application for costs brings me to contemplate the position of the Pagliucas, sandwiched (as it were) between Ms Parkin and her claim for her deposit and the need to maintain their own claim against Mr Williams with appropriate vigour and without incurring too many procedural disadvantages. In my view they acted reasonably, indeed it would have been difficult for them to act otherwise, in maintaining resistance to Ms Parkin's claim, although if they faced no other litigation than her claim I could not approve of their resisting it. 28 They could I suppose have conceded her claim but such conduct is extremely rare for litigants in three-sided controversies. In that event it would have been for them to prove as against Mr Williams that Ms Parkin had been entitled to get her deposit back: a better forensic course was to leave that task to her. In my view they took the reasonable course in resisting her claim, as indeed their counsel did with great vigour, as well as presenting their own case against Mr Williams. In the circumstances, I propose to make an order in the nature of a Bullock order. 29 I direct that the costs recoverable by the cross-claimants in the second cross-claim under order 6 of the orders of 7 March 2008 include the costs payable by them as defendants to the plaintiff under order 4 of those orders.