Supreme Court New South Wales Medium Neutral Citation: Tagget v HP Industrial Pty Ltd [2014] NSWSC 901 Hearing dates: 3 July 2014 Decision date: 03 July 2014 Jurisdiction: Common Law Before: Davies J Decision: 1. Judgment for the Plaintiff against the First Defendant in the sum of $9,137,646. 2. The First Defendant pay the Plaintiff's costs of the proceedings. Catchwords: CONTRACT - breach of contract - contract for the sale of land - failure by purchaser to complete - assessment of damages - purchase price partly dependent on extent to which land can be developed Legislation Cited: Civil Procedure Act 2005 (NSW) Category: Interlocutory applications Parties: Ian Graeme Tagget (First Plaintiff) Rhonda Isabel Tagget (Second Plaintiff) HP Industrial Pty Ltd (First Defendant) HP 010 754 953 Pty Ltd (under external administration) (Second Defendant) Representation: Counsel: R A Parsons (Plaintiffs) No appearances (Defendants) Solicitors: CLS Legal (Plaintiffs) No appearances (Defendants) File Number(s): 2014/50210 Judgment 1The Plaintiff entered into a contract on 20 December 2007 to sell land at 795 Pottsville Road, Cudgera Creek to the First Defendant. The contract was varied on 24 December 2008. The deposit of $900,000 was paid by the First Defendant on 21 December 2007. 2The completion date was apparently extended to 4 January 2010 but it passed without the First Defendant having completed. That failure to complete led, ultimately, to receivers being appointed by the vendor's mortgagee (the Bank of Queensland) on 12 July 2012. The receivers served a Notice to Complete on the purchaser and stipulated the completion date as 18 September 2012. 3On 17 September the First Defendant by written notice purported to rescind the contract. The contract was not completed on 18 September or at all and on 19 September the receivers issued a notice terminating the contract. 4The Plaintiff now seeks damages for the breach of the contract against the First Defendant as purchaser and against the Second Defendant as guarantor of the First Defendant's obligations pursuant to clause 29 of the contract. The Second Defendant is now under administration. 5The First Defendant did not file a defence to the claim and on 8 May 2014 an order was made for judgment for the Plaintiff against the First Defendant for damages to be assessed. It is the assessment of damages with which this judgment is concerned. 6The land the subject of the contract was vacant land but was being sold for development purposes. So much is apparent from the terms of the contract. The purchase price consisted of three parts: First, the deposit of $900,000 which, as I have said, was paid; the second was for what was called a completion payment of $5.1m; the third was what was described as deferred payments which were calculated in accordance with Special Condition 20 of the contract. Both the completion payment and the deferred payments were to be paid upon completion of the contract. 7The calculation of the deferred payments is set out in clause 20.2 and subject to the definitions of "agreed land", "developable land" and "residue land" contained in clause 18.2. Clauses 18.2, 19 and 20 relevantly provide: 18.2 Definitions Agreed Land means that part of the Property with an area of no more than 6 ha which the parties agree is Developable Land as at the date of this Contract. Completion Payment: means the Completion Payment referred to in Special Condition 19.1(2) Deferred Payments means that part of the Purchase Price calculated in accordance with Special Condition 20. Developable land means land within the Property that upon completion of Earthworks is suitable for the erection of industrial improvements but does not include land within the Property required for Roads. Residue Land means an agreed part of the Property with an area of not less than 4 ha which is not Agreed Land but which the parties consider will be or is determined to be Developable Land after completion of the Earthworks. 19 PURCHASE PRICE 19.1 Calculation of Price The Purchase Price is the aggregate of; (1) the Deposit, being nine hundred thousand dollars ($900,000); (2) the Completion Payment, being five million one hundred thousand dollars ($5,100,000); and (3) the Deferred Payments, being the amount calculated in accordance with Special Condition 20. 19.2 Timing of Payment (1) The parties acknowledge that the Deposit is released to, and is the property of, the Vendor from the date it is paid. (2) On Completion the Purchaser must pay to the vendor: (a) the Completion Payment; and (b) any Deferred Payments owing as at Completion. (3) The Purchaser must pay any additional Deferred Payments to the Vendor in accordance with Special Condition 20. 20 DEFERRED PAYMENT 20.1 Basis of payment The parties acknowledge that (1) their initial agreement in relation to the Purchase Price was that the Purchaser would pay the Vendor an amount equal to $100 per square metre of Developable Land available on the Property the Purchaser then anticipating being able to extract approximately 10ha of Developable Land from the Property. (2) the Purchaser believes there is, at the date of this Contract, no less than 6 ha of Developable Land on the Property; (3) the parties believe that after the conduct of the Earthworks there will be at least 10 ha of Developable Land on the Property; and (4) the purpose of the Deferred Payments is to seek to ensure that the original agreement between the parties is honored in relation to the calculation of the Purchase Price. 20.2 Calculation For any part of the Residue Land that is determined to be Developable Land in accordance with Special Condition 20.3, the Deferred Payments are calculated based on the following formula: DP = DL x $100.00 where DP = means the Deferred Payment. DL = means each square metre of the Residue Land determined to be Developable Land in accordance with special condition 20.3. 20.3 Determination (1) The Vendor will serve a notice on the Purchaser identifying any part of the Residue Land it considers has become Developable Land (Vendor's Notice). Subject to paragraph (4) the Vendor may only serve two (2) Vendor's Notices under this Special Condition, the first of which must relate to at least 2ha of Residue Land, as surveyed by a registered surveyor appointed by the Purchaser. (2) Within twenty (20) business days (or such further time as may be reasonable in the circumstances as the case may be) of the date a Vendor's Notice is served the Purchaser must serve a notice on the Vendor: (a) accepting that all or any part of the Residue Land identified in the Vendor's Notice is Developable Land, in which case the date of the determination will be the date of the Purchaser's notice; or (b) denying that all or any part of the Residue Land identified in the Vendor's Notice is Developable Land and providing reasons for that denial. (3) If the Purchaser fails to serve a notice in accordance with paragraph (2)(b) the Residue Land subject to a Vendor's Notice will be determined to be Developable Land on the expiry of the period set out in paragraph (2). (4) If the Purchaser serves a notice under paragraph (2Kb) the Vendor may continue to carry out Earthworks on the Residue Land the subject of that notice and subsequently serve a further Vendor's Notice with respect to that land. 20.4 Timing of payment Any part of the Deferred Payments must be made on the later of: (1) Completion; and (2) within thirty (30) days of the determination being made that the relevant part of the Residue Land is Developable Land. 8In summary, the deferred payments were in respect of areas of the land that were described as developable land. The formula that was set out in clause 20.2 required the ascertainment of what the developable land amounted to. Clause 20.3 of the Special Conditions simplified that process in circumstances where the contract proceeded to completion in the ordinary course. However, what is being sought now is damages for breach of contract, and the provisions of clause 20.3 do not apply. 9The affidavit of Adam Michael Alexander Smith (who is an expert planning consultant) details how the developable land is calculated. Annexure G to that affidavit demonstrates that the net area, after allowing for the land subject to constraints and sterilised for industrial sub-division, as well as land that is reserved for infrastructure (principally roads), is 9.703 hectares. By reason of the definitions of "agreed land" and "residue land" the calculation in clause 20.2 relates to 3.703 hectares of land. 10After the failure of the purchaser to complete the contract, the receivers entered into a contract to sell the land on 21 March 2013 for $750,000. That contract completed on 19 June 2013. The result is that the damages that flow from the breach by the First Defendant of the contract consist of the $5.1m that ought to have been paid on completion and the amount of $3.703m consisting of the deferred payments, less $750,000 received by the re-sale of the land in 2013. The total of the completion payment and the deferred payments ought, if the contract had been completed, to have been paid no later than 18 September 2012, the date stipulated in the receiver's Notice to Complete. 11The Plaintiff is entitled to interest under section 100 of the Civil Procedure Act 2005 (NSW). Prior to the receivers' sale, the amount owing from 18 September 2012 was $8,803,000. Interest on that sum until 19 June 2013 amounts to $522,480.70. Thereafter, interest is calculated on $8,053,000 to the date of this judgment in the sum of $562,165.59. Interest, therefore totals $1,084,646.20. 12The Plaintiff is entitled to a judgment against the First Defendant in the sum of $9,137,646. 13I make the following orders: 1. Judgment for the Plaintiff against the First Defendant in the sum of $9,137,646. 2. The First Defendant pay the Plaintiff's costs of the proceedings. ********** 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. Decision last updated: 08 July 2014