Supreme Court New South Wales Medium Neutral Citation: Thomson v Golden Destiny Investments Pty Ltd (No 3) [2016] NSWSC 78 Hearing dates: 4 and 5 February 2016 Decision date: 17 February 2016 Jurisdiction: Equity - Expedition List Before: Stevenson J Decision: Application dismissed Catchwords: REAL PROPERTY – caveats – caveat lodged without reasonable cause – what loss attributable to caveator's refusal to remove caveat – alleged loss of a chance to purchase alternative property – whether causation shown on the balance of probabilities – whether lost opportunity was of some value Legislation Cited: Civil Procedure Act 2005 (NSW) Real Property Act 1900 (NSW) Cases Cited: Lee v Ross (No 2) [2003] NSWSC 507 Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 Thomson v Golden Destiny Investments Pty Ltd [2015] NSWSC 1176 Texts Cited: Concise Oxford Dictionary (2011, Oxford University Press) Category: Principal judgment Parties: Joseph Luis Alonso (Third Plaintiff) Kay Alison Alonso (Fourth Plaintiff) New Galaxy Investments Pty Ltd (Third Defendant) Representation: Counsel: G A Sirtes SC with N Bilinksy (Third and Fourth Plaintiffs) M L D Einfeld QC with D Krochmalik (Third Defendant) Solicitors: Fox & Staniland Lawyers (Third and Fourth Plaintiffs) Gardner Ekes Lawyers (Third Defendant) File Number(s): SC 2014/228930 Judgment Introduction 1. This is an application by two of the plaintiffs in these proceedings, Mr and Mrs Alonso, for compensation against the third defendant, New Galaxy Investments Pty Ltd ("NGI") pursuant to s 74P of the Real Property Act 1900 (NSW). 2. On 23 April 2014 the plaintiffs, including Mr and Mrs Alonso, exchanged contracts with the first defendant, Golden Destiny Investments Pty Ltd ("GDI") to sell six adjoining properties at Turramurra on terms that: 1. settlement was to occur on 22 July 2014; 2. the total purchase price for the properties was $15.3 million; and 3. on exchange, part of the purchase price, $8 million, was to be released to the vendors and paid to them in proportion to the overall sale price of the six properties. 1. Of the $8 million, $6 million was paid by NGI, allegedly in anticipation that GDI would novate to NGI the six sale contracts pursuant to an agreement described as the "Short Form Deed". 2. On 18 July 2014, relying on its rights under the Short Form Deed, NGI lodged caveats over the title of the Turramurra properties, including that owned by Mr and Mrs Alonso. The caveats remained on the title on the scheduled completion date of 22 July 2014, and settlement of the sale did not proceed. 3. On 4 August 2014 the vendors, including Mr and Mrs Alonso, commenced proceedings in this Court seeking removal of the caveats. 4. Those proceedings were heard by Sackar J over some 12 hearing days in March and May 2015. 5. Sackar J delivered judgment on 21 August 2015: Thomson v Golden Destiny Investments Pty Ltd [2015] NSWSC 1176. 6. At [15] of that judgment, Sackar J stated: "On the third day of final submissions, i.e. 15 May 2015, Mr Donohoe, then counsel for NGI, indicated to the Court that he had been instructed to concede that NGI was not at that time ready, willing and able to complete the New Contracts. Mr Donohoe also conceded that at that time there was no legal basis on which he could maintain the caveats. After a brief adjournment, Mr Donohoe indicated that the documentation to facilitate the withdrawal of the caveats was being prepared and he asked to be excused to attend to that process." 1. NGI removed the caveats from the titles of the relevant properties, including that of Mr and Mrs Alonso, on 15 May 2015. 2. So far as concerns the caveats, Sackar J concluded: "However, as a matter of practical reality, it was NGI's caveats which prevented the settlement at all relevant times from taking place. The moment the caveats were withdrawn, immediate steps were taken to organise a settlement. Intimate knowledge of the history of the matter points, in my view, to NGI's caveats as being the significant, if not sole, impediment to settlement occurring." [At [379]] And: "In relation to the case put by the plaintiffs, I am satisfied that NGI did not have a caveatable interest in the Turramurra Properties and, further, that NGI did not have reasonable cause to lodge the caveats. As a consequence, I am satisfied that the plaintiffs are entitled to compensation pursuant to s 74P of the RPA." [At [644]] 1. On 22 May 2015 Sackar J ordered that the $6 million (referred to at [3] above) be paid into Court. That sum remains in Court. 2. On 3 July 2015 the sales were completed and Mr and Mrs Alonso received the sum of $1,076,659.75 (in addition to the sum that they had received on the exchange of contracts). 3. On 20 November 2015, Sackar J made an order pursuant to s 82 of the Civil Procedure Act 2005 (NSW) that NGI make an "interim payment of damages" to the plaintiffs pursuant to s 74P of the Real Property Act in the sum of $796,026.41. 4. Of that amount, $96,911.30 was attributable to Mr and Mrs Alonso's then claim for damages which, for the most part, comprised a claim for "rent" in the order of $39,312 and "interest on balance" in the sum of $27,965 (together with minor amounts for electricity, water and insurance costs). 5. Also on 20 November 2015, Sackar J stayed the order at [13] pending NGI's appeal against Sackar J's decision. Mr and Mrs Alonso's claim 1. Mr and Mrs Alonso now seek compensation under s 74P of the Real Property Act upon a basis which was described by Mr Sirtes SC, who appeared with Mr Bilinsky for Mr and Mrs Alonso, in opening written submissions as: "…an amount of compensation essentially representing the difference between the average purchase price of selected properties (namely those which they now identify as ones which they would have purchased after 22 July 2014), and the price of those properties as at the eventual date of settlement (being 3 July 2015)." 1. In closing submissions, Mr Sirtes made clear that the case sought to be advanced on behalf of Mr and Mrs Alonso was one of loss of a chance or opportunity to purchase identified properties. That was consistent with his opening written submissions as follows: "Put simply, by NGI's actions in wrongfully maintaining (and thereafter refusing to withdraw) the caveats, the Alonsos were prevented from settling on the sale of their Turramurra home and using the proceeds of such sale (which in reality would have been immediately available to them) to purchase a new home for themselves in the Collaroy area." 1. Mr Sirtes also submitted: "Now that this claim has been brought, the Alonsos readily accept that they cannot double-dip in terms of their damages. Sackar J has already evaluated the losses that the Alonsos have sustained in being forced to rent premises after they vacated their home in anticipation of a settlement that, due to [NGI's] conduct, was derailed and only occurred in early July 2015. The rent payments they made actually occurred; the damages they now seek however operate on a presumed substratum that had they actually bought into the market in July 2014 they would have obtained 'more bang for their buck' than being forced into the Sydney residential property market a year later. If the Court accepts the Alonsos' evidence that they are financially worse off in having been locked out of the market, they accept they must relinquish their rent claim. If this claim fails, however, the Alonsos are entitled to their rental losses calculated and awarded by Sackar J." Section 74P of the Real Property Act 1. Section 74P(1) of the Real Property Act is in the following terms: "(1) Any person who, without reasonable cause: (a) lodges a caveat with the Registrar-General under a provision of this Part, (b) procures the lapsing of such a caveat, or (c) being the caveator, refuses or fails to withdraw such a caveat after being requested to do so, is liable to pay to any person who sustains pecuniary loss that is attributable to an act, refusal or failure referred to in paragraph (a), (b) or (c) compensation with respect to that loss." 1. Mr Einfeld QC, who appeared with Mr Krochmalik for NGI, accepted that the effect of Sackar J's findings was that NGI was liable to pay Mr and Mrs Alonso such pecuniary loss as they could demonstrate was "attributable" to the lodgement by NGI of the caveat on the property on 18 July 2014. 2. The test under s 74P that loss be "attributable" to the lodgement of the caveat without reasonable cause has been said to be less exacting than a test of causation. 3. Thus, in Lee v Ross (No 2) [2003] NSWSC 507 Palmer J said: "40. I do not think it is necessary to show that the precise loss suffered by an owner of land as a consequence of the wrongful lodgement of a caveat is known to or foreseeable by the caveator at the time of lodgement. So to hold would be to introduce into the statutory remedy afforded by s.74P(1) notions of causation and loss which are highly developed in the law of tort and contract. The section itself does not use words which invoke or suggest those notions: it seems deliberately to avoid the use of the words 'caused by' and uses, instead, the more general word 'attributable'. In my view, a practical commonsense approach to the identification of compensable loss 'attributable' to the wrongful lodgement of a caveat is what is required under s.74P(1). 41. One starts with the basic proposition that a caveat, particularly one preventing any dealing at all with the subject land, prohibits during its currency the owner of that land from dealing with it as that owner would otherwise be free to do. In the normal course of a contract for the sale of land between parties at arm's length, the vendor does not usually inform the purchaser of the vendor's own financial position and of the vendor's plans for the use of the proceeds of sale of the property and as to how those plans might be affected if a dispute arises, the contract is not completed and the purchaser places a caveat on the title so that the vendor has neither the right to deal with the property nor any monetary compensation for the loss of that right. 42. In my view, when a purchaser places a caveat on the title to property in such a case, the purchaser accepts the risk of liability to compensate the vendor for whatever loss can realistically be shown to be attributable to a wrongful lodging of the caveat, whether or not the purchaser knows what that loss is likely to be." 1. For myself, I do not see very much (if any) difference between the notion that loss is "caused by" an event on the one hand and the notion that a loss is "attributable" to an event on the other. 2. Indeed, the Concise Oxford Dictionary (2011, Oxford University Press) defines "attribute something to" an event as meaning "regard something as belonging to or being caused by" that event. 3. My attention was not drawn to any other case under s 74P in which compensation was sought or obtained for pecuniary loss "attributable" to a loss of a chance or opportunity. 4. In my opinion, notwithstanding Palmer J's remarks in Lee v Ross, and the use of the word "attributable" in s 74P, a party seeking compensation under s 74P for the loss of a chance to acquire an alternate property, must satisfy the usual requirements for demonstrating that the impugned conduct (lodgement of a caveat without reasonable cause) has caused the loss of opportunity contended for. I regard that as being no different, as a practical matter, to showing that the loss of opportunity is "attributable" to the presence on title of the impugned caveat. The evidence of Mr Alonso 1. Mr Alonso swore two short affidavits in support of Mr and Mrs Alonso's claim for compensation under s 74P. 2. Relevantly, Mr Alonso's first affidavit was in the following terms: "3. We lived in our Turramurra Property for 13 years. It was our principal place of residence. 4. Settlement of the sale of our Turramurra Property was originally due to take place on 22 July 2014. Upon sale, we always intended to purchase another property on the Northern beaches in the Collaroy area. So that we could find a property in that area, we decided to rent a house while we were looking. 5. We subsequently rented 76 Aubreen Street, Collaroy Plateau and moved into that property on 5 July 2014. 6. We only wanted a 6 month lease but the landlord insisted on us taking a 12 month lease, which we subsequently agreed to. It was our intention that if we found our new property during the rental period, we would move out and pay the break fee. 7. We always particularly liked the Collaroy area and intended to purchase a house with at least 4 bedrooms, a minimum of 2 living spaces and preferably a swimming pool, although in our view this was not mandatory. We considered the proximity to the beach, as well as the proximity to transport and children's schools. 8. For this reason, we enrolled our daughter at St Rose Primary School, which is located at the top of Collaroy Plateau, and our 10 year old son at Pittwater House, which is on the edge of Dee Why and Collaroy. Our daughter will attend Pittwater House from year 5. 9. My wife and I viewed a number of properties (approximately 20-30) in the Collaroy area. 10. In doing so, we identified 5 properties that we would have purchased. Two of those properties (being the first two in the list below) sold prior to the scheduled settlement date of 22 July 2014. The 5 properties were:- (a) 14 Bedford Crescent, Collaroy: (b) 13 Hilma Street, Collaroy: (c) 37 Lincoln Avenue, Collaroy: (d) 3 Eastbank Avenue, Collaroy: (e) 18 Alexander Street, Collaroy All of these properties were on the market for sale between May and November 2014 and all sold during that period. 11. By reason of the settlement of the sale of our Turramurra Property not proceeding on 22 July 2014, we were not in a financial position to purchase any of the properties". 1. In his second affidavit Mr Alonso deposed to the fact that, as at July 2014 he and Mrs Alonso had something in the order of $1.1 million available to contribute to the purchase of a property. Of that sum, some $600,000 represented that part of the purchase price (beyond the deposit) that had been made available to Mr and Mrs Alonso and which Mr and Mrs Alonso regarded as being potentially liable to be repaid in the event that the conveyancing transaction went awry. 2. In his second affidavit, Mr Alonso also said: "Further to what I have said in paragraphs 7 and 8 of my affidavit sworn 19 November 2015, it remains the intention of my wife and I to purchase a 4 bedroom house with a minimum of 2 living spaces in the suburb of Collaroy. Given however that the market has moved against us since July 2014, we will now need to borrow money from our bank in order to do so." Consideration 1. It is common ground that I should approach Mr and Mrs Alonso's claim for compensation upon the basis that, but for the lodgement by NGI of the 18 July 2014 caveat, the sales of the Turramurra properties (including that of Mr and Mrs Alonso) would have completed on or about 22 July 2014. 2. I am satisfied, on the evidence, that in the event settlement had occurred, Mr and Mrs Alonso would have "been in the market" to purchase a property in the Collaroy area and had something in the order of $2.125 million available with which to purchase a property in the Collaroy area. 3. As I have set out above, Mr Alonso's affidavit evidence was that he and Mrs Alonso had identified five properties "that we would have purchased". 4. Two of those properties were sold in May 2014 and thus would not have been available for purchase by Mr and Mrs Alonso after 22 July 2014. 5. As to the other three properties: 1. 37 Lincoln Avenue was sold on 13 September 2014 for $2,080,000; 2. 3 Eastbank Avenue was sold on 27 October 2014 for $2,125,000; and 3. 18 Alexander Street was sold on 2 November 2014 for $1,935,000. 1. Mr Alonso said that he understood that each of those properties was sold at auction. 2. Bound up in Mr and Mrs Alonso's case that they "would have" purchased one of these properties are several propositions. The first is that they "would have" attended the auctions of one or more of these properties (with $2.125 million available to spend). The second is that they "would have" sought to make bids at one or more of the auctions. The third is that at one of the auctions (not identified) they "would have" been the successful bidders. 3. In my opinion, in the light of the authorities, the correct analysis of these propositions requires consideration of two questions. 4. First, did the lodgement of the caveats by NGI cause Mr and Mrs Alonso to lose the opportunity to attend and bid at the auctions of all or any of the three properties referred to at [35]? 5. Second, what is the value of that lost opportunity (or those lost opportunities)? 6. As to the first question, in Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 Brennan J stated (at 362 and 368): "…the loss of a mere opportunity to acquire a benefit is not in itself a loss, but the loss of the benefit will be such a loss if the plaintiff proves that he could and would have taken the opportunity and that the benefit would then have been yielded. That is tantamount to saying that the benefit is a loss in respect of which an amount may be recovered if the links in the chain of causation up to the loss of the benefit are proved. … Where a loss is alleged to be a lost opportunity to acquire a benefit, a plaintiff who bears the onus of proving that a loss was caused by the conduct of the defendant discharges that onus by establishing a chain of causation that continues up to the point when there is a substantial prospect of acquiring the benefit sought by the plaintiff. Up to that point, the plaintiff must establish both the historical facts and any necessary hypothesis on the balance of probabilities. A constant standard of proof applies to the finding that a loss has been suffered and to the finding that that loss was caused by the defendant's conduct, whether those findings depend on evidence of historical facts or on evidence giving rise to competing hypotheses. In any event, the standard is proof on the balance of probabilities." 1. Mr Sirtes pointed to the fact that the evidence established that Mr and Mrs Alonso: 1. moved from Turramurra to Collaroy in June 2014 with a view to purchasing a property in the Collaroy area; 2. rented accommodation in Collaroy for that purpose and enrolled both their children in local schools; 3. inspected some 20 to 30 properties in the Collaroy area; 4. had located five "suitable" properties in Collaroy of which three were still available for purchase at the time the sale of Turramurra would otherwise have been completed; and that: 1. of the three properties still available, two actually sold at auction for an amount less than the amount Mr and Mrs Alonso had available to spend. 1. In these circumstances, and although Mr Alonso did not say so in terms, I am prepared to infer that, had the sale of Turramurra settled in July 2014 he (and Mrs Alonso) would, in all probability, have "taken the opportunity" to attend and bid at one or more of the auctions. 2. They have been denied that opportunity by reason of the caveat. 3. As to the value of that lost opportunity, the plurality in Sellars (Mason CJ and Dawson, Toohey and Gaudron JJ) said at 355: "…damages for deprivation of a commercial opportunity…should be ascertained by reference to the court's assessment of the prospects of success of that opportunity had it been pursued … …the applicant must prove on the balance of probabilities that he or she has sustained some loss or damage…by demonstrating that the contravening conduct caused the loss of a commercial opportunity which had some value (not being a negligible value), the value being ascertained by reference to the degree of probabilities or possibilities." [Emphasis in original] 1. Brennan J said (at 364): "As a matter of common experience, opportunities to acquire commercial benefits are frequently valuable in themselves, not only when they will probably fructify in a financial return but also when they offer a substantial prospect of a financial return… Provided an opportunity offers a substantial, and not merely speculative, prospect of acquiring a benefit that the plaintiff sought to acquire or of avoiding a detriment that the plaintiff sought to avoid, the opportunity can be held to be valuable." [Emphasis in original] 1. I have given Mr and Mrs Alonso's case careful consideration. No one could fail to have sympathy for their plight. However, I am unable to come to any conclusion as to the value of the opportunity they have lost, nor even as to whether the lost opportunity has any value. I simply cannot say what probably, or even possibly, may have been the outcome of any of the three auctions had Mr and Mrs Alonso attended them. 2. There is no evidence before me of the precise nature of those properties, the differences between them, the particular attributes that attracted Mr and Mrs Alonso's interest, the marketing campaign undertaken in relation to them, the number of persons bidding at each auction, or the manner in which the bidding proceeded. 3. The earliest auction was that for 37 Lincoln Avenue (on 13 September 2014). It sold for $45,000 less than Mr and Mrs Alonso would have had available. I can only speculate as to what would have happened if Mr and Mrs Alonso were also bidding for that property. 4. The second auction was for 3 Eastbank Avenue (on 27 October 2014). That property sold for an amount equal to the amount Mr and Mrs Alonso had available to spend. I can only speculate as to what effect Mr and Mrs Alonso's presence as active bidders would have had on the price at which the property would have sold at auction. 5. The third auction was for 18 Alexander Street (on 2 November 2014). That property sold for $190,000 less than Mr and Mrs Alonso would have had available. But, again, I can only speculate as to what would have happened if Mr and Mrs Alonso had joined the bidding; let alone how long Mr and Mrs Alonso would have continued bidding. According to Mr and Mrs Alonso's expert valuer, Mr Thomas Webster, this property was in "original condition" and, unlike 37 Lincoln Avenue, has no views and unlike 3 Eastbank Avenue, has no pool. There may be other differences not revealed on the evidence. The sale price suggests this property was less attractive than the other two. There is no evidence from Mr and Mrs Alonso about this. 6. As Mr Sirtes accepted in final submissions, Mr Alonso's evidence that he and Mrs Alonso "would have purchased" one of the three nominated properties had they had the funds was in truth aspirational and amounted to no more than a statement that they would have wished to, and would have sought to have done so. 7. As sympathetic as I am to the position Mr and Mrs Alonso have found themselves in as a result of the nightmare that has resulted from their decision to enter the contracts of 23 April 2014, I am not able to accept their case that they have lost an opportunity which has given rise to a pecuniary loss attributable to NGI's caveat. 8. This application should be dismissed. 9. In those circumstances, it is not necessary for me to address the criticisms offered by Mr Einfeld of Mr Webster's valuation report. ********** 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: 17 February 2016