Court of Appeal Supreme Court New South Wales Medium Neutral Citation: Upside Property Group Pty Ltd v Tekin [2017] NSWCA 336 Hearing dates: 25 May 2017 Decision date: 18 December 2017 Before: McColl JA at [1]; Macfarlan JA at [2]; Meagher JA at [3] Decision: 1. Appeal dismissed. 2. The appellant to pay the respondent's costs of the appeal. Catchwords: CONTRACTS – anticipatory breach – where vendor repudiated contract for sale of development land and purchaser elected to terminate – where purchaser brings action in damages for loss of bargain – whether purchaser satisfied requirement that it was not substantially incapacitated from performance at time of termination – whether primary judge erred in formulation of that test of readiness and willingness – whether purchaser also required to prove on balance of probabilities that it would have proceeded to completion but for repudiation VALUATION – development land – evidence of informal and unaccepted offers – whether primary judge erred in giving no significant weight to that evidence Legislation Cited: Supreme Court Act 1970 (NSW), s 75A Uniform Civil Procedure Rules 2005 (NSW), r 51.53 Cases Cited: Auxil Pty Ltd v Terranova [2009] WASCA 163; (2009) 260 ALR 164 Commonwealth v Amann Aviation (1991) 174 CLR 64 Cordelia Holdings Pty Ltd v Newkey Investments Pty Ltd [2004] FCAFC 48 De Medina v Norman (1842) 9 M & W 820; 152 ER 347 DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423 Foran v Wight (1989) 169 CLR 385 Fox v Percy (2003) 214 CLR 118; [2003] HCA 22 Hensley v Reschke (1914) 18 CLR 452 Hochster v De la Tour (1853) 3 El & Bl 678 Hoffman v Cali [1985] 1 Qd R 253 Kuru v State of New South Wales (2008) 236 CLR 1; [2008] HCA 26 Michael Realty Pty Ltd v Carr [1977] 1 NSWLR 553 MMAL Rentals Pty Limited v Bruning (2004) 63 NSWLR 167; [2004] NSWCA 451 Peter Turnbull & Co Pty Ltd v Mundus Trading Co (Australasia) Pty Ltd (1954) 90 CLR 235 Psaltis v Shultz (1948) 76 CLR 547 Rawson v Hobbs (1961) 107 CLR 466 Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 Sharjade Pty Ltd v The Commonwealth [2009] NSWCA 373; (2009) 15 BPR 28,443 Y P Barley Producers Ltd v E C Robertson Pty Ltd [1927] VLR 194 Category: Principal judgment Parties: Upside Property Group Pty Ltd (Appellant) Celal Tekin (Respondent) Representation: Counsel: J Stoljar SC and P Reynolds (Appellant) GA Sirtes SC and A Cornish (Respondent) Solicitors: MLH Lawyers (Appellant) Low Dougherty & Stratford (Respondent) File Number(s): 2016/292021 Decision under appeal Court or tribunal: Supreme Court Jurisdiction: Equity Citation: [2016] NSWSC 1260 Date of Decision: 12 September 2016 Before: Darke J File Number(s): 2015/133351 [Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.] Headnote [This headnote is not to be read as part of the decision] The parties entered into a contract for the sale of a large development site in Castle Hill and a side deed permitting each to procure the re-sale or sub-sale of the property to a third party. After the time for completion had passed, the respondent vendor issued a notice to complete and later purported to terminate the contract. His doing so constituted a wrongful repudiation, for which the appellant purchaser elected to terminate the contract and brought an action for anticipatory breach of contract seeking substantial damages for loss of bargain (or, alternatively, loss of profit). Dismissing that action, the primary judge (Darke J) held that the purchaser had failed to prove a condition precedent to its claim, namely, that at the time of repudiation it was ready, willing and able to proceed to perform its contractual obligations. Preferring the expert opinion for the vendor to that for the purchaser, his Honour also concluded that the purchaser had not suffered any damage because the market value of the property did not exceed the contract price. The purchaser appeals from that judgment. Held (Meagher JA, McColl and Macfarlan JJA agreeing), dismissing the appeal: i. The entitlement to bring a cause of action in damages for anticipatory breach depends on proof that, at the time of termination, the plaintiff was sufficiently on track to perform that there was a reasonable prospect of its being able to complete in the future. By contrast, the entitlement to recover substantial damages for loss of bargain in such an action depends on proof that more probably than not completion would have occurred in the events which happened, other than the repudiation and its consequences. Those damages would be assessed at the time of the anticipated breach, namely, the time contemplated for completion, which in this case would have occurred after the giving of a notice specifying a reasonable time: at [12], [21]. Foran v Wight (1989) 169 CLR 385; Sharjade Pty Ltd v The Commonwealth [2009] NSWCA 373; (2009) 15 BPR 28,443 applied. Hensley v Reschke (1914) 18 CLR 452; Y P Barley Producers Ltd v E C Robertson Pty Ltd [1927] VLR 194; Psaltis v Shultz (1948) 76 CLR 547; Peter Turnbull & Co Pty Ltd v Mundus Trading Co (Australasia) Pty Ltd (1954) 90 CLR 235; Rawson v Hobbs (1961) 107 CLR 466; Michael Realty Pty Ltd v Carr [1977] 1 NSWLR 553; Hoffman v Cali [1985] 1 Qd R 253; considered. ii. The primary judge erred by adopting the test for recovering substantial damages when formulating the condition precedent to bringing such a claim. However, the evidence did not establish that there was a reasonable prospect of it raising the funding necessary to complete, and his Honour was correct to conclude that the purchaser had failed to prove an element of its cause of action: at [29], [34]. Fox v Percy (2003) 214 CLR 118; [2003] HCA 22 applied. iii. The primary judge did not err in giving no significant weight in the surrounding circumstances to the informal and unaccepted offers to purchase the property, which were relied upon in the expert opinion for the purchaser: at [45]. Cordelia Holdings Pty Ltd v Newkey Investments Pty Ltd [2004] FCAFC 48; MMAL Rentals Pty Limited v Bruning (2004) 63 NSWLR 167; [2004] NSWCA 451; Auxil Pty Ltd v Terranova [2009] WASCA 163; (2009) 260 ALR 164 considered. Judgment 1. McCOLL JA: I agree with Meagher JA. 2. MACFARLAN JA: I agree with Meagher JA. MEAGHER JA: Overview 1. The principal question in this appeal is whether the primary judge (Darke J) erred in dismissing a purchaser's claim for loss of bargain damages following its acceptance of the vendor's repudiation of a contract for sale of land: Upside Property Group Ltd v Tekin [2016] NSWSC 1260. The answer to that question turns on whether at the time of termination for anticipatory breach the purchaser was sufficiently ready and willing to perform that contract such that he was entitled to bring an action, and has proved on the balance of probabilities a loss for which substantial damages are recoverable. 2. By October 2014, the respondent vendor (Mr Tekin) was under some financial pressure. A default judgment had been obtained against him for about $250,000 in respect of excavation work carried out on four parcels of vacant land which he owned at Castle Hill (the property). There was a possibility of that property being rezoned from medium to high density residential. A bankruptcy notice had been served on Mr Tekin by the judgment debtor, ADN Investments, in respect of that judgment. An amount of $160,000 was also owing to WRV Development, which had lodged a caveat over the property. The property was also subject to a first mortgage to HSBC Bank securing in excess of $1.6 million, which was in default. 3. In August and September 2014, Mr Tekin engaged in discussions with Mr Harsany directed to resolving the financial difficulties under which he laboured. The outcome of those discussions was that the appellant (Upside Property) was incorporated with Mr Harsany as its sole director. By a contract for sale of land dated 21 October, Upside Property agreed to purchase the property from Mr Tekin. The price was $7.8 million plus GST. The completion date was 1 December 2014. Of the 10% deposit, an amount of $300,000 was paid on exchange, at the direction of Mr Tekin, to several of his creditors, including ADN Investments. 4. On the same day, the parties entered into a deed by which they agreed that, prior to completion, each was free to procure the sale of the property, either as a re-sale by Mr Tekin or as a sub-sale by Upside Property to which Mr Tekin covenanted to agree. The significant terms of that deed are extracted in Judgment [13]. They included various mechanisms by which each of the parties would, directly or indirectly, share in the proceeds of any such re-sale or sub-sale, after taking account of the purchase price under the contract for sale, which was to be rescinded in the event of a re-sale by Mr Tekin. 5. Completion did not occur by 1 December 2014. On 4 December 2014, Mr Tekin's solicitors served a Notice to Complete which required completion by no later than 18 December 2014. That did not occur. On 13 March 2015, Mr Tekin purported to terminate the contract for failure to comply with that notice. In response, Upside Property on 19 March 2015 asserted that Mr Tekin's purported termination constituted a wrongful repudiation, for which it elected to terminate the contract. 6. Upside Property brought proceedings for a declaration that the contract had been validly terminated on 19 March 2015; recovery of the paid deposit of $300,000; and damages for loss of bargain. By the time of the hearing, the paid deposit had been repaid. As pleaded, the damages were quantified as "the difference between the market value of the property at the date of repudiation [and] the agreed sale price of $7.8 million". Upside Property claimed that, as at 13 March 2015, that market value was between $11.5 million and $12 million. 7. Having held that Upside Property was not shown to have repudiated the contract, the primary judge held Mr Tekin's purported termination on 13 March 2015 to be wrongful and "itself a repudiation of the contract": Judgment [58]. But his Honour dismissed Upside Property's claim for damages following its termination for anticipatory breach on the following basis (Judgment [84]): I am not satisfied that in March 2015 Upside was ready, willing and able to proceed to perform its contractual obligations. Upside has thus failed to prove a matter that is a condition precedent to its claim for damages. It follows that the claim for damages must be dismissed. 1. His Honour then proceeded to consider, in the alternative, the quantum of damages that would have been recoverable for Upside Property's loss of bargain claim, which was formulated as the difference between the market value of the property "at the time of repudiation" on 13 March 2015 and the purchase price: Judgment [86]. In support of its claim as to the market value at that date, Upside Property relied upon two valuation reports of a licensed real estate agent (Mr Gunning), which took into account a number of informal "offers" made by prospective purchasers of the property between 18 November 2014 and January 2015. On the other hand, the valuer retained by Mr Tekin (Mr Mannell) assessed its value as at 1 March 2015 by reference to comparable sales to be $6.8 million. Accepting Mr Mannell's opinion as a "conservative but reliable guide to the market of the property as at March 2015", his Honour concluded at Judgment [141] that Upside Property had not suffered any damage because the market value of the property did not exceed the contract price of $7.8 million. 2. By its notice of appeal, Upside Property challenges both bases upon which its claim for substantial damages failed: the first by grounds 1 and 2, and the second by grounds 3, 4, 5 and 6. Whether the appellant purchaser is entitled to damages for loss of bargain (grounds 1 and 2) Upside Property's claim 1. Upside Property's primary claim was that it was entitled to damages for loss of bargain upon its termination of the contract for Mr Tekin's anticipatory breach. Ordinarily, those damages are to be assessed at the time the anticipated breach would have occurred, namely the time contemplated for completion, rather than the time of repudiation (as identified in Upside Property's claim): Hoffman v Cali [1985] 1 Qd R 253. As the time stipulated in the contract had expired, completion would have been required following the giving of a notice specifying a reasonable time: see, for example, Michael Realty Pty Ltd v Carr [1977] 1 NSWLR 553 at 570–571 (Mahoney JA). Before the primary judge, the parties did not focus on when that time would likely have been. In fact, as at 13 March 2015, both parties regarded the time originally fixed for performance as having passed and "conducted themselves in a manner suggesting that completion of the contract was not required, at least for the time being": Judgment [55]. In argument in this Court, the appellant described the time for completion as being "within a reasonable period from 13 March 2015", and not later than June 2015. 2. Upside Property contended that the disposition of its claim only raised one question involving its readiness and willingness. Allowing for the onus, that question was said to be whether at the time of termination Upside Property was not "substantially incapable of raising the finance it needed to complete the contract in the future" or "had definitively resolved or decided not to perform it". It maintained that position in this Court. Before considering its submissions in support of grounds 1 and 2, it is necessary to say something about the relevant principles. General principles 1. Generally speaking, the doctrine of anticipatory breach enables a party to an executory contract to elect to terminate it and bring an action in damages upon a counterparty's renunciation of, or disablement from performing, the contract, notwithstanding that the time for performance had not expired at the time of termination: see Hochster v De la Tour (1853) 3 El & Bl 678 at 687–8; 118 ER 922 and 925. In delineating that doctrine, reference to the innocent party's readiness and willingness (in some relevant sense) may occur in relation to three entitlements (Sharjade Pty Ltd v The Commonwealth [2009] NSWCA 373; (2009) 15 BPR 28,443 at [64] (Hodgson JA)): 1. the entitlement to terminate, in order to be discharged from future performance and recover any deposit; 2. the entitlement to bring a cause of action in damages for anticipatory breach; and 3. the entitlement to recover substantial damages for loss of bargain in such an action. 1. The first entitlement is attended by some controversy. On one view, a party wishing to terminate a contract for anticipatory breach of a dependent obligation must be ready and willing to perform on its part at that time: DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423 at 433 (Stephen, Mason and Jacobs JJ); Foran v Wight (1989) 169 CLR 385 at 406–407 (Mason CJ), 422 (Brennan J), 452 (Dawson J). However, that requirement has been questioned as not justified by principle or common sense: Foran v Wight at 437–438 (Deane J); Sharjade at [60]–[63], [68] (Hodgson JA), [176]–[177] (Sackville AJA). The respondent's repayment of the partly paid deposit makes it unnecessary to consider this dispute any further. 2. As to the second entitlement, the cause of action for anticipatory breach has been described as an "artificial cause of action in the nature of an action for breach of contract" because the law treats the repudiation, once accepted, as if it were a breach of contract: Y P Barley Producers Ltd v E C Robertson Pty Ltd [1927] VLR 194 at 208 (McArthur J). It is an element of that action – a "condition precedent" to the "right to recover" – that but for the repudiation the plaintiff (although absolved from actual performance) would have been ready and willing to perform any obligation on which the defendant's obligation was conditioned: Hensley v Reschke (1914) 18 CLR 452 at 460 (Barton J), 467 (Isaacs and Rich JJ); Peter Turnbull & Co Pty Ltd v Mundus Trading Co (Australasia) Pty Ltd (1954) 90 CLR 235 at 253 (Kitto J); Foran v Wight at 402 (Mason CJ). As the Chief Justice earlier (in the last-cited case) explained at 400, proof of this element "went to the existence of the cause of action; its materiality was not confined to the recovery of substantial damages". His Honour continued at 406: Implicit in this view of the concept of readiness and willingness in the context of an action for damages for anticipatory renunciation is the proposition that the action will be dismissed if the plaintiff was not, immediately before acceptance of the renunciation, in a position to complete on the day appointed for completion". 1. In this context, readiness and willingness include the capacity to perform: De Medina v Norman (1842) 9 M & W 820 at 827; 152 ER 347 at 350 (Lord Abinger CB). However, this element in the cause of action (and, on one view, precondition to terminating a contract) may not be onerous. As Dixon J indicated in Psaltis v Shultz (1948) 76 CLR 547 at 560, "[i]t is enough that [the plaintiff] is not presently incapacitated from future performance and is not indisposed to do, when the time comes, what the contract requires". Returning to the subject in Rawson v Hobbs (1961) 107 CLR 466 at 481, Dixon CJ insisted on care "to see that nothing but a substantial incapacity or definitive resolve or decision against doing in the future what the contract requires is counted as an absence of readiness and willingness". 2. In Foran v Wight at 403, Mason CJ described the essence of readiness and willingness in relation to the entitlement to bring a claim: … in a damages context … when the defendant has dispensed with performance by the plaintiff of a mutually dependent and concurrent obligation, it remains for the plaintiff to show, not that he was ready and willing to perform, but that he would have been ready and willing to perform had the defendant not dispensed with performance. 1. This fundamental requirement is to be distinguished from the question which arises from general principles governing the assessment of loss in a claim for substantial damages for loss of bargain, the third entitlement above: Foran v Wight at 403 (Mason CJ), 430–431 (Brennan J), 454 (Dawson J). Those general principles were explained as follows in Commonwealth v Amann Aviation (1991) 174 CLR 64 at 80 by Mason CJ and Dawson J: The award of damages for breach of contract protects a plaintiff's expectation of receiving the defendant's performance. That expectation arises out of or is created by the contract. Hence, damages for breach of contract are often described as "expectation damages". The onus of proving damages sustained lies on a plaintiff and the amount of damages awarded will be commensurate with the plaintiff's expectation, objectively determined, rather than subjectively ascertained. That is to say, a plaintiff must prove, on the balance of probabilities, that his or her expectation of a certain outcome, as a result of performance of the contract, had a likelihood of attainment rather than being mere expectation. 1. Justice Brennan in Foran v Wight at 430 exposed the questions deriving from the application of those general principles to cases of anticipatory breach: … In assessing the damages, it is necessary to form an estimate of the benefit to which B would have been entitled had A performed his contractual obligation. Where, as in this case, a purchaser who has made no announcement that he will not complete and who is attempting to raise finance in order to complete when the vendor intimates that he will not complete on the stipulated day, the purchaser's entitlement to damages for the vendor's failure to complete on that day depends on two related but distinct questions: first, whether the purchaser was at the time of the intimation substantially incapable of raising the finance and, second, whether it is more likely than not that the purchaser would have succeeded in raising the finance. A reasonable prospect of a purchaser's raising finance (the converse of "substantial incapacity") suffices to show that the purchaser was ready and willing at the time of the intimation, but it does not establish that the purchaser would have been ready and willing to complete when the time for completion arrived and would have become entitled to the benefit of the completed contract. The onus is on the purchaser to establish his damages on the balance of probabilities. [emphasis added] 1. In summary, the second entitlement depends on proof that the plaintiff was sufficiently on track to perform that there was a reasonable prospect of its being able to complete in the future; the third, on proof that more probably than not completion would have occurred in the events which happened, other than the repudiation and its consequences. Central to this appeal is the distinction between these tests. In their practical application, that distinction is more pronounced where termination occurs well before the time for performance. In the formulation of Upside Property's claim, that time was insufficiently emphasised. Asserted misdirections 1. By its submissions in support of grounds 1 and 2, Upside Property asserts that the primary judge misdirected himself in two respects as to the applicable legal principles. 2. First, its written submissions contend that the primary judge wrongly proceeded on the basis that its claim in damages depended on proof that it had access, at 13 March 2015 (the date of repudiation), to an amount of $8.28 million (the balance of the purchase price) in "immediately available clear funds" in order to complete the contract. Developing that position in oral argument, it submitted that his Honour's judgment focussed on 13 March 2015 and "asked the question whether the funds were available on that date". That question was said to conflate completion with readiness to perform, which at that time merely involved the absence of a substantial incapacity to complete when the time came. 3. At Judgment [60], the primary judge identified the onus on Upside Property to establish that it was "ready, willing and able to perform its obligations, including the payment of the purchase price" as "a condition precedent to the right to recover damages". His Honour also cited Sharjade at [68] and [122], in which Hodgson JA described that element as "part of [the plaintiff's] cause of action", and necessary "even to establish bare liability" and "to support even a claim for nominal damages". At Judgment [63], after referring to 13 March 2015, his Honour recorded that "it was for Upside [Property] to prove that at that time it was ready, willing and able to proceed to complete the contract". In considering whether Upside Property had discharged that onus, at Judgment [64], his Honour referred to the absence of "documentary evidence … showing that Upside [Property] had obtained any approval for finance sufficient to complete the contract, or even that it had applied for such finance". 4. Contrary to the appellant's submission, this analysis did not impose any requirement on Upside Property to prove that it was able to complete the contract on 13 March 2015. Rather, it directed attention to whether Upside Property was at that time in a position "to proceed to complete". One error in his Honour's doing so is that he ought to have considered Upside Property's readiness and willingness as at 19 March (the date of termination), rather than 13 March (the initial date of repudiation). However, the evidence does not suggest, and the appellant has not referred to, any material change in its position in the intervening six days. 5. Secondly, the appellant takes issue with the primary judge's rejection of its submission (summarised at Judgment [71] as) "that it only had to establish that it was not at the relevant time presently incapacitated from future performance" (emphasis added). In maintaining that submission on appeal, Upside Property asserts both that establishing that matter would complete its cause of action and also that its recovery of substantial damages does not engage any further requirement involving its readiness and willingness. 6. It is true that Upside Property's right to bring an action in damages depended on its readiness and willingness in the sense described in Psaltis v Schultz and Rawson v Hobbs, namely, the absence of any substantial incapacity or definitive resolve against performance, or, equivalently, the presence of some reasonable prospect of being able to perform. However, as Brennan J observed in terms (italicised in the extract at [20] above), being ready and willing in that sense is insufficient to recover damages for loss of bargain. That requires proof at the civil standard that, but for the repudiation, the plaintiff could have obtained the benefit of the contract at the time for performance of the respondent's concurrent and mutually dependent obligation to give title. In general, a plaintiff seeking substantial damages for anticipatory breach who succeeds on the former test, but fails on the latter, obtains only nominal damages, as of right. 7. On its face, the primary judge's stated reason for rejecting Upside Property's submission is not wholly consistent with the principles thus stated. After referring to discussion in Foran v Wight of the less onerous test, his Honour observed at Judgment [72]: However, it must be recognised that those statements of Brennan and Dawson JJ were made in the context of the discussion of the readiness and willingness requirement for a party seeking to rescind (that is, terminate) following a breach or repudiation by the other party. That requirement is not to be regarded as the same as the readiness and willingness requirement for a party seeking to recover damages for the other party's breach. That is made apparent by a number of passages in Foran v Wight (supra) where the requirements are treated as distinct. In particular, Brennan J (at 431) noted that the purchasers in that case were not seeking damages but were rather seeking to rescind for breach and recover the deposit, and that different questions were involved (see also Deane J at 438-9 and Dawson J at 454). 1. Had the primary judge qualified the reference to "damages" with the word "substantial", the second sentence may have been unobjectionable. However, as expressed, it suggests that the less onerous test applies only in relation to the entitlement to terminate (the first at [14] above). The balance of his Honour's reasons contain no express indication that he applied that less onerous test in concluding at Judgment [78] and [84] that Upside Property failed to prove an essential element of its cause of action, namely its readiness and willingness to perform, and that its claim should be dismissed. Instead, those reasons suggest that his Honour applied the test for recovering substantial damages in determining the question of whether Upside Property was entitled to bring a claim for damages. His Honour should first have enquired whether the appellant was not substantially incapacitated and, if the appellant satisfied that test, then addressed whether it had established that it would have completed had the respondent not repudiated the contract. 2. That being so, the first question is whether this Court, discharging its appellate function by way of a rehearing, is in a position to substitute its own conclusion as to the company's readiness and willingness in the necessary sense: Supreme Court Act 1970 (NSW), s 75A; Fox v Percy (2003) 214 CLR 118; [2003] HCA 22 at [44] (Gleeson CJ, Gummow and Kirby JJ). The appellant invited the Court to do so, and to determine the question in its favour. 3. As found by the primary judge, completion required Upside Property to pay the remaining balance of the purchase price, $8.28 million (including GST). The potential sources of that amount were Upside Property's own assets, external finance or the assistance of a third-party purchaser. There was no evidence (including in Mr Harsany's affidavits) that the company could fund completion from its own resources. It had been incorporated only days before the contract for sale was executed. Nor was there evidence that Upside Property had sought or obtained any approval for external finance: Judgment [64]. As to sources of finance, Upside Property submitted on appeal: Upside only needed to show that it was nether definitely resolved against, nor substantially incapable of, performance … the circumstances were not such as to show that Upside's attempts to raise finance were futile; neither Denis Hasany's female relative nor the bank had been shown to be without lending capacity; nor could it be concluded that, had Upside searched for a third party to sell the Property to, pursuant to the Side Deed, such efforts would have been futile; these circumstances precluded the finding that Upside was substantially incapable of performing the contract. It should be emphasised that the burden on Upside was in a practical (not a legal) sense less than the burden on the purchasers in Foran because no date for the completion of the contract had been fixed. Completion would have occurred, if at all, at undefined and possibly distant point in the future … 1. These submissions refer to Mr Harsany's non-specific evidence that he intended to seek and obtain finance, within a period of approximately three weeks, from his "aunty" or "ex-aunty", who was keen to act as a potential purchaser or provider of finance (the evidence being unclear as to what was proposed): see Judgment [65]. Finally, it was said in argument that Upside Property might have completed with the assistance of a third party purchaser. No evidence was adduced as to the existence or identity of such a purchaser, or the terms upon which it was possible he, she or it might have been prepared to facilitate completion: Judgment [83]. 2. Describing the evidence of Upside Property's capacity to obtain finance as "vague, entirely lacking in detail, and not supported by any testimony from the suggested source of finance", the primary judge concluded that there was no direct evidence or justification for an inference in the company's favour: Judgment [79], [80]. That conclusion was plainly available. Furthermore, there was no objective reason to suppose that external finance, or a third-party purchaser prepared to pay at least $8.28 million without a delayed settlement and unconditionally, might be forthcoming. That was especially so given the disparity between the contract price and market value of the property (as found by the primary judge and upheld for the reasons which follow) and the earlier unsuccessful efforts by Mr Tekin and Mr Hasany to raise more than $4 million in finance on the property: Judgment [38], [41], [42], [44]. 3. For these reasons, I am not persuaded that at the time of termination Upside Property was not substantially incapacitated from completing, accepting that the time for doing so may have been as late as June 2015. The evidence did not establish that there was a reasonable prospect of the appellant raising the funding necessary. It follows that the primary judge was correct to conclude that Upside Property had failed to prove an element of its cause of action. Grounds 1 and 2 should be dismissed. The remaining grounds strictly do not arise, but are considered in accordance with Kuru v State of New South Wales (2008) 236 CLR 1; [2008] HCA 26 at [12] (Gleeson CJ, Gummow, Kirby and Hayne JJ), and to show that on any view the claim which was dismissed could only have resulted in an award of nominal damages. Whether the appellant established loss as a result of Mr Tekin's breach (grounds 3, 4, 5 and 6) The grounds of appeal 1. Ground 3 challenges the primary judge's conclusion that Upside Property did not establish that it suffered compensable damage being either loss of bargain, measured as the amount by which the market value of the property exceeded the purchase price (grounds 4 and 5), or loss of profit, measured as the upside from its completing the contract and accepting one of the third-party offers for the property (ground 6). Loss of profits from resale (ground 6) 1. This ground may be dealt with shortly. Upside Property's alternative claim was that, "had settlement of the contract proceeded, Upside [Property] would have then accepted an offer to purchase, entered into a contract for sale, and thereby derived a profit": Judgment [143]. As the primary judge observed, that claim was not made on the basis that, by reason of the respondent's repudiation, the appellant lost a valuable commercial opportunity to derive that profit: cf Sellars v Adelaide Petroleum NL (1994) 179 CLR 332. Accordingly, the appellant had to prove on the balance of probabilities that it would have completed the contract for sale and (simultaneously or shortly after, the appellant's case does not make clear) sold the property to a third party at a given profit. As there was no evidence identifying any third-party offer open for acceptance in or after March 2015, or supporting a conclusion that such an offer would have been accepted and resulted in the on-sale of the property at a profit to Upside Property, his Honour concluded that this claim was not made out: Judgment [147]. 2. The appellant submits that his Honour "should have accepted the proposition that Upside [Property] would ultimately have completed the contract and accepted the offers". That submission was not supported by analysis or reference to evidence justifying such a finding; and could not overcome the absence of any identified purchaser and purchase-price. The "expression of interest" referred to in [42] below was not evidence answering that description, was conditional and was tied to the settlement of court proceedings then on foot between the parties. The primary judge's conclusion was plainly correct. Ground 6 should be dismissed. Market value of property (grounds 4 and 5) 1. These grounds concern the market value of the property in March 2015. The property was in Castle Hill and zoned R3 medium density residential. It was subject to a development approval permitting the construction of 22 townhouses and approximately 900 metres from the proposed Castle Hill Station, which in turn was part of the proposed North West Rail Link. The Castle Hill Station Structure Plan, issued by the NSW Department of Planning and Environment in September 2013, identified land within about 800 metres of the proposed station site for potential development. In one part of that plan the property was included within an area designated "high density residential". In another it was within an area described as being for medium density apartment living: Judgment [110]. 2. Having considered and determined not to accept Mr Gunning's evidence, (Judgment [120]-[123]), the primary judge accepted Mr Mannell's opinion as to the property's value (Judgment [139]), which adopted the comparable sales method as the primary basis for its valuation conclusion. In applying that method, Mr Mannell took account of the existing approval for a two- to three-storey development and the potential, by virtue of the existing zoning as R3, for a development of at most between five and seven storeys. In turn, he identified five potentially comparable development site sales (four in Castle Hill and one in Homebush), expressly placing "more emphasis on those sales" of R3-zoned land "where [a] speculative buyer is less likely to have played a role in investor/developer decision making". So proceeding, he considered but gave much less weight to the sale of a property in Garthowen Crescent, Castle Hill, which he judged to be "an above range sale based on speculative buying". He also noted that the subject site was "inferior" to that property, which was much closer to the proposed railway station and local shopping services. Taking account of these development site sales, Mr Mannell considered the property's market value to be $6,800,000 – equivalent to $1,402 per square metre and $309,091 per unit or townhouse (measured by reference to the property's assessed market value divided by the number units or townhouses in the proposed development). 3. The appellant's principal attack upon Mr Mannell's opinion was that it took "an unduly narrow approach to the market" by excluding speculative interest arising from the prospect of the rezoning of the property to R4. In that context, the appellant also relied on the offers to purchase, as a "check" on Mr Mannell's opinion, and submitted that his opinion was well below market: Judgment [131]. 4. The primary judge found Mr Mannell's explanation of his approach to speculation in the market for the property to be "plausible". His Honour summarised that explanation as being that "in the circumstances a property developer, acting prudently, would not have placed much weight on the possibility of a re-zoning to R4": Judgment [132]. His Honour also found Mr Mannell's assessment of that possibility, considered prospectively at March 2015, to be justified by reference to the Castle Hill Structure Plan, and concluded that the "location of the property towards the fringe [of that area] and the equivocal nature of that 'strategy document' in relation to the property, suggests that the prospects of it being rezoned to R4 were not at all strong": Judgment [132]. In relation to the offers to purchase, the primary judge concluded that "no significant weight should be accorded to these offers as evidence of what willing buyers in the market were prepared to pay for the property" and, for the same reason, concluded that no "significant weight should be accorded to them as a check on Mr Mannell's opinion or the methodology he employed": Judgment [138]. These conclusions are challenged by ground 4. 5. There were five offers between November 2014 and January 2015 and an "expression of interest" in June 2015. Those offers are described at Judgment [17], [18], [30]–[34] and [40]. The primary judge was prepared to assume that each was "made bona fide by parties unrelated to Upside [Property] or Mr Tekin": Judgment [119]. However, as he observed, "virtually nothing" was known about the offerors and the identity of at least one was unknown. In no case were the detailed terms and conditions of the offer specified. Each offer left open the possibility for the inclusion of terms making the proposed sale conditional on a favourable rezoning or revised development approval. The expression of interest, not even described as an offer, was subject to "satisfactory" due diligence, and the scope of that inquiry not further defined. 6. In Auxil Pty Ltd v Terranova [2009] WASCA 163; (2009) 260 ALR 164 at [51], Buss JA (Miller JA agreeing) included as factors which might be considered in assessing whether an unaccepted offer is to be given any weight in a valuation exercise "whether the purchaser was willing and able to complete the purchase in accordance with the terms of the offer" and "why the offer was not accepted". Referring to the first of these factors, the primary judge concluded at Judgment [119]: … nothing is known about the ability of any of the offerors to actually complete a purchase in accordance with the offer made … In circumstances where offers are sought to be used to establish what willing buyers are prepared to pay, the absence of such evidence reduces very significantly the weight that might otherwise be given to the offers". 1. The appellant submits, in support of ground 4, that his Honour erred in concluding that these offers should be given little or no weight as evidence setting the floor for the market value of the property or as providing a "check" on Mr Mannell's valuation. Whilst accepting that there was no evidence of the offeror's ability to complete the purchase "in accordance with the terms of the various offers", the appellant submits that it was "reasonable to infer that the purchasers had done due diligence on or familiarised themselves with the property in advance of instructing their solicitors to make an offer to buy it" and that there was "nothing to suggest that any of the offers was ill-considered or misconceived." 2. The primary judge did not err in not drawing the inference for which the appellant contends. The offers were not in a form that could be accepted or that excluded the possibility of special or unusual conditions. Each assumed that the potential rezoning would occur and enable development to justify its price. In evaluating what a willing but not anxious buyer would pay for a large development site with that potential, common sense suggests that significant weight should not be given to offers with such deficiencies and assumptions without, at minimum, some basis for concluding that the offeror is, or was at the relevant time, willing and able to complete the purchase in a stipulated time and on an unconditional basis. His Honour did not err in concluding that the evidence of the offers made should be given no significant weight in the "surrounding circumstances": see MMAL Rentals Pty Limited v Bruning (2004) 63 NSWLR 167; [2004] NSWCA 451 at [93] (Spigelman CJ, Mason P and Hodgson JA agreeing). For these reasons, ground 4 should be rejected. 3. Ground 5 contends that the primary judge erred in rejecting the opinion of Mr Gunning and preferring the evidence of Mr Mannell. The primary judge rejected Mr Gunning's valuation opinion for reasons related to his methodology and its application. That methodology is extracted at Judgment [101]: (a) Considered the offers made by interested third parties in respect of the subject property in late 2014 to 2015 (as identified by the Plaintiff); (b) Examined comparable unit site sales in Castle Hill about the same period for similar residential unit sites; (c) Spoken to residential unit builders and developers as to the price of a raw home unit site which is approximately 600-800 metres from the new Castle Hill railway station, about the same period; and (d) Considered the potential built unit sale price and formed an opinion of what developers and builder would purchase 10-16 Cecil Street Castle Hill on reasonable terms. 1. Having observed that the "reasoning that underpins Mr Gunning's opinions as to value is difficult to discern" (Judgment [113]), the primary judge ventured, the appellant accepts correctly, that his valuation opinion relied significantly on the third party offers referred to above. The methodology referred to in (a) above involved using those offers as direct evidence of the value of the subject property, which the primary judge held (at Judgment [117]) to be contrary to the general rule that an unaccepted offer to purchase land is not admissible as "direct evidence" of its value: see Cordelia Holdings Pty Ltd v Newkey Investments Pty Ltd [2004] FCAFC 48 at [128] (Black CJ, French and Tamberlin JJ); MMAL Rentals Pty Limited v Bruning at [95] (Spigelman CJ); Auxil v Terranova at [46]-[49]. 2. The appellant appears not to challenge the correctness of that conclusion. Instead, it maintains that the offers remained available to be relied on as evidence setting the floor for the market value and as a "check" on Mr Mannell's valuation. The primary judge rejected Mr Gunning's use of the evidence for each of those purposes, including because he was not satisfied it should be attributed any weight: Judgment [120]. The appellant's challenge to that conclusion has been dealt with above and rejected. 3. To the extent that Mr Gunning examined comparable development site sales in Castle Hill, in accordance with para (b) of his methodology, the primary judge did not accept that as a justifiable basis for his opinion. As his Honour records at Judgment [122], "Whilst it emerged in cross-examination that [Mr Gunning] came to the view that $2,500 per square metre might be reasonable, his process of reasoning was not disclosed in his report and was not explained in the witness box". The appellant's submissions do not address his Honour's justifiable reason for rejecting this basis for Mr Gunning's opinion. The only response made in support of his view as to the value of the land is that per square metre it was well below that achieved in Garthowen Crescent, which Mr Gunning regarded as a comparable sale. The primary judge's treatment of Mr Mannell's view of that sale (see [39] above) is an answer to this submission. That property was not sufficiently comparable to the subject property: Judgment [134]. 4. Finally, in relation to para (c) of Mr Gunning's methodology, the primary judge rejected his opinion so far as it was based on "feedback" he received from builders and developers as to the prices they would pay for land on a per-unit or townhouse basis. Mr Gunning recorded those prices as ranging from $140,000 to $150,000. He then multiplied that range by 80, being the number of units or townhouses the property would yield if rezoned to R4. The primary judge rejected this as a "suitable" basis for valuing the property because in March 2015 a rezoning from R3 to R4 was only reasonably regarded as a "possibility": Judgment [121]. Mr Gunning's methodology assumed it was a certainty. The appellant does not seek to support this part of Mr Gunning's reasoning, describing it as "peripheral" to his opinion. Ground 5 also should be dismissed. Conclusion 1. In the result, although the primary judge misdirected himself as to what must be shown to satisfy the requirement of readiness and willingness to bring an action in damages for anticipatory breach, Upside Property's action was correctly dismissed. 2. Had this Court not been in a position to determine on a rehearing the question incorrectly formulated by the primary judge, it would have been necessary to consider whether that error occasioned any "substantial wrong or miscarriage" requiring a retrial: Uniform Civil Procedure Rules 2005 (NSW), r 51.53(1). In any such retrial, only nominal damages could have been awarded. That is so given the primary judge's findings as to value (which have been upheld on appeal) and the fact of the return of the deposit. That is also likely to have been so because the effect of his Honour's findings was that Upside Property failed to prove on the balance of probabilities that it would have completed, and thus suffered any loss. In these circumstances, because the appellant would not suffer any injustice in not being permitted to pursue that claim, I would not have remitted the matter for further hearing had that issue arisen. 3. Accordingly the orders I propose are: 1. Appeal dismissed. 2. The appellant to pay the respondent's costs of the appeal. ********** 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: 18 December 2017