North Coast Conveyancing Pty Ltd v Bradbury

1. [1]

   BASTEN JA: On 21 September 2009 the respondents, Wayne Bradbury and Narelle Bradbury, entered into a deed of option with respect to the purchase of a property at Telegraph Point near Port Macquarie. The option fee, being 10% of the agreed purchase price, was an amount of $66,750. The deed required that the option be exercised by 5pm on 18 September 2010. The option was not exercised and the respondents forfeited the fee which, had they executed a contract to purchase the land, would have been treated as the deposit payable under the contract of sale.

2. [2]

   In addition to payment of the option fee, the respondents had occupied the premises the subject of the option to purchase for a weekly occupation fee of $350. They also incurred significant expenditure by way of improvements on the property.

3. [3]

   The respondents commenced proceedings in the District Court against the appellant, North Coast Conveyancing Pty Ltd, which had acted for them with respect to the deed of option and the proposed agreement for sale of land. They brought a claim in negligence seeking to recover, by way of damages, the option fee together with interest, fees and disbursements and the amount expended on improvements.

4. [4]

   By judgment delivered on 24 February 2015, the trial judge, Maiden SC DCJ, gave judgment for the plaintiffs (the respondents in this court) in the amount of $66,750. On 26 March 2015 a further order was entered requiring the appellant to pay interest in the amount of $22,060.19. The trial judge rejected the claim for expenditure by way of improvements, a finding which has not been challenged.

5. [5]

   The appellant seeks leave to appeal against that judgment, leave being required because the amount in issue is less than $100,000. [1]

6. [6]

   Despite the small amount in dispute, for reasons explained below, there should be a grant of leave to appeal; further, the appeal should be allowed and the judgment in the District Court set aside. Despite a suggestion that this Court might dispose of the matter by final orders, the absence of findings of particular facts precludes that possibility. It follows that there must be a retrial; however, the parties should be required to mediate prior to the matter being remitted to the District Court. [2] (Neither party opposed such a course when raised as a possibility at the hearing of the leave application and appeal.)

Issues

1. [7]

   The trial commenced in the District Court at Port Macquarie on 6 November 2013 and proceeded for three days. It was then adjourned to Sydney on 30 January 2014 when an amended statement of claim was filed containing 13 particulars of breach of duty on the part of the appellant, including some 20 subparagraphs. In fact, the case ultimately run was not complex. The respondents relied upon a report of a solicitor with particular experience in the area of property law, Dennis Raymond Bluth, who identified various elements of inadequate advice on the part of the appellant. His opinion was accepted by the appellant and breach of duty was ultimately conceded. The breaches were, broadly speaking, twofold. First, the appellant failed to provide written advice to the respondents, on or before the deed of option was signed, that the term of the option was for a period of 12 months with no mechanism for an extension of the term and that, if the option were not exercised by 5pm on 18 September 2010, the respondents would forfeit the option fee.

2. [8]

   Secondly, although by mid-September 2010 the respondents were not in a position to settle the purchase, they should have been advised to exercise the option, a course which would have placed them in a better position to negotiate an extended period for settlement and might in any event have permitted them to rescind the contract and recover the option fee, as the deposit under the contract.

3. [9]

   Breach being established, it was necessary for the respondents to prove on the balance of probabilities the harm which was caused by the negligence. [3]

4. [10]

   In seeking leave to appeal, the appellant contended that, having identified causation as an issue, the trial judge failed to make the necessary findings of fact to support a judgment in favour of the respondents. The respondents conceded that there were no express findings as to causation, but nevertheless contended that the loss suffered was the forfeited option fee and that there was an implicit finding (which was correct) that the negligent conduct of the appellant caused the loss of the option fee. Given that the amount of the fee was not in dispute, the respondents also submitted that, if there were some basis for asserting that a lesser loss had been suffered, the onus to establish a reduction lay on the appellant, a task which it had not assayed.

5. [11]

   Before addressing the issues in greater detail, it is appropriate to note that the task facing both the parties and the Court was rendered considerably more difficult than it should have been due to the form of the judgment provided by the District Court. The form of the judgment suggests that it was a draft. The date on the front cover was recorded as 18 February 2015, but it appears to have been delivered on 24 February 2015. Although there was a stamp on the final page (numbered page 1) certifying the correctness of the document, it did not indicate the number of preceding pages, was dated 6 June 2014 and was unsigned. Paragraphs were numbered but the numbering recommenced with each heading; there were indications within the text of omissions to be completed later. There were also paragraphs in which it was difficult to determine whether evidence was being summarised or findings of fact were being made. In the result, it has been necessary to proceed on the basis of a flawed record.

(a) executing the deed of option

1. [12]

   The respondents’ case on causation in relation to the initial breach of duty involved two simple propositions, namely that (a) they were not aware that the option was required to be exercised within 12 months without a mechanism for extension and, (b) had they been advised of that fact they would not have entered into the option. It followed, the submission continued, that (c) had they not entered into the deed of option they would not have lost the option fee. This last proposition was no doubt correct: the problem arose from the failure of the trial judge to make sufficiently precise findings with respect to the two earlier propositions.

2. [13]

   With respect to the state of mind of the respondents, the judge made a finding in the following terms:

3. [14]

   There was no finding as to the understanding of Ms Bradbury, although she gave evidence in that regard which will be noted below.

4. [15]

   The respondents’ case in this Court was that each had given evidence that, had they understood the terms of the option, they would not have entered into it. In written submissions it was said that Mr Bradbury was not challenged on those assertions; in the course of oral submissions, counsel conceded that he had been challenged in cross-examination, but had not been “controverted.” [4] How that should have occurred was by no means clear.

5. [16]

   Mr Bradbury gave evidence that he and his wife had taken up a franchise in the Harvey Norman Port Macquarie store in mid-2009. At or about that time, they placed on the market for sale a farming property of some 500 acres, near Yass, which they had purchased in 2004. (Prior to moving to Port Macquarie, they had lived and worked in Busselton, WA.) Mr Bradbury said that he and his wife had agreed to rent a property in the Port Macquarie area, ideally a property which they wished to buy, and complete the purchase when the Yass property was sold.

6. [17]

   Mr Bradbury gave evidence of telling both the vendors (Robert and Mandy Murrell) and Cory Darcy, the principal of the appellant who was acting on the conveyance, that they would need “at least 12 months (and possibly 18 months) in which to sell the property in Yass.” He then stated: [5]

7. [18]

   Mr Bradbury further stated, after noting the circumstances in which the deed of option was signed: [6]

8. [19]

   Referring to the work done on the house, Mr Bradbury also said: [7]

9. [20]

   Ms Bradbury made a statement partly in similar terms: [8]

10. [21]

    Counsel appearing for the defendant at trial objected to the evidence at [19] above on the basis that it offended s 5D(3)(b) of the Civil Liability Act. After discussion, the objection was withdrawn, although it was clearly a valid objection. On any view, statements made, after suffering harm, about what would have been done absent the breach of duty are of little weight. [9]

11. [22]

    In order to make a finding as to whether or not the respondents would have entered into a deed of option had they been aware of the precise terms, it was necessary to deal with a number of factual issues. [10] First, as the material set out above suggested, Mr Bradbury appeared to have a different view as to the content of the legal document (providing for a 12 month period to exercise the option) and the separate possibility of an extension, which might need to be for six months. That he had such an understanding could also be derived from his evidence in cross-examination, which concerned a conversation with Mr Murrell, a vendor, prior to documenting the agreement: [11]

12. [23]

    He was further cross-examined as to events during 2010: [12]

13. [24]

    When Ms Bradbury’s statement was tendered, objection was taken to the first sentence set out at [20] above. The judge dealt with it by stating, “Just state of mind, it’s not binding against your client.” The passage, like the similar statements by Mr Bradbury, was inadmissible, pursuant to s 5D(3)(b) of the Civil Liability Act.

14. [25]

    Ms Bradbury also gave evidence as to her understanding of the period of the option in cross-examination: [13]

15. [26]

    Again referring to the date on which the option deed was signed, 21 September 2009, in the presence of Ms Darcy, Ms Bradbury was asked: [14]

16. [27]

    It was a matter for the trial judge to determine whether the respondents believed on 21 September 2009 that, in paying 10% of the purchase price, they were required to exchange contracts within 12 months, pursuant to the option, but with an expectation (however induced) that they would be able to obtain an extension of that period, or, on the other hand, whether they believed there was a mechanism within the deed for the grant of an extension, without any other variation of the financial arrangements. It was also necessary for the trial judge to determine whether in stating that, had they been aware of the precise terms of the deed they would not have entered into it, they were really saying, as appears from Ms Bradbury’s evidence, that had they appreciated the possibility that they would not be able to complete the purchase, they would not have taken out the option.

17. [28]

    Precise factual findings in these respects were an essential step in determining whether the failure of the appellant to provide written advice as to the terms of the option, presumably in advance of the meeting at which the option was signed, would have led the respondents not to sign the agreement. No such findings were made. Nor can such findings properly be made on the basis of a transcript of their oral evidence.

(b) failure to exercise the option

1. [29]

   The events which took place in August and September 2010 tended to confirm the suggestion that Mr Bradbury knew that the contractual position involved a 12 month period within which to exchange contracts, but that there was an understanding with the vendors as to a possible extension, if the Yass property had not been sold in the meantime. He was cross-examined as to a conversation he had with Mr Murrell (a vendor) in August or September 2010 to the following effect: [15]

2. [30]

   This evidence was immediately followed up in re-examination, but not greatly clarified:

3. [31]

   In his statement Mr Bradbury said that Mr Murrell did not get back to him, but that, on 17 September 2010, he received a letter from Mr Murrell’s wife, Mandy Murrell, who was a vendor and the solicitor acting for the vendors, addressed to the appellant, stating that the vendors would enter into a new option agreement for a period of three months, expiring on 18 December 2010, with contracts “to be exchanged and settled by 18th January 2011”, the payment of a further option fee of $20,000 and an increased occupation fee of $850 per week. [16] The respondents did not accept that offer. Mr Bradbury stated: [17]

4. [32]

   According to Mr Bradbury’s evidence, the option fee already paid, together with the amount spent on the property was some $90,000, without interest. The extra rental payment ($500 per week) would have been in the order of $8,000. From these facts it could be inferred that he considered the chance of selling Yass by 18 January 2011 to be remote. On this approach, it might also be inferred that the likelihood of the property at Yass selling within the six month extension, which would have expired on 18 March 2011, might also have been low.

5. [33]

   The Bradburys gave no evidence as to the indebtedness of the Yass property, nor as to their ability to raise funds by way of mortgage. They appear to have approached the purchase at Port Macquarie on the basis that they could only complete if the Yass property sold. Accordingly, at least on the evidence, the negligence which resulted in the Bradburys believing they had a further six months to settle the purchase would appear to have been a lost opportunity, arguably of relatively limited value.

6. [34]

   There is a qualification to this analysis derived from the expert opinion evidence of Mr Bluth. Mr Bluth’s advice as to what should have happened in September 2010 included the following:

7. [35]

   Mr Bluth’s evidence may be accepted in its entirety – it was not challenged – although it was arguably incomplete. However, he was concerned with the advice which ought reasonably to have been given to the respondents. He did not, understandably, purport to advise on the likelihood of particular advice being accepted, nor on the consequences of its acceptance or non-acceptance. Although, in the course of argument, counsel for the respondents contended that, had they exchanged contracts, they would then have had a “right” to rescind and recover the full amount of the deposit, Mr Bluth’s evidence did not establish that as an inevitable outcome. Had there been any doubt as to the likely success of a purported rescission, or of proceedings under s 55 of the Conveyancing Act 1919 (NSW) to recover the deposit, there would then have been doubt as to whether the respondents would have taken such steps and, if they did, whether they would have succeeded. (Possible omissions from the advice Mr Bluth said should have been given were: (a) any assessment of the risk that a court would not accept his view, expressed at par 34; (b) the possible exposure to a damages claim if contracts were exchanged and settlement did not take place; (c) the discretionary nature of the court’s power under s 55; (d) the potential costs if litigation eventuated, and (e) the general vicissitudes of litigation.)

8. [36]

   Had the counter-factual hypothesis been addressed, it is almost inevitable that the court would have concluded that what was lost was not the full amount of the deposit (plus interest), as the respondents contended, but the loss of an opportunity. The value of that opportunity was not assessed, nor could it be without findings of fact as to the likely consequences of the respondents being given the advice which a conveyancer exercising reasonable care, skill and judgment should have given. That exercise cannot be undertaken on the transcript, where critical answers reveal ambivalence and ambiguity and a degree of inconsistency between them.

Conclusions

1. [37]

   Because it was ultimately common ground that the trial judge did not make critical findings of fact relating to causation, it is not necessary to explore in detail the reasons which were provided. The judgment in favour of the respondents must be set aside and, subject to appropriate orders with respect to mediation, there must be a retrial. The retrial should not extend to the rejected claim for expenditure on improvements

2. [38]

   Where the court directs mediation, it is sound practice to require that it take place expeditiously. The rules provide that mediation should be completed within 28 days (presumably from the date of the order); [18] a period of six weeks was allowed in Mouti v Nguyen. [19] However, given the time of year at which this judgment will be delivered, together with the degree of expedition obtained in this Court, it should be recognised that mediation may not be possible before the long vacation. As, on any view, a retrial (if required) will not occur until next year, some flexibility should be allowed with respect to the timing of the mediation. The Court will refer the proceedings to a Registrar to conduct the mediation.

3. [39]

   The Court should make the following orders:

   1. (1)

      Grant the applicant leave to appeal from the judgment and orders in the District Court.

   2. (2)

      Allow the appeal and set aside orders (1) and (2) entered on 24 February 2015 and order (1) entered on 26 March 2015.

   3. (3)

      Refer the proceedings to a Registrar of the Court to conduct a mediation at a time to be fixed by the Principal Registrar.

   4. (4)

      Direct that the mediation occur, if possible, by 23 December 2015 and no later than 29 January 2016.

   5. (5)

      In the event that no settlement has been reached by 30 January 2016, remit the matter to the District Court for a retrial, limited to the claim for damages calculated by reference to the forfeited option fee and interest thereon.

   6. (6)

      Direct that the costs of the first trial be dealt with in the course of the mediation and otherwise be in the discretion of the trial judge on a retrial.

   7. (7)

      Order that the respondents pay the appellant’s costs in this Court.

   8. (8)

      Grant the respondents a certificate under the Suitors’ Fund Act 1951 (NSW).

4. [40]

   LEEMING JA: I agree with Basten JA.

5. [41]

   EMMETT AJA: This appeal is concerned with a deed whereby the respondents, Mr Wayne Bradbury and Mrs Narelle Bradbury, were granted the option to purchase a property at Telegraph Point in New South Wales. The appellant, North Coast Conveyancing Pty Ltd (North Coast), acted for Mr and Mrs Bradbury in connection with the grant of the option. The option was not exercised within the time limited by the grant and Mr and Mrs Bradbury lost the option fee of $66,750 that they paid for the grant of the option. They sued North Coast in the District Court alleging negligence in the performance of the retainer to act in connection with the option and the proposed purchase. A judge of the District Court gave judgment for Mr and Mrs Bradbury against North Coast in the amount of $66,750 plus interest.

6. [42]

   Breach of duty was ultimately conceded by North Coast in two respects. It was accepted that North Coast was in breach of its retainer in failing to give adequate advice as to the term of the option. In addition, although Mr and Mrs Bradbury were unable to settle the purchase of the property by the time the option was required to be exercised, they should have been advised to exercise the option. Adopting that course would have placed them in a more favourable position to negotiate an extended time for settlement. That may also have given them the opportunity to rescind the contract and recover the option fee. However, it was still necessary for Mr and Mrs Bradbury to prove the loss that was caused by the negligent advice. North Coast contended that the primary judge failed to make relevant findings of fact to support a judgment in favour of Mr and Mrs Bradbury.

7. [43]

   I have had the advantage of reading in draft form the proposed reasons of Basten JA for concluding that the appeal should be allowed and that there should be a retrial. I agree with the orders proposed by his Honour for the reasons proposed.