AVENHOUSE & ANOR v THE COUNCIL OF THE SHIRE OF HORNSBY [NO 2]

MASON P: I agree with Sheller JA.

PRIESTLEY JA: I agree with Sheller JA;

SHELLER JA: On 15 May 1998 this Court (Mason P, Priestley and Sheller JJA) delivered judgment in an appeal brought by Mr and Mrs Avenhouse against the Hornsby Shire Council from a decision given by Spender AJ on 27 June 1995 in favour of the Council. Mr and Mrs Avenhouse had sought to recover damages for the Council’s alleged breach of a duty of care to process a plan of subdivision, including the certification of the linen plan of subdivision, with due diligence and within a reasonable time. Spender AJ was satisfied that the Council owed the duty of care claimed and was in breach of its duty but was not satisfied that Mr and Mrs Avenhouse had suffered any damage.

At page 50 of his judgment Spender AJ said that the damages claimed fell under the broad heads of economic loss, damages claimed for health problems and their financial consequences. Under economic loss he listed loss of profits on the proposed re-development, interest or holding costs and legal costs incurred in the three legal proceedings. Spender AJ held that the plaintiffs were entitled to recover only that which they had lost and not that which they might have gained had the development gone forward and could only recover loss on an alternative use of their money, whether in another investment or on the basis of a loss of a chance to make such an investment, if the evidence established such a case. On this basis their claim for loss of profits was rejected. His Honour then said at 57-58: “From what I have said about applicable principles, it follows that Mr and Mrs Avenhouse’s claims against the defendant and Council are limited to those which can be made out within Gates [ v The City Mutual Life Assurance Society Limited (1986) 160 CLR 1] and Kyogle [ Shire Council v Francis (1988) 13 NSWLR 396] . The other claims for damages are unsustainable. In short, they can get what they have lost, and no more. Their claims for actual losses in summary are: (a) legal costs of first Equity proceedings - $6,190 or thereabouts, there is some duplication between some of the amounts claimed under this head, and under the head of the second Equity proceedings; (b) legal costs of second Equity proceedings - $13,227 (c) legal costs of Land and Environment Court proceedings against the Council - $3,138 (d) survey fees paid to W G Hunt Sunter & Co for the preparation of plans of sub-division and inter allotment drainage - $11,221 (e) interest or holding costs between 29 June 1979 to July 1982 (paragraph 10 and Annexure C, Exhibit K3 - Mr Avenhouse’s further supplementary statement) - $22,563 Total $56,349 This total figure does not allow for some duplication or overlap between costs in the first and second equity proceedings. This duplication or overlap arose out of difficulties in identifying which of certain charges should be allocated to the first equity proceedings and which should be allocated to the second. The overall amount of legal costs claimed for the two sets of equity proceedings would be somewhat less than the total of the two amounts set out. But putting this to one side, and even assuming that interest charges somewhat higher than those claimed should be allowed (ie beyond July 1982 and until sale), the losses claimed by Mr and Mrs Avenhouse were less than the net proceeds of sale on 19 Fraser Road. In any event, two claims cannot be sustained. The first equity proceedings resulted from a dispute between Mr Avenhouse and Mr Carlyle which, in my view, was in no way attributable to the actions of the Council. The dispute concerned the alleged non-fulfilment of the Avenhouses of special condition 24, which related to the registration of the plan of sub-division as a deposited plan. Notice of this dispute was given to Mr Avenhouse’s solicitors by the solicitors for Mr Carlyle by letter of 4 May 1979. It was not until 23 May 1979 that the plans were lodged with the Council; the section 34B certificate was not lodged until 11 June 1979. In the meantime, by letter of 28 May 1979 Mr Carlyle’s solicitors had confirmed rescission. Initiating process of the first equity proceedings was lodged on 3 September 1979. This sequence of events makes it plain that the Council cannot be blamed for the first equity proceedings, and consequently for any costs attributable to those proceedings. Nor would I have allowed the legal costs of the Land and Environment proceedings against the Council. Those proceedings were settled on terms that there should be no costs orders. It would be wrong to allow that term to be nullified in these proceedings. In any event the loss of those costs follows the terms of settlement in those proceedings and not from the Council’s negligence. Alternatively expressed, the agreement as to costs broke the chain of causation. Subtracting the amounts referable to the first equity proceedings (without any allowance for overlap between the first and second of equity proceedings) and the Land and Environment court proceedings one comes to a figure of $47,011. The Avenhouses’ interest in 19 Fraser Road was sold for a gross amount of $84,000; the net figure to them was $81,080. The original purchase price was $15,000 (no claim has been made for the extra $10,000 agreed to be paid to Mr Carlyle on settlement of proceedings), and the difference between that figure and the net figure which the Avenhouses got on resale of 19 Fraser Road if $66,018 or roughly $19,000 more than actual losses.” His Honour also disallowed damages for vexation.

Accordingly, his Honour gave judgment for the Council from which Mr and Mrs Avenhouse appealed. The Council filed a notice of contention and cross-appeal. At the hearing of the appeal the Council conceded that Mr and Mrs Avenhouse were entitled to recover as damages any profits on the development of their land which they lost as a result of the Council’s breach of duty.

In the course of my judgment on the appeal, with which the other members of the Court agreed, I set out Mr and Mrs Avenhouse’s claims for actual loss in summary as follows (see p19): $ Legal costs of first equity proceedings 6,190 Legal costs of second equity proceedings 13,227 Legal costs of Land and Environment Court proceedings against the Council 3,138 Survey fees paid to WG Hunt Sunter & Co for the preparation of plans of sub-division and inter-allotment drainage 11,221 Interest or holding costs between 29 June 1979 to July 1972 22,563 Total 56,339

I said at 20: “[Spender AJ] disallowed the claim for the first equity proceedings and the claim for the legal costs of the Land and Environment proceedings. Part of the terms on which the Land and Environment Court proceedings were settled was that there should be no order as to costs. His Honour considered it would be wrong to allow that term to be nullified in these proceedings. The removal of these amounts reduced the amount allowed to $47,011, less than the net figure Mr and Mrs Avenhouse recovered from the sale of 19 Fraser Road, $81,080.”

On page 22 I noted that the parties accepted that in accordance with a direction which Cole JA gave at the call-over of the appeal this Court would not assess damages.

The appellants challenged unsuccessfully the trial Judge’s disallowance of damages for legal costs of the first equity proceedings and the costs of the Land and Environment Court proceedings. However, they successfully appealed on their claim that vexation was an allowable head of damages. In the result I proposed the following orders: “1. Appeal allowed with costs; 2. Set aside order 1 made by Spender AJ on 27 June 1995 giving judgment for the defendant and order 2 in so far as it ordered that the plaintiffs pay the defendant’s costs of the proceedings; 3. Direct a new trial limited to damages quantified as the profits on the development of the land contained in the sub-division lost as a result of the Council’s breach of duty and damages for vexation; 4. Cross-appeal dismissed with costs; 5. The costs of the first hearing to be the costs in the hearing of the new trial directed in order 3.”

The orders have not been taken out and both the respondent and the appellants have filed notices of motion seeking to have order 3 amended.

The respondent Council wants the order amended to make plain that the new trial limited to damages should be limited to the following claimed heads of loss: “(i) the profits on the development of the land contained in the subdivision lost as a result of the Council’s breach of duty; (ii) the legal costs of the second equity proceedings lost as a result of the Council’s breach of duty (claimed to be $13,227); (iii) the survey fees paid to W G Hunt Sunter & Co for the preparation of plans of subdivision and interallotment drainage lost as a result of the Council’s breach of duty, (claimed to be $11,221); and (iv) interest or holding costs between 29 June 1979 and July 1982 lost as a result of the Council’s breach of duty, (claimed to be $22,563) and, if any pecuniary loss is proved, damages for vexation.”

The Council contends for the following order, in substitution for order 3 that I proposed: “Direct a new trial limited to damages, quantified as the profits on the development of the land contained in the sub-division that were lost (including the loss arising from any legal costs of the second equity proceedings, survey fees and interest and holding costs that were incurred) as a result of the Council’s breach of duty and, if such damages are proved, damages for vexation.”

Mr and Mrs Avenhouse wish it to be amended by adding: “together with $47,011 in respect of the legal costs of the second equity proceedings, survey fees and interest or holding costs incurred.”

It will be seen that the point of difference is that the appellants assert that the trial Judge assessed damages in respect of the legal costs of the second equity proceedings, survey fees and interest or holding costs incurred at $47,011 which was not disturbed by this Court. The Council claims either that there was no such assessment or, alternatively, if there was, the damages found were not the result of any breach of duty, a matter raised in ground 8 of the notice of contention. Damages for vexation were only recoverable if pecuniary loss was found.

The respondent says that it expressly refrained from arguing ground 8 of the notice of contention because of the form of order sought on the appeal and the appellants’ concession that damages would not be determined on the appeal. It is said that in so far as there was material in the respondent’s submission that was capable of supporting part of ground 8 of the notice of contention, that material was not dealt with in the judgment of 15 May 1988. Ground 8, so far as relevant, goes only to the question of whether the respondent’s breach caused the appellants to incur any one of the several amounts of actual loss claimed. It is not directed to the assessment of damages presumably because the respondent proceeded on the basis, as will appear, I think correctly, that the trial Judge had not assessed the damages under those heads.

In the passage from which I have quoted I referred to $47,011 as being “the amount allowed”. Paragraph 4 of the issues on the appeal as I set them out at 22 was “4. Whether Mr and Mrs Avenhouse were entitled to recover as damages the profits on the development of the land which they lost and damages for the cost of the first equity and the Land and Environment Court proceedings and for vexation.” I did not mention as giving rise to any issue on the appeal any of the actual losses other than those amounts which the trial Judge disallowed. Had other amounts been disallowed by his Honour this would have been a matter for appeal. At the hearing of the appeal nobody proceeded on this basis. Nor did the respondent address any argument for the proposition that these amounts should have been disallowed. So much is conceded. The reason was, so it was said, the appellants’ concession that damages would not be determined on the appeal. Plainly this was directed to the assessment of damages which his Honour had disallowed, if they were allowed on appeal, not to a question whether a head of damages was allowable, which is the point raised but not argued in ground 8 of the notice of contention.

From the passage in Spender AJ’s judgment which I have quoted it is clear enough that his Honour was of the view that the claims in respect of the first equity proceedings and the Land and Environment Court proceedings could not be sustained. However, contrary to what I previously understood to be the position, I do not think that his Honour assessed the damages for the actual losses in paras (b), (d) and (e). There is no suggestion in the reasons for judgment that his Honour had done this. He merely accepted the figure of $47,011 to demonstrate that even if that full amount were allowed the net recovery on the sale of the property would have exceeded it. It was not necessary for his Honour to make a specific finding about the amount recoverable or the extent to which the expenses were attributable to the Council’s breach.

In my reasons for judgment on the appeal in referring to damages for non-pecuniary loss, such as damages for vexation, I said at 64: “Damages for such non-pecuniary loss, irrecoverable if claimed alone, may be added if the plaintiff has suffered and the defendant is liable for pecuniary loss. In the present case Mr and Mrs Avenhouse have succeeded in proving damages for pecuniary loss in a total amount of $41,001. In addition they are entitled to recover, if proved, damages for lost profits.” If the claim for pecuniary damages, that is to say for the actual losses and the loss of profits fails entirely no damages for vexation are separately recoverable.

In my opinion, the respondent is entitled to have order 3 amended generally as it proposes and to have the costs of this application. However, before any formal order is pronounced the parties should have the opportunity to address the Court on its form.