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Macquarie Trustee Limited v Watson [2024] NZHC 708 (28 March 2024)

Last Updated: 11 April 2024

JUDGMENT OF ASSOCIATE JUDGE SKELTON

[Formal proof of damages and quantum]

• [1] On 12 December 2023, I entered summary judgment on liability by default against the defendant. The agreement with the plaintiff for sale and purchase of the property at Lot 31 and Carpark Lot 127, 10 Trieste Way, Paraparaumu dated 2 June 2021, was breached by not settling on the settlement date.

• [2] The defendant was served with the proceedings on 2 October 2023. She has not filed any notice of opposition or defence and has not taken any other step in the proceeding.

• [3] The matter was set down for a formal proof hearing on damages and quantum under r 15.9 of the High Court Rules 2016.

MACQUARIE TRUSTEE LIMITED v WATSON [2024] NZHC 708 [28 March 2024]

Relevant background

• [4] The plaintiff is a trustee of the Macquarie Trust and was previously the registered owner of the property.

• [5] On 27 May 2021 the plaintiff began listing lots for sale at its proposed development, constructing residential townhouses on the land at 10 Trieste Way, Paraparaumu. Construction began in or around March 2022.

• [6] The plaintiff and the defendant entered into the sale and purchase agreement on 2 June 2021. The purchase price for the property was $833,000 including GST. The agreement required the defendant to pay a deposit of $83,800 by 16 June 2021 with the balance being paid on the settlement date.

• [7] The deposit was paid by the defendant on 16 June 2021, and the agreement was unconditional from 19 August 2021.

• [8] The settlement date was to be the fifth working day after the plaintiff received a new record of title, a code compliance certificate, or achieved practical completion, whichever was the last to occur. On 23 June 2023, the plaintiff notified the defendant that the settlement date was 30 June 2023.

• [9] The defendant failed to settle the purchase on 30 June 2023. On the same day, the plaintiff served a settlement notice on the defendant requiring settlement by 20 July 2023. Once again, settlement did not occur.

• [10] Urgent settlement was requested on 1 August 2023 but did not occur. As a result, the plaintiff entered into a new sale and purchase agreement for the property on 31 August 2023, which cancelled the agreement for sale and purchase with the defendant under cl 11.4(1) of that agreement.

• [11] The plaintiff commenced proceedings against the defendant on 21 September 2023.

Relevant legal principles

Formal proof

• [12] Rule 15.9 of the High Court Rules provides for the formal proof of claims where a defendant does not file a statement of defence and the plaintiff seeks judgment by default for other than a liquidated demand.

• [13] Under r 15.9(4), the plaintiff must file affidavit evidence establishing, to a Judge’s satisfaction, each cause of action relied on and, if damages are sought, providing sufficient information to enable the Judge to calculate and fix the damages.

• [14] Although the plaintiff is still required to prove their claim, the requirement that matters are established “to a Judge’s satisfaction” does not import notions of the burden of proof or the setting of any particular standard of proof — rather, the Judge must make up their mind.¹

Damages

• [15] The victim of a breach of contract is primarily entitled to be compensated for their “expectation” loss, in other words the loss of the bargain. An award of expectation damages puts the plaintiff in the position he or she would have been in if the contact had been performed.²

• [16] Following cancellation of a contract for the sale of land the vendor is entitled to resell the property and to recover any shortfall and consequential loss by way of damages, subject to the requirement to mitigate loss.³ If there is no resale, the vendor may establish loss of bargain by evidence of the property’s value at the cancellation date, or (particularly in a period of fluctuating land values) at any other date which properly compensates the vendor.⁴

¹ R v Leitch [1998] 1 NZLR 420 (CA) at 428.

2. Stirling v Poulgrain [1980] 2 NZLR 402 (SC) at 419; Marlborough District Council v Altimarloch Joint Venture Ltd [2012] NZSC 11, [2012] 2 NZLR 726 at [23].

³ Williams v Kirk [1987] NZCA 132; [1988] 1 NZLR 452 (CA).

⁴ Stirling v Poulgrain [1980] 2 NZLR 402 (CA); Thomson v Rankin [1993] 1 NZLR 408 (CA).

• [17] A plaintiff may not recover damages which are too remote. Liability extends to losses that a reasonable defendant will have realised were sufficiently likely to result from the breach, in light of the information available to the defendant when the contract was made, so as to make it proper for the Court to hold that losses flowed naturally from the breach, or that losses of that kind ought to have been within the parties’ contemplation when they made the contract.⁵

• [18] In appropriate cases, interest, including compound interest, can be awarded as damages for breach of contract under the principles in Hadley v Baxendale.⁶

Evidence

• [19] The plaintiff has filed an affidavit of Kurt Roland Kerrison sworn 15 March 2024 which provides information to enable the Court to calculate and fix damages. Mr Kerrison is the sole director of the plaintiff company.

• [20] Mr Kerrison states that after the defendant defaulted, the plaintiff took steps to mitigate its loss and resell the property. The plaintiff entered into an agreement for sale and purchase of the property with a new purchaser on 31 August 2023 for

$702,000. Settlement for this sale occurred on 20 October 2023. Mr Kerrison states that, taking into account the deposit paid by the defendant which has been retained, the plaintiff has therefore suffered a loss of profit of $52,200 on the resale.

• [21] Mr Kerrison also states that the applicant had to pay a real estate commission to the real estate agent for the sale of the property that did not settle. The plaintiff was required to pay 50 per cent of the commission prior to settlement, being the sum of

$12,570 (excl GST). A copy of the commission invoice is provided.

• [22] Mr Kerrison states that the plaintiff incurred losses in marketing the property for resale. He sets out the various fees for marketing and provides copies of the

5. Hadley v Baxendale (1854) 9 Exch 341; Victoria Laundry (Windsor) Ltd v Newman Industries Ltd [1949] 2 KB 528, [1949] 1 All ER 997 (CA); Inder Lynch Devoy & Co v Subritzky [1979] 1 NZLR 87 (CA).

⁶ Clarkson v Whangamata Metal Supplies Ltd [2007] NZCA 590; [2008] 3 NZLR 31 (CA).

relevant invoices to his affidavit. The total amount incurred by the plaintiff for marketing of the property for resale was $6,470.70 (excl GST).

• [23] Mr Kerrison states that the plaintiff incurred additional losses in the resale of the property through having to furnish the property. Mr Kerrison provides details of the furnishings obtained and the relevant invoices. The total amount incurred by the plaintiff for furnishing the property for resale was $10,456.01 (excl. GST).

• [24] Mr Kerrison states that the plaintiff incurred legal costs for work done in preparing the agreement for sale and purchase with the defendant. The legal costs for drafting the agreement were $500 (excl GST), and an invoice is produced for this cost. Legal costs incurred in respect of these proceedings are covered in the costs award set out below.

• [25] Mr Kerrison states that the plaintiff has also incurred various Council costs in the period between the breakdown of the sale to the defendant and the subsequent resale of the property. These costs include costs for power, rates and strata in the total sum of $4,572.17 (excl. GST). Mr Kerrison has provided evidence of these Council costs.

• [26] Finally, under cl 3.12 of the sale and purchase agreement with the defendant, if any portion of the purchase price was not paid on the due date for payment, the defendant was required to pay interest at the interest rate for late settlement, being 14 per cent per annum, on the unpaid portion of the purchase price. Mr Kerrison has calculated that the holding period is a total of 112 days. The total interest cost is calculated at $36,000.

Assessment

• [27] Having reviewed the affidavit of Mr Kerrison and the invoices and other documents exhibited, I am satisfied that the plaintiff has suffered the following losses as a result of the defendant’s breach:

(a) $52,200 (loss of profit on resale due to drop in market value);

(b) $12,570 (wasted real estate agent commission);

(c) $6,470.70 (additional marketing fees on resale);

(d) $10,456.01 (additional furnishing costs on resale);

(e) $500 (wasted legal costs);

(f) $4,572.17 (additional power, rates and strata costs);

(g) $36,000 (contractual interest for delay).

• [28] The above figures exclude GST. The plaintiff is registered for GST and therefore entitled to GST input tax credits.

• [29] I am satisfied that, in accordance with the damages principles set out above, the defendant is liable for damages resulting from her breach of contract in the total sum of $122,768.88.

Result

• [30] I enter judgment for the plaintiff against the defendant for damages in the total sum of $122,768.88.

• [31] The plaintiff is entitled to costs on a 2B basis and reasonable disbursements to be fixed by the Registrar.

• [32] The plaintiff has indicated that it intends to issue a charging order against the defendant once this judgment is sealed. The issue of a charging order under r 17.42 of the High Court Rules 2016 is approved once this judgment has been sealed.

Associate Judge Skelton

Solicitors:

JB Morrison, Wellington for Plaintiff Impact Legal, Wellington for Defendant