Equity steps in to remedy the breach of purchaser in a property transaction – Hamann v Taleb [2021] NSWSC 1632

The plaintiffs were purchasers of property in Bexley by way of a contract entered into on 9 January 2021. The plaintiffs had commenced proceedings against the defendants, the vendors, for an award of damages (known as equitable damages) under section 68(b) of the Supreme Court Act 1970 NSW (the SCA) for damages suffered as a result of the defendants’ delay in completion of the contract.

Section 68(b) of the Supreme Court Act 1970 grants the Court the power, upon breach of a contract to:

  • grant an injunction;
  • order specific performance of the contract;
  • award any damages in substitution or addition to these remedies (particularly in circumstances where an injunction/specific performance may not be a practical outcome).

An award of damages under section 68(b) is a statutory remedy and is available if a plaintiff makes out an equity for relief through specific performance: Madden v Kevereski [1983] 1 NSWLR 305 at 306G-307D.

Breach of Contract

Originally, the contract was set to be completed by 8 March 2021. The defendants were not ready as they were awaiting a Foreign Resident Gain Withholding Clearance Certificate from the Australian Tax Office. The contract was not completed by the set date.

On 31 May 2021, the plaintiffs lodged a caveat on the property and pressed the defendants to confirm whether the contact would be completed by 7 June 2021. The contract was not completed by this date and on 15 July 2021, the Court made a declaration that the contract ought to be specifically performed and the plaintiffs were awarded their costs in the sum of $12,000.00. The contract was completed on 21 July 2021.

The completion of the contract between the plaintiffs and defendants only occurred only after an order was obtained from the Court for specific performance. This order then enlivened the jurisdiction of the Court’s to award damages under section 68(b) of the SCA (McKenna v Ritchey [1950] VLR 360).

Damages at Common Law

The plaintiff’s loss as a result of the conduct of the defendant included a liability to pay an increased rate of interest on funds borrowed for the purchase of the property. This is what the plaintiffs sought as a remedy from the Court on the basis of the defendant’s clear breach of the contract in question.

The Court confirmed that the damages sought by the plaintiffs were too remote to be granted damages at common law.

Damages at Equity

The Court then turned its focused to section 68 of the SCA and whether the plaintiff could recover the damages sought in equity.

The Court considered the defendant’s delay and the notice provided by the plaintiff’s representatives that if the contract was not completed on time, that the plaintiffs would suffer a loss and the nature of this loss was such to diminish equity in the property. This is because the plaintiffs debt to the bank would be greater than it would have been had the contract been performed on time.

The Court considered that a just outcome in these circumstances would be to “restore the plaintiffs to the position which they would have been in had the defendants completed the contract in a timely manner, or at least, before the plaintiffs suffered their loss”.

To that end, the Court awarded the plaintiff damages under section 68(b) of the SCA in addition to the order for specific performance of the contract, in the sum of $15,000.00 representing the diminution of value in the property

This case sheds some further light on the application of equitable principles where mere delays occur between contracting parties and how the Court deals with the consequences of losses suffered by one party as a result of a breach in contract.