The re-sale of a Mackay home at a $100k loss after the first buyer failed to settle, has resulted in a far lower sum in damages recovered, because settlement of the subsequent sale occurred more than 2 years after the termination of the original contract.

Geoffrey and Julie Baguley sold their home at 30 Byron Street, Mackay for $400k in August 2010, with settlement due in October. The buyer defaulted and the seller sued.

The Property was ultimately resold on 17 October 2012 for $300k settling in January 2013.

The Baguleys claimed the $100k diminution in price, accumulated interest of $40k over the intervening years and commission & legals on the first sale.

The issue at trial was the difference between general law damages on the one hand and liquidated damages allowable under standard condition 9.4 and 9.5 of the REIQ contract terms.

Damages for breach are generally assessed as at the date of the breach. Evidence of value must be produced as at that date, to allow the court to make the assessment and calculate the difference between that and the contract price.

Clause 9.4 obviates the requirement by specifying that the seller can recover as “liquidated damages” the deficiency in price on resale plus expenses but only if the re-sale “settles within two years of the termination” of the original contract.

Because settlement of the subsequent sale occurred here after two years from the date of termination, the seller was precluded from recovery of that type.

Rather, damages fell to be assessed under the general law, i.e. as at the date of breach in October 2010 or another appropriate date the sellers could persuade the court that the circumstances warranted be adopted for that purpose.

Was it reasonable for the Baguleys to retain the home for more than two years? The court answered this question in the affirmative because they had taken all reasonable steps to effect a sale in the meantime. But other variables caused the court to prefer the date of breach, as the appropriate date for assessment of the loss.

So the relevant question was the value – as determined by expert valuation evidence – of the home at the resale date in October 2010, at the relative beginning of Queensland’s GFC related property crash.

Taylor Byrne’s Scott Braithwaite was the valuer whose view – an all up $350k – the District Court preferred as against Ryan Booth who pitched in at $320k.

The resale loss available for recovery of Braithwaite’s evidence was a mere $50k.

Both valuers agreed that by the date of actual date of on sale, the value had slumped further to around $310k – $320k. Thus had the damages been assessed as at that later date, the Baguley’s recoverable loss would have been that much higher.

The court allowed recovery of the loan interest of $40k and would have allowed commission and legal costs on the resale but because the Baguleys had only argued for those in respect of the first aborted sale – which under law are not recoverable – they missed out on the part of the recovery.

Total judgement, after crediting the $1000 deposit forfeited from the original sale, was $88,982.00

Baguley v Lifestyle Homes Mackay Pty Ltd [2014] QDC 066 Searles DCJ 03/04/2014


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