Damages - The Failed $22M Settlement

When a high-end property transaction in Vaucluse collapsed, it triggered a major legal battle over "loss of bargain" damages. The resulting Supreme Court judgment in Thomson v CW2 Pty Ltd (No 2), is a detailed look at how the law protects vendors when a purchaser walks away.

The Background: A Deal on the Rocks

The case centered on a residential property with a contract price of $22.888 million and a deposit of $1.717 million. The vendors, Mr and Mrs Thomson, originally expected settlement in December 2022. However, the purchaser, CW2 Pty Ltd, failed to complete the transaction on time.

The Termination: Why the Vendors Pulled the Plug

The path to termination was paved with several warnings. After the purchaser missed the December deadline, the Thomsons issued a notice to complete. A technical point regarding missing documents delayed settlement further, but the vendors rectified this by late December 2022.

Despite the vendors being ready to settle in early January 2023, the matter "dragged on" for months. A final notice to complete required settlement by 12 April 2023. When the purchaser still failed to perform, the Thomsons officially terminated the contract on 17 April 2023.

The agent then carried out a new marketing campaign, which led to the property's resale at a significantly lower price of $17 million. The resale contract was signed on 20 May.

Translating Breach into Dollars

To assess damages, the court aimed to place the vendors in the same position they would have been in had the contract been performed. The calculation followed a specific sequence:

1. Establishing the Unpaid Balance: The court started with the remaining sum due under the contract, which was $21.171 million (the original price minus the deposit).

   
   

2. Adding Contractual Interest: Because the contract included a 10% interest rate for delays, the court added $586,000 for the period between the earliest possible completion date and the actual termination.

   
   

3. Determining Current Value: The vendors eventually sold the property to another purchaser for $17 million shortly after termination. The court inferred that this resale price represented the true market value at the time of termination and deducted this from the claim.

   
   

4. Recovering Resale Costs: The court allowed the recovery of $51,000 in additional expenses, which included property styling, garden maintenance, and the legal fees associated with the second sale.

   
   

5. Statutory Interest: Finally, the court applied pre-judgment interest of $359,000 to account for the time elapsed since the breach.

While the exact mathematical total was approximately $5.167 million, Justice Parker noted that property valuation is an "inference" rather than an exact science. In a move reflecting the imprecisions of the real estate market, the court rounded the final award to the nearest $100,000, resulting in a judgment of $5.2 million against the purchaser and the guarantor.

Takeaway

This case highlights that a purchaser’s failure to complete can have catastrophic financial consequences, especially in a fluctuating luxury market. For vendors, it emphasises the importance of maintaining the property (like gardening and styling) during the resale period, as these costs are often recoverable as mitigation expenses.

If you are facing a settlement delay or a breach of contract, the specific wording of your notices to complete and the timing of your termination are critical to securing a judgment like this one. See the Property Law section of our website for more information and do not hesitate to contact our office for a free initial consultation.