Abstract

This article analyses a case in which Burns & Associates Solicitors acted for the successful defendant in obtaining a substantial award of interest.

Claims for interest are very important, particularly where the seller claims specific performance, but later elects to terminate the contract. The issues relating to the basis for the award of interest where the buyer wrongfully failed to settle the contract were discussed by the Queensland Court of Appeal in QM Properties Pty Ltd v Belscorp Pty Ltd [2019] QCA 138.

Key points

1. An award for interest often involves a significant amount of money and should be claimed.
2. The court calculates an award of interest from when the cause of action accrues.
3. Where a defaulting purchaser fails to settle a contract for the sale of land, the cause of action for breach of contract accrues when the contract was required to be settled.
4. This is the case even where the seller initially affirms the contract and sues for specific performance, and then later in the proceedings elects to terminate the contract and claim common law damages. In this situation, an award of interest is calculated from the date that the contract was required to be settled, not the date of the subsequent election or the amendment of the pleading.
5. A prayer for relief claiming damages ‘in addition to or in lieu of specific performance’ encompasses a common law claim for damages for breach of contract in addition to a claim for equitable damages.

The facts

1. On or about 11 September 2007, Belscorp entered into a contract to sell land at Albany Creek to QM.
2. The following were material terms of the contract:
   1. The purchase price was $3,835,000.
   2. The deposit was $191,750.
   3. The settlement date was 13 November 2007.
3. QM paid the deposit of $191,750.
4. In November 2007, QM refused to settle and terminated the contract, alleging they were induced to enter the contract through misleading or deceptive conduct and misstatements.
5. QM commenced legal proceedings to recover the deposit of $191,750.
6. Belscorp denied liability, alleged that QM had breached the contract on 13 November 2007 by failing to complete, and counterclaimed for specific performance of the contract.
7. Until 19 December 2016, Belscorp sought specific performance and interest. That is, Belscorp sought an order that QM pay the balance purchase price in exchange for the transfer of the property.
8. On 19 December 2016, Belscorp amended its pleading so that the counterclaim sought, as an alternative form of relief to specific performance, ‘damages in lieu … as a result of [QM’s] breach and repudiation of the contract’. The counterclaim also sought, in the prayer for relief, ‘damages in addition to, or in lieu of, specific performance’. As at this date, the principal claim was for an order for specific performance.
9. On 26 February 2018, at the opening of its counterclaim, Belscorp, for the first time, elected to accept QM’s repudiation and terminate the contract.
10. On 2 March 2018, consequent upon Belscorp’s election, the Court granted leave to Belscorp to amend its counterclaim to reflect this election, that is, that Belscorp now sought damages rather than specific performance.
11. In its answer to the counterclaim, QM pleaded that Belscorp’s 2 March 2018 amendments were the first time a claim for damages for breach of contract had been advanced, such that any award of interest should only be from 2 March 2018, not from 13 November 2007.
12. If QM’s contention was correct, Belscorp’s claim for interest for over ten years would be reduced to a claim for interest for only four months.
13. Essentially, QM contended that Belscorp’s claim for common law damages did not accrue until 2 March 2018.
14. The trial judge rejected that claim, finding that the claim for common law damages accrued when QM breached the contract. The trial judge found that QM breached the contract on 13 November 2007 when it did not settle on the contract for the sale of the property.
15. QM appealed, claiming that the trial judge erred in finding that the alternative counterclaim for ‘damages in lieu of specific performance’ was a claim for damages at common law, claiming that such a claim was for equitable damages, which are generally assessed at judgment or when the principal equitable relief is refused.
16. In their appeal, QM also contended that the right to claim common law damages did not accrue until Belscorp made an election to terminate the contract for repudiation, which did not occur until 26 February 2018, or 2 March 2018, when the counterclaim was amended.

The Court of Appeal decision

1. The Court of Appeal rejected QM’s submission and dismissed the appeal.
2. The Court of Appeal observed that QM confused the date of accrual of a cause of action with the date on which that cause of action was pleaded or asserted.
3. Adopting Millstream Pty Ltd v Schultz, the Court of Appeal held that the accrual of a cause of action for breach of contract occurred when the contract was breached, not when the election to terminate the contract was made.
4. It follows that Belscorp’s cause of action for breach of contract accrued on 13 November 2007, when QM failed to complete the contract.
5. The Court of Appeal observed that the accrual of a cause of action for breach of contract remained intact, even though Belscorp affirmed the contract and sought specific performance.
6. Although Belscorp could not accept ‘that’ breach, having affirmed the contract, QM’s ongoing refusal to settle commencing on 13 November 2007 constituted a repudiation which was capable of being accepted, and which was eventually accepted. The late acceptance of the repudiation did not, in any way, displace the fact that the cause of action for breach of contract accrued on 13 November 2007.
7. Further, the Court of Appeal held that the prayer for relief claiming damages ‘in addition to or in lieu of specific performance’ encompassed a common law claim for damages for breach of contract in addition to a claim for equitable damages.

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