Paolucci v Makedyn [2021] NSWCA 215

Andrew Hales  |  Nicholas Grewal  |  Jonin Ngo

Key takeouts

• Historical breaches (which have been cured) are not a basis for an order for specific performance or statutory damages under s 68 of the Supreme Court Act (known as Lord Cairns’ Act damages).
• A court is not permitted to in effect rewrite or reshape the bargain entered into between the parties.
• An order for specific performance will not necessarily be granted even where the other party has misconstrued the interpretation of a contract.
• Statutory damages under s 68 of the Supreme Court Act are a discretionary award, not a right.  Even if the preconditions to entitlement for these damages are satisfied, the award of these damages is at the discretion of the court.

Facts

This case concerns an appeal for the availability of specific performance or Lord Cairns’ Act damages under s 68 of the Supreme Court Act 1970 (NSW), which had been rejected by the trial judge at first instance.

In 2015, the appellant, Mrs Paolucci, and the respondent, Makedyn Pty Ltd, entered into a series of contracts involving a parcel of land in western NSW. Mrs Paolucci had agreed to transfer the land to Makedyn on the condition that, after the land had been subdivided, two lots of the land be retransferred and Makedyn would build a house and a duplex on those lots. Under those contracts, Makedyn also had to prepare layout plans for the house and the duplex (which were only provided to Mrs Paolucci in October 2018).

The transfer and subdivision occurred, but not the retransfer and the construction of the house and duplex. This was delayed partly due to the dispute between the parties as to the dimensions of the duplex. Mrs Paolucci’s primary argument was that Makedyn had failed to provide the layout plans for the duplex promptly and that had this occurred, the dispute between the parties concerning the dimensions of the duplex would have crystallised and been resolved promptly, with the result that by the time of the trial Makedyn would have built what it had promised to build. On this basis, Mrs Paolucci wanted  an order for ‘partial’ specific performance, involving a transfer to her of the lots created by the subdivision, plus damages reflecting the difference in value of the vacant lots compared to the lots with residences constructed on them and lost rent, rather than an order for full performance of the entirety of the parties’ bargain. This was different to the original bargain between the parties.

Decision of the Court of Appeal

The appeal was dismissed. The court held that Mrs Paolucci’s primary submission, which hypothesises what would have happened had she been provided with the layout plans in a timely manner, is contrary to basic principles. Hypothesising may be deployed in questions of causation and damages at common law but not when seeking specific performance. If accepted, her argument would have triggered a claim for common law damages. However, this was not articulated in the trial at first instance nor sought on appeal.

Should specific performance be ordered?

There was no basis for specific performance because:

• The layout plans had already been provided (in 2018). No court in 2019 or 2020 would order a builder to provide the layout plans which had already been provided. This is so even if Makedyn had misconstrued the provisions of the contract regarding the dimensions of the duplex.
• Even if there was an extant (ie continuing) breach (being that Makedyn had not commenced construction of the house and duplex), it was reasonable for Makedyn not to do so until the dispute between the parties as to the dimensions of the duplex was resolved.
• The relief sought by Mrs Paolucci was quite different from what the parties had bargained for.
• Once the dispute between the parties as to the dimensions was resolved, there was nothing to suggest that Makedyn would be unready or unwilling to build the house and duplex.

Should Lord Cairns’ Act damages be awarded?

There was no basis to award of statutory damages because the precondition to the discretion for ordering these damages (ie either the court has power to grant an injunction or order specific performance) was not satisfied.