Toni Collette's appeal secures reduced Paddington property sale damages legal bill

Toni Collette's appeal secures reduced Paddington property sale damages legal bill
Toni Collette's appeal secures reduced Paddington property sale damages legal bill

Toni Collette and her musician husband, David Galafassi have secured a small reduction in the damages they must pay in their legal battle over abandoned plans to buy a Paddington terrace.

After a two day hearing, the NSW Court of Appeal ruled on Friday that the couple pay $602,500 to Industrie clothing label founder Susan Kelly for reneging on their 2011 agreement to buy Kelly's double fronted Stewart Street property (pictured in gallery above).

The revised damages bill represents a reduction of $212,407 on the original damages bill of $814, 907 ordered by Supreme Court Acting Justice William Windeyer last year.

The purchase price under the contract was $6,350,000, of which the purchasers paid a 5% deposit ($317, 500). The date fixed for completion under the contract was 30 December 2011.

But on the morning of 30 December 2011 the purchasers' solicitors advised that the purchasers did not have the funds necessary to enable them to complete and that they would not be able to proceed with the purchase.

The vendor responded that she did not accept the purchasers' apparent repudiation and intended to institute proceedings for specific performance.

On 4 January 2012 the purchasers' solicitors again advised that the purchasers were not financially capable of completing the contract and that they would be unable to comply with an order for specific performance.

On 20 January 2012 the vendor commenced proceedings in the Equity Division of the Supreme Court seeking orders for specific performance and, in the alternative, damages.

On 24 January 2012 Mrs Galafassi sent an email to the vendor and her husband apologising for their failure to complete.

The email explained that the purchasers had been unable to sell their own home and had instead agreed to a property swap arrangement with the vendor of a different property, and in the process they had lost all their savings, meaning that they were unable to go through with the purchase.

On or about 24 February 2012 Mrs Galafassi sent a further email again stating that there was no way they could comply with an order for specific performance if such an order was granted because they did not have the means to raise the funds to complete.

But the Galafassi couple pursued the latest court hearing where the NSW Court of Appeal ruled that Mrs Kelly was not entitled to "special condition interest", which is paid in cases where completion of a property deal is late.

The court found that since completion of the sale had not occurred, special condition interest did not apply.

But Ms Collette and Mr Galafassi will still have to forfeit their $317,500 deposit, taking the total bill to more than $920,000. Plus much of the legal expenses of Ms Kelly.

Ms Collette and Mr Galafassi had agreed to buy the terrace in September 2011 for $6.35 million, but when due to settle three months late they backed out.

"We feel sick about this, you and the vendors nothing but great and we apologise profusely," the couple said in an email to the McGrath selling agent Ben Collier.

"David and I feel absolutely sick about not being able to go through with the purchase of your house. We had every intention of doing so and it has broken our hearts. We can't apologise enough and totally empathise with your position. We are mortified. If we had the money we would happily be living in it by now," she emailed the Kelly's.

The Purchasers' email concluded with the plea: "Please reconsider taking us to court. It just makes a very sad situation much worse. We can no longer buy your beautiful house. Again, we apologise profusely. We don't have the finances to go through with the purchase. For the sake of both our families, I implore that you find a way to settle this less publicly. Understandably, all of this is not your concern. You thought you had sold the house and the sale has fallen through. We sincerely hope that you can understand our position and find it in your hearts to deal with this in another way."

The email contained the postscript: "ps...our lawyer was not entirely comfortable with us writing this letter and does not want it used against us. His advice is to state that this "appeal" is without prejudice and should not be used in a legal case against us, or in the press, and is very much confidential."

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On or about 24 February 2012, Mrs Galafassi sent a further email to the vendor's husband referring to recent publicity in the press and stating: "... I wanted to write to you in the hope that we can try and sort something out before good press becomes bad press. We are truly sorry for the position that we put you in last year, we can't stress that enough, but there has to be a way that this matter can be resolved.

"If we can't settle it commercially, quickly, rather than legally, slowly, the value of Paddington may well be jeopardised once our legal teams get in to the Court room and the media have a field day. I am being perfectly honest when I say that there is no way that we could comply with an order to complete the purchase of Paddington if your order was granted. We don't have the means to raise the funds to settle on Paddington. When Bronte Road didn't sell at auction last November, we were very worried.

"I fully appreciate that I am not in a good position but, without admitting that I am liable for anything, I understand that if you were to sell Paddington now, it is likely I would have to find the difference to satisfy a claim of damages if the price came in under the contract price that we signed.

"So you would be in the same position as you would have been had you sold to us at the end of last year. Whether that happens or not, that all makes sense to me but what doesn't make sense is that the longer this matter is dragged out through legal processes (at least another month), the more damage it will do when the property is finally listed.

"It would become like a forced sale and the media coverage would not force the price up! At the moment you have $315,000 and you still have the house, so in essence you are in a better position than you were at the end of last year. In my humble view I wouldn't put that position at risk."

Mrs Galafassi's email continued: "I am due to settle on the sale of our Bronte Road house in the next few days. As the article in the media said we have 'swapped' our house for one not too far away, and at the moment the story that we wanted to stay close to the ocean with our young family, is not too far from the truth.

"My view is that if that story was maintained in the press, rather than coverage of all the details of a litigious battle, you will get a far better result than if you pursue me in the Courts. If you listed Paddington for sale now, who knows, you may get more than the price we agreed to pay. You just don't know. But if you don't get a higher price, well, then Dave and I may have to suffer the consequences of a damages claim.

"Either way, you really are not going to be any commercially worse off, but we all will have avoided some of the stress, anxiety, time and effort that inevitably go hand in hand with litigation. I am not trying to avoid the consequences of our action but trying to consider more commercial and realistic options with more satisfactory outcomes for everyone, rather than paying lawyers to follow procedures and argue legal points on our behalves."

At trial the Galafassi couple contended, unsuccessfully, that these two emails were "without prejudice" and should not have been admitted into evidence.

About two months after the second email, the Kellys sold the house to Ernst & Young accountant Ian Ball for $5.5 million. Ben Collier had shown the property to nine interested purchasers between January and April 2012; and that the offer ultimately accepted from Mr Ball on 24 April 2012 of $5,500,000 was an increase of $200,000 on his first offer.

Mrs Kelly then sued for the difference plus interest and land tax that arose on the December 31, since they had already bought their next home in Vaucluse.

Ms Collette wrote to Mrs Kelly's husband Nick in 2012, urging the couple not to proceed with the court case.

"I wanted to write to you directly in the hope that you will understand," she said in an email.

"We can no longer buy your beautiful house. We don't have the finances to go through with the purchase. For the sake of both our families I implore you to find a way to settle this less publicly."

The court has yet to finally decide on legal costs indicating that Ms Collette and Mr Galafassi should pay 65% of Mrs Kelly's costs though the parties are to be given the opportunity to make further submissions on costs, the chief Justice Thomas Bathurst and Justices Julie Ward and Fabian Gleeson proffered.

David Galafassi (First appellant) and Toni Galafassi (Second appellant) were represented by solicitors: YBR Solicitor and counsel: J Stoljar SC with J C Hewitt.

Susan Kelly engaged B A Coles QC with C G Carroll who were advised by solicitors, Osborne Lawyers. 

There were 66 prior cases cited in the matter which was first ruled on in May last year.

Jonathan Chancellor

Jonathan Chancellor

Jonathan Chancellor is one of Australia's most respected property journalists, having been at the top of the game since the early 1980s. Jonathan co-founded the property industry website Property Observer and has written for national and international publications.

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New South Wales

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