Toni Collette ordered to pay $814,000 difference, plus lose deposit, after dumped Paddington property purchase: Title Tattle

Actor Toni Collette and her musician husband, David Galafassi have lost the case where they were sued over their failure to settle on a $6.35 million Paddington terrace purchase.

They have been ordered to pay $814,000, plus the deposit, plus legal costs to the vendor Susan Kelly.

The specific performance decision was handed down in the NSW Supreme Court equity division this morning by Acting Justice Windeyer.

"I consider [Mrs Kelly] made reasonable efforts to minimise her loss and took reasonable care in selling the property at the price she did," he said in his 28 page judgment.

In October 2011 the couple signed a contract to buy a double-fronted Paddington terrace from Susie Kelly, the co-founder and owner of Industrie clothing with her husband, Nick. The Galafassi couple cried poor and pleaded to have legal action over the house purchase against her dropped, the Supreme Court hearing was told.  

The Stewart Street house (pictured below) was snapped up – quite early in its marketing campaign through McGrath agent Ben Collier by the Galafassi couple.

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However after they decided not to proceed with its purchase the Paddington terrace was resold for $5.5 million with the entertainment industry couple facing a claim against them for the difference. 

The plaintiff sought:

The deposit was five per cent of the original purchase price, namely $317,500.

Acting Justice Windeyer came to the conclusion that "there was a clear continuing act of repudiation by the purchasers who had indicated they could not complete, that they had no intention of completing, and they had in fact sold their property at Bronte and bought another property which, on the basis of their evidence, put it beyond their powers to complete.

"In those circumstances, I find that the purchasers repudiated the contract, that the vendor was entitled to terminate and did so, and thereupon is entitled to seek damages for breach," the judgement noted.

Collette and Galafassi argued the vendors resold the property under value. It was partly because "the plaintiff admitted that for the purposes of resale, the property was not put up for sale by auction, the property was not listed for sale on any real estate website, and it was not advertised for sale in any newspaper."

The Galafassi coupled claimed the price ought to have been $6.25 million at auction, according to documents filed in the Supreme Court, with evidence from valuers, WK Wotton after a drive-by inspection.

The Wotton report set out some figures of sales in the Paddington and Woollahra areas of house properties between $3 million and $8 million between 1 July 2011 and 30 June 2012.

It noted the average price for sales of property in Paddington fell by 4.86%, but those were not necessarily for sales within the price range.

Figures for the Woollahra Council area for sales within the $3-8 million range over that period showed a reduction in price of 5.14%.

The Wotton report said that to obtain the best price for the property "it needed to be extensively exposed to the market to make its availability known; to market the property properly would need a four to six week period followed by auction or by seeking expressions of interest; and that proper marketing would include extensive advertising in local and international press or magazines."

The Acting Justice noted he thought McGrath estate agent Ben Collier, the Kelly's salesperson on both sales, was "a convincing witness and a very experienced salesman."

His honour noted that the failed sale to the purchasers had been well publicised in media reports and that Collier's opinion was "a failed sale resulted in a stigma attaching to the property making it difficult to sell with prospective purchasers expecting to use the failure as a bargaining point, particularly if the vendor had purchased another property as was the case here."

"That is important as it is the right of the vendor to resell."

Mr Collier was showing prospective purchasers quietly through the property from January 2012.

"He had lists of people interested in such properties or who had been unsuccessful bidders at earlier auctions of similar properties," the judgement noted.

"He is not a valuer but is a very successful real estate agent operating in the Paddington and Woollahra area.

"The most significant evidence he gave was that over the period from 2008 to 2012 there was a drop in the market prices of valuable homes in the area and a drop in those prices between September 2011 and April 2012.

"The details he gave for sales on 9 March 2011, 5 July 2011 and 26 April 2012 of properties at 86, 88 and 90 Holdsworth Street, Woollahra support that claim.

"In his affidavit Mr Collier 2013 gave evidence of this reduction in price, but also said that reports of the failed sale to the purchasers had been well publicised in media reports placed into evidence, and that in his opinion a failed sale resulted in a stigma attaching to the property making it difficult to sell with prospective purchasers expecting to use the failure as a bargaining point, particularly if the vendor had purchased another property as was the case here.

"Mr Collier did recommend and expected there would be a further marketing campaign, but Mr Kelly had rejected this.

"On the other hand, Mr Collier had sent to the vendors a report list of properties sold in Paddington and Woollahra from 1 July 2011, the highest price being 88 Holdsworth Street, Woollahra being sold for $6,250,000.

"He said there were only two properties in Paddington and four in Woollahra in any way similar to the Stewart Street property and that even with the limited stock, sales were very difficult and he considered that if Stewart Street were put back onto the market, he thought the likely result would be a sale of somewhere around $5 million," the judgement noted.

The Kelly's valuer Paul Donavan of Ponton Valuations supported Mr Collier about a decline in values of similar properties between March 2011 and mid-2012.

He considered a number of properties as being the closest comparable, particularly 65 Goodhope Street, Paddington; 90 Holdsworth Street, Woollahra, as these had occurred in 2012.

The Goodhope Street property was sold for $4,906,000 and the Holdsworth Street property was sold for $5,597,000.

Donavan noted said that these two properties had less land area, but were in a better location being north of Oxford Street.

Most importantly Donavan agreed that "a failed sale had a detrimental effect on a marketed property, particularly in a subdued market as then existed."

Donavan valued the property in April 2012 at $5,600,000, but said that he considered a sale at $5,500,000 “a sound transaction for the property at that date and given the particular circumstances”.

His Honor noted he accepted that Mr Collier said that the property might have sold for more had there been an advertising campaign, "but it is certainly not established that this would have been the result and the evidence of Mr Wotton does not support it.

"I consider that the plaintiff made reasonable efforts to minimise her loss and took reasonable care in selling the property for the price which she did," the judge ruled.

Designed by architect Anthony Gill and completed in 2009, the five-bedroom, four-bathroom house sits on a 360-square-metre block.

The entertainment industry couple made their decision not to proceed with the Paddington purchase after they struggled to find a buyer of their Bronte house.

Their 1885 Bronte weatherboard cottage that cost $4.4 million in mid-2009 struggled to find a buyer despite being tipped to sell for around $900,000 less than their purchase price.

Collette and Galafassi instead bought back at Bronte, swapping homes with the buyer of their own $3.5 million house.

The Kellys bought on Kutti Beach at Vaucluse last March for $15.5 million, so incurred a land tax charge on the redundant Paddington property. So their damages claim against the entertianment industry couple also includes a claim for $43,516 in state land tax and interest for four months. Earlier this month the Kelly family upgraded to a $20 million house elsewhere on the beach.

The $6.35 million sale of the five-bedroom home was due to be settled by late December 2011, but Collette's lawyer, David Carr, told the Kellys' lawyer in an email on New Year's Eve last year his clients intended "not to proceed" with the purchase.

Mr Collier sent an email on December 31, 2011 to the Galafassi couple pointing out that the risk to them if the purchase was not settled.

They sent an email back to him saying inter alia “we feel sick about this, you and vendors nothing but great and we apologise profusely”.

Collette also sent an email to Nick Kelly on February 24, telling him the couple had actually decided to buy another house in Bronte.