Supreme Court New South Wales Medium Neutral Citation: Lindsay-Owen v HWL Ebsworth Lawyers [2023] NSWSC 68 Hearing dates: 7-11, 14-17, 21, 24, 25, 31 March, 1 April 2022 Date of orders: 17 February 2023 Decision date: 17 February 2023 Jurisdiction: Common Law Before: Harrison J Decision: (1) Judgment for the plaintiffs for damages to be calculated on the basis of my indicative findings. (2) Grant liberty to apply. Catchwords: NEGLIGENCE - professional negligence - solicitors advising on large-scale property development - failure to include key clause in joint venture agreement NEGLIGENCE - causation - loss of chance - alleged loss of chance to amend joint venture agreement to include clause - alleged loss of chance to consummate joint venture with alternative partner NEGLIGENCE - damages - ascertainment of quantum - loss from inability to develop land in accordance with desired joint venture agreement - land still not fully developed - forecasting how hypothetical development would have proceeded CONSUMER LAW - misleading or deceptive conduct - causation - Trade Practices Act 1974 s82(1) - suffering loss "by conduct of" the defendants EVIDENCE - opinion evidence - whether fields of expertise exist - forecasting hypothetical property development outcomes Legislation Cited: Evidence Act 1995 (NSW) s 79 Trade Practices Act 1974 (Cth) s 82 Cases Cited: About Life Pty Ltd v Maddocks Lawyers [2021] NSWSC 1370 Atlas Tiles Ltd v Briers (1978) 144 CLR 202; [1978] HCA 37 Berryman v Hames Sharley (WA) Pty Ltd [2008] WASC 59 Carey v Freehills (2013) 303 ALR 445; [2013] FCA 954 Castel Electronics Pty Ltd v Toshiba Singapore Pty Ltd (2011) 192 FCR 445; [2011] FCAFC 55 Cullen v Trappell (1980) 146 CLR 1; [1980] HCA 10 Daniels v Anderson (1995) 37 NSWLR 438 Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1; [1986] HCA 3 Gill v Australian Wheat Board [1980] 2 NSWLR 795 Gore v Montague Mining Pty Ltd [2000] FCA 1214 Hart Security Australia Ltd v Boucousis (2016) 339 ALR 659; [2016] NSWCA 307 Heenan v Di Sisto [2008] NSWCA 25 Housing Commission of New South Wales v Falconer [1981] 1 NSWLR 547 Hughes v St Barbara Mines Ltd [No 4] [2010] WASC 160 Johnson v Perez (1988) 166 CLR 351; [1986] HCA 64 Lindsay-Owen v Schofields Property Development Pty Ltd [2014] NSWSC 1177 Makita v Sprowles (2001) 52 NSWLR 705; [2001] NSWCA 305 Mal Owen Consulting Pty Ltd v Ashcroft (2018) 97 NSWLR 1163; [2018] NSWCA 135 Malec v JC Hutton Pty Ltd (1990) 169 CLR 638; [1990] HCA 20 Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494; [1998] HCA 69 Principal Properties Pty Ltd v Brisbane Broncos Leagues Club Ltd [2018] 2 Qd R 584; [2017] QCA 254 Ricochet Pty Ltd v Equity Trustees Executors and Agency Co Ltd (1993) 41 FCR 229 at 235 Sellars v Adelaide Petroleum NL (1994) 179 CLR 332; [1994] HCA 4 Sydney Local Health District v Macquarie International Health Clinic Pty Ltd (2020) 105 NSWLR 325; [2020] NSWCA 274 Winton Partners Funds Management Pty Ltd v Lindsay-Owen [2016] NSWSC 640 Category: Principal judgment Parties: Gregory Hamilton Willoughby Lindsay-Owen (First Plaintiff) Dairycorp Pty Limited (Second Plaintiff) Martin Downing & Ors Trading as HWL Ebsworth Lawyers (First to One Hundred and Sixth Defendants) Representation: Counsel: T Alexis SC with P Afshar (Plaintiffs) T Faulkner SC with C Bannan (Defendants) Solicitors: Gadens (Plaintiffs) Gilchrist Connell (Defendants) File Number(s): 2016/85879 Publication restriction: Nil Judgment 1. HIS HONOUR: By their amended statement of claim filed on 8 July 2016 the plaintiffs, Gregory Hamilton Willoughby Lindsay-Owen and Dairycorp Pty Ltd, claim damages from their former solicitors, the partners of HWL Ebsworth Lawyers ["HWLE"], for negligence and breach of retainer arising out of advice provided to the plaintiffs concerning their acquisition and development of land at Schofields in the western suburbs of Sydney. There is no issue concerning the scope of the retainer or the existence of the duty of care. Introduction 1. Until early 2015, Mr Lindsay-Owen and Dairycorp owned a large parcel of approximately 56 hectares adjacent to Schofields railway station on the Blacktown-Richmond line within the North West Growth Centre of Sydney. Mr Lindsay-Owen wanted to sub-divide and develop the land so as to maximise his return upon a rezoning from rural to urban, together with an experienced developer. In about 2005, Mr Lindsay-Owen retained Martin Downing of HWLE, one of the defendants, to advise in relation to the development of the land and the preparation of a joint venture agreement. On 29 March 2010, the plaintiffs entered into a Joint Venture Agreement with Schofields Property Development Pty Ltd ["Schofields"], a special purpose vehicle of Villawood Management Group Pty Ltd ["Villawood"]. 2. Since 2006, and at the time that the joint venture agreement was executed, the plaintiffs had a loan facility with the National Australia Bank for approximately $20M secured by mortgage over the land. It was essential for the plaintiffs in committing to any joint venture to develop the land that the incoming joint venture partner should agree that the debt would become a joint venture liability: Mr Lindsay-Owen had no independent means from or with which to discharge the existing loan. Mr Downing knew and understood his instructions in that regard. 3. However, the joint venture agreement when executed contained a provision that obliged the plaintiffs to repay the loan and procure a release of all securities from the title when "planning approval" was obtained. Clause 11(b) was as follows: "11. By the date which is 30 Business Days after Planning Approval is obtained: (a)… (b) Dairycorp agrees to repay its existing debt facility and procure the release of all securities in relation to that debt facility from title to the Joint Venture Assets and the Land." 1. When planning approval was obtained in April 2014, Mr Lindsay-Owen was unable to discharge the debt in accordance with this clause and the joint venture partner relied on this as a default enabling it forcibly to sell the land with the benefit of planning approval. The land was sold to Stockland for $103,500,000 on 26 March 2015. In the result, the plaintiffs allege that they incurred significant expenses and lost the opportunity to develop the land and earn substantial profit. 2. The relevant contention advanced by the plaintiffs about this was pleaded in paragraph 18 of the amended statement of claim filed on 8 July 2016 in these terms: 18. The plaintiffs instructed the defendants that: (a) one of the key objectives of any joint venture (or similar transaction) was that the Existing Debt be discharged by external loan funds: and (b) such funds were to be borrowed by any joint venture (or similar transaction) into which the plaintiffs entered into [sic] for the Development. 1. As late as 10 March 2022, when HWLE filed their amended defence to the amended statement of claim, that paragraph was still denied. However, two days later at transcript pages 784-785, the following exchange occurred: "FAULKNER: I think as your Honour rightly observed in view of Mr Downing's evidence, we can't maintain that denial of that paragraph. … HIS HONOUR: … Well, I will just note that the denial in para 18 of the further amended defence is withdrawn, not pressed. … FAULKNER: It's not pressed. But this is more important. I am instructed, having a look at what Mr Downing said in cross examination, he accepted the proposition that he left in the drafting in the joint venture agreement to the implication what could have been expressed. And, in those circumstances, I am instructed that my client concedes that it breached its duty of care to the plaintiff in relation to the drafting of the joint venture agreement." [Emphasis added] 1. In those events, the case is no longer concerned with whether HWLE breached their duty or their retainer but whether in either case the breach caused loss to the plaintiffs and the quantification of any such loss if it did. The plaintiffs also maintain a claim that their loss and damage arises from HWLE's misleading and deceptive conduct. The Claim 1. The plaintiffs contend that HWLE's breaches and their statutory contravention caused them to suffer loss and damage, falling into two separate categories. First, the expenses incurred by the plaintiffs and paid out of the proceeds of sale of the land. Secondly, the sum representing compensation for the plaintiffs' lost opportunity to develop the land in accordance with an amended joint venture agreement either with Schofields or some other joint venture partner and to receive a share of the resulting net development profit. 2. The plaintiffs also maintain that HWLE's breaches were a necessary condition of the harm that they have suffered. Schofields' default notice and the resulting forced sale of the land would not have occurred but for the breach. Further, they contend that it is appropriate for HWLE's liability to extend to the harm they caused, and that the loss was wholly foreseeable. The same conclusion applies to causation in respect of damages for misleading or deceptive conduct. 3. The plaintiffs maintain that Schofields would have accepted an amendment to clause 11 of the joint venture agreement so as to make it clear that the joint venture parties would assume liability for the NAB loan after planning approval was obtained. The amendment would have unambiguously linked Dairycorp's performance obligation in clause 11(b) to the external loan funds in clause 11(a). The plaintiffs and Schofields would thereafter have proceeded in accordance with a joint venture agreement amended in this way. The plaintiffs contend that the lost opportunity to have the joint venture agreement amended had some value, not being merely a negligible value. 4. Alternatively, if Schofields did not accept the amendment to the joint venture agreement, Mr Lindsay-Owen would not have executed it with clause 11 in its then terms but would have proceeded to negotiate an alternative joint venture on similar terms with the other interested developers such as Australand. He would have negotiated extensions of his loan obligations to the NAB until this occurred. The opportunity to negotiate an alternative joint venture on similar terms with other interested developers had some value, not being a merely negligible value. Defences 1. Although HWLE originally, and for some time, maintained a series of defences, including contributory negligence, failure to mitigate, novus actus interveniens, proportionate liability and advocate's immunity, these were ultimately not pressed. HWLE now relies only upon a specific denial of the misleading and deceptive conduct allegation together with their general response to the whole of the plaintiffs' claim that neither their admitted breach of duty and breach of retainer nor their alleged misleading and deceptive conduct caused the plaintiffs to suffer any loss. 2. Put simply, HWLE maintains that by the time that Villawood terminated the joint venture agreement relying upon the plaintiffs' failure to comply with clause 11(b), the relationship between the joint venture partners was so dysfunctional as to be in a state of incipient failure: the agreement would in effect have come to an end for some other reason at about the same time resulting, presumably, in a sale of the land in circumstances not dissimilar to what occurred in fact. The prospect that Villawood would have renegotiated the deal on terms that corrected HWLE's breach was, on this analysis, non-existent. The so-called lost opportunity to renegotiate the terms of the agreement with Villawood was an illusion with no real or discernible value: the opportunity was worthless. 3. By the same token, according to HWLE, there was no realistic prospect in the alternative that the plaintiffs would or could have found some other joint venture partner on no less favourable terms than those to which HWLE failed to give effect if Villawood had not agreed to proceed at the time that it did. Put another way, Villawood was the only joint venture prospect at the time and the plaintiffs suffered no lost opportunity in the relevant sense because there was no other available or interested player who would have joined them to develop the land. Background The land 1. The land at Schofields had been in Mr Lindsay-Owen's family since 1947. It comprised Lot 200 and Lot B at Bridge Street, Schofields. Mr Lindsay-Owen inherited a one-half share of the land from his mother in 1990 and his company Dairycorp Pty Limited purchased the other half share from his sister in early 2006 for $16M. In order to fund that acquisition, Mr Lindsay-Owen obtained a loan facility from the National Australia Bank with an initial limit of $21.5M in December 2005. This was later increased to $22.6M in December 2006. The facility allowed interest to be capitalised and was secured by a mortgage over the land. Mr Downing, the first defendant, acted for Mr Lindsay-Owen in relation to the land debt. Although the facility was initially granted for a term of two years, it was extended numerous times. 2. It does not appear to be controversial that the land was a unique development prospect and had significant development potential. First, it was a very large parcel by Sydney standards with effectively one owner. The size was advantageous because it enabled development in isolation without the need to amalgamate a number of parcels of land owned by several proprietors. Secondly, unlike other areas of Northwest Sydney, the land was and came to be at the epicentre of the vision for the development of growth centres by state and local governments. For example, the land ended up directly adjacent to a new railway station and was to be serviced by substantial infrastructure, including a Metro station. Planning changes 1. On 4 December 2005, the NSW Premier and the Minister for Planning released "The City of Cities Report" that outlined the state government's metropolitan strategy for Greater Sydney. As part of the strategy for growth in Western Sydney, the report identified land release areas in the Northwest that included the land. It was around this time that developers and other interested parties began approaching the plaintiffs with proposals to develop the land. Those approaches took place in two distinct phases, which straddled the announcement of the new Schofields railway station. 2. The first phase (2005 to 2008) saw approaches from a variety of different kinds of partners (developers, financiers and project managers) with various proposals in terms of the development itself and the commercial terms for doing so. The second phase (2008 and 2009) is characterised by the existence of serious (and persistent) interest in a joint venture from experienced and well-funded developers such as Peet Limited, Australand and Villawood Management Group Pty Limited. This phase was also characterised by discussions on more concrete terms as to the commercial operation of the proposed joint ventures. Mr Lindsay-Owen's debt to NAB was an important part of these discussions. 3. Mr Downing was retained to advise the plaintiffs in relation to these negotiations and other matters and the plaintiffs followed his advice on significant or major issues. The close professional relationship between the plaintiffs and Mr Downing continued until late 2014. The SEPP and the Precinct Acceleration Protocol 1. On 28 July 2006, the Growth SEPP was gazetted. The stated aims of the policy included the release of land for residential, employment and other urban development in the North West and South West Growth Centres of Sydney. 2. In February 2008, a "Precinct Acceleration Protocol" was announced by the Department of Planning to allow landowners and developers to apply for the early release of land in the Schofields precinct for urban development. 3. Importantly, on about 26 February 2008, the Minister for Transport announced a new railway station at Schofields. The Transport Infrastructure Development Corporation (TIDC) then clarified that Schofields railway station would be relocated about 800 metres to the south of its then existing location, and in due course, a 3.5 hectare portion of the plaintiffs' land was resumed for that purpose. That station is now built adjacent to the land. 4. The railway station and the proposed Metro substantially enhanced the desirability of the land as a development site. Unlike other similar areas, the Growth SEPP did not provide maximum dwelling controls, so as to encourage development. Whereas maximum dwelling controls were introduced elsewhere, the land was insulated from such changes, because it was considered to be a town centre. 5. On 5 August 2008, the NAB increased the limit of the land debt to $24.2M to accommodate interest capitalisation. On 30 October 2008, a Precinct Acceleration Protocol Submission was made by consultants on behalf of the plaintiffs to the Growth Centres Commission (Department of Planning). 6. On 19 November 2008, the NAB gave the plaintiffs a formal default notice with respect to the land debt. That notice related to a non-financial covenant concerning a valuation of the land. The NAB loan continued nevertheless to be extended from time to time. Importantly, NAB chose not to apply the relevant default rate of interest under the facility but instead opted to charge a less aggressive option of 1% per annum. It did so because of its "continued preference to work together with [the plaintiffs] to achieve a palatable solution". 7. The plaintiffs maintain in these proceedings that there is no evidence that the NAB was considering a forced sale of the land at this time based on the formal default notice. Further, there is no evidence that the plaintiffs' facility was in fact moved to the "debt recovery" department within the NAB, despite NAB's statements to the plaintiffs to that effect. Mr Moses of NAB and his assistant Ms Chung continued to be the relationship managers for the plaintiffs and the absence of any communication from the bank's debt recovery team supports that proposition. 8. As time went on, the NAB expressed increasing concern about Dairycorp's inability to service the loan, without interest being capitalised. It is common ground that the plaintiffs could not service the interest payments or discharge the land debt without selling the land. 9. However, whilst expressing some frustration, it seems apparent that the NAB in 2009 and 2010 not only viewed the land as an excellent development prospect but also saw a valuable opportunity to fund it. That proposition is supported by a consideration of the NAB's internal communications at that time which disclose a stance by the NAB of continued cooperation with and support for the plaintiffs. Whilst their communications reveal a level of frustration with the rate of progress as to rezoning, the NAB also considered the land the "best property in north-western Sydney" and wished to finance its development. 10. The plaintiffs maintain that the difference between the tone and content of the NAB's communications with them and its internal communications was no more or less than "textbook loan management strategy". That approach was characterised by exerting pressure on the plaintiffs to progress the plans for development by invoking the bank's terms whilst not being so aggressive as to alienate the plaintiffs or to imperil the bank's commercial opportunity to fund the development. The 2014 proceedings before Ball J 1. Well before the current proceedings were commenced, the plaintiffs took proceedings that came before Ball J in the Equity Division seeking to rectify clause 11(b) of the Joint Venture Agreement to give effect to their instructions to Mr Downing concerning joint venture responsibility for the NAB debt. HWLE were obviously not a party to those proceedings. However, his Honour's reasons for judgment contain an historical review of the contractual negotiations that bears to some extent upon what the parties rely upon in these proceedings. It is convenient to adopt his Honour's recitation of these matters for present purposes. 2. Commencing at [5] of his judgment in Lindsay-Owen v Schofields Property Development Pty Ltd [2014] NSWSC 1177, his Honour sets out the relevant agreements as follows: "[5] Two agreements are relevant to the resolution of the issues in this case. The first is the JVA itself. The second is a Facility Agreement by which Schofields agreed to advance the plaintiffs certain sums of money. [6] The joint venture was established by cl 3 of the JVA. Clause 3.1 provides: The Joint Venture Parties agree to form an unincorporated joint venture to carry out the Project on and subject to the terms and conditions set out in this Agreement. The expression 'Joint Venture Parties' is defined to mean Dairycorp and Schofields. 'Project' is defined relevantly to mean 'the development, subdivision, marketing and sale of the Land primarily for residential purposes and other ancillary uses as Lots, super Lots or in its entirety ...'. [7] The parties' participating interests in the joint venture are set out in cl 4. They change over time depending on the amount advanced under the Facility Agreement. [8] Clause 4 of the Facility Agreement provides for five types of advance to be made by Schofields to the plaintiffs: ● A 'Prior Advance' to be made within 14 days of the date the conditions precedent set out in the JVA are satisfied. That advance consisted of $3,000,000 plus the difference between the amount of the plaintiffs' existing debt facility and the amount for which they were able to refinance that facility (in excess of $18.8 million); ● Eight 'Interim Advances' each of $250,000 to be paid quarterly, the first of which was to be paid on the date that was one calendar quarter after the date of satisfaction of the conditions precedent set out in cl 2 of the JVA; ● 'Interest Advances' on the plaintiffs' existing debt. These amounts were to be advanced from 1 April 2010 up until the time when 'Planning Approval' was obtained for the Land. They were to be made to the extent that interest was not paid by the plaintiffs and could not be capitalised under the relevant facility; ● 'Capital Advances' in respect of the plaintiffs' existing debt. These advances were required to be made from the date of the agreement until Planning Approval if the plaintiffs were required to repay part of the existing debt in circumstances described in cl 6 of the JVA to the extent that the repayments were not made by the plaintiffs; ● A 'Valuation Advance' payable in accordance with cl 4.4(b) of the Facility Agreement, which provides: (b) If Planning Approval is obtained at any time during the term of this agreement, the Financier shall, within one month of obtaining a Valuation of the Land, provide to the Borrower an Advance calculated as follows: A = (50% - PI) x (V - LA) - I where: A = amount of the Advance V = the amount of the Valuation LA = the amount owing by the Borrower to other lenders and secured by the Security Property in priority to the Securities PI = the Financier's then existing Participating Interest under the Joint Venture Agreement expressed as a percentage I = the amount of interest paid by the Financier in respect of the LA and treated as an Advance under clause 4.5 and A is a positive number. If A is not a positive number the Financier will not be required to make any further Advance and clause 4.1(n)(ii) of the Joint Venture Agreement will apply. 'Planning Approval' is defined to mean 'approval by the relevant consent authority of the first development application ... which must allow for the delivery of at least 100 lots lodged in accordance with the relevant precinct plan ...'. [9] By making the Prior Advances, Interim Advances and Capital Advances, Schofields obtains an interest in the land and the joint venture in the proportion that the amount advanced bears to an agreed or notional value of the land of $30 million. So, for example, on the payment of the Prior Advance of $3 million, Schofields obtained a 10 percent participating interest. [10] Schofields also obtains a participating interest by making Interest Advances. However, cl 4.1 of the JVA provides that the interest it obtains depends on when the advance is made. If the advance is made prior to 30 months after the date of the agreement, the interest is the proportion that the amount of the advance bears to $30 million. If the Interest Advance is made between dates that are 30 months and 48 months from the date of the agreement, the interest is the proportion that the amount of the advance bears to the market value of the property at the date that is 30 months after the date of the JVA as determined in accordance with cl 25 of the JVA. If the Interest Advance is made between dates that are 48 months and 66 months from the date of the agreement, the interest is the proportion that the amount advanced bears to the market value of the property at the date that is 48 months after the date of the JVA. [11] On making the Valuation Advance, Schofields obtains a 50 percent interest in the joint venture. Under cl 4.1(n)(ii), if the Valuation Advance is a negative figure, the plaintiffs must repay the overpayment, and, if they fail to do so, cl 4.1(n)(ii)B provides that 'each Joint Venture Party will have a Participating Interest equal to the actual interest existing at the date Planning Approval was obtained'. [12] There appears to be a minor drafting error in clause 4.4(b) of the Facility Agreement. 'I' is defined to be the amount of the Interest Advances. However, it also appears from cl 4.6(b) that it was intended to include Capital Advances. That clause provides: Each payment under clause 4.6(a) [which provides for the payment of Capital Advances] will constitute an Advance under this Agreement and will be deducted from Advances in accordance with clause 4.4. [13] Clause 4.3 of the JVA sets out how the joint venture is to be funded. It provides that a committee established under the JVA may make cash calls. However, cl 4.3(a) provides: The Joint Venture Parties acknowledge that it is their intention to fund all Joint Venture Costs, whether before or after the date that Planning Approval is obtained by way of External Loan Funds. 'Joint Venture Costs' is defined broadly in cl 1.1 to mean 'the aggregate of all costs, expenses and outgoings incurred by the Joint Venture Parties in connection with the Project, the Land or the Joint Venture Assets, as detailed in the Project Budget or otherwise approved by the JV Committee and accounted for in accordance with generally accepted accounting principles in Australia'. The definition goes on to list a number of inclusions, including (in para (d)) 'other costs necessarily incurred as a result of ownership of the Land excluding any interest payable under any refinancing obtained under clause 2(b)'. There is no mention in the definition of the costs of repaying the NAB facility following the granting of Planning Approval. [14] Clause 5.4 of the Facility Agreement provides: If a Participating Interest is taken by [Schofields] under clauses 4.1 of the Joint Venture Agreement then, to the extent applicable, the relevant Advances under this Agreement will be deemed to have been repaid. [15] Clause 2 of the JVA sets out several conditions precedent. Relevantly, cl 2(a)(i) provides that the agreement is conditional on: [R]efinancing of the debt facility taken out by Dairycorp and secured against the Land as at the date of this Agreement by Dairycorp on terms acceptable to both Dairycorp and Schofields including those terms set out in clauses 2(b)(iv) and (v) by the Refinance Condition Date [16] Clause 2(b) sets out the obligations of the parties in relation to the refinance. It is evident from that clause that the parties proceeded on the basis that the refinancing would be for an amount of at least $18.8 million. Under cl 2(b)(iii), Schofields agreed, if required by the new financier, to provide a guarantee of Dairycorp's obligations limited to an amount equal to three years worth of interest. Clause 2(b)(iv) required that it be a term of the new facility that the financier would agree to a transfer of parts of the land to Schofields to correspond to its participating interest. Clause 2(b)(v) required it to be a term of the new facility that the financier would execute a tripartite agreement with Dairycorp and Schofields, which gave Schofields step-in rights in the event of a default by Dairycorp. Clause 2(d) provides: For the avoidance of any doubt, Dairycorp acknowledges that Schofields is under no obligation to assume any liability under Dairycorp's existing debt facility (or any refinance of that existing debt facility). [17] Clause 11 sets out what is to happen when planning approval is obtained. It provides: External Loan Funds By the date which is 30 Business Days after Planning Approval is obtained: (a) the Joint Venture Parties agree to: (i) borrow all External Loan Funds required to complete the Project in proportion to their Participating Interests, with each Joint Venture Party being severally liable for its share of borrowings; and (ii) execute all documents and do all things necessary to provide security to any provider of External Loan Funds over their respective interests in the Joint Venture Assets and the Land, including signing any mortgage over the Land under which the Joint Venture Parties will be tenants in common in proportion to their Participating Interests in the Land or any charge in respect of the Joint Venture Assets and the Land. If Schofields does not hold an Interest in the Land, Schofields will be liable for the External Loan Funds to the extent of its Participating Interest in the Joint Venture Assets; and (b) Dairycorp agrees to repay its existing debt facility and procure the release of all securities in relation to that debt facility from title to the Joint Venture Assets and the Land. [18] 'External Loan Funds' is defined in cl 1.1 to mean: any loan: (a) provided by any party who is not a Joint Venture Party to the Joint Venture Parties for the purposes of the Project after the Planning Approval is obtained; and/or (b) in respect of which the Joint Venture Parties become severally liable in proportion to their Participating Interests after the Planning Approval is obtained, and includes all unpaid interest and all capitalised interest in relation to that loan from time to time. [19] Clause 15 provides a mechanism to deal with defaults by either party. It provides for the service of a default notice and a cure period. Ultimately, if a default is not remedied, the non-defaulting party has a right to buy out the defaulting party's interest at the 'Valuation Amount'. 'Valuation Amount' is defined to mean: An amount equal to VA where: VA = (V - EL - C) x PI x 0.94 V = the Valuation as advised by the Valuer PI = the Participating Interest of a Defaulting JVP EL = all outstanding External Loan Funds C = outstanding Joint Venture Costs [20] Clause 23.1 of the JVA provides: Standstill Period Unless required to do so in order to comply with its obligations under this Agreement, a Joint Venture Party must not Alienate or in any other way deal with the whole or part of its Participating Interest or the Land before Planning Approval is obtained in respect of the Land other than with the consent of the other Joint Venture Party which consent may be withheld without reason or given on condition. 'Alienate' is defined in cl 1.1 to mean, relevantly: ... sell, lease, licence, assign, transfer, grant options or rights of pre-emption (other than by way of security) over, create trusts in respect of or otherwise part with possession of any Joint Venture Asset or Participating Interest or the Land or any interest in the whole or any part of it ..." 1. His Honour then summarised the negotiations commencing at [21] as follows: "[21] Mr Lindsay-Owen started looking for a joint venture partner in about August 2009. He settled on Villawood in late 2009. Before doing so, he says that he sent Villawood a statement of his assets and liabilities, which disclosed that his total assets were approximately $83.7 million (including the Schofields land at $65 million) and that his total liabilities were approximately $29.2 million (including the loan to NAB of $23.5 million). There is, however, no evidence that Villawood received that statement of assets and liabilities, and, in my opinion, it is unlikely that it was sent. Mr Lindsay-Owen discovered his telephone records, which show that he dialled Villawood's fax number on 27 August 2009. However, the records indicate that that call lasted for 3 seconds. It is unlikely that that was sufficient time for the fax to go through. It is more likely that he dialled the number by mistake, since, immediately after placing that call, he rang Villawood's normal telephone number and spoke for a period of 2 minutes and 18 seconds. [22] Villawood retained Mr Mazzone of Clayton Utz to act for it in the negotiations of the joint venture, and the plaintiffs retained Mr Downing of HWL Ebsworth. It is apparent that Mr Lindsay-Owen relied heavily on Mr Downing in connection with the negotiations for the joint venture. [23] Villawood has two executive directors: Mr Costelloe and Mr Johnson. They were the two most senior executives within the group. Mr Costelloe had established Villawood in 1989. Mr Johnson joined him in 2006, and, from that time, their interests in the group were equal. The third most senior executive of Villawood was Mr Taber, who is and was at the relevant time the managing director. Up until 16 December 2009, Mr Costelloe was the person at Villawood who was primarily responsible for negotiating with Mr Lindsay-Owen, although Mr Taber also played a role, and they both kept Mr Johnson informed of what was happening in the negotiations. [24] The parties exchanged several draft term sheets between September and November 2009. [25] On 1 December 2009, Mr Taber circulated a revised term sheet that he had prepared. The term sheet relevantly proposed two options. Option 1 was in the following terms: Villawood pays to Dairycorp: ● $3 million within 14 days of signing documents ● $250,000 quarterly per quarter for the next 8 quarters ● After PSP, 33.3% of the value of each stage of the land at the commencement of construction of each stage Debt position: ● Dairycorp remains liable for all debt until PSP ● At PSP: (a) Dairycorp repays land debt (b) Villawood and Dairycorp assume 50/50 liability for development debt (assuming development debt is staged) Option 2 was in the following terms: Villawood pays to Dairycorp: ● $3 million within 14 days of signing documents ● $250,000 quarterly per quarter for the next 8 quarters ● At PSP, 33.3% of the value of the land at PSP less 50% of the land debt Debt position: ● Dairycorp remains liable for debt until PSP ● At PSP, Villawood and Dairycorp assume 50/50 liability for land and development debt 'PSP' is an acronym used in Victoria standing for 'Precinct Structure Plan'. It is similar to rezoning. [26] The term sheet was sent to Mr Downing who, after he received it, rang Mr Mazzone. According to Mr Downing, he said to Mr Mazzone that 'it is [a] fundamental thing for us that [Schofields] be responsible for 50% of the NAB debt'. Mr Mazzone does not deny that conversation, and I accept that it occurred. [27] There were various other discussions between the parties in relation to the term sheet, and there was a lengthy meeting in Melbourne on 7 December 2009 attended by Mr Lindsay-Owen, Mr Downing, Mr Costelloe, Mr Taber and Mr Mazzone to discuss it. [28] Following that meeting, on 10 December 2009, Mr Downing circulated by email a marked-up version of the term sheet. The marked-up version deleted Option 1 and amended the expression 'PSP' in Option 2 so that it read 'rezoning'. The earlier version of the term sheet also contained some provisions dealing with the payment of interest on the existing land debt. Mr Downing added the following two bullet points to those provisions: ● Dairycorp may at any time elect to pay some or all of the interest on the land debt to the bank rather than Villawood. ● Dairycorp can elect to repay some or all of the Villawood interest loan immediately prior to conversion. [29] Mr Costelloe replied to that email the same day saying: It looks like we have a deal, please all confer with each other to produce docs asap [30] On the following day, Mr Lindsay-Owen forwarded a copy of Mr Costelloe's response (and the amended term sheet) to Mr Moses at NAB. Mr Taber also prepared a summary of the term sheet and, at Mr Johnson's request, sent a copy to Mr Moses and Mr Sherlock at NAB. The first three paragraphs of the summary were in the following terms: Villawood to pay Dairycorp $3m at execution & $250k per quarter over 2 years (total $5m). This will be initially by way of loan secured by second mortgage over the land and charge over the company. Villawood to pay the current NAB loan interest when it falls due for the first 2.5 years. This will be treated as a loan to Dairycorp with security as above. At rezoning the site will be revalued and Villawood will acquire 50% share in the land by way of payment of 33.3% of the rezoning valuation of the land (excluding NAB debt) less 50% of the NAB debt less the NAB loan interest accrued to date. The summary went on to explain how interest on the NAB loan was to be paid pending planning approval. It stated that Villawood could pay interest on the loan but that Dairycorp also had the right to pay all or part of the NAB loan interest. The summary concluded: Given that rezoning occurs then development will proceed on the basis of a 50:50 joint venture ownership of the land. We would be expecting the development costs to be fully funded under normal terms and conditions. [31] On 14 December 2009, Schofields was incorporated. Its directors are Mr Johnson and Mr Robertson, a solicitor who, over the years, has done a substantial amount of work for Villawood. Schofields' shareholder is TOR Pty Ltd, now known as Sandhurst Capital Pty Ltd, a company in the Villawood group. [32] Mr Costelloe went on holidays on 16 December 2009 and did not return to the office until February 2010. Mr Taber became primarily responsible for instructing Mr Mazzone in relation to documentation of the joint venture. [33] Some time prior to 23 December 2009, Mr Taber says he became concerned about the arrangement by which Schofields would take over half the NAB debt when planning approval was obtained. That concern arose because of the risk that, if Schofields took over half the debt and made the advance payments contemplated by the parties, it would overpay for its half interest in the joint venture without any guarantee of being able to recover the amount of the overpayment. Driven by that concern, it appears that Mr Taber instructed Mr Mazzone to draft the joint venture agreements on the basis that the plaintiffs would repay the NAB debt when planning approval was granted. Neither Mr Taber nor Mr Mazzone specifically raised that change with Mr Lindsay-Owen or Mr Downing. In cross-examination, Mr Taber said that he thought that Schofields' change in position would be apparent from the drafting of the agreements and that the circulation of the first drafts was itself the beginning of the negotiating process in relation to the final terms of the joint venture. The plaintiffs took issue with that evidence. They pointed out that Mr Taber had not given that evidence in his affidavit and that it appeared to be inconsistent with subsequent events (described below) in which Mr Taber gives an account of the agreement that suggests Schofields would become responsible for repayment of half the debt after planning approval had been granted. However, I found Mr Taber to be a satisfactory witness. The evidence strikes me as plausible, and I accept that Mr Taber's failure to give the evidence in his affidavit can be explained by his ill health at the time the affidavit was prepared. [34] On 23 December 2009, Mr Mazzone circulated first drafts of the relevant agreements, including a first draft of the JVA and Facility Agreement. There were significant differences between the drafts circulated by Mr Mazzone and the final versions of the agreements. It is apparent that they were reviewed carefully by Mr Downing, and he made extensive comments on them. Clause 9 of the draft circulated by Mr Mazzone was relevantly in substantially the same terms as cl 11 of the final version of the JVA. The final version amended cl 9 of the draft to provide that security given to any provider of External Loan Funds be over a party's respective interests in the Joint Venture Assets 'and the Land', and it specified that a mortgage granted as security be one under which the Joint Venture Parties are 'tenants in common in proportion to their Participating Interests in the Land'. The final version also added the last sentence in subpara (a)(ii). A subparagraph was removed from the draft provision, which dealt with the ranking of securities as between External Loan Funds providers and proposed 'Cross Charges' over each Joint Venture Party's Participating Interest. Importantly, however, the final version of cl 11(a)(i) remained unchanged, and the only amendment made in cl 11(b) was to specify that Dairycorp's obligation to procure the release of all securities in relation to its debt facility with NAB be from title to the Joint Venture Assets 'and the Land'. Clause 4.4 of the first draft of the Facility Agreement was also in similar terms to cl 4.4 of the final version of that agreement. In particular, the formula in cl 4.4(b) did not change. [35] Mr Downing did not make any changes to cl 9 as originally circulated by Mr Mazzone, although he included a comment at the end of cl 9(a)(ii) saying 'Presumably the intention here is the refinance'. Clayton Utz responded to that question on 15 January 2010 saying 'Yes. That is correct.' [36] The JVA and the Facility Agreement went through further drafts. However, none of the changes are of significance to this case. Mr Johnson and Mr Robertson executed the Facility Agreement and JVA on behalf of Schofields. Mr Johnson says that he read through the agreements before signing them. He says that, at the time he signed the JVA, it was his intention that Dairycorp alone would be obliged to discharge the debt over the land shortly after planning approval had been obtained. I accept that Mr Robertson looked through the agreements before signing them. Whether he formed the intention that he said he did is less clear. Although Mr Johnson was a director of Schofields, he was not the person who was responsible for negotiating the agreements or the commercial terms of them. He became a director of Schofields because it was known that Mr Costelloe would be away. The agreements are quite complicated and take some time to understand. Mr Johnson is a busy person and appeared to have a poor recollection of the agreements when giving evidence. His recollection is likely to have been affected by subsequent events. I think it is unlikely that he turned his mind specifically to the question whether the existing NAB loan would become part of the joint venture debt after Planning Approval was granted. Mr Robertson did not give evidence." CAUSATION 1. The plaintiffs frame their case in alternative ways. First, as a loss of the opportunity to amend the joint venture agreement with Villawood 2. It is trite to observe that no amendment could have been achieved without Villawood's agreement. Accordingly, in order to establish that HWLE's conduct caused the plaintiffs to lose a valuable opportunity, they must establish that they would have sought amendments to the draft joint venture agreement that was ready for execution on 29 March 2010, that Villawood would have agreed to those amendments, that NAB would in addition have agreed to a further extension on the loan so that that could happen and that the amendments would have had a value that was not merely negligible, speculative or theoretical. The first of these requirements is hardly controversial as the plaintiffs always anticipated that the land debt would become a joint venture liability. The remaining requirements are very much in issue. 3. HWLE submits that the plaintiffs have not proved and cannot establish as a probability the hypothetical possibility that Villawood would have agreed to amend clause 11(b) to conform to the plaintiffs' instructions to them if the mistake had been drawn to the attention of Villawood by 29 March 2010 and the amendment had been requested. To start with, the terms of the joint venture agreement had been negotiated over a considerable period of time. There is in those circumstances no warrant for the assumption that Villawood would have given up its anticipated contractual benefits simply to alleviate the consequences of HWLE's mistake. That is more so when the terms of clause 11(b) were valuable to Villawood, a fact that is well demonstrated by Villawood's ultimate reliance upon the plaintiffs' failure to conform with the obligation it imposed upon them. In a related sense, the plaintiffs have not established what consequential amendments Villawood would have required to account, and compensate them, for the loss of the benefit of clause 11(b) to them. As a matter of commercial reality, any such amendments would need somehow to have balanced a loss or detriment in the order of $10M to account for the NAB debt to which the clause related. HWLE submits that the complexity of the joint venture agreement and the history of negotiations between its parties make it clear that a simple linear reduction in an amount payable by Villawood was unlikely. 4. Secondly, the plaintiffs' claim is framed as a loss of the opportunity to proceed with an alternative joint venture partner on more favourable terms, at least to the extent that any hypothetical alternative joint venture agreement would have included the clause which the defendants failed in breach of their duty to include in the original agreement. Loss of chance – legal principles 1. HWLE provided a brief and uncontroversial analysis of the legal principles that apply in a case, such as this, where loss is said to be constituted by the loss of a chance. In such a case, the Court must undertake a two-step analysis: see Sellars v Adelaide Petroleum NL (1994) 179 CLR 332; [1994] HCA 4 at 355. First, a plaintiff must prove that it has suffered some loss by demonstrating that the defendant's conduct caused the loss of a commercial opportunity which had some value. This is a question of causation, and the plaintiffs must prove this aspect of their case on the balance of probabilities. 2. Different opportunities raise different questions of causation and have different values. The opportunity that a plaintiff claims to have lost must therefore be identified with precision: Hart Security Australia Ltd v Boucousis (2016) 339 ALR 659; [2016] NSWCA 307 at [165]. Where a plaintiff claims to have lost the opportunity arising from particular contractual relations, it must prove on the balance of probabilities that it would have entered into those contractual relations with the prospective counterparty: Hart at [135] – [137], [141] – [142], [165]. The plaintiff must prove both the hypothetical of what it would have done and what the prospective counterparty would have done. 3. The question of whether these hypothetical parties would have agreed to a particular contract cannot be decided in a vacuum. The Court must have regard to the terms of the hypothetical contract and each party's attitude to the particular terms. HWLE provided the following examples: * in Sellars, the Court assessed the terms which had been the subject of negotiations at the point of breakdown, including the requirement for underwriting and the conditions precedent to completion; * in Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1; [1986] HCA 3 at 13, the Court said that the plaintiff had to prove that an alternative insurance policy was available in the market and the benefits provided by that alternative policy; * in Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494; [1998] HCA 69, the Court concluded that the plaintiffs suffered no loss because they failed to prove that there was an alternative loan available in the market with terms more beneficial to them than the loans they in fact ultimately received from GIO; * in Castel Electronics Pty Ltd v Toshiba Singapore Pty Ltd (2011) 192 FCR 445; [2011] FCAFC 55 at [157] and [161], the Court considered the acceptability or otherwise of the price that would have had to be paid for any agreement to be reached; * in Gore v Montague Mining Pty Ltd [2000] FCA 1214 at [36], the Court assessed one party's attitude to adding a term permitting the other party to assign a joint venture agreement; * in Heenan v Di Sisto [2008] NSWCA 25 at [47], the Court assessed the developer's attitude to the essential requirement that the two contracts be interdependent; and * in Hart at [166], the Court had regard to a $1M unconditional bank guarantee that the plaintiff was not willing to give, concluding that the counterparty would not have foregone the requirement and that no agreement would for that reason have been consummated. 1. If the history of negotiations is such that a plaintiff cannot prove that the parties would have agreed on all terms, the plaintiff will have failed to prove that it lost the claimed opportunity: Hart at [169]. It is insufficient merely to demonstrate that the defendant caused "some reduction in its chances of a favourable outcome to the negotiations": Hart at [171]. Moreover, not only must the plaintiff prove that it has lost the particular contractual relations, but it must also prove that those contractual relations had some value. It is not sufficient if the value was negligible (Sellars at 355) or speculative (Sellars at 364) or theoretical: Principal Properties Pty Ltd v Brisbane Broncos Leagues Club Ltd [2018] 2 Qd R 584 at 587; [2017] QCA 254 at [13]. To the same effect, if the contractual relations had no chance of being profitable, it was an opportunity of no value and loss of such an "opportunity" is not compensable: Principal Properties at 590; [23]. The plaintiff must prove that the opportunity had some value, in the sense that it offered a substantial, and not merely speculative, prospect of acquiring a benefit. 2. Alike with other questions of causation, the claim that particular contractual relations had some value requires a comparison between the hypothetical contractual relations and the position in which the plaintiff ended up: Sellars at 355. If the plaintiff does not prove that it lost an opportunity which had some value by reason of the defendant's breach of duty or breach of contract, no further question of the value of the lost opportunity arises: the case fails. 3. Secondly, if the plaintiff proves that it lost an opportunity that had some value as a result of a defendant's default, it must then establish the quantum of the value of the lost opportunity having regard to the probabilities and possibilities: Sellars at 355. At this stage of the analysis, in contrast to the first stage, even if the Court finds that the chance of a particular relevant event was less than 50%, the Court is still required to take that event into account: Malec v JC Hutton Pty Ltd (1990) 169 CLR 638; [1990] HCA 20 at 642-643. Where the lost opportunity is hypothetical contractual relations, the Court must have regard to the terms that would have been agreed in order to assess the value of the lost opportunity. 4. The second step of the analysis is distinct from the first, but the same body of evidence may be relevant to both: Principal Properties at 591; [28]; About Life Pty Ltd v Maddocks Lawyers [2021] NSWSC 1370 at [506]. Loss of opportunity to amend 1. There is no dispute that Mr Downing did not appreciate that his instructions concerning the land debt had not been incorporated in the Joint Venture Agreement before it was signed. The plaintiffs' case is that if Mr Downing had appreciated this, he would have been able to avoid the problem by securing Schofields' agreement to amend the document to reflect his instructions. 2. Mr Downing conceded, if concession is the correct analysis in this setting, that he expected that Clayton Utz would have agreed to make changes to the draft Joint Venture Agreement to give effect to the plaintiffs' fundamental requirements concerning the repayment of the land debt: "Q. So, Mr Downing, I don't want to go over old ground, but can I just draw some threads together before I come back to the question that I asked you that drew the objection. We know that you spoke with Mr Mazzone on 1 December 2009 and told him that it was fundamental for the joint venture to assume liability for the NAB debt. A. Correct. Q. And we know that after that, the revised term sheet came forward in response to which you deleted option 1 because it was only option 2 that satisfied that fundamental objective, correct? A. Correct. Q. And we know that after you got the draft joint venture agreement, you made the drafting comment to which we've referred this morning, and you got the response that said that your presumption was correct, we know all that? A. Yes, we do. Q. So, if you'd realised that clause 9 that then became clause 11 should be amended for the purpose of making clear in or by ordinary language, that it was the joint venture that would assume liability for the NAB debt upon a rezoning or a planning approval as it later became, and that the joint venture agreement ought to be amended to make that clear. A. Yes. Q. You would have expected that Clayton Utz would have accepted that, correct? A. Without the benefit of hindsight, yes, I would have, yes. Q. That's simply because you had received not one word from the other side in the negotiation that suggested that any of this was controversial. Correct? A. No. Correct." 1. Presumably Mr Downing's reference to hindsight was an implicit acknowledgement that he no longer maintained that view in the events that have occurred, including Schofields' reliance upon clause 11(b) to terminate the joint venture. Be that as it may, it was submitted on behalf of the plaintiffs that Mr Downing gave no evidence that he expected that any other changes were needed to accommodate the plaintiffs' fundamental requirement, nor any evidence that he considered that other changes to the transaction documents were necessary. He was not re-examined on this point. 2. The plaintiffs submitted that Mr Downing's expectation is amply supported by contemporaneous documents from Schofields that straddle the periods of time immediately before and after the signing of the Joint Venture Agreement. They submit that there is, in contrast, no evidence that supports a contrary position and that the evidence "is thus all one way on causation". The plaintiffs maintained that the evidence of the parties' commercial negotiations and what they referred to as "the commercial realities at the time" wholly supported the proposition that Schofields would have acceded to any request to amend the Joint Venture Agreement to reflect the plaintiffs' fundamental requirements. The following examples were emphasised. 3. First, the parties had a "deal", which had been communicated to the NAB as their joint position. Throughout the negotiation process and even after the Joint Venture Agreement was executed, Schofields had given every indication that they had made and were intending to keep the "deal" reached in December 2009 in relation to the land debt. Other peripheral terms changed in the course of negotiations but the so-called fundamental requirement terms did not. 4. The plaintiffs submit that this contention is supported by Villawood's conduct immediately after the Joint Venture Agreement was signed on 29 March 2010. One month later, on 29 April 2010, Mr Taber at Villawood wrote to Mr Lindsay-Owen in these terms: "I have reviewed the matter with Rory and advise our position remains unchanged - There are two ways to structure / view the foundations of this deal 1. if we take responsibility for say 50% of the debt then we could buy 50% of the net equity for (32-20.9)/2 = 5.6m (and be responsible for half the debt) or 2. if Dairycorp remain solely responsible for all of the debt then our money only buys equity in the land (based on agreed valuations) and Dairycorp retains the remaining equity in the land and is responsible for all of the debt. The second option is the basis of our deal and all documentation. We have no responsibility for (and obtain no benefit from) the debt despite the fact that our payments to Dairycorp in return for equity in the land are based on a combination of payments including reductions to debt and interest on debt. It is this reasoning that underpins our position that the finance costs relating to the debt is solely the responsibility of Dairycorp. This situation changes after planning approval when money changes hands so that both Dairycorp and Schofields will each have 50% equity in the land and 50% responsibility for the debt (which will be increased to account for development costs, etc) and both will be entitled to 50% of the profit from the development. I trust this explains the reasoning behind our position." 1. Ball J referred to this email at [38] of his judgment in Lindsay-Owen v Schofields Property Development Pty Ltd as follows: "The statement that, following planning approval, Dairycorp and Schofields will have '50% responsibility for the debt (which will be increased to account for development costs, etc)' certainly suggests that, at the time Mr Taber wrote the email, he thought that the joint venture would take over responsibility for the existing debt following the granting of planning approval." 1. His Honour went on at [45] to observe: "On 29 April 2014, Mr Taber sent a letter to Dairycorp stating that Dairycorp was responsible for repaying the NAB facility. Following that letter, the plaintiffs amended their Summons and Commercial List Statement to seek rectification of the JVA." 1. As is well understood, the plaintiffs were unsuccessful in those proceedings and clause 11(b) of the Joint Venture Agreement remained. There is to that extent some little tension between that fact and the plaintiffs' submission that Schofields were somehow tied, morally if not legally, to adhere to a deal that included the implementation of their instructions to Mr Downing or Mr Taber's understanding to the same effect. The fact of the matter is that Schofields relied upon the very clause to terminate the contract. However, I take the plaintiffs' submission to be that the position in April 2010 was considerably and fundamentally different to the position four years later, by which time a plethora of factors had intervened to alter the relationship between the contracting parties. Further, Mr Taber's understanding in April 2010 was effectively representative of Schofields' likely attitude at that time to a request to amend, if Mr Downing had appreciated his error and made such a request. 2. Secondly, the plaintiffs submitted that "the commercial realities" support a finding that Schofields would have acceded to such amendments rather than lose the opportunity to develop the land. The land had significant development potential, a matter that was well known and understood by all concerned. For example, Mr Costelloe wrote to Mr Lindsay-Owen on 26 July 2009 in the following enthusiastic terms: "Hi Greg, I was pleasantly surprised with the property, we look at many properties which often end up in the 'too hard basket', but your farm has great potential. The combination of rail, mixed use, proximity to Rouse Hill, topography and being cleared all make it attractive." 1. The Villawood media release on 31 March 2010, referring to the potential to develop more than 800 lots, was to a similar effect. The plaintiffs submitted that it is in these circumstances highly unlikely that Schofields would have walked away from the negotiations if the plaintiffs had "insisted" [sic!] on terms that would give effect to their fundamental requirements, especially when the whole of the land debt would have been accounted for in determining Schofields' participating interest, as explained by Mr Downing to the NAB in his email on 12 March 2010, in part as follows: "In essence, the revised position is as follows: ● Villawood will pay interest on the NAB facility from 1 April onwards ● Villawood will pay Dairycorp $3m plus the NAB capital shortfall within 14 days of the execution of (and NAB consenting to) the Villawood second mortgage security documents. The NAB capital shortfall will be paid by Dairycorp to NAB to reduce the principal outstanding on the existing facility. ● Villawood will receive a higher initial equity participation level than originally agreed due to the increase in the amount of its initial contribution to the joint venture to cover the repayment of the NAB capital shortfall ● Villawood's due diligence period expires on 7 April 2010." 1. The plaintiffs submitted that walking away from the deal in the face of a request to amend would have made no commercial or common sense. 2. Thirdly, Mr Downing conceded that as the person in the centre of negotiations and the person responsible for numerous communications with Clayton Utz, he had received no indication from anyone that their attitude to the issue of the land debt had changed: "Q. No. As far as you were concerned, as Mr Lindsay-Owen's solicitor, that element, that fundamental element did not change, correct? A. No, it did not. Q. At no time did anyone from Clayton Utz or Villawood indicate that they had a different view? A. No, they did not. Q. You never said anything to Mr Lindsay-Owen between that period, 10 December 2009 and execution of the joint venture agreement on 29 March 2010, anything to the effect that the treatment of the NAB debt and the servicing of that debt had changed? A. No, I did not." 1. Fourthly, the plaintiffs submitted that it was unlikely that Villawood would have resiled from the most important integer of the parties' "deal" as communicated by the plaintiffs and Mr Taber to the NAB. On 2 January 2010, the NAB had indicated that its loan would be extended with a facility limit of $21.3M for a further two years, but subject to the Joint Venture Agreement being acceptable to the bank "and that it does not differ to [sic, from] what has been proposed to the bank thus far". On 10 February 2010, the NAB had extended the acceptance date in the letter of offer to 31 March 2010. The plaintiffs submitted that it would have been highly unlikely that there would have been any retreat from the articulated position concerning treatment of the land debt. 2. Finally, Mr Downing gave this evidence: "Q. Can I just ask you to focus, if you would, on the word 'refinance' in your drafting note? A. Yes. Q. Did you have in mind by the use of that word the effective refinance of the existing debt to NAB that was obviously secured over the land that would be assumed by the joint venture upon a rezoning or, as it later became, planning approval? A. Yes, that was, that was what my assumption was. Q. That's what you intended. Is that right? A. Yes, that's correct." 1. The plaintiffs submitted that the implementation of their fundamental requirement would have been commercially neutral for Schofields, in that they expected to receive what they gave. By agreeing to repay the land debt on rezoning (or as Mr Downing expected, planning approval), Schofields demonstrated that it was content to accept responsibility for half the land debt following planning approval provided that it received credit for it in the calculation of its equity buy in. As the plaintiffs have pointed out, the sense of that commercial position is obvious and was recognised by Ball J at [73] of his judgment: "[73] … in my opinion, it is clear that Villawood's intention as expressed in the amended term sheet was that it would agree to the joint venture taking over the NAB debt provided the plaintiffs agreed to reduce the amount Villawood had to pay to acquire a 50 percent interest in the joint venture by half the amount of the debt. That was expressed by the bullet point which stated that '[a]t PSP' Villawood would pay Dairycorp '33.3% of the value of the land at PSP less 50% of the land debt'. It is clear from the two options presented in the amended term sheet that Villawood was willing to pay half the value of the land to acquire a 50 percent interest in the joint venture. It was indifferent to whether it took responsibility for half the NAB debt following PSP provided that, if it did, the price it paid was reduced by the amount of the debt for which it took responsibility. Its position made perfect commercial sense. However, Mr Downing says that he interpreted the statement '33.3% of the value of the land at PSP less 50% of the land debt' as meaning 33.3 percent of (the value of the land at PSP less 50% of the land debt) - in other words, 33.3 percent of the value of the land less one sixth of the land debt. Mr Lindsay-Owen did not form a separate intention in relation to the term sheet but relied on advice from Mr Downing concerning its appropriateness. Mr Downing's interpretation of the bullet point was obviously favourable to his clients. On the plaintiffs' case, the amount to be deducted in respect of the debt changed when the first draft of the JVA was circulated on 23 December 2009. That change, on the plaintiffs' case, was less favourable than Mr Downing's interpretation of the term sheet but still more advantageous to them than the interpretation that was obviously being placed on it by Villawood." [Emphasis added] 1. HWLE responded with the obvious proposition that no amendment could have been achieved without Villawood's agreement. In order for HWLE's conduct to have caused the loss of a valuable opportunity, HWLE submitted that the plaintiffs must establish all of the following things on the balance of probabilities: 1. that they would have sought amendments to the draft Joint Venture Agreement that was on the table on 29 March 2010; 2. that Villawood would have agreed to those amendments; 3. that NAB would have agreed to a further extension of time to allow that to happen; and 4. that the amendments that would have been agreed would have had some value, not being a value that was negligible, speculative or theoretical. 1. There seems little doubt, and no apparent contest, that the plaintiffs would have sought the relevant amendment. HWLE contends that the evidence does not support proof of the remaining matters. 2. HWLE accepted that if the plaintiffs had realised that clause 11(b) did not cast the future burden of the NAB debt onto the joint venture, it may be inferred that they would have sought amendments to the Joint Venture Agreement. However, HWLE contended that Villawood would not have agreed to amendments that did no more than change who would become responsible for the NAB debt once planning approval was achieved. Without more, those amendments would have reduced the value of the transaction to Villawood without any compensatory provisions. The uncompensated reduction would have been significant as the NAB debt exceeded $20M at the time of the hypothetical negotiations and the amendments standing alone would have reduced the value of the transaction to Villawood by at least $10M. 3. HWLE acknowledged that the Terms Sheet, which was the focus of the parties' attention on 10 December 2009, contemplated that the joint venture could take over the NAB debt in the circumstances referred to in that document. However, neither side considered itself bound by the Terms Sheet. Between 10 December 2009 and 29 March 2010, the parties engaged in extensive negotiations. By 29 March 2010, almost every provision of the Terms Sheet had been changed. 4. According to HWLE, by March 2010, "the commercial deal had completely changed". Risks had been reallocated. The amounts to be paid by Villawood had changed significantly. In light of the new terms, the Terms Sheet does not support an inference about what if any amendments Villawood would have agreed to in March 2010. Moreover, HWLE submitted that the Terms Sheet does not support the inference that Villawood would have accepted a simple amendment to clause 11(b) of the draft Joint Venture Agreement that was on the table at that time. On the contrary, the Terms Sheet contemplated a direct connection between responsibility for the NAB debt and the amount that Villawood was willing to pay the plaintiffs: change to one integer would have led to changes in others. 5. HWLE also submitted that the complexity of the Joint Venture Agreement and the history of negotiations between the parties make it clear that a simple linear reduction in the amount payable by Villawood was unlikely to have occurred. HWLE made the following written submission: "The plaintiffs submit that Villawood would simply accede to the proposition that the joint venture should be liable for 50% of the debt without any quid pro quo. In closing address, it was suggested that this was demonstrated by the email of 29 April 2010 and that this had escaped attention in the proceedings before Ball J. That is not correct. As recorded in the judgment of Ball J, the plaintiffs expressly relied upon that email (see [54] of the judgment) – as well as other subsequent conduct – in support of the proposition that Villawood intended that the joint venture would assume liability for the debt. Those submissions (including by reference to the 29 April 2010 email) were rejected by reference to all of the surrounding circumstances and the cross-examination of the relevant witnesses. Mr Taber was challenged on his evidence about Villawood's intention in this regard and his evidence was accepted. Ball J found that Mr Taber was a satisfactory witness ([33]). Ball J concluded that Villawood did require a quid pro quo (see [72] – [74]). His Honour expressed that conclusion as follows: 'what is clear is that the intention on which the rectification case is based was an intention that Villawood should take responsibility for half the land debt provided the amount payable by it for a half interest in the land (and joint venture) was reduced by that amount. Those two elements cannot be separated'." 1. HWLE listed a series of other objective facts that it contended also gave strong support to the inference that in March 2010 Villawood would have required other changes before it was willing to agree to the joint venture taking responsibility for the NAB debt. They are as follows. 2. First, if the joint venture took over the NAB debt, the Terms Sheet unsurprisingly contemplated that the amount Villawood would pay to Dairycorp for a 50% interest in the joint venture would be much less than the draft Joint Venture Agreement required, a circumstance that Ball J described as "perfect commercial sense". Consistently with the Terms Sheet, his Honour found that it was not Villawood's subjective intention that the joint venture take over the existing NAB debt unless other changes were agreed. 3. Secondly, and in any event, the evidence of Villawood's willingness to accept the Terms Sheet is confined to the 10 December 2009 email from Mr Costelloe in which he wrote "it looks like we have a deal, please all confer with each other to produce docs asap". This email was positive but not definitive, and contemplated further negotiation about detailed and complex documents. When Villawood issued draft documentation on 23 December 2009, they had been prepared by lawyers and contemplated a different deal to that referred to in the Terms Sheets. 4. Thirdly, Ball J found that Villawood's documents were different to the Terms Sheet because Mr Taber had taken over from Mr Costelloe and he took a different view of the transaction, including the risk that Villawood would overpay and not be able to recover its expenditure due to the structure of advance payments it was required to make to or on behalf of Dairycorp. 5. Fourthly, the final Joint Venture Agreement differed from the Terms Sheet in many respects, not only as to future responsibility for the NAB debt. These differences variously favoured one party or the other, indicating that neither party considered itself bound by the Terms Sheet. The differences also show that the final terms of the Joint Venture Agreement in March 2010 were materially different to those that were discussed in December 2009. HWLE maintained that in the intervening three and a half months, the commercial deal had moved on in significant respects. 6. HWLE submitted that these objective facts support the inference that the most likely position is that Villawood would not have agreed to amend clause 11(b) unless the plaintiffs were willing to agree to consequential amendments. HWLE posed the question as not whether Villawood would have agreed to amend the Joint Venture Agreement but whether it would have agreed on terms that were acceptable to the plaintiffs. 7. For instance, HWLE posed the following hypothetical example of how reduction in the amount Villawood would be required to pay to Dairycorp as a consequential amendment might have been considered. A reduction could have been made to the upfront payment of $3M or the subsequent periodical payments of $250,000 per quarter, or the payments to meet Dairycorp's ongoing interest obligations or the final payment to be made once planning approval was obtained. A reduction may have been made to all of these payments. Given the deemed value of the land of $30M and the NAB debt in March 2010 of almost $21M, such changes may have reduced the total payments to Dairycorp to about $4M or less, which would not have been enough both to permit the plaintiffs to refinance at $18.8M and service the remaining debt for the time it would take to achieve a rezoning and Development Approval for the first 100 lots. The reduction may even have eliminated all payments to the plaintiffs until planning approval was obtained, or even eliminated them entirely. HWLE submitted that the objective facts do not warrant a finding that, on the balance of probabilities, such a deal would have been acceptable to the plaintiffs. Moreover, even if the plaintiffs were willing to proceed at such a reduced price, they may not have been able to do so given NAB's requirement that the debt be reduced. 8. HWLE also submitted that while a reduction in payments might have been one possibility, there were others as well, such as Villawood taking a 75% share of the joint venture instead of 50%. It may have required the plaintiffs to accept funding from Villawood with which to retire the NAB debt which would then have to be repaid from the first proceeds of land sales. Villawood may have required the transfer of an immediate interest in the land, with consequential tax implications for the plaintiffs. 9. HWLE submitted that in these circumstances, Villawood would itself not have been willing to proceed at all if the joint venture had to take over the plaintiffs' existing NAB debt. HWLE submitted that, confronted with terms that it could not accept, rather than have no joint venture at all, the plaintiffs may have chosen to proceed with the draft Joint Venture Agreement that Villawood issued. HWLE submitted that the evidence does not establish that the plaintiffs would have been prepared to agree to invest the time necessary to conclude an alternative Joint Venture Agreement. HWLE submitted that, on the contrary, the evidence establishes that Villawood was increasingly frustrated with amendments being sought by the plaintiffs and the resulting delay. 10. HWLE submitted that ultimately the proposition that there would have been a suite of amendments to the draft Joint Venture Agreement that would have been acceptable to both Villawood and to the plaintiffs rises no higher than speculation. 11. However, this was not the limit of HWLE's submissions. HWLE argued that even if the parties had themselves been able to arrive at consensus on amendments to the Joint Venture Agreement, that would not be sufficient to establish causation. The Court would have to be satisfied in addition that the amendments, and the associated delay, if any, would have been acceptable to the NAB. 12. HWLE contended it was clear by March 2010 that the bank's patience was running out and that the plaintiffs have not established that it would have been willing to grant further time. NAB agreed to a three year loan to the plaintiffs in 2005, with an expectation that the land would be rezoned within that time. NAB issued a default notice on 17 December 2008 as the result of a failure to provide a valuation of more than $41,500,000. The NAB facility had been used to fund 100% of Dairycorp's purchase of its half share in the land, with a mechanism for capitalising interest. The plaintiffs lacked the ability to pay interest without that arrangement and were unable to repay the loan without the sale of the land. NAB's exposure was a function of the land appreciating in value, so that the bank's risk increased over time. 13. On 2 June 2009, the NAB wrote indicating that due to Mr Lindsay-Owen's "reluctance to provide any clarity/visibility", the bank "won't be extending this facility as we are not making headway and have no visibility". The bank suggested that "an orderly disposal by [Mr Lindsay-Owen] would be a better outcome than a forced sale by the bank". However, on 25 September 2009, the bank did extend the facility until 31 December that year, subject to monthly payments by Mr Lindsay-Owen of $100,000. In late 2009, Mr Moses of NAB said to him: "You do not seem to be able to meet the interest payments on our loan and we are not open to further capitalising the interest. The loan has actually moved to our default/recovery division." 1. Ms Chung from the bank also said this to Mr Lindsay-Owen: "NAB is not going to change its position and is not prepared to carry the debt at the level it is at. NAB is also not prepared to capitalise the interest on the debt." 1. These conversations are deposed to by Mr Lindsay-Owen in his principal affidavit. HWLE contends that they are significant for that reason alone as an uncontested indication of Mr Lindsay-Owen's concern that the bank's comments were very troubling and that they can now be relied upon as an indication of the bank's then current attitude. 2. In the events that occurred, on 15 January 2010, the NAB offered to extend the facility to 31 December that year with a limit of $21,300,000 subject to the provision of a certified copy of a joint venture agreement with Villawood in a form acceptable to the bank and a capital injection of $3M by Schofields. The offer expired on 28 February 2010 but was extended to 31 March 2010, two days after the day upon which the Joint Venture Agreement was executed. 3. HWLE argues that the plaintiffs have not in these circumstances proved that there would have been further extensions granted by NAB. On 29 March 2010, the bank told Mr Lindsay-Owen that "it is important to note that the existing facility expires as at the close of business 31 March 2010 therefore at this point the whole facility amount is due and payable". 4. In my view, HWLE's submissions on these questions misunderstand the plaintiffs' case on the amendment to the Joint Venture Agreement for which they contend. It is, for example, entirely beside the point of my present inquiry that Ball J concluded that it was not Villawood's subjective intention that the joint venture would take over the existing NAB debt unless other changes were agreed. His Honour's concern was to determine what the parties intended by the terms of their written agreement from his standpoint in 2014. I am not dealing with that issue. The plaintiffs do not now endorse the accuracy of his Honour's view, that Mr Taber's 29 April 2010 email suggested that at that time he thought that the joint venture would take over responsibility for the existing debt following the granting of planning approval, in order somehow to revive their rectification arguments. On the contrary, they do so in order to find support for the commercial acceptability, a mere month after the Joint Venture Agreement was executed, of a deal in which clause 11(b) were amended to reflect their instructions. 5. Nor does the fact that Schofields relied upon clause 11(b) to terminate the agreement alter this position. By 2014, the landscape had changed considerably. If HWLE's submissions are to be accepted, the relationship had reached a poisonous state of irreconcilable conflict. Presumably, on this analysis, Mr Taber was delighted to have in 2014 a mechanism for extracting his company from that relationship without incurring a loss. That is an entirely different setting from the mood in 2010 when all parties had persevered with protracted and difficult negotiations in order to exploit the significant commercial potential of the plaintiffs' land. That was the prevailing atmosphere in which Schofields would have been approached by Mr Downing if his mistake had been recognised in time. Villawood and Schofields recognised that commercial potential and in my opinion it is unrealistic to suggest that the land debt issue would have become a deal breaker at that time. 6. There does also not seem to me to be merit in the suggestion that the need to provide Schofields with a quid pro quo for the amendment would have been an insurmountable hurdle. Mr Lindsay-Owen was in no position to resist having to pay the price of the transfer of the NAB debt to the joint venture if the Joint Venture Agreement did not already do so. If the price for Schofields' financial accommodation meant a reformulation of the parties' respective equity positions, then that was the price that the plaintiffs would have to pay. It is wrong to suggest that the plaintiffs considered that they had secured a deal represented by the Joint Venture Agreement that would not have to be varied, to their detriment, if their instructions concerning assumption of the land debt by the joint venture had been followed. That reality must be inherent in the plaintiffs' case in these proceedings. 7. In that last respect, the timing of the request to amend should not, in my view, be restricted to some notional period after 29 March 2010. The burden of HWLE's submissions appears to be that negotiations for what they refer to as a suite of consequential amendments would have started only after that date. However, that was the date when Mr Downing's breach was consummated. Although his breach did not cause irrevocable damage until 29 March 2010, it should have been prevented by him negotiating for a clause that effected his instructions from well before this. For obvious reasons, these would not be "amendments" but the negotiation of different terms. However, the history of the parties' activities at the time shows that they were energetically in the train of negotiations in late 2009 and early 2010 when Mr Downing should have been alive to his potential mistake. 8. In that last respect, HWLE's submission that Villawood would not have agreed to amendments that did no more than change who would become responsible for the NAB debt once planning approval was achieved is obviously correct. Similarly, HWLE's observation that the Terms Sheet contemplated a direct connection between responsibility for the NAB debt and the amount that Villawood was willing to pay the plaintiffs, and that a change to one integer would have led to changes in others, is equally true. That commercial reality, recognised by Ball J, cannot be gainsaid. As I have attempted to indicate, it would in my view have been taken into account in late 2009 and early 2010 if and when Mr Downing had properly followed his instructions on the joint venture's assumption of the land debt. 9. Finally, I am unable to accept that the NAB would have withdrawn its support for the plaintiffs if the 31 March 2010 deadline had not been met. As HWLE's submissions make clear, the plaintiffs had been indebted to the bank for some years by early 2010. The bank had an exposure about which it appears in correspondence to have been concerned. Concerns about that exposure, inevitably tied to the value of the land, could only or at least would preferably have been mollified by the prospect of a successful joint venture and the exploitation of its full development potential. Far from being a source of possible frustration, securing the agreement of Schofields to the debt becoming a joint venture responsibility would more likely than not have been attractive to the bank. 10. Similarly, it is not a simple question of whether the bank would have agreed to an extension from 31 March 2010 to allow for the amendments to be agreed. Attention to the joint venture's responsibility for the land debt should have been given by Mr Downing much earlier. That is particularly so having regard to the fact that he was aware of the bank's increasing frustration with the recalcitrance of their mutual clients and was similarly aware of the need for the debt to be "refinanced". Mr Downing's drafting comment upon what was then clause 9 of the draft Joint Venture Agreement sent to him on Christmas Eve 2009, indicated as much, as his evidence confirmed: "Q. So, if you turn to what was sent to Clayton Utz, page 4382, you'll see that we have the form of the HWL Ebsworth's form of document that contains your drafting comments in the rectangular boxes that we see by way of illustration on 4381 and 4382? A. Correct. Q. Relevantly, we see, with respect to clause 9, a drafting comment which is identified with the reference in square brackets [HWL 31]. A. I see that. Q. And your comment is in these terms, 'Presumably, the intention here is the refinance'? A. Yes. Q. That was your drafting comment? A. Yes. Q. Should his Honour understand that the reason for the presumption in that drafting comment was what you saw as an apparent lack of clarity with respect to the clause in clause 9 of the draft joint venture agreement? A. Yes, I was trying to clarify meaning. Q. You sought to get some clarity by your drafting note and you've put it in the terms that you did because you expected to get a response, in effect, 'yes or no'? A. Yes." 1. That is hardly controversial having regard to clause 2 of the draft Joint Venture Agreement which made refinancing by Dairycorp on specified terms and by specified times a so-called "condition precedent" to the Joint Venture Agreement. Mr Downing was asked about this: "Q. You know, don't you, that the draft joint venture agreement contained a condition precedent clause in clause 2? A. Yes. Q. Perhaps I ought to, in fairness, take you to that, which in the draft as it was then you'll find at page 4371. A. Yes. Q. You'll see in clause 2(a) that the agreement was conditional unless and until certain things were satisfied. A. Mm. Q. And you'll see in little (i) the debt facility taken out by Dairycorp and secured against the land is refinanced by Dairycorp on terms acceptable to both Dairycorp and Schofields. Do you see that? A. Yes, I do. Q. Reasonable minds might differ around what a refinance actually means. A. Mm. Q. But, can I just draw your attention to this, that the draftsperson of the condition precedent clause 2(a)(i) has used the word 'refinance' in circumstances where what was really to happen was not a refinance, but really a rolling over or an extension of an existing loan. Correct? A. That was my understanding of the, the mechanism that was going to take place, yeah. Why they used the word 'refinanced' in that, I, maybe technically it, it is a refinance. I, you know. Q. Yes, and I won't pause to debate that with you. A. Yeah. Yeah. Yeah. Q. All I'm drawing attention to is that the draftsperson in the condition precedent clause seems to have used the word 'refinance' to actually mean a rolling over or an extension of the existing NAB debt that was secured on the land. A. Yes. Q. Some might say it's actually not a refinance because it's already an existing facility. So, therefore a refinance is inappropriate. Do you A. Yeah, the same, same lender and, yes. Yes. Q. Nonetheless, when you referred in your drafting note to the refinance, presumably the intention here is to refinance. Did you pause to think that perhaps your note wasn't clear because of the use of the word 'refinance' in another context, for example, in clause 2(a)(i)? A. Did I pause to think about that? I can't recall, but, yeah." 1. It seems to me to be a fair reading of this evidence that Mr Downing was acutely aware that the NAB facility would have to be renegotiated or replaced and that in that context the prospect of NAB remaining as the lender was not discarded as a reasonable possibility. I consider that Mr Downing's acceptance of that possibility must be taken to have been informed by his expectation that the NAB was not at the point of severing its ties with the plaintiffs and that the bank was in my opinion likely to have remained cooperative if some further time were needed to negotiate the amendments required to give effect to his instructions. 2. As the plaintiffs have also emphasised, the bank was not a party to the Joint Venture Agreement. NAB wanted only to be satisfied that the plaintiffs had the benefit of an experienced joint venture partner to develop the land, so that its debt was serviced, and its security was protected. There is no evidence beyond speculation based upon the bank's self-defensive but hyperbolic correspondence and conversations with Mr Lindsay-Owen that the bank would have been anything other than an enthusiastic proponent of a successful joint venture for the land and any amendments that were likely to enhance its prospects. As I have already indicated, earlier attention to the issue by Mr Downing in, say, January 2010 would have meant that delays caused by negotiations about amendments would have been subsumed in the timetable that saw the agreement finalised in late March in any event. 3. I am satisfied on the balance of probabilities that the plaintiffs lost an opportunity to amend the Joint Venture Agreement so that the NAB debt became a joint venture responsibility, in accordance with their instructions to Mr Downing to that effect. The remaining question in this setting is whether the hypothetical amendments to the draft Joint Venture Agreement had some value. 4. It is convenient to consider HWLE's submissions on this question first. 5. HWLE submitted that there are two separate reasons why amendments to the Joint Venture Agreement are unlikely to have had any value. First, having regard to the profits made by the plaintiffs from the unamended agreement, the evidence does not establish that any further profits would have been earned. Secondly, having regard to what HWLE insists was the plaintiffs' inability to work with Villawood, as revealed by the events between March 2010 and April 2014, the joint venture would have had no long-term value even if the Joint Venture Agreement were amended. These are considered in turn. 6. First, by March 2010 the draft Joint Venture Agreement was on the table as the result of negotiations since it was first issued by Villawood on 23 December 2009. That draft, which became the Joint Venture Agreement on 29 March 2010, secured the prospect of very large benefits for the plaintiffs. It enabled them the avoid further default on the NAB facility. It enabled them to retain the land and avoid a forced sale without the benefit of rezoning. It resulted in the retention of the land until 2015 when it was sold to Stockland and the RMS after rezoning and development approval for the first tranche of development. From these sales, the plaintiffs repaid their debt of approximately $22M to the NAB and other expenses that they would otherwise have had to pay from their own resources. The plaintiffs received a further $29.4M on top of that. In addition, the plaintiffs had already received cash payments from Villawood totalling $5M and Villawood had made further payments in excess of $8M to meet the plaintiffs' other obligations to the NAB being the partial debt repayment in April 2010 and monthly interest payments. 7. What further benefits would the amendments have produced? HWLE insists that, in the absence of any certainty about what the amended terms would have looked like, it is pure speculation to suggest that a joint venture on those (unknown) terms would have proceeded to completion or whether it would have fared any better or worse than the actual joint venture itself. 8. HWLE maintained that even if the joint venture had proceeded to completion on different terms, it is also speculation to suggest that it would have yielded greater benefits than those achieved in fact. HWLE submitted that it is not enough for the plaintiffs to adduce evidence that they would have made a profit from one of Mr Dyson's three hypothetical scenarios (as to which, see paragraph [190] below), because each of these calculations proceeds from the premise that an amended Joint Venture Agreement would have been exactly the same as the one which the parties executed on 29 March 2010, except that Villawood would have "gratuitously agreed to accept half of the plaintiffs' NAB debt". HWLE submitted that that "was never a possibility". HWLE submitted that even if it is assumed that there would have been amendments, I could not be satisfied on the balance of probabilities that they would have had a value to the plaintiffs that was more than negligible, speculative or theoretical. 9. Secondly, the events that are now known to have occurred between March 2010 and April 2014 demonstrate that there was never any prospect of the plaintiffs and Villawood successfully undertaking a complicated multi-year commercial undertaking that required them to work cooperatively and constructively together. HWLE maintains that the evidence establishes that well before April 2014, the joint venture had broken down and was beyond redemption. This is said to follow from the fact that: 1. the parties were already in litigation unrelated to the NAB debt; 2. further proceedings were foreshadowed by both sides; 3. Villawood had issued a notice of default and had foreshadowed another; 4. the plaintiffs had foreshadowed issuing their own notice of default; 5. the plaintiffs were in discussions with a prospective new joint venture partner (Australand) as part of their "Villawood exit"; 6. the management of the joint venture was dysfunctional, with direct implications for the joint venture to transact or even communicate with multiple third parties essential to the joint venture operations including the appointed project manager, NAB, a prospective alternative financier (Bendigo Bank), Blacktown City Council, Gadens solicitors, the RMS, valuers, sales agents, tax advisers and purchasers; 7. the parties had lost trust in each other. 1. Mr Lindsay-Owen was asked about these matters extensively in cross-examination, of which the following excerpts are a small example: "Q. But you agree that you'd had many disputes with Schofields over the first four years of the joint venture? A. There's been a few. All, all obviously sorted out because we're still living together. Q. Almost none of the disputes to which I've referred you to had been sorted out by April 2004, had they? A. I was meaning they're sorted out in the sense that they're taking their due course and, and we will all take heed at what that decision turns up, because we'll be obliged to do that. Both they will and we will. Q. As at April 2014 there was litigation which Schofields had commenced against you which was in the process of working its way through the Court? A. Could you say all that again, please? Q. Yes. As at April 2014 there was the litigation which Schofield had commenced against you which was in the process of working its way through the Court? A. Correct. Q. That included your cross-claim where you alleged that they had development in breach of their duty of good faith to you? A. Yes, that's correct, also, to my knowledge." 1. The evidence also reveals that there were very aggressive incidents that took place at joint venture meetings: "Q. But is it the case that by about March 2013, the regular meetings of the joint venture had become heated? A. I don't believe so, no. Q. Were they robust? A. Always. That's what business people got to do, to stay in business. Q. Is this your evidence that at that point, the meetings were no different, to what you consider to be normal business meetings? A. Correct. Q. Now, I want to show you an email that Mr Downing-- A. There's one exception to that sorry. HIS HONOUR: Sorry. WITNESS: There is one exception to the 'correct'. HIS HONOUR: Yes, go ahead. A. Thank you. Unfortunately, Mr Taber decided to get up on his feet in one meeting and walk around the, the table, with putting his face there in front of my face, hovering over me, trying to bait me, being very aggressive. That was most unusual and a scary event. I didn't respond. I sat in my seat and didn't move. … Q. You've referred to the 'angry and unprovoked attack on the writer by Mr Taber in the November and December 2013 JVC meetings'. Just pausing there, I asked you about the behaviour of Mr Taber at the December 2013 meeting previously. A. You - well, I don't recall it, but go on. Q. On 11 December, but it's true isn't it that Mr Taber's behaviour was not just at that meeting, there were other meetings where Mr Taber behaved in a way which you regarded as an angry and unprovoked attack? A. Well, if that was the case, what you're putting to me, I would have put it in this letter. Q. Yes and that's what you've done in that sentence, 'the angry unprovoked attack on'-- A. No, that's not what I'm saying. You asked me were there other times that this was happening, because it was common at the meetings. This was the full story, as far as I know. Q. And the full story was that there were angry and unprovoked attacks on you by Mr Taber in, firstly, the November 2013 meeting and secondly, the December 2013 meetings? A. Yes. Q. To your observation-- A. That's the two observations I've got in there, no more. Q. And to your observation Mr Taber was angry? A. If that's the word I've used there, I'll - I will stick with what's here. I don't want to change anything there at this point." 1. Mr Lindsay-Owen agreed that to pursue the joint venture it would have been necessary to work with Schofields for a further four, five or six years at least. 2. In this context, HWLE gave a series of examples of disharmony between the parties: 1. On 17 May 2013, Villawood wrote that Mr Lindsay-Owen's approach and conduct had not assisted the planning process, that his conduct and general demeanour continued to impede the proper conduct of the joint venture and that he conducted himself in an obstructive and uncooperative manner that was not in the best interests of the joint venture; 2. On 19 August 2013, Schofields wrote that Mr Lindsay-Owen's obstructionist behaviour had seen the project deprived of significant commercial returns; 3. On 7 October 2013, Schofields wrote that Mr Lindsay-Owen had attacked Greg Poole, the Villawood management representative, in a very personal way. Mr Lindsay-Owen was very suspicious of the request for an undertaking that this would not reoccur. Schofields also stated that Mr Lindsay-Owen's conduct smacked of deliberate conduct to seek to derail the joint venture committee meetings, which at times descended into farce. Schofields also wrote that Mr Lindsay-Owen was acting in a manner that was detrimental to the interests of the joint venture; 4. On 18 November 2013, Schofields referred to "yet another attempt by your clients to delay and obstruct the joint venture by, in this instance, making serious yet false allegations"; 5. On 19 November 2013, Schofields referred to Mr Lindsay-Owen's continued contesting at every point of the decision making, and wrote that Dairycorp needed to decide whether to commit to the spirit of the joint venture to deliver the project for a profit or jeopardise the outcome for all parties; 6. On 4 February 2014, Schofields referred to inflammatory comments and serious accusations made in correspondence and joint venture committee meetings; 7. As early as 19 November 2012, Mr Lindsay-Owen suggested that Schofields was acting in a way that was "in bad faith and unjust". Between May 2012 and October 2012, it was Mr Lindsay-Owen's opinion that Schofields was deliberately holding up the development; 8. On 20 December 2013, Mr Lindsay-Owen wrote that Schofields seemed to be conducting itself with a focus on attempting to bully him into submission rather than focussing on the project and holding the project manager to account, that their behaviour verged on ludicrous and that had the behaviour not been so serious, it would have been laughable to watch the machinations and attempted justifications of the arrogance and complete disregard of their contractual obligations; 9. On 20 December 2013 in a separate letter, Mr Lindsay-Owen wrote that Schofields' conduct was indicative of either abject incompetence or some undisclosed agenda, that there was a pattern of behaviour aimed at marginalising the plaintiffs and their interest in the project and that Mr Taber had made verbal threats, swearing and making ultimatums, and that it was clear that the vitriol was coming from Schofields. 1. By December 2013, Mr Lindsay-Owen had no trust that he was being kept properly informed by the project manager about activities relating to the project: "Q. At the top of the second page of that letter, there's a sentence that says, 'In short we have no trust that we are being kept properly informed by the project manager about activities relating to the project'. That is true, isn't it, in December 2013 you had no trust that you were being kept properly informed by the project manager? A. This was shown by the fact that they've said that they presented to the meeting something that which they knew was incorrect, but then corrected themselves, which funnily enough didn't get in the minutes. Most unusual." 1. By that time, Mr Lindsay-Owen was also wondering whether there was any genuine intent on the part of Schofields actually to progress the project efficiently and properly and in compliance with the Joint Venture Agreement. He also regarded the accusations being made by Schofields about his conduct to be fallacious and deliberately mischievous: "Q. … In December 2013, was it your view that Schofields were making allegations against you which were fallacious and deliberately mischievous? A. Yes." 1. HWLE cited several other instances of disharmony and dysfunction in the relationship between Mr Lindsay-Owen and his joint venture partners. HWLE stressed that what it called the breakdown of this relationship was not caused, nor was it contributed to, by the terms of clause 11(b). Prior to planning approval being obtained in April 2014, there was no suggestion of a dispute about future responsibility for the NAB debt. HWLE submitted that the joint venture had "utterly broken down" well before April 2014. 2. HWLE therefore made the following submission: "In view of this reality, the counterfactual propounded by the plaintiffs is wholly divorced from reality. Both in broad concept and at the micro details, the plaintiffs' case is based on the unspoken assumption that there would have been a joint venture conducted in accordance with normal commercial norms of behaviour. Another way of looking at this aspect of the case is that the historic events have revealed that the joint venture between the plaintiffs and Villawood suffered from an inherent flaw. It had value in theory only. In reality, it had no value. No amendment to the draft Joint Venture Agreement which the plaintiffs could have sought in early 2010 would have increased the value of the joint venture to the plaintiffs unless the amendment was capable of ensuring the future ability of the plaintiffs and Villawood to work together. It is clear on the evidence that this was not possible. The plaintiffs have not proved on the balance of probabilities that amendments to the draft Joint Venture Agreement would have resulted in a joint venture with Villawood which achieved a better outcome than the truncated joint venture actually undertaken. This is so, no matter what terms were agreed in March 2010." 1. The plaintiffs responded to the submission that an amendment to the Joint Venture Agreement was unlikely to have had any value because of lack of evidence showing that they would have made greater profits by submitting that it fails to take account of the fact that the land would not have been sold out from under them, a circumstance itself having real value. Amendments to the draft Joint Venture Agreement, eliminating clause 11(b), would have coincidentally avoided Schofields' ability to bring the joint venture to an end. The amendment does not invite speculation: all that was necessary was to link by clear language Dairycorp's performance obligation in clause 11(b) to the external loan funds in clause 11(a). 2. The plaintiffs contended that HWLE's submission that Villawood's acceptance of one half of the land debt "was never a possibility" is plainly wrong. The contemporaneous emails from Mr Costelloe and Mr Taber show that they did contemplate just that. HWLE's submission emphasised a change in timing from rezoning to planning approval but Mr Taber's 29 April 2010 email drew no such distinction and expressly refers to the plaintiffs and Schofields each having 50% responsibility for the land debt on planning approval. The submission reconstructs events rather than relying on what occurred at the time. 3. As to the second premise, the plaintiffs submitted that HWLE's submissions ignore the legally binding nature of the Joint Venture Agreement and the fact that the plaintiffs and Schofields continued to work together well into 2014. The joint venture had not "broken down beyond redemption" well before April 2014. The examples given to "support" this contention do not establish as much. Schofields took an opportunity by implementing clause 11(b) to make a 400% profit without undertaking the development, instead relying upon the plaintiffs' breach to force a sale of the land. Nor is there any evidentiary support for the suggestion that the plaintiffs or Schofields ever considered determining the joint venture by mutual agreement or abandonment. Moreover, such a proposition was never put to Mr Lindsay-Owen in cross-examination. Mr Downing did not concede that the joint venture had broken down. 4. In my opinion, it cannot be correct to say that the lost opportunity to amend the Joint Venture Agreement had no value, for either of the reasons propounded by HWLE. 5. In my opinion, the first argument, that having regard to the profits made by the plaintiffs from the unamended agreement, the evidence does not establish that any further profits would have been earned, elides the question of whether the lost opportunity had some value with the question of whether the plaintiffs can quantify, or are otherwise able to prove, the loss and damage for which they contend. In this respect I have found the following analysis by Rees J in About Life v Maddocks Lawyers at [505] – [512] to be particularly helpful: "[505] The principles regarding compensation for a loss of chance to pursue a commercial opportunity are well established. There are three steps: Masters Home Improvement Pty Ltd v North East Solution Pty Ltd [2017] VSCA 88; (2017) 372 ALR 440, Santamaria, Ferguson and Kaye JJA at [411]. First, was there a chance? The plaintiff must prove on the balance of probabilities that, absent the negligent conduct, there was some prospect of success. As explained in Sellars v Adelaide Petroleum (1994) 179 CLR 332; [1994] HCA 4 at 355 per Mason CJ, Dawson, Toohey and Gaudron JJ: '… the applicant must prove on the balance of probabilities that he or she has sustained some loss or damage. However, in a case such as the present, the applicant shows some loss or damage was sustained by demonstrating that the contravening conduct caused the loss of a commercial opportunity which had some value (not being a negligible value), the value being ascertained by reference to the degree of probabilities or possibilities. It is no answer to that way of viewing an applicant's case to say that the commercial opportunity was valueless on the balance of probabilities because to say that is to value the commercial opportunity by reference to a standard of proof which is inapplicable.' [506] Notwithstanding the demarcation between proving that there is some chance and ascertaining the value of that chance, 'it will usually be the same body of evidence that tends to establish both the existence of a loss and the amount to be recovered': Principal Properties Pty Ltd v Brisbane Broncos Leagues Club Ltd [2018] 2 Qd R 584; [2017] QCA 254 at [28] per McMurdo JA (Philippides JA and Boddice J agreeing) citing Sellars at 364 per Brennan J. [507] As to the identification of the commercial opportunity, the relevant opportunity is the opportunity to make a profit: see also Principal Properties at [21]. As McMurdo JA clarified (in terms redolent of Brennan J in Sellars at 364) at [23]-[24]: '[23] If a commercial opportunity has no chance of being profitable, it is an opportunity of no value and its loss could not be compensable. I would also accept that a commercial opportunity which no rational investor would pursue, having regard to the relative probabilities of a profit and a loss and the likely magnitude of each, would be a valueless opportunity. [24] However, I do not accept that the same may be said whenever it is more likely than not that the pursuit of the opportunity would have resulted in an investor's loss. Many investments are pursued with an appreciation that, more likely than not, they will not be profitable after money is spent in pursuing them. They are pursued because the magnitude of the potential profit, considered against the relatively small amount of the potential loss, makes the risk, sometimes a high risk, of that loss one which is worth taking. …' [508] Second, has the opportunity been lost, that is, would the plaintiff have pursued it? Where realisation of the chance depends on a plaintiff's own decision to take it up, the plaintiff must also establish on the balance of probabilities that it would have been taken up: Doolan v Renkon Pty Ltd (2011) 21 Tas R 156; [2011] TASFC 4 at [60] and [66] per Crawford CJ, Blow and Porter JJ; Olympic Holdings Pty Ltd v Lochel [2004] WASC 61 at [121]-[123] per McLure J. [509] Third, what amount should be awarded having regard to the prospects of success if the opportunity had been pursued. The Court must value the lost opportunity by reference to the degree of probability that the events posited by the plaintiff would have occurred, provided that the probability is not so low (less than one per cent) as to be speculative or so high (more than 99 per cent) as to be practically definite: Malec v JC Hutton Pty Ltd (1990) 169 CLR 638; [1990] HCA 20 (per Brennan and Dawson JJ at 639 and Deane, Gaudron and McHugh JJ at 642-3); Berry v CCL Secure Pty Ltd [2020] HCA 27; (2020) 381 ALR 427 at [36] per Bell, Keane, Nettle JJ; Bartier Perry Pty Ltd v Paltos [2021] NSWCA 158 at [154], [203] per Payne JA (White and McCallum JJA agreeing). [510] When considering the probabilities and possibilities, the Court ordinarily takes a 'broad brush approach': Nikolaou v Papasavas, Phillips & Co (1989) 166 CLR 394 at 404; [1989] HCA 11 per Wilson, Dawson, Toohey and Gaudron JJ. The analysis does not lend itself to hard and fast rules: Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64 at 119; [1991] HCA 54 per Deane J. However, as Barrett JA (Leeming JA agreeing) cautioned in Thompson v Schacht [2014] NSWCA 247; (2014) 53 Fam LR 133 at [76]: '… It is, of course, not possible for the court to make the determination in an evidentiary vacuum and, while the plaintiff is not required to prove the postulated outcome according to the balance of probabilities, there must be some evidence on which to base the determination.' [511] An example of the Courts' approach in applying a discount which reflects the prospects of success is Burger King Corporation v Hungry Jack's Pty Ltd [2001] NSWCA 187, where Hungry Jack sought damages for the loss of an opportunity to expand its business. Hungry Jack's chairman gave evidence that, in the absence of Burger King's conduct, Hungry Jack would have opened 17 new restaurants every year. Sheller, Beazley and Stein JJA noted at [596]: (emphasis added) 'The base chosen was the best estimate of how many restaurants would be opened … in the years in question. The degree of the decision-maker's confidence in that best estimate will be reflected in the discount for contingencies. But without that estimate, the calculation cannot proceed. Moreover, whatever figure is chosen, an allowance must be made for the possibility that it is too low or too high. None of this is scientific but it is the best that the Court can do. There is a danger in using mathematical calculations which may give a false impression that the result is scientifically arrived at or necessarily precise.' [512] In a case where the Court has found that a client has lost a valuable opportunity due to the negligence of the solicitor, the Court tends to assess the damages generously given that it was the solicitor's negligence 'which has lost [the client] the chance of succeeding in full or fuller measure': Sharif v Garrett & Co [2002] 1 WLR 3118 at [18] per Tuckey LJ and [39] per Simon Brown LJ (Chadwick LJ agreeing with each)." 1. It must in my opinion be the case that the opportunity to amend the Joint Venture Agreement in order to ensure that the NAB debt became a joint venture obligation had a real value that was not merely negligible, speculative or theoretical. The plaintiffs were the owners of a substantial parcel of land with an uncontested commercial value as a development opportunity of some considerable significance. However, the plaintiffs were coincidentally burdened with a debt that they could not discharge without either selling the land in its then condition without appropriate consents or approvals or securing a joint venture partner who was willing and able to take over or share responsibility for that debt on appropriate terms and conditions. The opportunity to secure an outcome in which the plaintiffs' immediate and pressing obligations to the NAB were effectively put on hold and converted to a joint venture obligation that simultaneously exploited the plaintiffs' ownership, and the development potential, of the mortgaged land was an opportunity that quintessentially had some value. The need in proceedings such as the present for the plaintiffs to establish the quantum of the damages incurred by the loss of that opportunity should not be permitted to disguise the existence of the value of the loss of that opportunity. So much may be inferred from HWLE's own submissions that the plaintiffs could not have been expected to achieve the sought after amendment without the need to pay for it in terms that acknowledged the cost of the amendment to Schofields. The issue of whether the plaintiffs can establish some loss occasioned by the breach, subsisting in the notional value of the opportunity to amend, is entirely distinct from the issue of whether the lost opportunity, if the plaintiffs had been able to exploit it, would have caused them to sustain calculable losses that flowed from the events in April 2014 over and above the benefits that those events generated. 2. Nor am I satisfied that it is legitimate in the present context entirely to discount the value of the lost opportunity by reference to the suggestion that, with the benefit of what is known now, it is apparent or at least possible that the commercial significance of the opportunity is in fact an illusion. Once again, having regard to at least one of the ways in which the plaintiffs propound their claim for damages, this doomed to fail analysis may have some work to do. However, in the highly charged and optimistic setting of March 2010, when the relevant breach occurred and when the subject opportunity was lost, an assessment of its value could have had nothing to do with the fact that exploitation of that opportunity became impeded by the type of incidents to which HWLE has drawn attention. As the cases in this area demonstrate, even the loss of an opportunity to enter an inherently risky venture does not deprive the opportunity of all value, even if its value may be reduced by the existence of the risk. 3. In the present case, the commercial risks were in broad focus quite minimal. The risk that joint venturers might encounter problems as between or among themselves would not appear to me to be uncommon. The disharmony and loss of trust may have made things difficult for this joint venture as time went by, but as the plaintiffs have correctly observed, it had not led to the termination of the joint venture before Schofields brought it to an end in reliance upon clause 11(b). The faint suggestion that the act of doing so was somehow a function of the deteriorating relationship between the joint venturers was not explored with any enthusiasm in the case before me. 4. It follows that I am satisfied on the balance of probabilities that the plaintiffs were deprived of an opportunity to amend the Joint Venture Agreement so as to incorporate their fundamental requirements as advised to Mr Downing and that that opportunity had some value. Loss of opportunity to proceed with some other partner 1. The plaintiffs next contend that "the evidence is also all one way on [their] alternative case on causation". Had Mr Downing raised what they refer to as the red flag with Clayton Utz and had Schofields not agreed to amend the draft Joint Venture Agreement and ended negotiations, the plaintiffs maintain that they would have been able to conclude a successful joint venture agreement that implemented their fundamental requirements with other developers. 2. If negotiations for an amendment had failed, contrary to the plaintiffs' primary position, it would have occurred towards the end of 2009 or in early 2010. The plaintiffs submitted that in those circumstances they would have been able to deal with at least three other developers with the relevant skills and experience and financial backing. Mr Downing accepted that such approaches had been made: "Q. In the next sentence, you'll see that you told council in this memo, that Dairycorp as that term is used in the joint venture agreement, you were meaning by that to include Mr Lindsay-Owen of course, negotiated with several possible joint venture partners, all of whom had strong financial backing and relevant skillsets-- A. Yes. Q. --including Villawood, Peet and Australand, do you see that? A. Yes, I do see that. Q. So, may we take it that at least at the time you wrote the memo, you well understood that each of those three including Peet and Australand had strong financial backing? A. Yes. Q. And the relevant skillsets to fully develop and exploit the development potential of this land. A. Yes. Q. Do you accept that? A. Yes, I do." 1. The plaintiffs submitted that if negotiations with Villawood had failed, they would have had "no hesitation" in dealing with the other potential joint venture partners. There would have been no legal or ethical impediment to doing so. 2. The plaintiffs submitted that the evidence supports a finding that these other parties would have been interested in partnering the plaintiffs to develop the land. For example, Australand pursued the plaintiffs until February 2010. Mr Lindsay-Owen referred to this in evidence: "Q. That was the truth, wasn't it, on 19 February 2010 when you wrote and sent this email you wished to joint venture with Australand, didn't you? A. The only thing that I was looking for is cover for my rear end if Villawood walked away." 1. The plaintiffs also submitted that even if the negotiations with Villawood/Schofields had failed, the NAB would have in all likelihood extended the facility by at least three months or more in order to allow the plaintiffs time to negotiate a new joint venture arrangement. 2. The plaintiffs submitted that, having achieved a "deal" on acceptable terms in December 2009, there is no reason to suggest that they would not have achieved the same or a similar deal in January 2010. The loss of the opportunity to make a deal on the same or similar terms as that reached with Villawood had some value, if only equal to one half of the land debt. 3. HWLE submitted on the contrary that the plaintiffs have not proved on the balance of probabilities that the lost opportunity to negotiate with alternative partners had any value at all. The plaintiffs plead that loss as one "occasioned by being denied the opportunity not to proceed with Villawood but with another JV partner on better terms than those under the JVA". HWLE emphasised that in order to succeed on this alternative, the plaintiffs would have to prove each of the following matters: 1. Upon discovery of Villawood's attitude to taking responsibility for the NAB debt in, say, February 2010 and having first tried but failed to negotiate amendments with Villawood, the plaintiffs would have identified an alternative partner, negotiated, agreed and fully documented a joint venture agreement in sufficient time to satisfy the NAB's deadline; 2. The terms of the alternative agreement would have been "better" than those which were already on the table with Villawood; and 3. The betterment of the terms would have had some value, not being a value that was negligible, speculative or theoretical. 1. HWLE submitted as follows. Unlike the position with Villawood in March 2010, identification of a new partner and negotiation and agreement on terms "would have been at large". The plaintiffs had been actively looking for a partner since 2005. The negotiations with other parties, although unsuccessful, were complex and time-consuming. By March 2010, the plaintiffs had been negotiating with Villawood for nine months and had still not reached agreement. Presumably Clayton Utz had been working on the first drafts of the documents since December 2009 and by March 2010 negotiations were still not finalised. 2. By 2010, the plaintiffs had experienced many failures in negotiations and no partner other than Villawood had been identified. There was no alternative joint venture partner that could have stepped into Villawood's shoes before the expiry of the NAB deadline on 31 March 2010. HWLE submitted that if the negotiations with Villawood had broken down in March 2010, the objective facts show that it is more likely than not that the NAB would have demanded repayment of its facilities. The result for the plaintiffs would have been far worse than the "huge and immediate benefits" they received from the joint venture with Villawood, including the $8M in cash payments and the further profit of $29.4M. 3. Rather than supporting the plaintiffs' case, the evidence "makes it clear" that if negotiations with Villawood had collapsed in March 2010, there was no viable option that could possibly have concluded within a period acceptable to the NAB. The NAB had moved the loan to its default recovery position and this was a very pressing issue, as Mr Lindsay-Owen acknowledged. 4. Mr Lindsay-Owen said that by late 2009, Villawood and Australand were "top of the pile". He also gave this evidence: "Q. By early 2010, Australand was not an option for you to reach an agreement with? A. Correct. Q. This is the position, isn't it, that by February 2010, the only option left to you to form a joint venture was Villawood? A. Yes. Q. Now-- A. I wasn't dealing with anyone else." 1. The NAB had indicated that it would not provide finance based on a management agreement proposed by PEET and Mr Lindsay-Owen had concluded that it was necessary to end that chapter. There had been no substantive negotiations with Urbex for over two and a half years. Negotiations with Valad had come to an end in July 2007. 2. HWLE submitted that it became clear from contemporaneous documents that Mr Lindsay-Owen was attempting to deal with Australand in February 2010 but that those attempts proved to be futile. Shortly before 10 February 2010 he requested Australand to send terms for a prospective joint venture. He was cross-examined about this: "Q. If you could please go to page 4921? You have there at 4921 an email to you from RichardMcLachlan@australand.com.au on Wednesday 10 February 2010? A. Yes. Q. And it says, 'Greg, as you requested', do you see that? A. I do. Q. Do you see the attachment which is a three page document dated 8 February 2010, 'Further counter proposal'? A. Yes, I do. Q. This is the truth, isn't it, that you requested that Mr McLachlan send you terms for a prospective joint venture with Australand shortly before 10 February 2010? A. I don't know the answer, but I - from their dealings, they approached me. I would have thought they said this trying to get me. Q. The email says-- A. I don't recall asking for it. Q. The email says, 'as you requested'. That doesn't assist you to remember? A. Well, no, it wasn't, because it might he was talking about I'm going to send it and I said okay, send it. I don't recall." 1. Australand proposed a four month due diligence period for a fee of $1.00. Presumably this due diligence period was to enable Australand to determine whether it wanted to proceed at all. HWLE maintained that a period of four months at that time would clearly have been unacceptable to Mr Lindsay-Owen where the NAB had agreed to an extension on the condition that he sign a joint venture agreement with Villawood by no later than 31 March 2010. He was also cross-examined about this: "Q. Then if you go to page 4929 at paragraph B-- A. B, yes. Q. -- it says, 'Australand wishes to carry out due diligence in respect of the property, with a view to enter a joint venture to develop the property as set out in the attached draft terms of agreement'. Had you requested this document from Australand? A. No. Q. You told them to go away, did you? A. Yes, I'd said there would be no due diligence. Q. Because that wouldn't meet your concerns with the bank to have a signed joint venture agreement by 31 March-- A. Please, please say that again, I'm sorry? Q. Because that wouldn't meet-- A. I thought? Q. Can I just finish the question and then you can tell me what you thought. A. I'm not hearing you, so it's-- Q. Because a four months due diligence period would not permit you to meet the requirements of the bank? A. That would be one reason. But I didn't want to do it." 1. HWLE contended that Mr Lindsay-Owen's evidence that he told Australand to "go away" is clearly incorrect as Australand would not have sent their subsequent proposal if that had occurred. Australand's further proposal in fact came in five days later. Then nine days later on 19 February 2010, Mr Lindsay-Owen invited Australand to attend a meeting with the Transport and Infrastructure Development Corporation, suggesting that he was clearly pursuing them. 2. Mr Lindsay-Owen ultimately accepted that he was continuing to engage with Australand because he "didn't know whether Villawood were going to hang around". HWLE submitted that if Villawood had not stayed, the terms of the Australand proposal would not have been acceptable to the NAB, which would inevitably have demanded payment of its facility. Nor was Australand prepared at that point to improve the terms of its offer. In those circumstances there was no prospect of any further negotiation with Australand. That submission also embraces Mr Lindsay-Owen's evidence to the same effect: "Q. Can I ask you about Australand-- A. You, you may. Q. --in the second half of 2009? Is this fair to say, that in the second half of 2009, the two options you were considering were Australand and Schofields? A. Well, it was of the last quarter, I think, because Schofields hadn't come along until the last quarter of-- Q. So whether it was the second half or the last quarter-- A. Okay, it doesn't matter. Q. --the two options you were considering were Australand and Schofields, that's right, isn't it? A. They were at the top of the pile, yep. Q. What I want to suggest to you is that by early 2010, Australand was not an option for you to reach an agreement with. A. What, what date were you saying? Q. I put it to you for early 2010. A. No, it wasn't. Q. Are you disagreeing with me, or are you - I'll ask the question again, because sometimes that kind of negative answer gets confused. A. Yeah, it does. I agree. Q. I want it to be clear. A. Thank you. Q. By early 2010, Australand was not an option for you to reach an agreement with? A. Correct. Q. This is the position, isn't it, that by February 2010, the only option left to you to form a joint venture was Villawood? A. Yes. Q. Now-- A. I wasn't dealing with anyone else." 1. HWLE finally submitted that without some sort of initial framework, it is pure speculation as to what might have been agreed with a new partner, pure speculation that the terms would have been better than those which were on the table with Villawood and pure speculation that an improvement in terms with a different partner would have had value to the plaintiffs. HWLE submitted that the plaintiffs have not proved on the balance of probabilities the matters necessary to show that they suffered a loss of an opportunity to proceed on better terms with an alternative partner. 2. It seems to me that this question could be easily and confidently decided in favour of the plaintiffs if, for example, one or more of the putative prospective alternative joint venture partners had made a firm and definite offer or proposal which was commercially viable to the plaintiffs, but which they chose not to accept because they proceeded with Villawood. That would be the loss of a tangible opportunity to take up with a different partner on terms that could be examined and compared with the terms of the Joint Venture Agreement that came into effect on 29 March 2010. It would also presumably, and necessarily, contain a provision that accommodated the plaintiffs' difficulty with the NAB, so that the bank was satisfied in the short term and the plaintiffs were assisted to discharge that debt by the new partner in the longer term. The assessment of whether the terms upon which an alternative partner may have been prepared to proceed would be a matter of relative certainty and the extent to which the plaintiffs would have been better off would be clear to see. 3. Unfortunately, there is no such offer by reference to which these matters can be determined. In order for the loss of an opportunity to have at least some value, it must be capable of examination and assessment. The plaintiffs' case on this alternative basis proceeds on the unestablished assumption that they could have consummated a better deal if, for example, Mr Downing had been unable to convince Villawood to accept the NAB debt as a joint venture obligation at some appropriate time. The pleaded reference to "better terms than those under the JVA" must at least include a term satisfactorily dealing with the NAB's concern that the land would have to be sold if no suitable arrangement could be organised. 4. Simply put, it can be accepted that the plaintiffs lost the hypothetical opportunity to negotiate a joint venture agreement with a different partner. However, the absence of any details about such an offer leads me to agree with the HWLE contention that it is no more than speculation that it could have occurred. The position might have been different if the plaintiffs had been able to call evidence from one or other of the suggested possible joint venture partners to say, in terms, that they would have been prepared to contract with the plaintiffs and that they would have accommodated the plaintiffs' problem with the bank. I remain of the view, without relying upon Mr Dyson's opinions, that the bank would have been prepared to accommodate further delay if necessary. The failure to call such evidence does not raise any adverse inference and I am not concerned to deal with it in that fashion. I raise the absence of evidence of this type purely in the sense that there is nothing going beyond unsupported assumptions, or what HWLE would characterise as pure speculation, about the terms of an alternative proposal to permit me to say that this lost opportunity had some value. This is fundamentally different from the first way in which the plaintiffs put their case on the loss of an opportunity, where the framework is well in place and adequately documented. The loss of an opportunity to amend a draft agreement is light years away from the loss of a so-called opportunity to engage with some other partner on terms that are not fully explored. As HWLE has emphasised, the four month due diligence period that Australand wanted was a period in which they could decide if they might be interested, not one following which an agreement would be concluded. 5. I am unable to accept that the plaintiffs' so-called loss of an opportunity to contract with a different partner had any value beyond the purely hypothetical. Is Robert Gordon's evidence admissible? 1. Robert Gordon prepared a report dated 20 December 2019 on behalf of the plaintiffs. Mr Gordon was employed by Macquarie Bank Limited for 23 years from April 1990 until August 2013 in various capacities, culminating in his position as Division Director – Corporate and Asset Finance Group. Among other duties with Macquarie Bank, Mr Gordon was responsible for overall management of the $2.5billion Macquarie Real Estate Structured Finance Australian property loan and transactions portfolio. Mr Gordon's extensive experience in the banking industry with Macquarie bank was not in dispute. Since leaving the bank, Mr Gordon has been self-employed as an "expert witness property financier". 2. The plaintiffs sought to rely upon this report in order to support their contention that the NAB would have been prepared, in the circumstances as they existed in late 2009 and early 2010, and in particular having regard to the bank's deadline of 31 March 2010, referred to earlier in these reasons, to accommodate the delays that might have been occasioned by the time it would theoretically have taken either to amend the draft Joint Venture Agreement or to find an alternative joint venture partner. As will be apparent, I have already concluded, without the benefit of Mr Gordon's evidence, that the bank would, in the circumstances as they prevailed at these times, have given the plaintiffs time to seek to amend the agreement in the way for which they contend. I formed that view having regard to all of the evidence in much the same way as Ball J concluded that a particular matter made perfect commercial sense in his judgment referred to earlier. The issue of Mr Gordon's evidence, and whether it is admissible, does not therefore strictly arise. 3. However, for more abundant caution I should indicate that in my opinion, Mr Gordon's evidence is inadmissible on the question of what the NAB would have done in 2010. His report does not satisfy the requirements of s 79 of the Evidence Act 1995. Mr Gordon purports to express opinions about what the NAB might have done, about what NAB's state of mind was, and even about what an alternative joint venture partner might have done. These opinions are not evidence of banking practice or any other fields of expertise based on specialised knowledge. 4. In the events that occurred, HWLE's series of objections to Mr Gordon's evidence were less significant than might at first sight have appeared. Mr Gordon gave the following evidence: "Q. Could I ask you to go to the same expression of opinion in paragraph 69 of your report? At paragraph 69 you've said, 'In my opinion if NAB or a lender in its position was faced with the hypothetical scenario posed for my instructions, NAB or a lender in its position would likely have', and then you've put a list of actions. What you're saying there is that's what you would've done, is that right? A. What I've written there should be interpreted on the words that I've used, and that is that in my opinion NAB or a lender in its position would've done those things and I would've as well. Q. I understand you saying what you would've done, but the question of what NAB would have done, that's just a hypothetical, you don't know the answer to that do you? A. I can't know what NAB would've done, only NAB can know that. I, I don't pretend to know what NAB would've done. But what I can do, as I've said, is use my 32 years' experience of dealing with lenders in the Australian market of all sizes and all types. And as I've said, my observation is they all have the same motivations, procedures and desired outcomes. They all act in a very, very similar way. So whilst, whilst I don't know and I can't claim to know what NAB would've done, only NAB would know that, I, I can be very confident in, in the opinions that I've written. But yes, they're my opinions of what I - you know, I would've done and what I think NAB would've done, or any lender in those same situations - in the same situation." 1. I take the question of whether the NAB would have been prepared to permit the plaintiffs to attempt to negotiate amendments to the draft Joint Venture Agreement, having regard to the bank's evident concern and impatience at the time, to be a matter for me to decide. As I have already indicated, it is my view that the NAB would have been attracted to the proposition that it was beneficial to remain with the plaintiffs who were in fruitful negotiations with Villawood and that a further delay would not have discouraged the bank from maintaining its support. Moreso would that have been the case if the problem had been identified by Mr Downing in late December or early January, with the 31 March deadline then some months away. Is Michael Dyson's evidence admissible on his question 1? 1. The second area of expert evidence upon which the plaintiffs rely to prove causation of some loss is the response given by Mr Dyson to the question of whether it was more probable than not that a joint venture with a different partner would have proceeded on enumerated terms if the joint venture with Villawood had not been formed. Mr Dyson is a Certified Practising Valuer with over 30 years' experience with the Australian Valuation Office. 2. Mr Dyson was asked to answer two questions: "92.1 In about March 2010 (or within a further period of about 3 months) assuming the venture with Villawood did not proceed, is it more likely than not that another developer (the alternate JV partner) would have agreed to a joint venture with GLO/Dairycorp, where the key items were similar to the JVA with Villawood and the Terms Sheet…[Question 1] 92.2 In your opinion, assuming development of the subject property had gone ahead (whether with Villawood or another joint-venture partner) what cash flows would the joint venture have been likely to receive from the development, and over what period?..." [Question 2] 1. At paragraphs 103 and 104 of his 27 May 2020 report, Mr Dyson expressed the following opinions with respect to the first question: "103. It is therefore my considered opinion that the subject property, in early to mid-2010 would have been seen in the market as an attractive property to either purchase or more particularly become a prospective joint venture partner to, on the basis of the JV terms. On the basis of the above, it is considered that such an interest in the subject property would have been attractive to institutions and other parties for future development. 104. As such, my opinion in response to question 1 is that had the agreed JVA not proceeded, a similar JVA would have been achieved within 3 to 6 months on terms that were consistent with the terms sheet." 1. HWLE objected to the reception of that opinion in answer to question 1 by Mr Dyson upon the basis that it was not a matter of expertise upon which Mr Dyson, or indeed anyone, could express an admissible opinion. Whether a hypothetical joint venture would have proceeded on the precise terms put to Mr Dyson for his consideration is a matter to be assessed having regard to the circumstances prevailing at the time. Mr Dyson's opinion is not based upon a recognised field of study. It is no more than an opinion about what might have happened, and as such remains in the realm of hypothesis or speculation. 2. HWLE contends that the reports of Mr Dyson should be rejected in their entirety. However, insofar as the reports purport to express conclusions about which scenario is more likely, or what the scenarios pursued by the joint venture parties would have looked like, Mr Dyson lacks any relevant expertise. 3. HWLE in fact contends that there is no relevant field of expertise. The developments depended upon political matters, finance, economic, planning (including the water course issues at the land), design and market considerations. There is no body of peer reviewed literature that would allow an expert to express an opinion on how the land would have been developed. Similarly, there is no experience any expert could have that would allow him or her to say that, based on his or her experience of property development, he or she can say what scenario was more likely or might have been pursued by parties to a joint venture to develop this land starting in March 2010. 4. In any event, even if it were possible to conceive of an expert who might have expertise that would allow an opinion to be proffered on these matters, it is not Mr Dyson. He may have witnessed developments from the outside, but he has never undertaken the risks and responsibilities from within. It would be misleading to suggest that Mr Dyson had relevant expertise based on a small scale development he has apparently undertaken in his spare time. 5. In my view, that portion of Mr Dyson's report dealing with the probabilities of what might occur, to which objection is taken, is inadmissible. It does seem to me that there is no identified field of training, education or experience that would permit of the expression of an admissible opinion about what would have been the probable outcome from a range of posited scenarios. 6. In fairness to those attempting to prove the plaintiffs' losses, the task posed seems in my view to have been unnecessarily complicated by the first question Mr Dyson was asked. It does not seem to me to be to the point that some other developer would or may have proceeded to enter a joint venture with the plaintiff on some hypothetical terms. Even if that approach were persisted with, as here, there does not seem to me to be a relevant field of expertise, and Mr Dyson does not have expertise, in foretelling or predicting the likely commercial decisions of a hypothetical joint venture party, a skill that seems to me to be required to answer the first question asked. 7. The task at hand is surely that of quantifying the probable value of the lost opportunity to develop the land in accordance with the assumed amended Joint Venture Agreement with Schofields, making due allowance for the need to adjust the cost to the plaintiffs (the so-called quid pro quo) that Schofields would have required for the assumption of the NAB debt as a joint venture liability. In that respect, it is known that the Joint Venture Agreement operated for approximately four years before Schofields brought it to an end. That is a history to which I consider I can have regard. It does not require inadmissible and tortured prognostications about what some hypothetical other joint venture partner would or might have done over a particular period. 8. Mr Dyson's report, to the extent that he purports to answer question 1, should be rejected. The objection to Mr Dyson's report dealing with question 2 is considered later in these reasons. DAMAGES 1. The plaintiffs' claim is now one for damages calculated as the loss resulting from the lost commercial opportunity to develop the land in accordance with an amended Joint Venture Agreement where the joint venture assumed liability for the NAB loan after planning approval was obtained. It falls to me to try to determine the quantum of loss the plaintiffs have sustained by reference to future hypothetical events and the probabilities and possibilities. As explained in Malec v JC Hutton Pty Ltd at 643, it is necessary to determine the degree of probability of the event occurring and then adjust the award of damages according to that calculation, unless the probability is so low (less than 1%) as to be speculative or so high (more than 99%) as to be practically certain. 2. The plaintiffs' claimed loss falls under two categories. 1. First, there are expenses the plaintiffs incurred that were largely paid out of their share of the proceeds of sale of the land to Stocklands on 26 March 2015. The plaintiffs would not have incurred these expenses under an amended joint venture agreement with Schofields where the joint venture assumed liability for the NAB loan after planning approval was obtained; 2. Secondly, the plaintiffs lost their share of the development profit under an amended joint venture agreement, where the joint venture assumed liability for the NAB loan after planning approval was obtained. 1. The first is certain in amount and requires no adjustment. The second requires assessment according to the degree of probability or possibility. Expenses 1. The plaintiffs' share of the proceeds of the sale of the land to RMS and Stocklands do not appear to be controversial. This was largely regulated by a Deed of Acknowledgment between the plaintiffs, Stocklands and Winton dated 6 December 2014. However, the plaintiffs' claim for expenses is not entirely conceded by HWLE. 2. The monies received by the plaintiffs following the sale of the land are as follows: 1. Share of sale proceeds from RMS (after costs): $5,474,469 2. Share of sale proceeds from Stocklands (less adjustments and costs): $56,932,976 3. Reimbursement of share of planning debt: $651,782 TOTAL: $63,059,227 1. From the monies received by the plaintiffs, they paid out expenses in the sum of $33,648,042, incurred as the direct result of HWLE's breaches of duty, itemised as follows: Description of expense Amount Interest payment on the NAB loan (initially paid by Schofields) that was reimbursed by the plaintiffs to Schofields $127,437 Extension and rollover fees paid to NAB after 16 April 2014 ($300,000 on 28 October 2014 and $235,000 on 2 February 2015) $535,000 Penalty interest on the NAB loan after 16 April 2014 $1,147,397 The plaintiffs' share of consultant fees initially paid by Schofields that was reimbursed by the plaintiffs to Schofields $152,633 Repayment of 100% of the NAB loan (paid in two tranches of $9,227,151.50 and $13,713,418.98) $22,940,570* Fees paid to Winton by the plaintiffs in connection with sale to Stocklands $5,747,718 Schofields' costs and disbursements $2,384,205 Mills Oakley's costs and disbursements $456,608 HWLE's costs and disbursements $156,474 Total $33,648,042 1. The expense item relating to the repayment of 100% of the NAB loan is marked with an asterisk to indicate that in the calculation of the expenses as damages, a credit of 50% of the NAB loan should be allowed. 2. Thus, the plaintiffs' claim the tabled expenses less 50% of the NAB loan amount as damages amounting to $22,177,757 together with interest from 26 March 2015. The plaintiffs emphasise that these expenses are recoverable even if the joint venture were destined to fail at the time that the land was sold, as HWLE maintains, but which the plaintiffs dispute. 3. HWLE disputes the plaintiffs' entitlement to the Winton payment as well as the claim for penalty interest, Schofields' costs and disbursements, Mills Oakley's costs and disbursements and HWLE's costs and disbursements. The Winton payment 1. HWLE submitted that the Winton payment was not a compensable loss and should be excluded from any calculation of the plaintiffs' loss. 2. The so-called Winton payment was an extraordinary fee of $5,747,717 that Dairycorp paid to a land development company called Winton. 3. The circumstances in which Dairycorp became liable to pay the fee to Winton are explained in the judgment of Hammerschlag J in Winton Partners Funds Management Pty Ltd v Lindsay-Owen [2016] NSWSC 640: "[6] At some point during 2014, DairyCorp and Schofields fell out. There was litigation between them in this Court. DairyCorp was, by all accounts, under financial pressure, particularly with respect to repaying NAB. [7] Winton is a privately owned company which specialises in residential property development. [8] On 30 September 2014, Mr Lindsay-Owen was introduced to Winton's Chief Executive officer, Mr Chris Meehan (by a Mr Iain Murray, a business acquaintance of Meehan), as a person who might be able to assist DairyCorp. Mr Lindsay-Owen maintained that Villawood was trying to back him into a corner so that he would default on the NAB loan, and they could then 'steal the property' from him. [9] Endeavouring to assist DairyCorp, Winton made contact with NAB. Winton reported back to DairyCorp that it was unlikely that NAB would agree to an extension for repayment. [10] On 6 October 2014, Schofields gave DairyCorp notice under the Joint Venture Agreement requiring the land to be sold. [11] Subsequently, various proposals were made by Winton with a view to resolving DairyCorp's difficulties with NAB and Schofields. By 27 November 2014 however, no solution had been achieved. Winton then proposed that it could be of assistance, given the acrimony between DairyCorp and Schofields, by being involved in the sale which was anticipated to result from Schofield's notice. [12] Winton and DairyCorp then started to discuss the terms of what ultimately became the Mandate." 1. Accordingly, on 6 December 2014, a Deed of Acknowledgment was executed by Villawood and the plaintiffs. It was described by HWLE in written submissions, and would appear on any view to have been, an "extraordinary document". In particular: 1. although a stranger to the joint venture and the land, Winton became a further party to the deed in its own capacity; 2. Dairycorp and Mr Lindsay-Owen personally promised that neither would attend any meeting with, or communicate with, Villawood or anyone engaged by Villawood in relation to the joint venture or the land - clause 3(c); 3. instead all such attendances and communications would be conducted by Winton - clause 3(c); 4. even though the plaintiffs had the majority interest in the land, the management of the sale process was undertaken by Villawood - clause 5; 5. safeguarding the plaintiffs' interests (including the exercise of discretions) was left in the hands of Winton, not the plaintiffs - clause 5; 6. Villawood agreed to consult with Winton about the sale, not the plaintiffs - clause 5(d); 7. Winton, Dairycorp and Mr Lindsay-Owen personally agreed not to approach or communicate with any potential purchaser or agent - clause 5(d); and 8. the plaintiffs were required to give Winton a power of attorney in order for Winton to perform its role in the sale process. 1. Winton agreed to take on this unusual mandate in exchange for payment of the Winton fee. Hammerschlag J described the commercial purpose of the Mandate: "[50] The commercial purpose and object of the Mandate was to enable Winton to act as DairyCorp's agent and to monitor the sale process, and to use its best endeavours to ensure appropriate rigour was used in trying to get DairyCorp the best outcome. For this it was to be paid a proportion of the net proceeds after DairyCorp had taken the first $12 million. There is no suggestion that Winton did not perform." 1. HWLE submitted that the plaintiffs and Villawood had a common interest in the sale of the land, under which both would benefit from the price at which it was sold. However, Winton was not a selling agent. Its role was directed solely to the management of the plaintiffs' dysfunctional relationship with Villawood. The only reason that it was necessary for Winton to perform the role contemplated by the Deed of Acknowledgment was due to the complete breakdown of the relationship between Mr Lindsay-Owen and Dairycorp on the one hand, and Villawood on the other. 2. It is common ground that by 6 December 2014, when the Deed of Acknowledgment was executed, relations had got to a point where it was thought that from Schofields' perspective at least, the sale process would proceed better from their perspective if Mr Lindsay-Owen was not involved: "HIS HONOUR: Before you get to that, it may be irrelevant, what was the purpose of excluding Mr Lindsay-Owen and Dairycorp from the involvement in the sale? ALEXIS: I think it's fair to say that by this stage, relations had got to a point where it was thought that from SPD's perspective at least, that the sale process would proceed better from their perspective, if Mr Lindsay-Owen was not involved." 1. HWLE submitted in these circumstances that a fee paid by the plaintiffs was too remote from any breach of duty by HWLE. At the time of the breach in March 2010, it was not reasonably foreseeable that a commercial party with whom the plaintiffs contracted would not be willing to deal directly with them or meet with them or even speak to them, even though the matters about which such interaction was necessary were matters of common interest. Only Villawood required the interposition of a third party. 2. Nor can such a fee be said to have been fairly and reasonably arising naturally in the ordinary course of things or such as may reasonably be supposed to have been in the contemplation of both HWLE and the plaintiffs when they entered into their retainer in 2005. In terms of the claim under the statutory prohibition on misleading or deceptive conduct, the requirement that loss be caused "by" contravening conduct has wrapped up in it the common law concept of remoteness. 3. Alternatively, it cannot be said that the Winton fee was caused by HWLE's breach of duty. It was caused by the acrimony between the plaintiffs and Villawood which had developed over the years and which pre-dated the 2014 dispute about clause 11(b) of the Joint Venture Agreement. 4. Mr Eversgerd included the Winton fee to reduce the amount of the actual profit which the plaintiffs made from the joint venture with Villawood between 2010 and 2015. According to HWLE, that profit is therefore understated by $5,747,717. 5. The plaintiffs' response was to say that HWLE's submissions appear to accept that Winton was necessarily involved in the sale process (it was the third party named in the Deed of Acknowledgment) and that the fee was incurred and paid by the plaintiffs as a cost of the sale. The "Terms of Advisory Mandate" between the plaintiffs and Winton expressly refer to the Power of Attorney (in turn, referred to in clause 7 of the Deed) and Winton's role as attorney and agent for the plaintiffs "in relation to the exercise of Schofields' right of sale" of the land under the Deed and "that Schofields' sale process is appropriately conceived, transparent and executed in such a way as to maximise the sale price achieved." The scope of Winton's role in the sale process and its remuneration are then set out. 6. The plaintiffs maintain that the Winton fee was incurred "as a direct result of the breach", presumably in the sense that the sale itself was triggered by the reliance on clause 11(b) that led to the sale. The plaintiffs submitted that HWLE's submissions do not suggest otherwise except to the extent that it is contended that the fee was too remote or could not reasonably have been in contemplation. However, if it is accepted that the engagement of Winton was a direct cost of the forced sale of a very valuable parcel of land where the joint venture parties were at odds over the sale process, the engagement and thus the fee are not too remote and ought to be seen as a natural consequence of the breach. 7. In any event, the plaintiffs maintained that even if the Winton payment is too remote in tort, it was nonetheless incurred "by" the misleading or deceptive conduct of HWLE and is recoverable as damages under section 82 of the Trade Practices Act 1974. 8. In my opinion, this issue can be easily resolved by reference to the reasons why Winton became involved at all. As indicated earlier, Winton was not a selling agent that became entitled to a fee following the introduction of a purchaser in the normal course. Winton became involved as the direct result of Mr Lindsay-Owen's concern that he needed the assistance of a third party to protect his interests in the sale of his land in order to ensure that he received the best return. Winton was not engaged in order to effect a sale but to monitor the process. On one view, Winton was engaged as the result of Mr Lindsay-Owen's idiosyncratic concerns about his joint venture partner and the integrity of the sale process. 9. However, clause 15 of the Joint Venture Agreement dealt with Events of Default. As is well known, the sale of the property was the result of an event of default following Schofields' reliance on of clause 11(b). Clause 15.9 is in these terms: 15.9 Powers of attorney If a Joint Venture Party becomes a Defaulting JVP, that Joint Venture Party irrevocably grants a power of attorney to: (a) the Non-Defaulting JVP; and (b) each director and secretary from time to time of a Non-Defaulting JVP, To do anything which that Joint Venture Party fails to do within a reasonable time under this clause 15. The Defaulting JVP ratifies and confirms all actions taken by the Non-Defaulting JVP in accordance with this clause. 1. Clause 15.6, dealing with failures to remedy default, provided for the sale of the property on the open market on the most appropriate terms available, having regard to the market conditions at the time (clause 15.6(d)(ii) and (iii)). 2. I have some difficulty in these circumstances with the proposition that the plaintiffs can maintain an argument that the Winton fee was either reasonably foreseeable or in the contemplation of the parties if the irrevocable appointment of the non-defaulting party as the attorney of the defaulting party would, absent some suggestion of a fraud on the power or other disentitling circumstance, have foreclosed the plaintiffs' ability to intervene in the sale in any event. Precisely what it is that Winton was able to do for its fee is difficult to discern. Whether or not the plaintiffs received some practical benefit from Winton's role or activities is beside the point. I do not consider that HWLE is liable for the fee: it is too remote. 3. Nor was the Winton fee incurred "by" HWLE's misleading or deceptive conduct: any disposal of the property upon default would have been similarly subject to the irrevocable grant of the power in clause 15.9, about the existence of which the plaintiffs were always aware. Moreover, "the mere possibility that a misrepresentation might have induced a course of action by the representee can never of itself attach liability under s 82 to the making of it": per Kenny J in Carey v Freehills (2013) 303 ALR 445; [2013] FCA 954 at [412], citing Lockhart, Gummow and French JJ in Ricochet Pty Ltd v Equity Trustees Executors and Agency Co Ltd (1993) 41 FCR 229 at 235. The appointment of Winton occurred in circumstances that were associated with, or followed upon, HWLE's impugned conduct but the appointment was in no sense caused by that conduct. Other expenses 1. With respect to the balance of the expenses claimed, the significant area of dispute appears to be whether the plaintiffs have actually established by evidence what the quantum of the expenses is said to be. For example, HWLE maintains that the document relied upon by the plaintiffs to establish the penalty interest claimed on the NAB loan after 16 April 2014 contains no entry relating to the suggested sum of $1,147,397 and so does not prove the claim for that amount. Similarly, the document provided in support of the claim for consultant's fees does not establish that those fees were incurred by reason of any negligence by HWLE. Similar arguments are raised concerning various claims for costs and disbursements. 2. I am not satisfied that these are matters that cannot and should not conveniently be referred out to an appropriate expert accountant or some other appropriately qualified person for consideration and assessment if the parties are not otherwise able to agree upon them among themselves. I shall invite the parties to respond to this proposal if it becomes necessary to do so in the absence of agreement about these expenses. Lost development profits 1. The plaintiffs claim that they would have earned substantial profits from the joint venture's development, subdivision, marketing and sale of the land for residential purposes and other ancillary uses as lots and super lots. These were the "Project Objectives" referred to in clause 8 of the Joint Venture Agreement. The whole purpose of the joint venture was to maximise profit from the project in an efficient and timely manner. 2. The parties' respective submissions on the losses claimed by the plaintiffs for these lost development profits are detailed and complicated, as is the expert evidence marshalled for and against the proposition that the plaintiffs lost substantial sums by reason of having been denied the opportunity to exploit the land in accordance with the terms of the Joint Venture Agreement. Two preliminary things should be noted about the claim. 3. First, it is known that Stocklands, which company purchased the land for $103M plus GST, went on thereafter to subdivide and sell some of it over a number of years. In the strict forensic sense, little is known of the details of that company's activities in doing so. In particular, in circumstances that draw no criticism from me, having regard to the commercial sensitivities involved, there is no case mounted by the plaintiffs in this Court suggesting that their losses should be assessed by specific and particular reference to the cashflows generated by Stocklands in carrying out the development that the plaintiffs and Schofields had hoped to complete together. 4. However, secondly and in a related sense, in the absence of any benchmark by reference to which the claimed losses can be gauged, the plaintiffs have necessarily resorted to the postulation of a series of hypotheticals. In essence, these hypotheticals pose the extraordinarily difficult question of what would have happened if the Joint Venture Agreement had been permitted to take its own course. In order to support this approach, the plaintiffs have relied upon Mr Dyson who has posited three possibilities, which he has described as scenarios. It must be accepted that these are not the only possibilities that might be postulated and that there is an infinite number of others that could be considered. 5. The parties have indicated that I ought to approach the calculation of these damages by making the findings that determine each of the integers across the applicable calculations so that they can then attend to the determination of the appropriate arithmetical result with the assistance of their respective accounting experts. In this respect, HWLE have suggested that there are a series of issues to which I could direct attention in aid of that approach. Having regard to these matters, and in accordance with the parties' invitation, I offer the following responses to the issues for decision posed by HWLE in its outline of closing submissions. Is Mr Dyson's evidence admissible as to: (a) the specification of his three hypothetical scenarios? (b) the gross realisation from each scenario? (c) the development costs for each scenario? (d) nothing? 1. Mr Dyson's three scenarios are described as follows in his 27 May 2020 report: "Scenario 1 – Base Case Model 49. Development Approval (DA 12-1948) was granted for the subdivision of part of the subject property (Tranche 1) in December 2013 and a submission was prepared by the JV parties and submitted to NAB at the time, which outlined a proposal for proceeding to develop the subject property. DA 12-1948 provides a base as to the potential development of this part of the subject property in 2014, with most of this part being zoned R2 Low Density Residential and a small component zoned RE1 Public Recreation for parks. The remainder of the subject property (Tranche 2) was included in the submission to NAB and was suitable for varying densities of development which ideally would be sold as development 'super-lots'. Lot B (on the northern side of Schofields Road) was not included in either Tranche 1 or 2 and therefore subject to separate development. As Development Approval was granted for subdivision of a large part of the subject property, (Tranche 1) it is my considered opinion, based on the advice that I have provided that bears on the timing of stages of development and from my observations over many years of the progress of similar developments, that on this scenario the development of the subject property would commence quickly with sale of the lots commencing within 12 months of the commencement of development. This scenario has been assessed on the basis of the subdivision, timing as outlined in the NAB application, with Lot B being developed in accordance with the lands surrounding it on the northern side of Schofields Road. 50. I consider this scenario was the most likely in 2014 however no flexibility is contemplated as it is based on the market at the beginning of the development period (2014) only. Scenario 2 – Optimum Development Model 51. I have considered the Mecone Report. This report describes the maximum potential that the subject property could be developed to. It provides for higher density development within Tranche 1 than DA 12-1948 as well as high rise development within Tranche 2, including the increases in density and development envisaged as a result of the recently proposed Metro Station at Schofields (near the existing Blacktown to Richmond Railway line) as a result of a proposal to extend the existing Metro Line from Tallawong Station to Marsden Park. The report also envisages high density development on Lot B. As the land was not developed in 2014, this scenario is assessed on the basis that the subject property is developed to its maximum potential in accordance with the Mecone Report. 52. Part of the Mecone Report has been adopted as the basis of assessing the development of the later stages of Tranche 1 (Stages 3, 4 and residue) and for Tranche 2, as Option 2 Optimum Development Model with an extended development period, due to the delay as a result of achieving the higher density provided in the report. The earlier Stages (Stages 1, 2 and 5) and Lot B have been modelled on the Stockland development which occurred in 2015 – 2016 as this is considered to represent a combination of the highest potential realisation in the shortest time frame as any major changes as envisaged would take considerable time to be prepared and approved by Council. 53. I consider this scenario to be the least likely as it is based on hindsight as to market conditions and delays the development of Tranche 2 into the present time or future to achieve higher densities that may not be able to be achieved and may be out of line with current market conditions, as it assumes that Tranche 2 is still vacant at the end of 2019. Scenario 3 – Scenario 1 with Increased Development in line with market changes 54. It is noted that the subject property was sold to Stockland Corporation in early 2015 who have since developed the subject property in stages with some areas sold as single dwelling lots and others as townhouse style (attached) dwellings to increase density above that as approved in Development Approval (DA 12-1948). For the purposes of this Scenario 3, Tranche 1 has been assessed on the basis that Stages 1, 2 and 5 are developed in accordance with DA 12-1948, as this provides earlier Cash Flow to reduce interest costs. The balance of Tranche 1, being Stages 3, 4 and the residue are developed at a slightly higher density as the market for land changed with acceptance of smaller lots. This allows for higher realisation of the subject property in line with market changes. Tranche 2 has been assessed on the basis that it was developed as 'super-lots' with these sold from the end of 2016. Lot B has been assessed on the basis it was developed at the same time and in the same density as the surrounding lands. 55. I consider this scenario to be the most likely as it is based on the market at the beginning of the development period (2014) and then the development scenarios of future stages changes in line with market supply and demand." 1. HWLE contends that Mr Dyson's evidence on cashflows, which they concede is the cornerstone of the plaintiffs' case, ought also to be rejected. Mr Dyson expressly says that he has no expertise in relation to costs and that it is a matter for a quantity surveyor. This is perhaps a statement of the obvious. HWLE submits that it follows that there is simply no basis on which he can express any opinion on costs. 2. According to HWLE, Mr Dyson's report completely fails to expose the reasoning that he has used in his Estate Master financial model on which he has relied in order to develop the cashflows for each of the three hypothetical scenarios he has propounded. 3. HWLE submitted that it would be one thing if there was a simple gap in the arithmetic that could be easily explained. However, the gaps are fundamental. There is no basis for Mr Dyson's assertions as to the scenarios that would have been pursued, the terms on which they would have been pursued, the timeframe over which they would have been pursued, the timing of the commencement of construction, the timing of the completion of construction, the likelihood of those scenarios and the costs that might have been incurred. 4. Moreover, even the basis for Mr Dyson's conclusions on matters within his expertise are unexplained. For example, the valuation of lots for Stage 1 of Tranche 1A and the basis on which a value can be derived by reference to comparable sales or otherwise in each of the postulated scenarios; the valuation of lots in subsequent stages including the basis for the incremental increases by reference to comparable sales or otherwise (in circumstances where, again, not all comparable sales have been provided to the defendants) in each of the postulated scenarios; the suggested gross realisation for Tranche 2 which is based on a realisation per square metre, and the matters justifying the massive increase in the figure from Mr Dyson's first report to his report in reply. 5. While Mr Dyson said that he "looked at" the question of value (presumably by reference to the schedule of sales not exposed in his evidence and not provided to HWLE), the change is unexplained. In cross-examination, for the first time, Mr Dyson referred to an unexplained concept of "efficiency". The amended figures per square metre mean that the revenue figure is unchanged. For example, the increase in the value per square metre for Tranche 2 in scenario 1 from $900 to $1,171 meant that the gross revenue remained exactly the same at $158,670,000. That is, the price per square metre has simply been manipulated (without explanation) so as not to disturb Mr Dyson's figures. HWLE contends that this evidence is incapable of being accepted, especially as it was not revealed until the cross examination and objection was taken to Mr Dempsey expressing his view on the new evidence. 6. Finally, it is highly significant that it is not the case that the problems set out above were identified for the first time in objections to evidence served shortly before the hearing. Mr Dempsey raised in his report dated 13 May 2021 that as a valuer he had no expertise to opine on costs or the likely scenarios. He also stated in his report that Mr Dyson had not exposed the reasoning behind his conclusions or provided the comparable sales to which Mr Dyson had had regard. 7. In some respects, Mr Dyson attempted to address these gaps in his oral evidence. For example, in answer to the proposition that no comparable sales had been provided to support his suggested values of the lots in the hypothetical scenarios, Mr Dyson in his reply report provided a sample of such sales. As noted in the detailed objections, the position remains problematic because it is clear that there are a range of other sales to which Mr Dyson has apparently had regard and, even now, HWLE complains that it does not know what those comparable sales are (let alone the process of reasoning which Mr Dyson has used in order to arrive at the valuations per lot or per square metre which are the subject of bald assertions in his report). 8. According to HWLE, this is a clear case of a failure to comply with the requirements of Makita v Sprowles (2001) 52 NSWLR 705; [2001] NSWCA 305 at [85], and the many cases that have applied the Makita principles, and s 79 of the Evidence Act 1995. HWLE submitted that Mr Dyson's report should be rejected in its entirety and this issue ought to be determined on the basis that his evidence is not admissible as to anything. 9. HWLE submitted that there is nothing in the "joint report" which cures these deficiencies. 10. HWLE has emphasised that the plaintiffs have set out to prove a quantum of loss which they claim is an extremely large amount of money. They seek an order that HWLE pay that large amount to them as damages. HWLE submitted that to permit a massive quantum of damages, or indeed any damages, to be determined based on the evidence of Mr Dyson will be a gross injustice to HWLE and that the consequence of the deficiencies in the evidence of Mr Dyson must fall on the plaintiffs, not HWLE. 11. Mr Dyson's second question was what cashflows would the joint venture have been likely to receive from the development, and over what period. In my opinion, Mr Dyson is qualified to express opinions on possible gross realisations and development costs associated with developing the land in accordance with the amended Joint Venture Agreement. In forming that view I have taken account of the following submissions proffered by the plaintiffs in reply. 12. First, the submission that there is no field of expertise in modelling scenarios for development purposes is not correct and is inconsistent with the evidence in this case. The question for the Court is whether the plaintiffs have established that there is a field of expertise and experience involving modelling of the commerciality and valuation of land developments and their expected or predicted cashflows. The evidence in this case shows the answer is in the affirmative. The actual cashflows submitted to the NAB by the joint venturers further support that proposition. The plaintiffs submitted that I would comfortably conclude that there is a field of expertise for advisers and land economists who model future cashflows for the purposes of advising developers (and others) based on various inputs (including facts and assumptions). The submission that Mr Dyson himself is not a developer is unimportant, as it is patently clear that developers approach him to do their work. 13. Secondly, the modelling of Mr Dyson's scenarios is clearly based wholly and substantially on his experience, which has been summarised and detailed in his report. That kind of modelling is a central part of his role in advising developers. Based on that experience, he has used various inputs, including the DA and the joint venture parties' stated plans, the applicable planning rules, architectural plans and historical sales data to model three development scenarios. The facts and assumptions underlying the models have been clearly exposed. 14. Thirdly, HWLE's submissions about "fundamental gaps" in Mr Dyson's reasoning are wrong, but, in any event, do not go to admissibility. The scenarios are based on the joint venturers' intentions. The reasoning is set out clearly and in detail throughout Mr Dyson's reports. The terms are as they existed between the joint venturers. The timeframe is based on the reality and, insofar as it goes beyond mid-2014, is based on the facts as they have been presented (as to zoning and sales data), and Mr Dyson's experience in modelling similar developments with set time frames. Notably, the Jones Lang La Salle valuation that Schofields sought in June 2014 took a similar approach. 15. The evidence that fell from Mr Dyson in cross-examination provided further support to the submission that his evidence is both admissible and persuasive. HWLE's submission that there is no basis to find scenarios 1 or 3 were more likely to have occurred than any number of countless alternative scenarios and that neither has any probative value singularly fails to have regard to the development consent that was obtained and the content of the subsequent finance application to the NAB in December 2013. The application clearly and cogently shows what the plaintiffs and Schofields intended to do at the time. 16. The plaintiffs submitted that the quantum of the loss is a function of the significance of Mr Downing's conduct and its catastrophic effect on the plaintiffs. He knew that this was a large project with over $100M profit for each of the joint venturers. Mr Dyson's evidence models the project in a detailed and concise way based on his experience in doing that type of work for large and small developers. The attacks on the quantum of damages claimed are almost all highly technical in nature, but miss the fundamental point, namely, that those damages are well within the range of the parties' (and Mr Downing's) expectation of the future value of the project to the joint venturers. 17. In my opinion, Mr Dyson's opinions about various scenarios are relevant and admissible. As I have attempted to indicate, I consider that the joint venture partners would have proceeded to develop the land in accordance with the amended Joint Venture Agreement in some fashion or another. It must be accepted that the precise details of how that would or might have occurred are not known and can never be known. That is not to say, however, that an expert such as Mr Dyson cannot offer an admissible opinion about a series of reasonably available possibilities in order to demonstrate the potential scope of losses that were occasioned by HWLE's breaches. Predictions about the future are not illegitimately speculative or hypothetical if they are based on a relevant degree of education, training and experience. Mr Dyson's opinions offered in answer to question 2 are of this kind. Is there any basis on which the Court can find that the joint venture parties would have pursued one of Mr Dyson's hypothetical scenarios to completion (if so, which one), or alternatively some other hypothetical scenario (if so, what other scenario)? 1. In my opinion, the joint venture parties would have proceeded to develop the land. I do not accept that the relationship between the plaintiffs and Schofields had irretrievably broken down in the way contended for by HWLE. There were certainly tensions in existence in the period leading up to April 2014 but there is insufficient evidence for me to conclude that these difficulties would alone have precipitated a collapse of the joint venture. 2. The question is whether there is any basis on which I can find that the joint venture parties would have pursued one of Mr Dyson's hypothetical scenarios or some other hypothetical scenario. HWLE submitted that there was no basis to find that any of Mr Dyson's three hypothetical scenarios was more likely to have occurred than any of the countless alternatives and that none has any probative value. They submitted in detail as follows. 3. A large scale development of land on the edge of Sydney is a highly complex undertaking, yet Mr Dyson's scenarios are described at the highest level of generality only. Although opaque, the only matters that distinguish the three scenarios are the number of lots for each stage of a multi-stage development and the time at which a 12-month construction period would have started for each stage. 4. Mr Dyson has expressed the (inadmissible) view that, hypothetically, his scenario 2 is the least likely to have occurred. HWLE does not dispute that. However, scenario 2 is a set of assumptions made by Mr Dyson built upon another set of assumptions by an expert planner (Ms Sedgmen), which in turn rests upon another set of alternative assumptions by an expert architect (Mr Pearse). HWLE submitted that this is speculation upon speculation and will not assist me to determine the quantum of the value of the lost chance. HWLE perceives that the only purpose of scenario 2 in the scheme of the plaintiffs' evidence is to portray scenario 3 as the reasonable mid-point. 5. Mr Dyson has expressed the view that his scenario 3 is the "most likely", by which he means more likely than scenario 1 and scenario 2. Mr Dyson is a valuer and not a land developer. HWLE again submitted that Mr Dyson is not qualified to express an opinion about the options to develop the land in 2014, which would have depended upon many matters, including commercial considerations, finance, costs and planning issues. However, I have already indicated that the scenarios should be considered in the context of an amended joint venture with Schofields, not some other hypothetical partner, so that Mr Dyson is suitably qualified. I have also already indicated that the question of which scenario is more likely than any other is not one upon which Mr Dyson can express an admissible opinion. I indicated as much in the course of the hearing: "HIS HONOUR: He makes an assumption about what is likely and values it accordingly, whether that assumption proves to be correct remains to be seen. His view about the likelihood of it coming to pass is irrelevant, isn't it? ALEXIS: It remains to be seen in the sense that it's a matter for your Honour." 1. This appears to be common ground: "HIS HONOUR: Because both valuers must be valuing on a hypothetical basis. ALEXIS: And of course they are. HIS HONOUR: Right. But to say, "My hypothetical opinion is more probable or more likely than other", that's not available to an expert, is it? ALEXIS: Your Honour won't be hearing a submission from me that says your Honour should accept scenario 3 because Mr Dyson says so." 1. In any event, HWLE submitted that Mr Dyson's view that one of his scenarios is more likely than another is meaningless when there are any number of others not taken into account by him at all. All three of Mr Dyson's scenarios assume that the development would have been fully completed years ago and the last block sold in an orderly way. 2. Mr Dyson accepted in cross-examination that there are any number of developments that could have been undertaken: "FAULKNER: You accept, don't you, that there could've been any number of different developments undertaken at that site? WITNESS DYSON: Yes. FAULKNER: Is this right: that in all of the three scenarios that you have identified you have assumed that the development would have proceeded to completion? WITNESS DYSON: Yes." 1. Mr Dyson has assumed for each of his three scenarios that the development has been completed to the sale of the last lot. They do not take into account the possibility that the development might have started but not been completed. Mr Dyson accepted that whether any particular development goes ahead depends on a range of matters that have nothing to do with the expertise of valuation including the incentives and actions of the owners of the property. HWLE persisted with the submission that Mr Dyson's attempts to suggest he had any expertise on this subject based on small scale development he has undertaken does not improve his evidence. 2. HWLE submitted that the attempt to fill this evidentiary gap by inviting Mr Dempsey to embrace Mr Dyson's scenarios failed. The suggestion by the plaintiffs that Mr Dempsey's evidence provides support for the plaintiffs' position, and sets some sort of minimum benchmark, should be rejected. Mr Dempsey made it very clear that he did not regard the scenarios as reasonable, and he was simply responding to Mr Dyson's postulated scenarios: "ALEXIS: May we take it that you thought that each of the scenarios that Mr Dyson proposed in his report were reasonable? WITNESS DEMPSEY: No. ALEXIS: You didn't? WITNESS DEMPSEY: No. ALEXIS: If that is so could you tell us, please, why in your report, or indeed in the joint report we see not a word about you forming the view that those scenarios were unreasonable? WITNESS DEMPSEY: No, well, I think the point here is that I was asked, I was instructed to address the case that was postulated by Mr Dyson, that these are the three scenarios that he undertook, and I was asked to comment on only those three scenarios, not to form an opinion as to how this could have otherwise been put together. ALEXIS: I see. WITNESS DEMPSEY: So, so, it was only those three scenarios I was asked to look at. ALEXIS: Okay. That was because your instructions, as you saw them, constrained you from expressing a view about whether or not some other sort of scenario might be appropriate in the circumstances. Is that right? WITNESS DEMPSEY: Yes, to a degree, and also it then goes to how profits have been assessed. And so it's a unorthodox approach in my view. But, that's not something for me, it's something for the, this particular case as to how it's put to the Court. So, I was only asked to provide, within my expertise, those matters that were expressed by Mr Dyson within his expertise." 1. HWLE submitted that it was clear that Mr Dempsey at no time opined on development costs. As noted above, like Mr Dyson, he expressly says he has no expertise in relation to development costs. 2. In any event, HWLE submitted that there are a vast range other hypothetical options, which include at least the following: * scenario 4 - no joint venture was undertaken at all; * scenario 5 - a joint venture started but did not proceed to completion; * scenario 6 - a joint venture started but still to this day remains only part complete. 1. HWLE submitted that even if it be assumed that the joint venture did not come to an end prematurely, scenario 6 is objectively more likely than either of Mr Dyson's scenario 1 or scenario 3. This is because of the historic facts which have occurred since the land was sold to Stockland in 2015. In the years following the sale, Stocklands developed Tranche 1 and Lot B. However the largest part of the project, Tranche 2, remains undeveloped to this day. There is no reason to assume that a hypothetical development of the land would have proceeded more smoothly or more quickly than the historical fact. Mr Dyson referred to the fact that Stocklands was not in a joint venture, but that does not reveal a reason for it to take a different approach. Further, even if it is assumed that there was a joint venture with Villawood but in a different form, the fractured relationship between the parties is likely to have resulted in a much slower development. All of Mr Dyson's scenarios are undermined by these historic facts. 2. In dollar terms, Tranche 2 would have been the largest part of the development. For all Mr Dyson's scenarios, the majority of the gross revenue which the hypothetical joint venture would have received would have come from Tranche 2. Given the historic facts, this suggests that the most likely hypothetical development was a hybrid between Mr Dyson's scenario 1 for Tranche 1 and Lot B (i.e. development in 2014 in accordance with Villawood/Dairycorp's original plan) and HWLE's scenario 6 for Tranche 2 (i.e. no development and revenue to this day, with holding costs all the while). 3. However, HWLE emphasised that there is no evidence about what profit would have been made from this hybrid development, if any. There is no evidence about when that profit would have been (or will be) received. This is a critical matter. It is Mr Eversgerd's opinion that for any joint venture to have proceeded on terms consistent with the Joint Venture Agreement, no proceeds would have been distributed to the joint venture partners until the entire development was complete. Subject only to Mr Eversgerd "imagining" as an afterthought when his cross-examination was complete that it was possible there might be some alternative commercial arrangement between the parties for an early distribution, any distribution pursuant to the Joint Venture Agreement would happen in the future. 4. Clause 17.4 of the Joint Venture Agreement specified the sequence in which proceeds would be distributed. Unsurprisingly, taxes, debt and costs would be paid first and provision for future costs made. Only then would there have been any distribution to the joint venture partners. On scenario 6, or a hybrid between scenario 1 and scenario 6, the plaintiffs would not have received any profits to date. Even if it is assumed that profits will still be made after all interests and holding costs are paid, the plaintiffs will not receive any profit (if ever) until an unknown date in the future. 5. This position is to be compared with the profit which the plaintiffs actually received in 2015 from the joint venture itself. The plaintiffs received the certain and early profit of $29.4M. 6. What can be said, according to HWLE, is that Mr Dyson's scenario 1 (which assumes that all gross revenue from the development and sale of the Tranche 2 land would have been received and all profits distributed by 2016) significantly overstates the profit the plaintiffs would have made from any hypothetical development. The calculation of loss using scenario 1 profit as the starting point must be higher than the absolute maximum of the true value of the lost opportunity. This applies a fortiori in relation to scenario 2 and scenario 3. 7. HWLE submitted that ultimately, the fact the plaintiffs have only put forward figures based on Mr Dyson's three scenarios means that those figures must be heavily discounted when regard is had to the possibilities and probabilities. 8. Having considered these submissions and all of the evidence, I find it difficult with confidence to say which of Mr Dyson's scenarios, or any alternative, would have been pursued to completion. Mr Dyson has expressed the inadmissible opinion that his scenario 2 is the least likely to have occurred. I feel even less able to do so. I accept that I may appear to be elevating the authenticity of my opinion to a status that is not warranted if I were to express, or to purport to express, a view about which so-called scenario would have seen the joint venturers develop the land in some way. More particularly, I consider myself ill-equipped to posit "some other hypothetical scenario". 9. However, the fact remains that the plaintiffs' expectation, that the joint venture would have proceeded in some fashion to develop the land as anticipated by the Joint Venture Agreement, was disappointed by HWLE's breach cannot be denied. They undoubtedly sustained loss as a result. I consider that the best indicator of what would have occurred can be derived from the development of the land that occurred in fact. In those circumstances I consider that the most probable scenario is that which would have seen the development of Tranche 1 and Lot B proceed to completion with the remainder of the land sold off to a third party as super lots. This would appear to conform most closely to the model proposed by Mr Dyson as his scenario 1. For the purpose of determining the nominal cashflows for each of Mr Dyson's three hypothetical scenarios: (a) would a hypothetical development of home lots on Tranche 1 and Lot B have proceeded by way of pre-sales, thus requiring gross realisation to be assessed as at the date of commencement of the construction period for each stage (Mr Dempsey) rather than halfway through the construction period (Mr Dyson)? 1. HWLE submitted that even if Mr Dyson's three scenarios are accepted, the gross realisation figures which he has used in his nominal cashflow for each scenario are excessive. HWLE contends that Mr Dempsey's figures are to be preferred. 2. HWLE submitted that I should find that for each of Mr Dyson's three scenarios, the sales of the Tranche 1 and Lot B home lots would have proceeded by way of pre-sales, with the result that the gross realisation ought to be determined as at the dates used by Mr Dempsey, not Mr Dyson. An important difference between Mr Dyson and Mr Dempsey is the date at which sales of the Tranche 1 and Lot B home lots would have occurred for each of his three scenarios. 3. Mr Dyson has specified the date at which construction of each hypothetical stage would have commenced and the duration of each construction period (uniformly 12 months). Although not stated in his first report, Mr Dyson has assumed that the hypothetical joint venture would have sold the home lots progressively over each stage and he has taken six months after the construction period commenced as the date at which to estimate the gross realisation for each stage. 4. On the other hand, Mr Dempsey has assumed that the hypothetical joint venture would have sold the home lots by way of pre-sales before construction commenced for each stage, similar to selling apartments off the plan. Mr Dempsey's date of valuation is therefore uniformly six months earlier than Mr Dyson's. 5. Hindsight reveals that the market was rising throughout the relevant period, sometimes significantly. The six month delay for the estimate of proceeds from each stage means that Mr Dyson's estimates are higher than would be the case if he had also assumed the development would have proceeded by pre-sales. 6. HWLE submitted that the objective facts which pertained in 2014 onwards as established by the contemporaneous documents strongly support the conclusion that the hypothetical joint venture would have sought to pre-sell and that Mr Dyson's suggestion that this was conservatism on the part of Mr Dempsey should be rejected. In a "hot" market, the developer knows only that the current market is hot; a delay risks missing out on taking advantage of market conditions. As Mr Dempsey put it, "a developer doesn't know the future". This concern is apparent in the documents prepared by the joint venture prior to its collapse. As I observed during the proceedings, buying off the plan is a fact of life where demand exceeds supply. 7. HWLE contended that Mr Dempsey's reasons as to why a developer would proceed by pre-sales are common sense. Pre-sales reduce development risk by locking in future cashflow. They also reduce lending risk to financiers. 8. Mr Dyson accepted that pre-sales are common for apartment developments, but gives a number of theoretical reasons why the hypothetical joint venture would have delayed sales of home lots around Schofields in 2014, 2015 and 2016. HWLE submitted that none of his reasons withstands scrutiny, and that Mr Dyson has not identified any reason why the hypothetical developer would have departed from the common sense approach of making pre-sales for the Tranche 1 and Lot B home lots. 9. In my opinion, the hypothetical development of home lots on Tranche 1 and Lot B would have proceeded by way of pre-sales before construction commenced for each stage. Mr Dyson and Mr Dempsey agreed that there is no universal practice by developers when selling home lots and that a different approach may be taken depending upon the circumstances of each development. This is unsurprising. The decision whether to proceed by way of pre-sales will depend upon many considerations, including the prevailing market, perceived competition, contemporaneous assessment of the future market (but not hindsight), construction costs, cashflow, finance, requirements of the lender and other commercial considerations. 10. Both Mr Dempsey and Mr Dyson have referred to other developments of which they are aware in which sales have, or have not, proceeded by pre-sales. However, there is insufficient information about the circumstances of these other developments to assist me to determine what would have happened in 2014. 11. HWLE submitted, and I accept, that the best guide are the objective facts which surrounded the Dairycorp/Villawood development as at 2014. Villawood was an extremely experienced and successful property developer. By 2013 and 2014, Villawood had been working on the Schofields land for years and would have been intimately familiar with all relevant circumstances, including the market (both demand and competing supply), contemporaneous perception of the future market, construction costs, cashflow, finance, requirements of the joint venture's lenders and other commercial considerations. 12. More particularly, the joint venture history with the NAB would in my view have supported the likelihood that the relative certainty of pre-selling would have been more attractive and commercially expedient than some hypothetical postponement of sales in anticipation of a rising market. Such an analysis is heavily infected with hindsight and should be rejected. (b) are there other reasons why Mr Dyson or Mr Dempsey's figures ought to be preferred for Tranche 1 and Lot B? 1. HWLE submitted that I should find that for scenario 1, Mr Dyson's gross realisation figure for the Lot B home lots is overstated when regard is had to the market value of the Lot B home lots. For Lot B in scenario 1, Mr Dyson considered that the home lots in Lot B ought to be valued at $505,000 per lot (or $1,300 per m2). In his first report, Mr Dyson did not identify any comparable sales to support those figures. He has provided a schedule of comparable sales with his second report, but he does not attempt to explain how they support the figure of $1,300 per m2 and none of the sales listed in that schedule comes close to $505,000 for a 396m2 lot in November 2015. He was not able to explain his position in cross-examination. HWLE submitted that Mr Dempsey's figure of $415,800 per lot (or $1,050 per m2) is to be preferred. 2. The plaintiffs' comprehensive contentions were as follows. 3. The planning experts agree on the applicable zoning, permissible land use and minimum lot sizes, as outlined in Ms Sedgmen's report. Notably under the Growth Centres SEPP, there was no maximum density control. This was explained by Ms Sedgmen as encouraging development, rather than a control on overdevelopment. 4. There are no planning issues in relation to Tranche 1 between the planning experts. They agree that Tranche 1 has been developed with many smaller lot sizes and that the registered development is a 35% increase in the number of lots that were approved under DA 12-1948. They agree that the Housing Diversity package was implemented through the Growth Centres SEPP in August 2014 and that there was time available to redesign the approved lot layout in Tranche 1. They also agree that the actual yield for Lot B was 43 lots. 5. The plaintiffs maintained that this "strongly supports scenario 3 as a reasonable postulation of the hypothetical development for Tranche 1 and Lot B". 6. In relation to Tranche 2, the planning experts agree that the development yield will increase with the location of the proposed Metro station and interchange at Schofields. While future Floor Space Ratio (FSR) is not certain, forecasts of potential FSR's and yields can be made based on available precedent. Ultimately, however, this is determined by the evidence of the architectural experts who opine on developable lot area in terms of Gross Floor Area (GFA) and the evidence of the valuation experts who express opinion on the gross realisations of Tranche 2 based on saleable area or GFA. 7. While the expert reports of the architects and the joint report of Mr Pearce and Mr Szwaj indicate a range of available GFA on the 3 architectural scenarios, ultimately Mr Szwaj accepted in his evidence that the chance of a developer obtaining at least 130,000 m2 of GFA was "almost certain." This concession was based on Mr Pearce's scenario 1 which conservatively assumed the existing railway station and no Metro station. 8. This evidence also strongly supports scenario 3 as a reasonable postulation of the hypothetical development for Tranche 2. Importantly, Mr Dyson's gross realisations for Tranche 2 only rely on 129,442 m2 of GFA for both scenarios 1 and 3. Mr Dempsey takes a more optimistic view of the saleable area for Tranche 2 at 156,244 m2 on both scenarios 1 and 3. 9. A summary of the gross realisations on each scenario taken from the joint report of Mr Dyson and Mr Dempsey and Ex F is as follows: Gross Realisations Scenario Mr Dempsey Mr Dyson Mid-Point 1 $251,340,860 $296,832,460 $274,086,660 2 $327,721,325 $410,167,260 $368,944,292 3 $290,136,420 $349,787,860 $319,962,140 1. Mr Dempsey adopted Mr Dyson's indicative timing for the construction and the settlement of sales on each of the scenarios. The revenue differences between Mr Dempsey and Mr Dyson are distilled into separate tables for each scenario. To illustrate the position with respect to scenario 3, it can be seen: 1. The revenue from the RMS acquisition was agreed at $10,897,260; 2. The revenue from Tranche 1A (155 lots across stages 1, 2 & 5) is between $68,517,000 (Dempsey) and $75,535,000 (Dyson); 3. The revenue from Tranche 1B (144 lots across stages 3, 4 & the residue lots) is between $68,666,400 (Dempsey) and $70,200,000 (Dyson); 4. The revenue from Lot B (only 21 lots) is between $10,810,800 (Dempsey) and $10,605,000 (Dyson); and 5. The revenue from Tranche 2 is between $131,244,960 (Dempsey) and $182,550,600 (Dyson). 1. Mr Dyson has been a valuer for over 40 years. He has extensive experience in subdivisions and particular experience in valuing englobo (undeveloped) development land and undertaking development modelling. He is routinely required to consider the earning capacity of proposed development sites involving various combinations of individual lots, englobo and super lots. This generally requires the preparation of expected cashflows and involves a consideration of anticipated timing of various stages in the development project and the expected revenues, costs and profits as set out in the cashflow analysis. 2. In determining the gross realisations for the Tranche 1 land, Lot B land and the Tranche 2 land Mr Dyson: * determined the gross realisations from the sale of the land in lots over the various stages of the development by reference to actual sales analysis, including sales prices and volumes of sales as well as local knowledge of the sales and marketing of comparable land subdivisions in the Schofields area. The comparable prices were identified by reference to the zoning of the different parts of the land, in particular as applicable to Tranche 2; * relied on the Brown Smart Consulting costings, checked those costs for reasonableness against industry benchmarks as set out in the Rawlinsons Costs Guide and his own previous experience of costs of similar subdivisions. He escalated those costs at 5% based on the aforementioned industry benchmarks; * determined other costs by reference to the joint venture's documents and based on his own experience; * assessed GST as applicable in relation to the cashflows; and * entered that information into the ARGUS EstateMaster software - software that is commonly used by developers, valuers and other advisors to developers (and also used by Mr Dempsey) to calculate the cashflows. 1. The plaintiffs maintained that Mr Dyson has properly and conservatively had regard to appropriate comparable sales, and that his written and oral evidence provides a reliable base upon which the Court can make findings with respect to the gross realisations from Tranche 1, Lot B and Tranche 2. Importantly, Mr Dempsey's evidence on gross realisations provides substantial support for Mr Dyson's evidence. Mr Dempsey's oral evidence made clear that the revenues he has opined would have been received from the sale of Tranche 1, Lot B and Tranche 2 during the applicable development and sale period. On scenario 3, he accepted that he would expect gross realisations during the development and sale period totalling $290,136,420. 2. The plaintiffs therefore submitted, not without some force, that I could be satisfied that the gross realisations postulated by Mr Dempsey on each scenario would have been received by the joint venture, at the very least. In other words, apart from the revenue from the RMS acquisition that is certain, Mr Dempsey's opinion on the expected gross realisations helpfully sets a minimum benchmark. The assessment of the degree of probability or possibility of those revenues being received, only attends the difference in the revenue streams between the valuation experts. 3. The difference is explained, first by a timing difference that arises from Mr Dempsey's assumption that each stage of Tranche 1 would have been sold off the plan. The second difference is methodological and relates to comparable sales for Tranche 2. 4. Mr Dyson adopted sale dates on the basis that lots in Tranche 1 would be sold progressively and adopted an average date at the mid-point during the development period in each stage. The plaintiffs contended that as the market was strong from late 2013 and during the development period, with significant growth in prices for lots, Mr Dyson considers his approach of taking a mid-point to be conservative. 5. Mr Dempsey's opinion about pre-sales is founded on the hypothetical developer seeking to minimise risk before construction commences. He opines that a buyer would choose the lot they wish to purchase having inspected the land in its englobo condition. However, in oral evidence he accepted that the market at the time was strong and the prices for single lots during each development period for scenario 1 and scenario 3 were escalating. The plaintiffs submitted that it is difficult to conceive that a developer intent on maximising profit would sell lots off the plan and not capture the rising market by selling subdivided lots following construction. 6. Ultimately, Mr Dempsey's opinion was exposed as based on nothing more than a discussion with a developer at Box Hill and the Celestino subdivision in that location, where there were some initial sales off the plan. He did not consider any local examples to the Schofields site, for example, the Mirvac development in Alex Avenue in 2013 or early 2014 where none of the lots were sold off the plan, nor did he consider the lots in Tranche 1 that were sold by Stocklands, where none were sold off the plan. 7. Mr Dempsey also conceded that he and Mr Dyson may both be correct in the sense that there may be a range of scenarios where some sales occurred before construction to reduce risk while others occurred later to capture the rising market. The revenue differences between them on Tranche 1A, 1B and Lot B on scenario 3 is about $8.345M. Taking a mid-point would reflect a reasonable margin of error. 8. I have elsewhere expressed my view on this issue. I consider that Mr Dempsey's approach is to be preferred, for the reasons I have given. 9. As noted in relation to Tranche 2, Mr Dyson relies on 129,442 m2 of GFA for his opinion on gross realisations with scenarios 1 and 3. For the latter, Mr Dyson has opined $1,300/m2 for the R2 low density residential land, $1,500/m2 for the R3 medium density land and $1,250/m2 for the non-residential land, with an average of $1,410/m2 across 11 super lots (consistent with the number of super lots in the finance application to the NAB). 10. Mr Dempsey, however, only had regard to comparable sales with respect to R2 low density land. On that basis, he derived a land value of $1,000/m2 and then applied a "bulk" discount of 30% for sales as super lots, to arrive at $700/m2. He accepted in his oral evidence that his 30% discount was "simply an estimate". Mr Dempsey did not consider any comparable sales with respect to the medium density R3 land or the B2 Local Centre land that Tranche 2 contained and provided no sales evidence of the higher density land. As the expert planners noted in their joint report, these different zone types cannot simply have a minimum lot size applied to calculate yield, as is common within the R2 residential zone where single dwelling houses are developed. 11. Mr Dempsey's opinion is founded on there being no discernible difference in the market between R2 land and R3 land, but this has not been established. When asked by the Court if he had drawn on what Stocklands had done to inform that opinion, he initially responded in the affirmative, but was then taken to the joint report to demonstrate that he had not. His opinion was actually based on transactions that occurred at Box Hill in the Baulkham Hills Shire (not in the Blacktown City Shire), where there is no railway station, no proposed Metro station and only a bus. 12. In his report in reply, Mr Dyson comprehensively addresses the difference in market values between the R2 land, the R3 land and the B2 Local Centre zoned land. In his market commentary for scenario 1, Mr Dyson said that the market for R3 medium density and B2 Local Centre zoned land was strong as evidenced by the sales evidence of englobo land selling for up to $1,324/m2. 13. With respect to the land in Tranche 2, Mr Dempsey conceded as a reasonable proposition that he and Mr Dyson may both be correct, in the sense that some sales would be achieved at a R2 land rate and others would be achieved at a R3 land rate, to the extent of any difference. The revenue differences between them in Tranche 2 on scenario 3 is about $51.305M. Again, taking a mid-point would reflect a reasonable margin of error. At $1,205/m2 (i.e. the average of $1,000/m2 and $1,410/m2) the revenue from the sale of 130,000 m2 of GFA is $156,650,000. 14. A summary of the net development profit on each scenario taken from the joint report of Mr Dyson and Mr Dempsey and Ex F is as follows: Net development profit Scenario Mr Dempsey Mr Dyson Mid-Point 1 $124,298,811 $162,048,367 $143,173,589 2 $171,199,293 $240,009,579 $205,604,436 3 $150,651,684 $200,288,731 $175,470,208 1. The plaintiffs contended that the differences between Mr Dyson and Mr Dempsey on the net development profit are explained entirely by the differences on the gross realisations. 2. In relation to the costs of the development on each scenario, Mr Dyson relied on the "Opinion of Probable Costs" from Brown Smart Consulting for the development costs of Tranche 1 (stages 1, 2 and 5 and stages 3 and 4) and for Tranche 2, that was included in the finance application to the NAB. Further, Mr Dyson checked the costs for reasonableness by comparing those costs to industry benchmarks obtained from Rawlinsons Costs Guide and against his previous experience of costs from other similar subdivisions. As the development costs would be expended over the development period, Mr Dyson escalated the costs by 5% per annum. The escalation factor was derived from industry benchmarks (Rawlinsons) and other increases in development costs as provided by quantity surveyors over the period. 3. Despite the estimate of the development costs being prepared by the joint venture consultants and submitted to the Bank, HWLE seeks to impugn the reliability of the estimates. However, the plaintiffs submitted that there is no demonstrable reason why the consultants' estimates cannot be used to inform the net development profit of each hypothetical development model. 4. The plaintiffs anticipated that HWLE would maintain that the estimate understates the likely development costs, but insists that there is no evidence of this. Nor is there any evidence that any of the formal notations at the end of each estimate are likely to be engaged in any material way. HWLE has not led any evidence to rebut the inference clearly arising in the case that the joint venture parties were proceeding on the basis of the development costs that were estimated to the Bank. The assertion, that the estimate was unreliable or did not reasonably estimate the proposed costs of the development, was put for the first time in the cross examination of Mr Dyson. In other words, HWLE could have led evidence of that contention (from a quantity surveyor, for example) to demonstrate that the proposed costs were "hopelessly inaccurate" or some cognate submission, but have not done so. 5. In relation to the other costs, including marketing (advertising) and sales (agents commission and legal fees), Mr Dyson used a combination of those provided in the finance application to the NAB, with a check from valuation benchmarks including his previous experience of costs from other similar subdivisions and discussions with agents and lawyers in this field. He also applied GST on the sale of the land, with credits applicable from the costs of the development. 6. The gross realisations and the escalated development costs were then inserted into specialised cashflow modelling software (ARGUS EstateMaster) that is used by developers, valuers and other advisers to developers in the industry to perform the cashflow analysis. In addition, Mr Dyson properly brought to account the NAB land debt of $22,650M, when calculating the net development profit on each scenario. 7. Importantly, in preparing his own cashflow models, Mr Dempsey used the same modelling software as Mr Dyson and the same escalated development costs as Mr Dyson (both in timing and amount). The joint report records their agreement as to construction costs and other costs including contributions to Council, interest on debt, professional fees, selling costs and GST. 8. From all of this the plaintiffs submitted it follows, that if I accept the plaintiffs' primary submission that scenario 3 is the most likely development scenario (or alternatively scenario 1) then the findings with respect to the gross realisations ought to translate to the bottom line, that is, the net development profit set out in the joint report of Mr Dyson and Mr Dempsey and Ex F, accordingly. 9. On each scenario, the RMS land costs of $1,670,109 have been accounted for by Mr Eversgerd and Mr McGuiness and these need to be deducted to determine the net development profit for distribution. 10. I have already concluded that I favour Mr Dempsey's analysis of the pre-sales dispute. That, however, was a conclusion reached by me without reference to the matters to which I am about to refer. 11. At one level, prognostications of the type in which Mr Dyson and Mr Dempsey became involved ultimately distil to what I might colloquially refer to as "the next best guess". Experts with comparable experience and qualifications in an area of empirical analysis ought, as experts, arrive at the same result. The exercise with which Mr Dyson and Mr Dempsey were concerned is, however, not an empirical exercise. It is an attempt to calculate realisations from an hypothetical enterprise where the availability of a reliable, consistent and unchanging set of integers is no more than a methodological illusion. Distinguishing between or among otherwise well-reasoned analyses and unbiased opinions from comparable experts therefore becomes an exercise in subtle nuance and impression. 12. I have had the opportunity to see and hear both experts in joint session in court. Both men presented as competent and knowledgeable. It is therefore with some reservations that I indicate that I find it effectively impossible on any reasoned or principled basis to choose between their competing opinions with certainty. To that statement, however, there are two possible qualifications. 13. First, certainty is not the test that I am required to meet. My views are based on what is the more probable in a choice between two opinions. 14. Secondly, Mr Dempsey's presentation was slightly more impressive. That bald statement is to some extent an unsatisfactory differentiation between the two men upon which to express a preference. To the extent that my choice became a matter of impression, it is difficult to say more. 15. Thirdly, however, Mr Dempsey's analysis was generally more conservative, a matter from which I feel able to take some comfort. I accept the rationale, in assessing damages in cases like this, that the guiding principle must be that a plaintiff should be returned to the position, as far as possible, in which it would have been but for the breach causing loss. However, there must be some brake on the unrestrained acceptance of an opinion that diverges from another as significantly as Mr Dyson and Mr Dempsey diverge. 16. There is a hint of a suggestion in the submissions of both sides that a mid-point between the competing views may hold some attraction. The joint report represents a tempting haven for judicial indecision. But a Solomonic compromise would amount to a somewhat lame and unacceptable abrogation of my obligation to decide the issues in this case. I consider that Mr Dempsey's calculations and general approach are to be preferred. The extent to which this finding translates into the final calculation of damages may require further input from the parties, as discussed later in these reasons. (c) would a hypothetical development of super lots on Tranche 2 have proceeded by way of pre-sales, thus requiring gross realisation to be assessed as at the date of commencement of the construction for Tranche 2 (Mr Dempsey) rather than halfway through the construction period (Mr Dyson)? 1. Having regard to the view I have expressed about Tranche 2, this question is academic. However, I have no reason to suspect that the joint venture partners would have approached the issue of pre-sales or otherwise in any different manner to that which I consider would have been adopted with respect to Tranche 1 and Lot B. (d) would Lot 14 and Lot 13 have each been bisected by a road with the result that the area used by Mr Dyson for Tranche 2 is too big? 1. This question also does not arise having regard to my findings. (e) are there other reasons why Mr Dyson or Mr Dempsey's figures ought to be preferred for Tranche 2? 1. This does not arise. (f) is the result that Mr Dempsey's figures for gross realisation are to be accepted? 1. Yes. Is there any evidence before the Court to allow it to make a finding as to what the development costs would have been for any of Mr Dyson's scenarios (or otherwise)? 1. HWLE submitted that I ought to find that there is no evidence as to what development costs would have been incurred by the hypothetical development, so as to leave that aspect of the case largely a matter for speculation. 2. For a development from which proceeds of a quarter of a billion dollars were hoped to be realised, very significant development costs would have been incurred. Inaccuracies in the estimation of the development costs, even small inaccuracies, may result in very large overestimates of the profit which might have been made from a hypothetical development. 3. The plaintiffs have not adduced any credible or reliable evidence about the development costs which would have been incurred for the work on any of Mr Dyson's three hypothetical scenarios. Mr Eversgerd is not a property developer and disclaims any relevant expertise. For this half of the cashflows, Mr Eversgerd has relied entirely on Mr Dyson. 4. Mr Dyson does not have any relevant expertise. He indicated that he did not have the expertise to determine the costs of a project, which is usually provided by a quantity surveyor. Mr Dempsey is in the same position. The plaintiffs have not adduced evidence from a quantify surveyor. 5. As for the historic facts, from 2015 Stockland undertook development work on the Tranche 1 land and on Lot B, albeit in accordance with a different plan from that upon which the Villawood/Dairycorp joint venture embarked in 2010. There is no evidence of the development costs incurred by Stockland in that historic work. 6. In order to address the establishment of hundreds of millions of dollars of hypothetical development costs, the plaintiffs proceeded as follows: * by taking a draft "opinion of probable development costs" by Brown Smart Consulting which was prepared in late 2013; and * the unqualified Mr Dyson has used that opinion to calculate the costs for each stage of each Tranche for each of his three Scenarios; and * where a stage, Tranche or scenario differed from the specific development considered by Brown Smart Consulting in 2013, Mr Dyson has "adjusted" the costs "as considered appropriate". 1. Brown Smart Consulting's draft "opinion of probable costs" is not a credible starting point for calculating what development costs would have been incurred for any of Mr Dyson's scenarios, nor for any other development of the land. Specifically, the evidence does not address the identity, role or expertise of Brown Smart Consulting, although Mr Dyson thought that they were engaged not to prepare development costs but to secure finance for the development. While Mr Dyson initially expressed the view that they might be quantity surveyors, when pressed on that question he said that he had simply made an assumption that they were. Brown Smart Consulting were in fact engineers who were engaged to perform a range of functions that had nothing to do with quantity surveying. 2. The "opinion of probable costs" is a draft: there is no evidence about the status of the draft, or how it was prepared and there is no evidence that it was ever finalised or, if so, what the finalised document provided. 3. There is also no evidence of the purpose for which the opinion of probable costs was prepared: the fact that it was included in the documents sent to NAB proves nothing. The fact that only a draft was sent to NAB suggests it was not prepared for the purpose of the finance application. 4. HWLE submitted that for Tranche 1, very significant amounts of expenditure were estimated at the most rudimentary level. The draft estimate of costs was subject to 33 qualifications and assumptions including, for example, that no allowance was made for electricity infrastructure or for the requirements to comply with flood levels. 5. HWLE submitted that with the benefit of expert evidence it is clear that the developable area identified in the Opinion of Probable Costs document is wrong by a significant margin (39.81% to 51.3%): the developable area is not 17.63 hectares, but somewhere between 8.255 hectares and 10.6123 hectares as per the architects' joint report. 6. In addition, the "Opinion of Probable Costs" did not refer to or estimate the costs of Lot B. This is what Mr Dyson has relied on for Lot B, even though Lot B would have been developed at a different time on each of his scenarios. 7. Quite apart from the Brown Smart Consulting document, Mr Dyson did not allow for any development costs prior to December 2013 other than those which had accumulated in the land debt figure which was included in his spreadsheets. For example, land holding costs or the costs associated with a rezoning. HWLE described this as a significant deficiency given that the hypothetical development would have started in March 2010, not October 2013. 8. In any event, given Mr Dyson's lack of expertise, no weight can be given to any adjustment undertaken by him or any conclusions reached by him. 9. In summary, there is no credible evidence of one half of the nominal cashflows which make up the net development profit (or loss) which would have been made by a hypothetical development of the land. To show that it would have made a profit from a hypothetical development, the plaintiffs must prove that the development costs would have been lower than the gross realisation from the sale of the developed land. Even if it would have made a profit, the plaintiffs have failed to prove that it would have made a bigger profit than the $29.4M they made in fact. 10. HWLE submitted in conclusion that it is important for me to bear in mind that the plaintiffs have set out to prove a quantum of loss which they claim is an extremely large amount of money. To permit a massive quantum of damages to be determined based on the (absence of) evidence about development costs will be a gross injustice to HWLE. The consequence for the plaintiffs' case is that a very significant discount is necessary having regard to the high degree of uncertainty about development costs. 11. The plaintiffs not unnaturally took issue with this analysis. 12. HWLE's contention that I should disregard the "Opinion of Probable Costs" from Brown Smart Consulting disregards the fact that it was obtained by the plaintiffs and Schofields and relied on by them in the finance application. HWLE's assertion that the opinion from Brown Smart Consulting is neither credible nor reliable should be rejected. 13. The plaintiffs have maintained that HWLE has taken a selective approach to contemporaneous documents. In relation to the development costs issue in particular, the evidence shows that Schofields, through Mr Taber, actually instructed Jones Lang Lasalle on 30 June 2014 to rely on the same development costs for the purpose of undertaking a valuation strictly in accordance with clause 25 of the Joint Venture Agreement. The fact that Mr Taber did so demonstrates his confidence in the correctness of the costs figures, particularly having regard to the fact that the costs would be taken into account in arriving at the ultimate valuation figure. It is unlikely in these circumstances that the costs would have been underestimated and the opposite conclusion is more likely. In oral submissions in relation to the participation interest formula, HWLE emphasised the importance of the valuation taking the development costs into account. It can be seen from the Jones Lang Lasalle valuation of $51M as at 16 April 2014, that the same development costs were taken into account. Jones Lang Lasalle said: "Development costs provided by the developer have not been reviewed [although they had been peer-reviewed internally] by a Quantity Surveyor. The costs provided are from Brown Smart Consulting and are typical of this nature of development" 14. The plaintiffs contended that this comment makes it clear that the costs of a sub-division development "is not rocket science". That submission is in a sense, albeit in a different context, redolent of the reference by Rogers J in Gill v Australian Wheat Board [1980] 2 NSWLR 795 at 804 as follows: "I have not sought to do so by way of any exact calculation. I think it must necessarily be dealt with in a rough and ready way, simply as an element to be considered." [Emphasis added] 1. Ultimately, as the plaintiffs have emphasised, it is about the cost of laying roads and drains calculated by the lineal metre. The plaintiffs submitted that HWLE's contentions that seek to make it all sound very complicated are not persuasive. 2. The plaintiffs submitted that HWLE's plea for moderation belies the forensic decision they must have made not to impugn the opinion from Brown Smart Consulting by leading some evidence to show that the joint venture parties understated the development costs to the NAB in December 2013 and were therefore unreliable. 3. References by the plaintiffs in their submissions to the calculation of development costs not being rocket science or my passing reference to the possibility of approaching the matter in a rough and ready way at one level do an injustice to HWLE's understandable concern that the plaintiffs must, as any plaintiff must, establish the quantum of the loss that they claim. An important integer in that calculation are the development costs of the project. 4. At the risk of doing a disservice to HWLE's concerns, which proceed on the not unreasonable basis that the plaintiffs must prove the development costs in a scientific way, I take considerable comfort from the fact that the costs figures submitted to the NAB were prepared in the context of the actual contemporaneous performance by the joint venture parties of the Joint Venture Agreement. To that extent, the figures do not depend on estimates or hindsight or matters that suggest they are otherwise inflated or understated and so unreliable. The fact that the parties used the figures in the execution of contractual obligations provides a level of confidence in their accuracy. 5. The Jones Lang Lasalle description of the Brown Consulting costs as typical of this nature of development also lends a high degree of comfort to their acceptance. In reaching my view, I should indicate that I do not accept the plaintiffs' submission that HWLE had some kind of burden to lead evidence rebutting the plaintiffs' evidence: a decision not to do so does not reduce the thrust of HWLE's submission that the plaintiffs have not established the relevant costs, a submission I have in any event rejected. For the purpose of determining the amount of the final equity payment which would have been received or paid by the plaintiffs upon planning approval: (a) would the parties to the hypothetical JVA have agreed to: (i) the formula in clause 4.4(b) of the Facility Agreement (Eversgerd I); (ii) the formula in clause 4.4(b) modified as contended by Villawood in the counter-rectification proceedings before Ball J (McGuiness II); (iii) the formula used by Mr Eversgerd in his report of 23 December 2021 or (iv) some other formula (if so, what formula)? 1. The parties are agreed that Schofields' participating interest was 40.67% at planning approval and that any adjustment would have been calculated on that basis. It has also now been accepted that the relevant sum for use in the formula in clause 4.4(b) of the Facility Agreement was $20.5M, rather than the facility limit of $22.650M. (b) would the final equity payment have been calculated by reference to a Villawood participation interest of: (i) 40.67% (Eversgerd I and McGuiness); (ii) a mid-point between 36.48% and 33.99% (Eversgerd II); or (iii) some other participation interest (if so, what participation interest)? 1. The final equity payment would have been calculated by reference to a participation interest of 40.67%. (c) would the final equity payment have been calculated by reference to a valuation of the land of: (i) $102M (as per the Paul Dale valuation as instructed to Mr Eversgerd); (ii) $51M (as per the JLL valuation as instructed to Mr McGuiness); or (iii) some other valuation (if so, what valuation)? 1. The plaintiffs now accept that the final equity payment would have been calculated by reference to a valuation of the land of $51M. (d) would the final equity payment have been calculated by reference to a land debt of: (i) $22.65M (Eversgerd I and McGuiness); (ii) $18.8M (Eversgerd II); or (iii) some other land debt amount (if so, what amount)? 1. The final equity payment would have been calculated by reference to a land debt of $22.65M. Should the nominal cashflows be considered on a pre-tax basis (Mr Eversgerd) or a post-tax basis (Mr McGuiness)? 1. HWLE made the following submissions. 2. The authorities make clear that in the circumstances of this case, loss is to be assessed on a post-tax basis and the final award of damages (but not interest) is to be grossed up to compensate the plaintiffs for having to pay tax on the damages. In assessing loss and damage, the reality of the impact of taxation must be recognised and allowed for: Gill at 807; Sydney Local Health District v Macquarie International Health Clinic Pty Ltd (2020) 105 NSWLR 325; [2020] NSWCA 274 at [474]. 3. To comply with that requirement, the approach which is "routinely" taken in commercial cases in Australia is for the Court to determine the amount of the damages having regard to the tax which would have been paid upon the lost income, and then gross up the damages to that which is necessary to leave the plaintiff with that amount: Sydney Local Health District v Macquarie International Health Clinic Pty Ltd at [478]. This is especially so where there is a "marked" difference between the tax which would have been paid on the lost income and the tax which will be paid on the award of damages. This marked difference is likely to occur in any case where the alleged lost earnings are spread over a period of years (whereas damages are assessed and taxed in a single year): Gill at 800-1. 4. Another circumstance where it is necessary to assess loss on post-tax cashflows is where a plaintiff claims interest for losses suffered some years ago. In such a case, a "grossly unjust result" will be suffered by the defendant if the interest is calculated on pre-tax losses: Gill at 806-7. That calculation will result in the defendant having to pay interest to compensate the plaintiff for not having the use of sums which the plaintiff would never have enjoyed but instead have paid away as tax: Sydney Local Health District v Macquarie International Health Clinic Pty Ltd at [541]-[546]. 5. Atlas Tiles Ltd v Briers (1978) 144 CLR 202; [1978] HCA 37 at 236 was a wrongful dismissal case in which Stephen J in a dissent later followed in Cullen v Trappell (1980) 146 CLR 1; [1980] HCA 10 described the approach as follows: " … if the aim is to award damages which will as nearly as possible fairly compensate for economic loss measured in net, after tax, terms, the first step will be to estimate in net terms the plaintiff's loss due to his wrongful dismissal, applying the rate of tax appropriate to what would have been his taxable income, including income from other sources, but for his dismissal. This done, the damages to be awarded, after taking into account any adjustment for contingencies or discount for present payment if applicable, will be such a sum as will leave that amount of net loss in the plaintiff's hands after five per cent has borne tax at the rate of tax applicable to the plaintiff, again taking account of income from other sources." 1. HWLE submitted that Mr Eversgerd's approach is incorrect. The consequence is that all of his calculations have been prepared without regard to tax. His calculations for loss of profits are loss of pre-tax profits. Having regard to the authorities referred to above, Mr Eversgerd's approach is wrong in law. HWLE therefore submitted that I should resolve this issue by finding that any damages awarded for loss suffered by the plaintiffs is to be assessed having regard to after-tax cashflows. 2. The plaintiffs contended otherwise. 3. They maintained that HWLE's submissions that the authorities make clear that in the circumstances of this case, the loss is to be assessed on a post-tax basis and then grossed up, overlooks the fourth principle in Daniels v Anderson (1995) 37 NSWLR 438 and whether it would be "unjust" not to take identifiable and quantifiable taxation impacts into account. A proper evaluation of this will depend on the result, and this may then involve a consideration of the tax position of each plaintiff during each relevant tax year. 4. The plaintiffs submitted that the issue of how properly to treat tax will need to be considered after I have delivered my principal judgment when the parties can then undertake their calculations based on my findings. Whether the "massive windfall" postulated by HWLE will come to pass, remains to be seen. 5. In my opinion, HWLE's submissions are correct. The authorities support the proposition that damages are to be assessed by reference to a plaintiff's losses net of income tax. What was the date of the loss? 1. HWLE submitted that the parties entered into the Joint Venture Agreement on 29 March 2010 on which date the plaintiffs became contractually bound to repay the NAB debt when planning approval was obtained. The plaintiffs claim that they were never able to discharge that obligation. Indeed, that lies at the heart of their case on liability. It is not a case where there was some contingency that remained unfulfilled so that no loss was suffered until that contingency was realised. Dairycorp actually suffered a loss on 29 March 2010 when the defective document was executed. 2. The plaintiffs contended that they merely suffered a potential loss on 29 March 2010 when they entered into the defective Joint Venture Agreement. That loss did not become an actionable or actual loss until Mr Taber's letter dated 29 April 2014 that required the plaintiffs to perform clause 11(b). It was only when that demand was first made that the defect was manifest and the actual loss arose. The commencement of the construction suit thereafter on 29 May 2014 is ample evidence of this. Ball J then declared the proper construction of clause 11 of the Joint Venture Agreement on 28 August 2014. 3. I disagree with the plaintiffs' submission. They suffered loss when they were bound to an agreement that did not comply with the instructions they gave to Mr Downing who acted on their behalf. That breach was immediately actionable. The fact that the quantification of the loss that the plaintiffs sustained as a result of the breach could not immediately be quantified does not alter the date upon which the loss was sustained. Should the loss be assessed: (a) as at the date of the loss; (b) as at the date of the trial/judgment; (c) some other (if so, what)? 1. The plaintiffs emphasised that the general rule that damages for tort or breach of contract are assessed at the date of breach is not universal and must give way in the particular case to solutions best adapted to award an injured plaintiff an amount of damages that will most fairly compensate for the wrong. What is in the interests of justice is the guiding principle. 2. The plaintiffs submitted that, for the same reasons, the appropriate time or date for the assessment of damages in this case is from early 2015 when the revenues from the settlement of sales of residential lots would have commenced and the opportunity to develop the land in accordance with the amended Joint Venture Agreement was irretrievably lost by the sale to Stocklands. The date of assessment must necessarily follow the date when the defect in the Joint Venture Agreement first became manifest and actual loss that was actionable arose. 3. The plaintiffs submitted that HWLE's submissions inviting the assessment of damages as at 29 March 2010 should therefore be rejected. The plaintiffs conceded, however, that ultimately little turns on the date of assessment, whether in 2015 or at the time of trial, as I am entitled (and indeed required) to take account of all of the events that have actually occurred, as HWLE appear to accept. 4. HWLE's submissions were as follows. 5. Whilst not an invariable rule, the orthodox approach to the assessment of loss for both negligence and breach of contract is to carry out the assessment as at the date of the loss. The most clearly established exception is in personal injury and fatal accident cases where damages can be measured as at the date of trial or judgment because the assessment of damages at that time enables circumstances which would otherwise have been mere prophecies to be reviewed or relied upon as facts: see, for example, Johnson v Perez (1988) 166 CLR 351; [1986] HCA 64 at 387. 6. However, that reasoning does not apply in the present case. The Court is being presented with a past hypothetical. The Court does not know what would have happened with the joint venture now. It will not know any more in five years' time when the development of Tranche 2 may be completed. 7. Rather, the Court is forced to resort to mere prophesy as to what would have been achieved by the joint venture parties. In light of the matters discussed in response to issues of causation, including the fractured relationship between the joint venture parties, HWLE submitted that nothing would have been achieved in that counterfactual beyond the very substantial profit secured by the plaintiffs in fact. If, however, the Court concludes that something more could have been achieved by the parties (or some unidentified third party), then the date on which loss should be assessed is 29 March 2010, being the conventional approach. 8. There is no other reason to depart from the orthodox approach in the present case. For example, there is no suggestion that the plaintiffs were locked in because there was no viable market. The evidence clearly establishes the contrary. After the plaintiffs' failure to comply with a default notice under clause 15.6(d) of the Joint Venture Agreement served in October 2014, a contract for sale was executed on 6 February 2015. 9. HWLE accepted that a Court can take events into account after the date of breach in order to assess the foresight that should have been available as at 29 March 2010 to a person attempting to value an asset: see, for example, Housing Commission of New South Wales v Falconer [1981] 1 NSWLR 547 at 557; Mal Owen Consulting Pty Ltd v Ashcroft (2018) 97 NSWLR 1163; [2018] NSWCA 135 at [102]-[104] and [109]-[112]. 10. Using actual events in this way may inform a more reliable assessment of the past hypothetical loss. For example, subsequent events may allow the Court to ensure that a plaintiff has not been overcompensated. However, that is not the exercise that has been undertaken by the plaintiffs. Rather, they effectively ignore the date of breach. 11. This is despite the fact that the most important part of the property remains undeveloped and events after 29 March 2010 do not allow for certainty in quantifying the lost opportunity postulated by the plaintiffs. In any event, there are limits on the use of evidence after the date of the breach and, even if certainty were possible by reference to subsequent events, those events cannot be deployed in the manner in which the plaintiffs propose: Hughes v St Barbara Mines Ltd [No 4] [2010] WASC 160 at [907]-[910], [917], [940]-[941]. 12. The conventional approach to assessing loss at an earlier date is described by Mr McGuiness in his report dated 4 June 2021. To take account of risk, it requires the lost cashflows to be discounted back to the date of loss, and then for pre-judgment interest to be applied for that date until the present. At least until 23 December 2021, when Mr Eversgerd served a reply report, the same approach was also being adopted by the plaintiffs. Mr Eversgerd had selected a different date, but it is clear that that approach has now been abandoned. HWLE submitted that I am accordingly presented with a choice between 29 March 2010 (the date of loss) or alternatively the date of trial. 13. In making that choice, the comments of Hasluck J in Berryman v Hames Sharley (WA) Pty Ltd [2008] WASC 59 are relevant. In that case, the plaintiffs lost the opportunity to develop a property on the basis of favourable planning regime (greater building heights) because of a negligent failure by the defendants to advise them that if they did not commence within 12 months of approval, they would lose the benefit of the approval. 14. A dispute arose as to whether the damages should be assessed at the date of breach or as at the date of trial. His Honour concluded that the Court should adopt the usual approach of assessing damages as at the date of breach: "[765] In the present case, I am not persuaded that a departure from the general rule is justified. My principal finding against the defendant is that it was in breach of various duties prior to the gazettal of TPS6 on 29 April 2003 in failing to warn or inform the plaintiff about the potentially adverse consequences of such a gazettal. The case was argued at trial by both parties upon the basis that for the purposes of calculating loss, and with a view to avoiding unnecessary complexity, the date of breach in respect of such a finding could be calculated back to December 2002. It was on that basis that the plaintiff's alternative claim was presented, and challenged by the defendant, by opinions as to value referable to that benchmark. [766] It is apparent that the alternative claim contains various elements of prophecy as to future events, but these are of a kind that are familiar in cases involving the expression of expert opinions. As it happens, the experts have been in a position to take account of actual comparable sales in formulating their opinions and estimating loss. This is all part of a familiar process of estimating loss in a case where opinions as to value are required. [767] To my mind, in circumstances where a building programme was not actually embarked upon, and where the gazettal of TPS6 does not impact upon the purported values in respect of an 'as if complete' valuation of the project, because the valuers are presuming the existence of a project completed in accordance with a consent granted under TPS5, it cannot be said that there are subsequent events of the kind alluded to in Johnson v Perez and Kizbeau. There are no subsequent events which can truly be said to reflect or bear upon the loss earlier suffered. Compensation for delay in obtaining relief is ordinarily provided for by an allowance of interest. [768] Accordingly, in the present case, I am of the view, and so find, that the damages are to be assessed at the date of breach." 1. In my opinion, the plaintiffs' loss should be assessed conventionally as at the date it was incurred. Events after 29 March 2010 do not inform that assessment in a way that would make it unrealistic or artificial to ignore them or to fail to take them into account. 2. In Sydney Local Health District v Macquarie International Health Clinic Pty Ltd at [506] Bell P, as his Honour then was, said this: "[506] The general rule is that damages for torts or breach of contract are assessed as at the date of breach or when the cause of action arose: Johnson v Perez at 355–356 (Mason CJ). However, the general rule is not inflexible and as Mason CJ explained in Johnson v Perez at 355–356, 'it must give way in particular cases to solutions best adapted to giving the injured plaintiff the amount in damages which will most fairly compensate him for the wrong he has suffered.' Wilson, Toohey and Gaudron JJ were effectively of the same view (at 367). Brennan J (at 371) remarked that the general rule as to the date of assessment of damages 'is subject to the principle governing the measure of damages'. Deane J (at 380) described the 'general rule' as a 'prima facie general rule' that can 'be displaced or modified by other factors whose identity or comparative weight may vary in different categories of case and in the circumstances of the particular case'. Dawson J (at 386-387) referred to the underlying principle and its application, noting that even in contract, the rule that damages are assessed at the date of breach 'is not absolute and fairness may require a departure from the date of breach'." 1. There are no matters of fairness or particular aspects of the interests of justice to which my attention has been drawn in this case, or which otherwise appear to me to arise, that would support a departure from the usual rule. Should the nominal cashflows be discounted for non-diversifiable risks? 1. The essential question is whether a discount for non-diversifiable risk should be applied when the gross realisations or cashflows are achieved from the sale of subdivided land in a ready market. 2. Mr McGuiness gave evidence about this. It included the following exchange: "ALEXIS: If it be the case that the subject of risk is already reflected to a reasonably substantial extent already in each of the three scenarios, such as to within those three scenarios, bear on the degree of probability or possibility of each occurring, is that something that you have taken into account or you have ignored? WITNESS MCGUINESS: I think there's a confusion in your question, with respect. The matter of estimation risk goes to the expected cashflows. That is entirely different to the matter of non-diversifiable risk. ALEXIS: It might be but-- WITNESS MCGUINESS: Now, you've got three different estimates in Mr Dyson's first report, you've got three different estimates in Mr Dyson's second report, you've got three different estimates in Mr Dempsey's report. They all show quite a wide range of outcomes, I think at the lowest, $124 million worth of development profit and the highest of $240 million. To me, that looks and feels very much like variable or risky cashflows. I can't accept the proposition that they are risk free cashflows. So, they are risky cashflows, so, yes I have considered the nature of those cashflows but the variability of those estimates of cashflows says nothing about the market risk. It says nothing about the cost of capital. ALEXIS: In other words and this perhaps goes back to Mr Eversgerd's example earlier where he used different scenarios to earn, I think, $100 or $70 and he was using that by way of analogy with the three scenarios we have here. WITNESS MCGUINESS: To do with tax? ALEXIS: In approaching the question of discount and informing ultimately the rate that you've applied, you haven't adjusted that to take account of the fact that perhaps on one view, scenario 1 is less risky than for example scenario 3. WITNESS MCGUINESS: It might be you don't need to because the work that a cost of capital has to do is to account for the incremental market risk. It doesn't account diversifiable risk. What you're talking about is diversifiable risk. ALEXIS: Yes, but that all just shows that your evaluation of risk and the discount rate that you've applied has no regard to each of those three scenarios, correct? WITNESS MCGUINESS: It does have regard to the three scenarios but it's not accounted for on the cost of capital." 1. Mr Eversgerd was also asked about this. His evidence included the following: "FAULKNER: So, I don't mean to include the-- WITNESS EVERSGERD: Approach in general, whether you discount to a past date or not, yeah. FAULKNER: Yes. WITNESS EVERSGERD: Okay, so when things - okay, so when - I would say not necessarily. If things have happened in the past even if I got a report from Dyson or another expert that had - that wasn't very reliable, there is still lots of things just everybody knows, laymen know. We know that as an example, there wasn't a, another GFC. That reduces risk. We know that the economy is doing pretty well. We know that particularly the Sydney real estate market is doing very well, so even if I got a report from somebody that I thought, "They didn't do a good job", I would still know a lot about the past subsequent to, you know, 2010 because I'm sitting in - at the time, 2021. Now, sitting in 2022 and a lot of those risks can't be dealt with using, you know, the CAPM approach or some type of normal finance theory approach. FAULKNER: Yes. So, I appreciate there's a threshold question about which is the right approach and the view you hold currently is it's this second approach where we use today's date as a proxy for the date of a judgment, for example. WITNESS EVERSGERD: Mm-hmm. FAULKNER: But in relation to the other approach where you pick a date in the past and then you discount back, in your first report, you discounted back at a risk-free rate. WITNESS EVERSGERD: Mm-hmm. FAULKNER: Do you agree with that? WITNESS EVERSGERD: Yes, yes. FAULKNER: And it's the case, isn't it, that there were uncertainties from Mr Dyson's cash flows that warranted a discount for risk. Do you agree with that? WITNESS EVERSGERD: I would say that there are uncertainties. Whether they warranted discount for risk is a matter for the Court and the reason why I say that is you can apply a discount either in the discount rate or you can apply a discount in the cash flows. If the cash flows are already sufficiently discounted or conservative, then a discount and the discount rate is not necessary. FAULKNER: Can I suggest to you a third option, and that is you do both? You have a discount in the cash flows-- WITNESS EVERSGERD: Mm-hmm. FAULKNER: --and then the Court apply a further discount for other risks. Now, do you agree that's an option? WITNESS EVERSGERD: That's an option, yes. Yes." 1. HWLE criticised Mr Eversgerd's risk-free approach to the assessment of the Dairycorp's loss as unjustified and his failure to discount Mr Dyson's cashflow for non-diversifiable risk as an error. In response to a question from me, he gave this evidence: "HIS HONOUR: But your proposition is that using things that we know-- WITNESS EVERSGERD: Yes. HIS HONOUR: --in hindsight-- WITNESS EVERSGERD: Yes. HIS HONOUR: --has a tendency to damp down an assessment of what the risk might have been looking forward. WITNESS EVERSGERD: Yes." 1. HWLE criticised Mr Eversgerd's approach on this critical issue in the quantification of the lost chance as "wholly unsatisfactory". HWLE contended that his radical change of opinion otherwise undermines the value of his opinions on this issue: he now holds opinions which have only recently been formed and contradict those which he previously held, and which (unlike Mr McGuiness' approach) do not find any support in academic literature or the decided cases. HWLE submitted that I ought to prefer Mr McGuiness's evidence on this issue and find that a discount of the nominal cashflows for non-diversifiable risks is necessary. 2. HWLE also submitted that there are many cases about loss of chance where the Court has assessed damages first by applying a discount rate to nominal cashflows and then applying a second discount to take account of uncertainties associated with the realisation of the opportunity (if any) that the Court finds was lost. The authorities include cases where the lost opportunity was a past hypothetical rather than a future hypothetical. 3. In my opinion, a discount should be applied in the present case. If so, what is the appropriate discount rate? 1. I consider that a discount rate of 5% should apply. Should there be a further discount for diversifiable risks (possibilities and probabilities as per Sellars)? 1. Although the reference to a "further" discount for diversifiable risks assumes a position with which the plaintiffs disagree, I take their submissions uncontroversially to accept that a discount for the possibilities and probabilities peculiar to this subject development is appropriate. This follows from the fact that the plaintiffs do not claim compensation for loss of profits which would have been received from completion of one of Mr Dyson's scenarios but for the loss of the opportunity to pursue them, or one of them. Indeed, the plaintiffs' submission accept in terms that a Sellars discount for contingencies and vicissitudes should apply. 2. I have already concluded that I do not accept that the relationship between the joint venture parties was so dysfunctional that it was doomed or destined to fail. I am also satisfied that the NAB would have remained cooperative until then in accordance with a recognition by the bank that its security was well protected by the development of the land and the generation of the cashflow that it would have produced. All other things being equal, the prospect of the commercial exploitation of the opportunity presented by the Joint Venture Agreement would have seen, in my estimation, a continuation of the relationship at least to the conclusion of Tranche 1 and Lot B. Anything beyond that enters the realm of speculation. If so, what is the appropriate discount? 1. In the circumstances, I consider that a Sellars discount of 15% should apply. If the nominal cashflows are considered on a pre-tax basis, should pre-judgment interest include interest on that part of the loss which represents profit which would have been paid as tax? 1. I have determined that the plaintiffs' loss should be assessed on a post-tax basis. This issue does not therefore arise. If the nominal cashflows are considered on a post-tax basis, should there be a tax gross up: (a) on the damages? (b) on the pre-judgment interest? 1. HWLE accepts that the plaintiffs are entitled to a gross up for the tax they will be required to pay on the damages they receive. The plaintiffs should be given the opportunity to prove what that tax will be in general terms: see Gill at 804. However, for the purposes of calculating the gross up so as to leave the amount of the net loss in the plaintiffs' hands, prejudgment interest should be ignored as it is awarded without regard to the tax that would have been paid on any profits derived from the beneficial use of the money in the meantime: Sydney Local Health District v Macquarie International Health Clinic Pty Ltd at [541]-[546]. Conclusions 1. It will be apparent that I have not yet calculated the final sum representing the plaintiffs' damages. Having regard to the manner in which the quantum claim has been approached, I consider that, as the parties have anticipated, they should have an opportunity to consider my reasons so far and provide me with their respective contentions about how best to proceed from here. The burden of my findings on lost development profits is that Mr Dempsey's calculations on the basis of Mr Dyson's scenario 1 most closely represent the loss suffered by the plaintiffs under that head. I accept that some further clarification of that conclusion may be required. It may also be worthwhile giving some consideration to whether or not any outstanding issues upon which the parties cannot agree should be referred to an appropriate referee for determination. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 17 February 2023