Court of Appeal Supreme Court New South Wales Medium Neutral Citation: Bluth v Boyded Industries Pty Ltd [2024] NSWCA 67 Hearing dates: 12 February 2024 Date of orders: 04 April 2024 Decision date: 04 April 2024 Before: Bell CJ at [1]; Gleeson JA at [4]; Harrison JA at [5] Decision: (1) Allow the appeal. (2) Set aside orders 1 and 2 made on 11 August 2023 and, in lieu thereof, dismiss the Amended Statement of Claim with costs. (3) Dismiss the cross-appeal. (4) Order the respondent/cross-appellant to pay the appellant/cross-respondent's costs of the appeal and of the cross-appeal. Catchwords: APPEALS – from finding of fact – credibility of witness – where credibility informed assessment of competing contemporaneous documentary, affidavit, and oral evidence at trial – where credibility fell to be assessed having regard to evidentiary inconsistences in an individual's affidavit and oral evidence at trial in determining what he would have done in two counterfactual circumstances – where primary judge enjoyed the benefit of observing the trial in forming an assessment of credibility NEGLIGENCE – where law firm breached duty of care to advise client against lodgement of a caveat – damages – loss of chance to exercise right of recission under a call option deed – whether the lost opportunity had some non-negligible value within the principles in Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 – where relevant parties had a willingness to pay – where there was insufficient evidence for an inference that the relevant parties had an ability to pay Legislation Cited: Land Tax Management Act 1956 (NSW), s 47(1) Cases Cited: Boyded Industries Pty Ltd v Bluth & Ors [2023] NSWSC 915 Fox v Percy (2003) 214 CLR 118; [2003] HCA 22 Lee v Lee (2019) 266 CLR 129; [2019] HCA 28 Miles v Luneburger Franchising Pty Ltd [2021] NSWCA 248 Sellars v Adelaide Petroleum NL (1994) 179 CLR 332; [1994] HCA 4 Category: Principal judgment Parties: Dennis Bluth & the 274 others named in Schedule 1 trading as HWL Ebsworth Lawyers (Appellants) Boyded Industries Pty Limited (Respondent) Representation: Counsel: T M Faulkner SC with G Marsden (Appellants) J Giles SC with E Ball (Respondent) Solicitors: Gilchrist Connell (Appellants/Cross-respondents) Norton Rose Fulbright (Respondent/Cross-appellant) File Number(s): 2023/277802 Publication restriction: Nil Decision under appeal Court or tribunal: Supreme Court of New South Wales Jurisdiction: Common Law Citation: [2023] NSWSC 915 Date of Decision: 04 August 2023 Before: Chen J File Number(s): 2021/180823 [Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.] HEADNOTE [This headnote is not to be read as part of the judgment] The appellants are a firm of solicitors trading as HWL Ebsworth Lawyers (HWLE). The respondent, Boyded Industries Pty Ltd (Boyded), is a family-owned business that operated several car dealerships across New South Wales. Kieran Turner (Mr Turner) is the CEO of Boyded. In 2015-2016, Boyded entered into a series of contracts to sell three blocks of land to various entities known as the Gateway Group, which belonged to the Dyldam Group. Sam Fayad was the CEO of the Dyldam group and the sole director of the relevant Gateway entities. In December 2016, a dispute arose between Boyded and an entity in the Gateway Group regarding the sale of land. The settlement of those proceedings in February 2017 resulted in, among other things, an extension of time for Gateway to complete the purchase of land, and importantly, the grant of a call option to Boyded over a proposed lot to be created on the land as part of a planned development known as the car show room (the Deed of Call Option). The Deed of Call Option was executed in May 2017 and the Gateway entities completed the purchase of the land. Clause 37 contained an express prohibition on Boyded lodging a caveat over the land and granted Gateway a right to terminate the deed if Boyded did so. Clause 14.2 stipulated that Boyded was to receive $3.5 million in the event it rescinded the Deed of Call Option in the event the car showroom was not ready for development by 15 May 2020. In July 2018, contrary to the terms of the Deed, Mr Turner instructed HWLE to lodge a caveat over the land. In lodging the caveat at Mr Turner's instructions, HWLE conceded that failing to advise Mr Turner about the prohibition against lodging a caveat amounted to a breach of duty of care to Boyded. In August 2019, Gateway became aware of the caveat and terminated the Deed of Call Option. After unsuccessfully commencing proceedings challenging the termination, Boyded subsequently sued HWLE claiming damages for negligence and breach of retainer. The primary judge was asked to consider what Boyded would have done with its call option if it had not been terminated. This first question required the primary judge to consider two counterfactuals, namely, whether Boyded would have rescinded the call option pursuant to cl 14.2 of the Deed of Call Option if the car showroom was not ready to be developed by 15 May 2020 (thereby entitling it to $3.5 million), or whether it would have sought to negotiate an extension of the sunset date for the call option that expired on 15 May 2020. The second question was what the owners of the land (and their guarantors) would have done, namely, whether they were willing and able to pay Boyded the $3.5 million in the event Boyded exercised its right of recission, and whether the loss of the chance to exercise the right was of some non-negligible value. The primary judge concluded that, but for the breach, Mr Turner would have sought to rescind the Deed of Call Option, that Boyded lost the opportunity to recover $3.5 million from Gateway and Mr Fayad (with that opportunity having some non-negligible value), and that Gateway and Mr Fayad were both willing and able to pay the $3.5 million in May or June 2020. HWLE appealed from the primary judgment on six grounds, namely that: (1) The trial judge erred in finding that Boyded would have rescinded the Deed of Call Option when the Strata Documents were not registered by 15 May 2020. (2) The trial judge erred in not finding that Boyded would have instead extended the Deed of Call Option. (3) By reason of these matters, the trial judge erred in finding that HWLE's breach of duty / negligence caused loss. (4) The trial judge erred in finding that, in May or June 2020, the Gateway companies had both a willingness and an ability to pay $3.5 million under the Deed of Call Option. (5) The trial judge erred in finding that, in May or June 2020, Mr Fayad had both a willingness and an ability to pay $3.5 million under the Guarantee. (6) The trial judge erred in finding that Boyded had proved that the right under the Deed of Call Option to be paid $3.5 million by the Gateway companies and Mr Fayad was an opportunity of some value, not being a negligible or speculative value. Boyded cross-appealed on the basis that the primary judge erred in holding that Boyded's loss was limited to $2 million when: (7) Having found that Boyded would have instructed HWLE not to lodge a caveat and that it would have rescinded the deed, and having found that each of the Gateway entities and Mr Fayad had an ability to pay the full amount, Boyded contended that the primary judge ought to have held that Boyded's loss caused by HWLE's negligence was $3.5 million. The Court held (Harrison JA, Bell CJ and Gleeson JA agreeing), allowing the appeal and dismissing the cross-appeal: (1) The primary judge found Mr Turner to be a savvy businessman who undoubtedly would have pursued an outcome most favourable to Boyded. Notwithstanding evidence that the car showroom held sentimental value to Mr Turner as Boyded's "spiritual home", the primary judge was entitled to accept that the preference for the car showroom was not fixed, and that Mr Turner would have prioritised Boyded's commercial interests. Accordingly, Boyded would have rescinded the Deed of Call Option when the Strata Documents were not registered by 15 May 2020: [67], [72]. Fox v Percy (2003) 214 CLR 118, Lee v Lee (2019) 266 CLR 129, considered. (2) HWLE were required to point to some glaring improbability in the primary judge's findings or some compelling inference to the contrary of the finding that Boyded would have rescinded the call option and not sought to negotiate an extension. HWLE instead sought to portray irreconcilable differences, or at least inconsistencies, in Mr Turner's affidavit suggesting on the one hand that he would have tried to negotiate an extension of the call option, and his oral evidence that he would have instead exercised his right to recission to obtain the $3.5 million if the conditions Deed of Call option had not been satisfied by 15 May 2020. There was no discernible error in the primary judge's finding that the apparently contradictory reference in Mr Turner's affidavit to negotiating an extension of the call option was always tied or subject to him understanding the reasons why Gateway would have failed to satisfy the conditions listed in the Deed of Call Option before the expiry date on 15 May 2020: [69]-[70], [72]. Fox v Percy (2003) 214 CLR 118, Lee v Lee (2019) 266 CLR 129, considered. (3) The breach of duty resulted in the loss of the right under the option deed to receive $3.5 million. Mr Turner's evidence was that if Gateway failed to satisfy the conditions in cl 2.9(a)(i)-(iii) of the Deed of Call option by the sunset clause, he would need to know why the conditions were not met to consider whether he would consider negotiating an extension. It was open to the primary judge to conclude, having regard to Mr Turner's evidence and impression of him as a savvy businessman that would have pursued the financial position most advantageous to Boyded, namely, exercising the right to a recission rather than negotiating to extend the option deed: [72]. Fox v Percy (2003) 214 CLR 118, Lee v Lee (2019) 266 CLR 129, considered. (4) The Gateway companies had a willingness to pay $3.5 million in May or June 2020. However, the primary judge erred in finding that there was evidence rising higher than speculation or surmise that Gateway had the ability to pay $3.5 million. Boyded was required to lead sufficient evidence from which Gateway's ability to pay could be inferred. All three properties were encumbered with mortgages, yet none of the mortgages or their terms was in evidence. The Gateway balance sheet only described the financial positions of two of the three relevant Gateway entities, and did not include the most valuable entity. There was no evidence about the income of the companies. The only significant source of any positive change to the companies' debt to equity ratio could have been capital gains, yet the balance sheet demonstrated the value of the two parcels of land remained constant from the date of the purchase. The balance sheet also demonstrated that they were in a financial position at all times either alone or in aggregate that had liabilities which exceeded their assets. While this does not necessarily mean they lacked the capacity to borrow further funds, no inferences in favour of the existence of an ability to pay $3.5 million could be drawn from the evidence: [79], [95]-[103]. Miles v Luneburger Franchising Pty Ltd [2021] NSWCA 248, considered. (5) Mr Fayad had a willingness to pay $3.5 million May or June 2020. However, the primary judge erred in finding that there was evidence rising higher than speculation or surmise that Mr Fayad had the ability to pay $3.5 million. There was no evidence that Mr Fayad had any equity in his Constitution Hill residence, and he had not paid his land tax assessment in 2020 or in 2021. Mr Fayad's $14 million loan to Gateway in 2017 was undischarged as late as 2023. Without more, evidence of the ability to make a substantial loan in 2017 does not support an inference that Mr Fayad was in a position to pay $3.5 million in 2020: [79], [95], [104]-[109]. (6) It was unnecessary to deal with the cross-appeal having regard to the decision reached on appeal: [111]. JUDGMENT 1. BELL CJ: I have had the benefit of reading the reasons of Harrison JA. I agree with his Honour that it was open to the primary judge to hold that, but for the breach, Mr Turner would have sought to rescind the Deed of Call Option and sought to recover payment of $3.5 million pursuant to cl 14 of the Deed. I also agree that there is no basis established for disturbing the primary judge's closely reasoned conclusion in that regard, informed as it was by his assessment of Mr Turner in the witness box. 2. I also agree with Harrison JA that the primary judge erred in concluding that the commercial opportunity Boyded lost on account of HWLE's breach of duty, namely the opportunity to recover the payment of $3.5 million from Gateway and Mr Fayad, had some non-negligible value within the meaning of Sellars v Adelaide Petroleum NL (1994) 179 CLR 332; [1994] HCA 4. Gateway's encumbered ownership of substantial real property provided no sufficient basis for inferring that either it or Mr Fayad could meet this monetary obligation in May/June 2020 when the payment would have been due, on the counterfactual accepted by the primary judge. This was a matter upon which Boyded carried the onus of proof and, for the reasons given by Harrison JA, that burden was not discharged on the exiguous and incomplete material before the primary judge and relied upon at first instance. Indeed, such evidence as there was, such as the deteriorating negative asset position in the Gateway Balance Sheet between 2017 and 2020, the lack of any material progress in the development of the land parcels and, in Mr Fayad's case, outstanding land tax obligations as at May/June 2020, pointed against Gateway and Mr Fayad's ability to pay the $3.5 million. 3. I agree with the orders proposed by Harrison JA. 4. GLEESON JA: I agree with Harrison JA and the additional remarks of the Chief Justice. 5. HARRISON JA: The appellants are a firm of solicitors trading as HWL Ebsworth Lawyers (HWLE). The respondent is a family owned company which has operated car dealerships across New South Wales for many decades (Boyded). Mr Kieran Turner is the Chief Executive Officer of Boyded. In 2015 and 2016, Boyded entered into a series of contracts to sell land at 57, 63 and 83 Church Street, Parramatta, from which it operated its largest dealership, to various entities in a corporate group referred to as The Gateway Group. The Gateway Group belonged to the Dyldam Group. Sam Fayad was the Chief Executive Officer of the Dyldam Group and the sole director of the Gateway entities involved in the events that give rise to this appeal. The aggregate sale price of the lots which were sold was $150 million. 6. In December 2016, a dispute arose between Boyded and Gateway arising out of the sale of the land, about whether notices to complete issued by Boyded were effective. Proceedings were commenced but were settled in February 2017. The settlement included an extension of time for Gateway to complete the purchase and the grant of a call option to Boyded over a proposed lot to be created on the land as part of a planned development. The proposed lot became known as the car showroom. As at May 2017, the car showroom did not physically exist and did not have a separate legal title. 7. The Deed of Call Option was ultimately executed on 15 May 2017. It contained an express prohibition on Boyded lodging a caveat over the land and gave Gateway a right to terminate the deed if it did so. After May 2017, the Gateway entities completed the purchase of the land. 8. In July 2018, Mr Turner, who was then living in France, saw a media article which caused him to become concerned about the financial position of the Dyldam Group. On 20 July 2018, Mr Turner instructed HWLE to lodge a caveat over the land to protect Boyded's interest under the call option. In what was ultimately conceded to be a breach of its duty of care to Boyded, HWLE did not advise Mr Turner about the prohibition against lodging a caveat. On 8 August 2019, Gateway became aware of the caveat and terminated the Deed of Call Option eight days later. On 6 March 2020, Boyded commenced proceedings against Gateway challenging the termination on a number of bases. HWLE acted for Boyded in those proceedings. On 8 October 2020 the proceedings were dismissed: Boyded Industries Pty Ltd v Gateway Parramatta Two Pty Ltd [2020] NSWSC 1368. 9. Boyded sued HWLE claiming damages for negligence and breach of retainer. The proceedings were heard by Chen J, whose judgment was published on 4 August 2023: Boyded Industries Pty Ltd v Bluth & Ors [2023] NSWSC 915. The issue before his Honour was causation of loss, which turned upon two cumulative hypothetical questions: 1. What would Boyded have done with its call option if it had not been terminated? 2. What then would the owners of the land (and their guarantors) have done? 1. The trial judge concluded that HWLE's negligence had caused Boyded some loss and calculated the loss at $2 million. HWLE challenges both conclusions in this appeal. Deed of Call Option 1. The key provisions of the deed are as follows. 2. Clauses 2.1 and 2.2 of the deed granted Boyded the option to purchase the car showroom, described as a lot in an unregistered stratum plan: "2.1 Grant by the Grantor In consideration of the payment of the Call Option Fee by the Grantee to the Grantor, the receipt of which the Grantor acknowledges, on the date of this Deed, the Grantor grants to the Grantee a Call Option (subject to clause 2.9) for the Grantee or its Nominee to purchase the Property for the Purchase Price and on the terms of the Contract. 2.2 Irrevocable offer The Call Option constitutes an irrevocable offer by the Grantor to enter into the binding Contract for the sale of the Property to the Grantee which, if accepted, must be accepted strictly in accordance with the provisions of this document, the Contract [sic] or otherwise the Call Option will expire." 1. By cl 2.5, the call option was required to be exercised prior to the expiration of the call option period which expired on 15 May 2020, subject to any extension in accordance with cll 2.9(d), 5.5 and 15(d): "2.5 Exercise of Call Option The Call Option may only be exercised by the Grantee or Nominee delivering, on any Business Day during and prior to the expiration of the Call Option Period, to the Grantor's Service Address: (a) a Notice of Exercise of Call Option executed and dated by the Grantee or Nominee; (b) if applicable a copy of the power of attorney as registered in the New South Wales General Register of Deeds, if the Notice of Exercise of Call Option is executed under a power of attorney; (c) the Contract executed and dated by the Grantee or Nominee as purchaser. Prior to such execution, the Grantee or Nominee will complete details of the: (i) purchaser (being the Grantee or Nominee); (ii) purchaser's address (being the Grantee's or Nominee's address); and (iii) folio identifier of the Property as notified to the Grantee by the Grantor pursuant to clause 2.9(a)(iv), on the front page of the Contract; and (d) in the event a Nominee is appointed by the Grantee in accordance with Clause 6, a Notice of Nomination duly executed by the Grantee." 1. Clause 2.9 placed a number of conditions on the exercise of the call option: "2.9 Call Option Conditional (a) The Grantor or (subject to clause 6) the Nominee may exercise the Call Option in accordance with the provisions of clause 2, subject to and conditional upon the following conditions being satisfied prior to the Call Option Expiry Date: (i) Development Consent on terms and conditions as deemed acceptable to the Grantor in its absolute discretion being granted by the relevant Authority for the Car Show Room; and (ii) The Car Show Room must be as so described in clause 1.1(k) of this Deed; (iii) The registration of the Strata Documents upon which event a separate title for the Property has been created; and (iv) The Call Option being exercised within twenty-one (21) days of the Grantor serving written notice upon the Grantee that the provisions of clause 2.9(a)(i)-(iii) (inclusive) have been satisfied. In this regard, the Grantor must serve written notice on the Grantee within 5 Business Days of satisfaction of the provisions of clause 2.9(a)(i)-(iii) (inclusive). (b) If the provisions of clause 2.9(a)(i)-(iii) (inclusive) have not been satisfied prior to the Call Option Expiry Date then the provisions of clause 14.2 apply." 1. Clause 8(a) prohibited Boyded from causing any caveat to be registered on title and cl 8(b) contained an acknowledgement by the parties that cl 8(a) was an essential term, breach of which entitled the Gateway parties immediately to terminate it: "8 Caveat (a) The Grantee must not cause a caveat to be registered on the title of the Property or the Central Land in respect of any estate or interest that arises, or may arise, under this Deed or any other agreement collateral to this Deed. (b) The Parties acknowledge that clause 8(a) is an essential term of this Deed and a breach of clause 8(a) shall entitle the Grantor to immediately terminate this Deed." 1. Clause 13 dealt with the guarantee provided by Mr Fayad. Relevantly, it provided: "13 Guarantee (a) The Guarantor, by the Guarantor's execution of this Deed, acknowledges incurring obligations and giving rights under this guarantee and indemnity. (b) … (c) The Guarantor unconditionally and irrevocably guarantees to the Grantee due performance by the Guarantor of all obligations under this Deed. (d) The Guarantor indemnifies the Grantee against any cost, claim or liability arising from, or connected with any failure by the Grantor to comply with all [of] its obligations under this Deed. (e) the Guarantor must pay on demand any money due to the Grantee by reason of this indemnity." 1. Clause 14 dealt with the consequences of the car showroom not being created in a timely manner or if there was some other defined event occurring: "Right of Rescission 14.1 The Grantor may rescind this Deed upon service of notice in writing to the Grantee, on the basis that the Grantor pays to the Grantee or Nominee $3,500,000.00 (inclusive of GST) as the Grantee or Nominee directs, if one or more of the following occurs: a. The Grantor transfers ownership of the Central Land to another person or entity other than a Related Entity prior to the registration of the Strata Documents; or b. The Grantor cannot complete the Contract; or c. The Strata Documents are not registered by the Sunset Date; 14.2 If clause 2.9(b) applies, either party may rescind this Deed by serving notice in writing on the other party, in which event the Grantor must pay to the Grantee $3,500,000.00 (inclusive of GST). 14.3 If the Grantee rescinds this Deed under clause 5.4 or clause 15, the Grantor must pay to the Grantee $3,500,000.00 (inclusive of GST). 14.4 The payments by the Grantor to the Grantee in accordance with clauses 14.1, 14.2 and 14.3 are subject to the Grantee providing to the Grantor promptly following the rescission a tax invoice and a direction to pay the amount of $3,500,000.00 (inclusive of GST). 14.5 The Grantor must make the payment as the Grantee directs within twenty eight (28) days of receipt of the items stipulated in clause 14.4." 1. 'Sunset Date' is defined to be 15 May 2020 as extended by cll 2.9(e), 5.5 and 15(e). It is accepted that registration of the documents necessary to create the car showroom did not occur by 15 May 2020. Grounds of appeal 1. HWLE relies upon the following grounds of appeal: 1. The trial judge erred in finding that Boyded would have rescinded the Deed of Call Option when the Strata Documents were not registered by 15 May 2020. 2. The trial judge erred in not finding that Boyded would have instead extended the Deed of Call Option. 3. By reason of these matters, the trial judge erred in finding that HWLE's breach of duty / negligence caused loss. 4. The trial judge erred in finding that, in May or June 2020, the Gateway companies had both a willingness and an ability to pay $3.5 million under the Deed of Call Option. 5. The trial judge erred in finding that, in May or June 2020, Mr Fayad had both a willingness and an ability to pay $3.5 million under the Guarantee. 6. The trial judge erred in finding that Boyded had proved that the right under the Deed of Call Option to be paid $3.5 million by the Gateway companies and Mr Fayad was an opportunity of some value, not being a negligible or speculative value. 1. In summary, HWLE contends that his Honour erred in finding that its breach of duty and negligence caused Boyded to sustain any loss. Grounds 1, 2 and 3 Boyded's pleaded case at trial 1. Boyded's statement of clam is in unexceptionable terms. Paragraph 26 pleaded that Boyded suffered harm, loss and damage caused by HWLE's negligence as follows: 1. the loss of its rights under the Option Deed (including the right to the car showroom or $3.5 million, and the right to nominate a nominee); 2. the loss of the value of the Option Deed and its rights under the Option Deed (including the value of the right to the car showroom or $3.5 million, and the value of the right to nominate a nominee); and 3. the loss of the opportunity or chance to exercise its rights under the Option Deed (including the right to the car showroom or $3.5 million, and the right to nominate a nominee). 1. Despite the claim in paragraph 26(a) to the right to the car showroom, no claim was made for that by Boyded at trial. Boyded instead conducted its case on the basis that the lost right under the deed was the right to receive $3.5 million. A critical aspect of Boyded's case was that it would have rescinded the deed in May 2020, even though by doing so it would have had to abandon any prospect of getting the car showroom. 2. Boyded contended that rescission would have occurred in May 2020, leading to a demand for payment of the $3.5 million shortly thereafter. Boyded contended that the right to demand payment had some value as at May or June 2020. Boyded did not contend that the right had value at any later time. It was common ground that by April 2023 the right had no value. This meant that Boyded's case was "all or nothing" meaning that if the call option had been extended and the prospect of getting the car showroom was preserved, no loss caused by HWLE would have been suffered. 3. Boyded contended in the court below that the provisions of cll 2.9(a)(i)-(iii) inclusive of the deed had not, and would not have, been satisfied by 15 May 2020 and that in such circumstances the provisions of cl 14.1(b) applied. Boyded maintained that it would have rescinded the deed pursuant to cl 14.2 and would have become entitled to be paid $3.5 million upon doing so. HWLE contended on the contrary that the hypothetical prospect that Boyded would have done so should have been rejected by his Honour as Mr Turner's evidence did not support such an outcome but instead supported a counterfactual analysis, which should have led his Honour to find that Mr Turner would have instead sought to agree to extend the option for a further three years. That dispute acquires significance as the result of the very different financial position of the Gateway entities in May 2023 compared to their equivalent position in May/June 2020 when the obligation to pay $3.5 million to Boyded would have crystallised. 4. There are two general sources of evidence to which his Honour was taken for the purpose of deciding which hypothesis he favoured. Mr Turner's evidence 1. Mr Turner swore an affidavit in the proceedings on 19 November 2021. Paragraphs [84] – [86], under the chapeau "Loss arising from lodgement of caveat", are in these terms: "[84] If HWLE had advised Boyded that lodging the Caveat would allow Gateway Two and Gateway Two Commercial to terminate the Option Deed, I would have told HWLE not to lodge a caveat in respect of the Central Land. As I have explained above, the Car Show Room was important to me (and to Boyded and my family) because it enabled the Heartland Group to have a continuing presence at the 'spiritual home' of our business into the future. For this same reason, if the Option Deed had remained on foot, then I would have caused Boyded to exercise the Call Option under the Option Deed once it was able to. [85] I understand that the Call Option was subject to the conditions listed in clause 2.9(a)(i)-(iii) of the Option Deed being satisfied before the Call Option Expiry Date (which I understand was 15 May 2020). If it had appeared that those conditions would not be satisfied prior to that time, then I would have taken steps to try and renegotiate with the Gateway Two and Gateway Two Commercial to extend the Call Option Expiry Date so that the conditions in clause 2.9(a)(i)-(iii) of the Option Deed being satisfied by the extended Call Option Expiry Date and then exercised the Call Option. I believe that these negotiations would have had good prospects of success for the following reasons: (a) First, I had successfully negotiated with Gateway Two and Gateway Two Commercial, as well as the Dyldam group more generally, on several occasions (in addition to the settlement of the First Gateway Proceedings, as described in paragraphs [26] to [38] above). For example, I also negotiated directly with Remon Fayad, the son of the CEO of the Dyldam group, Sam Fayad (the Guarantor under the Option Deed), as well as Sam Fayad on a separate occasion, in relation to the property sales described above at paragraphs [19] to [25]. (b) Secondly, I understand that an extension of the Call Option Expiry Date would have been attractive to Gateway Two, Gateway Two Commercial and the Dyldam group because the Dyldam group has experienced cash flow concerns since at least 2018. In addition to the article dated July 2018 which I referred to above in paragraph [45], I have also located a number of articles from 2019 and 2020 to a similar effect. I would have used this fact to Boyded's advantage by pitching the extension of the Call Option Expiry Date as better for Gateway Two and Gateway Two Commercial than the alternative of having to pay $3.5 million to Boyded under the Option Deed. … (c) Thirdly, as Boyded's CEO, I know that Boyded's cash position was in a good state following the land sales referred to above in paragraphs [19] to [25], and so it had no pressing need for the $3.5 million in payment under the Option Deed but was instead willing and able to wait until the development was completed. (d) Fourthly, I was of the view that the value of the Car Show Room would appreciate over time, even if the development was significantly delayed. [86] If, despite what I have said above, my negotiations to extend the Call Option Expiry Date had not been successful, then I would have caused Boyded to exercise its rights under clauses 2.9(b) and 14.2 of the Option Deed requiring Gateway Two and Gateway Two Commercial to pay Boyded $3.5 million." (emphasis added) 1. HWLE contended before his Honour and in this Court that Mr Turner's affidavit supported as the most likely conclusion that he would have negotiated with the Gateway entities to extend the option if given the chance in May 2020 (and that Gateway would have agreed to such an extension). Mr Turner was cross-examined on this issue of what he would have done if his cl 14.2 choices had arisen for consideration by him on 15 May 2020. In response to a hypothetical question that, if it appeared to Mr Turner the conditions listed in cl 2.9(a)(i)-(iii) of the option deed would not be satisfied prior to 15 May 2020, he would have taken steps to try to renegotiate an extension of the call option date with the two Gateway companies, Mr Turner said: "Yes, I would need to know why the conditions weren't fulfilled to make a decision." 1. After the cross-examiner clarified that the hypothetical question assumed that the car showroom had not been built and the strata plan had not been registered prior to 15 May 2020, the cross-examination continued: "Q. It's at a time where you form a view that the conditions would not be satisfied. So, that's a hypothetical. A. Hard to answer a hypothetical like that. If it wasn't built and it was a year before and I'd have a whole pile of advisors around me telling me what stage they were up to in terms of the development and how quickly my show room could be built and if it was going to be built before that sunset date or not; and if not, how long after, a day or a year. Q. And you'd want to know, because you'd want to extend your call option for a sufficient time to allow the show room to be built and for you to get your show room, isn't that right? A. I'd need my advisors to tell me how long after that sunset date it would be until I got my show room, whether that is a day or a year. Q. That's right, and the reason I put to you was because you would want to know how long you would need to extend your call option so you would get that show room, isn't that right? A. Well, if my advisors told me that a day or a week after that sunset date, strata plan would be forthcoming, I would extend the deed. Q. If they told you it was going to take three more years, you would still extend the deed then, wouldn't you? A. Three more years from what date? Q. From May 2020? A. No." 1. The cross-examiner then challenged Mr Turner's evidence on the basis that the second sentence in paragraph [85] of his affidavit was not qualified by a reference to how long it would take the Gateway companies to satisfy the conditions in the option deed. Mr Turner rejected that criticism giving the following responses: "Q. Look at this second sentence, 'If it had appeared that those conditions would not have been satisfied prior to that time, that is May 2020, then I would have taken steps to try and renegotiated with the Gateway companies to extend the call option expiry date'. Do you see that? A. Yes. Q. You haven't said there, 'Well, it depends on how long it's going to take', have you? A. I didn't have to. Q. You thought you didn't have to say it because it doesn't matter how long it was going to take, you would have taken-- A. Because it was a hypothetical. Q. -- can I finish the question? You would have taken the time, you would have asked for it to be extended long enough for you to get your car showroom no matter what? A. I didn't think an affidavit would need hypotheticals, so I didn't include it. Q. Mr Turner, that evidence is not true, do you agree with that? A. Definitely not. … Q. It's a hypothetical, isn't it? A. Yes, but it is not required for me to go and give dates and timelines on a hypothetical, it's just a general statement for that hypothetical. Q. You said, 'I would have taken steps to try to renegotiate with the two Gateway companies to extend the call options', do you see that? A. Yes. Q. Then you said, 'How long?'; you said, 'So that the conditions in clause 2.9(a)(i) to (iii) of the option deed being satisfied by the extended call option date'. Do you see that? A. Yes. Q. You haven't said, 'Well, actually that is not true. It doesn't depend – it depends on how long the extension would be?', have you? A. But of course it does." 1. Mr Turner was then cross-examined at some length concerning what he had said in paragraph [85] as follows: "Q. ... You see in the third sentence of paragraph 85, beginning with the words, 'I believe that, what you've said is, 'I believe that these negotiations would have had good prospects of success for the following reasons'. Just so you can understand what I'm asking you about, your reference in that sentence to 'these negotiations' is a reference to negotiations with the Gateway companies to extend the call option expiry date in May 2020. Is that what you're referring to there? A. Yes. Q. And you believe they would have had good prospects of success and the matter described in paragraph 85(a) is one of your reasons for holding that belief. Is that right? A. Yes. Q. If you'd please go over the page to paragraph (b), what you've meant to do in that paragraph was set out another reason for you holding the belief I'm asking you about? A. Yes. Q. And what you say there is: 'I understand that an extension of the call option expiry date would have been attractive to Gateway Two, Gateway Two Commercial and the Dyldam Group because the Dyldam Group has experienced cashflow concerns since at least 2018.' [Q.] Do you see that? A. Yeah, from the articles. Yes. Q. Well, you follow the fortunes of the Dyldam Group closely? A. Not really, but I did get texts or I did read articles. Q. And as a result of the articles that you read you formed the understanding that you set out there in the first sentence of paragraph 85(b)? A. Yes, there was some concerns there. Yes. Q. And specifically the concerns were that the Dyldam Group had experienced cashflow concerns since at least 2018. Do you see that? A. I'll just have to check the dates. But there was articles. I don't know the dates of them, though. Q. What I'm asking you is not about the articles. I'm asking you about paragraph 85(b) in your affidavit. A. Yep. Q. And I'm asking you about the first sentence and the words in that sentence of paragraph 85(b). Can you just focus on that, please? A. Yes. Q. And one of the concerns you had was that the Dyldam Group had experienced cashflow concerns since at least 2018? A. Yes, and that was based on articles. … Q. Just satisfy yourself, because it's an important matter, that this is one of the articles that you're referring to in paragraph 85(b). Just satisfy yourself that this is one of those two articles. A. Yes, I believe it is. Q. And the article of 6 August 2019, can I just ask you to read through that and just familiarise yourself with the contents there? A. Yes. Q. The content of that article contributed to your understanding that the Dyldam Group was experiencing cashflow concerns since at least 2018. Is that right? A. Yes. … Q. Is this right: that the contents of this article also contributed to the understanding which you've described in paragraph 85(b), namely that the Dyldam Group has experience[d] cash flow concern since at least 2018? A. Yes. Q. That understanding is one of the reasons why you believe that negotiations to extend the call option expiry date in May 2020 would've had good prospects of success? A. Is this a hypothetical, or? Q. Yes. A. Can I get some more information on the hypothetical? Q. Go back to paragraph 85. A. Yep. Q. I'm asking you about the third sentence where you've written the words, 'I believe that these negotiations would've had good prospects of success'. Do you see that? A. Yes. … Q. The second sentence is in the middle of the third line, 'If it had appeared that those conditions would not be satisfied prior to that time'. A. Yes. Q. You know that means 15 May 2020? A. Yes. Q. 'Then I would've taken steps to try and renegotiation with the Gateway Two and the Gateway Two Commercial to extend the call option expiry date so that the conditions in clause 2.9(a)(i) to (iii) of the option deed being satisfied by the extended call option expiry date.' Do you see those words? A. Yes. Q. Then you said, 'And then exercise the call option'. Do you see that? A. Yes. Q. Then I'm going to the third sentence. You say, 'I believe that these negotiations would've had good prospects of success for the following reasons'. Do you see those words? A. Yes. Q. When you say 'These negotiations' in that sentence I've just read to you, you're talking about the negotiations prior to May 2020 to extend the call option expiry date so that the conditions in cl 2.9(a)(i) to (iii) of the option deed being satisfied by the extended call option date; isn't that right? A. Yes. Q. One of the reasons you have for the belief that those negotiations would've had good prospects for success is the understanding you've described in the first sentence of paragraph 85(b) that the Dyldam Group has experienced cash flow concerns since at least 2018; isn't that right? A. Yes. Q. In the second sentence there you've talked about the articles, but the third sentence of 85(b) you've explained why cash flow difficulties would have made it attractive to the Gateway companies to agree an extension. You've said: 'I would've used this fact', that's the cash flow difficulties, 'to Boyded's advantage by pitching the extension of the call option expiry date as better for Gateway Two and Gateway Two Commercial than the alternative of having to pay 3.5 million to Boyded under the option deed.' Do you see that? A. Yes Q. It's your understanding that Gateway, rather than make an immediate payment of 3.5 million in the middle of 2022 would have agreed to an extension of the option so that [t]he conditions in clause 2.9(a)(i), (ii) and (iii) of the option deed being satisfied by the extended call option deed; isn't that right? A. Yes. Q. Then the third reason you give in paragraph 85(c) is that, to put it simply, you didn't need the money? A. Yes. Q. The fourth reason you've given in paragraph 85(d) is that you thought the car showroom, when you got it, would appreciate in value over time? A. Yes. Q. This is right, though, isn't it: for you the car showroom was not just a question of having a good investment which would appreciate, for you it was retaining an interest in the spiritual home of your family's magnificent business? A. Yes, it would've been nice." The anterior correspondence 1. In early August 2019, Mr Turner became aware of a newspaper article that suggested that Dyldam may have been experiencing financial difficulties. The article referred to Dyldam's "wind-up challenge". Mr Turner's father-in-law sent him an email telling Mr Turner that he needed "to move to try and secure the Parramatta showroom asset or get in line for the $3m before they collapse". 2. On 7 August 2019, Mr Turner wrote to Mr Bluth of HWLE in these terms: "Hi Dennis, see below, do we have a caveat on the Parramatta property for our showroom? And I recall we have a personal guarantee from Sam at Dyldam for the showroom, can you confirm this? Please email them and ask for an update on the development and hand over of the showroom, I still want this and not the money." 1. It is instructive at this point to observe what his Honour made of this correspondence: "[64] Although the defendant did not rely upon this email, it does demonstrate what is otherwise apparent from the terms of the deed (which, in turn, derived from the settlement of the first Gateway proceedings under which the plaintiff secured the call option for the car showroom) – namely, that the plaintiff did, at least initially, prefer the car showroom to the payment of any money to which it might become entitled if the deed were rescinded. Nevertheless, as I later explain (see [72]ff, below), I am satisfied that this preference was simply that: there was no fixed and immutable decision to pursue the car showroom." 1. On 11 December 2019, Mr Turner wrote to Mr Bluth relevantly as follows: "Can we protect the showroom so they don't sell it another way? Or ask for the title deeds or something?" 1. On 12 December 2019, Mr Turner wrote to Mr Bluth and Mark Webeck asking: "Db, can you send me the clause for us to cash out of our Dyldam showroom for $4m? Maybe we get on the front and I take my cash off the table even though I'd prefer the showroom – a bird in the hand is better than 2 in the bush…" 1. His Honour characterised this correspondence as follows: "[66] In my view this exchange illustrates what was suggested by the plaintiff, during submissions, to reflect Mr Turner's 'slightly rudimentary … understanding' of what had developed – viz., the deed had been terminated. I address this later (see [68], below)." 1. On 22 February 2020, Mr Turner wrote to Mr Bluth: "Hi db I've just checked our sunset date for the showroom is 15/5/20. There is no way they can deliver it and while I would prefer the showroom I think a bird in the hand is worth two in the bush so let's write to them and collect the $4m per contract on his personal guarantee and use court if necessary. Please advise once you write [to] them this week. Thanks." 1. Mr Webeck replied to Mr Turner on 24 February 2020: "Hi Kieran Dennis has passed on to me your email below. It is now for me to go on the record for Boyded Industries and attempt to retrieve the position. To that end, we have Counsel preparing the necessary pleadings and we are aiming to launch the proceedings by the end of this week if not early next week. I will keep you advised as to further developments." 1. Shortly thereafter, Mr Turner wrote to Mr Webeck and Mr Bluth: "Is your intention to get the showroom or the cash?" 1. Mr Webeck replied: "Hi Kieran We need to restore the option first and then look at whether Dyldam can deliver. I will forward you the pleadings when they emerge from Counsel." 1. Mr Turner responded immediately: "Restore? It's not considered lost is it?" 1. Mr Webeck replied: "Hi Kieran Sorry to be obtuse … Dyldam's position is that they have exercised their right to terminate so that there is no longer any available option. Our position is that their notice of termination was invalid etc so that the option becomes restored. Hope that makes sense." 1. His Honour referred to this correspondence at [67], which he analysed at [68], set out later in these reasons at [48(4)]. 2. Mr Webeck sent an email to Mr Turner on 29 October 2020 informing him that senior counsel had advised that there was "no realistic prospect of success on appeal" from the judgment upholding the termination. Mr Turner responded as follows: "Yep that's disappointing. So let's cut to the chase then, how do I get my $4m cash?" 1. His Honour commented on this email in these terms: "[70] As I indicated above, in my view this email supports the finding that I have made – in connection with Mr Turner's 'rudimentary' understanding of the legal position in connection with the deed." 1. Mr Turner was not relevantly cross-examined about this correspondence. The judgment below 1. His Honour found that the most likely outcome was that, but for HWLE's negligence, Boyded would have rescinded the deed in May 2020: "[73] I am satisfied, and find, that the most likely scenario but for the negligence of Mr Bluth is that the plaintiff would have rescinded the deed. My reasons for making that finding are set out in what follows (see [74]ff, below). Shortly stated: I am satisfied that whilst Mr Turner (and thus the plaintiff) did have a preference for the car showroom, that preference was not a fixed one. Rather, the decision about whether to rescind the deed, I am satisfied, would most likely have been driven by Mr Turner's assessment of what he considered to be the most financially advantageous position for the plaintiff – which, given the uncertainty in Mr Turner's mind surrounding the financial position of the Gateway entities, I consider would have favoured Mr Turner rescinding the deed in May 2020. I turn now to explain my reasons for the finding that I have made." 1. According to HWLE, his Honour's conclusion was drawn from the following seven matters: 1. Mr Turner had some sentimental attachment to the site but it was simply one consideration to be evaluated amongst others: "[74] First, the defendant argued that the plaintiff – and Mr Turner in particular – had a strong sentimental attachment to the Church Street site, and that attachment significantly informed the likelihood of the plaintiff seeking to negotiate an extension of a deed in May 2020, rather than seeking to rescind it. I do not accept that submission. In my view, although I accept that Mr Turner had some sentimental attachment to the site, its significance should not be overstated: I do not accept that any sentimental attachment to the site would – inevitably – govern what Mr Turner would have done, nor significantly so; rather, in my view, it was simply a consideration for Mr Turner to be evaluated amongst a range of others. That is evident from the emails to which reference has been made. For example, the email dated 20 July 2018 indicated that Mr Turner still wanted 'my showroom or at least the $3.5m …' (see [23], above). And, by way of further example, it is consistent with what is contained in the email from Kieran Turner to Dennis Bluth sent on 22 February 2020 at 2:39 pm (see [67(1)], above) – namely: '… while I would prefer the showroom I think a bird in the hand is worth two in the bush so let's write to them and collect the $4m per contract on his personal guarantee and use court if necessary'. Further, it is also evident from the fact that the plaintiff sold the site in 2015, and it was only subsequently, as part of the resolution of the first Gateway proceedings in February 2017, that the plaintiff secured the interest in the Central Land that was the subject of the option deed. In my view these matters give proper context to the 'attachment' that Mr Turner had to the site." 1. Boyded would have made the decision about rescission based on Mr Turner's assessment of the most financially advantageous position: "[73] I am satisfied, and find, that the most likely scenario but for the negligence of Mr Bluth is that the plaintiff would have rescinded the deed. My reasons for making that finding are set out in what follows (see [74]ff, below). Shortly stated: I am satisfied that whilst Mr Turner (and thus the plaintiff) did have a preference for the car showroom, that preference was not a fixed one. Rather, the decision about whether to rescind the deed, I am satisfied, would most likely have been driven by Mr Turner's assessment of what he considered to be the most financially advantageous position for the plaintiff – which, given the uncertainty in Mr Turner's mind surrounding the financial position of the Gateway entities, I consider would have favoured Mr Turner rescinding the deed in May 2020. I turn now to explain my reasons for the finding that I have made. … [76] Secondly, my assessment of Mr Turner, and his evidence, is that he was a rather savvy businessman, and I am quite satisfied that he would – undoubtedly – have pursued an outcome that was the most financially advantageous to the plaintiff. I base that finding upon the way in which Mr Turner dealt with, in emails, the negotiations that were being conducted but also upon my assessment of his oral evidence. For example, when cross-examined about his dealings (and the negotiations) in connection with the first Gateway proceedings, it was put to Mr Turner that he had 'lost all confidence' in the Gateway entities settling, to which his response was: 'definitely not. It's just a game, gamesmanship. That's all it was' and he had earlier described his involvement in the negotiations as him 'equally playing a game on my side … It's a common strategy I use in business, to be honest'." 1. Mr Turner had concerns about the financial position of Gateway which would have caused Boyded to have rescinded and demanded the money in May 2020: "[77] Thirdly, and overlapping somewhat with the third matter raised above, the financial position of the Gateway group was a cause for some concern to Mr Turner. Indeed, it was these concerns – albeit that they were based upon what Mr Turner had seen reported in the media – that led him to send the text message to Mr Bluth on 20 July 2018 requesting that a caveat be lodged over the Central Land. To that end, in the period from around July 2018, I am satisfied that he held those concerns, based upon what he had read in the media. In my view this was likely to be the most significant consideration determining why the plaintiff would most likely have rescinded the deed, rather than negotiated an extension to it: I am satisfied that this points to the likelihood of Mr Turner recognising what the plaintiff submitted was 'the commercial reality'; that is, he held concerns about the financial position of the Gateway entities and, relatedly, whether the development would proceed." 1. Whilst Boyded originally had a preference for the car showroom, contemporaneous emails sent by Mr Turner in 2019 and 2020 demonstrate that by May 2020 that preference had changed: "[68] The plaintiff particularly relied upon the email sent on 22 February 2020 at 2:39pm (see [67(1)], above) – but, for context, I have set out the surrounding emails. In my respectful view the email responses that Mr Turner received to his specific requests or questions were somewhat opaque and indirect. In any event, it is I find apparent that Mr Turner's responses were consistent with him not being cognisant (or fully cognisant) of the consequences of what had transpired – namely, that the deed had been terminated by the Gateway entities because a caveat had been lodged over the Central Land and that the plaintiff had no rights at all under the option deed: I accept, as the plaintiff submitted, Mr Turner's knowledge was 'slightly rudimentary' and he had 'not quite grasped' the significance of what had occurred. In my view, the emails sent by Mr Turner on 11 and 12 December 2019 (see [65], above), and his email dated 29 October 2020 (see [69], below) reinforce this. Thus, to the extent it was suggested by the defendant, by reference to his affidavit at par 70, that the response that Mr Turner provided in the email sent on 22 February 2020 at 2:39pm was coloured by the fact that it was provided against the backdrop of the anticipated litigation and the dispute that had arisen in connection with the deed, I do not accept that submission: I am satisfied that Mr Turner had no proper understanding of the ramifications of what had occurred. Absent that understanding, the email does not evidence a change of position by Mr Turner that reflected him knowing that the showroom was 'lost'. In my view, the opposite is so – namely, it confirms that Mr Turner did not have a fixed position relating to the car showroom. … [81] In my view, the material (specifically, the email communications) that lend objective contemporaneous support for rescission are the emails dated 12 December 2019 sent at 9:05am (see [65(2)], above) and the email dated 22 February 2020 sent at 2:39pm (see [67(1)], above). I consider them to be the most significant given their proximity to the call option expiry date." 1. These emails were more reliable and informative evidence than the statements in paragraph [85] of Mr Turner's affidavit: "[80] Fifthly, although the defendant sought a finding that the most likely scenario was an extension of the deed – relying upon Mr Turner's evidence in par 85 of exhibit B – in my view the attitude and conduct of Mr Turner, as reflected in the material to which reference has been made, is likely to be the most reliable and informative evidence rather than any reconstruction assembled some years after the event in the context of the current litigation: Chappel v Hart (1998) 195 CLR 232; [1998] HCA 55 at [32] (fn 64); Effem Foods Pty Ltd v Lake Cumberline Pty Ltd (1999) 161 ALR 599; [1999] HCA 15 at [15]; Fox v Percy (2003) 214 CLR 118; [2003] HCA 22 at [31]." See also [81]. 1. The trial judge was unpersuaded that paragraph [85] in Mr Turner's affidavit reflected the most likely scenario: "[82] Sixthly, in relation to Mr Turner's evidence in par 85 of exhibit B more generally, I am unpersuaded that it reflects the most likely scenario, but for the negligence of the defendant. In this respect, I note the following: (1) Although the evidence in that paragraph was that Mr Turner 'would have taken steps to try and renegotiate' to extend the call option period, the evidence said nothing about the period of any extension that might have been pursued. As I have earlier noted, the defendant submitted that that extension would have been for 3 years. I do not accept that submission. When cross-examined about this, Mr Turner's evidence (which I accept) was a categorical denial of the proposition that he would have agreed to an extension of the deed for 3 more years following the expiry of the call option date. That denial – specifically on the second occasion when Mr Turner was cross-examined about this – was quite emphatic, and it was to the effect that he would not have entertained the idea of any extension for that length of time. The evidence he gave was quite credible, in my view, and entirely consistent with the recorded concerns about the financial situation that had been reported, by way of example. I would here observe the following: the basis upon which the defendant sought this inference (and finding) that there would have been an extension for a 3 year period was not identified. Given I have accepted Mr Turner's evidence on this topic, it is unclear on what basis this inference could possibly be drawn. It is, perhaps, possibly based on the notion that I should not accept Mr Turner's evidence on this topic – but even if that was so, a rejection of his evidence would not prove the opposite: Gauci v Commissioner of Taxation (Cth) (1975) 135 CLR 81, 87; [1975] HCA 54; Steinberg v Commissioner of Taxation (Cth) (1975) 134 CLR 640, 684 and 694; [1975] HCA 63." 1. Even if Mr Turner had tried to negotiate an extension, his optimism that Gateway would have agreed was speculative: "[82(3)] Further, I do not consider the suggested optimism expressed by Mr Turner about renegotiating (par 85(a)) to tell against the finding I have made. In my respectful view, Mr Turner's 'optimism' is largely based (if not entirely) upon the negotiations that were had in connection with the first Gateway proceedings, some 3 years prior. I am not satisfied that the outcome in that proceeding, and Mr Turner's involvement in any negotiations, reliably informs what might have occurred in a different – and later – context. Further, to the extent that Mr Turner based that optimism upon his role in the original property sales in 2015/2016 (par 85(a)), the affidavit provided no details at all about what this involved. (I note, separately, that not only did the defendant, and Mr Bluth in particular, act for the plaintiff in connection with each of the sales (exhibit B, par 21), but the plaintiff had two agents appointed for them in connection with the sale – namely, Colliers International and Matrix Property Group: so it is by no means clear what Mr Turner had in mind in this part of his evidence where he refers to as negotiating 'directly', and Mr Turner was not cross-examined about this issue). In those circumstances, I am not prepared to infer that Mr Turner's optimism was soundly based: in my respectful view it is speculative." The appellants' submissions: Grounds 1 - 3 1. HWLE contends that his Honour erred in drawing the inference that Boyded would have rescinded the deed in May 2020 and that he ought instead to have inferred that it would have extended the call option. In such circumstances, HWLE maintains that Boyded's all or nothing case fails for want of causation of loss. Mr Turner's sentimental attachment to the site 1. Despite Mr Turner's evidence that he had a strong sentimental attachment to the site and that it was Boyded's "spiritual home", his Honour concluded that such sentiment did not significantly inform the likelihood that an attempt to negotiate for an extension would have displaced a decision to rescind. HWLE submitted that there was a tension between that conclusion and Mr Turner's evidence where he identified his sentimental attachment as the specific reason why he would have exercised the call option if he was able to do so. HWLE conceded that to some extent "these are matters of degree" but that his Honour "did not give appropriate weight" to Boyded's sentimental attachment to the site. Boyded's financial interests 1. HWLE conceded that this is the other side of the coin and also a question of degree. It is not in dispute that Mr Turner is a savvy businessman or that one of the considerations for him in deciding whether to rescind would have been Boyded's financial interests. The essence of this submission is simply that his Honour got the balance wrong. Gateway's financial position 1. It was not in contest that from 2018, Mr Turner was concerned about the financial position of Gateway. His Honour considered that such concern would have been the main reason why Boyded would have rescinded in May 2020: it was directly linked to the prospect that the development would ever proceed. Mr Turner's concern about Gateway's viability was relevant not just to whether the development would proceed but also to its ability to make an immediate payment of $3.5 million. In that sense, there was no factor that exclusively or predominantly informed the "commercial reality" urged by Boyded in the court below. In addition, Mr Turner's affidavit referred to the fact that the car showroom would appreciate in value over time, suggesting or implying a commercial preference for capital appreciation. 2. HWLE's submission at paragraph 40 should also be noted: "40. Mr Turner's evidence is also important for what it does not say. Nowhere does Mr Turner say that his decision about whether to rescind would have been affected by a concern about Gateway's financial ability to carry out the development or deliver the Car Show Room. In fact, nowhere does Mr Turner say that he had such a concern. On the contrary, when Mr Turner was informed about Gateway's financial difficulties in July 2018, he did not doubt the completion of the development but instructed the Appellants to lodge a caveat to protect the Respondent's ability to get the Car Show Room in the future. In paragraph 70(a) of his Affidavit Mr Turner says that as late as 22 February 2020 he thought he could get the $3.5m now and still negotiate for the car showroom in the future, which presupposed an expectation that the development would be completed. This is an important matter. In paragraphs 84, 85 and 86 of his Affidavit, Mr Turner specifically addresses the counterfactual and the matters which would have informed his decision. If a concern for completion of the development and delivery of the Car Show Room would have been a matter relevant to the decision in May 2020, Mr Turner would have said so. Nor did he say so in cross-examination." 1. HWLE submitted that his Honour erred by finding that in May 2020 Mr Turner would have subjectively formed the view that it was in the financial interests of Boyded to rescind and claim the $3.5 million because of concerns about whether the development would be completed. Contemporaneous emails 1. Mr Turner's original preference was for the car showroom. His Honour found that the preference was not "fixed" or "immutable". The question is whether that preference would have changed by May 2020 had HWLE's negligence not led to Gateway's termination. 2. HWLE emphasised that Mr Turner's written preference was, up until 7 August 2019, for the car showroom and not the money. It was submitted that the 7 August 2019 email evinces the attitude that Mr Turner would have maintained up until May 2020 if their negligence had not intervened. Even in his 22 February 2020 email, Mr Turner expressed a preference for the car showroom but proposed seeking the money instead. Boyded placed the greatest weight on the 22 February 2020 email as it was closest in time to the rescission date. His Honour found that these emails demonstrated that Mr Turner's original preference changed. 3. HWLE submitted that his Honour erred in making the finding about why Mr Turner's preference changed. In paragraph 70(a) of his affidavit Mr Turner directly addressed the reason for his 22 February 2020 email and what was to be inferred from it about his newly expressed preference for the money: even though his email said he would "prefer the showroom", he thought that making an offer to Gateway to take the money instead might be a way to resolve the dispute about Gateway's termination. 4. HWLE also submitted that paragraph 70(a) is important for what it does not say: there is no mention of any concern for Gateway's financial position or non-completion of the development. Mr Turner said that he would still try to get the car showroom which HWLE submitted was irreconcilable with his Honour's finding that Mr Turner was concerned that Gateway would not complete the development. 5. HWLE contends that Mr Turner's change in preference was directly caused by HWLE's negligence. The emails written after the dispute arose on 8 August 2019 are not capable of supporting his Honour's conclusion about what would have happened in May 2020 if they had not been negligent. Moreover, the emails are the only evidence that supports his Honour's conclusion that Boyded would have rescinded in May 2020 apart from Mr Turner's evidence in cross-examination. Emails vs Mr Turner's affidavit 1. HWLE submitted that paragraphs 84, 85 and 86 of Mr Turner's affidavit are contrary to the inference drawn by his Honour about what he would have done in May 2020. His Honour concluded that the emails on 11 and 12 December 2019, 22 February 2020 and 29 October 2020 were more reliable and informative. HWLE submitted that these emails lack probative value on the question of what would have happened but for the negligence and cannot be a better guide than Mr Turner's affidavit, especially paragraph 85. It was submitted that the statements in paragraph 85 should be viewed as admissions and given primacy over the emails. Paragraph [85] not the most likely scenario 1. Mr Turner expressly confirmed in cross-examination that paragraph 85 was true. Even so, his Honour found that Mr Turner's statement in paragraph 85, that he would have tried to negotiate an extension of the call option, did not reflect the most likely scenario. His Honour said that this was because Mr Turner's evidence "said nothing about the period of any extension that might have been pursued". Mr Turner said, and his Honour accepted, that whether he would have extended would have depended upon the length of the extension. Mr Turner said that he would not have extended for three years. Mr Turner did not identify any other circumstances in which he would not have extended, implicitly allowing for the possibility that there would be other circumstances in which he would have extended. His Honour's rejection of a three year extension did not foreclose the possibility that Mr Turner would have sought an extension of less than three years. If Mr Turner's evidence allowed of the prospect that any other extension might have been considered, Boyded's all or nothing case fails. HWLE submitted that even if Boyded, who bore the onus, proved that a three year extension would not have been considered, it did not prove that there would not have been any extension. 2. HWLE submitted that, given Mr Turner's evidence in paragraph 85, his Honour ought to have found that in May 2020 he would not have rescinded the deed and thereby abandoned any prospect of acquiring the car showroom, but would instead have sought an extension of some period less than three years. Would Gateway have agreed? 1. HWLE contended that his Honour's finding that Mr Turner's optimism that he could have successfully negotiated an extension was speculative and was not the correct question in any event. His Honour should instead have addressed the question of whether Gateway would have agreed. Mr Turner's optimism is relevant but not determinative. 2. HWLE submitted that, on the hypothetical question being considered, Boyded would have sought an extension. Gateway's alternatives would have been to make an immediate payment of $3.5 million or to agree to an extension. HWLE submitted that "on any view" it would have been in Gateway's interests to agree to an extension, regardless of how long it might have been. His Honour accepted that Gateway would have been "attracted to an extension" but identified no reason why it would not have done so. It was submitted that his Honour should have found that Gateway would have agreed to an extension. Consideration 1. HWLE's appeal is based upon a review of his Honour's findings and inferences of fact. The critique of his Honour's decision is largely framed as a subjunctive analysis that urges this Court to consider his Honour's conclusions in terms of what he should have found or what weight he should have given to particular evidence. It is also based upon a cognate review of what, in a competition between alternative hypotheses, Mr Turner, and hence Boyded, would have done. To the extent that the task required his Honour retrospectively to choose between or among several possibilities, there was always scope for different opinions about the outcome. In order to succeed, HWLE must demonstrate that his Honour's choice was factually erroneous. 2. The scope and limitations of such an appeal where they concern findings based on credibility and demeanour are well-known. In Lee v Lee (2019) 266 CLR 129; [2019] HCA 28, the majority explained at [55]: "A court of appeal is bound to conduct a 'real review' of the evidence given at first instance and of the judge's reasons for judgment to determine whether the trial judge has erred in fact or law. Appellate restraint with respect to interference with a trial judge's findings unless they are 'glaringly improbable' or 'contrary to compelling inferences' is as to factual findings which are likely to have been affected by impressions about the credibility and reliability of witnesses formed by the trial judge as a result of seeing and hearing them give their evidence. It includes findings of secondary facts which are based on a combination of these impressions and other inferences from primary facts. Thereafter, 'in general an appellate court is in as good a position as the trial judge to decide on the proper inference to be drawn from facts which are undisputed or which, having been disputed, are established by the findings of the trial judge'…" 1. In the present case, his Honour found at [73] (set out in full above at [47]) what Boyded would have done but for HWLE's negligence. That finding was explicitly based on his Honour's assessment of Mr Turner's evidence and his Honour's impression of him as "a rather savvy businessman … [who] would – undoubtedly – have pursued an outcome that was most financially advantageous to" Boyded. 2. His Honour made similar findings with respect to Mr Turner's evidence concerning the question of whether he would have negotiated an extension of three years or more rather than rescinding the deed. His Honour described Mr Turner's "categorical denial" of that possibility as "quite emphatic" and "quite credible". 3. As Boyded has emphasised, in order for HWLE to succeed on these grounds of appeal, it must point to some glaring improbability in his Honour's finding or to some compelling inference to which the finding is contrary. HWLE has not sought to do this, instead comparing and contrasting his Honour's findings with evidence that might conceivably support a different conclusion. Boyded submitted in this context that it is "telling" that the list of seven matters described as the basis for his Honour's findings (see at [48] above), and the discussion of those matters in written submissions, omits any reference to his Honour's express reliance on his assessment of Mr Turner's oral evidence. Boyded submitted that this approach, in effect, disregards the well-accepted advantages that his Honour enjoyed in watching and "feeling" the case unfold (see Fox v Percy (2003) 214 CLR 118; [2003] HCA 22 at [23]), seeing Mr Turner give evidence and forming an assessment of his credibility and demeanour. 4. Somewhat unusually, although not uniquely, Mr Turner's credibility did not fall to be assessed by reference to competing evidence from other witnesses called by HWLE. On the contrary, the assessment of Mr Turner's credibility required consideration of what HWLE sought to portray as irreconcilable differences, or at least inconsistencies, in his account suggesting on the one hand that he would have rescinded the deed in May 2020 or instead sought an extension on the other hand. That task had to be performed by reference first to anterior correspondence between Mr Turner and others, secondly to his affidavit evidence, particularly at paragraphs 84 to 86, and thirdly to his oral evidence at the trial. His Honour's decision that Boyded would have demanded payment of the $3.5 million in May 2020 pursuant to cl 14.2 of the Deed of Call Option necessarily had to account for what HWLE maintained was Mr Turner's expressed preference for something different. 5. In such circumstances, his Honour was not confronted with a question of who between or among several witnesses to believe. Rather, his Honour was required to assess Mr Turner's evidence given at the trial in light of the uncontroversial fact that Boyded's all or nothing case depended upon its acceptance. It was HWLE's contention that the significance of that fact should have decisively informed his Honour's finding. In stark terms, that his Honour could not draw a legitimate inference that Mr Turner would have rescinded the deed because his affidavit, which he confirmed was true, suggested something quite different and by the time Mr Turner came to be cross-examined he well understood that fact. 6. However, despite the fact that Mr Turner was not in terms confronted with that proposition, it is clear that his Honour accepted Mr Turner's evidence that his apparently contradictory reference to negotiating to extend the option was always tied or subject to understanding the reasons why Gateway would have failed to satisfy the conditions listed in cl 2.9(a)(i)-(iii) of the deed before the call option expiry date on 15 May 2020. The lodgement of the fateful caveat was a manifestation of Mr Turner's concern about Gateway's financial troubles. His Honour accepted that Mr Turner was a skilful businessman whose sentimental attachment to Boyded's spiritual home would never prevail over raw commercial interests. It was in effect Mr Turner's evidence that if Gateway's failure to satisfy the conditions by 15 May 2020 itself bespoke or foreshadowed problems in the long term, he would have been uninterested in negotiating an extension. His Honour was in my opinion perfectly entitled to accept that evidence, in particular Mr Turner's unchallenged insistence when he said, "I would need to know why the conditions weren't fulfilled to make a decision": see [27] above. I am fortified in that conclusion by the fact that, in answer to the suggestion that he had not in his affidavit said that his apparent willingness to extend the option would depend on how long the extension would be, Mr Turner somewhat emphatically responded, "But of course it does". 7. I am unable to discern error in the way his Honour accepted Mr Turner's evidence about what he would have done if 15 May 2020 had arrived and the deed was still on foot. Grounds 1, 2 and 3 of the appeal should be dismissed. Grounds 4, 5 and 6 1. Having found that Boyded would have rescinded in May 2020 and that payment would have been due in June 2020, his Honour proceeded to determine whether the lost commercial opportunity to receive $3.5 million had any value at that time. His Honour addressed two considerations, namely Gateway and Mr Fayad's willingness to pay and their ability to pay. His Honour found that they were both willing and able to do so and that accordingly Boyded's lost opportunity had some value. His Honour did not consider whether the lost opportunity had some value at any time after May/June 2020: Boyded's all or nothing case meant that there was no allegation that the lost opportunity had any value after that time. His Honour approached this issue upon the basis that Boyded had to prove on the balance of probabilities that the lost opportunity had some value, being not a negligible value, or that there was a substantial prospect of acquiring the benefit sought: see Sellars v Adelaide Petroleum NL (1994) 179 CLR 332; [1994] HCA 4. HWLE's submissions – willingness to pay 1. The only matter identified by his Honour that supported Gateway's willingness to pay was the absence of any defence to Boyded's hypothetical claim: judgment at [102] – [103]. HWLE submitted that that fact alone did not warrant the conclusion that Gateway would have been willing to pay. The Gateway entities were special purpose vehicles established solely for the purpose of undertaking a profitable development on the land. Payment would have depended upon whether they intended to proceed with the development at the time payment would have had to be made, and whether an obligation to pay an extra $3.5 million would have affected that intention. His Honour found that the development was being pursued in the second half of 2019 but there was no evidence relating to any time after that. In May 2022 the land was listed for sale. At some stage between late 2019 and May 2022, Gateway decided not to proceed with the development. 2. HWLE submitted that on the evidence, Gateway's willingness to pay in May/June 2020 had been left as a matter of conjecture. Boyded had to prove willingness to pay. HWLE submitted that his Honour erred in making the finding that Gateway would have been willing to do so. 3. So far as Mr Fayad was concerned, HWLE submitted that His Honour found that Mr Fayad would have been willing to pay because there was no defence to the claim on the Guarantee and Mr Fayad subsequently took steps to defend bankruptcy proceedings arising from a judgment debt of approximately $10 million. 4. HWLE submitted that neither matter demonstrated a willingness to pay. Conclusion – willingness to pay 1. In my opinion, both Gateway and Mr Fayad would have been willing to pay $3.5 million in May or June 2020, if they had had the ability to do so, and his Honour made no error in concluding that they would have been so willing. The amount in issue as a fraction or percentage of the total project cost, or of the cost of acquisition of the land, even before the development costs are taken into account, was small. As Boyded contends, it is in my view singularly improbable that the commercial opportunity represented by the prospect of developing prime commercial sites acquired at significant cost would have been allowed to fail by risking liquidation or bankruptcy for the want of payment of the sum in question. It is well to remember that the Deed of Call Option was itself the product of a commercial response to litigation arising out of the original conveyance of the land. In that sense, the conditional obligation to pay $3.5 million was an unexceptionable cost of doing business. I consider that was reasonable for the primary judge to have inferred that Gateway and Mr Fayad would each have factored that cost into consideration at the time the deed was executed and, all things being equal, would have been more than willing, when faced with the potential consequences of not doing so, to discharge the obligation that they had originally assumed and which was still a continuing commercial reality in May 2020. But that willingness had to be accompanied by the ability to pay. His Honour's reasoning - ability to pay 1. It is convenient at this point to recall the way in which his Honour reasoned to his conclusion that Gateway and Mr Fayad had the ability to pay in May or June 2020: "[107] The plaintiff relied upon a number of matters that were argued to support a finding that the Gateway entities and/or Mr Fayad had the ability to pay $3.5 million at the relevant time. It is necessary to deal separately with the Gateway entities and Mr Fayad. [108] Put very simply, in relation to the Gateway entities, the plaintiff argued that the ability to pay was an inference to be drawn from the value of the property holdings of the Gateway entities (and the Gateway companies more generally) and consideration of the balance sheet of the Gateway entities, which was submitted to demonstrate an ability of those to draw and fund their obligations. [109] The defendant, on the other hand, in connection with the Gateway entities, pointed out a range of matters which it submitted demonstrated that they had no ability to pay …: that they were companies with issued share capital of $100, and were established as special purpose vehicles for these developments; their sole director was Mr Fayad; that although the development consent for the North, Central and South Land was granted on 9 August 2017, little physical work occurred on any of the land; that Mr Turner had seen a number of newspaper articles that caused him to have some concern about the financial position of the Dyldam group; the Chief Commissioner of State Revenue lodged a caveat, in October 2018, against the Central Land for unpaid tax; in May 2022, agents were appointed to sell the three parcels of land and, in fact, they were sold in March 2023; on 6 April 2023, Mr Fayad appointed administrators to the Gateway entities; and, on 8 May 2023, the Gateway entities were placed into liquidation. … [111] In my view, the value of the property held by the Gateway companies (which had been purchased for $150 million in 2015 and 2016) is significant (and, as I later explain, a basis for finding 'ability to pay': see [115], below): indeed, those properties were, as at May 2020, valued at $159 million - a valuation that the defendant expressly accepted. In this respect the plaintiff submitted that it was appropriate to deal with the South, North and Central Land as a single lot given that the lots were owned by 'Gateway companies', and given that the proposal involved a single development application and development consent over those lots. (I would also add: the settlement of the first Gateway proceedings reflects this reality as well - the proceedings involved the North and South Land, but the resolution extended to creating an interest in the Central Land). The defendant did not advocate against such an approach, and in fact adopted it. The plaintiff submitted that it followed, from a development site of that value, a likely ability to borrow money and, more fundamentally, a valuable asset. [112] I do not accept the defendant's submission that, of itself, the Gateway entities' ability to pay should not be inferred merely because little work had commenced across the site or because, as the defendant also submitted, it was 'clear that the development was not being pursued by 2018 at the latest' … [113] Nor do I accept that the newspaper articles tell against the finding that I later make (see [115], below) about the Gateway entities' ability to pay: as I have earlier noted, I am not prepared to act upon a newspaper article as a basis to infer, and find, inability to pay. The position is not otherwise because Mr Turner expressed concerns about the financial position of the Gateway entities, having read those articles. [114] The defendant also pointed out that each of the three lots were triple mortgaged. Although the fact that the properties were encumbered is of some potential importance (albeit not unexpected), its importance is significantly diminished by the fact that there is no evidence about the degree to which they were encumbered under those mortgages. To the extent that, as the defendant submitted, this demonstrated in fact an inability to secure further finance, I do not accept the submission. Again, absent knowing more about the extent of the encumbrances under the mortgages, I consider it would be conjecture to infer that this would stultify any ability to borrow against the land. [115] In any event, it is important to be precise. The Central and South Land were owned by the Gateway entities, and the North Land was owned by Gateway Parramatta One Pty Ltd and Gateway Parramatta One Commercial Pty Ltd. The North Land was purchased for $91 million. Aside from the fact that the property was submitted to be 'triple mortgaged' (see [114], above), there is no other financial information about those entities (the summary balance sheet - exhibit F - that the plaintiff relied upon was concerned only with the Gateway entities, not with these Gateway companies: see [117], below), nor was any submission directed to why, in and of itself, the ownership of the North Land was anything other than an asset of considerable value. In my view that is its correct characterisation, as the plaintiff submitted, and I am satisfied and find that it demonstrates 'an ability to pay'. And, to be clear, (consistent with the approach of the parties: see [111], above), I accept and find that the 'ability to pay' by the Gateway group demonstrates an 'ability to pay' by the Gateway entities. [116] The plaintiff also argued that as part of the resolution of the first Gateway proceedings, a number of Gateway entities (which included - the pleadings were not in evidence - at least one of the purchasers of the Central Land, being Gateway Parramatta Two Pty Limited) paid, following their resolution in February 2017 and the orders made by White J on 17 February 2017, approximately $2.8 million. This was submitted to be some evidence of the ability to pay as at May/June 2020. I respectfully disagree. In my view, of itself, that payment is too distant to be a proper basis upon which to infer an ability to pay some 3 years later. [117] The plaintiff next submitted that the Gateway entities, evident from the summary of the balance sheets, had a demonstrated ability to draw and fund their obligations in the period leading up to 30 June 2020 (and, if there is a difference, there was a demonstrated ability to borrow and repay amounts which were owing). The plaintiff submitted that the ability to do so renders it likely - indeed probable - that the amount that it (hypothetically) would have been owed by the Gateway companies (and guaranteed by Mr Fayad) in consequence of the rescission of the deed would have been paid to it. (It should be noted that this involves the present issue of fact, but also the subsequent one - viz., assessing the value of the lost opportunity: as to which see [131]ff, below). At a minimum, the plaintiff submitted that the inference to be drawn, having regard to the 'total' column contained within exhibit F was that although the total non-current liabilities had not significantly changed across the periods 2017-2020, the inference to be drawn is that there had been refinancing - thus an ability to obtain finance. The plaintiff also argued that this balance sheet showed a demonstrated ability to borrow and repay amounts which were owing, thereby negativing any inference that there was an inability to pay the debts as and when they fell due. [118] The defendant submitted that little, if anything, could be drawn from the balance sheet - but that, to the extent one could rely upon it, it demonstrated that the Gateway entities had limited equity, something that was evident from the total current and non-current liabilities. [119] In my view, the balance sheet demonstrates, in the Gateway entities, some ability to borrow and pay its expenses as and when they fell due and that this is some evidence supportive of the overall finding that I have made - namely, that the Gateway entities had an ability to pay. [120] As against the Gateway entities, therefore I am satisfied and find that the loss of opportunity had some value, not being a negligible value. [121] The plaintiff argued, in connection with Mr Fayad, that he too had an 'ability to pay', and was likely to do so - albeit accepting that not 'a great deal' was known about the financial position of Mr Fayad. The plaintiff relied upon the fact that: (a) Mr Fayad had significant personal land holdings and, therefore, an ability to lend money to the Gateway entities or, as he had guaranteed their obligations under the deed, to himself meet the obligation or otherwise procure the payment of $3.5 million; and, (b) Mr Fayad had loaned the Gateway entities approximately $14 million, suggesting that he was a man of some means. The evidence about the 'significant personal land holdings' was confined to a land tax assessment notice dated 22 January 2020. [122] In relation to Mr Fayad, the defendant argued that he had been the subject of bankruptcy proceedings 'which have been ongoing for some years', and drew attention to the litigation that resulted in a judgment being entered against him, on 1 November 2021, for $9,978,620.39 (B. & G. Properties Pty Limited v Fayad [2021] NSWSC 1382. On 22 July 2022, an appeal by Mr Fayad was dismissed: Fayad v B & G Properties Pty Ltd [2022] NSWCA 129). Subsequent to that judgment being entered, on 14 January 2022, a creditor's petition was served by B & G Properties Pty Ltd and as at 29 June 2023, the creditor's petition remained extant - albeit that other creditors have become involved. These matters of fact were argued by the defendant to demonstrate that Mr Fayad 'has been in the same perilous financial circumstances' as the Gateway entities, and therefore was not likely to pay $3.5 million if a demand had been made upon the Guarantee contained in the deed … To the extent that this submission was said to demonstrate the position as at 2023, I accept it; to the extent that this submission was said to demonstrate the position in June 2020, I do not accept it. In relation to that last point in time, the submission did not develop precisely why the position in 2023 resulted in the same finding in 2020. Further, in relation to the proceedings resulting in the judgment being entered in November 2021, the basis for those proceedings was not in evidence (only the fact that there were proceedings and that a judgment in the identified amount resulted). Again, the basis to infer that, by June 2020, Mr Fayad would have been unable to meet a claim made upon him as guarantor under the deed was not explained. I am not prepared to draw that inference. [123] The defendant also submitted that it was not possible to infer an ability to pay based upon the land holdings of Mr Fayad in 2020. The defendant submitted that the material relied upon by the plaintiff demonstrated very little, essentially because it was submitted that the 'court book is full of caveats and mortgages'. Neither side made any specific submissions about the significance of that material (the defendant provided a schedule with the references to those caveats and mortgages), although the defendant submitted that there was an absence of evidence about equity and an absence of evidence of ability to borrow. [124] The plaintiff's submissions on this were largely (but not exclusively) directed to the property described as Mr Fayad's principal place of residence - at … Constitution Hill. In relation to that property, there is some evidence about the unimproved value of the land (an average value of $1.3 million over 2018, 2019 and 2020). Mr Fayad is recorded to have a 50% ownership of that property. The defendant, as I have noted, pointed out that there were a range of caveats, as well as mortgages over that property… [125] It should be noted that there was no evidence of the improved value of the property as at June 2020, or indeed at any time. [126] The defendant's essential submission, as I have earlier noted, is that the above material demonstrated that Mr Fayad had no ability to pay - with the consequence that the plaintiff lost nothing of value: in the language of Sellars (at 355) whatever might be said to have been lost was 'negligible'. I respectfully disagree. In my view, the evidence supports an inference - that I draw - and my finding is that there was at least some value in the property, as at June 2020. My further finding is that Mr Fayad did have an 'ability to pay' and accordingly the plaintiff did lose an opportunity of value. My reasons for those findings are as follows. [127] The unimproved value of the land was averaged, over a 3 year period, at $1.3 million. From the registered interests on title, as set out in [124], above, the following should be noted. First, there was a caveat securing a charge over the property (involving Sam and Maria Fayad) in the amount of $1,389,088.16 as at 24 September 2019. That caveat was not withdrawn at any point, nor is there any evidence that the sum secured changed at any point. Secondly, the caveat supporting the mortgage with VADO005 Pty Ltd (the value of the mortgage was not in evidence) was withdrawn on 2 June 2021, and I infer that this occurred because the mortgage was discharged. Thirdly, there were two other caveats lodged - on 22 June 2020 and 24 June 2021 - albeit that the value of those interests that were secured by the caveat was not the subject of evidence. The second of those caveats (the one lodged on 24 June 2021) was subsequently withdrawn on 20 January 2022. Based upon this material, and in the absence of evidence about the improved value of the land it is difficult to know what equity, if any, was available in connection with the property. [128] However, there is some evidence that, in my view, permits an inference to be drawn that there was equity in connection with this property and an ability to pay more generally: a caveat in support of a mortgage was lodged, albeit shortly after the time for payment following the rescission of the deed (12 June 2020) would have passed. Further, a mortgage was discharged and, later, the property was further encumbered by way of mortgage in the amount of $1,267,000.76 on 24 December 2021. That is, notwithstanding what the defendant submitted was a title that was 'full of caveats and mortgages', Mr Fayad was able to use the property as further security for this amount (in addition to the amount of $1,389,088.16, earlier secured and in addition to the amount secured by the caveat lodged on 22 June 2020). The time period thus broadly corresponds with the period of assessing the plaintiff's loss (and the period following which there would likely have been a resolution: see [138], below), and I am satisfied that this material demonstrates that Mr Fayad's financial position was not the dire one that the defendant argued. [129] The plaintiff further submitted that Mr Fayad's ability to pay - in broad terms - was established by the fact that he had the capacity to loan Gateway Parramatta Two Pty Limited in excess of $14 million (exhibit F) and was an asset of corresponding value. In my view, this evidence is also supportive of the overall finding that I have made - namely, that Mr Fayad had an ability to pay. [130] As against Mr Fayad, therefore I am satisfied and find that the loss of opportunity had some value, not being a negligible value." HWLE's submissions – ability to pay 1. His Honour found that Gateway would have been able to pay in May/June 2020. That finding was based on two items of evidence only: 1. Gateway owned the land which was valued at $159 million; and 2. the summary of the balance sheet in Exhibit F. 1. His Honour viewed the Gateway group as a whole for the purpose of considering the implications of ownership of the land. HWLE accepts that this was the correct approach if the relevant Gateway obligors were willing to pay (and to call upon their related entities gratuitously to assist) but not otherwise. 2. His Honour held that the fact that the Gateway group owned the land was a significant reason supporting an ability to pay $3.5 million. His Honour accepted that ownership of valuable land demonstrated an ability to borrow. 3. HWLE submitted that ownership of land implies an ability to borrow only if the land can be given as security for the new debt. Security cannot be given unless the landowner has equity. In this case, each parcel of the land was subject to three mortgages. His Honour accepted that that fact was "of some potential importance (albeit not unexpected)". However, his Honour considered that "it would be conjecture to infer that this would stultify any ability to borrow against the land" because there was no evidence about the degree to which the land was encumbered under the mortgages. In taking that approach, HWLE submitted that his Honour reversed the onus of proof. Boyded had argued that Gateway's ownership of the land demonstrated an ability to borrow and that the existence of the triple mortgaging was a not unexpected matter of public record, yet Boyded did not adduce evidence to demonstrate that Gateway had any equity, let alone equity which was sufficient for new borrowing to fund a payment of $3.5 million in May/June 2020. As his Honour said, the position was left as a matter of conjecture. HWLE submitted that, without more, the mere fact that Gateway owned the land did not support the finding that it had the ability to pay in May/June 2020. 4. Boyded relied upon the summary balance sheet in Exhibit F which is appended to these reasons as a schedule. By reference to the "total" columns, his Honour accepted that Exhibit F demonstrated some ability to borrow and pay expenses when they fell due and that that was some evidence of an ability to pay. 5. However, HWLE submitted that Exhibit F's demonstration of an ability to borrow $3.5 million in May/June 2020 did not rise above the level of speculation. Gateway's assets, both current and non-current, were static year on year from 2017 to 2022. The current liabilities were static until 2020 when they increased. The non-current liabilities were generally increasing. Overall, Gateway always had a significant deficiency in net assets which consistently deteriorated year on year. Only one transaction is apparent from Exhibit F, which is an evident refinance between 30 June 2019 and 30 June 2020 when PAG via NAP was replaced by Global Portfolio Trading. None of the various other loans which were extant as at June 2019 was repaid as a part of the refinancing. HWLE submitted that the fact that there was existing debt did not demonstrate an ability to take on new debt. On the contrary. 6. HWLE emphasised that Boyded had to prove on the balance of probabilities that the lost opportunity to seek $3.5 million from Gateway had some value. HWLE submitted that, on the evidence, it failed to do so, and that his Honour erred in finding otherwise. 7. As for Mr Fayad's ability to pay, his Honour accepted that not a great deal was known about Mr Fayad's financial position. His Honour nonetheless drew an inference that he had the ability to pay $3.5 million. A land tax assessment showed that Mr Fayad's principal place of residence had an unimproved capital value of $1.8 million in 2020. However, there was no evidence of the improved value and the property was heavily encumbered. His Honour noted that it was difficult to know what equity Mr Fayad may have had in the property but held nonetheless that there was evidence that supported an inference that Mr Fayad had some equity and an ability to pay more generally. 8. HWLE submitted that the evidence upon which his Honour relied did not prove that Mr Fayad had any equity in the property as at May or June 2020 and that the evidence was to the opposite effect. Significantly, Mr Fayad did not pay his land tax assessment in 2020 or in 2021. HWLE submitted that a failure to pay land tax is indicative of a lack of means to meet the most elementary of financial obligations. Unpaid land tax is a first ranking encumbrance on land: s 47(1) of the Land Tax Management Act 1956. 9. The summary of the Gateway balance sheet in Exhibit F contained a line item that shows Mr Fayad made a $14 million loan to Gateway before 30 June 2017, which remained in subsequent years. His Honour held that the capacity to make that loan was evidence that Mr Fayad had the ability to pay in May or June 2020. HWLE submitted that no such inference could be drawn from that evidence standing alone. HWLE's submission was that the fact that Mr Fayad was able to lend Gateway a substantial amount of money in 2017 said nothing about his financial position in 2020. 10. HWLE contended that the correct approach to the assessment of the absence of evidence in this case is the approach taken by the Court in Miles v Luneburger Franchising Pty Ltd [2021] NSWCA 248 at [81] and [88] per Gleeson JA: "[81] Given the absence of evidence in relation to whether the Agent could and would have obtained an order for reinstatement of MJ Chatswood, the conclusion to be drawn on the evidence is that the value of the lost opportunity to obtain the benefit of the fee payable under the agreement for collecting the debt owed by MJ Chatswood was so low as to be regarded as negligible or speculative: Sellars at 350; Badenach at [39]. For this reason, Mr Miles has failed to prove on the issue of causation that the Agent lost an opportunity of some value. … [88] In my view, there was no error by the primary judge in finding that there is no evidence to establish that there was any real chance of enforcing any judgment obtained against the two directors." 1. No evidence was adduced in that case about the ability to recover from the company or the guarantors' ability to pay. There was an evidentiary vacuum. The Court held that the plaintiff had not proved that any loss had been caused by the breach of contract: in the absence of any evidence about the ability to recover, the conclusion to be drawn was that the value of the lost opportunity to obtain the benefit of the contingent fee was so low as to be regarded as negligible or speculative. Boyded's submissions – ability to pay 1. It is sufficient for present purposes to observe that Boyded embraced these findings and conclusions. In addition, Boyded's written submissions in response included the following summary with respect to the ability of Gateway and Mr Fayad to pay $3.5 million: "[30] It is also important when assessing the likelihood of whether Boyded would have been paid the $3.5 million to keep in mind where the onus lies and what the onus requires. Boyded bore the legal onus of proving its case on the balance of probabilities – including whether it was more likely than not that the $3.5 million would have been paid to it. In discharging this onus, however, Boyded was not required to disprove every competing hypothesis according to which it might not have been paid the money, and to thereby establish that it certainly would have been paid: see Bradshaw v McEwans Pty Ltd (1951) 217 ALR 1, 5 (Dixon, Williams, Webb, Fullagar and Kitto JJ); Placer (Granny Smith) Pty Ltd v Theiss Contractors Pty Ltd (2003) 77 ALJR 768; [2003] HCA 10, [41] (Hayne J, Gleeson CJ, McHugh, and Kirby JJ agreeing). All that was required was that Boyded's case rise above mere conjecture or surmise: Bradshaw, 5. As in Berry v CCL Secure Pty Limited (2020) 271 CLR 151; [2020] HCA 27, [29] and [39] (Bell, Keane, and Nettle JJ) and [65]-[66] (Gageler and Edelman JJ), the evidentiary onus, once Boyded's case rose to that level, shifted to HWLE; see also Placer, [41] (Hayne J). [31] Further, Boyded's success in discharging its onus was required to be assessed having regard to its position with respect to the relevant information: Placer, [37] (Hayne J) and [75] (Callinan J). In this respect, it should be kept in mind that what was in issue was the capacity of third parties (the Dyldam Group, the Gateway entities, and Mr Fayad) to pay – third parties against which Boyded had previously litigated twice and which were not in its control or camp. Financial records, with significant limitations, were obtained on subpoena. Further, the question of ability to pay or willingness to pay arose in circumstances in which, because of HWLE's negligence, the occasion for Boyded to seek payment never arose and the question of proof is of what would have occurred in a hypothetical. In those circumstances, HWLE bore the evidentiary onus of showing that otherwise trading corporations with valuable assets, and a guarantor with apparently valuable assets, would have been … unable to satisfy their obligation to pay $3.5 million to Boyded." 1. Finally, Boyded made the following submissions in aid of the contention that HWLE's arguments involved a reversal of the onus of proof: "40. First, [HWLE] suggests that the primary judge's reliance on the Gateway group's ownership of the land, in circumstances where each parcel was triple mortgaged, involved a reversal of the onus of proof because the equity available as security for borrowing is unknown. But this submission mistakes what Boyded was required to prove. The possibility that, despite its ownership of valuable land, the Gateway group would be prevented from borrowing any further money against that land is precisely the kind of competing hypothesis which Boyded was not required to disprove in order to succeed – a fortiori in circumstances where further information about the equity position in respect of the land was well-beyond its control (see paragraphs 30 and 31 above). It is not mere conjecture to suggest that companies owning nearly $160 million worth of land would be able to raise the relatively small sum of $3.5 million by security over those assets – but it is mere conjecture to assume … that the presence of existing securities over the land would preclude the possibility of any further borrowing. That is why the primary judge correctly held at J[114] … that 'absent knowing more about the extent of the encumbrances under the mortgages … it would be conjecture to infer that this would stultify any ability to borrow against the land' (emphasis in original). 41. Secondly, [HWLE] asserts that the summary balance sheet in respect of the Gateway entities … does no more than provide a basis to speculate as to the ability to borrow $3.5 million in May 2020 in circumstances where the assets were static, the current liabilities were static until 2020 when they increased, and the non-current liabilities were generally increasing. That submission, however, downplays the significance of the fact that the balance sheet demonstrates an ability of the Gateway entities to obtain finance, refinance, borrow money, and pay expenses. This is what the primary judge found… Once again, the suggestion … that despite these matters, including repaying other liabilities and increasing loans, the Gateway entities would not have been able to manage raising $3.5 million in order to pay Boyded is a competing conjecture which Boyded is not required to disprove. 42. Thirdly, [HWLE] seek to raise, incorrectly, multiple competing conjectures to be disproved by Boyded with respect to Mr Fayad's ability to pay (if called upon to do so as guarantor). As the primary judge explained at J[128], however, the history of encumbrances (and their removal) over Mr Fayad's principal residence exposes some ability on his part to use that land to raise money. Similarly, his substantial $14 million loan to one of the Gateway entities … was evidence of financial capacity. It is not for Boyded to disprove some alternative hypothesis sought to be advanced by HWLE to the effect that Mr Fayad's apparent ability to raise money had run dry by May 2020." Consideration The Gateway entities 1. In my opinion, his Honour was not correct to find that there was evidence rising higher than speculation or surmise that Gateway or Mr Fayad had the ability to pay the $3.5 million in May or June 2020. My reasons for coming to that view are as follows. 2. Boyded's contentions, regarding HWLE's criticisms concerning the so-called reversal of the onus of proof, in my view erroneously proceed upon the assumption that Boyded had in fact led sufficient evidence from which Gateway's or Mr Fayad's respective abilities to pay could be inferred. HWLE submitted that, despite its ownership of valuable land, Gateway would be prevented from borrowing further money. Boyded argued that this was a "competing hypothesis" that it "was not required to prove in order to succeed". I disagree. It is, on the contrary, the very thing that Boyded was itself required to demonstrate before the inference for which it contended could be drawn. In my opinion, his Honour's error was too readily to draw the inference of an ability to pay when the material available to him in Boyded's case did not support it. 3. Exhibit F is at the heart of Boyded's case concerning Gateway's ability to pay. It is described as the Gateway Balance Sheet but it only deals with the positions of Gateway Parramatta Two Pty Ltd and Gateway Parramatta Two Commercial Pty Ltd, the registered proprietors of 57 and 63 Church Street, Parramatta. There is no equivalent balance sheet for Gateway Parramatta One Pty Ltd and Gateway Parramatta One Commercial Pty Ltd, the registered proprietor of 83 Church Street Parramatta, the most valuable of the three parcels. All of the properties are encumbered with mortgages to the same three companies, Amber Bright Development IV Limited, Global Capital Prospect VII Limited and Global Asia Opportunity IX Limited. These mortgages were recorded on the respective titles to the three parcels of land on 3 October 2019, simultaneously discharging prior mortgages. 4. None of the mortgages is in evidence. The term of the mortgages is not known, nor is the interest rate or the amount secured. It is not known whether the mortgages are fully drawn or whether there is some capacity to draw down further funds without the need to revert to the mortgagee. His Honour noted Boyded's submission that a development site valued at $159 million supported a likely ability to borrow money on the security of the land and that ability to borrow corresponded to proof on the balance of probabilities of an ability of the companies to pay. It is hardly controversial that the extent to which ownership of a valuable land asset informs the owner's ability to use it to access funds is directly related to the owner's equity. I am unable to accept that the value of encumbered land is a relevant integer in the debt to equity equation without an understanding of the extent of the debt which the land secures. 5. Nor is the fact that the figures in Exhibit F regularly change any indicator of the companies' respective or combined ability to draw and hence their ability to pay $3.5 million. Unaided by any expert accounting analysis, a perusal of Exhibit F suggests that the two companies to whose financial position it relates at all times either alone or in aggregate had liabilities which exceeded their assets. That does not necessarily mean that they lacked the capacity to borrow further funds. The difficulty for Boyded, however, and the difficulty with his Honour's reasoning, is that no inferences in favour of the existence of an ability to pay $3.5 million can reliably be drawn on the material that was before his Honour. I am unable to agree with his Honour's conclusion at [119] that "the balance sheet demonstrates, in the Gateway entities, some ability to borrow and pay its expenses" or that "this is some evidence supportive of the overall finding that … the Gateway entities had an ability to pay [$3.5 million]". Contrary to his Honour's conclusion, the balance sheet does not in my opinion show a demonstrated ability to borrow and repay amounts which were owing, thereby negativing any inference that there was an inability to pay debts as and when they fell due. 6. There was no evidence before his Honour about the income of the companies. It appears to be the accepted position that they were special purpose vehicles and that the only income likely to be generated depended on the exploitation of the land as development sites. That fact standing alone does not derogate from Boyded's ability to rely upon the companies' balance sheet as support for the alleged existence of their ability to pay. However, in the absence of any information about income, the only significant source of any positive change to the companies' debt to equity ratio would be capital gains in the value of fixed assets over time. The balance sheet shows that the value of 57 and 63 Church Street remained constant from the date of purchase. It follows that, so far as the evidence before his Honour said anything about it, the companies' ability to pay $3.5 million was always dependent upon their capacity to refinance. 7. It will be recalled that at [117] his Honour referred to Boyded's submission that at a minimum, the inference to be drawn from the "total" column contained within Exhibit F, was that, although the total non-current liabilities had not significantly changed across the periods 2017-2020, there had been refinancing. That may be accepted. Boyded argued that this showed a demonstrated ability to borrow and repay amounts which were owing so that no inference of an inability to pay debts arose. However, Exhibit F also shows that the companies' total equity reduced between 30 June 2017 and 30 June 2020 from ($1,571,111) to ($9,099,410). That may not reveal the whole picture, but in the absence of information suggesting that the companies would have been able to borrow a further $3.5 million, the inference drawn by his Honour that they could have done was, with respect, speculative and not open on the evidence. In particular, the companies' deteriorating net equity position would suggest a diminishing capacity to refinance on the security of 57 and 63 Church Street rather than the reverse. 8. As I have recorded above, Boyded submitted that it is not mere conjecture to suggest that companies owning nearly $160 million worth of land would be able to raise the relatively small sum of $3.5 million by security over those assets. However, in much the same breath, Boyded also submitted that it is mere conjecture to assume that the presence of existing securities over the land would preclude the possibility of any further borrowing. This reasoning is difficult to follow. A complete understanding of the value of the land and the extent of borrowings secured over the land is of equal significance to both questions. Boyded's contention, and his Honour's finding at [114], that "absent knowing more about the extent of the encumbrances under the mortgages … it would be conjecture to infer that this would stultify any ability to borrow against the land" inconsistently discounts the importance of knowing the actual extent of the encumbrances. Boyded's case was beset by an evidentiary vacuum. An understanding of the companies' ability to borrow more and of their ability to pay $3.5 million depends upon the same thing, about which the evidence is silent. The suggestion and the assumption are informed by the same facts and are equally conjectural. His Honour's preference for one over the other was therefore erroneous. 9. I have so far not referred to the position concerning 83 Church Street, owned by entities different to 57 and 63 Church Street. It is common ground that this property is also security for the obligations of other corporate entities and that their financial position is relevant to the issue of Gateway's ability to pay $3.5 million in May or June 2020. No information, such as that contained in Exhibit F, about the financial position of the registered proprietors of 83 Church Street in mid-2020 was in evidence. The property secures obligations under three registered mortgages but the details of the mortgages or the extent of the companies' indebtedness is entirely absent. This is significant inasmuch as 83 Church Street is the most valuable of the three properties and it is clear that his Honour took Gateway's ownership or control of this property into account in drawing the inference that Gateway had the ability to pay. However, mere ownership of valuable but mortgaged land does not reliably inform the availability of that inference. Mr Fayad 1. His Honour dealt with Mr Fayad's ability to pay at [121] to [129] of his judgment (set out above at [80]). 2. His Honour noted that it was difficult to know what equity Mr Fayad may have had in his Constitution Hill residence but held nonetheless that there was evidence that supported an inference that Mr Fayad had some equity and an ability to pay more generally. 3. In my view, as HWLE submitted, the evidence upon which his Honour relied did not prove that Mr Fayad had any equity in the property as at May or June 2020 and that the evidence was to the opposite effect. Mr Fayad did not pay his land tax assessment in 2020 or in 2021. As submitted, such a failure to pay land tax is indicative of a lack of means to meet the most elementary of financial obligations. 4. Exhibit F contains a line item that shows Mr Fayad made a $14 million loan to Gateway before 30 June 2017. That loan remained undischarged as late as 2023. His Honour held that the capacity to make that loan was evidence that Mr Fayad had the ability to pay in May or June 2020. I am unable to accept that, without more, any such inference can be drawn from that evidence. I accept HWLE's submission that the fact that Mr Fayad was able to lend Gateway a substantial amount of money in 2017 says nothing about his financial position in 2020. 5. In short, the inference that Mr Fayad had any ability in mid-2020 to pay $3.5 million, relying upon his capacity to borrow that amount based on his property holdings and his debt to equity ratio, cannot be sustained in light of the paucity of evidence to support it. As his Honour observed at [127], "in the absence of evidence about the improved value of the [Constitution Hill] land it is difficult to know what equity, if any, was available in connection with the property." Evidence that Mr Fayad was apparently able from time to time to refinance debts secured over the property is inadequate support for the inference that his Honour was prepared to draw. 6. In this respect it should be noted, as Boyded appears to accept, that his Honour erroneously concluded that the Constitution Hill property was further encumbered on 24 December 2021 in the sum of $1.267 million. In fact, the transaction was a transfer of an existing encumbrance to which the property was always subject. Conclusion 1. In my view, the evidence does not support a finding on the balance of probabilities that Gateway or Mr Fayad had the ability to pay $3.5 million on May or June 2020. It follows that the appeal should be allowed and that Boyded should be ordered to pay HWLE's costs. Cross-appeal 1. By its notice of cross-appeal filed on 30 October 2023, Boyded contended that his Honour should not have discounted the damages he awarded from the full amount of $3.5 million to which they would have become entitled upon rescission of the deed in May 2020. Boyded argued that his Honour erred in holding that Boyded's loss was limited to $2 million when, having found that Boyded would have instructed HWLE not to lodge a caveat and that it would have rescinded the deed, and having found that each of the Gateway entities and Mr Fayad had an ability to pay the full amount, his Honour ought to have held that Boyded's loss caused by HWLE's negligence was $3.5 million. However, having regard to the conclusion I have reached on the appeal, it is unnecessary to deal with this issue. 2. It follows that the cross-appeal should be dismissed with costs. Orders 1. The orders I would propose are as follows: 1. Allow the appeal. 2. Set aside orders 1 and 2 made on 11 August 2023 and, in lieu thereof, dismiss the Amended Statement of Claim with costs. 3. Dismiss the cross-appeal. 4. Order the respondent/cross-appellant to pay the appellant/cross-respondent's costs of the appeal and of the cross-appeal. Schedule (106427, pdf) ********** Amendments 07 May 2024 - Change to description of parties in orders 3 and 4 made pursuant to the Slip rule. 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: 07 May 2024