Court of Appeal Supreme Court New South Wales Medium Neutral Citation: Sanpoint Pty Ltd v V8 Supercars Holding Pty Ltd [2019] NSWCA 5 Hearing dates: 25 May 2018 Decision date: 07 February 2019 Before: Beazley P; Macfarlan JA; Leeming JA Decision: Appeal dismissed with costs. Catchwords: CONTRACTS — Construction — Interpretation — whether primary judged erred in construction of commercial contract — whether respondent undertaking contractually required tender process was required to disclose status of ongoing negotiations with a third party to appellant — standard of disclosure and relevant time of disclosure required by contract CONTRACTS — Breach of contract — Standards of contractual duty — whether primary judge erred in finding no breach of commercial contract by respondent — whether contract correctly construed required respondent to disclose to appellant status of third party negotiations during due diligence period — whether respondent breached contractual requirement to disclose CONTRACTS — Remedies — Damages — Loss of chance — whether respondent's failure to disclose to appellant an offer made by third party caused the appellant to lose a chance to sell its rights under a contract at a substantially higher price CORPORATIONS — Directors and officers — Disclosure requirements — where there are common directors of two companies – whether knowledge acquired by one director in course of acting for one company will be imputed to the second company Cases Cited: Badenach v Calvert (2016) 257 CLR 440; [2016] HCA 18 Bradshaw v McEwans Pty Ltd (1951) 217 ALR 1 Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8 Re Hampshire Land Company [1896] 2 Ch 743 Re Marseilles Extension Railway Company (1871) LR 7 Ch App 161 Sellars v Adelaide Petroleum NL (1994) 179 CLR 332; [1994] HCA 4 V8 Supercars Holdings Pty Ltd v Lucas Dumbrell Investments Pty Ltd [2014] NSWSC 1391 Texts Cited: R P Austin, Company Directors: Principles of Law & Corporate Governance (LexisNexis Butterworths, 2005) Category: Principal judgment Parties: Sanpoint Pty Ltd (Appellant) V8 Supercars Holdings Pty Ltd (First Respondent) Australian Motor Racing Partners Pty Ltd (Second Respondent) Representation: Counsel: C R C Newlinds SC; B K Koch (Appellant) P Braham SC; T E O'Brien (First and Second Respondents) Solicitors: Shanahan Tudhope (Appellant) Deutsch Miller (First and Second Respondents) File Number(s): 2017/298772 Decision under appeal Court or tribunal: Supreme Court Jurisdiction: Equity Citation: V8 Supercars Holdings Pty Ltd v Sanpoint Pty Ltd [2017] NSWSC 1043 Date of Decision: 10 August 2017 Before: Robb J File Number(s): 2014/254679 [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] In 2011, Sanpoint Pty Ltd ('Sanpoint') and V8 Supercars Holdings Pty Ltd ('V8 Holdings'), entered into Racing Entitlement Contract ('REC'). Sanpoint paid $1,386,957.56 for rights under the contract, including the right to race a vehicle in the V8 Supercars Championship organised, inter alia, by V8 Holdings and V8 Supercars Australia Pty Ltd. There were 28 such contracts with individual entities including Sanpoint, each of which was referred to in its respective contract as a Team. Clause 5.1(d) of the REC provided that should a Team fail to submit an Entry Registration Form for the following year's racing events by 1 December, the Team surrendered its rights under the contract on the first day of the following year for subsequent sale by V8 Holdings in accordance with cl 10 of the REC. Clause 10 provided that in the event that a Team was required to surrender its rights under the contract, V8 Holdings 'will ensure that the price paid for the Rights is as commercially advantageous as possible having regard to the current market situation by offering the [REC] to the market by tender'. Sanpoint did not submit a Registration Form for the following year by 1 December 2013 and thus surrendered its rights under the REC as of 1 January 2014. Two other Teams also failed to register for the following years events and accordingly surrendered their rights under their respective RECs. In June 2014, V8 Holdings invited expressions of interest by way of tender for the three surrendered RECs. The due diligence period commenced on 18 July 2014 and the closing date for bids was 1 August 2014. By 8 July 2014, five people had registered their interest in the three RECs, two of whom were companies that surrendered them. However the tender closed on 1 August 2014, with no bids having been received. Both prior to and during the tender process V8 Holdings and Archer Capital Ltd – corporations that had some directors in common – were discussing options for a corporate restructure of V8 Holdings. In August 2014, subsequent to the tender process closing, the board of V8 Holdings, acting as agent for Sanpoint, sold Sanpoint's REC to one of V8 Holdings' related companies for $20 000, which was 1.4 per cent of the original purchase price paid by Sanpoint. The negotiations between V8 Holdings and Archer Capital Ltd continued, and in October 2014, resulted in an agreement whereby Teams would receive a 'Grid fee' paid out by V8 Holdings. Though that fee was not fixed, it was designed such that the value of rights under a REC would considerably exceed $20 000 per annum. Pembroke J determined by way of a separate question that cl 10 required V8 Holdings to engage in a tender process in order to ascertain what price for rights under a REC would be 'as commercially advantageous as possible having regard to the current market situation', but did not require V8 Holdings to sell the rights by tender. There was no appeal from Pembroke J's judgment. The principal issue before the primary judge, Robb J, was whether V8 Holdings had breached cl 10 by not disclosing to bidders that there were negotiations with Archer Capital to restructure V8 Holdings. However, given that no agreement as to the restructure had been reached during the course of the tender process, his Honour did not consider it necessary to determine whether V8 Holdings breached a contractual obligation by failing to disclose the fact of the negotiations. On appeal, the principal issues were: 1. Whether, as a matter of construction, cl 10.1(b) of the REC required V8 Holdings to disclose to potential bidders information regarding the potential restructure; 2. Whether the primary judge erred in failing to find that V8 Holdings breached cl 10.1(b) of the REC by failing to disclose to potential bidders information regarding the potential restructure, including information known to V8 Holdings' directors and members of its board and information that became available after the commencement of the due diligence period; 3. Whether the primary judge erred in failing to find that V8 Holdings breached cl 10.1(b) of the REC by conducting a tender process where the period between the tender closing and the next motor racing season commencing was too short to permit participation in the season; and 4. Whether the primary judge erred in failing to find that Sanpoint had established, on the balance of probabilities, that it suffered actual loss. The Court (Beazley P, Macfarlan JA, and Leeming JA) held, dismissing the appeal: In relation to issues 1 and 2 (i) The respondent was under an obligation to disclose to potential bidders the fact that Archer Capital Ltd had made a firm offer in May 2014 to V8 Holdings regarding the restructure. Such an offer was activity in the market that was likely to have had an impact on the decisions of a potential bidder, and therefore had to be disclosed: [73]-[85]. (ii) And as a matter 'inextricably linked' to that issue of the construction of the contract, the respondent breached cl 10 by failing to disclose Archer Capital Ltd's May 2014 offer. Re Marseilles Extension Railway Company (1871) LR 7 Ch App 161 referred to. Re Hampshire Land Company [1896] 2 Ch 743 referred to. Bradshaw v McEwans Pty Ltd (1951) 217 ALR 1 applied. In relation to issue 3 (i) The appellant failed to adduce evidence to substantiate the submission that the period between the tender closing and the next motor racing season commencing was too short to permit participation in the season. The ground of appeal failed: [95]-[96]. In relation to issue 4 (i) The appellant failed to adduce evidence that the losses it suffered were caused by the respondent's breach of the contractual disclosure obligations. As such, the ground of appeal failed: [114]-[118]; [120]. Sellars v Adelaide Petroleum NL (1994) 179 CLR 332; [1994] HCA 4 referred to. Badenach v Calvert (2016) 257 CLR 440; [2016] HCA 18 applied. Judgment 1. THE COURT: This is an appeal from a decision of Robb J dismissing a cross-claim brought by the appellant, Sanpoint Pty Ltd (Sanpoint), against the respondents, V8 Supercars Holdings Pty Ltd (V8 Holdings) and Australian Motor Racing Partners Pty Ltd (Australian Motor Racing Partners), in which Sanpoint sought declaratory relief in respect of a contract dated 2 June 2011 between it, V8 Holdings and others and damages for breach of that contract: V8 Supercars Holdings Pty Ltd v Sanpoint Pty Ltd [2017] NSWSC 1043. 2. In dismissing Sanpoint's cross-claim, his Honour held that there had been no breach of contract and that, in any event, Sanpoint had failed to establish that it was entitled to an award of damages. Background facts 1. In 2009, Sanpoint and V8 Holdings entered into what is known as a 'Racing Entitlement Contract', pursuant to which Sanpoint purchased, for $1,386,957.56, certain rights relating to the racing of a class of motor vehicles known as V8 Supercars in an event known as the V8 Supercars Championship. Sanpoint was one of a number of parties that had entered into a Racing Entitlement Contract. Holders of rights under those contracts are referred to as 'Teams'. Prior to 2011, the Teams held 75 per cent of the shares in V8 Holdings. 2. In 2011, the V8 Supercars Championship was restructured and each Team entered into a new Racing Entitlement Contract. Under the new arrangement, the Teams held 35 per cent of the shares in V8 Holdings and Archer Capital Ltd (Archer Capital) acquired 65 per cent of the shares. On 2 June 2011, Sanpoint entered into its new Racing Entitlement Contract with V8 Holdings, V8 Supercars Australia Pty Ltd (V8 Australia) and TouringCar Entrants Group Australia Pty Ltd (TEGA). It is the terms of this Racing Entitlement Contract that are in issue on the appeal. 3. Clause 1.1(b) of the Racing Entitlement Contract required Sanpoint to enter into the V8 Holdings Shareholders Agreement, which entitled Sanpoint to one class A preference share in V8 Holdings. 4. Pursuant to cl 3.2(a), V8 Australia undertook that there would be a maximum of 28 Racing Entitlement Contracts during the term of the contract. Each Racing Entitlement Contract was to relate to one car only. Clause 3.2(c) provided that a Team was entitled to enter one V8 Supercar in the V8 Supercars Championship. 5. Clause 5.1(d) required Sanpoint to submit an entry registration form to V8 Australia by 1 December each year as follows: "5. Team obligations 5.1 Provide support … (d) Subject to clause 5.1(e) the Team must (in respect of this Contract and each other subsisting Racing Entitlement Contracts to which it is a party) commit to enter a car to Compete in all Events (by submitting to [V8 Australia] an entry registration form in the form attached at Annexure 1 or otherwise approved by a Special Majority of the V8Holdings Board (Entry Registration Form)) by 1 December of each year of the Term for the following year. Time will be of the essence in relation to submitting the Entry Registration Form. Should the Team fail to submit to [V8 Australia] an Entry Registration Form in respect of this Contract by 1 December then the Team will surrender its Rights under this Contract on the first day of the following year for subsequent sale in accordance with clause 10 of this Contract." 1. Clause 10 governed the position if a Team was required to surrender its rights under cl 5.1(d) as follows: "10. Surrender of Rights 10.1 Surrender In the event that the Team is required by this Contract to surrender its Rights, the Team must do so on the following basis: (a) the surrender or a sale of the Rights will be administered by a Special Majority of the V8Holdings Board as agent for the Team in its absolute discretion; (b) V8Holdings will ensure that the price paid for the Rights is as commercially advantageous as possible having regard to the current market situation by offering the Contract to the market by tender; (c) V8Holdings may, in its absolute discretion, elect to compensate the Team for the surrender of its Rights for substantially the same price (with substantially the same conditions) as those negotiated with a proposed purchaser by tender (and will direct the Shares held by the Team to be transferred to its nominee); (d) any proceeds from the surrender or sale of the Rights will be paid by V8Holdings to the Team, less any costs incurred by V8Holdings. Costs incurred by V8Holdings may include advertising, administrative and legal costs and all other outlays; and (e) the amount paid and the names of the parties involved in the sale of the Rights will be entered in the Register by the V8Holdings Board." 1. Sanpoint did not submit an entry registration form by 1 December 2013. Accordingly, on 1 January 2014, it surrendered its rights under its Racing Entitlement Contract (pursuant to cl 5.1(d)), in order that they be put for sale in accordance with cl 10. Two other Teams also failed to submit entry registration forms by 1 December 2013 and, similarly, surrendered their rights for sale. 2. The tender of the three Racing Entitlement Contracts was discussed at meetings of V8 Australia's board in January and March 2014. However, no substantive action was taken until May 2014. On 4 May 2014, V8 Australia's board discussed concerns about the financial sustainability of a number of the Teams. On 20 May 2014, Roland Dane, a Teams representative and a member of V8 Holdings' board, sent an email to the other members of the board, stating that: "Given that any potential purchasers of these [Racing Entitlement Contracts] will need to work on sponsorship arrangements for 2015, I believe that we now need to offer these [Racing Entitlement Contracts] for sale by tender as per Clause 10.1(b). Therefore I propose that … we go to tender as soon as practical with a view to having a closing date [no] later than 30th June." 1. The day before, on 19 May 2014, Mr Dane had sent an email to Rishabh Mehrotra, who was a director of both Archer Capital and V8 Holdings, stating that: "There is extreme short term fragility around three or four [Racing Entitlement Contracts] as well as high 2015 risk around those and others … The team owners are clear in their expectation that [Brad Jones, another Team representative] and I arrive at a mutually equitable solution with Archer, on their behalf, in the next few weeks for their consideration. Therefore, I would ask that you forward to us both your proposal for a restructure as a matter of urgency so that we can try and reach a conclusion as quickly as possible and, not only avoid cars ceasing to compete, but also start the rebuilding process of making the category attractive enough for potential new [Racing Entitlement Contract] investors." 1. Mr Mehrotra replied to Mr Dane, stating that "we think we have a structure that could make sense for all". 2. As found by the primary judge at [173], [243] and [337], it appeared that by 27 May 2014, Archer Capital had made a proposal that would have guaranteed payments to each Team of $400,000 gross for the coming seasons, compared with the amount of $208,116 estimated gross for the 2014 season. On that date, Mr Dane sent an email to Mr Mehrotra, in which he said: "Further to our discussion last week, I've spoken further to [Brad Jones] and taken a couple of soundings. We won't get enough support for the proposal discussed to get up. 75% is necessary. The figures are too far away. You're aware of my original thoughts and if we can't do something closer to that then we will have to move on unfortunately." 1. The substance of the proposal referred to in this email is to be found in an email from James Warburton, the CEO of V8 Australia, to Greg Minton of Archer Capital, which is set out below at [17]. 2. Following this, V8 Holdings' board and Anthony Hogarth, V8 Holdings' general counsel, exchanged a series of emails regarding the tender process. As the primary judge found at [164], "it had become accepted that the tender process was to be completed before any corporate restructure". 3. On 29 May 2014, Mr Hogarth communicated with a representative of Ernst & Young, which was engaged by V8 Holdings to advise on the tender process. Mr Hogarth advised that "we are keen to conduct the required tender as soon as possible, and I am receiving increasing pressure from the board to start the process". He added: "At the same time, and this is subject to complete confidentiality, a restructure of the shareholdings of V8 Supercars Holdings Pty Limited is being considered and there is now an urgency to deal with the 3 surrendered [Racing Entitlement Contracts] in advance of such restructure. There is an interest in having 26 competing [Racing Entitlement Contracts] for 2015." 1. On 3 June 2014, Mr Warburton emailed Mr Minton as follows: "As discussed this morning the Teams deal has got to a point on the following basis:- • 10% of the field handed their [Racing Entitlement Contracts] back last year • 7 x [Racing Entitlement Contracts] are at risk (could be boy that cried wolf) for 2015 • Contractually we need 26 (we are getting by on 25 this year) • Ford are pulling out (still desperately trying to stop them) • Teams are burning about $1 mill in losses per car • Competitive threat from GT's and FOM as well as 7 • Teams deal is a good one - $400k plus tyre and fuel about $600k of value (worth $45 mill of EBIT @35%) • Having teams locked in for 6 years good for us - stability and kills competitive threat • Without strong teams we have no show to promote or sell • They give up tag along and drag along rights - good for exit • We own the business 100% We need to break the deadlock/stalemate and bring them along (assuming we want to do the deal). Roland says he wants $600K plus fuel and tyres, he would settle closer to $500K or we could shape it. We must have good and sustainable teams to get the right result in the exit and there must be a deal to be done that suits both parties before we all take our chances. Happy to discuss more." 1. Subsequently, discussions took place between V8 Holdings' board and Ernst & Young, which was engaged to advise on the tender process. One issue those discussions addressed concerned what information should be disclosed to potential bidders. By 18 June 2014, V8 Holdings' board had decided upon a two week period for registrations of interest and a two week period for due diligence. On 23 June 2014, Sanpoint was informed that, commencing on 24 June 2014, its Racing Entitlement Contract would be tendered to the market. 2. On 24 June 2014, V8 Holdings published a press release inviting expressions of interest for the three Racing Entitlement Contacts. All registrations were to be submitted by 5pm on 8 July 2014. Bids were required to be received from eligible parties by 5pm on 1 August 2014. 3. During the tender process, V8 Holdings and Archer Capital remained in negotiations regarding the potential restructure. On 23 June 2014, Mr Warburton sent an email to Mr Mehrotra in which he summarised the position of the Teams and stated that: "So all in all, if you still have an appetite to do the deal for 100% of equity this is an area of significant risk we need to have a plan to solve and something I have actively stepped out of. I still recommend strongly that it gets done but that is your call." 1. In another email of 24 June 2014, Mr Warburton wrote to Mr Mehrotra as follows: "They need to know we are in the shit ie: 20 EBIT next year before they overplay the hand. Good to settle down and minimise risk but deal needs to work." 1. On 3 July 2014, Mr Warburton gave a presentation to the Teams in Townsville, which contained a financial projection for 2015 in the absence of a restructure agreement with Archer Capital that forecast "$20m EBIT @ 35% and 26 [Racing Entitlement Contracts] = $269,000 ($576,000 @ 75%)". The following potential scenarios were then identified: "1. Archer and Team Board reps to finalise negotiations on Teams deal Subject to Archer Agreement … 3. Fuel supply deal expanded for 2015 to include race fuel charges @ $21,250 additional saving per [Racing Entitlement Contract] … 4. Tyre Subsidy: • Current spend excluding test and wets per [Racing Entitlement Contract] $120,000 (includes test tyres) • Option A – Same Hard/Soft configuration (excluding test and wets) saves $38,500 per [Racing Entitlement Contract] (based on 26 [Racing Entitlement Contracts]) • Option B – 300 Hard tyres only (excluding test and wets) saves $71,250 per [Racing Entitlement Contract] (140 tyres at no cost) 5. Forgiveness of over distribution to date plus 2014 over distribution of approximately $100,000 DISTRIBUTION EQUIVALENT • Option 1 – Cash + 100% fuel + current tyres = $350,150 (EBIT equivalent $26.0m) • Option 2 – Cash + 100% fuel + hard tyres = $382,900 (EBIT equivalent $28.4m)" 1. On 4 July 2014, a copy of the proposed information memorandum to be included in the data room was forwarded by V8 Australia to Ernst & Young, requesting comments. 2. Richard Featherby of Ernst & Young replied: "We would perhaps limit the information on the implications of the Archer transaction to something like 'This may impact the financial arrangements for future years'." 1. By 5pm on 8 July 2014, only five people had registered their interest in the three Racing Entitlement Contracts, two of whom were companies that had surrendered their Racing Entitlement Contracts. 2. On 14 July 2014, Mr Hogarth sent an email to Mr Warburton in the following terms: "Given that the directors will be the ones that have to answer any legal claims from potential bidders and sellers (which seem likely given more threats from Dumbrell's lawyers this afternoon), I think they should review this. The danger is that there is something that they have knowledge of (eg – more relevant detail regarding the Archer/teams deal) that they don't disclose and we therefore need to give them the opportunity to include any information they're aware of." 1. The following day, Mr Hogarth sent an email to the directors of V8 Holdings, stating: "Legally, we need to ensure that all material information that can impact the value of the surrendered [Racing Entitlement Contracts] (including the V8 Supercars Holding shares) and that is known to board members, is disclosed to bidders." (emphasis in original) 1. Mr Hogarth set out the information he considered should be disclosed, including "any other information within the knowledge of directors which could affect valuation". 2. On 18 July 2014, the due diligence period commenced. The registered bidders were provided with access to a data room, which included a document titled "Tender Process and Rules" and an "Information Memorandum". The information memorandum referred to the potential restructure in the following terms: "Again, there are currently confidential discussions taking place between the Archer Capital funds and the teams which may result in the Archer Capital funds acquiring some or all of the teams' interests in [V8 Holdings] in return for a guaranteed annuity payment which is expected to be in excess of the current annual distribution made to teams. No further detail is currently available to [V8 Holdings] and there is no guarantee that any such acquisition will proceed or that it will result in higher annual distributions to teams. V8 Supercars continues to work to negotiate additional benefits for teams – including an extension and expansion of current race fuel supply benefits which are worth approximately $20,400 per [Racing Entitlement Contract] in 2014, and potential improvements to the race tyre benefits provided to teams as reflected in the above calculation. No detail is currently available on these negotiations." 1. The memorandum also contained the following information: "7. APPEARANCE MONEY PAID TO TEAMS … Appearance money is paid to teams net of amounts charged for the provision to teams of tyres, a catering hoecker and certain other deductions in respect of freight costs and prize money contributions, as detailed in the [Racing Entitlement Contract]. By way of example, the distributions per [Racing Entitlement Contract] (although not applicable to the Surrendered [Racing Entitlement Contracts]) for 2014 are: Gross annual cash distribution to teams based on 2014 budgeted annual [V8 Holdings] profit: $208,116 Less: Tyre charge: $119,851 Catering Hoecker: $18,246 Misc costs: $38,069 Plus: GST: $3,195 NET CASH DISTRIBUTION (2014): $35,145 The number of operating [Racing Entitlement Contracts] will impact the amount of the distributions, and the above 2014 distributions are based on there being 25 operating [Racing Entitlement Contracts] (that is, it does not take into account the 3 Surrendered [Racing Entitlement Contracts] which may become active in 2015)." 1. The gross annual cash distributions for Teams in the 2012, 2013 and 2014 financial years were stated to be $309,000, $142,500 and $208,116 respectively. The forecast of the gross annual cash distribution for the 2015 financial year was $279,760. 2. Registered bidders were invited to contact V8 Holdings if further financial information not set out in the memorandum or the data room was required. 3. On 21 July 2014, a document titled "V8 Supercars – Archer Portfolio Evaluation" was prepared for Archer Capital's internal purposes, which indicated that there would be 25, rather than 28, Racing Entitlement Contracts, and that each Racing Entitlement Contract would be entitled to an annual gross cash distribution of $450,000. 4. The tender closed on 1 August 2014 with no bids having been received (Red 37). On 3 August 2014 the following email exchanges took place between Mr Warburton and Mr Mehrotra: "[From Mr Warburton to Mr Mehrotra] I've been thinking over the weekend where things sit and the Board call next week. … So my view is we need to look at the modelling and the timing and put our best foot forward. Tell the Teams we will have a position by September 1 to formally put to them. … On the basis that we get a successful result from the RFP and $25 mill of EBIT the deal will be an incremental $25–50K on the above depending on what you think works for us, bearing in mind we should put our best foot forward and the more the better. There is nothing else to say or do. The above is option (a) or the teams can do nothing and take the chances. Our main advantage is we remove the negativity and force them all to commit and get on with it. … So your call, but I feel we need to lead and drive our position as a take it or leave it. [From Mr Mehrotra in reply to Mr Warburton] James – I've been thinking about the #s and $400k + fuel + tires discount is effectively $479 + CPI … I agree that we take the leadership on this vs having Roland push this. Question is given the current dynamics, how do we change this up. I could call him tomorrow and let him know our position, cancel the meeting for this week and set-up a team owners meeting at SMSP to put the offer in front of them. Let's discuss our tactics tomorrow." 1. On 6 August 2014, V8 Australia's board considered a memorandum prepared by Mr Hogarth, canvassing the options for dealing with the consequences of the tender. These options were to "allow time for bids to be funded", "negotiated [Racing Entitlement Contract] buy-back", "keep [Racing Entitlement Contracts] surrendered" and "unilaterally 'retire' the surrendered [Racing Entitlement Contracts]". The board came to the view that the three Racing Entitlement Contracts should be retained by V8 Holdings "at zero market value". 2. On 7 August 2014, Mr Dane emailed Mr Mehrotra, relevantly, as follows: "As agreed at our meeting yesterday, Brad Jones and I, on behalf of the Teams, have given due consideration to the restructure proposal that you outlined. We both appreciate the time and effort that you are giving this issue and want to work with you to achieve an outcome quickly. However, we don't feel able to take the proposal in its existing form to the Teams as it is extremely unlikely to be accepted. Without 75% acceptance by the Teams (effectively if six eligible [Racing Entitlement Contract] votes are not in favour) then we cannot proceed. As we indicated yesterday, we feel that it is imperative to get all the Teams to agree if at all possible. To that end we respectfully make the following proposal (which represents a very significant compromise on our original proposition some time ago) to you. Following this proposal, we also lay out the substantial concessions that we believe we can obtain from the Teams for you that will serve to not only strengthen the business of V8 Supercars itself but also add value to your shares and therefore, ultimately, your exit. Proposal: • $500k + GST cash payment per [Racing Entitlement Contract] per annum for a minimum of six years. • We will concede the CPI increase – which, at a fair estimate of 3% per annum equates to a saving to the business of over $6m. • Tyres (slicks) to be paid for by V8 Supercars, not the Teams. Wet tyres to be paid for by the teams at the same rate as 2014. Using the hard tyre only will reduce the costs considerably as has already been flagged. • Fuel – up to a limit of 15,000 litres per car per annum – to continue to be provided free of charge to Teams, with Teams paying for the distribution (as in 2014) up to a limit of $20k per car per annum. … • The number of events is capped at 16 per annum. … In exchange: • The Teams hand to Archer our 35% shareholding of the business and, by doing so, extinguish the tag along rights we hold. • The [Racing Entitlement Contract] is changed to allow it to still be a tradable asset for the holder but ONLY if the holder maintains a continuous racing programme. • Each [Racing Entitlement Contract] holder would have to enter for the following season by October 1st every year. • Failure to do so would result in the [Racing Entitlement Contract] automatically reverting to V8SC at the end of that racing season without any compensation to the holder. • V8SC would then be free to allocate/sell etc such a [Racing Entitlement Contract] to whomsoever it so pleases. … Any team that does not already have a full sponsorship roster for 2015 (and no team does at the moment) is fully engaged in trying to complete a budget for next year right now. By the middle of September it is already starting to become too late in most instances to make much material difference. Therefore, as we have been stating for many months, the timing around any agreement to restructure is paramount in ensuring that we have the best possible chance, as a business and a category, of maintaining 2015 entries at a level that doesn't expose V8 Supercars and the Sport to great risk. Let's work together to achieve an outcome without delay." 1. On 18 August 2014, Archer Capital made an offer to the Teams, which provided, inter alia, that the Teams would be guaranteed a payment of $500,000 cash plus GST for six years. This proposal assumed that the three Racing Entitlement Contracts the subject of the failed tender would be "cancelled", leaving 25 Racing Entitlement Contracts. 2. A proposal in substantially the same terms was presented to the Teams on 22 August 2014. On 27 August 2014, Mr Dane sent an email to Mr Mehrotra, informing him that the proposal had the support of all the Teams and that the Teams that V8 Holdings had previously been concerned would not race in 2015 "are now of the view that they will definitely commit and that this deal has made the difference to them". 3. The following day, on 28 August 2014, V8 Australia's board noted that "a conditional deal" had been reached. They also noted that: "There are a number of conditions precedent to this transaction, including a condition that there be only 25 [Racing Entitlement Contracts] in place next year. If the [Racing Entitlement Contract] was sold to any party wishing to race next year this condition would not be met and the transaction with Archer Capital would not proceed. No offers have been received for the [Racing Entitlement Contract] at any price. The board of V8Holdings is of the view that the value of the [Racing Entitlement Contract] is therefore unchanged since the tender process was held." 1. The board resolved that V8 Holdings, acting as agent for the Teams, would transfer Sanpoint's Racing Entitlement Contract and its share in V8 Holdings to Australian Motor Racing Partners for $20,000, which was approximately 1.4 per cent of the original purchase price paid by Sanpoint at the time it entered into the Racing Entitlement Contract in 2009. 2. The restructure did not proceed in accordance with the proposal of 22 August 2014. In October 2014, further negotiations between V8 Holdings, the Teams and Archer Capital took place, which resulted in a final agreement whereby, instead of receiving a guaranteed amount, the Teams would be paid a "Grid fee". The fee, to be split equally between each Team, was an aggregate equal to 46.15 per cent of the total distributions from V8 Holdings up to a maximum of $5.76 million. Issues on the appeal 1. On the appeal, Sanpoint's overarching complaint was that the primary judge erred in failing to find that V8 Holdings breached cl 10.1(b) of the Racing Entitlement Contract by failing to ensure that the rights under the Racing Entitlement Contract were sold for the most advantageous price possible: appeal grounds 1 and 2. This raised the following issues: 1. Whether, as a matter of construction, cl 10.1(b) of the Racing Entitlement Contract required V8 Holdings to disclose to potential bidders information regarding the potential restructure: appeal ground 5. 2. Whether the primary judge erred in failing to find that V8 Holdings breached cl 10.1(b) of the Racing Entitlement Contract by failing to disclose to potential bidders information regarding the potential restructure, including information known to V8 Holdings' directors and members of its board and information that became available after the commencement of the due diligence period: appeal grounds 3(a)-(b), 6, 7(a)-(b). 3. Whether the primary judge erred in failing to find that V8 Holdings breached cl 10.1(b) of the Racing Entitlement Contract by conducting a tender process where the period between the tender closing and the next motor racing season commencing was too short to permit participation in the season: appeal grounds 3(d), 4. 4. Whether the primary judge erred in failing to find that Sanpoint had established, on the balance of probabilities, that it suffered actual loss: appeal ground 9. 1. During the hearing, Sanpoint abandoned appeal grounds 3(c) and 8(a)-(b), in which it had contended that the tender process should have been open for a longer period of time. First and second issues on the appeal: the proper construction of cl 10.1 and breach for non-disclosure 1. Sanpoint contended that the primary judge erred in respect of the construction he gave to cl 10.1(b) of the Racing Entitlement Contract and in finding that there had been no breach of that clause. These two contentions are inextricably linked. Sanpoint contended that on its proper construction, cl 10.1(b) required V8 Holdings to disclose to potential bidders any information that was relevant to any decision a potential bidder might make as to whether to make a bid and, if so, at what price. Sanpoint submitted that that required V8 Holdings to disclose, both before and during the due diligence period, the status of negotiations with Archer Capital, including whether any offers had been made. If this argument is correct, V8 Holdings will have breached the contract, as, apart from disclosing the fact that there were negotiations, it did not disclose the status of the negotiations with Archer Capital from time to time. Primary judge's reasons 1. The question of the proper construction of the contract had been dealt with by Pembroke J as a separate question: V8 Supercars Holdings Pty Ltd v Lucas Dumbrell Investments Pty Ltd [2014] NSWSC 1391. His Honour, at [14], upheld the construction of cl 10.1(b) that was advanced by V8 Holdings, namely, that the primary obligation on V8 Holdings was to "ensure that the price paid for the Rights is as commercially advantageous as possible having regard to the current market situation". The manner in which this was to be done was "by offering the [Racing Entitlement Contract] to the market by tender". 2. His Honour, at [12], rejected the construction advanced by Sanpoint that the sale of the rights had to be by tender and by no other means. His Honour considered that V8 Holdings could sell to a party that had not submitted a bid provided that the price at which the rights were sold was as commercially advantageous as possible having regard to the current market situation. In this regard, the tender process was a means by which a price as commercially advantageous as possible could be ascertained. If no bids were received, V8 Holdings could still sell to a party who had not tendered, provided that the primary obligation of selling at a price that was as commercially advantageous as possible having regard to the current market situation had been observed. 3. There was no appeal from Pembroke J's judgment. 4. On the hearing before the primary judge, Robb J, at [45] and [47], identified the question in issue before him as being whether, in the events that had happened, V8 Holdings had complied with cl 10.1(b) and ensured that the price for the rights created by Sanpoint's Racing Entitlement Contract was as commercially advantageous as possible having regard to the current market situation by offering those rights to the market by tender. 5. His Honour referred, at [48], to V8 Holdings' submission that Sanpoint appeared to have argued its case on alternative bases. However, his Honour was satisfied, at [52], that the case as finally argued by Sanpoint was contained in para (8) of its written submissions as follows: "The tension between the two halves of clause 10.1(b) is resolved by accepting that the content of the tender must be such as to be conducive to it ensuring that the price paid is as commercially advantageous as possible. That is, V8 Holdings must conduct the tender in such a manner as to achieve a price as commercially advantageous as possible." 1. The primary judge considered, at [53], that the obligation created by cl 10.1(b) properly construed was that it created: "… a composite obligation whereby V8 Holdings must put the [Racing Entitlement Contract] to the market by tender in a manner calculated to ensure that the price offered is as commercially advantageous as possible having regard to the current market situation, and if it does that, whatever price is in fact offered by the highest bidder will be the price that satisfies V8 Holdings' obligation to achieve the result contemplated by the clause. In that way the focus of what must be ensured is the process rather than the outcome." 1. His Honour stated, at [54], that if his understanding of the final submissions of both parties was correct, there was no issue between them concerning the proper construction of the clause. 2. His Honour observed, at [306], that V8 Holdings had implemented the tender on the basis that the "current market situation" referred to in cl 10.1(b) required it only to make available price-sensitive information that was available up until the time potential bidders were given access to the data room at the beginning of the due diligence period, which commenced on 18 July 2014. His Honour found that V8 Holdings had not acted on the basis that it was required to revise the information in the data room and include information that became available after that date. 3. His Honour considered, at [307], that that was the better construction of the provision, at least where there was no subsequent event that was "so obviously" relevant to the price that potential bidders would have been prepared to offer for the Racing Entitlement Contracts such that V8 Holdings would have been required to renew or extend the tender process. His Honour considered that a restructure agreement between Archer Capital and the Teams that substantially improved the financial viability of the Racing Entitlement Contracts could have been such an event. However, as that had not occurred, his Honour considered that it was not necessary to determine whether, on its proper construction, cl 10.1(b) could have required V8 Holdings to react to some fundamental development in the information available to renew or extend the tender. 4. His Honour observed, at [308], that there was no requirement that V8 Holdings continuously provide revised information of a: "… relatively minor and inconclusive nature concerning day-to-day developments that would tend to be relevant to the prices that potential bidders may have been prepared to offer." 1. There appears to be a typographical error in this statement. Presumably, his Honour meant to say "that would tend to be irrelevant". 2. His Honour continued, at [309]: "Furthermore, it is significant that cl 10.1(b) required V8 Holdings, through the use of the word 'by', to offer the [Racing Entitlement Contract] for sale by tender. The obligation to conduct a tender may also impose implicit restraints on what V8 Holdings was required to do by reason of the fact that a tender must be conducted in a conventional way that treats all potential bidders fairly and equally." 1. One of the factual issues in the case concerned what information V8 Holdings had or could be taken to have had. In this regard, there were two representatives of Archer Capital and two representatives of the Teams on the board of V8 Holdings. His Honour considered, at [316], that the evidence most relevant in this regard was the "V8 Supercars – Archer Portfolio Evaluation" document, to which reference is made above at [33], which was based upon an assumption that there would be 25 Racing Entitlement Contracts and that each Team would receive $450,000. 2. His Honour stated, at [319], that the relevant principle, in circumstances where there is a common director of two companies, is that the knowledge acquired by the director in the course of acting for one company will not be imputed to the second company, unless the director was under a duty to disclose that information to the second company: see R P Austin, Company Directors: Principles of Law & Corporate Governance (LexisNexis Butterworths, 2005) at [14.17]. 3. In Re Marseilles Extension Railway Company (1871) LR 7 Ch App 161, Mellish LJ stated, at 168, that: "I cannot think that, because he was a common director to the two companies, we are on that account to say that the one company has necessarily notice of everything that is within the knowledge of the common director, and which knowledge he has acquired as director of the other company." 1. Similarly, in Re Hampshire Land Company [1896] 2 Ch 743, Vaughan Williams J stated, in answer to the question "what is the test to be applied in order to say whether or not in each case the knowledge of the common officer is the knowledge of each company employing him", that: "… the knowledge which has been acquired by the officer of one company will not be imputed to the other company, unless the common officer had some duty imposed upon him to communicate that knowledge to the other company, and had some duty imposed on him by the company which is alleged to be affected by the notice to receive the notice." 1. His Honour considered, therefore, at [320], that it was not proper to treat V8 Holdings as if it was aware of all of the information known to Archer Capital's representatives on its board, when those representatives were entitled to keep that information secret from the other members of the board. 2. His Honour concluded, at [321], that V8 Holdings was required to disclose all material information that was available up to the beginning of the due diligence period, but not information that may have been known to those directors of V8 Holdings' board who were not under a duty to disclose information to other members of the board. 3. His Honour observed that V8 Holdings was also required not to mislead or deceive potential bidders, stating, at [328], that if there was positive information that ought to have been disclosed, it would also have been necessary to disclose "countervailing negative information". 4. In this regard, his Honour considered, at [329], that: "… although there was information known to V8 Holdings that in a positive, albeit inconclusive, way may have encouraged potential bidders to bid for the [Racing Entitlement Contract], there was also a substantial amount of negative information that would tend to discourage bidders." 1. However, his Honour considered, at [330], that had there been disclosure of both the positive and negative information, there may still have been no bids. 2. His Honour, at [331]ff, then considered what information was available to V8 Holdings up to the commencement of the due diligence period. His Honour found that that information included: * Mr Dane's statement to the board meeting on 4 May 2014 that a sustainable model would require the business to provide each of the Teams with $750,000 in value each year, which would potentially include the provision of tyres and fuel together with cash. Mr Mehrotra indicated that Archer Capital had considered the options and was working through its position with respect to finding a potential buyer of the business to allow its exit; * Mr Dane's email to Mr Mehrotra on 19 May 2014, which asked that Archer Capital forward to the remaining Teams "your proposal for a restructure as a matter of urgency"; * Archer Capital's proposal that would have guaranteed payments to each Team of $400,000 gross for the coming seasons, compared with $208,116 gross for the 2014 season; * Mr Dane's response that the Teams would not support the proposal and that something closer to $750,000 was being sought; and * Mr Warburton's email of 3 June 2014 to Mr Minton referring to a proposal "worth about $600,000 for each Team" but indicating that Mr Dane "would settle closer to $500 K". 1. His Honour observed, at [339], that that was the highest the prospect of an agreed restructure between Archer Capital and the Teams could have been put up to the commencement of the due diligence period. Parties' submissions 1. Sanpoint submitted that, in dealing with the question of breach, the primary judge erred in his construction of cl 10.1(b). Sanpoint submitted that it was not entirely clear from his Honour's reasons whether the findings they challenged went to his Honour's construction of cl 10.1(b) or were findings in relation to breach. It nonetheless proceeded in its initial argument that the findings related to the construction of the clause. Sanpoint's submissions in this regard related to [306]-[309], [321] and [328]-[350], with specific complaints being made in respect of his Honour's reasons at [307], [321], [329], [341] and [350]. 2. Sanpoint accepted his Honour's finding at [321] that there were limitations on the information that cl 10.1(b) required V8 Holdings to provide. However, it challenged his Honour's finding that, on its proper construction, cl 10.1(b) only required that material information that was known up to the commencement of the due diligence period be disclosed. 3. V8 Holdings submitted that the means of complying with cl 10.1(b) was by proceeding by way of tender and that his Honour's construction and understanding of the way that the clause operated was correct. (Here and subsequently, references to "V8 Holdings" are to both respondents to this appeal.) V8 Holdings accepted that the tender process had to be one that was calculated to test the market properly to achieve the most commercially advantageous outcome. Assuming such a tender was conducted, the relevant price in the market was thereby ascertained so that the conduct of the sale was then in the absolute discretion of V8 Holdings pursuant to cl 10.1(a). It submitted that there was no residual obligation, once the tender had occurred, to do anything else to ensure that the best market price was achieved. Consideration 1. Sanpoint's principal contention was that on the proper construction of the contract, V8 Holdings ought to have disclosed to potential bidders the status of its negotiations with Archer Capital both before and during the due diligence period in fulfilment of its contractual obligation under cl 10.1(b) to "ensure the price paid ... is as commercially advantageous as possible having regard to the current market situation". 2. Sanpoint submitted that there were three matters that ought to have been disclosed. The first was the offer of $400,000 that appeared to have been made by 27 May 2014 and which, it may be inferred, was rejected. The second was Archer Capital's proposal, set out in its "V8 Supercars – Archer Portfolio Evaluation" presentation of 21 July 2014, which indicated an offer to the Teams of $450,000. The third was information that Archer Capital was proposing to make an offer of $500,000, which Sanpoint submitted must have been known to V8 Holdings before the tender closed, given that Archer Capital made the offer within three weeks of the tender closing. 3. Each of the three matters raises different considerations. However, there is a general point that needs to be made. Clause 10.1(b) required V8 Holdings to ensure that the price paid for the rights conferred by the Racing Entitlement Contract was "as commercially advantageous as possible having regard to the current market situation by offering the Contract to the market by tender". The connection between the obligation to ensure that the price paid was "as commercially advantageous as possible" and "the current market situation" meant that if there was activity in the market that was likely to have had an impact on the decisions of a potential bidder, including whether to place a bid, that information had to be disclosed. This would include whether any firm offers had been made. This gives rise to questions about the extent and terms of any disclosure. There is also a factual question as to whether there was in fact information available to V8 Holdings to disclose. The $400,000 offer 1. The negotiations with Archer Capital fell into that category of information that was likely to impact upon the decisions of a potential bidder. V8 Holdings clearly recognised this, as the existence of those negotiations was disclosed in the information memorandum and they were said to be confidential. What was not disclosed, however, was that Archer Capital had made a firm offer, which would have resulted in a significantly increased return to Teams as compared to the predicted return under the current arrangements. 2. That was important information. A potential bidder would be interested to know not only that there were negotiations, but also what the potential outcome of those negotiations was likely to be, including the likelihood of there being a successful outcome. The fact that a definite offer had been made, which would have given the Teams a better return than that predicted for 2015, would have been a relevant consideration for a potential bidder. 3. It is also significant that the Teams, through Mr Dane, had indicated that they were looking for a figure nearly double the predicted return. A potential bidder would gain some confidence knowing that the "current market situation" for the rights conferred by the Racing Entitlement Contract was the existence of a firm offer which was greater than the predicted return. 4. That raises the question of the confidential nature of the negotiations. According to the information memorandum, the negotiations were confidential. Accepting that was so, that negotiations were being conducted was known to the existing 25 Teams. The content of those negotiations could have been disclosed provided that a mechanism requiring the Teams to keep the information confidential was implemented, such as the requirement of "complete confidentiality" stipulated in the information memorandum. The same position applies with the rejection of the offer. The $450,000 offer 1. The $450,000 offer raises different considerations. It appears from the evidence that that evaluation was part of Archer Capital's internal considerations, and was not disclosed to external parties, including V8 Holdings. Nor, so far as appears from the evidence, did any offer in those terms emanate from Archer Capital. 2. Mr Mehrotra was a director of both Archer Capital and V8 Holdings. However, in accordance with the principles set out by the primary judge, in respect of which the parties did not take issue, he was not under an obligation to disclose the information contained in the internal Archer Capital presentation to V8 Holdings. Indeed, on the basis that those internal considerations were confidential, he was obliged as a director of Archer Capital not to disclose that internal information to V8 Holdings unless and until the Archer Capital board had determined to do so. The $500,000 offer 1. That leaves the third matter that Sanpoint submitted was required to be disclosed to potential bidders pursuant to V8 Holdings' obligation under cl 10.1(b), namely, that negotiations had taken place in relation to an offer of $500,000 prior to the closing of the tender on 1 August 2014, but which was not formalised until 18 August 2014. Sanpoint asked the Court to draw the inference that such negotiations had taken place. 2. The High Court in Bradshaw v McEwans Pty Ltd (1951) 217 ALR 1 stated the test for the drawing of inferences as follows: "… where direct proof is not available it is enough [if] the circumstances appearing in the evidence give rise to a reasonable and definite inference: they must do more than give rise to conflicting inferences of equal degrees of probability so that the choice between them is mere matter of conjecture … But if circumstances are proved in which it is reasonable to find a balance of probabilities in favour of the conclusion sought then though the conclusion may fall short of certainty it is not to be regarded as a mere conjecture or surmise …" 1. Not only is there no legal obligation to draw an inference that is available on the evidence, but also, on balance the inference for which Sanpoint contended is not available. There was no evidence that there were any such discussions. Indeed, for the Court to make an inferential finding that there had been negotiations prior to the tender closing would be to ignore the opening words of Mr Warburton's email of 3 August 2014, where he refers to "thinking over the weekend". 2. Further, there is merit in V8 Holdings' submission that the evidence tended to contradict that there were any such discussions. As V8 Holdings pointed out, the structure of the offer in the 3 August 2014 email bore some similarity to the offer of $400,000 made prior to the tender process and was quite different to the considerations contained in the internal Archer Capital presentation. V8 Holdings submitted that, accordingly, the more likely scenario was that, not knowing of Archer Capital's internal considerations, it communicated with Archer Capital almost immediately after the tender had closed, to pick up the negotiations in effect, where they had left off in May. 3. Accordingly, cl 10.1(b) required V8 Holdings to make available information as to the $400,000 offer and that its failure to do so constituted a breach of its obligations under that clause. There was no evidence of any other matter that required disclosure. However, it should not be left unsaid that there was also an obligation to disclose any material that may have impacted negatively on any consideration a potential bidder may have given to the making of a bid. His Honour clearly referred to this at [328] of his judgment 4. As stated, the question of what V8 Holdings was required to do on the proper construction of cl 10.1(b) was inextricably linked to whether it had breached the contract on the basis of non-disclosure. As V8 Holdings was required to disclose to potential bidders information that was relevant to their consideration as to whether to make a bid and that the existence of a firm offer was relevant information in that regard, it follows that V8 Holdings breached cl 10.1(b). This is so, as we have explained, even though the offer was apparently rejected. Third issue on the appeal: breach on the basis of delay in concluding tender process Primary judge's reasons 1. The primary judge, at [283], identified the question raised by the third issue on the appeal as being whether the evidence established that by commencing the tender process on 24 June 2014, on the basis that bids were required to be returned by 1 August 2014, V8 Holdings failed to act so as to ensure that the price paid for the rights under the Racing Entitlement Contracts was as commercially advantageous as possible having regard to the current market situation by offering the contracts to the market by tender. 2. His Honour found, at [293], that the evidence did not justify a finding that V8 Holdings had breached cl 10.1(b) by conducting a tender process that did not finish until 1 August 2014, whether that gave rise to a problem in obtaining sponsorship by the end of September 2014, or in lodging an entry registration form by 1 December 2014, as alleged by Sanpoint. 3. His Honour noted, at [292], that Sanpoint did not call any evidence as to what process would needed to have been undertaken before the submission of a bid or an entry registration form, and that as Sanpoint's principals were experienced racers, they ought readily to have been in a position to provide such evidence. In his Honour's view, the only evidence that was capable of supporting Sanpoint's contention was a statement made by Mr Dane at a V8 Holdings board meeting on 6 August 2014 that "Teams need to have secured their funding budgets for 2015 by the start of October or they will be in trouble". 4. However, his Honour considered, at [291], that the "real issue" was whether potential bidders would be able to satisfy themselves that it was prudent to lodge a bid by 1 August 2014, and not whether the time left to the end of September 2014 or 1 December 2014 was sufficient to enable them to finalise any sponsorship arrangements or lodge an entry registration form. His Honour stated that "[i]f bidders were not ready by 1 August 2014, they had until March 2015 to get ready". 5. His Honour concluded, at [294], that the statement upon which Sanpoint relied was too insubstantial to support a finding that V8 Holdings had breached cl 10.1(b) and that, in any event, read in context, it related to the remaining Teams, and, inferentially, the need for any restructure agreement between Archer Capital and the Teams to be reached as soon as possible, to avoid the risk of a number of Teams not being able to submit entry registration forms by 1 December 2014. Parties' submissions 1. Sanpoint submitted that by conducting a tender process that did not conclude until 1 August 2014, this gave rise to difficulties in obtaining sponsorship by the end of September 2014 and in lodging an entry registration form by 1 December 2014. It pointed out that the primary judge had accepted, at [290], that, having regard to the "onerous sanctions" prescribed in the Racing Entitlement Contracts for failing to lodge an entry registration form by the due date, before a potential bidder committed itself to lodging a bid by 1 August 2014: "… commercial common sense would require that it either had all arrangements in place by that date, or a high level of confidence that all remaining issues that had not finally been determined could be completed in a manner that would allow the bidder to lodge an Entry Registration Form on 1 December 2014." 1. It followed, on Sanpoint's submission, that the short period of time between the conclusion of the tender process and the due date for lodging an entry registration form was a "substantial disincentive" against bidding in the tender process, particularly as it would have also been necessary for a Team to have had its sponsorship arrangements finalised by September 2014. 2. Sanpoint submitted that his Honour erred in finding that the evidence in support of this contention was insufficient. It relied on Mr Dane's statement referred to above, at [88], that Teams without secured funding by the beginning of October would "be in trouble". It also relied on the email of 7 August 2014 from Mr Dane to Mr Mehrotra, set out above at [36], in which Mr Dane stated that: "Any team that does not already have a full sponsorship roster for 2015 (and no team does at the moment) is fully engaged in trying to complete a budget for next year right now. By the middle of September it is already starting to become too late in most instances to make much material difference." 1. V8 Holdings submitted that the primary judge correctly identified, at [291], the "real issue" raised by this ground of appeal. It also submitted that his Honour was correct to find that there was insufficient evidence to support Sanpoint's contention. It submitted that the Court should draw a Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8 inference on the basis of Sanpoint's unexplained failure to call one of its principals to give evidence as to how long a potential bidder might reasonably have required to get ready for a V8 Supercars Championship the following year. Consideration 1. The only evidence adduced by Sanpoint in support of its contention that V8 Holdings had breached cl 10.1(b) by conducting a tender process that did not conclude until 1 August 2014 was the two statements made by Mr Dane. However, these statements are merely a recognition that the Teams needed to have finalised their sponsorship arrangements by the end of September 2014. They do not indicate the time required to make such arrangements, such as to prove that concluding the tender process on 1 August 2014 did not leave sufficient time for any successful bidders to race in March 2015, thereby constituting a "substantial disincentive" from bidding, as asserted by Sanpoint. To the contrary, in the email of 7 August 2014, Mr Dane noted that no team had, as at that date, finalised their sponsorship roster. 2. In the absence of any evidence as to what potential bidders would have been required to do before submitting a bid or before lodging an entry registration form, this ground of appeal has not been made out. Fourth issue on the appeal: whether any loss suffered by Sanpoint was causally connected to V8 Holdings' breach Primary judge's reasons 1. The primary judge found that, in the event that he was wrong in relation to the question of breach, nonetheless, Sanpoint had not established on the balance of probabilities that it suffered actual loss. After recording that there was no dispute between the parties as to the formulation of principle, and reproducing a passage from Sellars v Adelaide Petroleum NL (1994) 179 CLR 332; [1994] HCA 4 at 355, his Honour stated, at [393], that: "The first step is that Sanpoint must prove on the balance of probabilities that it has sustained some loss or damage as a result of the alleged breaches by V8 Holdings. As Sanpoint put it in par 25 of its final written submissions: The question of damages needs to be analysed with care. The first step is can Sanpoint prove on the balance of probabilities that had the tender process been properly conducted, a better price would have been obtained. If that question is answered in the affirmative then what is in essence a loss of a chance can be valued by assessing the chance …" 1. His Honour then stated, at [394], that it was first necessary to determine whether: "… if the tender process had been conducted in a manner that did not involve the breaches alleged by Sanpoint, on the balance of probabilities a bid would have been made for Sanpoint's [Racing Entitlement Contract] that would have led to Sanpoint receiving a greater return for the sale of its [Racing Entitlement Contract] than it in fact received." 1. His Honour held, at [396], that the evidence did not rise above speculation that any of the changes Sanpoint claimed ought to have been made in the tender process would have caused a bidder to offer a price of more than $20,000 for Sanpoint's Racing Entitlement Contract, and did not establish that it was more likely than not that such a result would have occurred. 2. His Honour continued, at [404], as follows: "In my opinion, far from the available information concerning the likelihood of a restructure agreement encouraging potential bidders to bid to acquire a [Racing Entitlement Contract], on balance that information was likely to depress the enthusiasm of potential bidders to bid a substantial price for a [Racing Entitlement Contract]. When added to the uncertainty as to the number of Teams that would be permitted to race in 2015, the most rational course for potential bidders was to wait and see the outcome of any negotiations." 1. His Honour concluded, at [408], that the likelihood that any of the registered bidders would have bid substantial prices for Sanpoint's Racing Entitlement Contract had V8 Holdings provided to them all of the information that was available was: "… so doubtful that I would not be able to find on the balance of probabilities that a substantial bid would in fact have been made without hearing evidence to that effect from one of the registrants." Parties' submissions 1. Sanpoint's principal argument was that the failure to disclose that Archer Capital had made an offer of $400,000 caused it to lose the chance to sell its Racing Entitlement Contract at a price that was substantially higher than that which was in fact achieved and that that chance was not negligible or speculative. It contended that there was a substantial evidentiary basis to support that case. 2. Sanpoint submitted that his Honour had erred in proceeding on the basis stated at [394], which is reproduced above. 3. Sanpoint submitted that not only was the test stated by his Honour contrary to the principle stated in Sellars v Adelaide Petroleum NL, his Honour, at [408], applied that test wrongly in stating that he: "… would not be able to find on the balance of probabilities that a substantial bid would in fact have been made without hearing evidence to that effect from one of the registrants." 1. V8 Holdings objected to the case that Sanpoint sought to argue on the appeal as being wider than the case that was argued at trial. First V8 Holdings submitted that the error which Sanpoint asserted was the acceptance by the primary judge, at [393], of Sanpoint's own submission at trial. 2. Secondly, it submitted that this was significant, because no loss of a chance case had been pleaded. Nor was a loss of a chance case mentioned in Sanpoint's written or oral opening. Instead, a claim for damages for loss of a chance was first raised in the appellant's written closing, and in that document Sanpoint was not contending that the opportunity was to receive a bid, but rather the opportunity was to receive a better price. A necessary component of proving a loss of that chance on the balance of probabilities was that a bid would have actually been made for Sanpoint's REC, and Sanpoint accepted that it needed to prove that fact on the balance of probabilities. 3. Thirdly, V8 Holdings submitted that while there had been no objection to the loss of a chance case being run, albeit late, on the limited basis set out in writing, it would not have been open to his Honour to have found the broader and materially different damages case now put on appeal, which would have been required to have been pleaded. 4. Fourthly, V8 Holdings went on to submit that the evidence relied on by Sanpoint, which did not include any evidence from any of the registered participants that they would have changed their decision, was speculative and did not discharge the onus borne by it. 5. In reply, Sanpoint rejected the proposition that the case sought to be advanced on appeal was unavailable to it, but accepted that "Sanpoint's expression of the 'first step' [in its submissions at trial] was infelicitous". Nonetheless, it maintained that the approach taken by the primary judge was inconsistent with the principles in Sellars v Adelaide Petroleum. Consideration 1. There was and is no dispute as to the principles available for loss of a business opportunity. In Sellars v Adelaide Petroleum, the joint judgment stated, at 355: "… damages for deprivation of a commercial opportunity, whether the deprivation occurred by reason of breach of contract, tort or contravention of s 52(1), should be ascertained by reference to the court's assessment of the prospects of success of that opportunity had it been pursued … … the general standard of proof in civil actions will ordinarily govern the issue of causation and the issue whether the applicant has sustained loss or damage. Hence the applicant must prove on the balance of probabilities that he or she has sustained some loss or damage. … the applicant shows some loss or damage was sustained by demonstrating that the contravening conduct caused the loss of a commercial opportunity which had some value (not being a negligible value), the value being ascertained by reference to the degree of probabilities or possibilities. It is no answer to that way of viewing an applicant's case to say that the commercial opportunity was valueless on the balance of probabilities because to say that is to value the commercial opportunity by reference to a standard of proof which is inapplicable." (emphasis in original) 1. Brennan J stated, at 364: "As a matter of common experience, opportunities to acquire commercial benefits are frequently valuable in themselves, not only when they will probably fructify in a financial return but also when they offer a substantial prospect of a financial return." (emphasis in original) 1. The principles governing a loss of a chance were considered recently by the High Court in Badenach v Calvert (2016) 257 CLR 440; [2016] HCA 18. That case involved a claim, brought by a named beneficiary under a will, for breach of a solicitor's duty of care in failing to advise a testator in relation to possible claims of potential beneficiaries should they not be provided for in the will. 2. The High Court rejected that there was a duty on the solicitor to advise the testator in the terms that had been alleged. The Court nonetheless considered whether the named beneficiary had proved that any loss suffered was caused by the alleged breach. The claim for damages had been framed as a loss of a chance that the testator may have undertaken inter vivos transactions to avoid exposing his estate to statutory claims for maintenance, as had occurred. French CJ, Kiefel and Keane JJ stated: "[38] It has been explained that to speak of loss as the loss of a 'chance' distorts the question of causation. It involves the application of a lesser standard of proof than is required by the law … It confuses the issue of the loss caused with the issue of assessing damages which are said to flow from that loss. In that assessment a chance may be evaluated. [39] The respondent's case on causation is not improved by seeking to equate the chance spoken of with an opportunity lost. It may be accepted that an opportunity which is lost may be compensable … But that is because the opportunity is itself of some value. An opportunity will be of value where there is a substantial, and not a merely speculative, prospect that a benefit will be acquired or a detriment avoided. [40] It remains necessary to prove, to the usual standard, that there was a substantial prospect of a beneficial outcome. This requires evidence of what would have been done if the opportunity had been afforded. The respondent has not established that there is a substantial prospect that the client would have chosen to undertake the inter vivos transactions. Therefore, the respondent has not proven that there was any loss of a valuable opportunity. [41] The onus of proving causation of loss is not discharged by a finding that there was more than a negligible chance that the outcome would be favourable, or even by a finding that there was a substantial chance of such an outcome. The onus is only discharged where a plaintiff can prove that it was more probable than not that they would have received a valuable opportunity. To the extent that the majority in Allied Maples Group Ltd v Simmons & Simmons (a Firm) holds that proof of a substantial chance of a beneficial outcome is sufficient on the issue of causation of loss, as distinct from the assessment of damages, it is not consistent with authority in Australia ..." (emphasis added; footnotes omitted) 1. Two obstacles stand in the way of accepting Sanpoint's submissions on this ground. 2. First, there is a significant change in the submissions propounded on appeal from those advanced at trial. On appeal, Sanpoint contended that it was sufficient for it to establish that there was a real chance more bidders may have participated in the tender process than in fact did, which was sufficient to constitute a business opportunity which should then be valued "by reference to the degree of probabilities or possibilities": Sellars v Adelaide Petroleum at 355. However, at trial, Sanpoint's submission was materially different. It was precisely as reproduced in the reasons of the primary judge: "The question of damages needs to be analysed with care. The first step is can Sanpoint prove on the balance of probabilities that had the tender process been properly conducted, a better price would have been obtained. If that question is answered in the affirmative then what is in essence a loss of a chance can be valued by assessing the chance ..." 1. That submission was characterised by Sanpoint as "infelicitous" in its submissions in this Court. It was, with respect, the reason that the primary judge framed [394] of his reasons in the way he did. There was no error in his Honour accepting the precise basis articulated by Sanpoint as a necessary element of its claim for damages. 2. Secondly, V8 Holdings submitted that Sanpoint had failed to lead any evidence, including from the three relevant registered bidders, that any of the alleged breaches would have changed their decision not to bid in any way. V8 Holdings submitted that it was no more than speculation that if things had been done differently, one of the registrants might have made a bid. As found by the primary judge at [397]–[418], to the extent that there was any evidence, it did not support that speculative chance. 3. V8 Holdings' submission should be accepted. As the High Court stated in Badenach v Calvert, in order to prove an entitlement to damages based on a loss of a chance, it was necessary for Sanpoint to adduce evidence of "what would have been done if the opportunity had been afforded". It is to be borne in mind that there were several unusual features about the sale process. There was no expert evidence of the value of Sanpoint's Racing Entitlement Contract in July and August 2014. It was, however, certain that any purchaser who acquired the contract would need to spend significant amounts of money in order to compete, and with very limited scope for any short term return. The trial judge recorded, at [132], Sanpoint's submission that: "… any party who contemplated buying its [Racing Entitlement Contract] during the tender process would realistically have to factor in that it would probably make a significant loss in each racing year." 1. Some teams appear to have been losing money for many years (cf the reference to "Teams are burning about $1 mill in losses per car" in Mr Warburton's 3 June email). Further, the contemporaneous negotiations between the respondents and the competing teams (especially, the emails of 19 and 27 May) disclose that there was a deal of uncertainty regarding the future of the competition and the terms on which it would operate. 2. In all of those circumstances, there was no error in the primary judge proceeding on the basis that evidence was required to be adduced that at least one of the registered bidders might have made a bid. The primary judge's dispositive finding on the evidence, at [408], did not reflect the error for which Sanpoint contended, of requiring proof to the civil standard of the realisation of the business opportunity. Rather, it was tied to the facts of this case, especially, the unusual loss-making asset which was the subject of the process. No error has been established in his Honour proceeding on that basis. 3. True it is that Sanpoint pointed to evidence of sales, both before and after the tender, of Racing Entitlement Contracts for some hundreds of thousands of dollars. However, those were consensual sales, at a time and in an amount agreed to by vendor and purchaser. Further, it seems clear that the market for such rights was relatively thin, if indeed it existed at all (it will be recalled that Mr Warburton's first and second points in his email of 3 June 2014 were that 10 per cent of the field handed their Racing Entitlement Contracts back last year, and that seven more were "at risk"). It does not follow from the fact that on other occasions there were consensual sales that any different conduct by the respondents in July 2014 for the compulsive sale of Sanpoint's Racing Entitlement Contract would have led to a sale at a substantial price. Conclusion 1. We have found that V8 Holdings breached the contract on the basis of non-disclosure (see above at [85]). However, we have held that Sanpoint has not shown that the loss it suffered was caused by V8 Holdings' breach. Accordingly, we dismiss the appeal. Orders 1. We make the following order: 1. Appeal dismissed with costs. ********** Amendments 08 February 2019 - Amendment made to Headnote. 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: 08 February 2019