(iv) Damages
110 It is no answer to a claim for damages under s 82 of the TPA that the loss suffered by an applicant is difficult, or even impossible to quantify with precision. As Deane J observed in The Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64, at 125:
'In some circumstances, the determination of what proportionate figure represents the extent of the chance or possibility of benefit or detriment and the assessment of what would represent fair and just compensation for an actual loss of that benefit or an actual sustaining of that detriment is relatively straightforward. Where that is so, there is little difficulty in assessing damages for the loss of the chance of the benefit or for the existence of the possibility of detriment [See, eg, as to the straightforward process of valuing such a chance, Takaro Properties Ltd v Rowling[1986] 1 NZLR 22, at pp 62-65; and cf, generally, King, op cit, at pp 1381-1387]. In other circumstances, the assessment of damages for the loss of such a chance or for the existence of such a possibility may be fraught with difficulty and attended by uncertainty. The mere fact that damages cannot be assessed without difficulty and uncertainty does not, however, relieve a court from the responsibility of attempting to assess them as best it can [See, eg, Howe v Teefy (1927), 27 SR (NSW) 301, at p 306; McRae v Commonwealth Disposals Commission (1951), 84 CLR 377, at pp 411-412]. As was pointed out by Dixon and McTiernan JJ in Fink v Fink [(1946) 74 CLR 127, at p 143] "Where there has been an actual loss of some sort, the common law does not permit difficulties of estimating the loss in money to defeat the only remedy it provided for breach of contract, an award of damages." There are, however, extreme cases in which curial procedures are simply inadequate to determine whether there was any real or significant chance that an alleged benefit would actually have been obtained but for the repudiation or breach of contract or to assess the intrinsic worth of a particular suggested "benefit".'
111 That difficulty is frequently encountered where, as here, the Court is invited to assess the profit which an applicant would have made had he or she taken a course different from that which was, in fact, taken. However, the difficulty is alleviated to some extent by the ability to take into account all matters known by the later date when the Court's assessment is being carried out; see HTW Valuers (Central Qld) Pty Ltd v Astouland Pty Ltd (2004) 79 ALJR 190 at 199 [39] citing Kizbeau Pty Ltd v W G & B. Pty Ltd (1995) 184 CLR 281 at 291-296.
112 The starting point of Arms' case on damages was that he had spent almost six months to the end of June 2000 developing a business which was incapable of operating in the manner which he intended. To preserve his credibility and goodwill with the wineries and in the industry generally he was forced to convert auscellardoor door into a retailer but one with a mark-up or commission limited to the 5% which he had represented would be charged to the wineries under the system which he had been forced to abandon at the end of June 2000. It was next contended that the business had to operate in that way for the ensuing twelve months ie, until 30 June 2001. That was said to be so even in respect of wineries to which no commitment had been made before 30 June 2000 because it was impracticable, if not unethical, to run two different businesses in parallel during the financial year which ended on 30 June 2001. That compelled Arms to maintain, for that year, the system under which auscellardoor was the merchant accredited to ANZ e-Gate, Diners Club and American Express but confined to its recovering from the wineries a commission of only 5% of sales effected on their behalf.
113 Once he was free of those constraints, so the submission went, Arms was able to adopt a completely different business structure and move from trading losses of about $40,052 in the year ended 30 June 2001 and about $26,898 in 2001-2002 to a net operating profit of $55, 728.96 in the nine months ending on 31 March 2003 and a net operating profit for the year ended 30 June 2004 of $130,219.35 after disregarding, as an abnormal expense, the legal costs incurred in connection with this case. Had he not been misled by the ANZ Requirements Representation, he would have commenced the business under its present structure early in 2000.
114 It was contended that Arms had been set back 18 months in the development of his now profitable business which is currently returning net profits at a rate of $130,000 a year. Accordingly, a figure of $195,000 was suggested as appropriate to compensate Arms for the period of "arrested development" from January 2000 to 30 June 2001. To that amount, Mr Riordan contended, should be added a further $66,950 representing "losses that were suffered", apparently being the trading losses of $40,052 and $26,898 incurred by Auscellardoor in the respective financial years ended 30 June 2001 and 30 June 2002; see [113] above.
115 It was sought to justify the eighteen months as an appropriate period on which to base the "lead-time loss" by contending that the retail business which Arms eventually instituted required no "build-up" or "lead-time" to be successful. However, that contention is negated by the fact that, even in the year ended 30 June 2002 after the new retail format had been operating for a full twelve months, Arms had incurred a loss of $26, 898 after allowing himself a salary of only $8,750.
116 In addition to damages calculated in the way just described, Arms pointed to the fact that he had paid WSA about $58,000 and Rare Media a further amount of about $38,000 for a website which, on Mr Davidson's evidence, would have cost no more than $24,000 to build from "the ground up". However, Mr Riordan accepted that no part of that expense could be identified as attributable to Arms' reliance on the ANZ Requirements Representation.
117 Mr Cawthorn for WSA submitted, on the other hand, that, since the auscellardoor website eventually became a successful operation, the measure of Arms' loss, if WSA had been guilty of any misrepresentation, was the difference between what the website had cost and what Arms would have expended if the representation had not been made. There was, no evidence, Mr Cawthorn submitted, to establish that any damage had been suffered on that measure.
118 To similar effect, Mr Settle, for Student and Houghton, contended that the change whereby auscellardoor became the credit card merchant instead of the wineries occurred "virtually overnight" and did not contribute to the delay until after the end of 2000 in achieving a satisfactory operation of the business.
119 These submissions on behalf of the respondents do not acknowledge the premise of Arms' case that the operation of the business whereby he became the merchant but was confined to charging a commission of only 5% was an interim arrangement until he could, without damage to his goodwill, undertake the more profitable role of an independent retailer, presumably through the same website. His evidence that it was necessary, in order to maintain his reputation in the industry, to maintain that interim arrangement for twelve months was not seriously challenged and was not contradicted by any other evidence. He had extensive experience in the marketing of wine and had personally, and apparently exclusively, made and maintained contact with the participating wineries. In these circumstances, I find that his decision to maintain the interim arrangement for twelve months was not unreasonable.
120 I am not prepared to allow, as part of Arms' damages for the breach which I have found of the ANZ Requirements Representation, the expenses incurred in developing the website being the amounts successively paid to WSA and Rare Media. I infer that expenses of that order would have been incurred in developing the website even if Arms had adopted his present, retail, method of trading early in 2000. There was certainly no evidence from Mr Davidson or any other suitably qualified expert to suggest that significant savings would have been achieved solely by the adoption of that method of trading from the outset.
121 Nor can I allow the promotional expenses in the order of $14,000 which were said to have been thrown away because of the delay until November in auscellardoor's website becoming operational. Those expenses were included in the trading losses for the year ended 30 June 2001 noted at [113] and [114] above. In the second place, the evidence does not permit a finding as to what proportion of those promotional expenses were, in fact, thrown away and what proportion enured for the benefit of the business as it was reconstituted after 30 June 2001.
122 Nor does the evidence support a finding that the losses of slightly more than $40,000 and slightly more than $26,000 which were incurred in the financial years ended 30 June 2001 and 20 June 2002 would not have been incurred had the business operated in its reconstituted form from the outset. Indeed, the loss in the second of those years was incurred when the business had presumptively been operating in its reconstituted form for the whole year.
123 In the circumstances, I consider it reasonable to assume that, had he known the truth about the ANZ Requirements Representation, Arms would have changed the website to its present method of trading by November 2000. (It is to be remembered that it was not until then that auscellardoor, as the sole ANZ e-Gate merchant, obtained the necessary accreditation from both Diners Club and American Express). On that assumption the time lost in the development of the reconstituted business was about seven months between November 2000 and 30 June 2001.
124 The authorities noted at [111] above recognize that it is appropriate to assess, with the benefit of hindsight, profits which would have been made on the hypothesis which an applicant has persuaded the court to adopt. However, I am not persuaded on the basis of evidence of 21 months of profitable trading to assume that the reconstituted auscellardoor business will continue to return an average annual profit of $130,000 in real terms. Although it involves an arbitrary estimate in the nature of the "guesswork" referred to by Haynes J in Placer (Granny Smith) Pty Ltd v Thiess Contractors Pty Ltd (2003) 196 ALR 257, at 266 [38], I have discounted the probable average profit from the amount of slightly more than $130,000 achieved in the year ended 30 June 2004 to $100,000. That is to take account of vicissitudes likely to affect the reconstituted business over its expected life and the notoriously intense competition which prevails in the local wine retailing industry. On that basis, a figure of $58,331 represents appropriate compensation for the set back of seven months which I have imputed to the development of the business.