(a) the Coles offers
Richmond Growth does not rely on its communication of the first Coles "offer" to White Property; accordingly, no more need be said about it. The second Coles proposal, contained in Consolidated Properties' letter of 28 February 1995, was not fully communicated to White Property until 6 March. By that time, as indicated in the factual outline above, the second Coles offer had ceased to be, if it ever was, acceptable to Richmond Growth. In any case, it did not make an offer to White Property. What it did, when one has regard to its letters of 3rd March and 6th March (per Matthew Bennett), was no more than to deny that White Property had any extant first right of refusal and to invite it to enter a bidding competition. There was nothing to which White Property's board might say, "We accept". Hence, nothing in these transactions amounted to a performance by Richmond Growth of its contractual duty.
(b) the Woolworths offers
Richmond Growth submits that its agreement with the Woolworths subsidiary comprised by the latter's offer of 7 March and Richmond Growth's communication of its acceptance on 9 March did not constitute a binding agreement: it was within the third class of agreements where a later formal contract is contemplated, as referred to in Masters v Cameron at 360; that is,
"one in which the intention of the parties is not to make a concluded bargain at all, unless and until they execute a formal contract".
In the circumstances of this case, I agree. Either party was free to require new provision to be made on significant matters. That is in fact what happened.
Hence those negotiations did not necessarily have the legal effect that Richmond Growth had rendered itself unable to fulfil its contractual obligations to White Property. I agree also that, if the Woolworths subsidiary had a contractual right that Richmond Growth would not negotiate with anyone else for five days, Richmond Growth might still have sold to White Property, but on pain of paying damages to Fabcot.
However, while Richmond Growth might still have been legally able to fulfil its obligations to White Property, the proper factual conclusion, in my opinion, is that it had manifested a complete unwillingness to do so. This conclusion flows from Richmond Growth's dealings on 7 March with the Woolworths interests, and the accompanying or subsequent conduct of Richmond Growth's agents, Messrs O'Brien (in his conversation of 9 March) and Bennett (the attempted deception of 10 March), towards Mr Morcom on behalf of White Property.
By accepting Woolworths offer, albeit by way only of "agreement to agree", the Richmond Growth board, in my opinion, evidenced an intention of not being bound by any offer Richmond Growth might have made to White Property and which might have been accepted.
No circumstance existed to negate the term generally to be implied in a contract that:
"[it] is a general rule applicable to every contract that each party agrees, by implication, to do all such things as are necessary on his [or her] part to enable the other party to have the benefit of the contract": Butt v McDonald (1896) 7 QLJ 68 per Griffith CJ at 70-1;
and see generally, the discussion in Cheshire and Fifoots Law of Contract, 7th Australian Edition, Butterworths, 1997, pp 349-50.
White Property could not have the benefit of its contractual first right of refusal, if Richmond Growth was not going to do what was necessary for that benefit to be realised, namely accept that it was bound by the acceptance of any offer by it to White Property.
Hence, in my view, there was a breach of contract involved in Richmond Growth's not affording White Property the opportunity to match the Woolworths offer before Richmond Growth signified its acceptance of it to Woolworths. It will be convenient later to call this the first breach. It is true that, when the terms of the Woolworths offer were later put to White Property, the latter indicated, by a counter offer, that it did not wish to accept the property on those terms. But that circumstance goes not to whether Richmond Growth was in breach of its contract but to what loss, if any, arose from the breach, a question I deal with below.
In any case, in the events which occurred, Richmond Growth was evidently unable to sell the property on those terms to Fabcot. Richmond Growth manifested a subsequent willingness to accept terms which were less favourable to it. Nothing had absolved Richmond Growth of its obligation to re-offer the property to White Property on those lesser terms. Hence there was another breach of its contractual obligations (which I will call the second breach).
(d) Damages for breach of contract
Causation
The first question is whether it was likely that White Property would have accepted any offer by Richmond Growth made otherwise than in breach of the contract. As to the failure to make an offer equivalent to the non-binding Woolworths' offer involved in the first breach of contract, it appears that White Property would not have accepted such a bona fide offer made at that time: soon after, it did not accept those terms which its executives then thought they were being offered. I agree, in this regard, with counsel for Richmond Growth that, in Australian law as it presently stands, a counter-offer (properly so-called and as distinct from a merely inaccurate paraphrase of the offer) is a rejection of an offer even if the difference in the two positions is not commercially significant (or a "material" alteration, c.f. s 2-207 of the US Uniform Commercial Code). In any case, rejection of the capacity for excision by the vendor of what would undoubtedly be a valuable corner block from the development site does not impress me as lacking commercial significance or materiality.
It by no means follows that White Property would not have accepted the lesser terms which, by reason of Richmond Growth's second breach of contract, it was not offered. By the time those lesser terms were available, the White group executives would have had more time for thought and for legal advice. The hypothetical choice for White Property would have been between standing on such legal rights for breach of contract (and/or infraction of the trade practices laws) as it might have, or taking the property on no worse terms than, as White Property would have known, Woolworths was seriously prepared to accept. There would have been a second chance for White Property to avoid the chagrin of losing both the benefits made possible by its decisive intervention with the local council and the value of the subsequent work put into the project. The legal advice would not have been wholly sanguine, given that Whites had, on 14 March, rejected the earlier terms. On balance, I believe that White Property would probably have accepted the offer that ought to have been made to it.
Damages
The next matter is properly to assess White Property's losses, if any. There are three claims at issue:
(i) a "success fee" said to be part of the claimed project management fees,
(ii) the project management fees, being the said claimed success fee and the fair value of the work done by White Property after 14 December 1994, and
(iii) loss of the opportunity to make a profit from undertaking the development, physical and commercial, of the site into a going concern as a commercial rentier's venture, and then re-selling it, probably to an institutional investor.
Success fee
In my view, this claim cannot succeed. The consideration for White Property's assisting Richmond Growth to achieve success with the council was that Richmond Growth would give White Property the first right of refusal. That promise by Richmond Growth was itself the success fee. White Property cannot have both the benefit of that promise, via damages for its breach, and a monetary success fee for which it might, alternatively or additionally to Richmond Growth's promise, have bargained, but did not.
Project management fees
It is clear that Richmond Growth appointed White Property to be its Project Manager by the letter of 14 December 1994, signed by Mr O'Brien after the victorious council meeting. This claim depends on that circumstance and my rejection of Richmond Growth's interpretation of "either . . . or".
Rounding the figures to the nearest $1,000, White Property claimed $227,000 made up as follows:
Salary and on costs for White group personnel $180,000
Legal fees $10,000
Consultants (not part of the White group establishment) $37,000
$227,000
Three principal questions arise:
• how much of what White Property did was "project management" for the benefit of Richmond Growth (and, possibly, also White Property itself), as distinct from project investigation and maximisation of commercial opportunity purely for White Property's own benefit (for, surely, White Property can only, in a direct claim for project management fees, have recompense for the former: Sabemo Pty Ltd v North Sydney Municipal Council (1977) 2 NSWLR 880)? However, the latter kind of expense may also fall for consideration under the claim for breach of contract in relation to the first right of refusal, as expenses reasonably incurred, if White Property's claim for loss of opportunity to make a profit should fail for its inability to demonstrate whether or to what extent a profit would have resulted: Commonwealth v Amann Aviation Pty Limited (1991) 174 CLR 64. Those questions are considered below.
• how much of what is claimed represents fair compensation for the project management proper?
• should any amount recoverable by White Property include the work of persons paid by other corporate members of the White group other than White Property?
In general, except as to the third matter, I agree with the submissions of counsel for Richmond Growth. I summarise the effect of these:
(1) Work done before 14 December is not compensable. Before then, White Property was not the Project Manager. (But, the Amann principle could be relevant - see below.)
(2) The "restitutionary principle" cases (Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221 per Deane J at 263 and Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234 at 276) provide compelling guidance as to the method of compensation. Upon their authority, the compensation should be calculated at "a reasonable rate for work actually done or the fair market value of materials [or, as here, services] provided", rather than the value, as performed, of such work and services for the party to whom they are provided.
(3) Not more than half of the hours claimed to have been worked by White group staff ought reasonably be assigned to work done wholly or partially for Richmond Growth's benefit. (That is, subject to Amann.)
(4) An allowance for "on-costs" of double the actual salaries paid is ample (very ample, I should say - the applicants claimed treble the payments actually made - "ambit" claims are not, it seems, confined to trade unions).
(5) Legal costs incurred by White Property provided no benefit to Richmond Growth and ought not be recompensed: see Sabemo at 902-3. (Again, Amann may be relevant.)
(6) Fees claimed as payable to three consultants have not been shown truly to have been incurred as debts. The inference rather seems to be that those consultants performed their work merely on the speculative basis that, if White Property secured the ongoing actual development and/or project management rights, they would be paid. This aspect of the claim should be rejected.
I do not agree, however, that anything turns on the facts that most of the White group personnel were employed or engaged and paid by companies within the group other than White Property and that it had not been arranged that those other companies should "charge back" the services of their employees/contractors to White Property. That White Property had been able to arrange such work in such a way appears to me not to diminish the "fair value of the benefit provided", calculated by the method set out above. The difference, in this regard, between the work done by the White group staff and the outside consultants, is that the work of the latter was entirely speculative, i.e. only to be paid by anyone if certain other events transpired, such that it could not be said to have had a presently ascertainable "fair value".
Applying the conclusions set out above in a broad-brush way, it seems to me that an allowance of $50,000 would be appropriate.
The loss of opportunity claim
This was, at trial, the principal claim made by White Property. The claim was greatly hindered however by White Property's unexplained tardiness in the preparation of its case; and its choice, until the very last minute, to proceed with scant material; and my consequent refusal of courses of action proposed by White Property which would have allowed it to obtain further evidence as to damages, but which would have also resulted in a substantial wastage of available court sitting time and a lengthy adjournment. This is explained in more detail below.
White Property claimed that, but for Richmond Growth's breach of contract, it would have bought the property; that it was its intention to develop the property for resale at a profit; that that was known to Richmond Growth; and that it had lost the opportunity to make such a profit.
It was submitted that regard should be had to what Woolworths in fact did with the site, and that that would furnish a sound guide as to the value of White Property's lost opportunity. It was submitted that the likely profit range was in the order of $3.24 m to $4.25 m.
The position of the respondents is that, by its own default, White Property left the evidence in such a state that it is not possible to say that it lost anything nor to quantify any loss sustained by it. It is one thing to say that broad judgments and even guesswork may be necessary to value the chance of a lost profit; it is quite another to say that a court must do so even when the fact or extent of the supposedly possible profit cannot reasonably be ascertained or quantified.
In this case, the claim for loss of the chance of a profit relates not to a profit which might have been made under the broken contract itself, which was for the right to have first chance to buy the property on given terms. A contract for the supply of goods or services is commonly such a case e.g. Amann. Rather, the present claim relates to profit that might have been made out of subsequent dealings with the property which would have been acquired had the contract not been broken. That White Property intended such subsequent dealing was, of course, within the contemplation of Richmond Growth. It was not submitted that the indirect nature of the claimed loss of the opportunity to make a profit made any difference to the applicable principles.
The claimed loss was the loss of an opportunity to acquire a commercial benefit. As Brennan J observed in Sellars & Poseidon Ltd v Adelaide Petroleum NL (1994) 179 CLR 332 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. The volatility of the market for speculative shares testifies to both the valuable character of commercial opportunities and the difficulty of assessing the value of opportunities which are subject to serious contingencies. Provided an opportunity offers a substantial, and not merely speculative, prospect of acquiring a benefit that the plaintiff sought to acquire or of avoiding a detriment that the plaintiff sought to avoid, the opportunity can be held to be valuable.
. . .
However, a causal relationship between the loss of such an opportunity and the defendant's contravening or tortious conduct must be proved before any issue of assessment of the amount of the loss arises. As the Full Court of the Federal Court observed in Enzed Holdings v Wynthea:
'If the court finds damage has occurred it must do its best to quantify the loss even if a degree of speculation and guess work is involved ... We emphasise, however, that the principle applies only when the court finds that loss or damage has occurred.'
Although the loss of a valuable opportunity and the assessment of its amount are concepts that can be logically separated, in practice it will usually be the same body of evidence that tends to establish both the existence of a loss and the amount to be recovered. That evidence may establish the loss of a valuable opportunity more clearly than the value of the opportunity lost."
In Sellars, the High Court applied to contractual, trade practices and tortious cases alike the principles that:
(a) "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 an award of damages" (at 349)
(b) (as originally enunciated in a tort case, Malec v JC Hutton Pty Ltd (1990) 169 CLR 638 at 643),
"If the law is to take account of future or hypothetical events in assessing damages, it can only do so in terms of the degree of probabilities of those events occurring . . . [Where] proof is necessarily unattainable . . . the court assesses the degree of probability that an event would have occurred, or might occur, and adjusts its award of damages to reflect the degree of probability."
The authors of the principal judgment (Mason CJ, Dawson, Toohey and Gaudron JJ) concluded (at 355):
". . . damages for deprivation of a commercial opportunity . . . 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 had some value (not having a negligible value), the value being ascertained by reference to the degree of probabilities or possibilities." (emphasis in the original)
Thus in terms of evidentiary requirements there is a two-stage process: firstly, proof to the ordinary, civil standard that the defendant caused the plaintiff to lose a commercial opportunity of some non-negligible value and secondly, ascertainment of the actual value of the loss by valuing the probabilities or the possibilities.
As to the first element, proof of a loss of a commercial opportunity of some appreciable value, it is, in my opinion, capable of legitimate inference that such loss was incurred by White Property. Corporations of the size and character of Woolworths, Coles and the White Group were obviously in pursuit of just such an opportunity by seeking to acquire the land in question. One of them did so acquire almost all of it at a price and on conditions that I have held White Property would ultimately have been prepared to meet. In my opinion, there is no warrant for assuming that it was only in Woolworths' own hands that, at such a price and on such conditions, the opportunity for profitable commercial dealing was not exhausted, although, as indicated later, Woolworths might have had some special interest in the site. Coles' withdrawal from the race appears to have been influenced by factors other than price, notably some apparent disenchantment by Coles' representative with Mr Bennett's perceived ethics as a negotiator.
As to the second stage of the inquiry, the actual valuation of that opportunity, questions of real difficulty arise. In my opinion, the general observations in Sellars do not have the result that in no case will it be impossible to arrive at an assessment. The point may be demonstrated by reference to a case of bodily injury (the principles are the same: Sellars). Suppose an injury to an organ (perhaps the appendix) or disturbance of the functioning of an organ (say the brain), and medical evidence that such organ or function is likely to have some significant role in bodily well-being but as yet it is not known what that role is. If it cannot be said what the possible role of the bodily part is, a court could hardly award other than nominal, or at least unusually modest, compensation for its loss.
Paucity of the evidence as to the value of loss of an opportunity and late efforts to improve the situation
The hearing of this matter commenced on Monday 18 November 1996 after Mr Burbidge QC, senior counsel for White Property, told the Court that the matter was ready to proceed. The liability aspects of the case were opened in some detail on that day. The next day, Tuesday 19 November, Mr Burbidge frankly conceded that "the manner in which . . . damages [has] been approached is not as adequate as might properly be required in a case of this size and . . . complexity" and suggested a stage might soon come when, in effect, there would need to be some delay in trying the quantum issues, a prospect which did not appeal to the respondents. The matter was then left on the basis that, in the "next day or so", additional material on which White Property wished to rely would be provided to the respondents.
On Wednesday 20 November Mr Burbidge sought to file in Court further material in support of White Property's claim for damages. As a result of directions given by Whitlam J, White Property had been ordered in February 1996 to file and serve statements of the evidence on which it intended to rely by 8 March 1996. On 18 June 1996 the case was fixed for trial as a "long matter" by Sheppard J, there then being no suggestion that any aspect of the case was or would not be ready for trial. In mid-October the respondents were provided with an alleged expert's opinion attempting to quantify certain aspects of the claim and to justify damages of several million dollars, but little effort was then made to furnish material which would prove the assumptions upon which those opinions were based. The material sought to be filed by White Property on 20 November was in part material that might fill that gap in the evidence and in part new material.
The respondents, in my view perfectly reasonably, objected on the basis that they would need, among other possible preparations, to obtain expert advice and evidence from people such as a valuer, architect and a town planner to counter the new material. If the material were admitted there would then necessarily have been an adjournment on the third day of the trial for a considerable period to enable that additional preparation by the respondents to be undertaken, with the consequent wastage of several days' hearing time. I held that White Property ought not be permitted to rely on the additional material, except insofar as it related to the claim for project management fees up to 14 March 1995. I reserved my reasons but indicated that I thought that the respondents should be able, on very short notice, to deal with the additional material on the lastmentioned aspect.
My reasons, shortly stated, were these. Nothing was put to avert the inference that the delay in timely preparation, and the consequent unreadiness for trial, after implicit indication that the case was ready, were attributable to the default of White Property (of course, I mean by those controlling and directing it), rather than, say, by its legal advisors, nor was there any other extenuating circumstance suggested. The application to file late material could hardly have come later than it did. The respondents included three human beings as well as a corporation. No respondent was guilty of any relevant default. At the time it is fair to say that I relied upon the statements of principle both made and collected in Bomanite Pty Ltd v Slatex Corporation Australia Pty Ltd (1991) 32 FCR 379 at 387 and 390-2 and State Pollution Control Commission v Australian Iron & Steel Pty Ltd (No 2) (1992) 29 NSWLR 487 at 492-5. In my opinion:
(i) it would have been entirely unjust to the respondents to permit a course that would postpone the trial after it had begun. Only those who have never felt the strain of being litigants could doubt the wisdom of the effort by Samuels JA in GSA Industries Pty Ltd v NT Gas Ltd (1990) 24 NSWLR 710 to consign the supposed "emollient effect of an order for costs as a panacea" propounded 100 years previously by Bowen LJ in Cropper v Smith (1884) 26 Ch. D 700 "to the Aladdin's cave which Lord Reid rejected as one of the fairy tales in which we no longer believe".
(ii) any injustice to the applicant was the consequence entirely of its own unmitigated default;
(iii) the established rules and procedures of courts must, for their practical efficacy, be vindicated by insistence that they be complied with in cases where extenuating circumstances are lacking and a significant amount of hearing time would be wasted without such insistence;
(iv) weight must be given to the injustice to litigants generally in permitting wastage of court sitting time at the behest of particular litigants - it would not have been possible to avoid such substantial wastage in this case;
(v) weight must also be given to the public interest in the Court maintaining "the integrity and vigour" as (Gummow J put it in Bomanite) of its own processes of case management; and
(vi) the effective denial by a court of an opportunity to a litigant to bring evidence of an allegedly substantial claim is a big step, even when that litigant has wasted earlier opportunities to do so, and ought only to be taken where there is no just and practicable alternative; in my view, there was none such here.
After I gave that decision, the High Court delivered judgment in Queensland v JL Holdings Pty Ltd (1997) 141 ALR 353. The Court made it clear that, while case management factors are a relevant consideration for a trial judge exercising a discretion in circumstances like those in this case, such factors should not prevail over any injustice to a litigant in being shut out of the presentation of a legitimate issue. The Court, while upholding the general principle of Cropper v Smith that no punitive approach should be taken and that parties' mistakes should not stand in the way of the trial of the real issues in a case, if that "can be done without injustice", did not comment adversely on the modern perceptions of limitations of the balm of costs, at least for personal litigants: see 357 and per Kirby J at 369-70.
No subsequent application was made to me, based on the reasoning in JL Holdings, to take steps which might relieve White Property from its difficulties which my interlocutory decision left unrelieved. Nevertheless, I considered whether I should invite further debate on the matter. I concluded that I should not. In my view, leaving aside case management considerations, this is a case, albeit commercial, in which the injustice to the personal respondents by proceeding as White Property wished would have outweighed the injustice to the applicant of not so doing. In any case, considerations of case management are relevant. Here, for the reasons I have given, they were highly relevant and, indeed, in my view, powerful enough to warrant preference being given to them over White Property's own interests, White Property having so egregiously brought itself into conflict with such considerations. In my view, in this case a balance of the considerations listed by way of guidance by Kirby J in JL Holdings quite decisively favours the course I took. This was, in my view, a much stronger case for the refusal of indulgence than JL Holdings.
On 22 November Mr Burbidge then sought the adjournment of the proceedings (again, involving a substantial waste of sitting time). I also refused that application. My reasons were, broadly, the same as those discussed above.
No further application to be relieved from the consequences of its miscalculation or neglect of its own interests was made by White Property at any subsequent stage of the hearing or thereafter.
Later in the hearing, on 28 November, I admitted certain material into evidence at the behest of White Property, despite its lateness, subject to a later decision as to its relevance. This was material of a non-controversial kind, so far as it went, as to what Woolworths had done with the land by way of its physical development and arranging tenancies, both from itself and others. Mr Burbidge put that:
"It certainly provides a measure of the damage . . . nobody from our side is suggesting that this is a dollars and cents exercise . . . this is evidence which would assist your Honour to come to some evaluation of the level of loss which we had sustained by the loss of our chance and it is clearly relevant for that reason."
In my view, the material does not so assist. Woolworths' project was quite different from what White Property had been planning. Woolworths' ultimate commercial objectives as to their entire involvement in the site would probably have included securing an outlet at that site and excluding its competitors. For example, Woolworths might have been prepared to administer matters so that it would pay a higher than ordinarily expected rent in a complex built quite for its own purposes - such would assist re-sale of the complex and might be seen as involving no more than an acceptable marketing cost to Woolworths.
Likewise, such material as was otherwise admitted into evidence concerning White Property's own feasibility assessments does not assist. Boardroom assessments, at least in this industry, on the evidence of Mr Quayle, are somewhat speculative. They do not bear any of the character of a disinterested, objective assessment such as ought be made by relevant experts like valuers. Hopes, or even expectations, are not indicators. Thus White Property was left without proof of the factual assumptions of its expert.
An assessment ought to be made
This case, in my opinion, is close to the borderline but I think that principle requires that I do my best to make some assessment. In my opinion, one can make a judgment that White Property lost a significant chance to make some substantial profit. That, however, imprecise it is, is nevertheless as precise as one can be.
I am conscious that such a finding is a vague one. There was no evidence to establish an actual likely resale price. As a real possibility, no profit might have been realised; I cannot say how great that possibility was. When any profit might have been realised is problematic. Whether any profit would actually have been large or small is unknown. Nevertheless, the choice is between awarding a purely nominal amount which, despite the uncertainties and guesswork, I believe would certainly do an injustice to White Property, or making an assessment that can be little better than a stab in the dark and which might, because of that, do one of the parties an injustice. In my view, the certainty of injustice should be avoided despite the great attendant difficulties in so doing.
In the circumstances, an assessment must be very much a subjective affair: an award of $100,000 seems to me to be too little; anything over $500,000 seems too much. Because of the uncertainty, conservatism seems prudent. I think that an award of $200,000 is, but is all that is, warranted.
Damages in the nature of lost opportunity to make a profit having been thus assessed, there is no warrant for adding thereto those parts of White Property's expenses not compensated above under the rubric of "Project Management Fees": Amann. If I am wrong in proceeding to assess the loss of opportunity in the state in which the evidence was left, the case would be one of inability to quantify that loss and Amann would require the award of the justifiable balance of those expenses; this might be of the order of $100,000.
The right party?
A submission was made on behalf of Richmond Growth that White Property could not get damages because, within the White group, it was intended White Construction should actually purchase the property from Richmond Growth. The contractual right of refusal was, however, that of White Property. That right was, in my opinion, not robbed of its value because White Property was intending to have a related company exercise that right. There was no evidence that White Property would not have had, one way or another, from White Construction or otherwise, countervailing benefits if, in the result, White Construction had exercised White Property's right against Richmond Growth. The breach of White Property's right, in my opinion, remained compensable at White Property's suit.