[1994] HCA 4
Steinberg v Commissioner of Taxation (Cth) (1975) 134 CLR 640
[1975] HCA 63
Tabet v Gett (2010) 240 CLR 537
Judgment (31 paragraphs)
[1]
Tabet v Gett (2010) 240 CLR 537; [2010] HCA 12
Category: Principal judgment
Parties: Boyded Industries Pty Ltd (plaintiff)
Dennis Bluth & 274 others named in Schedule 1 t/as HWL Ebsworth Lawyers (defendants)
Representation: Counsel:
J Giles SC with E Ball (plaintiff)
T Faulkner SC with G Marsden (defendants)
Boyded Industries Pty Ltd ('the plaintiff') sues its former solicitor, HWL Ebsworth Lawyers ('HWLE' or 'the defendant') for professional negligence in connection with a call option deed over a parcel of land located in what was described as 'Auto Alley' in Parramatta, NSW.
The proceedings were commenced by statement of claim filed in 2021. By its defence to statement of claim, filed on 3 August 2021, the defendant denied any liability to the plaintiff. Nevertheless, shortly prior to the commencement of the trial, the defendant filed an amended defence that admitted breach of duty of care: specifically, the defendant admitted that it failed to advise the plaintiff that lodging a caveat, in accordance with the instructions provided by the plaintiff to the defendant, would entitle the other parties to that call option deed to terminate it.
[4]
Background
The background facts were largely uncontroversial or not significantly in issue. They are set out in what follows, and reflect my findings unless otherwise stated. There are, however, a number of contested issues of fact - essentially in connection with causation as it relates to damages. Those contested issues are dealt with separately when dealing with causation and damages.
[5]
The plaintiff
The plaintiff is a family owned company, which commenced operations in 1966, that forms part of the Heartland Group - which owns and operates car dealerships across NSW, one of which was located in Parramatta, NSW, in an area described as 'Auto Alley'. That car dealership operated on land owned by the plaintiff, and is otherwise known as 57, 63 and 83 Church Street, Parramatta ('the land').
The car dealership that operated at this location was Heartland Group's first and largest dealership.
[6]
The defendant
The defendant is a firm of solicitors. That firm - or its predecessors - had been the solicitors for the plaintiff since at least the 1980s.
Since the early 2000s Dennis Bluth, a partner of HWLE, was the primary solicitor for the plaintiff and the Heartland Group.
[7]
The purchase of the property by the Gateway group
In 2015 and 2016, the plaintiff sold the land in Church Street, Parramatta on which the car dealership had operated to various corporate entities that formed part of the Gateway Group. Each Gateway entity was part of a group related to Dyldam Developments Pty Ltd.
The defendant acted for the plaintiff on each of these sales, and Mr Bluth was the solicitor with day-to-day carriage of these transactions.
In 2015 two Gateway entities acquired 63 Church Street, Parramatta from the plaintiff for $50 million: the contract was dated 17 December 2015, and completion occurred in late January 2016. This property became known as the Central Land, and it is convenient to continue to describe it as such.
The purchasers of the Central Land were Gateway Parramatta Two Pty Limited and Gateway Parramatta Two Commercial Pty Limited (collectively 'the Gateway entities'). The Gateway entities were incorporated in August 2015 for the purpose of acquiring, and developing, the properties in Church Street, Parramatta.
On 26 October 2016, the plaintiff entered into contracts for the sale of the remaining land - being 57 and 83 Church Street, Parramatta - to the Gateway Group. The property at 57 Church Street became known as the South Land, and the property at 83 Church Street became known as the North Land, and it is convenient to continue to describe them as such. The contracts provided for a combined purchase price of $100 million: the contract in connection with the North Land was entered into between the plaintiff and Gateway Parramatta One Pty Ltd and Gateway Parramatta One Commercial Pty Ltd (for $91 million); the contract in connection with the South Land was entered into between the plaintiff and Gateway Parramatta Two Pty Limited (for $9 million).
[8]
The dispute in connection with the North and South Land
A dispute arose in connection with the purchase of the North and South Land and proceedings were commenced in this Court, essentially concerning whether notices to complete issued by the plaintiff were effective ('the first Gateway proceedings').
The defendant acted as the solicitors for the plaintiff in those proceedings, and Mr Bluth was the solicitor with day-to-day carriage of the matter.
The parties reached a settlement of those proceedings in February 2017. A number of orders or notations were made, by consent, on 17 February 2017, relevantly including: (a) an order to the effect that the contracts in connection with the North and South Land were to be completed by 15 May 2017; and (b) a notation that there was an agreement involving the sale of what came to be described as the 'car showroom' (a lot in the Central Land: see [20]ff, below) to the plaintiff, with such transaction to be documented by way of option deed including a requirement that, in short, precluded the lodgement of a caveat on the Central Land by the plaintiff and that this stipulation was to be an essential term of the option deed and contract for sale.
The option deed was the subject of negotiations between early March and May 2017, and was executed on 15 May 2017. During the course of these negotiations, the parties were legally represented, with the plaintiff being represented by the defendant and Mr Bluth.
To signpost: the option deed between the plaintiff and the Gateway entities contained the two terms referred to in the notation made on 17 February 2017 - viz., precluding the lodgement of a caveat on the Central Land by the plaintiff and making that term an essential one - but contrary to the term, a caveat was in fact lodged on 24 July 2018.
[9]
The Deed of Call Option dated 15 May 2017
On 15 May 2017 a deed - described as a Deed of Call Option ('the deed') - was entered between the plaintiff, Gateway Parramatta Two Pty Limited, Gateway Parramatta Two Commercial Pty Limited and Sam Fayad as guarantor to reflect, inter alia, the agreed basis for the resolution of the first Gateway proceedings.
The plaintiff was referred to in the deed as the Grantee, and the Gateway entities as the Grantor. Mr Fayad was described and defined as the Guarantor (see the definition of 'Guarantor', cl 1.1(hh) and Items Schedule, Item 9).
It is important to make reference to a number of key provisions of the deed. Relevantly here, they include the following:
1. By cll 2.1 and 2.2 the deed granted the plaintiff a call option to purchase part of that property that was described as a lot in an unregistered stratum plan, and otherwise referred to as the car showroom (see the definition of 'Property', cl 1.1(ss) and Items Schedule, Item 6). Those clauses provide:
2.1 Grant by the Grantor
In consideration of the payment of the Call Option Fee by the Grantee to the Grantor, the receipt of which the Grantor acknowledges, on the date of this Deed, the Grantor grants to the Grantee a Call Option (subject to clause 2.9) for the Grantee or its Nominee to purchase the Property for the Purchase Price and on the terms of the Contract.
2.2 Irrevocable offer
The Call Option constitutes an irrevocable offer by the Grantor to enter into the binding Contract for the sale of the Property to the Grantee which, if accepted, must be accepted strictly in accordance with the provisions of this document, the Contract [sic] or otherwise the Call Option will expire.
…
1. By cl 2.5, the call option was required to be exercised prior to the expiration of the call option period - a period that was defined (see the definition of 'Call Option Period' in cl 1.1(j) and Items Schedule, Items 3 and 4) to be 15 May 2020, subject to any extension in accordance with cll 2.9(d), 5.5 and 15(d):
2.5 Exercise of Call Option
The Call Option may only be exercised by the Grantee or Nominee delivering, on any Business Day during and prior to the expiration of the Call Option Period, to the Grantor's Service Address:
(a) a Notice of Exercise of Call Option executed and dated by the Grantee or Nominee;
(b) if applicable a copy of the power of attorney as registered in the New South Wales General Register of Deeds, if the Notice of Exercise of Call Option is executed under a power of attorney;
(c) the Contract executed and dated by the Grantee or Nominee as purchaser. Prior to such execution, the Grantee or Nominee will complete details of the:
(i) purchaser (being the Grantee or Nominee);
(ii) purchaser's address (being the Grantee's or Nominee's address); and
(iii) folio identifier of the Property as notified to the Grantee by the Grantor pursuant to clause 2.9(a)(iv),
on the front page of the Contract; and
(d) in the event a Nominee is appointed by the Grantee in accordance with Clause 6, a Notice of Nomination duly executed by the Grantee.
1. Clause 2.9 placed a number of conditions on the exercise of the call option:
2.9 Call Option Conditional
(a) The Grantor or (subject to clause 6) the Nominee may exercise the Call Option in accordance with the provisions of clause 2, subject to and conditional upon the following conditions being satisfied prior to the Call Option Expiry Date:
(i) Development Consent on terms and conditions as deemed acceptable to the Grantor in its absolute discretion being granted by the relevant Authority for the Car Show Room; and
(ii) The Car Show Room must be as so described in clause 1.1(k) of this Deed;
(iii) The registration of the Strata Documents upon which event a separate title for the Property has been created; and
(iv) The Call Option being exercised within twenty-one (21) days of the Grantor serving written notice upon the Grantee that the provisions of clause 2.9(a)(i)-(iii) (inclusive) have been satisfied. In this regard, the Grantor must serve written notice on the Grantee within 5 Business Days of satisfaction of the provisions of clause 2.9(a)(i)-(iii) (inclusive).
(b) If the provisions of clause 2.9(a)(i)-(iii) (inclusive) have not been satisfied prior to the Call Option Expiry Date then the provisions of clause 14.2 apply.
…
1. By cl 8(a) the plaintiff was prohibited from causing any caveat to be registered on the title of the car showroom or the Central Land and, by cl 8(b), the deed contained an acknowledgement by the parties that cl 8(a) of the deed was an essential term, and that breach of it entitled the defendants to immediately terminate the deed:
8 Caveat
(a) The Grantee must not cause a caveat to be registered on the title of the Property or the Central Land in respect of any estate or interest that arises, or may arise, under this Deed or any other agreement collateral to this Deed.
(b) The Parties acknowledge that clause 8(a) is an essential term of this Deed and a breach of clause 8(a) shall entitle the Grantor to immediately terminate this Deed.
1. Clause 13 dealt with the guarantee provided by Mr Fayad. Relevantly it provided:
13 Guarantee
(a) The Guarantor, by the Guarantor's execution of this Deed, acknowledges incurring obligations and giving rights under this guarantee and indemnity.
(b) …
(c) The Guarantor unconditionally and irrevocably guarantees to the grantee due performance by the Guarantor of all obligations under this Deed.
(d) The Guarantor indemnifies the grantee against any cost, claim or liability arising from, or connected with any failure by the Grantor to comply with all [of] its obligations under this Deed.
(e) the Guarantor must pay on demand any money due to the Grantee by reason of this indemnity.
…
1. Clause 14 (broadly) concerned the consequences of the car showroom not being created in a timely manner or if there was some other defined event occurring:
Right of Rescission
14.1 The Grantor may rescind this Deed upon service of notice in writing to the Grantee, on the basis that the Grantor pays to the Grantee or Nominee $3,500,000.00 (inclusive of GST) as the Grantee or Nominee directs, if one or more of the following occurs:
a. The Grantor transfers ownership of the Central Land to another person or entity other than a Related Entity prior to the registration of the Strata Documents; or
b. The Grantor cannot complete the Contract; or
c. The Strata Documents are not registered by the Sunset Date;
14.2 If clause 2.9(b) applies, either party may rescind this Deed by serving notice in writing on the other party, in which event the Grantor must pay to the Grantee $3,500,000.00 (inclusive of GST).
14.3 If the Grantee rescinds this Deed under clause 5.4 or clause 15, the Grantor must pay to the Grantee $3,500,000.00 (inclusive of GST).
'Sunset Date' is defined to be 15 May 2020 as extended by cll 2.9(e), 5.5 and 15(e). It is accepted that registration of the documents necessary to create the car showroom did not occur by 15 May 2020 (cl 14.1(c)).
1. The contract attached to the deed contained a number of special conditions. Special condition 37 of the contract was in the following terms:
Caveat
37.1 The Purchaser must not cause a caveat to be registered on the title of the Property or any part of it in respect of any estate or interest that arises, or may arise, under this Contract or any other agreement collateral to this Contract.
37.2 The Parties acknowledge that clause 37.1 is an essential term of this Contract and a breach of clause 37.1 shall entitle the Vendor to immediately terminate this Contract.
[10]
A caveat is lodged against the title to the Central Land
Kieran Turner, following reports in the media outlets, became concerned about the financial position of the Dyldam group. (Precisely when Mr Turner began to have those concerns was contested. I address, and make a finding about, this issue later: see [78], below).
On or around 20 July 2018, Mr Turner read a newspaper article (that had been published on 18 July 2018) which reported that "Dyldam" was looking to sell the Parramatta property (amongst other property within their portfolio).
On 20 July 2018, Mr Turner sent a text message, that referred to the above article, to Mr Bluth in these terms:
Db, did you get this?
Hi Dennis and Steve, Nick Turner just text me saying Dyldam are selling our Parramatta side plus other for $900m, in today's AFR. I still want my showroom or atleast [sic] the $3.5m, I'd prefer to wait longer and get the showroom though, so can you please lodge a caveat on the site and contact them for an explanation?
Mr Bluth's text message reply to Mr Turner, sent on that day, included the following response: "Yes will do this".
On 24 July 2018, a caveat was recorded on the register against the title to the Central Land. The caveat was lodged on instructions from Kieran Turner, by Mr Bluth (or, on Mr Bluth's instructions, by another employed solicitor of the defendant), and named the plaintiff as the caveator on 24 July 2018. Mr Bluth subsequently confirmed to the plaintiff, on 31 August 2018 that he had lodged for registration a caveat on the title.
It appears that, around 8 August 2019, the existence of the caveat came to the attention of Gateway - specifically to the attention of the Property Finance Director of Gateway, Christopher Jarrett. Mr Jarrett subsequently informed Gateway's in-house legal counsel of the existence of the caveat.
On 14 August 2019 there were communications in relation to the caveat between the in-house lawyers of Gateway, and the defendant. At that time, the Gateway entities sought the consent of the plaintiff, as caveators, to lodge a Voluntary Planning Agreement in respect of the development of the land.
[11]
The Gateway entities terminate the Deed of Call Option
On 16 August 2019 Gateway terminated the deed on the basis that the plaintiff had breached cl 8(a). The termination was communicated by the solicitors for Gateway via a letter sent to the defendant. In addition to advising that Gateway exercised its rights to terminate the deed (and reserved its rights in all other respects), the solicitors for Gateway demanded that the plaintiff immediately withdraw the caveat.
On 19 August 2019, the solicitors for Gateway sent a further letter to the defendant. The letter confirmed service of the letter dated 16 August 2019, and restated the demand for the immediate withdrawal of the caveat.
On 20 August 2019 Mr Bluth advised the solicitors for Gateway that he was seeking instructions from the plaintiff. Further letters were sent by the solicitors for Gateway to the defendant, seeking the immediate withdrawal of the caveat, on 26, 27 and 29 August 2019. Following this last contact, Mr Bluth sent an email to the solicitors for Gateway advising that he had instructions to withdraw the caveat, and steps were being taken for the caveat to be withdrawn.
On 28 August 2019, Mr Bluth sent an email to Mr Turner which included the following:
Kieran,
Under the Call Option Deed with Dyldam for the car showroom there was a clear prohibition to lodging a caveat on title.
…
I suspect that we will have to withdraw the caveat as there is a clear prohibition against lodgement and then seek from the Supreme Court a declaration to over ride (sic) the termination.
…
On 28 August 2019, Mr Turner responded to the email sent by Mr Bluth in these terms:
Why didn't you know about the prohibition when you lodged the caveat?
I need this resolved urgently and to no cost to me.
Later, on 29 August 2019, Mr Bluth sent a further letter to the solicitors for Gateway advising that the plaintiff's position was that the purported termination of the deed was invalid and of no effect.
On or around 29 August 2019 the caveat was withdrawn.
The plaintiff contested the validity of the termination: in truth, the idea to contest the validity of the termination was initiated by Mr Bluth.
[12]
Further Supreme Court proceedings: contesting the termination
The plaintiff, still represented by the defendant, commenced proceedings in this Court by statement of claim filed on 6 March 2020.
The evidence makes it clear that the commencement of these proceedings was driven by an acknowledgement by the defendant that lodgement of the caveat was "a problem". It was accepted that the commencement of those proceedings, and all costs associated with them, were borne by the defendant. It should also be noted that the defendant sought advice from counsel about whether the termination was effective, and counsel's advice, dated 29 November 2019, was rather lukewarm: the advice was that "the termination was effective, although there is an available argument that the provision entitling the Grantor to do so was penal, which may render the termination liable to challenge".
By those proceedings, it was accepted that by causing the caveat to be registered on the title to the Central Land the plaintiff had breached cl 8(a) of the deed, but nevertheless it was argued that: (a) Gateway, by their conduct, waived any right to rely upon a breach of cl 8(a); or, (b) Gateway otherwise elected to affirm the deed.
The plaintiff's proceedings against Gateway were dismissed by judgment delivered on 8 October 2020: Boyded Industries Pty Ltd v Gateway Parramatta Two Pty Ltd [2020] NSWSC 1368. Specifically, it was held that Gateway had not, by waiver or election, lost the right to terminate the deed in consequence of the plaintiff's breach of cl 8(a).
The defendant, on 14 October 2020 subsequently sought advice from senior counsel on the prospects of an appeal from that judgment. Pending the provision of that advice, on 23 October 2020, the defendant filed a Notice of Intention to Appeal.
On 29 October 2020, the defendant sent an email to Mr Turner advising that senior counsel had advised that the plaintiff had "no realistic prospects of successfully appealing" the decision and, further, advised that "we are otherwise liable for [senior counsel's] fees and we have paid the filing fee for the Notice of Intention to Appeal".
Shortly after this time, Mr Turner had a conversation with another partner of the defendant who advised him that he needed to retain a different lawyer.
[13]
Breach of duty
As earlier noted, the defendant admitted breach of duty of care in failing to advise the plaintiff, and Mr Turner in particular, that lodging a caveat in accordance with the instructions that Mr Turner provided on 20 July 2018 would entitle the Gateway companies to terminate the deed by reason of cll 8 (a) and (b) of the deed. It was, during submissions, admitted that the breach was under the general law, as well as a breach of the implied term of the retainer (to exercise reasonable care and skill).
The defence filed did not address the issue of causation presented by this admitted breach of duty - viz., whether the plaintiff (through Mr Turner) would have maintained his instructions - to lodge the caveat - if properly advised of the consequences of taking that step. Nevertheless, during submissions the defendant expressly conceded that Mr Turner, had he been so advised, would have instructed Mr Bluth not to lodge a caveat and in those circumstances the deed would not have been terminated.
In my view that concession was entirely appropriate. It is amply borne out by the evidence from Mr Turner about his desire and motivation to protect the plaintiff's interests under the deed and, further, the customary way in which he received, and acted upon, the advice provided by Mr Bluth, as the plaintiff essentially submitted. Given the defendant's concession, and Mr Turner's evidence (which I accept), I find that if the defendant had provided proper advice, and Mr Turner's attention had been expressly drawn to the prohibition against lodging a caveat in cl 8(a) of the deed and the ramifications identified in cl 8(b), he would have accepted that advice - with the consequence that no caveat would have been lodged, and the deed would not have been terminated in consequence.
[14]
The plaintiff's claim for damages: a summary of the competing positions
It is useful to commence with a short explanation of the plaintiff's case - and, no less importantly, to record what did not form part of the plaintiff's case.
Before doing so, the following matters should be noted. First, the plaintiff sued the defendant in negligence, and for breach of contract - albeit that each cause of action relied upon the same conduct, being the failure of Mr Bluth to provide advice to Mr Turner about the consequences of lodging a caveat over the Central Land (see [43], above). Ultimately, however, during submissions, no distinction was sought to be made between these causes of action by either party. That is, it was not suggested that, in the circumstances of this case, there were any juridical advantages conferred upon the plaintiff in pursuing, say, the claim for breach of contract (rather than in negligence), nor was it suggested that in approaching the issues in relation to causation and the assessment of damages that different principles (relevantly) applied depending upon the cause of action. I have, thus, approached the matter in this way. Secondly, it was accepted by both parties that causation was to be addressed by reference to s 5D of the Civil Liability Act 2002 (NSW) ('the CLA'), no doubt reflecting the fact that the admitted breach constitutes "negligence" (s 5 of the CLA), with the consequence that Part 1A of the CLA applies to the claim "regardless of whether the claim is brought in tort [or] in contract": s 5A of the CLA. Thirdly, to the extent that there were arguments in connection with causation, they were confined to factual causation (s 5D(1)(a) of the CLA); no issue about scope of liability was raised (ss 5D(1)(b) and (4) of the CLA). Fourthly, in determining liability "for negligence, the plaintiff always bears the onus of proving, on the balance of probabilities, any fact relevant to the issue of causation": s 5E of the CLA.
In proceedings, such as this, where it is alleged that there has been loss caused by the negligence of the defendant (and breach of the implied duty), the guiding principle in the assessment of damages is compensatory: Haines v Bendall (1991) 172 CLR 60, 63; [1991] HCA 15 ('Haines'). In Haines (at 63) that principle was expressed as follows:
The settled principle governing the assessment of compensatory damages, whether in actions of tort or contract, is that the injured party should receive compensation in a sum which, so far as money can do, will put that party in the same position as he or she would have been in if the contract had been performed or the tort had not been committed …
[15]
Introduction
As earlier noted, the plaintiff claims damages for the admitted breach of duty on the basis that the defendant's failure to advise the plaintiff of the consequence of lodging a caveat over the Central Land caused it to lose a valuable chose in action once the deed was terminated - that is, the right to be paid $3.5 million (plaintiff's submissions at [36]).
The trigger for this payment, relied upon by the plaintiff, is the fact that registration of the documents necessary to create the car showroom did not occur by 15 May 2020 (plaintiff's submissions at [13]). The consequence of the absence of registration of the documents necessary to create the car showroom is that the conditions precedent to the exercise of the call option, as provided by cl 2.9(a)(i)-(iii), had not been satisfied prior to 15 May 2020 (being the call option expiry date). Given the provisions of cll 2.9(a)(i)-(iii) had not been satisfied by the call option expiry date, "then the provisions of clause 14.2 apply": cl 2.9(b).
I add here that it became a common ground (and I find) that, by 15 May 2020, the conditions in cl 2.9(a) were not satisfied. Specifically, it was accepted that the condition in cl 2.9(a)(iii) was not satisfied by 15 May 2020, or indeed at any other date.
By cl 14.2, if cl 2.9(b) applies "either party may rescind" the deed by serving a notice in writing on the other party, in which event the Gateway entities "must pay to the [plaintiff] $3,500,000.00 (inclusive of GST)". The right conferred by cl 14.2 is only enlivened upon non-satisfaction of the conditions in cll 2.9(a) prior to the call option expiry date - being 15 May 2020.
The framework of the deed crystallises the issue of fact raised by the plaintiff's claim for damages: the plaintiff's case is that, given the non-satisfaction of the matters in cl 2.9(a) by the call option expiry date, the plaintiff would have rescinded the deed (pursuant to its contractual entitlement to do so) and served a notice requiring the payment of $3.5 million.
[16]
The plaintiff's submissions
The plaintiff's essential case is that the contemporaneous evidence supports its counterfactual analysis, and that the plaintiff, notably guided by Mr Turner, would have taken steps to rescind the deed by reason of the failure of the Gateway entities to achieve the relevant contractual milestones required by cl 2.9(a)(i)-(iii). The plaintiff relies upon what was submitted to be the critical objective evidence demonstrating this - being, what was recorded in emails dated 6 and 7 August 2019; 11-12 December 2019; 22-24 February 2020; and 29 October 2020.
The plaintiff's ultimate submission was that, by 2020, Mr Turner had expressed his strong desire to receive the money and that, based upon that material, the Court should be satisfied that this was the most likely scenario, but for the negligence of the defendant. The related submission was that Mr Turner's state of mind, in the circumstances of the lack of progress with the development, had changed and this too significantly informed the most likely scenario argued by the plaintiff.
The emails dated 6 and 7 August 2019 record communications between Mr Turner and his father-in-law (amongst others). Following Mr Turner sending, by email on 6 August 2019, a link to a newspaper article to his father-in-law (Mr Bargwanna) about Dyldam's "wind-up challenge", Mr Bargwanna relevantly responded (on 7 August 2019 at 6:22am):
You need to move to try and secure the Parramatta showroom asset or get in the line for the $3m before they collapse!!!!
Following receipt of that email, on 7 August 2019 at 9:11am, Mr Turner replied to that email (copying in Mr Bluth) in these terms:
Hi Dennis, see below, do we have a caveat on the Parramatta property for our showroom? And I recall we have a personal guarantee from Sam at Dyldam for the showroom, can you confirm this? Please email them and ask for an update on the development and hand over of the showroom, I still want this and not the money.
Although the defendant did not rely upon this email, it does demonstrate what is otherwise apparent from the terms of the deed (which, in turn, derived from the settlement of the first Gateway proceedings under which the plaintiff secured the call option for the car showroom) - namely, that the plaintiff did, at least initially, prefer the car showroom to the payment of any money to which it might become entitled if the deed were rescinded. Nevertheless, as I later explain (see [72]ff, below), I am satisfied that this preference was simply that: there was no fixed and immutable decision to pursue the car showroom.
[17]
The defendant's submissions
The defendant submitted that the most likely scenario, but for the defendant's negligence, was that Mr Turner would have taken steps in and around May 2020 to secure an extension of the call option deed. In support of that factual finding, the defendant relied upon the evidence that Mr Turner gave in par 85 of exhibit B (Mr Turner's affidavit sworn 19 November 2021), submitting in effect that it was the most persuasive evidence. That evidence was as follows:
85 I understand that the Call Option was subject to the conditions listed in clause 2.9(a)(i) - (iii) of the Option Deed being satisfied before the Call Option Expiry Date (which I understand was 15 May 2020). If it had appeared that those conditions would not be satisfied prior to that time, then I would have taken steps to try and renegotiate with the Gateway Two and Gateway Two Commercial to extend the Call Option Expiry Date so that the conditions in clause 2.9(a)(i) - (iii) of the Option Deed being satisfied by the extended Call Option Expiry Date and then exercised the Call Option. I believe that that these negotiations would have had good prospects of success for the following reasons:
(a) First, I had successfully negotiated with Gateway Two and Gateway Two Commercial, as well as the Dyldam group more generally, on several occasions (in addition to the settlement of the First Gateway Proceedings, as described in paragraphs [26] to [38] above). For example, I also negotiated directly with Remon Fayad, the son of the CEO of the Dyldam group, Sam Fayad (the Guarantor under the Option Deed), as well as Sam Fayad on separate occasion, in relation to the property sales described above at paragraphs [19] to [25].
(b) Secondly, I understand that an extension of the Call Option Expiry Date would have been attractive to Gateway Two, Gateway Two Commercial and the Dyldam group because the Dyldam group has experienced cash flow concerns since at least 2018. In addition to the article dated July 2018 which I referred to above in paragraph [45), I have also located a number of articles from 2019 and 2020 to a similar effect. I would have used this fact to Boyded's advantage by pitching the extension of the Call Option Expiry Date as better for Gateway Two and Gateway Two Commercial than the alternative of having to pay $3.5 million to Boyded under the Option Deed.
At Tab 31 (p.306-317) of KJT-1 are copies of the articles I refer to above from 2019 and 2020, entitled "Supreme Court denies Dyldam's wind-up challenge" dated 6 August 2019 (page 306 of KJT-1)…and "Dyldam supersite listed for sale by receivers" dated 2 November 2020 (page 312 of KJT-1)…, both of which were published in the Australian Financial Review.
(c) Thirdly, as Boyded's CEO, I know that Boyded's cash position was in a good state following the land sales referred to above in paragraphs [19] to [25], and so it had no pressing need for the $3.5 million payment under the Option Deed but was instead willing and able to wait until the development was completed.
(d) Fourthly, I was of the view that the value of the Car Showroom would appreciate over time, even if the development was significantly delayed.
[18]
Discussion and consideration
It is important to emphasise that the issue to be resolved requires the plaintiff to prove, on the balance of probabilities, that the most likely scenario, but for the admitted negligence of the defendant, is that the plaintiff would have rescinded the deed.
I am satisfied, and find, that the most likely scenario but for the negligence of Mr Bluth is that the plaintiff would have rescinded the deed. My reasons for making that finding are set out in what follows (see [74]ff, below). Shortly stated: I am satisfied that whilst Mr Turner (and thus the plaintiff) did have a preference for the car showroom, that preference was not a fixed one. Rather, the decision about whether to rescind the deed, I am satisfied, would most likely have been driven by Mr Turner's assessment of what he considered to be the most financially advantageous position for the plaintiff - which, given the uncertainty in Mr Turner's mind surrounding the financial position of the Gateway entities, I consider would have favoured Mr Turner rescinding the deed in May 2020. I turn now to explain my reasons for the finding that I have made.
First, the defendant argued that the plaintiff - and Mr Turner in particular - had a strong sentimental attachment to the Church Street site, and that attachment significantly informed the likelihood of the plaintiff seeking to negotiate an extension of a deed in May 2020, rather than seeking to rescind it. I do not accept that submission. In my view, although I accept that Mr Turner had some sentimental attachment to the site, its significance should not be overstated: I do not accept that any sentimental attachment to the site would - inevitably - govern what Mr Turner would have done, nor significantly so; rather, in my view, it was simply a consideration for Mr Turner to be evaluated amongst a range of others. That is evident from the emails to which reference has been made. For example, the email dated 20 July 2018 indicated that Mr Turner still wanted "my showroom or at least the $3.5m …" (see [23], above). And, by way of further example, it is consistent with what is contained in the email from Kieran Turner to Dennis Bluth sent on 22 February 2020 at 2:39 pm (see [67(1)], above) - namely: "… while I would prefer the showroom I think a bird in the hand is worth two in the bush so let's write to them and collect the $4m per contract on his personal guarantee and use court if necessary". Further, it is also evident from the fact that the plaintiff sold the site in 2015, and it was only subsequently, as part of the resolution of the first Gateway proceedings in February 2017, that the plaintiff secured the interest in the Central Land that was the subject of the option deed. In my view these matters give proper context to the 'attachment' that Mr Turner had to the site.
[19]
The assessment of whether the plaintiff lost anything of value
Cases involving professional negligence commonly involve difficult issues of causation, and the assessment of loss. This case is no different. Usually, the difficulties arise because the plaintiff's case requires the Court to undertake an assessment of these issues based upon a counterfactual analysis: the Court is required, by that analysis, to determine a "what if" scenario - viz., what would have occurred if (here) Mr Bluth had discharged, rather than breached, his duty of care to the plaintiff. I have already assessed, and made findings about, two issues that arise in that analysis: the first was that Mr Turner would have acted on the correct advice and not instructed Mr Bluth to lodge a caveat over the Central Land (see [45], above); the second was that Mr Turner would have rescinded the deed, rather than negotiated an extension of it (see [73]ff, above).
Two issues remain in the plaintiff's counterfactual analysis: whether the plaintiff lost anything of value and, if it did, assessing the value of that loss. I address these remaining issues in what follows.
[20]
The competing cases: introduction
The next step in the plaintiff's counterfactual analysis involves assessing whether the plaintiff lost anything of value: the plaintiff argues it did, whereas the defendant argues it did not.
The plaintiff's claim was expressed to be one for damages for a lost commercial opportunity - being, upon the expiration of the call option expiry date, the entitlement to receive payment of $3.5 million following rescission of the deed. It is convenient to describe this, as the parties did during submissions, as the 'lost opportunity'.
Put simply, the plaintiff's argument is: proceeding on the footing that following the expiry of the call option period Mr Turner would have taken steps to rescind the call option deed, and required the payment of $3.5 million, the Gateway entities or Mr Fayad (as guarantor) would have paid that amount. The plaintiff submitted that the circumstances demonstrate that recovery was likely or, at a minimum, there was a significant likelihood of that outcome. To the extent that the plaintiff submitted that it was, in effect presumptively, entitled to recover the full amount (the plaintiff's primary case), I do not accept that submission. That is because, as the defendant submitted, the amount payable following rescission was in practical terms unsecured - it was a chose in action - and, relatedly, that characterisation of what was "lost" necessarily required an assessment of whether that chose in action had a value. In those circumstances, the plaintiff's claim could not be characterised as "so high as to be practically certain": Malec v JC Hutton Pty Ltd (1990) 169 CLR 638, 643; [1990] HCA 20 ('Malec'). Thus, in my view, the plaintiff's claim is correctly characterised as one for a lost commercial opportunity, as I have described in the preceding paragraph.
The defendant argued (defendant's closing submissions at [8]-[10]), and the plaintiff accepted, that the date for the assessment is in fact 28 days from the expiration of the call option deed - the payment was only required to be made within 28 days of receipt of a tax invoice and direction to pay: cll 14.4 and 14.5 - such that the date of assessment should be 12 June 2020. That is, on the plaintiff's case, the plaintiff was deprived of the $3.5 million payment 28 days after the option deed was rescinded. It followed that the determination of whether the plaintiff lost an opportunity of some value is to be determined at that date. I add: the evidence did not suggest that there was any difference between those dates - essentially, May or June 2020 - in connection with the "financial position" of the Gateway entities and Mr Fayad, and the defendant did not submit to the contrary.
[21]
The relevant principles
In order for the plaintiff to succeed in a case that it had lost the opportunity to exercise its option rights under the deed, the plaintiff is required to demonstrate, on the balance of probabilities, that it has, in fact, lost an opportunity of some value, which is not negligible; and, upon demonstration of that fact, it becomes necessary to quantify the value of that opportunity. These principles (and requirements) were established in Sellars v Adelaide Petroleum NL (1994) 179 CLR 332; [1994] HCA 4 by Mason CJ, Dawson, Toohey and Gaudron JJ (at 355):
On the other hand, 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. However, in a case such as the present, the applicant shows some loss or damage was sustained by demonstrating that the contravening conduct caused the loss of a commercial opportunity which had some value (not being a negligible value), the value being ascertained by reference to the degree of probabilities or possibilities. It is no answer to that way of viewing an applicant's case to say that the commercial opportunity was valueless on the balance of probabilities because to say that is to value the commercial opportunity by reference to a standard of proof which is inapplicable.
Brennan J explained the requirement of a plaintiff to demonstrate the loss in these terms (at 367-368):
… Unless it can be predicated of an hypothesis in favour of causation of a loss that it is more probable than competing hypotheses denying causation, it cannot be said that the plaintiff has satisfied the court that the conduct of the defendant caused the loss. Where a loss is alleged to be a lost opportunity to acquire a benefit, a plaintiff who bears the onus of proving that a loss was caused by the conduct of the defendant discharges that onus by establishing a chain of causation that continues up to the point when there is a substantial prospect of acquiring the benefit sought by the plaintiff. Up to that point, the plaintiff must establish both the historical facts and any necessary hypothesis on the balance of probabilities. A constant standard of proof applies to the finding that a loss has been suffered and to the finding that that loss was caused by the defendant's conduct, whether those findings depend on evidence of historical facts or on evidence giving rise to competing hypotheses. In any event, the standard is proof on the balance of probabilities.
[22]
Discussion and consideration
This issue was argued by the parties as involving consideration of the willingness of the Gateway entities (or Mr Fayad) to pay $3.5 million upon demand and the ability of the Gateway entities (or Mr Fayad) to do so at the relevant time. (To be clear: the parties address the position as confined to requiring the resolution of these two issues of fact).
In terms of willingness to pay, the defendant emphasised that the amount was an unsecured promise to pay money that had no value unless it could be enforced and satisfied (defendant's closing submissions at [26] and [28]). The plaintiff submitted that the Court should infer that willingness not merely because there was the legal obligation to pay it, but because of the unambiguous strength of the cause of action. The defendant did not argue to the contrary; nor did the defendant advance a submission that there was any defence to the claim for payment of the $3.5 million.
In my view, the fact that there was essentially no suggested defence to the claim is a significant objective fact supportive of an inference being drawn that there would have been a willingness to meet the demand by the Gateway entities, or Mr Fayad.
That is not an end to the enquiry about willingness to pay. That is because willingness to pay is also informed, in my view, by the consequences of the Gateway entities and Mr Fayad failing to do so: liquidation in the case of the Gateway entities, or bankruptcy in the case of Mr Fayad. In relation to Mr Fayad, as the defendant later argues in relation to the issue of ability to pay, he has more recently been defending bankruptcy proceedings against him. Given that he is presently resisting bankruptcy proceedings (and has done so in the recent past), I infer that he would have been concerned about the threat of bankruptcy had that been raised in 2020 (and thereafter), and had a personal interest in staving off any (potential) bankruptcy proceedings.
For these reasons I infer, and find, that the objective strength of the claim, and the potential consequences of failing to do so, was such that there would have been a willingness to meet the demand to pay by the Gateway entities and Mr Fayad.
In relation to the ability to pay, the defendant argued that the plaintiff had failed to adduce any evidence to prove that the unsecured promises to pay $3.5 million had some value (defendant's closing submissions at [30]-[31]).
[23]
Assessing the loss: quantification
The plaintiff submitted that the loss suffered was the chose in action under the deed once terminated - being the right to be paid $3.5 million and, further, that this represented the value of the right (plaintiff's submissions at [36]).
In my view, as the defendant essentially submitted, the loss in question - the commercial interest lost - is properly characterised as the loss of the opportunity to be paid $3.5 million. However, given the right was unsecured, its value is not a reflection of the promised amount but a value having regard to the probabilities and possibilities.
The defendant submitted that if the Court finds that the value of the lost opportunity had a value that was not theoretical or negligible, then the Court is to undertake an assessment of the value of the commercial opportunity having regard to the probabilities and possibilities: the ultimate submission advanced was the plaintiff's claim required "a very substantial discount" to $3,181,818.00 (defendant's closing submissions at [25]). The amount identified by the defendant in this submission reflects an argument raised, to the effect that the contractual stipulation provided that the amount to be paid would be exclusive of GST. This argument is dealt with separately (see [150]ff, below).
[24]
The relevant principles
There was no dispute between the parties as to the correct approach to determine the value of that which has been lost: the assessment of value of the lost commercial opportunity is to be "ascertained by reference to the degree of probabilities or possibilities: Sellars at 355. In Searle v Commonwealth of Australia (2019) 100 NSWLR 55; [2019] NSWCA 127 at [202] ('Searle'), by reference to Sellars, it was said that this "only requires there to be established on the balance of probabilities that there was loss of an opportunity of some value but does not require it to be shown that the likelihood of that opportunity being realised was greater than 50%"; see also Mal Owen at [100].
Some other matters should be noted about the task of assessing the value of that which has been lost. First, the fact that the quantum of damages is difficult to assess does not mean that the plaintiff's entitlement to damages is confined to a nominal sum; rather, the Court must estimate them, as best they can: Fink v Fink (1946) 74 CLR 127, 143; [1946] HCA 54; Sellars at 349. In Fink (at 143) this principle was expressed in these terms:
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.
Secondly, in relation to the "difficult task" of estimating hypothetical events (and assessment of loss based upon those events), in Searle it was reinforced that damages based upon hypothetical evaluations do not admit to precise calculation (at [206]):
It is not essential for a trial judge assessing damages for loss of a chance to nominate a particular percentage of probability to be attributed to the prospect of the chance being realised, and to insist on this would be prone to artificiality. A global approach not requiring the specification of particular percentages or degrees of probability or possibility was endorsed as acceptable by this Court in Fightvision Pty Ltd v Onisforou (1999) 47 NSWLR 473; [1999] NSWCA 323 at [147]. In Malec at 640, Brennan and Dawson JJ said:
"… we think it undesirable for damages to be assessed on the footing of an evaluation expressed as a percentage. Damages need not be assessed by first determining an award on the footing that the hypothetical situation would have occurred and then discounting the award by a selected percentage. Damages founded on a hypothetical evaluations defy precise calculations."
[25]
Discussion and consideration
As I have earlier noted, the defendant's position was that, when assessing the value of the opportunity lost, the circumstances of the case required "a very substantial discount", a submission that extended to suggesting recovery should be confined to 10% of the amount claimed (which it capped based upon the "GST issue"). The plaintiff, on the other hand, submitted that there should be a modest discount only of the full amount claimed - and to the extent that this was reflected in a discount percentage, submitted that it should be around 10% but no more than 20%.
The parties did not enumerate specific matters that required consideration (nor, for that matter, did they assign any particular weight to certain matters that called for particular discounting or should inform the ultimate amount), but essentially (so far as the defendant is concerned) relied upon the financial position of the Gateway entities and Mr Fayad, and the uncertainty that inevitably attached to recovering from one or other of them. The position adopted by the parties was presumably a reflection of the fact that although proving a loss of a chance of some value and ascertaining the value of that chance are conceptually distinct steps in the plaintiff's claim, "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": Sellars at 364.
As I have earlier noted, the matter was argued on the basis that two findings (favourable to the plaintiff) were needed on the issues of willingness, and ability, to pay (so as to permit a conclusion that the plaintiff lost something of value), and, when dealing with the question of the quantification of that loss, confined to the ways referred to in [138]-[139], above.
In my view an assessment based upon the plaintiff's hypothesis requires consideration not only of the above, but also of how the claim would have been dealt with by the parties.
The plaintiff's entitlement to be paid $3.5 million (subject to the GST issue) was clear, and the defendant did not identify any basis upon which it could, or might, be argued that the Gateway entities or Mr Fayad could have resisted that claim. There was, therefore, a strong legal entitlement to be paid this amount. Nevertheless, it remains at least possible that the Gateway entities and Mr Fayad disputed the claim, and had a basis to do so. In this respect it is well to recall what was said (albeit in a different context) by Megarry J in John v Rees [1970] Ch 345, 402:
As everybody who has anything to do with the law well knows, the path of the law is strewn with examples of open and shut cases which, somehow, were not; of unanswerable charges which, in the event, were completely answered …
[26]
The GST argument
The plaintiff argued that, given that it was not registered for GST purposes (exhibit A) the entitlement was to receive the amount of $3.5 million without any reduction for the GST otherwise payable.
The defendant argued that the maximum value of the plaintiff's cause of action was the sum of $3.5 million, less GST: that is, the maximum value was $3,181,818.00 (defendant's outline of submissions at [7] and [25]). The basis for that submission is that, by reason of cl 14.2 of the deed, if the provisions of cl 2.9(b) apply - which is accepted to be the position here - then the entitlement to receive $3,500,000 was "inclusive of GST".
As it happens, very little was said about this issue in the course of submissions by the defendant - a matter which I noted and raised with the parties. The defendant sought, and was granted, leave to file further submissions on the GST issue by 21 July 2023, with the plaintiff to provide submissions in response by 25 July 2023.
The submissions for the defendant were delayed, and filed on 24 July 2023 (the 'defendant's GST submissions'), necessitating an extension of time for the plaintiff to respond. The plaintiff's submissions were filed on 28 July 2023 (the 'plaintiff's GST submissions').
[27]
The submissions of the parties
The defendant essentially raised the following submissions in connection with this issue in the written submissions filed:
1. First, the requirement to pay GST on any payment following rescission depended upon the plaintiff being "registered" or "required to be registered" for GST purposes: s 23-5 of the A New Tax System (Goods and Services Tax) Act 1999 (Cth) ('the GST Act') (defendant's GST submissions at [8]-[9]).
2. Secondly, the "facts strongly indicate that the Plaintiff is required to be registered", it being submitted that the business activity of the plaintiff "is substantial. It cannot be assumed that its turnover is less than $75,000". In this respect the defendant submitted that whilst the plaintiff had adduced evidence that it was not registered, the plaintiff "has not produced any evidence about its turnover, from which an adverse inference may be drawn" (defendant's GST submissions at [9]).
3. Thirdly, given the plaintiff "conducts the enterprise through a trust", the rescission of the deed would have been a taxable supply if the trust was registered or required to be registered (defendant's GST submissions at [10]).
4. Fourthly, in relation to the third submission, the defendant argued that having regard to Mr Turner's description of the business activities of the trust, the "clear inference is that the trust is registered in the way that businesses usually are" (defendant's GST submissions at [13]). In this last respect, the defendant submitted that this explained why the plaintiff was not registered - albeit, the submissions did not attempt to deal with what, at least impressionistically, appears to be an inconsistency with the earlier submissions that suggested the plaintiff itself was required to be registered (it should be noted: no submission was put that they were both required to be registered).
The following matters should be noted, at this point. First, the defendant did not squarely address any question of onus of proof, albeit that it did submit that the plaintiff's claim was based upon "an assumption" (namely, that no GST would have been payable) which unless it is proved has the effect of capping the plaintiff's damages (defendant's GST submissions at [2]). The defendant did not refer to any authorities in support of its submission, or on the onus of proof more generally. Secondly, although the defendant did raise, during the hearing, a question about the statutory requirement for the plaintiff to be registered, nothing was said about the trust (the defendant's third and fourth submissions summarised above). Thirdly, the submissions accepted that the liability to pay GST is not a matter of contractual construction, but an application of the relevant taxation statute - the GST Act.
[28]
Discussion and consideration
In relation to the defendant's first submission - viz., that the plaintiff was "required to be registered" in accordance with s 9.5(d) of the GST Act - the defendant argues that the "facts strongly indicate that the Plaintiff is required to be registered": and in this respect submits that as the plaintiff has not produced any evidence about its turnover, an adverse inference can and should be drawn to the effect that its turnover is not less than $75,000 (being the monetary registration threshold).
The evidence, which I accept, is that the defendant, although it has an ABN, and been incorporated since 1951, has "[n]o current or historical GST registrations" (exhibit A). That is, it is not registered for GST purposes.
The defendant's submission accepted that the evidence demonstrated that the plaintiff was not registered for GST purposes - nevertheless the defendant submitted that this was "remarkable". In my view, to the extent that this submission sought to cast some doubt upon that fact, I do not accept it and, further, it would, at a minimum (and as a matter of fairness), have been necessary to cross examine Mr Turner about this; as it happens, there was no cross examination of Mr Turner at all about this topic.
Returning now to the balance of the defendant's submission, the defendant, in effect, submits that the Court should infer and find that the plaintiff was required to be registered, so that the fact that it was not registered is of no moment: the outcome would be the same, according to the defendant's argument. I confess to being quite uneasy about the idea that a highly specific issue such as this can be raised in the way that it has: the substance of the defendant's submission would involve me making a finding that the plaintiff, despite not being registered, was required to be registered for GST - which, as the plaintiff noted in its GST submissions, would be a significant finding against the plaintiff involving, or at least potentially involving, a finding that it has failed to comply with the GST Act. This is particularly in circumstances where there was no cross examination of Mr Turner about this issue: as a director he would have been well-placed to give evidence about why that decision had been made, and on any other issue relating to the need for the plaintiff to be registered or not.
[29]
The specific defences: contributory negligence and proportionate liability
The defendant, by its amended defence, raises two specific defences: contributory negligence and proportionate liability (it being accepted that the plaintiff's claim is an apportionable claim for the purposes of Part 4 of the CLA).
The defendant accepts, in raising this defence, three matters that should be noted: first, given the defences both rely upon the same conduct - viz., Mr Turner failing to recall the prohibition on lodging a caveat contained in the deed - there cannot be two discounts (Cam and Bear Pty Ltd v McGoldrick [2018] NSWCA 110 at [101]); secondly, that "they are primarily responsible for any loss caused by not advising the plaintiff that the Gateway companies would be entitled to terminate the option deed if the plaintiff lodged the caveat in July 2018"; and, thirdly, it is argued that, given Mr Turner's conduct some "small discount would be just and equitable in the circumstances".
The defendant, ultimately, pressed the defence as being one of contributory negligence: that Mr Turner's error, as argued by the defendant, should be attributed to the plaintiff resulting in an apportionment.
In the way in which the defendant argues that there has been contributory negligence, under s 5R of the CLA, the question is whether Mr Turner's omission - if it be that - evidences a want of due care. The Court applies an objective test to the facts and circumstances of the case (s 5R(2)(a)), including what, relevantly here, Mr Turner knew or ought to have known at the time: s 5R(2)(b); Origin Energy LPG Pty Ltd v Bestcare Foods Ltd [2012] NSWCA 407 at [217]; Libra Collaroy Pty Ltd v Bhide [2017] NSWCA 196 at [269]. If contributory negligence is established, then the Court is obliged to apportion liability under s 9(1)(b) of the Law Reform (Miscellaneous Provisions) Act 1965 (NSW): Boral Bricks Pty Ltd v Cosmidis (No 2) (2014) 86 NSWLR 393; [2014] NSWCA 139 at [47]-[48]; Alzawy v Coptic Orthodox Church Diocese of Sydney, St Mary and St Merkorious Church (No.2) [2016] NSWSC 1123 at [99]; Libra Collaroy Pty Ltd v Bhide at [272].
As I have noted, above, the defendant's case is that Mr Turner himself "failed to recall the prohibition on lodging a caveat" and that bespeaks negligence.
In my view there is no basis to find that Mr Turner was himself negligent nor, in any event, do I consider it to be just and equitable that there be any apportionment. That is for the following reasons.
[30]
Orders
For the above reasons, I make the following orders:
1. Direct that the parties confer with a view to agreeing upon proposed orders finalising the proceedings in accordance with these reasons (including interest and costs), with agreed orders to be filed and served by 9 August 2023, 5pm.
2. To the extent that agreement cannot be reached, direct that each party is to file and serve, by 9 August 2023, 5 pm, the proposed orders it seeks with submissions explaining the basis for why those orders are sought limited to no more than 2 pages.
3. Direct that any evidence in support of any contested orders be filed and served by 9 August 2023, 5pm.
4. The matter will be listed for further argument, and the entry of further orders, on a date to be fixed.
[31]
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: 04 August 2023
Here, the application of that principle rests upon a counterfactual analysis in relation to the issue of causation. That counterfactual is necessary because proof of a cause of action in negligence, or in contract, requires the plaintiff to prove that the defendant's breach of duty caused the particular damage that the plaintiff suffered. As to this, the plaintiff's case is that the defendant's failure to advise it (specifically, Mr Turner) of the risks and consequences of lodging a caveat over the Central Land caused the plaintiff to lose a valuable chose in action under the deed once it was terminated by the Gateway entities - namely, the right to be paid $3.5 million. In this respect, the plaintiff identifies this as the right to be paid that amount by reason of the failure of the Grantor (the Gateway entities - being the parties to the option deed) to effect the registration of the strata documents by 15 May 2020 in accordance with cl 14.1 of the deed (plaintiff's submissions at [36]). (The plaintiff's fallback case is that it lost the opportunity or chance to exercise its rights under the option deed, requiring modest discounting).
The counterfactual hypothesis advanced for the plaintiff thus rests upon demonstration of a central, and contested, issue of fact - being that, but for the admitted negligence of the solicitor, the plaintiff would have rescinded the deed in May 2020 so as to secure the entitlement to be paid $3.5 million. Further, building upon this, the plaintiff's counterfactual was to the effect that, having rescinded the deed, the plaintiff would have secured that payment from the Gateway entities or by enforcing the guarantee against Mr Fayad.
I turn now to identify what was not the plaintiff's case - and it is convenient to do so by reference to the essential argument advanced by the defendant, an argument which was submitted to be destructive of the plaintiff's primary case, and the fallback one. In identifying the defendant's "case", I am not suggesting the defendant is required to prove this: the onus is upon the plaintiff, on the balance of probabilities, to demonstrate that it would have rescinded the deed following the call option expiry period.
The defendant's overarching submission was that the plaintiff had failed to prove that the admitted breach of duty caused the plaintiff any loss. That was because, the defendant argued, the evidence did not support a finding that Mr Turner would have elected to rescind the option deed in May 2020. Rather, the defendant argued, the most likely scenario was that Mr Turner would have sought, and secured, an extension of the deed from the Gateway entities (essentially on identical terms to the existing deed) and, importantly, that extension would have been for a further period of 3 years. (This argument, which was advanced during oral submissions and is reflected in the defendant's outline of submissions at [17] and [24], was a slight refinement to that which was put in the defendant's closing submissions at [7]. There it was argued that the deed would not have been rescinded in May 2020 but "remained in place", until it would have been rescinded upon the Gateway entities transferring the Central Land to a third party following the entry into contracts for sale on 13 March 2023. Nothing was submitted to turn on this difference).
The defendant's argument, if accepted, would involve the making of two findings: first, a finding that the deed would not have been rescinded, but extended; and, secondly, that extension would have been for 3 years with a call option expiry date being May 2023. A consequence of the acceptance of the defendant's argument would be that the date for determining the value of any loss suffered by the plaintiff was in 2023, and not in 2020. The plaintiff, however, specifically eschewed any case based upon an extension of the call option deed - a concession that (appropriately) recognised the difficult financial position of the Gateway entities, and the guarantor (Mr Fayad), in 2023.
The plaintiff's case is therefore "all or nothing": its success turns - as a threshold factual issue - upon the finding made in connection with the most likely scenario in May 2020, and whether the plaintiff has demonstrated that the most likely scenario was rescission of the deed, rather than an extension of it.
The email exchange on 11 and 12 December 2019 included the following:
1. Email from Kieran Turner to Dennis Bluth sent on 11 December 2019 at 8:37am (relevantly):
…
Can we protect the showroom so they don't sell it another way? Or ask for the title deeds or something?
1. Email from Kieran Turner to Dennis Bluth and Mark Webeck sent on 12 December 2019 at 9:05am:
Db, can you send me the clause for us to cash out of our Dyldam showroom for $4m? Maybe we get on the front and I take my cash off the table even though I'd prefer the showroom - a bird in the hand is better than 2 in the bush…
In my view this exchange illustrates what was suggested by the plaintiff, during submissions, to reflect Mr Turner's "slightly rudimentary … understanding" of what had developed - viz., the deed had been terminated. I address this later (see [68], below).
The next email relied upon by the plaintiff was an email sent by Mr Turner to Dennis Bluth dated 22 February 2020, and the exchange that followed ending on 24 February 2020:
1. Email from Kieran Turner to Dennis Bluth sent on 22 February 2020 at 2:39pm:
Hi db
I've just checked our sunset date for the showroom is 15/5/20. There is no way they can deliver it and while I would prefer the showroom I think a bird in the hand is worth two in the bush so let's write to them and collect the $4m per contract on his personal guarantee and use court if necessary.
Please advise once you write [to] them this week.
Thanks.
1. Email from Mark Webeck to Kieran Turner sent on 24 February 2020 at 12:37pm:
Hi Kieran
Dennis has passed on to me your email below.
It is now for me to go on the record for Boyded Industries and attempt to retrieve the position.
To that end, we have Counsel preparing the necessary pleadings and we are aiming to launch the proceedings by the end of this week if not early next week
I will keep you advised as to further developments.
Regards
Mark
1. Email from Kieran Turner to Mark Webeck and Dennis Bluth sent on 24 February 2020 at 2:35pm:
Is your intention to get the showroom or the cash?
Regards
1. Email from Mark Webeck to Kieran Turner sent on 24 February 2020 at 2:49pm:
Hi Kieran
We need to restore the option first and then look at whether Dyldam can deliver.
I will forward you the pleadings when they emerge from Counsel.
Regards
Mark
1. Email from Kieran Turner to Mark Webeck and Dennis Bluth sent on 24 February 2020 at 2:58pm:
Restore? It's not considered lost is it?
Regards
1. Email from Mark Webeck to Kieran Turner sent on 24 February 2020 at 3:02pm:
Hi Kieran
Sorry to be obtuse … Dyldam's position is that they have exercised their right to terminate so that there is no longer any available option.
Our position is that their notice of termination was invalid etc so that the option becomes restored.
Hope that makes sense.
Best wishes
Mark
The plaintiff particularly relied upon the email sent on 22 February 2020 at 2:39pm (see [67(1)], above) - but, for context, I have set out the surrounding emails. In my respectful view the email responses that Mr Turner received to his specific requests or questions were somewhat opaque and indirect. In any event, it is I find apparent that Mr Turner's responses were consistent with him not being cognisant (or fully cognisant) of the consequences of what had transpired - namely, that the deed had been terminated by the Gateway entities because a caveat had been lodged over the Central Land and that the plaintiff had no rights at all under the option deed: I accept, as the plaintiff submitted, Mr Turner's knowledge was "slightly rudimentary" and he had "not quite grasped" the significance of what had occurred. In my view, the emails sent by Mr Turner on 11 and 12 December 2019 (see [65], above), and his email dated 29 October 2020 (see [69], below) reinforce this. Thus, to the extent it was suggested by the defendant, by reference to his affidavit at par 70, that the response that Mr Turner provided in the email sent on 22 February 2020 at 2:39pm was coloured by the fact that it was provided against the backdrop of the anticipated litigation and the dispute that had arisen in connection with the deed, I do not accept that submission: I am satisfied that Mr Turner had no proper understanding of the ramifications of what had occurred. Absent that understanding, the email does not evidence a change of position by Mr Turner that reflected him knowing that the showroom was "lost". In my view, the opposite is so - namely, it confirms that Mr Turner did not have a fixed position relating to the car showroom.
The plaintiff next relied upon an email sent from Kieran Turner to Mark Webeck on 29 October 2020 at 5:05pm. This email was a response to an email that Mr Webeck had sent, earlier that day, advising that senior counsel had advised Mr Webeck that there was "no realistic prospect of success on Appeal" from the judgment upholding the termination. Mr Turner's email was:
Yep that's disappointing. So let's cut to the chase then, how do I get my $4m cash?
Regards
As I indicated above, in my view this email supports the finding that I have made - in connection with Mr Turner's "rudimentary" understanding of the legal position in connection with the deed.
In relation to the email dated 22 February 2020, the defendant submitted that the significance of that email, in the present context, was significantly diluted: it was argued, given the fact that it was sent in the context of the second Gateway proceedings, that this demonstrated a change of heart by Mr Turner - put simply, because a controversy had arisen about the termination of the deed, it was only the dispute that generated Mr Turner's interest "in the money". I do not accept that submission (see [68] above). In my view, it is self-fulfilling: it assumes that Mr Turner had, to that point, made a conscious decision to pursue the showroom when I am satisfied that no such decision had been made. Further, the submission also assumes that, having made that decision, Mr Turner - mindful of the ramifications and legal consequences of what had occurred (namely, that the lodgement of the caveat resulted in the Gateway entities having a right to terminate the deed) - decided to adopt a different strategy or, as the defendant submitted, had a "change of heart". There is no basis to make the intermediate finding that is implicit in the submission; that is, that Mr Turner had a proper understanding of what had occurred in connection with the termination of the deed. Not only is it contrary to the finding that I have made - namely, Mr Turner had no proper understanding of what had occurred (see [68], above), but I would also observe that there was no cross examination of Mr Turner directed to establishing that he did have such understanding.
Secondly, my assessment of Mr Turner, and his evidence, is that he was a rather savvy businessman, and I am quite satisfied that he would - undoubtedly - have pursued an outcome that was the most financially advantageous to the plaintiff. I base that finding upon the way in which Mr Turner dealt with, in emails, the negotiations that were being conducted but also upon my assessment of his oral evidence. For example, when cross-examined about his dealings (and the negotiations) in connection with the first Gateway proceedings, it was put to Mr Turner that he had "lost all confidence" in the Gateway entities settling, to which his response was: "definitely not. It's just a game, gamesmanship. That's all it was" and he had earlier described his involvement in the negotiations as him "equally playing a game on my side … It's a common strategy I use in business, to be honest".
Thirdly, and overlapping somewhat with the third matter raised above, the financial position of the Gateway group was a cause for some concern to Mr Turner. Indeed, it was these concerns - albeit that they were based upon what Mr Turner had seen reported in the media - that led him to send the text message to Mr Bluth on 20 July 2018 requesting that a caveat be lodged over the Central Land. To that end, in the period from around July 2018, I am satisfied that he held those concerns, based upon what he had read in the media. In my view this was likely to be the most significant consideration determining why the plaintiff would most likely have rescinded the deed, rather than negotiated an extension to it: I am satisfied that this points to the likelihood of Mr Turner recognising what the plaintiff submitted was "the commercial reality"; that is, he held concerns about the financial position of the Gateway entities and, relatedly, whether the development would proceed.
It is convenient, at this point, to deal with an issue raised by the defendant about when Mr Turner began to have concerns about the financial position of the Dyldam group (which included the Gateway group). In this respect, the defendant sought a finding that Mr Turner held these concerns since "late 2017". That was the approximate period referred to by Mr Turner in his affidavit, par 45. I do not accept that that date was intended to be, or in fact is, a precise statement of when Mr Turner held those concerns. My finding, one that I have already made in the above paragraph, is that Mr Turner held them from around July 2018, and it is likely that he held it for a non-specific period before then in 2018. My reasons for making that finding are as follows: (a) the evidence in par 45 was expressed to be "[f]rom around late 2017" - which is why I consider it was never intended to be an exact statement of when Mr Turner began to have the concerns; (b) my assessment of Mr Turner's oral evidence (as well as the evidence in his affidavit) is that his concerns were prompted by what he had read in the media, and he was unable to recall any articles from before July 2018. He certainly does not identify any other basis for his concerns other than what he had read; and (c), much (if not most) of the cross examination, and the evidence that Mr Turner gave (which I accept), proceeded upon the basis that Mr Turner held "concerns since at least 2018" in connection with the Dyldam group.
Fourthly, there is no suggestion that, at least in the period leading up to the expiry of the call option deed, the development had significantly progressed (albeit that the Gateway entities sought to lodge full registration of the Voluntary Planning Agreement in August 2019, by way of example). Mr Turner's assessment in early 2020 (see [67(1)], above) was that the Gateway entities had no prospect of "delivering" the showroom by 15 May 2020. In my view this fact is, in the context of resolution of this issue, largely neutral on its own (putting to one side that it explains why the right to rescission had arisen) but its significance is closely connected with Mr Turner's assessment of the financial position of the Gateway entities, as I have noted above.
Fifthly, although the defendant sought a finding that the most likely scenario was an extension of the deed - relying upon Mr Turner's evidence in par 85 of exhibit B - in my view the attitude and conduct of Mr Turner, as reflected in the material to which reference has been made, is likely to be the most reliable and informative evidence rather than any reconstruction assembled some years after the event in the context of the current litigation: Chappel v Hart (1998) 195 CLR 232; [1998] HCA 55 at [32] (fn 64); Effem Foods Pty Ltd v Lake Cumberline Pty Ltd (1999) 161 ALR 599; [1999] HCA 15 at [15]; Fox v Percy (2003) 214 CLR 118; [2003] HCA 22 at [31].
In my view, the material (specifically, the email communications) that lend objective contemporaneous support for rescission are the emails dated 12 December 2019 sent at 9:05am (see [65(2)], above) and the email dated 22 February 2020 sent at 2:39pm (see [67(1)], above). I consider them to be the most significant given their proximity to the call option expiry date.
Sixthly, in relation to Mr Turner's evidence in par 85 of exhibit B more generally, I am unpersuaded that it reflects the most likely scenario, but for the negligence of the defendant. In this respect, I note the following:
1. Although the evidence in that paragraph was that Mr Turner "would have taken steps to try and renegotiate" to extend the call option period, the evidence said nothing about the period of any extension that might have been pursued. As I have earlier noted, the defendant submitted that that extension would have been for 3 years. I do not accept that submission. When cross-examined about this, Mr Turner's evidence (which I accept) was a categorical denial of the proposition that he would have agreed to an extension of the deed for 3 more years following the expiry of the call option date. That denial - specifically on the second occasion when Mr Turner was cross-examined about this - was quite emphatic, and it was to the effect that he would not have entertained the idea of any extension for that length of time. The evidence he gave was quite credible, in my view, and entirely consistent with the recorded concerns about the financial situation that had been reported, by way of example. I would here observe the following: the basis upon which the defendant sought this inference (and finding) that there would have been an extension for a 3 year period was not identified. Given I have accepted Mr Turner's evidence on this topic, it is unclear on what basis this inference could possibly be drawn. It is, perhaps, possibly based on the notion that I should not accept Mr Turner's evidence on this topic - but even if that was so, a rejection of his evidence would not prove the opposite: Gauci v Commissioner of Taxation (Cth) (1975) 135 CLR 81, 87; [1975] HCA 54; Steinberg v Commissioner of Taxation (Cth) (1975) 134 CLR 640, 684 and 694; [1975] HCA 63.
2. True it is that, in the chapeau to par 85, the evidence there does say that Mr Turner would have investigated the possibility of an extension of the call option deed and that there was a measure of confidence in that outcome. But the generality of that evidence, in my view, needs to be assessed against other evidence and, further, in the context of the range of other variables - including, as Mr Turner said during his evidence, that he would have sought advice in connection with the length of any extension. It is, again, true that he had expressed some tentative views about possibly waiting to get the car showroom. I have no doubt that this would have been a matter for consideration, but it would have been for consideration with the other "variables", one of which was the concern of the financial position of the Gateway entities.
3. Further, I do not consider the suggested optimism expressed by Mr Turner about renegotiating (par 85(a)) to tell against the finding I have made. In my respectful view, Mr Turner's "optimism" is largely based (if not entirely) upon the negotiations that were had in connection with the first Gateway proceedings, some 3 years prior. I am not satisfied that the outcome in that proceeding, and Mr Turner's involvement in any negotiations, reliably informs what might have occurred in a different - and later - context. Further, to the extent that Mr Turner based that optimism upon his role in the original property sales in 2015/2016 (par 85(a)), the affidavit provided no details at all about what this involved. (I note, separately, that not only did the defendant, and Mr Bluth in particular, act for the plaintiff in connection with each of the sales (exhibit B, par 21), but the plaintiff had two agents appointed for them in connection with the sale - namely, Colliers International and Matrix Property Group: so it is by no means clear what Mr Turner had in mind in this part of his evidence where he refers to as negotiating "directly", and Mr Turner was not cross-examined about this issue). In those circumstances, I am not prepared to infer that Mr Turner's optimism was soundly based: in my respectful view it is speculative.
4. In relation to the Gateway entities being attracted to an extension, in very broad terms that might be accepted (par 85(b)): but, as I have elsewhere noted, the key issue was likely to be the period of any extension and in that respect it is difficult to accept that there would have been consensus about this given Mr Turner's clear position about the period of any suggested extension (and the finding that I have made about this) and his underlying concerns about the financial position of those entities within the Dyldam group.
5. I do not regard the fact that the plaintiff's "cash position" following the land sales was "in a good state" and that there was no "pressing need for the $3.5 million payment" (par 85(c)), nor the fact that Mr Turner considered that the value of the car showroom might appreciate over time, even if the development was the subject of significant delays (par 85(d)), to undercut the position: they are obviously considerations that were material to any decision that was required to be made at the expiration of the call option period following the non-satisfaction of the requirements in cl 2.9(a)(i)-(iii).
The defendant's ultimate position is that the circumstances were such that, even if the Court accepts that Mr Turner would have instructed Mr Bluth to take steps to rescind the deed in May 2020, there was no realistic prospect of any recovery - with the consequence that there could be no recovery of damages by the plaintiff. The defendant thus argued that the chose in action sued upon by the plaintiff was worthless, precluding the recovery of any damages: the "conclusion to be drawn is that the value of the lost opportunity to obtain the benefit of the unsecured promise to pay $3.5 million was so low as to be regarded as negligible or speculative" (defendant's closing submissions at [39]-[40]).
The specific focus of the defendant's submissions in connection with the assessment of the plaintiff's loss was built upon the finding that it sought - namely, that the most likely scenario was that Mr Turner would have secured an extension of the call option period for 3 years - such that it was ultimately submitted that the time at which the loss should be assessed was in April 2023 (defendant's closing submissions at [25]).
The defendant identified April 2023 as being the critical time period for the assessment of the plaintiff's loss - a submission that was based upon a number of assumed facts, including: (a) the call option period was extended for a further 3 years following the expiration of the call option period on 15 May 2020; (b) the call option deed would have been extended on relevantly identical terms, with the call option period to expire notionally on 15 May 2023; (c) on 13 March 2023 the Gateway entities entered into a contract to sell the Central Land to JQZ Seventeen Pty Limited - an event that would have triggered an entitlement, at that time for the plaintiff to rescind the extended call option deed by reason of cl 14.1(a) ("the Grantor transfers ownership of the Central Land to another person or entity …"); and (d) upon the happening of that event, the plaintiff would have rescinded the extended call option deed serving a notice in writing requiring the payment which the Grantor was required to pay following receipt of "a tax invoice and a direction to pay" within 28 days: cll 14.1, 14.4 and 14.5.
As I have indicated earlier, the plaintiff's case was an "all or nothing" one in connection with the rescission issue. The case was put in this way in part because of the recognition that, by April or May 2023, the financial position of the Gateway entities and Mr Fayad was known to be terminal: the Gateway entities were, on 8 May 2023, placed into liquidation and Mr Fayad was the subject of bankruptcy proceedings in the Federal Circuit and Family Court of Australia (Division 2).
At the same time, the defendant's written (and oral) submissions did not expressly deal with the detail of the financial position of the Gateway entities, and Mr Fayad as at May or June 2020 - except in a confined way (defendant's closing submissions at [38]-[40], [41]), and, even then, largely dealing with issues of principle rather than evidence or issues of fact. Nevertheless, the defendant maintained its position that the plaintiff had failed to establish that the Gateway entities (or Gateway group) or Mr Fayad were able and willing to pay the $3.5 million at the relevant time in 2020.
Before addressing the evidence, I will set out the relevant legal principles that inform the approach to be taken.
In Mal Owen Consulting Pty Ltd v Ashcroft (2018) 97 NSWLR 1163; [2018] NSWCA 135 ('Mal Owen') the relevant principles from Sellars were concisely explained by Barrett AJA at [100]-[101] as involving a two-staged enquiry:
[100] … the joint judgment in Sellars v Adelaide Petroleum NL identifies as two distinct stages relevant to the resolution of a case such as the present. At that first stage, causation must be proved on the balance of probabilities: the question of causation is, after all, "entirely factual, turning on proof of relevant facts and on the balance of probabilities in accordance with s 5E" of the Civil Liability Act 2002 (NSW). The second stage becomes relevant only if causation is established at the first. The issue at the second stage is the assessment of damages; and the focus then is upon the actual value of the lost opportunity which, to that point, has been appraised only as not merely theoretical or negligible. Value must be ascertained at the second stage by reference to "the degree of probabilities, or possibilities, inherent in the plaintiff's succeeding had the plaintiff been given the chance" of which the plaintiff has been deprived. These are again words used in the joint judgment in Sellars v Adelaide Petroleum NL. (footnotes omitted)
[101] At each of the two stages, therefore, attention must be given to a question relevant to the value of the lost opportunity. At the first stage concerned with causation, the task is no more than to confirm that the value is not in the realms of the merely theoretical or negligible - in other words, to establish, according to the balance of probabilities, that there is some colour of value to the lost opportunity. It is only if the second stage is reached (after causation is established at the first) that anything approaching particular quantification is required. An assessment made at the second stage by reference to the degree of probabilities and possibilities of factual hypotheses may require a process of estimation extending even to a degree of guesswork and may lie at any point within a broad range. (footnote omitted)
As I have earlier noted, the matter was argued on the basis that the "loss of opportunity" claim was available irrespective of whether the claim was in contract or tort (see Johnson v Perez (1988) 166 CLR 351, 363; [1988] HCA 64 ('Johnson')), a position that presumably was adopted because, in respect of both causes of action, the focus is the same - being upon the value of the commercial interest lost: Tabet v Gett (2010) 240 CLR 537; [2010] HCA 12 at [124]. Given the common approach of the parties, it is unnecessary to deal with this issue further.
The issue that presently arises is the first stage of the enquiry - viz., determining whether, on the balance of probabilities, the plaintiff lost an opportunity of some value. I am satisfied that the plaintiff lost, in consequence of the negligence of the defendant, something of value - namely, the opportunity to be paid an amount following the rescission of the deed - and that opportunity had some value, not being negligible. My reasons for that conclusion are as follows.
Although I recognise that it is for the plaintiff to demonstrate, on the balance of probabilities, that it lost something of value (in the sense described in the authorities, earlier referred to), there are a number of difficulties with, or limitations in, the defendant's submissions which should be noted. First, the immediate difficulty with much - if not all - of the defendant's submissions is that they were tied to its primary case - viz., the inability of the Gateway entities, and Mr Fayad, to meet this obligation in 2023, and not the position in 2020. Secondly, the defendant submitted that in assessing the probabilities of whether the plaintiff lost anything of value, it was relevant and permissible to look at subsequent events - that is, events that have occurred subsequent to the date of the assessment of the loss. That submission accords with principle, and should be accepted: Johnson at 368-369. However, the defendant did not identify precisely which events, in its submission, informed or negated the probabilities of the plaintiff securing an opportunity of value as at May/June 2020 other than in a confined way (see [109], below), nor why (upon its argument) that followed from a consideration of those matters it did raise. Again, as earlier pointed out, the focus of the defendant's attack on this part of the plaintiff's claim dealt with what was submitted to be the most likely scenario - viz., extension of the call option deed for a period of 3 years. To illustrate: the defendant submitted that the financial position of the Gateway entities and Mr Fayad in 2023 reflected their position "at any other time". I do not accept the submission: it does not follow that the inference can be drawn simply from their current financial position that that was the position in May/June 2020, less still that it should be. And, to the extent that this inference was sought based upon "other material", that "other material" was not identified. Nor, in my view, on its own or in conjunction with what was known by April 2023, is the fact that the companies decided to sell the land by May 2022, destructive of the inference that the plaintiff seeks.
The plaintiff relied upon a number of matters that were argued to support a finding that the Gateway entities and/or Mr Fayad had the ability to pay $3.5 million at the relevant time. It is necessary to deal separately with the Gateway entities and Mr Fayad.
Put very simply, in relation to the Gateway entities, the plaintiff argued that the ability to pay was an inference to be drawn from the value of the property holdings of the Gateway entities (and the Gateway companies more generally) and consideration of the balance sheet of the Gateway entities, which was submitted to demonstrate an ability of those to draw and fund their obligations.
The defendant, on the other hand, in connection with the Gateway entities, pointed out a range of matters which it submitted demonstrated that they had no ability to pay (defendant's closing submissions at [35]): that they were companies with issued share capital of $100, and were established as special purpose vehicles for these developments; their sole director was Mr Fayad; that although the development consent for the North, Central and South Land was granted on 9 August 2017, little physical work occurred on any of the land; that Mr Turner had seen a number of newspaper articles that caused him to have some concern about the financial position of the Dyldam group; the Chief Commissioner of State Revenue lodged a caveat, in October 2018, against the Central Land for unpaid tax; in May 2022, agents were appointed to sell the three parcels of land and, in fact, they were sold in March 2023; on 6 April 2023, Mr Fayad appointed administrators to the Gateway entities; and, on 8 May 2023, the Gateway entities were placed into liquidation.
The defendant's ultimate submission was that the Gateway entities would not have made the $3.5 million payment "unless it was desirable for the development to proceed": it was submitted that it was "clear that the development was not being pursued by 2018 at the latest" (defendant's closing submissions at [36]) and that subsequent events have demonstrated that they were not solvent (defendant's closing submissions at [39]).
In my view, the value of the property held by the Gateway companies (which had been purchased for $150 million in 2015 and 2016) is significant (and, as I later explain, a basis for finding "ability to pay": see [115], below): indeed, those properties were, as at May 2020, valued at $159 million - a valuation that the defendant expressly accepted. In this respect the plaintiff submitted that it was appropriate to deal with the South, North and Central Land as a single lot given that the lots were owned by "Gateway companies", and given that the proposal involved a single development application and development consent over those lots. (I would also add: the settlement of the first Gateway proceedings reflects this reality as well - the proceedings involved the North and South Land, but the resolution extended to creating an interest in the Central Land). The defendant did not advocate against such an approach, and in fact adopted it. The plaintiff submitted that it followed, from a development site of that value, a likely ability to borrow money and, more fundamentally, a valuable asset.
I do not accept the defendant's submission that, of itself, the Gateway entities' ability to pay should not be inferred merely because little work had commenced across the site or because, as the defendant also submitted, it was "clear that the development was not being pursued by 2018 at the latest". As to the first part of this submission, the evidence was that work had physically commenced under the development consent. As to the second part of this submission (viz., that the development was not being pursued by 2018 "at the latest"), the basis for drawing that inference was not identified and, in any event, I am not prepared to draw it: I regard it as mere conjecture. Further, it is contrary to other - unchallenged - evidence which I accept, that suggests that work was being performed in connection with the site and that the development was being pursued in the second half of 2019 - for example:
1. The Gateway entities had prepared a "VPA" (a Voluntary Planning Agreement) in relation to the developments of the land, which had been finalised for lodgement and registration at that time. (In the second Gateway proceedings, it was said that this instrument had been "finalised" and lodged by the defendants in about mid-July 2019: reasons at [23]). This activity is apparent from the email communications between the solicitors for the Gateway entities and Mr Bluth on 14 August 2019 (at around the time it was discovered that the plaintiff had lodged the caveat on the title to the Central Land), and the Gateway entities sought the consent of the plaintiff "as caveators to lodge a VPA". On 19 August 2019, Mr Bluth sent a letter to the Register General, NSW Land Registry Services advising that the plaintiff "consents to the registration of a voluntary planning agreement" on the title to the Central Land.
2. Geotechnical and hydrogeological investigations of the site were undertaken resulting in the preparation of a report dated 27 August 2019.
3. A plan of subdivision (DP 1249271) was registered on 3 December 2019.
Nor do I accept that the newspaper articles tell against the finding that I later make (see [115], below) about the Gateway entities' ability to pay: as I have earlier noted, I am not prepared to act upon a newspaper article as a basis to infer, and find, inability to pay. The position is not otherwise because Mr Turner expressed concerns about the financial position of the Gateway entities, having read those articles.
The defendant also pointed out that each of the three lots were triple mortgaged. Although the fact that the properties were encumbered is of some potential importance (albeit not unexpected), its importance is significantly diminished by the fact that there is no evidence about the degree to which they were encumbered under those mortgages. To the extent that, as the defendant submitted, this demonstrated in fact an inability to secure further finance, I do not accept the submission. Again, absent knowing more about the extent of the encumbrances under the mortgages, I consider it would be conjecture to infer that this would stultify any ability to borrow against the land.
In any event, it is important to be precise. The Central and South Land were owned by the Gateway entities, and the North Land was owned by Gateway Parramatta One Pty Ltd and Gateway Parramatta One Commercial Pty Ltd. The North Land was purchased for $91 million. Aside from the fact that the property was submitted to be "triple mortgaged" (see [114], above), there is no other financial information about those entities (the summary balance sheet - exhibit F - that the plaintiff relied upon was concerned only with the Gateway entities, not with these Gateway companies: see [117], below), nor was any submission directed to why, in and of itself, the ownership of the North Land was anything other than an asset of considerable value. In my view that is its correct characterisation, as the plaintiff submitted, and I am satisfied and find that it demonstrates "an ability to pay". And, to be clear, (consistent with the approach of the parties: see [111], above), I accept and find that the "ability to pay" by the Gateway group demonstrates an "ability to pay" by the Gateway entities.
The plaintiff also argued that as part of the resolution of the first Gateway proceedings, a number of Gateway entities (which included - the pleadings were not in evidence - at least one of the purchasers of the Central Land, being Gateway Parramatta Two Pty Limited) paid, following their resolution in February 2017 and the orders made by White J on 17 February 2017, approximately $2.8 million. This was submitted to be some evidence of the ability to pay as at May/June 2020. I respectfully disagree. In my view, of itself, that payment is too distant to be a proper basis upon which to infer an ability to pay some 3 years later.
The plaintiff next submitted that the Gateway entities, evident from the summary of the balance sheets, had a demonstrated ability to draw and fund their obligations in the period leading up to 30 June 2020 (and, if there is a difference, there was a demonstrated ability to borrow and repay amounts which were owing). The plaintiff submitted that the ability to do so renders it likely - indeed probable - that the amount that it (hypothetically) would have been owed by the Gateway companies (and guaranteed by Mr Fayad) in consequence of the rescission of the deed would have been paid to it. (It should be noted that this involves the present issue of fact, but also the subsequent one - viz., assessing the value of the lost opportunity: as to which see [131]ff, below). At a minimum, the plaintiff submitted that the inference to be drawn, having regard to the "total" column contained within exhibit F was that although the total non-current liabilities had not significantly changed across the periods 2017-2020, the inference to be drawn is that there had been refinancing - thus an ability to obtain finance. The plaintiff also argued that this balance sheet showed a demonstrated ability to borrow and repay amounts which were owing, thereby negativing any inference that there was an inability to pay the debts as and when they fell due.
The defendant submitted that little, if anything, could be drawn from the balance sheet - but that, to the extent one could rely upon it, it demonstrated that the Gateway entities had limited equity, something that was evident from the total current and non-current liabilities.
In my view, the balance sheet demonstrates, in the Gateway entities, some ability to borrow and pay its expenses as and when they fell due and that this is some evidence supportive of the overall finding that I have made - namely, that the Gateway entities had an ability to pay.
As against the Gateway entities, therefore I am satisfied and find that the loss of opportunity had some value, not being a negligible value.
The plaintiff argued, in connection with Mr Fayad, that he too had an "ability to pay", and was likely to do so - albeit accepting that not "a great deal" was known about the financial position of Mr Fayad. The plaintiff relied upon the fact that: (a) Mr Fayad had significant personal land holdings and, therefore, an ability to lend money to the Gateway entities or, as he had guaranteed their obligations under the deed, to himself meet the obligation or otherwise procure the payment of $3.5 million; and, (b) Mr Fayad had loaned the Gateway entities approximately $14 million, suggesting that he was a man of some means. The evidence about the "significant personal land holdings" was confined to a land tax assessment notice dated 22 January 2020.
In relation to Mr Fayad, the defendant argued that he had been the subject of bankruptcy proceedings "which have been ongoing for some years", and drew attention to the litigation that resulted in a judgment being entered against him, on 1 November 2021, for $9,978,620.39 (B. & G. Properties Pty Limited v Fayad [2021] NSWSC 1382. On 22 July 2022, an appeal by Mr Fayad was dismissed: Fayad v B & G Properties Pty Ltd [2022] NSWCA 129). Subsequent to that judgment being entered, on 14 January 2022, a creditor's petition was served by B & G Properties Pty Ltd and as at 29 June 2023, the creditor's petition remained extant - albeit that other creditors have become involved. These matters of fact were argued by the defendant to demonstrate that Mr Fayad "has been in the same perilous financial circumstances" as the Gateway entities, and therefore was not likely to pay $3.5 million if a demand had been made upon the Guarantee contained in the deed (defendant's closing submissions at [37]). To the extent that this submission was said to demonstrate the position as at 2023, I accept it; to the extent that this submission was said to demonstrate the position in June 2020, I do not accept it. In relation to that last point in time, the submission did not develop precisely why the position in 2023 resulted in the same finding in 2020. Further, in relation to the proceedings resulting in the judgment being entered in November 2021, the basis for those proceedings was not in evidence (only the fact that there were proceedings and that a judgment in the identified amount resulted). Again, the basis to infer that, by June 2020, Mr Fayad would have been unable to meet a claim made upon him as guarantor under the deed was not explained. I am not prepared to draw that inference.
The defendant also submitted that it was not possible to infer an ability to pay based upon the land holdings of Mr Fayad in 2020. The defendant submitted that the material relied upon by the plaintiff demonstrated very little, essentially because it was submitted that the "court book is full of caveats and mortgages". Neither side made any specific submissions about the significance of that material (the defendant provided a schedule with the references to those caveats and mortgages), although the defendant submitted that there was an absence of evidence about equity and an absence of evidence of ability to borrow.
The plaintiff's submissions on this were largely (but not exclusively) directed to the property described as Mr Fayad's principal place of residence - at XX XXXX XXXX, Constitution Hill. In relation to that property, there is some evidence about the unimproved value of the land (an average value of $1.3 million over 2018, 2019 and 2020). Mr Fayad is recorded to have a 50% ownership of that property. The defendant, as I have noted, pointed out that there were a range of caveats, as well as mortgages over that property, as follows:
1. 24 September 2019: a caveat was lodged by Brickworks Building Products Pty Ltd securing a charge pursuant to which Sam and Maria Fayad charged this property in favour of the caveator in connection with the supply of goods from it to Dyldam Developments Pty Limited. The caveat recorded: "As at 28 August 2019, to the best of the caveator's knowledge the total amount owing to the caveator was $1,389,088.16 (noting the figure remains subject to change)".
2. 4 November 2019: a caveat was lodged by VADO005 Pty Ltd supporting a mortgage between that entity and Mr Fayad. (The caveat did not record the amount of the mortgage).
3. 22 June 2020: a caveat was lodged by Lion Order Pty Ltd securing a charge granted pursuant to loan agreements between that entity and Stamford House 88 Pty Ltd (as borrower) and Mr Fayad as guarantor.
4. 2 June 2021: the caveat lodged by VADO005 Pty Ltd (supporting the mortgage between that entity and Mr Fayad) on 4 November 2019 was withdrawn.
5. 24 June 2021: a caveat was lodged by All Cranes Hire Pty Ltd. The caveat recorded the details supporting the claim as an agreement between Sam and Maria Fayad and also recorded: "Pursuant to clause 9 of the Deed of Assignment, Settlement and Release dated 18 June 2021".
6. 24 December 2021: a transfer of a mortgage (A1584603) from Westpac Banking Corporation to I Properties - which involved Westpac acknowledging "receipt of the consideration of $1,267,000.76".
7. 20 January 2022: the caveat lodged by All Cranes Hire Pty Ltd on 24 June 2021 was withdrawn.
It should be noted that there was no evidence of the improved value of the property as at June 2020, or indeed at any time.
The defendant's essential submission, as I have earlier noted, is that the above material demonstrated that Mr Fayad had no ability to pay - with the consequence that the plaintiff lost nothing of value: in the language of Sellars (at 355) whatever might be said to have been lost was "negligible". I respectfully disagree. In my view, the evidence supports an inference - that I draw - and my finding is that there was at least some value in the property, as at June 2020. My further finding is that Mr Fayad did have an "ability to pay" and accordingly the plaintiff did lose an opportunity of value. My reasons for those findings are as follows.
The unimproved value of the land was averaged, over a 3 year period, at $1.3 million. From the registered interests on title, as set out in [124], above, the following should be noted. First, there was a caveat securing a charge over the property (involving Sam and Maria Fayad) in the amount of $1,389,088.16 as at 24 September 2019. That caveat was not withdrawn at any point, nor is there any evidence that the sum secured changed at any point. Secondly, the caveat supporting the mortgage with VADO005 Pty Ltd (the value of the mortgage was not in evidence) was withdrawn on 2 June 2021, and I infer that this occurred because the mortgage was discharged. Thirdly, there were two other caveats lodged - on 22 June 2020 and 24 June 2021 - albeit that the value of those interests that were secured by the caveat was not the subject of evidence. The second of those caveats (the one lodged on 24 June 2021) was subsequently withdrawn on 20 January 2022. Based upon this material, and in the absence of evidence about the improved value of the land it is difficult to know what equity, if any, was available in connection with the property.
However, there is some evidence that, in my view, permits an inference to be drawn that there was equity in connection with this property and an ability to pay more generally: a caveat in support of a mortgage was lodged, albeit shortly after the time for payment following the rescission of the deed (12 June 2020) would have passed. Further, a mortgage was discharged and, later, the property was further encumbered by way of mortgage in the amount of $1,267,000.76 on 24 December 2021. That is, notwithstanding what the defendant submitted was a title that was "full of caveats and mortgages", Mr Fayad was able to use the property as further security for this amount (in addition to the amount of $1,389,088.16, earlier secured and in addition to the amount secured by the caveat lodged on 22 June 2020). The time period thus broadly corresponds with the period of assessing the plaintiff's loss (and the period following which there would likely have been a resolution: see [138], below), and I am satisfied that this material demonstrates that Mr Fayad's financial position was not the dire one that the defendant argued.
The plaintiff further submitted that Mr Fayad's ability to pay - in broad terms - was established by the fact that he had the capacity to loan Gateway Parramatta Two Pty Limited in excess of $14 million (exhibit F) and was an asset of corresponding value. In my view, this evidence is also supportive of the overall finding that I have made - namely, that Mr Fayad had an ability to pay.
As against Mr Fayad, therefore I am satisfied and find that the loss of opportunity had some value, not being a negligible value.
A similar point was made in Mal Owen by Barrett AJA, where it was said that valuing the lost opportunity "may require a process of estimation extending even to a degree of guesswork and may lie at any point within a broad range" (at [101]); see also Nikolaou v Papasavas, Phillips & Co (1989) 166 CLR 394, 404; [1989] HCA 11, and Sellars at 368, where Brennan J described the evaluative task to determine the amount or value of the loss suffered to be "a matter of informed estimation".
Thus, although, as I have said, I consider the claim to be a strong one, it is appropriate to take into account the possibility that there is some basis to resist that payment, or at least part of it. For example, although I separately address this issue, below, the fact that there is a dispute in connection with whether the plaintiff's entitlement was the claim $3.5 million, or the amount less the GST is a reflection of the need to adjust the value of the plaintiff's overall claim.
There is also a further reason to adjust the plaintiff's claim, being the likelihood of the claim resolving by way of compromise. Compromise is reasonably commonplace, and it is, I think, a reality in the hypothetical circumstances here - particularly, given the financial concerns that Mr Turner had about the Gateway entities and the Dyldam group more generally. At the relevant time, Mr Turner knew very little, at least very little first-hand, about the liquidity - or otherwise - of the Gateway entities (or the Gateway companies) and Mr Fayad. I deal with this in a little more detail in what follows.
The financial position of the Gateway entities, and Mr Fayad, is, in my view, likely to have been at the relevant time the "great unknown". What Mr Turner was alive to were media reports that suggested that the Gateway entities - or at a minimum the Dyldam group of which they formed part - were experiencing a degree of financial stress, albeit that the degree of that financial stress was not known to him. Nevertheless, Mr Turner was alive to the possibility that there was a risk that he would not secure any benefit under the deed because of this. This is evident, by way of example, from the fact that Mr Turner instructed Mr Bluth to lodge a caveat on the title to the Central Land in 2018 and, by way of further example, illustrated by Mr Turner sending, to his father-in-law, a newspaper article about Dyldam's "wind-up challenge" on 6 August 2019, and the response dated 7 August 2019. In my view, particularly given Mr Turner's expressed concerns about this, in and around this time period, I consider that this is likely to be something that Mr Turner would have seriously entertained and acted upon given his concerns about the financial position of the Gateway entities. Again, I see this as consistent with my assessment of Mr Turner, and his business acumen reflected in his expressed views that it is better to receive something, rather than nothing. Further, I consider that compromise is something that was a distinct possibility from the perspective of the Gateway entities and Mr Fayad. Although during the second half 2019 there is some evidence that the development was progressing (see [111], above), its financial position and the strength of the plaintiff's claim against the Gateway entities (and Mr Fayad) all point in that direction - namely, that compromise would have been pursued.
Thus, although litigation (including to judgment) was a possibility, in my view a negotiated resolution of the plaintiff's claim impresses as a distinct possibility, for the reasons I have given.
As to when there might have been resolution, that necessarily is a difficult predictive exercise: the claim may have been agreed to, and compromised, in a relatively confined period of time or following the commencement of proceedings if there was some resistance (substantive or tactical) to it. Given the likely confined nature of the issues that arise, and based upon the fact that the time involved in the second Gateway proceedings (from termination of the deed to judicial determination) was around one year, my assessment is that the claim would have been resolved within that same timeframe.
In my view an appropriate assessment of the value of the loss of opportunity is $2 million.
There is a threshold issue to deal with, and rule upon. The plaintiff raises, with some force and justification, a number of responses to what the defendant has raised in the defendant's GST submissions, including a complaint about the belated - and what it submits to be unfair - way in which this issue has arisen. Specifically, the plaintiff submits that the GST issue sought to be raised by the defendant: (a) was never pleaded by the defendant; (b) was not raised in the agreed statement of issues in dispute filed by the parties shortly prior to the hearing; (c) was raised (in a confined way, in connection with the plaintiff) for the time in the defendant's outline of submissions; (d) had these issues been identified by the defendant, then it may have conducted its case differently, including addressing this issue by way of evidence; and (e) at least in relation to the submissions in connection with the trust, had not been raised at any time.
In my view it is necessary to draw a distinction between the defendant's GST submissions directed to the plaintiff, as opposed to the defendant's GST submissions directed to the trust. In the former situation, the matter was raised, albeit only in opening submissions (and, even then, limited to submissions directed to the terms of cl 14.2 of the deed), and only very briefly during closing submissions. In the latter situation (viz., in connection with the trust), however, that point was never raised at any time by the defendant: that is, the first notice that the plaintiff had about this issue was receipt of the defendant's GST submissions filed after the hearing. In the circumstances, essentially for the reasons that I have set out in [155], above, I refuse to permit the defendant to belatedly raise this issue in connection with the trust: fundamentally I consider it to be unfair, and inconsistent with the requirements under ss 56 and 58 of the Civil Procedure Act 2005 (NSW), to raise the issue in the way that it has been and I accept, as the plaintiff has submitted, that it may have conducted its case differently, including by calling evidence.
In my view, having proven that it is not registered for GST purposes, the plaintiff is not required to negate that it is "required to be registered"; in my respectful view it would be for the defendant to demonstrate this, as the plaintiff submitted. As to the requirement to be "registered", the defendant's submissions invite not only an "adverse" inference to be drawn, but an adverse inference in very precise terms: namely, that the plaintiff's business activities exceed the monetary registration threshold of $75,000. Putting to one side whether the (adverse) inference that is sought to be drawn could here extend (consistently with Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 9) in the way submitted, I am not prepared to draw the inferences that the defendant seeks in connection with the plaintiff's suggested "turnover". In my view it would involve a considerable amount of guesswork, and speculation. At a minimum, it is equally likely that the plaintiff complied with its statutory obligations and is not registered because it was not required to be.
Given the confined nature of the defendant's argument, I am not satisfied that the plaintiff was "required to be registered", with the consequence that the starting point of the plaintiff's claim for damages notionally is $3.5 million. Nevertheless, I think it useful to emphasise that, in context, I regard that notional starting point to be of limited practical significance. That is because, as I have already held, given the right to receive the payment upon rescission of the deed was unsecured, the loss of opportunity in my view is not this amount, but a value having regard to the probabilities and possibilities. It is also of limited significance because, in the hypothetical exercise required to be undertaken as part of assessing the value of the plaintiff's claim, my finding is that the circumstances were such that compromise of the claim was likely. Thus, irrespective of whether one commences the assessment from the position of the plaintiff or the defendant, my assessment of the value of the loss is not materially different. This last point reflects the fact the authorities recognise that assessments of hypothetical scenarios "defy precise calculation" and that it is "undesirable" to first determine the award of damages on the basis that the hypothetical scenario "would have occurred", and then undertake a discounting by a "selected percentage": Malec at 640 (see also the authorities at [136]-[137], above).
First, the defence assumes that Mr Turner not only knew of the existence of cll 8(a) and (b), but also that he understood their legal effect. I am not satisfied that Mr Turner had that knowledge or understanding. The communications that Mr Turner had in the period following the Gateway entities terminating the deed satisfy me that he did not. For example, the email "chain" commencing 22 February 2020 and ending on 24 February 2020 (set out at [67], above) shows, I find, no understanding of the consequences of lodging a caveat on the title to the Central Land nor anything other than a "rudimentary" and incomplete understanding of the ramifications that had resulted from the lodgement of the caveat (see [68] and [75], above). In this regard it is important to note that (a) there was no cross examination of Mr Turner to suggest that he knew and understood these matters; (b) it was not otherwise suggested, by reference to evidence, that he knew and understood these matters - for example, by advice that had been provided by the defendant to Mr Turner.
Secondly, putting the first matter to one side, the context to the sending of the communication is important: Mr Turner, who was then on holidays overseas, sent on 20 July 2018 a text message to Mr Bluth about lodging a caveat. The defendant's argument is that Mr Turner should himself have been aware and had in mind, at the time of sending that message, the terms of the deed that had been executed over a year prior. Given these matters, I am unpersuaded that there is any want of due care by Mr Turner. Again, as with the first matter, I would observe that Mr Turner was not cross-examined at all about this issue.
In my view, the circumstances negate any suggestion that Mr Turner (and, thus, the plaintiff) was negligent in the way alleged. They also demonstrate, in any event, why it would not be just and equitable for there to be any apportionment.