[84] The plaintiff contends that, but for the defendant's breach of contract in failing to complete the construction of the Connector Park roadway, those positive cashflows would have commenced 3½ years earlier than they did. On the basis of data relating to those cashflows, Mr Rands has expressed an opinion as to the extent of the loss suffered by the plaintiff as a result of delayed cashflows as at September 2014."

1. The Mr Rands to whom the trial judge referred is Mr Daniel Rands, an experienced chartered accountant who provided a report for the plaintiff (Exhibit P25 AB 1994-2035). Mr Rands relied upon financial figures provided by the finance manager of the JAC group of companies, Mr Stephen Blackwood.
2. As mentioned, the trial judge found in favour of the plaintiff's case that the first net positive cashflow occurred in 2012. However, in the years 2004 to 2012, subdivision costs of $2,844,134 were incurred by the plaintiff which was an accumulated debt in 2012. In determining the funds available for investment in 2012 and following years, Mr Rands did not take into account the possibility that net cashflow from 2012 onwards might have been used to repay the accumulated debt. Mr Rands calculated the loss on the basis that the net positive cashflow was available for investment. The defendant submitted that before funds were available for investment, the accumulated debt had to be repaid.
3. In the context of the plaintiff's case as to damages based on the evidence of Mr Blackwood and Mr Rands, the defendant sought to tender a report dated 7 May 2016 by Mr Wallace (Exhibit D17 AB 2036-2427). In his report Mr Wallace set out 16 points of comment upon various sections of Mr Rands' report. Objection was taken to the entire report. The trial judge ruled that most of the 16 points were inadmissible, primarily because the report failed to identify the reasoning underlying the views expressed by Mr Wallace.
4. Ground 6 as originally worded challenged the award of $2.2 million on the broad basis that "the contrary evidence of Mr Wallace ought not to have been excluded". In written submissions filed on appeal before the application was made to amend ground 6, the defendant narrowed the focus of ground 6 to the "rejection of points 2 and 5 of Mr Wallace's report, as related to the respondents' costs of construction". This position was confirmed in the first set of written submission filed in support of the application for leave to amend ground 6:

"7 Ground 6 of the appellant's notice of appeal, as originally drafted, impugned the exclusion by the Honourable trial judge of the evidence of an accounting expert called by the appellant/defendant at trial, Mr Wallace, to the effect that expenses should have been taken into account by the respondents' expert Mr Rands.

1. By its outline of submissions in this appeal, the appellant focused its criticism upon the exclusion of items 2 and 5 of Mr Wallace's report, as related to the respondents/plaintiffs' costs of construction which accrued as losses."
2. Points 2 and 5 of Mr Wallace's report were both identified as concerned with section 6.1 of the report by Mr Rands. Section 6.1 read as follows:

"[6.1] Attached as Appendix 1 is a printout of the spreadsheet prepared by employees of RV Pty Ltd I have been instructed to adopt as reflecting the actual and projected cashflows of the project both as they have and are projected to occur and also how they would have occurred if the roadway was completed three years earlier."

1. Point 2 of the report by Mr Wallace was as follows:

"2 (a) KPMG Appendix 3 is a document from Shaun McElwaine + Associates to Mr Rands. In this document in the section titled 'The Plaintiffs' Financial Accounts and Dealings', Mr Rands is requested to meet with staff of RV Pty Ltd to ask questions relating to the report. Mr Rands seems to have been relying on management data without verification or scrutiny for reasonableness.

(b) The document has missing expenses, formula errors, overstated income forecasts and amounts that are not equalling the RV Pty Ltd column in the consolidated spreadsheets at KPMG Appendix 6.

(c) Errors noted in the following KPMG points numbers 3 to 6."

1. Point 5 of Mr Wallace's report read as follows:

"5 (a) The spreadsheet mentioned in Mr Rands' section 6.1 has formula errors at cells F141 & F143. Effectively the initial cash outlaid for the commencement of the subdivision is missing.

(b) The row heading 'Net Cash Flow (excl State 1)' as mentioned in Mr Rands' section 6.4 first shows the total cash spent on the subdivision in 2006 at $194,957. In 2006 the WIP balance is $1,757,759. How is it possible for the total expenses spent to date to be reported as only $194,957 if the WIP balance is much greater.

(c) It is suggested that $1,562,802.57 is excluded from the cash position of the company in 2004 and 2005 due to the formula errors."

1. The trial judge regarded point 2 as an introduction to points 3-6. Having ruled that points 3-5 were inadmissible, but having admitted point 6, his Honour expressed the view that nothing in point 2 added anything by way of expert opinion to the opinion expressed in point 6 and, on that basis, ruled point 2 to be inadmissible.
2. As to point 5, the trial judge regarded it as a criticism of Mr Blackwood's spreadsheet (Exhibit P22). His Honour continued (AB560):

"It's an expression of expert - well, 5(a) is an expression of expert opinion that the cash outlaid for the commencement of the subdivision should have been brought into account but it was not. There is no reasoning in support of that opinion. 5(a) is therefore inadmissible.

5(b) amounts to an expression of opinion that two figures in Exhibit P22 are inconsistent. No reasoning is given as to what makes them inconsistent. 5(b) is therefore inadmissible. 5(c) is a conclusion based on 5(b). It must also be inadmissible."

1. The wording of proposed ground 6 extends beyond the contention that Mr Rands erred in failing to take into account that the net positive cashflow in 2012 might have been used, or would probably have been used, to pay off the accumulated debt. For example, proposed ground 6(a) attacks the finding of the trial judge that positive cashflows commenced in 2012, "have continued ever since and are likely to continue for years to come". Proposed ground 6(b) asserts that the trial judge erred in "accepting or adopting the evidence of Mr Blackwood and Mr Rands in relation to positive cashflows commencing in the financial years 2012".
2. Subparagraph (d) of proposed ground 6 complains that the trial judge erred in failing to consider whether the net cashflow figure prepared by Mr Blackwood "properly accounted for cumulative developments costs for the financial years preceding the 2011-2012 financial year". However, subpar (e) is a complaint that the trial judge failed to make a finding as to cash available to the plaintiff for investment commencing in the 2012 year.
3. In addition, while ground 6 as originally worded was, through the submissions advanced by the defendant, said to be directed to points 2 and 5 of the report by Mr Wallace, and the first set of written submissions on the application for leave to amend ground 6 similarly referred to point 5 and the failure to take into account accumulated debt, the defendant's amended written submissions in support of the admissibility of Mr Wallace's report rely on points 9 and 10 of that report:

"9 a) I refer to Mr Rands' report section 7.9 (refer to appendix 4 page 9 for the correct section 7.9 as Mr Rands' report contains 2 section 7.9s). In this section, he states that his calculations are showing the 'net cash generated by the sales of allotments less the amounts expended on allotment construction'.

1. The first year that a net cash flow is reported is 2012 for an amount of $1,974,279. This is in fact the proposed net amount received for the 2012 year only.

1. The previous year's initial construction costs in 2004 to 2011 are not included.

1. The total amount for these years is as follows:

1. $194,958
2. $166,983
3. $107,618
4. $258,959
5. $528,969
6. $24,324

1. It is unreasonable to assume in Mr Rands' calculations that these initial costs are never repaid from 2012 to 2029. Given there are bank loans in both RV Pty Ltd and also the consolidated group as detailed in KPMG point 10, it is suggested this loan plus the unfunded costs would be repaid in 2012 and 2013 year's cash.
2. Therefore, in 2012 there is nil Net cash flow from the project and that 2013 is reduced by the remaining balance.
3. The net present value variance is between $1.03M and $849K.

1. a) Further to KPMG point 9, there are currently bank loans in the balance sheet of RV Pty Ltd to the Commonwealth Bank (CBA) in the 2012 year plus other bank loans in the consolidated group.

1. In RV Pty Ltd, the closing balance of debt at 30 June 2012 was to the CBA of $794K and other bank loans in the consolidated group were totalling $16,046,655. Refer KPMG appendix 6 page 28.

1. It is concluded that the initial subdivision costs totalling $2,844,134 would have been repaid to the bank and therefore not available for reinvestment as per Mr Rands' report."
2. The trial judge ruled that both points 9 and 10 were inadmissible. In essence his Honour identified the lack of reasons in the report as the basis of his decision (AB 561 and 562):

"Point 9 has to do with expenditure prior to the first positive cash flow in the 2012 tax year. The - it begins with the statement or the recitation of some factual premises. Paragraphs (a) to (c) basically say that Mr Rands' calculations ignored the expenditure that was incurred before the first year of positive cash flow. 9(d) sets out figures which can be found in the spreadsheet, exhibit P22 as to the amount of such expenditure. Then we have the opinion in 9(e) to the effect that it - that one, it should be inferred that RV would have reduced loan debts once there was a positive cash flow, and two, that the amounts paid to - or the assumed amounts paid to reduce such loan debts, should have been brought into account. Well those are the opinions, no reasons are given for them.

(f) and (g), go on to set out further opinions as to the consequences of bringing into account the amounts assumed to have been paid to reduce loan debts but there aren't any calculations provided to substantiate the assertion of a nil balance in (f) and the figures in (g). So, all of paragraph 9 becomes in - must be inadmissible because the opinions expressed in it aren't explained by way of - no reasons are given for the reasons expressed in the paragraph - in the point. Item 10 - in item 10, the central opinion is in paragraph (c). It's an opinion that the initial subdivision costs totalling 2.844 million, that's - that comes from 9(d) that, that amount would have been repaid to the bank and therefore not available for investment as per Mr Rands' report. No reasoning is given for that opinion, therefore point 10 is inadmissible."

1. In order to be admissible, opinion evidence must comply with Pt 3 of the Evidence Act 2001. The relevant sections are as follows:

(1) Evidence of an opinion is not admissible to prove the existence of a fact about the existence of which the opinion was expressed.

(2) Subsection (1) does not apply to evidence of an opinion contained in a certificate or other document given or made under regulations made under an Act other than this Act to the extent to which the regulations provide that the certificate or other document has evidentiary effect.

77 Exception: evidence relevant otherwise than as opinion evidence

The opinion rule does not apply to evidence of an opinion that is admitted because it is relevant for a purpose other than proof of the existence of a fact about the existence of which the opinion was expressed.

The opinion rule does not apply to evidence of an opinion expressed by a person if -

(a) the opinion is based on what the person saw, heard or otherwise perceived about a matter or event; and

(b) evidence of the opinion is necessary to obtain an adequate account or understanding of the person's perception of the matter or event.

78A Exception: Aboriginal and Torres Strait Islander traditional laws and customs

The opinion rule does not apply to evidence of an opinion expressed by a member of an Aboriginal or Torres Strait Islander group about the existence or non-existence, or the content, of the traditional laws and customs of the group.

79 Exception: opinion based on specialised knowledge

(1) If a person has specialised knowledge based on the person's training, study or experience, the opinion rule does not apply to evidence of an opinion of that person that is wholly or substantially based on that knowledge."

1. Section 76 is an exclusionary rule excluding opinion evidence and s 79 provides an exception to that rule. Section 79 specifies two criteria that must be satisfied before an opinion is admissible. First, that the person expressing the opinion possesses "specialised knowledge based on the person's training, study or experience". Secondly, that the opinion is "wholly or substantially based on that [specialised] knowledge". In its terms, s 79 does not specify that identification of reasons for an opinion is a condition of admissibility.
2. In Dasreef Pty Limited v Hawchar [2011] HCA 21, 243 CLR 588, the High Court was concerned with the provisions of the Evidence Act 1995 (NSW) which were in the same terms as the Tasmanian provisions. In proceedings before the New South Wales Dust Diseases Tribunal an employee, who suffered from silicosis, led evidence from a chartered chemist as to the extent of the employee's exposure to silica dust. The plurality determined that the evidence was not admissible to establish that the employee's "exposure to silica dust in the course of working for [the employer] was greater than the level prescribed as the maximum permissible level of exposure" [9]. The judgment continued at [9]:

To the extent to which Dr Basden expressed an opinion about the numerical or quantitative level ... of respirable silica dust to which [the employee] was exposed in the course of working for [the employer], his evidence was not 'wholly or substantially based on' 'specialised knowledge based on [his] training, study or experience'."

1. Although the plurality did not deal specifically with the question as to whether opinion evidence permitted by s 79 is only admissible if the reasoning of the expert is disclosed, only two criteria for admissibility under s 79(1) were identified by the plurality in the following passage:

"[32] To be admissible under s 79(1) the evidence that is tendered must satisfy two criteria. The first is that the witness who gives the evidence 'has specialised knowledge based on the person's training, study or experience'; the second is that the opinion expressed in evidence by the witness 'is wholly or substantially based on that knowledge'."

1. The plurality noted that in the circumstances of that case, proof that the witness possessed specialised knowledge based on his training, study or experience and, secondly, that his opinion was wholly or substantially based on that knowledge, could only come from the evidence of the witness, and followed with observations of assistance:

"[36] In this case, demonstration of those matters could come only from evidence given by Dr Basden. That is why, in HG v The Queen, Gleeson CJ pointed out that, '[b]y directing attention to whether an opinion is wholly or substantially based on specialised knowledge based on training, study or experience, [s 79] requires that the opinion is presented in a form which makes it possible to answer that question'.

[37] It should be unnecessary, but it is nonetheless important, to emphasise that what was said by Gleeson CJ in HG (and later by Heydon JA in the Court of Appeal in Makita (Australia) Pty Ltd v Sprowles) is to be read with one basic proposition at the forefront of consideration. The admissibility of opinion evidence is to be determined by application of the requirements of the Evidence Act rather than by any attempt to parse and analyse particular statements in decided cases divorced from the context in which those statements were made. Accepting that to be so, it remains useful to record that it is ordinarily the case, as Heydon JA said in Makita, that 'the expert's evidence must explain how the field of "specialised knowledge" in which the witness is expert by reason of "training, study or experience", and on which the opinion is "wholly or substantially based", applies to the facts assumed or observed so as to produce the opinion propounded'. The way in which s 79(1) is drafted necessarily makes the description of these requirements very long. But that is not to say that the requirements cannot be met in many, perhaps most, cases very quickly and easily. That a specialist medical practitioner expressing a diagnostic opinion in his or her relevant field of specialisation is applying 'specialised knowledge' based on his or her 'training, study or experience', being an opinion 'wholly or substantially based' on that 'specialised knowledge', will require little explicit articulation or amplification once the witness has described his or her qualifications and experience, and has identified the subject matter about which the opinion is proffered.

[38] But that was not this case." [Footnotes omitted.] [My emphasis.]

1. Heydon J expressed the view that in order to be admissible under s 79, the evidence "must reveal the expert's reasoning" [129]. His Honour was of the view that "admissibility does depend on the reasoning being stated" and that there is nothing in s 79 to suggest that the common law rule has been abolished. Further, his Honour expressed the opinion that the "language of s 79 positively supports its [the common law rule] continuance" [130].
2. The issue of the continued application of common law rules concerning the admissibility of expert opinion evidence was the subject of consideration by the Tasmanian Court of Criminal Appeal in Langford v Tasmania [2018] TASCCA 1. In a trial before a jury of one count of unlawfully setting fire to property, a fire investigator gave evidence of his opinion that the fire had started on the particular area of a car. Much of the investigator's evidence was based upon his specialised knowledge as to the cause and behaviour of fires being knowledge that had "been acquired from his experience and training in that field" [4]. However, as one of the possible causes of the fire was an electrical fault within the vehicle, and as the investigator did not possess the expertise "in the electrical circuitry of motor vehicles generally, including a Toyota Prius, which is a 'hybrid vehicle'" [4], the investigator consulted with an unnamed person or persons at the Toyota Dealership in Launceston. Person or persons with whom the investigator consulted were not called to give evidence.
3. In a judgment with which Blow CJ and Wood J agreed, Brett J summarised the effect of the evidence [23]:

"A reasonable summary of the effect of this evidence is that, consistent with the methodology described above, the battery was identified at an early stage in the investigation as a potential ignition source. After the consultation with Toyota, Mr Catterall conducted a number of further investigations and made observations himself. On the basis of all of this information, he excluded the battery as a cause of the fire. It is a reasonable assessment of this evidence that the only role played by the information obtained from Toyota was the identification of the battery as the correct battery for the vehicle. This was a piece of factual information which was not otherwise within the knowledge of Mr Catterall. It clearly played some role in the formation of his opinion, although the extent of that role was not clear."

1. The issue before the Court in Langford was summarised by Brett J as follows [33]:

"The ground asserts that Mr Catterall's ultimate opinion as to the source of the fire is inadmissible because it relies, in part, on opinion and facts within the knowledge of others which has not been proved by calling those persons to give evidence. This is an appeal to what at common law may have been called the 'basis rule' or 'proof of assumption rule'. The decision of the High Court in Ramsay v Watson [1961] HCA 65; (1961) 108 CLR 642 was often cited as authority for the proposition that proof of assumed facts was a necessary precondition of admissibility of expert opinion at common law. Whether such a rule was actually identified by that case was a matter of some controversy."

1. Brett J observed that in Dasreef, "Heydon J contended for the existence of 'the proof of assumption rule' in the operation of s 79" [36]. However, his Honour noted that the plurality "refrained from reading such a requirement into the wording of the section and made it clear that the admissibility of opinion evidence is to be determined by the application of the requirements of the Act" and that s 79 "does not expressly require proof of underlying factual assumptions" [36]. His Honour continued:

"However, as was noted by the New South Wales Court of Criminal Appeal in Taub v The Queen [2017] NSWCCA 198, the plurality also considered that these requirements implied a further condition of admissibility. Their Honours reasoned that the need for the evidence to demonstrate that the opinion is wholly or substantially based on the specialised knowledge of the witness requires an explanation of this relationship in the context of the factual assumptions upon which the opinion is based."

1. Brett J then cited par [37] from the judgment of the plurality, which has been cited earlier in these reasons. His Honour continued [37] and [38]:

"[37] The plurality made it clear that this 'third' condition of admissibility did not introduce or re-establish a general rule that necessarily required proof of the underlying factual assumptions of an opinion:

'[41] Contrary to submissions on behalf of Mr Hawchar, this analysis does not seek to introduce what has been called "the basis rule": a rule by which opinion evidence is to be excluded unless the factual bases upon which the opinion is proffered are established by other evidence. Whether that rule formed part of the common law of evidence need not be examined. It may be accepted that the Law Reform Commission's interim report on evidence Australia, The Law Reform Commission, Evidence, Report No 26, (1985) vol 1 at 417 [750]. denied the existence of such a common law rule and expressed the intention to refrain from including a basis rule in the legislation the Commission proposed and which was later enacted as the Evidence Act 1995 (Cth) and the Evidence Act 1995 (NSW). What has been called the basis rule is a rule directed to the facts of the particular case about which an expert is asked to proffer an opinion and the facts upon which the expert relies to form the opinion expressed. The point which is now made is a point about connecting the opinion expressed by a witness with the witness's specialised knowledge based on training, study or experience.

[42] A failure to demonstrate that an opinion expressed by a witness is based on the witness's specialised knowledge based on training, study or experience is a matter that goes to the admissibility of the evidence, not its weight.'

[38] The effect of the plurality's reasoning is that evidence of an opinion is admissible if the requirements of the section are satisfied and the connection between the witness's opinion and his specialised knowledge, as it applies to the assumed facts is demonstrated on the evidence. The factual assumptions must therefore be stated and their relationship to the opinion explained, but they need not necessarily be independently proved. The failure to prove facts upon which the expert has relied to form the opinion will therefore not affect the application of s 79 to the evidence, and hence unless the evidence is excluded for another reason, it will be admissible."

1. Citing the observations of Simpson JA in Taub v The Queen [2017] NSWCCA 198 at [30] and [31], Brett J observed that "proof, or lack thereof, of the underlying facts will be relevant to the weight of the evidence" [39]. His Honour also observed that failure to prove underlying assumptions or facts might be fatal to admissibility because the opinion does not satisfy the test of relevance contained in s 55 of the Evidence Act. If evidence fails to satisfy that test, it is inadmissible (s 56).
2. In ruling that the opinion of the expert was admissible because the criteria in s 79 had been satisfied, Brett J spoke of partial reliance on information provided by others [46]:

"[46] The partial reliance by an expert on information, factual or otherwise, provided by others, will not impact on the admissibility of the opinion, provided that the opinion is based wholly or substantially upon the expert's specialised knowledge. Whether the opinion is substantially based on such knowledge is a question of degree, and requires an evaluative assessment by the court when determining admissibility. It is inevitable that experts will often rely partially on such information when formulating an opinion. In his submissions, the Director of Public Prosecutions referred to comments of Hall J in R v Jung [2006] NSWSC 658 at [57]:

'[57] It is not uncommon for professional persons or experts in various fields to utilise materials produced by third party specialists for the purpose of assisting them apply their specialised knowledge. That does not mean that the opinion of the former is not based wholly or substantially upon his or her specialised knowledge (the making or production of such materials being proved independently or admitted in legal proceedings). An example is the radiologist who produces an MRI scan which, in due course, is utilised by a medical specialist for the purposes of forming an opinion concerning causation, diagnosis and/or treatment. The specialist utilises such materials (and equipment) for the purposes of exercising his specialised knowledge in order to arrive at an opinion for the purposes of treatment or otherwise. It is apparent from the evidence that Dr Sutisno has, from her experience, an appreciation that photographic images can be affected by issues such as distance between subject and lens, angle, perspective and other issues. Whether or not the ATM photographs and forensic procedures are affected by circumstances that impact upon their quality or utility are matters that go to the soundness or value or integrity of the factual material utilised by her as an expert'."

1. This discussion, and the authorities cited, demonstrate that, provided evidence of opinion passes the test of relevance in s 55 of the Evidence Act, the evidence is admissible if it satisfies the two criteria specified in s 79. Exposure of reasoning is not a condition of admissibility, but the opinion must expose a connection between the opinion and the specialised knowledge possessed by the witness. In other words, a judge called upon to determine admissibility must be able to discern from the terms of the written or verbal opinion that the opinion is "wholly or substantially based" on the "specialised knowledge".
2. At trial there was no doubt that Mr Wallace possessed "specialised knowledge" based on his "training, study or experience". His CV disclosed a number of qualifications, including a Bachelor of Commerce. Mr Wallace was a registered company auditor. He had been working as an accountant for 29 years with experience in auditing and advising on matters relating to tax and business activities.
3. Mr Wallace was provided with a copy of the report by Mr Rands and asked to prepare a report "responding to and commenting on the correctness or otherwise of Mr Rands' report, applying his assumptions". The instructions continued:

"In doing so, please also comment upon the correctness or otherwise of any assumptions within your field of expertise that he applies, and set out the type of factual material that would be required in order to found those assumptions."

1. As it was put to the trial judge, Mr Wallace was not asked to prepare a report quantifying the value of the plaintiff's lost opportunity. He was asked to provide a "critique" of Mr Rands' methodology and opinion.
2. In common with his rulings concerning other points in the report of Mr Wallace, with respect to points 2, 5, 9 and 10, his Honour regarded the lack of reasons for the opinions expressed in those points as fatal to the admissibility of those opinions. It is not suggested that either counsel misled his Honour, but the submissions of counsel concentrated upon the absence of reasons in Mr Wallace's report.
3. The critical passage in the judgment of the plurality in Dasreef v Hawchar is found in [32] of the judgment. Although counsel for the plaintiff referred to that paragraph, counsel then emphasised those passages concerned with the requirement that the evidence of the expert must explain how there is a connection between the specialised knowledge and the opinion expressed by the witness. Counsel took the trial judge to a passage in the judgment in which the plurality noted an observation by the Court of Appeal that the absence of reasoning in that case led "inexorably ... to the lack of any sufficient connection between a numerical or quantitative assessment or estimate and relevant specialised knowledge". Counsel then followed with the statement (AB 536):

1. After referring to the views of Hayden J in Dasreef v Hawchar, counsel for the plaintiff then addressed the various points in the report of Mr Wallace and submitted that they were inadmissible because the reasoning process was not exposed. When counsel for the defendant followed with submissions, he also concentrated upon whether the reasoning process was exposed. After a short adjournment, the trial judge delivered his rulings.
2. In view of the late provision of the report by Mr Wallace and the emphasis in the submissions upon whether the reasoning of Mr Wallace was exposed in his report, it is not surprising that in delivering ex tempore reasons the trial judge similarly concentrated upon whether the reasoning of Mr Wallace was exposed in his report. It appears likely that the combination of circumstances resulted in his Honour overlooking the critical question as to whether the wording of each opinion in the report was sufficient to establish the necessary connection between the specialised knowledge and the opinion by demonstrating that each opinion was "wholly or substantially based" on the specialised knowledge.
3. The defendant's written submissions suggest that in "fixing upon there being 'no reasons', the trial judge may have mistakenly applied the Supreme Court Rules 2000 and the Expert Witness Code of Conduct identified in Practice Direction 1 of 2016." Paragraph 3(e) of the Code of Conduct provides that every expert report shall state, specify or provide the reasons for each opinion.
4. Neither counsel nor the trial judge referred to the Rules or the Code of Conduct. There is no basis for inferring that the trial judge mistakenly applied the Rules or Code of Conduct.

1. The plaintiff submitted that Mr Wallace's report did not expose how his specialised knowledge provided the basis for his opinions. In addition, the plaintiff contended that to the extent that Mr Wallace provided a critique of Mr Rands, the opinions of Mr Wallace amounted to no more than inadmissible speculation and inference.
2. In summary, the defendant's written submissions in support of the contention that the opinions of Mr Wallace "were wholly or substantially based on specialised knowledge" were as follows:
   • "In the case of points 9 and 10, the relevant fact in issue was whether Mr Rands' net cashflow projections should be accepted and, in particular, whether Mr Rands' assumption as to the non-payment of the plaintiff's costs of construction was appropriate" [52].
   • As the plaintiff's claim was for lost opportunity, the plaintiff bore the onus of "proving causation of loss" which was only discharged if the plaintiff "proved that it was more probable than not that it would have received a valuable opportunity" [53].
   • Mr Rands' assessment of loss for lost opportunity involved "assessing the proceeds from the sales of allotments and when funds would become available for investment" [54]. This methodology "necessarily involved the making of assumptions by Mr Rands including (critically) as to the plaintiff's costs of construction, in order to opine on the net cash generated by the sales of allotments less the amounts expended on allotment construction and sale (s 7.9 (first occurring))" [55].
   • The Wallace report responded to the Rands report with respect to the key issue "whether Mr Rands' net cashflow projections (and hence the funds available for investment) should be accepted or not" [56]. The opinions of Mr Wallace in points 9 and 10 "were responsive to s 7.9 of the Rands report" [57].
   • Points 9 and 10 expressed both the expert opinion of Mr Wallace and the reasons for that opinion that "in estimating projected cashflows, it is unreasonable to assume that the initial costs of $2.8 million are not repaid in circumstances where there are bank loans in R V Pty Ltd and the consolidated group as detailed in point 10" [59].
   • "In Mr Wallace's view, the proper assumption to make (ie in assessing projected cashflows) is to conclude (in the sense of 'assume') that the initial costs of $2.8 million would have been repaid in 2012 and 2013 and therefore would not have been available for investment, contrary to Mr Rands' projections" [59].
   • "The reasons" for the opinion of Mr Wallace are that it is "unreasonable to assume that the initial costs of construction are not repaid in circumstances where there are bank loans". The "proper assumption to make in assessing the project (hypothetical) cash flows is to conclude that the initial costs of $2.8 million would have been repaid in 2012 and 2013 and therefore would not have been available for investment" [60].
   • Points 9 and 10 "sufficiently articulate and explain Mr Wallace's professional opinion that the approach of Mr Rands overstates the positive cash available because the initial costs should have been taken into account" [61].
   • It is apparent that the opinion of Mr Wallace expressed in points 9 and 10 was "wholly or, at the very least, substantially based on his specialised accounting knowledge" [62].
   • "Tested from another angle, if Mr Rands' opinion as to his cash flow projection is admissible under s 79 notwithstanding that he (Mr Rands) did not give reasons as to why it is appropriate to assume that the initial costs will not be paid. In those circumstances, it cannot be right that Wallace's responsive opinion, taking issue with that approach, is inadmissible. That would be a curious result" [64].

1. The critical points are points 5, 9 and 10. Point 2(a) is a comment rather than an opinion, but point 2(b) is a general observation concerning missing expenses in the spreadsheet, which is the type of opinion that an accountant is permitted to express by reason of the particular accounting expertise. However, unless the missing expenses are identified, the opinion is inadmissible because it does not satisfy the test of relevance in s 55.
2. Point 5(a) expresses views about the spreadsheet that are well within the province of an accountant. Similarly, the observations in point 5(b) and (c) are accounting type observations. The connection between the specialised knowledge and the observations or opinions is obvious.
3. Point 9(a)-(d) contain observations concerning the absence of "initial construction costs in 2004 to 2011" and the extraction of those costs from the spreadsheet to reach a total of $2,844,134. Perhaps those figures could have been extracted by a person without specialised accounting knowledge, but those figures provide the basis for the opinions expressed in point 9(e)-(g), namely:
   • It is unreasonable to assume in Mr Rands' calculations that the initial costs are not repaid from 2012 to 2029.
   • In view of bank loans in both the plaintiff and the consolidated group, "it is suggested this loan plus the unfunded costs would be repaid in 2012 and 2013 years cash".
   • On this basis there would be a nil net cashflow in 2012 and the flow in 2013 would be reduced by the remaining balance of the debt repaid.
   • The net present value variance would be between $1,003,000 and $849,000.
4. Bearing in mind the accounting and business experience of Mr Wallace which provides him with specialised knowledge in that field, the fact that his opinion concerning the likely repayment of debts is based on his specialised knowledge is readily apparent. It is one of those occasions when the fact that the opinion is wholly or substantially based on specialised knowledge requires "little explicit articulation and amplification". Point 9(f) and (g) are merely arithmetical calculations that flow from repayment of the construction costs incurred from 2004 to 2011.
5. Whether these opinions suffer from a lack of reasoning, evidence or otherwise, is a matter going to the weight of the opinions, not their admissibility.
6. The same result flows from an examination of the opinion expressed in point 10. Subparagraphs (a) and (b) are merely observations of figures underlining the opinion expressed in point 10(c) that the initial subdivision costs of $2,844,134 would have been repaid to the bank and, therefore, would not have been available for re-investment. In essence, it is a repeat of the opinion expressed in point 9 and the connection between the specialised knowledge and the opinion is obvious.
7. For these reasons, the trial judge erred in excluding points 2(a) and (b), 5, 9 and 10 of Mr Wallace's report. Whether the opinions expressed in those points were of any significance is a different question.

1. The plaintiff submitted that if the opinions of Mr Wallace were wrongly excluded, nevertheless the judgment should stand because the defendant has failed to establish that the evidence of Mr Wallace could have affected the outcome of the trial. In essence, the plaintiff contended that the opinions of Mr Wallace were of no substance and demonstrated a misunderstanding of the methodology employed by Mr Rands.
2. Further, the plaintiff submitted that during cross-examination counsel for the defendant accepted the answers of Mr Rands concerning his methodology, and it would now be unfair to the plaintiff if the defendant is permitted on appeal to complain that evidence was excluded concerning that methodology.
3. In the context of these issues, it is necessary to consider the course of the trial, together with some of the evidence of Mr Blackwood, Mr Rands and Mr Wallace.
4. The trial commenced on 9 May 2016. It appears that the parties filed summaries of opening submissions prior to the trial commencing. In par [15] of the defendant's summary it was asserted that the value of the loss of chance assessed by the plaintiff's expert was "grossly overstated" and that "the methodology used was incorrect". Reference was made to reliance on the expert accounting evidence of Mr Wallace, when that evidence was available, "anticipated today and at the latest by tomorrow".
5. The report of Mr Wallace was provided to the Court and counsel for the plaintiff late on the evening of 8 May 2016. In oral opening on 9 May 2016 counsel for the defendant apologised for the late provision of the report and identified a number of criticisms which Mr Wallace would direct to the evidence of Mr Rands. Counsel did not specifically refer to the issue of accumulated expenses.

1. Mr Blackwood was called to give evidence on 12 May 2016. He prepared the spreadsheet which provided the financial figures upon which Mr Rands relied (Ex P22). He said he was asked to prepare a "calculation of the net cash flows from the Mount Pleasant subdivision project" (AB 339).
2. Mr Blackwood gave evidence that the purchase of the land was funded by an inter-group loan from JAC Group Holdings to the plaintiff. No interest was ever charged on those loans (AB 323). From time to time additional amounts were advanced by JAC Group Holdings to the plaintiff and these advances were reflected in the debt recorded in the accounts.
3. According to Mr Blackwood, development expenditure was treated as work in progress in the accounts (WIP). For accounting purposes, there were a number of stages of costs, and a "proportionate divisional exercise" was undertaken based on the square metres of land which resulted in lots within a particular stage being allocated a proportion of the costs. The lot square metres were assessed as a proportion of the saleable square metres of a particular stage (AB 325 and 326). In this way, across the various stages of the development, when a lot was sold the costs were allocated to the sold lot on a proportionate square metre basis.
4. In examination Mr Blackwood was taken through the various financial years set out in his spreadsheet and he explained how the costs were allocated in this manner. Until the financial year 2011-2012, the allocated costs exceeded the proceeds of the sale of lots resulting in a "net cash outflow" in those years (AB 345). In the 2012 year there was a "net positive cash flow" because, in that year, cash received from the sale of lots exceeded the development expenditure allocated to the lots sold in that year (AB 345).
5. According to Mr Blackwood, as reflected in his spreadsheet, there was also a net cash inflow in the 2013 year (AB 346). However, as the spreadsheet was prepared in about May or June 2014, for the 2014 year onwards, Mr Blackwood made an estimate or forecast of the likely results. In the 2014 year he had figures for almost the full financial year, and in 2015 he considered the number of lots available to sell and contracts on hand, together with the rate at which contracts had been signed over the immediately preceding period. On this basis Mr Blackwood "put in a forecast of the total lots to be sold in each of those stages in that year". Forecasts were then made for subsequent years through to 2029 (AB 347 and 348).
6. The trial judge set out his view of the way in which Mr Blackwood had made his calculations:

"[87] Mr Blackwood's calculations as to the actual cashflows up to 30 June 2013 were based on figures extracted from the JAC group's financial records as to the following:

• Sales revenue for each stage of the Mount Pleasant subdivision for each financial year, excluding GST and rebates. (There was evidence that, whilst the plaintiff would never sell a lot for less than its asking price, it would sometimes agree to allow rebates to purchasers. For example it would sometimes, by agreement, reimburse purchasers in respect of expenses such as landscaping costs, the cost of gas appliances, stamp duty, or legal costs. Sometimes purchasers would be paid a rebate if they completed construction of a dwelling within an agreed time.)
• The selling expenses for each stage for each financial year.
• The value of work in progress for each stage at the start of each financial year.
• The amount of accumulated expenditure for each stage at the start of each financial year.
• The proportion of the cost of land attributed to the lots sold in each stage in each financial year.
• The proportion of development costs attributed to the lots sold in each stage in each financial year.
• Costs incurred but not attributed to particular stages as at the end of each financial year.
• The value of work in progress for the entire Mount Pleasant subdivision project at the end of each financial year.

[88] Mr Blackwood's predictions in relation to 2014 and subsequent years were based on the following:

• Actual sales and expenditure data for most of the 2014 financial year. (He made his predictions in or about May or June 2014.)
• Estimates by him of the number of sales per year, based on his experience in relation to various other subdivision projects undertaken by members of the JAC group.
• An assumption that future sale prices would be equal to the average of pre-2014 sale prices, with no inflationary increase over time.
• An assumption that future expenses would accord with contractors' estimates, and not increase with inflation over time.
• An assumption that the plaintiff's profits would continue to be subject to a tax rate of 30%."

1. The trial judge noted that when Mr Blackwood gave evidence in May 2016, the actual sales since 1 July 2013 had exceeded his estimates.
2. As to the $2.8 million costs to which Mr Wallace referred, Mr Blackwood said that if Mr Wallace was referring to the initial expenditure, it was "all sunk expenditure that occurred before this breach issue arose", and the model for the spreadsheet was a reference to "future cash flows after the breach occurred" (AB 356).
3. Counsel for the plaintiff was obviously alive to the issues raised in the report of Mr Wallace, including the issue of accumulated debt and the application of surplus cashflow to repay loans. In examination counsel took Mr Blackwood to various points in the report of Mr Wallace, including points 5, 9 and 10 (AB 364-369). During that examination Mr Blackwood acknowledged that he had not included bank loans because they were a financing issue (AB 369). He also acknowledged that initial development costs in the order of $1.5 million, incurred before the breach of contract, were not part of the model. Mr Blackwood said "the whole point of the cash flow is to forecast the future cash flows that arose subsequent to the breach" (AB 368).
4. Mr Blackwood also explained that the spreadsheet was not concerned with what might be done with the cash flow once it was received (AB 369). It could be used to repay bank debt or invest in other activities such as funding other subdivisions. The use of the cashflow was, in the view of Mr Blackwood, a separate question from the assessment of the actual cashflows. As counsel for the plaintiff put it, the assessment process was about cashflow, not profit.
5. By the end of the examination of Mr Blackwood, therefore, the purpose of the spreadsheet had been explained, and the fact that initial development costs had not been included was apparent. During cross-examination it was not suggested to Mr Blackwood that there were errors in this spreadsheet, but it was suggested that by excluding the costs of the Stage 1 development, the figures for the project as a whole were distorted because "in every other sense you use the costs per square metre for the project as a whole". Mr Blackwood gave an affirmative answer, but then said Stage 1 had its own costs which had been allocated.
6. It was not suggested to Mr Blackwood that any cash surplus was likely to have been put to reducing debt. These were questions that could have been put both to Mr Blackwood and to Mr Cocker, but they were not asked any questions about this issue by either counsel.
7. As to Mr Blackwood, proposed grounds 6(b) and (d) directly challenge the spreadsheet by asserting that the trial judge erred in accepting the evidence of Mr Blackwood and in failing to consider whether the spreadsheet "properly accounted for cumulative development costs for the financial years preceding the 2011/2012 financial year". The first written outline of submissions on the application for leave to amend ground 6 referred to the question raised in item 5 of Mr Wallace's report, but concentrated upon the failure of Mr Rands to deduct "accumulated losses of $1,757,759" from the "positive cash flows". The defendant's subsequent more detailed written submissions stated [83]:

"The evidence of the plaintiff's accountant Mr Blackwood is not challenged on this appeal. Mr Blackwood calculated the plaintiff's cashflows for each of the relevant years, and gave evidence that the plaintiff's 'Cash received from the sale of lots in that year' for the financial year (FY) 2012 was $1,974,379. That figure was the first year the plaintiff's cash receipts exceeded development expenditure."

1. The remainder of the written submissions concentrated upon the approach of Mr Rands and the findings or lack of findings by the trial judge. There was no suggestion of a challenge to the reliability of the spreadsheet.
2. In oral submissions on the appeal, counsel for the defendant pointed to evidence given by Mr Rands concerning point 2 of Mr Wallace's opinion that expenses were missing from the spreadsheet. The oral submissions continued with reference to the omission of development costs from the spreadsheet [T115]:

"So this is relevant to the third point that we make and that is that the spreadsheet prepared by Mr Blackwood failed to properly record some $1.5 million of non-stage 1 expenditure in the financial year 05 resulting in an addition $1.562,802 of negative cashflow which should've been taken into account when assessing when a net positive cashflow for the development was actually achieved."

1. Counsel then referred to other evidence of Mr Blackwood concerning the expenditure in the financial year 2005, and drew attention to the trial balance which he demonstrated that Mr Blackwood's evidence was wrong and that he had erroneously omitted work in progress costs for the subdivision in the order of $1.5 million.
2. Earlier in submissions, counsel referred to evidence led from Mr Blackwood in examination concerning the comment at point 5 of Mr Wallace's report that the spreadsheet contained "formula errors at cells F141 and F143" and that, effectively, "the initial cash outlaid for the commencement of the subdivision" was missing from the spreadsheet. Mr Blackwood had answered that those cells were blank because the expenditure related to Stage 1 of the subdivision which had been excluded from the spreadsheet. Mr Blackwood said the amount of $1.562 million had been excluded because it was expenditure prior to the breach. Counsel submitted that the evidence demonstrated a misunderstanding by Mr Blackwood.
3. Those submissions were followed by the general observation that it was "not being suggested that Mr Blackwood was not thorough or that the accounts he produced were inaccurate because when you do look at Exhibit P22 [the spreadsheet], other than leaving out the unallocated costs and the two cells which were left blank ... we don't quibble with his Honour's findings at 101 that Mr Blackwood was thorough and meticulous in his calculations ..." [T109].
4. The finding of the trial judge to which counsel referred was as follows:

"[101] Mr Blackwood was thorough and meticulous in his calculations, and conservative in his assumptions. I accept that his methodology was appropriate. It is true that he made no allowance for real estate prices increasing with inflation, but sale prices are only one component in a very complex calculation. Construction costs might also increase with inflation, but Mr Blackwood made no assumption that they would. Rather than looking at trends in relation to real estate prices or construction costs in isolation, it would be more appropriate to consider what trends there were as to the margins between sale prices and expenses, but I have not been presented with any evidence as to such margins, and will therefore have to assess damages as best I can."

1. In final written submissions, the defendant specifically stated that the complaint is "not" that the spreadsheet fails to account for all of the expenditure identified by Mr Wallace. The defendant identified its "central complaint" that those parts of the spreadsheet which record the plaintiff's expenditure of $2,844,134 incurred before the breach of the contract "are not the portions of P22 which were the 'starting point' of Mr Rands' calculations, as then adopted to calculate the [plaintiff's] damages at trial".
2. Although the defendant's submissions sometimes veered in the direction of suggesting error by Mr Blackwood, ultimately the defendant accepted that the spreadsheet was accurate and contained all the relevant figures. It was the use of the spreadsheet by Mr Rands which provided the basis of the defendant's attack upon the value attributed by Mr Rands to the lost opportunity.

1. Mr Rands commenced his evidence on 12 May 2016. He confirmed that he had been instructed to accept the figures in the spreadsheet prepared by Mr Blackwood as accurate.
2. It is clear from the examination-in-chief of Mr Rands that counsel for the plaintiff was alive to the issues raised in the report of Mr Wallace, including the issues of accumulated development costs and the use of cash surpluses. Counsel asked Mr Rands about a number of matters raised by Mr Wallace, including points 2, 5, 9 and 10 (AB 404-407).
3. Dealing with points 9 and 10, Mr Rands gave the following evidence-in-chief (AB 406):

"Let's go to his .8 which I think - no, we've dealt with .8, .9, and I direct your attention to sub-paragraph (e) because this seems to be the pith and substance of what's being said. The contention that it's unreasonable to assume in your calculations that initial costs are never repaid from 2012 to 2029. Having heard the evidence of Mr Blackwood and read this report of Mr Wallace, is there any qualification - ?.....No.

You see necessary, why not?.....No because the - those initial costs were before the positive cash flow started in the project and so they're not relevant to an analysis of the bringing forward of positive cash flows.

Right, so they would have happened in any event?.....Yes.

The next point - well 10(c), did you make any adjustment for the Commonwealth - initial subdivision costs of 2.844 million dollars and the contention that they would have been repaid to the bank, or do you understand what's meant by this?.....I - I don't know on what basis it can be said that any amounts would have been repaid to the bank. I certainly wasn't advised of that when speaking to Mr Blackwood.

But, again, does it make any difference, because you might choose to repay a loan at 6 or seven percent?.....No, no, no. Repaying the loan is perhaps one of the uses of funds along with investing it and I don't know why we would want to repay initial costs. I mean, they're costs, they're not anything that gets repaid. They're - they've been outlaid."

1. Counsel for the defendant cross-examined Mr Rands about point 9 of Mr Wallace's report and the failure of Mr Rands to take into account the accumulated expenses (AB 434 and 435):

"The question would be - we'll phrase it another way, your Honour. (Resuming) Would you accept that, that would be the debt that would've been built up, if you had've started with a cash position of zero, that would've been the debt built up for a standalone situation for Mt Pleasant subdivision stage 2?.....Yes.

Yes. Now, I'd ask you to turn to Mr Wallace's report because I suggest to you that at .9, he shows the expenses of the Mt Pleasant subdivision for those years, 2005 to 2011. Point 9?.....Yes, I'm just tracking those back to the-

Thank you?.....In part that is correct but there's also a 1.562802 for 2004/5 which has been added in there as well.

It's otherwise-?.....Then the balance of it, yes. Yes, indeed.

In a standalone situation, stage 2 onwards, would you agree that the RV Pty Ltd cash flow values would show an overdrawn balance of approximately 2.8 million at the end of financial year 2011?.....Well, no, because if we're going to exclude the 1.5 which is at the top of that column, the amount which would be the stage 2 overdraft balance, on your assumption, would be approximately 1.3.

I see. And if the 1.5 was added in, then it would be the 2.8?.....The 2.8, yes because he's put the 1.5 there.

Okay. If funds received in 2012 were the 1,974,379, if they were applied off the opening balance, cash flow would still be negative?.....Well, if we're going to say the opening balance was 1.3, as we established a moment ago, no, it wouldn't.

No, but if it were 2.8?.....If it were 2.8, yes, 2.8 is larger than 1.9.

I see. If we're showing the net present value of the funds RV had in the bank, why wasn't the opening negative cash position for 2012, included in your calculations?.....Because we were not doing the value of the company, we weren't doing the net present value of the total project, we were modelling the difference between the positive cash flows starting when they did start and starting three and a half years earlier. And so, those earlier costs are not relevant to that analysis.

On the basis that you're constricted to that model?.....No, not at all. They are different things which would've been modelled. I was not asked to calculate the net present value of the project and if you include the earlier cash flows, that's the net present value of the whole project. If what you're trying to do is understand the economic impact of bringing the positive cash flows forward, then you disregard the earlier negative cash flows.

And you'd agree with me that the results are very different if based on those two streams?.....Well, they're two different questions and so they would have two different answers."

1. Later in cross-examination Mr Rands was asked whether he accepted that there was a conflict between claiming lost earnings on surplus funds, but wanting to be reimbursed the interest cost of borrowing funds for the project. He responded in the negative (AB 436). Mr Rands denied that there was any element of double dipping (AB 437).
2. Mr Rands was also questioned in cross-examination about re-payment of loans (AB 440):

"You said yesterday, that 'I don't know on what basis it can be said that any amounts would've been repaid to the bank. I certainly wasn't biased of that when speaking to Mr Blackwood'?.....Yes.

Wouldn't it have been an obvious enquiry for you to make?.....No.

I suggest that you didn't ask that question because, effectively, you were only working towards the assumptions that you'd been directed?.....No. No, the allocation or the repayment of loans is a separate consideration to the timing and quantum of the cash flows at their present value and then bringing them forward three and a half years and finding out that present value. The bank funding or repayment of bank debt or the recoupment of stage 1, is irrelevant to that consideration, to that process.

I suggest to you that the repayment of bank debt would have affected things such as taxation. I mean, interest is deductible, it's-?.....Yes.

So, clearly it would've affected your projections, wouldn't it?.....No, because what we've done is we have disregarded overheads, we've disregarded financing and we've just looked at the cash flow coming out of the project itself and then applied - I could have said 'notional', I believe the word I've used is 'implicit.' A tax, only applicable, to those cash flows."

1. As to the accumulated expenses, Mr Rands was asked whether he assumed that those expenses were never re-paid (AB 450-451):

"Would you agree that you made an assumption when calculating the available cash for reinvestment, that initial funds of 2.8 million outlaid in years 2004 to 2011 for the commencement of the subdivision, including stage 1, are never repaid, correct?.....Um, my model - the spreadsheet doesn't deal - Mr Blackwood's spreadsheet doesn't deal with the repayment of debt. My analysis doesn't deal with the repayment of debt. We established it was 1.3, not 2.8. Um, I - it - they are outlays on the cost if - on the project before the cash flows - positive cash flows commences, I just don't see how any of that is helpful to my analysis.

When you say helpful, you mean helpful to the assumptions that you were given?.....No. It was helpful in trying to understand it or criticise it.

I suggest to you that the model that you were given was designed to calculate a loss?.....I can only take it as it was given to me.

I suggest to you that if the 2.8 million was repaid into your model then that would change the positive cash available in the model?.....If we were not going to look just at operating costs our operating cash flows, which is what my analysis is, and we were to take into account debt repayments, yes, that's right.

Would you agree with Mr Wallace that by not adopting the $2.8 million as repaid this overstates the positive cash available by between 1.03 million and $849,000?.....I can't understand where he would get his money from and I can't accept that criticism."

1. The topic was again raised a little later in cross-examination, which included a question as to the likelihood of cash surplus being used to repay accumulated expenses (AB 452 - 453):

"In relation to expenses on the allotments, in terms of the net cash generated by the sales of allotments, less the amounts expended on allotment construction, which is in your report of the 2nd, 7.9, would you agree that there is no reference there in the report to initial construction costs in - sorry, to construction costs from 2004 to 2011?.....That is correct.

Would you agree that it's unreasonable to assume, in your calculations, that these initial costs are never repaid from 2012 to 2029?.....That's not relevant to the process that I went through to establish the net present values of the breach and no-breach cash flows.

Would you agree with me that in terms of giving the most accurate assessment of events, that it would've been reasonable to assume that those costs were repaid from 2012 to 2029?.....It's really not relevant to the calculations.

Would you agree that if they were repaid, that would've affected the net cash flow from the project, according to your model.

MR McELWAINE SC: Well, he said, it's not relevant, and so the next question follow.

MR WILLIAMS: (Resuming) I'll withdraw that question, your Honour. Would you agree with Mr Wallace's contention that the initial subdivision costs, totalling approximately $2.8 million , would have been repaid to the bank as cash was made available and would therefore not be available for reinvestment, according to your report?.....When we discussed this earlier, we established that it was actually 1.3 because 1.5 of the 2.8 relates to stage 1 of the subdivision and I maintain that it is not relevant, they're not considerations.

I suggest to you that it is relevant that stage 1 and stage 2 be considered together for the actual project, therefore, it is relevant. What do you have to say to that?.....I disagree that it is relevant."

1. The evidence of Mr Rands was completed on 13 May 2016. The plaintiff closed its case on 17 May 2016. Counsel for the defendant called Mr Wallace to give evidence and the plaintiff objected to the entirety of the report by Mr Wallace. Following submissions, the trial judge gave his ruling on the same day.

1. Immediately after the ruling, Mr Wallace gave evidence. The evidence-in-chief was brief. In examination Mr Wallace was asked about the discount rate used by Mr Rands, but an attempt to have Mr Wallace give evidence concerning the methodology used by Mr Rands was the subject of a successful objection. The trial judge ruled that the question was leading to evidence that would be given in breach of the rule "requiring expert evidence to be disclosed before it's given" (AB 567).
2. Counsel for the defendant did not attempt to call Mr Wallace for the purposes of a voir dire examination with respect to any of the contentious issues. Nor did counsel attempt to supplement the evidence of Mr Wallace to provide reasons for any of the opinions which had been ruled inadmissible. In other words, counsel did not attempt to overcome the deficiencies that underpinned the ruling that most of the report of Mr Wallace was inadmissible.
3. Mr Wallace was cross-examined about aspects of the financial figures, which are irrelevant for present purposes. He was then taken to the methodology used by Mr Rands and agreed that the "discounted cash-flow is a common methodology employed to calculate the present value of a future cash-flow" (AB 580). He agreed that the "whole purpose of a net present value discounted cashflow analysis ... is to compare the likely cash receipts assuming no breach with the likely cash receipts with the breach" (AB 580-581). Mr Wallace also agreed with a number of propositions put to him by counsel concerning the assessment of the discount rate.
4. The initial cross-examination related to evidence that had been provisionally received, subject to objection. The trial judge then ruled that parts of the evidence were inadmissible, and cross-examination resumed. During this part of his evidence Mr Wallace agreed that Mr Rands had been instructed to determine "the difference between the cash-flow that might have been received and which might be received in the case of breach" (AB 605), but added that although this was "not an illegitimate approach", there is more than one methodology that can be used (AB 606). Counsel put to Mr Wallace that the approach of Mr Rands proceeded "in accordance with correct principles" and Mr Wallace replied (AB 606):

1. During cross-examination counsel was careful to avoid opening up the areas of the report by Mr Wallace which had been ruled inadmissible. The answers given by Mr Wallace concerning the methodology used by Mr Rands must be viewed in the context known to Mr Wallace, namely, his opinions as to the accumulated expenses and paying off debt rather than investment, had been ruled inadmissible. Mr Wallace was not asked whether, in adopting the methodology which he said was not an illegitimate approach, Mr Rands should have assumed that all or some of the accumulated debt would be paid from the cash surplus, rather than assuming that the cash surplus would be invested.
2. In re-examination Mr Wallace was asked what methodologies he had in mind when he answered in cross-examination that the approach of Mr Rands was not illegitimate but there was more than one methodology that could be used. He answered (AB 611):

"So, it would be a calculation of economic loss and it would be based on the facts of the particular case and standing back and trying to make an assessment of what the real loss actually is and net present value of future cash flows is certainly one methodology. An alternative methodology could be what is the cost for the breach which maybe the net present value of future cash flows, but it may also be, in this example, not receiving a return on funds invested in the subdivision for the three and a half years whilst it was delayed. So you could do an economic loss calculation based on 2.8 million or 1.5 was invested up to '05, but it seems to be common that work in progress was 2.8 before sales happened, so there's a - there's a cost, an opportunity cost of those funds, in a sense, sitting idle. So that would be an alternative methodology which isn't a net present value that has you dealing with known figures, as opposed to some known and then forecast. So that would be an alternative methodology that you could use to assess this economic loss."

1. Ultimately, therefore, Mr Wallace accepted that the discounted cashflow methodology used by Mr Rands was a legitimate methodology used to compare the likely cash receipts, assuming no breach, with the likely cash receipts on the basis of a breach of contract. Mr Wallace agreed that, in this respect, Mr Rands proceeded in accordance with correct principles. However, in acknowledging that the methodology used by Mr Rands to compare cash receipts in this way was correct in principle, Mr Wallace was not asked, and did not concede the validity of, the next step taken by Mr Rands of assessing the likely value of the cash receipts, if they had been received earlier, by reference to the likely return on investment of those cash receipts (rather than through the payment of accumulated debt).
2. The closing submissions of counsel for the plaintiff did not make any reference to accumulated expenses or paying off debt rather than investment. However, the closing submissions of counsel for the defendant drew attention to the failure of the plaintiff to include in its calculations the initial costs of the subdivision (AB 741 and 742):

"Now, the method of calculation submitted, or put forward by the plaintiff, is flawed in a number of respects. There's no doubt that Mr Blackwood is a faithful employee of the JAC Group, but he did what he was directed. He developed a spreadsheet that he himself agreed was too conservative and, as directed by Mr Cocker, a fundamental defect in this spreadsheet is that it took out the initial costs - 2.8 million. It didn't include the $400,000 that was paid. There's nothing in that spreadsheet that deals with the $400,000 that was paid and there's nothing in it that deals with $400,000 that would later be paid.

In very simple terms, your Honour, by taking out that initial cost, it exaggerates the later profit. That's the effect of it. By taking out that initial cost of 2.8 million, it distorts the future profit.

So we have a calculation which fundamentally is unreliable."

1. After advancing this contention, counsel for the defendant drew attention to the cross-examination of Mr Rands about failing to take into account the costs of development (AB 742 and 743):

"Now, your Honour, one could feel sympathy for Mr Rands. I asked him, at page 402 of the transcript:

If you'd been asked to come up with the most accurate figure, then you would have taken into account the costs of development, too, wouldn't you?

If I was going to do the exercise Mr Blackwood did, do you mean?

Yes.....I would have called, absolutely, I would have called for expert input as to both the sales, timing and quantum, and also the expenditure and quantum and timing, absolutely.

Do you accept that your opinion evidence is an opinion based on the spreadsheet prepared by Mr Blackwood?.....Well, I've accepted certain assumptions and as if they were facts, those projections, I've accepted those. My opinion is the conversation of those cash flows and taxable incomes into an economic loss, that's my opinion.

Would you accept, in this case, that your acceptance of the rigid assumptions and the calculations by others, that the outcome that you have predicted is different to an outcome if you hadn't been guided by those assumptions and you made your own inquiries?.....Who knows what I would have been provided had I not been provided the spreadsheet and I was engaged to compile that spreadsheet myself."

1. In reply, counsel for the plaintiff drew attention to the evidence of Mr Blackwood as to why the development costs of $2.8 million had been excluded from the spreadsheet (AB 755). Counsel submitted that the Stage 1 costs were "irrelevant to the determination of the difference in net present value but between the actual cash-flow once it was received and the hypothetical cash-flow which the plaintiff says ought to have been received at an earlier point in time." (AB 756). Reference was then made to the evidence of Mr Rands as to the nature of his exercise.
2. While the evidence to which counsel for the plaintiff referred dealt with the nature of the exercise undertaken by Mr Blackwood and Mr Rands, that evidence did not deal with the defendant's contention that by removing the initial cost of $2.8 million from the calculations, the later profit was exaggerated and distorted.

1. The plaintiff submitted that during cross-examination at trial the defendant did not challenge the evidence of Mr Rands in which he explained why the accumulated debt was irrelevant to Mr Rands' calculation of the value of the lost opportunity. In addition, the plaintiff's written submission on the appeal summarised additional evidence which might have been led from Mr Rands if his evidence had been challenged by cross-examining counsel:

"It is also plainly the case that if cross-examining counsel had challenged the critical evidence of Mr Rands, that his modelling permissibly ignored the cash outflows, that he could have given a more detailed explanation and, most likely, would have explained the range of different methodologies which might have been employed and why he chose only the NPV calculation as applied to the difference between the receipt of identical income streams, but at different points in time. The possibility that this evidence might have been given, requires that the application to amend be refused."

1. When these submissions are considered in the context of the course of the trial, it is apparent that they face two essential problems. First, the defence case that Mr Rands' methodology was flawed because it failed to take into account the use of profit to pay off accumulated debt was a live issue at trial. Secondly, the plaintiff chose to meet that criticism found in points 5, 9 and 10 of Mr Wallace's report during examination of Mr Rands.
2. In summary, the defendant's case in this regard was apparent from the moment the report of Mr Wallace was provided to counsel for the plaintiff at the commencement of the trial. Point 9 of the report referred to the accumulated debt of $2,844,134 and included the statement that it was "unreasonable to assume in Mr Rands' calculations that these initial costs are never repaid from 2012 to 2029". Point 9(e) continued:

"Given there are bank loans in both R V Pty Ltd and also the consolidated group as detailed in KPMG point 10, it is suggested that this loan plus the unfunded costs would be repaid in the 2012 and 2013 years' cash."

"(f) Therefore, in 2012 there is Net cashflow from the project and at 2013 is reduced by the remaining balance.

(g) The net present value variance is between $1.03M and $849K."

1. Point 10 of the report of Mr Wallace also referred to bank loans in the balance sheet of the plaintiff and stated:

"(c) It is concluded that the initial subdivision costs totalling $2,844,134 would have been repaid to the bank and therefore not available for reinvestment as per Mr Rands' report."

1. Through the report of Mr Wallace, counsel for the plaintiff was well aware of the fundamental proposition that Mr Rands was in error in excluding the accumulated debt, and repayment of that debt, from his assessment of the plaintiff's loss. The validity of the defendant's case in that regard was a different question. The fact that the defendant was mounting this case was sufficiently obvious to cause counsel for the plaintiff to lead evidence from both Mr Blackwood and Mr Rands in response to points 9 and 10 of Mr Wallace's report.
2. As to the plaintiff's submission that counsel for the defendant did not challenge the evidence of Mr Rands concerning the omission of the accumulated debt from his assessment, this contention overstates the position at trial. While counsel for the defendant did not specifically suggest to Mr Rands that he was in error, counsel put the proposition to Mr Rands that repayment of debt would have affected his projections. It was put to Mr Rands that he assumed the accumulated debt of $2.8 million was never repaid, and it was suggested that if the $2.8 million was repaid into his model, the result would have been a change in the "positive cash available in the model". He was then asked whether he would agree that by not adopting the $2.8 million as repaid, his model overstated the positive cash available by between $1.03 million and $849,000.
3. Later in the cross-examination Mr Rands was asked whether he would agree that it is unreasonable to assume that the initial costs were never repaid from 2012 to 2029. He was asked whether he would agree that in order to provide the most accurate assessment, it would have been reasonable to assume that the costs were repaid from 2012 to 2029. Further, Mr Rands was asked whether he would agree with Mr Wallace's contention that the initial costs of approximately $2.8 million would have been repaid to the bank as cash was made available and, therefore, would not have been available for re-investment. When Mr Rands answered that $1.5 million of the $2.8 million related to Stage 1 which was not relevant, the cross-examiner suggested it was relevant that Stage 1 and Stage 2 be considered together.
4. The plaintiff's submission that the cross-examiner accepted the answers of Mr Rands, to the point that the question of accumulated expenses was no longer an issue in the trial, must be rejected. Counsel for the defendant was cross-examining an expert witness and was not obliged to pester the witness or go through the motions of suggesting that every explanation given by the witness was inadequate. In the context of Mr Wallace's report having been brought to the attention of Mr Rands during examination, it was sufficient to raise the issue and ask whether the witness agreed with the proposition or otherwise. In this way the witness was given a reasonable opportunity to meet the contention of the cross-examiner.
5. Further, notwithstanding the answers of Mr Rands and the absence of contrary evidence from Mr Wallace, in closing submissions counsel for the defendant submitted that by removing the initial cost of $2.8 million, the future profit was distorted and, therefore, "we have a calculation which is fundamentally unreliable". Counsel then drew attention to the cross-examination of Mr Rands about this issue.
6. The closing submissions of counsel for the defendant drew a response in reply from counsel for the plaintiff. In substance counsel urged that the Stage 1 costs were irrelevant and referred to the evidence of Mr Rands concerning the nature of the exercise he undertook. Counsel for the plaintiff did not suggest that as counsel for the defendant had accepted the answers of Mr Rands in cross-examination, the issue of accumulated debt was no longer a live issue at the trial. Nor did counsel suggest that in view of the acceptance of the answers of Mr Rands, the defendant was precluded from raising the issue of accumulated debt. There was no suggestion that the trial judge should not consider that issue or, if he intended to do so, that it would be unfair to the plaintiff unless the plaintiff was permitted to re-open its case.
7. The issue as to the validity of Mr Rands' approach in assessing the value of the lost opportunity by reference to the use of net positive cash proceeds to invest, rather than to pay off accumulated developments costs, was a live issue at the conclusion of the evidence. The plaintiff had attempted to deal with this issue during examination of Mr Rands. It remained a live issue at the conclusion of the submissions. The fact that the evidence of Mr Wallace in this regard had been ruled inadmissible did not mean that the defendant was prevented from pursuing that line of defence or from challenging the reliability of the assessment by Mr Rands on this basis. The case that the assessment of the value of the lost opportunity resulted in an exaggerated figure because of the error in the approach of Mr Rands was put to the trial judge. In these circumstances, his Honour was obliged to deal with that case.
8. In his reasons, the trial judge found that the breaches of contract "caused the loss of a commercial opportunity that had a substantial value" [59]. Recognising that if the construction and dedication of the Connector Park roadway had proceeded in accordance with the contract there was a small chance that delays in the development of the subdivision might have occurred, his Honour found that there was a "very substantial prospect that the plaintiff would have acquired the benefit of subdivision approvals from the Council with little or no delay." Further, his Honour concluded that the plaintiff was, therefore, entitled to damages for breach of contract "in respect of the loss of the opportunity to develop its land for a residential subdivision earlier than was ultimately possible."
9. The trial judge noted that the development and sale of lots in Stage 1 was not delayed by the breach of contract, but that no lots were sold in any other stages until the 2011-2012 financial year when sales revenue exceeding $2.3 million was received from the sale of lots in stages other than Stage 1. His Honour accepted that positive cashflows commenced in that financial year and have continued ever since.
10. The trial judge accepted the evidence of Mr Blackwood and Mr Rands. With respect to Mr Wallace, in addition to canvassing four topics which had been ruled admissible in the report of Mr Wallace, his Honour noted that Mr Wallace accepted that the methodology used by Mr Rands was a common methodology [93] (AB 1942):

"An experienced chartered accountant named Matthew Wallace gave evidence for the defendant. He criticised some aspects of the calculations undertaken by the plaintiff's witnesses. However he agreed that discounted cashflow was a common methodology employed to calculate the present value of a future cashflow. He accepted that cash received at an earlier point in time is more valuable than cash received at a later point in time; that such calculations had to take account of risk associated with the cashflow stream; that that risk was reflected in the discount rate used to convert future cashflows into a present value; and that the use of such a methodology was widespread in relation to projects with a finite life, such as subdivisions. He accepted that one has to make a projection in undertaking a discounted cashflow analysis for a subdivision, and that that projection was a matter of professional judgment."

1. In accepting the evidence of Mr Rands as to his methodology and calculations, the trial judge accepted the calculations of Mr Rands based on the lost opportunity of investing the net cash profits 3½ years earlier than such profits became available. His Honour did not refer to the possibility of the use of those proceeds to pay off or reduce accumulated development costs. Perhaps this is not surprising given the rejection by Mr Rands of the suggestion that his model should have assumed the net cash profit would have been used for that purpose rather than investment. In this context it should not be overlooked that Mr Rands made the point that, depending upon the interest rate, there would be little or no difference to the assessment of the damages if it was assumed that debt was repaid rather than cash was invested.
2. In addition, in the absence of the opinion of Mr Wallace, there was no evidence to support the defendant's contention concerning the repayment of the debt. In oral submissions on appeal counsel for the defendant suggested that it was a matter of common sense that debt would be repaid rather than surplus cash being used to invest. That submission does not survive scrutiny. Much would depend on the particular circumstances of the plaintiff at the relevant time. Further, bearing in mind that no interest was being charged by the group for the borrowings of the plaintiff to finance the costs of development, it is more likely that the surplus cash would have been invested with a view to making a profit.
3. In short, although the trial judge was obliged to consider the defence case that the assessment by Mr Rands of the value of the lost opportunity was exaggerated or distorted because Mr Rands assumed that accumulated debt was not repaid, following the ruling that the opinion of Mr Wallace was inadmissible, there was no evidence to support the defence case. That case had been firmly rebutted by both Mr Blackwood and Mr Rands and there was no evidence at trial to challenge the views expressed by Mr Blackwood and Mr Rands. The absence of such evidence, available through Mr Wallace, was the result of the ruling of the trial judge and the failure of counsel for the defendant to seek to lead oral evidence from Mr Wallace, either to support the admissibility of his report or to substitute oral opinions for those ruled inadmissible through a lack of reasoning in the report to support them.
4. In summary, the issue of the validity of the methodology employed by Mr Rands in ignoring accumulated debt and assuming investment of net positive cash was a live issue at the trial and the plaintiff sought to meet that criticism through the examination of both Mr Blackwood and Mr Rands. In that context, the opinions of Mr Wallace were wrongly excluded, leaving the defendant without any evidence to support its case in this regard. This situation brings into focus the significance or otherwise of the evidence of Mr Wallace.

1. In support of the contention that the opinions of Mr Wallace were of no substance and misunderstood the methodology employed by Mr Rands, the plaintiff's written submissions advanced the following propositions:
   • It is apparent from the defendant's written submissions that it does not understand the methodology employed to calculate the value of the opportunity lost by the plaintiff as a consequence of the defendant's breach of the contract. In summary that methodology was [3]:

"(a) determine the anticipated hypothetical 'no breach' positive cash flows in each year by bringing forward the actual and forecast positive cash flows by 3.5 years;

(b) subtract the actual and forecast positive cash flows in each year from the hypothetical 'no breach' positive cash flows in each year to calculate the difference between the two positive cash flows in each year;

(c) discount the difference in those two positive cash flows in each year back to 2005 dollars;

(d) add the discounted differences in cash flow to arrive at the Net Present Value (NPV) of the loss caused by the 3.5 year delay in 2005 dollars;

(e) apply a range of interest rates to the calculated loss in 2005 dollars until September 2014 (the date of the report of Mr Rands) and, thereafter, until the date of judgment;

(f) the interest free loans from JAC Group Holdings Pty Ltd to the respondent, between 2004 and 2011, mean that the discount rate is 0% in those years and therefore there is no discounting of any of the negative cash flows; and

(g) accordingly, there is no difference between the sum of actual negative cash flows and the sum of a hypothetical 'no breach' negative cash flow with the consequence that the NPV caused by any difference in the timing of negative cash flows between 2004 and 2011 is zero, consistent with a discount rate of 0%."

• Mr Wallace was not retained to provide an assessment of loss, rather, he was instructed to "prepare a report responding to and commenting on the correctness or otherwise of Mr Rands' report, applying his assumptions" and also to "comment upon the correctness or otherwise of any assumptions within your field of expertise that [Mr Rands] applies" [6].
• Reliance by the defendant on points 9 and 10 of Mr Wallace's report is "apt to mislead" without reference to the oral evidence of Mr Wallace, the contrary evidence of Mr Blackwood and Mr Rands, and the conduct of counsel for the defendant in cross-examination [8] and [9].
• Mr Wallace accepted that the discounted cashflow model is a "common methodology" [10]:

"[Mr Wallace] agreed that the purpose of the modelling of Mr Rands is to reasonably calculate the economic loss caused to the respondent by reason of delayed performance in the construction of the road. Importantly, he accepted that the modelling of Mr Rands proceeds in accordance with 'correct principles', is correct in its treatment of 'like for like' and was undertaken in order to determine 'the economic consequence of having cash flows at an earlier point in time'." [Footnotes omitted.]

• Mr Blackwood gave evidence that the initial costs of development, which occurred before the breach of the contract by the defendant, were not relevant "to loss caused by the delayed receipt of future cash flow". "Thus, the initial expenditure of money is not relevant to the modelling" and the expenditure of funds between 2004 and 2011 is "not relevant to the modelling of future cash flow after the [defendant] breached its contract". Counsel for the defendant did not challenge this evidence in cross-examination. The evidence of Mr Rands explained why the earlier costs were not relevant when "modelling the difference between the positive cash flows starting when they did start and starting 3½ years earlier". In the evidence of Mr Rands, "what you are trying to do is understand the economic impact of bringing the possible cash flows forward" and in these circumstances "you disregard the earlier negative cash flows". When the evidence of Mr Rands is analysed:

"19 This analysis demonstrates that, firstly, Mr Wallace did not give evidence contrary to the factual finding that his Honour made at [105]; secondly, the methodology upon which his findings is based intentionally, and permissibly, excluded any consideration of expenditure between 2004 and 2011 as irrelevant; thirdly, expenditure in earlier years may have been relevant to other methodologies which may have calculated a different range of damages but Mr Wallace did not have the time to undertake that exercise; and fourthly, even if Blow CJ did not rule as inadmissible the critique and tentative conclusion of Mr Wallace, there is no proper basis for this Court to conclude that the appellant has discharged the onus which requires it to demonstrate that acceptance of this evidence could have affected the outcome of the trial.

1. The appellant makes no attempt to deal with the last point. If the evidence was wrongly excluded, it must satisfy this Court that, had the evidence been received, it 'could not [sic] have' affected the outcome. Mr Wallace did not undertake an alternative damages calculation. He did not say in his report that the early expenditure must be taken into account in reduction of the hypothetical future cash flows. He limited his opinion to a suggestion that the money lent by JAC Group Holdings Pty Ltd 'would be repaid', in 2012 and 2013. He identified no factual basis for that suggestion and there was no cross-examination of any of the respondent's witnesses to this effect. His suggestion is also contrary to what occurred in these years: a sum was repaid in 2012, but more money was borrowed in 2013. The 2012 repayment corresponded with an increase in the respondent's borrowing from the CBA and the earning of substantial profits from its total business activities, not limited to the Mt Pleasant subdivision." [Footnote omitted.]

• The defendant's submission compounds the defendant's error "when it wanders into the causation issue". Damage was established "by the fact of breach", namely, "the loss of the promised opportunity". "Once the respondent established damage caused by the [defendant's] admitted breach of contract, Blow CJ was entitled to assess damages" [28]-[30].

1. In response, the defendant drew attention to findings of the trial judge which it suggested were in error and would have been apparent to his Honour if the evidence of Mr Wallace had been admitted. The relevant paragraphs of his Honour's reasons are as follows:

"[86] He provided Mr Rands with data as to the actual net cashflows relating to the Mount Pleasant subdivision, excluding Stage 1, up to 30 June 2013, as well as his predictions as to such net cashflows from 1 July 2013 until the sale of the last lots in the subdivision. He predicted that the last lots would be sold in the 2028 financial year.

[87] Mr Blackwood's calculations as to the actual cashflows up to 30 June 2013 were based on figures extracted from the JAC group's financial records as to the following:

• Sales revenue for each stage of the Mount Pleasant subdivision for each financial year, excluding GST and rebates. (There was evidence that, whilst the plaintiff would never sell a lot for less than its asking price, it would sometimes agree to allow rebates to purchasers. For example it would sometimes, by agreement, reimburse purchasers in respect of expenses such as landscaping costs, the cost of gas appliances, stamp duty, or legal costs. Sometimes purchasers would be paid a rebate if they completed construction of a dwelling within an agreed time.)
• The selling expenses for each stage for each financial year.
• The value of work in progress for each stage at the start of each financial year.
• The amount of accumulated expenditure for each stage at the start of each financial year.
• The proportion of the cost of land attributed to the lots sold in each stage in each financial year.
• The proportion of development costs attributed to the lots sold in each stage in each financial year.
• Costs incurred but not attributed to particular stages as at the end of each financial year.
• The value of work in progress for the entire Mount Pleasant subdivision project at the end of each financial year."

1. The defendant's written submissions concerning the findings in those paragraphs, and as to the relevance of the evidence of Mr Wallace if it had been received, were as follows:

"The Honourable trial judge described the evidence of Mr Blackwood as being the provision to Mr Rands 'actual net cashflows' based upon material including, 'as to the actual cashflows up to 30 June 2013', 'the amount of accumulated expenditure for each stage at the start of each financial year', and the 'proportion of the cost of land' and the 'proportion of development costs' attributed to lots sold in each stage in each financial year.

The apparent finding by the Honourable trial judge at paragraph [87] - that the 'actual cashflows up to 30 June 2013' were based upon that list of inclusions- is wrong, if His Honour was intending to say that the respondent's cashflows allowed for (were 'based on') its past expenditure as, it is submitted, His Honour seems to have intended. The cashflows were not 'based on' all of the respondent's expenditure, but only on selective 'post-breach' expenditure. Those purported 'actual cashflows' were then embraced by His Honour in adopting Mr Rands' evidence from paragraph [90] and onwards of his reasons.

In the appellant's submission, this quarantining of 'pre-breach' expenditure is the issue which was identified by Mr Wallace, most conveniently at point 9 of his report (as was excluded by the Honourable trial judge). Mr Wallace's opinion highlights the error of Mr Rands as being Mr Rands saying that the respondent's loss is calculated upon 'net cash generated' only by reference to amounts which exclude 'pre-breach' expenditure. 'Net cash', in the appellant's submission, means available cash after allowing for all expenditure (not selective expenditure) - but this is not what Mr Rands deployed.

The appellant submits that had Mr Wallace's evidence been received, the Honourable trial judge would have identified the disconnect between the claimed 'net cash flow' and a truly positive cash flow including 'pre-breach' expenditure: an issue which in the appellant's submission is not identified or addressed in His Honour's reasons.

The admission of Mr Wallace's evidence would, it is submitted, have necessarily led the Honourable trial judge to consider whether or not the 'actual' cashflows excluded, and ought properly exclude, 'pre-breach' expenditure. Had that evidence been received, it was capable of influencing the Honourable trial judge's findings in particular at paragraphs [87] and [90], engaging s. 50(1)(a) of the Supreme Court Civil Procedure Act 1932 (Tas) in that the rejection of Mr Wallace's evidence:

(a) improperly limited the evidentiary materials by which it is not an unreasonable hypothesis to suppose the judgment of the judge might have been affected; and/or

(b) wrongly exposed the appellant to a hazard, that is appreciable and not illusory, of a verdict against it that otherwise might not have been found; and/or

(c) is not unreasonable to be regarded as capable of contributing to the result.

Further or alternatively, the appellant submits that the absence of proper explanation from Mr Rands, for Mr Rands incorporating only 'post-breach' expenditure to influence his calculations concerning the impact of delayed cashflows, is a matter which required findings by the Honourable trial judge regardless of His Honour otherwise adopting Mr Rands' evidence.

The notion of allowing only 'post-breach' expenditure in, and excluding 'pre-breach' expenditure from, cashflow calculations is something which finds no footing in the Honourable trial judge's reasons for decision, and is seemingly inconsistent with His Honour's description of Mr Blackwood's evidence at paragraph [87] as then inputted at paragraph [90].

It is central to the appellant's ground 6 (in both unamended and to sought-to-be-amended form) that only Mr Wallace's excluded evidence, as then buttressed by submissions in closing by the appellant's trial Counsel, properly queried the excision of the respondent's $2,844,134 in 'pre-breach' expenditure - with there being nothing of substance before the Court from Mr Rands, or falling from trial Counsel or the Honourable trial judge, to explain how that excision was immaterial and should not be the subject of explicit findings." [Footnotes omitted.]

1. For the purpose of the following discussion, the legal question as to the burden resting on the defendant with respect to the impact of the evidence of Mr Wallace had it been admitted is put aside.
2. The competing submissions well demonstrate the difficulty confronting this Court in assessing the potential impact of the wrongly excluded evidence of Mr Wallace. There is force in the plaintiff's submission that the evidence and previous authorities support the discounted cash-flow methodology as an appropriate methodology for assessing the present value of a future cashflow. In principle, Mr Wallace accepted the validity of this methodology.
3. On the other hand, Mr Wallace is an experienced expert in the relevant field who, in wrongly excluded evidence, expressed a view that the final step in the assessment should have assumed repayment of accumulated costs of development. Of course, in uncontested evidence, Mr Rands said that repayment of debt which was attracting interest was likely to result in a similar value of the lost opportunity because of his conservative approach with respect to interest earned on investment.
4. In addition, in the absence of direct questions to Mr Blackwood and Mr Cocker, this Court has competing submissions concerning the conclusion to be drawn from the evidence as to whether the plaintiff would have used cash received 3½ years earlier to invest or pay off debt (or a combination of both). The defendant advanced the following submission:

"[91] The proposition that the plaintiff would have invested positive cashflows rather than repay debt is inconsistent with:

(a) it claiming as a compensable loss the interest paid to CBA;

(b) evidence of Mr Blackwood that net cash flow in the 2009 financial year was used to repay JAC Group Holdings Pty Ltd's inter-company loan;

(c) the plaintiff's trial balances produced at trial recorded the loan from JAC Group Holdings Pty Ltd as a liability, which was reduced (the only explanation available on the evidence is that it was repaid) in every financial year between FY07 and FY12;

(d) the evidence of Mr Blackwood that some funds from the plaintiff's CBA loan were used to pay money back to JAC Group Holdings." [Footnotes omitted.]

1. In response, the plaintiff provided the following summary of the plaintiff's "immediate history of using its surplus funds for economic advantage:

"• Substantial and profitable development and investment since 2003;

• Net group assets of approximately $40M when the Connector Park Agreement was signed;
• The profitable development of a 108 lot subdivision at Shearwater;
• Net group assets of approximately $53M in June 2006;
• Investment in floating rate notes in 2003;
• The receipt of interest on money upon deposit;
• The payment of interest upon an advance from the Commonwealth Bank from 2010;
• The advancement and receipt of loan funds from other corporations within the group;
• The profitable conduct of its business over many years;
• The necessity to borrow from the Commonwealth Bank, caused by delayed performance by the appellant;
• That the hypothetical positive cash flow could have been used to repay bank debt, or for investment in other activities, including further subdivisions;
• The initial development cost from 2004 until 2011 was funded by JAC Group Holdings; and
• If the surplus cash flow had been received at an earlier point in time it could have been used to repay debt, and reduce the interest expense or could have been invested in other profitable activities." [Footnotes omitted.]

1. Specifically in response to the defendant's submissions cited in par [209] of these reasons, the plaintiff's written submissions address the question of repayment of loans and the profitability of the plaintiff's business activities:

"Mr Blackwood gave evidence of group loans by reference to exhibit P19. Interest was never charged to the respondent upon group advances. In some years, net cash inflow was, in part, used by the respondent to make capital repayments on group loans as set out below.

JAC Group Holdings Pty Ltd funded the initial subdivision costs until 201.

Whilst it is true that the loan advance from JAC Group Holdings Pty Ltd fluctuated between 2004 and 2013, the conclusion that the appellant seeks to draw at [91](c) overlooks the returns that the respondent achieved in consequence of its business activities and the retained cash that it used for investment. Exhibit P23 included the consolidated group accounts for the years 2005-2013. Relevantly the respondent generated revenue, made profit, invested money and held cash as follows:

These figures differ from those in exhibit P22 as it is confined to revenue and expenses of the respondent for the Mount Pleasant subdivision: it ignores the entirety of its business activities in the relevant years.

The appellant submits at [91](c) that the respondent reduced its debt to JAC Group Holdings Pty Ltd in every financial year between 2007 and 2012. But it ignores what happened in other years. The evidence in exhibits P18 and P19 discloses that:

The appellant also, at least on this point, overlooks the evidence that the respondent obtained a business line of credit from the Commonwealth Bank of Australia on 29 June 2010 with a facility limit of $2,010,000.00. The respondent utilised that facility, as demonstrated in exhibit P19 as follows:

Thus, whilst it is correct that the respondent reduced its debt to JAC Group Holdings Ltd between 2011 and 2012, the debt increased in 2013 and correspondingly, the respondent's debt to the Commonwealth Bank substantially increased from 2010 until 2013.

Moreover, the relevant question is not how much the respondent paid, by way of loan capital repayments, to other group companies but what return it made upon its business activities as a whole? The appellant errs in that it makes no reference to all of the profitable activities of the respondent that, concurrently, included the subdivision and sale of land at Shearwater. Exhibit P23 discloses the profit made in each year from the entirety of the respondent's business. In summary:

In each year it is self-evident that the net profit margins substantially exceed the very conservative rates of return adopted in the analysis of Mr Rands. If one focuses only upon the returns from the Mount Pleasant subdivision, as exhibit P22 demonstrates (and excluding stage 1), total sales revenue is $26.7M, total expenditure is $12.4M and therefore net cash flow is $14.2M. On these figures expenses as a percentage of gross revenue may be calculated as: 12.4÷26.2 x 100 = 47% and correspondingly, net cash flow as a percentage of sales is 53%.

What this analysis demonstrates is that although the respondent did not receive a positive cash flow from the Mount Pleasant subdivision until 2012, it did manage to make loan repayments to JAC Group Holdings Pty Ltd between 2007 and 2012 which was funded by a combination of the Commonwealth Bank loan facility from June 2010 and the profitable conduct of its other business activities. It is artificial and wrong for the appellant to speculate that if the respondent had received positive cash flows three and one half years earlier than it did (the 2008-2009 financial year) that it would have used all of that cash flow to repay internal debt in 2012 and 2013. As Mr Blackwood explained, there were other options: the repayment of the Commonwealth Bank Debt, investment in other activities or the development of new subdivisions. Mr Blackwood was not cross-examined as to any aspect of the terms of the loan from JAC Group Holdings Ltd, the obligation of the respondent to make capital repayments nor the reasons why the respondent made repayments, and drew down further funds, between 206 and 2013.

It is clear that the respondent conducted very profitable business activities, and received significant economic returns, between 2004 and 2013, despite its indebtedness to JAC Group Holdings Pty Ltd. It is plain that if it had received even greater positive cash flow, from the Mount Pleasant subdivision, that it was open to it to employ this cash flow to its economic advantage. On the damages assessment question, did not have to prove how it would have utilised that cash, on the balance of probabilities." [Footnotes omitted.]

1. Not surprisingly, the evidence demonstrates that the plaintiff operated a substantial business in its own right within the context of a larger group. There were a variety of potential uses for cash received 3½ years earlier, including investment, repayment of debt or funding of other subdivisions. There is no basis in the evidence to support the broad contention of Mr Wallace that had the cash been received 3½ years earlier it would have been used to repay accumulated costs of development.
2. Further, Mr Wallace's position requires repayment of the entire debt of approximately $2.8 million in two years. This position flies in the face of the proven conduct of the plaintiff with respect to the loan from the JAC Group. The suggestion that the full debt would have been repaid in two years is also undermined by the fact that the loan from the JAC Group, which funded the initial subdivision costs, was interest free. It would not have made commercial sense to repay the debt in full in such a short period.
3. In common with many cases involving lost opportunity, it is possible to identify a variety of uses that would have been open to the plaintiff with respect to cash received 3½ years earlier. This leads to more than one way of assessing the value of the lost opportunity. The methodology adopted by Mr Rands chose a relatively conservative route involving investment at various rates as the means of determining the value of cash-flow received 3½ years earlier. The evidence and authorities supported the finding of the trial judge that this was an accepted and appropriate methodology.
4. For these reasons, if the evidence of Mr Wallace had been admitted, it could not have affected the outcome.

1. Ground 6 as originally worded attacked the finding that a payment of $2.2 million was appropriate to compensate the plaintiff for its lost commercial opportunity on the basis that "the contrary evidence of Mr Wallace ought not to have been excluded by his Honour". To the extent that Mr Wallace would have given evidence that the assessment of value by Mr Rands was inflated because it did not allow for repayment of the accumulated cost of development, the evidence of Mr Wallace would have been "contrary" to the evidence of Mr Rands. However, the wrongly excluded evidence of Mr Wallace could not have affected the outcome. Further, having regard to all the evidence, including the report of Mr Wallace, the evidence of Mr Rands was convincing, both as to his methodology and the rejection of the opinions expressed in points 5, 9 and 10 of Mr Wallace's report.
2. For these reasons, while the evidence of Mr Wallace was wrongly excluded, ground 6 as originally worded is not made out.

1. In the first written outline of submissions filed in support of the application for leave to amend ground 6, the defendant contended that "a consideration of what impact Mr Wallace's report would have made upon the Honourable trial judge's conclusion exposes the more expansive grounds of appeal now sought to be raised by this amendment." Referring to pars [83]-[91] of the reasons of the trial judge, the written submission asserted that his Honour recited the evidence of Mr Wallace and Mr Rands "without expressing positive findings of fact as to the various elements which make up the conclusions expressed".
2. The written submissions continued with reference to item 5 of Mr Wallace's report:

"[14] In saying that admission of the evidence of Mr Wallace ought to have led the Honourable trial judge to an enquiry about the exclusion of the plaintiff's accumulated losses from its 'available cash', the [defendant] also says that the same enquiry exposes the absence of any factual finding about what 'available cash' the plaintiff had or, alternatively, exposes and error in any finding discernible about that point.

[15] These asserted failings are the matter intended to be encompassed by the proposed amendment to ground 6. The asserted failings are also raised by ground 7."

1. The application to amend ground 6 was first the subject of oral submissions on 18 April 2018. On that occasion counsel for the defendant similarly centred his submission on the omission of accumulated costs of development from the assessment by Mr Rands.
2. In subsequent written submissions the defendant identified "broader issues" to be dealt with under proposed ground 6. In summary, those issues were:
   • The failure of Mr Rands to take into account the $2.8 million initial construction costs "should have been addressed by the trial judge in assessing the plaintiff's damages for lost opportunity".
   • Even if the opinion of Mr Wallace was inadmissible, "the proper treatment of the initial costs in determining damages was a relevant fact in issue of the proceeding requiring consideration and determination".
   • "The proper question to be asked in determining what compensable loss was suffered by the plaintiff/respondent is: 'what foreseeable loss of a Hungerfords kind was in fact suffered by the [plaintiff] as a result of' the defendant appellant's failure to construct the Connector Park Roadway, within the time required by clause 5.6 of the Connector Park Agreement."
   • "Such an award requires both proof of loss and that the loss is not too remote. Before an assessment can be made, appropriate findings must be capable of being made on the balance of probabilities."
   • "The appellant submits that both on the issue of proof and on the issue of remoteness, in calculating an award upon the plaintiff respondent's cashflow, rather than on its profit, the Honourable trial judge fell into error."
3. It is readily apparent that the defendant is now seeking to embrace within proposed ground 6 wider issues than the failure of Mr Rands to have regard to the initial construction costs and repayment of debt. In particular, the issues of proof of loss and remoteness were not previously mentioned in connection with the amendment to ground 6. Further, the written submission contends that "presuming a use of monies is not the correct approach", the burden rested on the plaintiff to establish "how the money or assets would have been used if the payment away or detriment had not occurred."
4. To the extent that proposed ground 6 and the submissions are concerned with the failure of the trial judge to address the defendant's case that the value of the lost opportunity was exaggerated because accumulated costs had not been taken into account, as discussed previously this aspect was a live issue at the conclusion of the evidence and submissions, and his Honour ought to have dealt with that case. However, that failure is of no significance because, even if the report of Mr Wallace had been admitted, the defendant's case with respect to this issue could not have succeeded.
5. The issue of accumulated costs of development was encompassed by ground 6, and proposed ground 6 adds only the complaint that the trial judge erred in failing to make a specific finding concerning this matter. For the reasons discussed, proposed ground 6 in this respect could not succeed.
6. As mentioned, the wider aspect of proposed ground 6 which the defendant seeks to pursue on appeal concerns the approach of the trial judge to the assessment of the value of the lost opportunity. This aspect relates to the latest submission that the question to be asked was "what foreseeable loss of Hungerfords kind was in fact suffered by the plaintiff as a result of" the breach of contract. The defendant submitted that the burden rested on the plaintiff to establish "how the money or assets would have been used if the payment away or detriment had not occurred" and the plaintiff failed in this regard. Further, the defendant contended that the loss, as assessed by Mr Rands, was not reasonably foreseeable.
7. In summary, the defendant submitted that a "loss of profit" was reasonably foreseeable. However, "profit" for these purposes is the excess of proceeds over expenses. The defendant did not know the plaintiff was being financed through group resources and did not know that the plaintiff was free to ignore its debts thus enabling it to invest its cash-flow rather than just its profit. In these circumstances, contended the defendant, it cannot be said that "the defendant should have had in its contemplation that the plaintiff would in effect finance construction through borrowings, not repay those, and invest something more in its profit". The submission continued:

"Such a consequence is, it is submitted, outside the natural and ordinary consequence of the plaintiff being delayed in its subdivision endeavours. Such a purported loss was not, and is not, foreseeable so as to properly form part of the plaintiff's compensable loss.

No such finding was made by the Honourable trial judge, but in any event the question of whether the plaintiff's claimed damages is foreseeable is a question properly capable of answer by this Court."

1. In response, the plaintiff first submitted that the defendant's propositions in support of proposed ground 6 raise issues which were not the subject of any ground of appeal, and it would be unfair to allow the defendant to advance the argument with respect to proof of loss and remoteness:

"• 'This ground asserts that Blow CJ committed three errors, in four respects. The appellant makes no attempt in the framing of its submissions to identify which submission is relevant to one or more of the asserted errors. In large measure the appellant departs from the errors that it asserts in the drafting of this proposed ground and seeks to raise a number of issues that do not form any ground of appeal. Not only is this fundamentally unfair but it is contrary to the appellant's basal obligation to identify error in the notice of appeal, to comply with rule 657(4)(b) and to comply with the requirements of Practice Direction 3/2017. Given the very unsatisfactory procedural history in the conduct of this appeal by the appellant, it is submitted that no further indulgence should be afforded to it and that it must now be confined, if at all, to the amendments which it has identified in the drafting of ground 6, of which notice was given on 17 April 2018.'

• 'The respondent identifies the following material departures in the appellant's written submissions, from the terms of ground 6 as proposed to be amended.'
• 'The appellant frames a number of submissions broadly under the umbrella of Hungerfords -v- Walker by reference to:

(a) foreseeability of loss: [75], [81] and [94-100];

(c) a failure to prove consequential loss: [77], [79], [80] and [87-91]; and

(d) a Hadley -v- Baxendale submission that loss did not reasonably and naturally flow from the breach and/or was not a kind of loss within the knowledge of the appellant.'

• 'Each of these contentions open for consideration large issues upon points not taken at the trial and of which fair notice, which identifies the precise errors, has not been given in the notice of appeal as filed or as proposed to be amended. It is submitted that this Court should deny to the appellant the opportunity to raise any of these matters at this late stage: Aon Risk Services Australia Ltd -v- Australian National University (2009) 239 CLR 175.'

'If the appellant seeks further leave to amend this ground, then leave ought to be refused, not only by reference to the principles in Aon-v- ANU but also for the following specific reasons'."

1. The issues that the defendant now seeks to raise concerning proof of loss and remoteness were not raised before the trial judge. Similarly, they are not contemplated by proposed ground 6 and were not the subject of written or oral submissions initially advanced in support of the application to amend ground 6. No application was made to the Court to further amend ground 6 in order to accommodate this aspect of the defendant's complaint.
2. The defendant should not now be permitted to advance its case on appeal on this basis.
3. In addition, apart from that aspect of the damages related to damages in the nature of interest with respect to the period from September 2014 until judgment, for the reasons that follow, the defendant's submissions with respect to the principles governing the assessment of the value of the lost opportunity should be rejected.
4. In Sellars v Adelaide Petroleum NL (1994) 179 CLR 332, the High Court was concerned with a claim that by reason of the conduct of the appellant in contravention of s 52 of the Trade Practices Act 1974 (Cth), the respondent entered into an agreement on less favourable terms than an earlier agreement which had been repudiated because of the misconduct of the appellant. The claim for loss and damage was based on the lost benefit of the first agreement, and the trial judge awarded damages for the lost commercial opportunity. Both the Full Court of the Federal Court and the High Court upheld the judgment.
5. In the High Court, the plurality (Mason CJ, Dawson, Toohey and Gaudron JJ) discussed the principles governing the assessment of damages in contract and tort for a loss of chance (at 349 and 350):

"In the realm of contract law, the loss of a chance to win a prize in a competition resulting from breach of a contract to provide the chance is compensable, notwithstanding that, on the balance of probabilities, it is more likely than not that the plaintiff would not win the competition . As the contract contained a promise to provide the chance, the breach of the contract resulted in the loss of the chance and that loss was for relevant purposes an actual loss, in the sense in which Dixon and McTiernan JJ used that expression in Fink v Fink . And, where there has been an actual loss of some sort, the common law does not permit difficulties of estimating the loss in money to defeat an award of damages. The damages will then be ascertained by reference to the degree of probabilities, or possibilities, inherent in the plaintiff's succeeding had the plaintiff been given the chance which the contract promised.

This approach is not confined to contracts relating to games of chance, sporting contests or other competitions. Fink v Fink concerned a contract to provide an opportunity for a reconciliation, breach of which was held to entitle the wife to damages. And there can be no doubt that a contract to provide a commercial advantage or opportunity, if breached, enables the innocent party to bring an action for damages for the loss of that advantage or opportunity. So, in The Commonwealth v Amann Aviation Pty Ltd, Mason CJ and Dawson J, Brennan J and Deane J concluded that a lost commercial advantage or opportunity was a compensable loss, even though there was a less than 50 per cent likelihood that the commercial advantage would be realized. Damages for breach of contract were assessed by reference to the probabilities or possibilities of what would have happened.

Damages in tort have also been assessed by reference to the probabilities or possibilities of what will happen or what would have happened. That approach has been frequently adopted in the assessment of damages for personal injuries where a court has been called upon to assess future possibilities and past hypothetical situations. In Malec v J C Hutton Pty Ltd, this Court drew a distinction between, on the one hand, proof of historical facts - what has happened - and, on the other hand, proof of future possibilities and past hypothetical situations. The civil standard of proof applies to the first category but not to the second, particularly when it is necessary to determine future possibilities and past hypothetical situations for the purpose of assessing damages.

In Malec, Deane, Gaudron and McHugh JJ explained the way in which the matter is to be approached in these terms:

'If the law is to take account of future or hypothetical events in assessing damages, it can only do so in terms of the degree of probability of those events occurring. ... But unless the chance is so low as to be regarded as speculative - say less than 1 per cent - or so high as to be practically certain - say over 99 per cent - the court will take that chance into account in assessing the damages. Where proof is necessarily unattainable, it would be unfair to treat as certain a prediction which has a 51 per cent probability of occurring, but to ignore altogether a prediction which has a 49 per cent probability of occurring. Thus, the court assesses the degree of probability that an event would have occurred, or might occur, and adjusts its award of damages to reflect the degree of probability.'

The same approach has been adopted in England and Canada.

Neither in logic nor in the nature of things is there any reason for confining the approach taken in Malec concerning the proof of future possibilities and past hypothetical situations to the assessment of damages for personal injuries. The reasons which commended the adoption of that approach in assessments of that kind apply with equal force to the assessment of damages for loss of a commercial opportunity, as the judgments in Amann acknowledge." [Footnotes omitted.]

1. The plurality then discussed authorities which suggested that "in some hypothetical fact situations, causation and the incurring of some loss or damage must be established according to the civil standard of proof" (351). The judgment continued (at 355 and 356):

"Notwithstanding the observations of this Court in Norwest, we consider that acceptance of the principle enunciated in Malec requires that damages for deprivation of a commercial opportunity, whether the deprivation occurred by reason of breach of contract, tort or contravention of s 52(1), should be ascertained by reference to the court's assessment of the prospects of success of that opportunity had it been pursued. The principle recognized in Malec was based on a consideration of the peculiar difficulties associated with the proof and evaluation of future possibilities and past hypothetical fact situations, as contrasted with proof of historical facts. Once that is accepted, there is no secure foundation for confining the principle to cases of any particular kind.

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.

The conclusion which we have reached on this question finds support in other considerations. The approach results in fair compensation whereas the all or nothing outcome produced by the civil standard of proof would result in the vast majority of cases in over-compensation or under-compensation to an applicant who has been deprived of a commercial opportunity. Furthermore, it is an approach which conforms to the long-standing practice of taking into account contingencies in the assessment of damages.

On the findings made by the trial judge, the Pagini contract would have been entered into but for the contraventions of s 52(1). Although, on the probabilities, it would not have been completed, there was a significant chance that it would be completed. It follows that the Full Court of the Federal Court were not in error in dismissing the appeals."

1. Brennan J discussed the opposing submissions at (358 and 359):

"As French J found that it was improbable that the Pagini contract would have proceeded to completion, the defendants argue that his Honour must have found that it was improbable that the plaintiffs would have obtained financial benefits under the contract. In the defendants' submissions, the loss of those benefits is the only loss in respect of which the plaintiffs could have recovered under s 82(1) and, as they failed to prove on the balance of probabilities that that loss was the result of the contravening conduct, the plaintiffs' action must fail.

The ultimate objective of the plaintiffs was to acquire the financial benefits that would have flowed to them if the Pagini contract had been entered into and completed. Before that objective could be attained, there were several contingencies which had to be satisfied: the continuation of negotiations with Pagini, their satisfactory conclusion, the obtaining of an underwriter for the proposed share issue, the execution of the contract with Pagini, the satisfaction of the seven conditions precedent which were to be contained in the contract and performance of the contract by Pagini. If the relevant loss be identified as the financial benefits which it was the ultimate objective of the plaintiffs to acquire, the plaintiffs must fail for they failed to prove all the links in the chain of causation. That, indeed, is the defendants' submission. But if the loss of an opportunity to continue the negotiations with Pagini be identified as a loss entitling the plaintiffs to recover under s 82(1), they succeed for they were induced to lose that opportunity. The amount of that loss can be assessed by evaluating the prospects or possibilities of satisfying all the contingencies that stood between the continuing of the negotiations and the ultimate acquisition of the financial benefits that would have flowed from the completion of the Pagini contract. And that, indeed, is the plaintiffs' submission."

1. Brennan J then identified a critical distinction between damages for lost opportunity based on breach of a contract and cases based in tort (at 359):

"The cases where a plaintiff seeks damages only for breach of a contractual promise to afford the plaintiff an opportunity to acquire a benefit are in a different category from cases under s 82(1) and cases in tort where damage is the gist of the cause of action. In a case like Chaplin v Hicks , the relevant loss is identified by the contractual promise to afford the plaintiff an opportunity to acquire a benefit or to avoid a detriment. A breach of the promise to afford that opportunity necessarily establishes that the loss flows from the breach. In contract cases, a plaintiff may be entitled to nominal damages for loss of the opportunity promised even though the plaintiff fails to prove what, if any, value performance of the unfulfilled promise would have had. But in cases arising under s 82(1) of the Act, as in cases of tort where damage is the gist of the action, a lost opportunity may or may not constitute compensable loss or damage. In such cases, the existence and causation of a compensable loss cannot be proved by reference to an antecedent promise to afford an opportunity." [Footnotes omitted.]

1. Later in his judgment, Brennan J addressed the specific issue under consideration concerning the burden of proof in cases concerned with damages for lost opportunity (at 368):

"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.

Although the issue of a loss caused by the defendant's conduct must be established on the balance of probabilities, hypotheses and possibilities the fulfilment of which cannot be proved must be evaluated to determine the amount or value of the loss suffered. Proof on the balance of probabilities has no part to play in the evaluation of such hypotheses or possibilities: evaluation is a matter of informed estimation."

1. The guiding principles enunciated in Sellars v Adelaide petroleum NL were discussed by this Court in Doolan v Renkon Pty Ltd [2011] TASFC 4, 21 Tas R 156. The Court (Crawford CJ, Blow and Porter JJ) noted that a plaintiff must prove the existence of a loss of chance and opportunity. Further, where "realisation of an opportunity depends on a plaintiff's own decision to take it up, it must be proved on the balance of probabilities that it would have been taken up" at [175].
2. The trial judge found that, but for the breaches of contract by the defendant, "there was a very substantial prospect that the plaintiff would have acquired the benefit of subdivision approvals from the Council years earlier than it did" [59]. His Honour found that from the date of the contract, "the plaintiff was making repeated and reasonable efforts to proceed with the Mt Pleasant subdivision beyond Stage 1" [56]. Having considered the evidence concerning risks and obstacles with respect to proceeding with the subdivision development, his Honour concluded that there was "a very substantial prospect that the plaintiff would have acquired the benefit of subdivision approvals from the Council with little or no delay" [82]. Further, his Honour found that the breaches of contract "caused the loss of a commercial opportunity that had a substantial value" [59]. Those findings are not challenged.
3. The plaintiff discharged the burden of proving the loss of a valuable opportunity which it would have taken up. The fact of damage was proven. The extent of the damage in the form of the value of the lost opportunity was not to be assessed by reference to proof on the balance of probabilities. As Brennan J pointed out, determining the value of the loss suffered involves hypotheses and possibilities in respect of which "a valuation is a matter of informed estimation" (368).
4. The trial judge undertook a process of "informed estimation" as to the value of the loss of opportunity to develop the land earlier than was possible. In this process his Honour had the assistance of the evidence of Mr Rands, who undertook the process of converting future cash-flows into a present value using a common and accepted methodology known as "discounted cash-flow" or "net present value". It was a methodology that the trial judge noted had been accepted in a number of cases involving lost commercial opportunities [94]. There was no error in his Honour's approach to the assessment of the value of the lost opportunity.
5. As the plaintiff pointed out, the defendant was a subdivider of land and a property developer. It knew that the plaintiff intended to subdivide its land and relied upon the defendant building the Connector Park roadway in accordance with the contract in order to proceed with its subdivision. It would have been obvious to the defendant that by failing to construct the roadway on time, it was delaying the plaintiff's subdivision and causing the plaintiff to suffer financial loss. It would also have been obvious to the defendant that if the plaintiff was able to proceed with its subdivision it would have received income and made use of the income in the ordinary course of its business as a property developer.
6. For these reasons, leave to amend ground 6 is refused.

1. Mr Blackwood gave evidence that because of the delay caused by the defendant's breach of contract, a decision was made to use the subdivision project as security for a loan from the Commonwealth Bank. Interest was incurred on that loan and, in his calculations, Mr Rands added interest of $288,349 to the investment return that he assessed could have been achieved if the net positive cashflow had been achieved 3½ years earlier. His explanation was as follows: (AB 2006):

"8.2 Under the heading 'After Tax Interest Paid' is the amount I am instructed was paid by RV Pty Ltd to external financiers in the 2011, 2012, 2013 and 2014 financial years, net of associated tax deductions, and I am instructed that these amounts would not have been paid had the roadway been completed as contracted, and proceeds from allotments been received 3½ years earlier."

1. In the view of Mr Rands, the amount of $288,349 was an economic loss incurred as a consequence of the breach of contract. Hence he added this amount to the value of the lost opportunity to invest net positive cashflow.
2. Although not a specific ground of appeal, during submissions counsel for the defendant contended that this process involved a form of double dipping. Either the plaintiff could claim the loss of the opportunity to invest the net positive cashflow, or it could claim the interest paid on the Commonwealth Bank loan which would not have been taken out if the net positive cashflow had been received on time. But it could not claim both.
3. Mr Rands was asked about this issue in cross-examination (AB 436 and 437):

"Well, I put it to you this way: the assumption is that everything is the same and but for the breach there would have been no bank loan then if it was going to return to - if you were going - three and a half years in the model should go back to there is no bank loan, ie, the debt has been repaid, shouldn't it? Wouldn't that give a fairer picture of this as a stand-alone model?.....The parts of the spreadsheet that I have used start with the positive cash flows. So what happened earlier has not been taken into account for the reason I gave that we're not looking at the net present value of the total project.

There's a conflict - do you accept that there's a conflict between claiming lost earnings on surplus funds but wanting to be reimbursed the interest cost of borrowing the money?.....No.

Well, as an example, if there was a hypothetical $100 invested by RV you're suggesting they should be $6.20 in lost investment income?.....Yes.

In the final calculation you're claiming a further $6.20 for interest they had to pay the Commonwealth Bank?.....I've used the actual amounts paid to the Commonwealth Bank.

Whatever it is, but there's a double dipping there, isn't there?.....No. I don't believe there is."

1. Counsel for the plaintiff re-examined Mr Rands (AB 455):

"You were asked the question about whether you had been double-dipping by reference to the interest claim - you remember that?.....Yes.

-and you were cut off. Why don't you believe there's double-dipping?.....Because I'm instructed that, but for the breach, there would have been no borrowings, therefore no interest. So, so, clearly, the payment of interest is part of the economic loss."

1. As discussed earlier in these reasons, if the net positive cashflow had been received 3½ years earlier, there were a number of ways in which that cashflow could have been used, including investment, paying off debts or engaging in other subdivisions. Notwithstanding the existence of loans, it was an accepted and legitimate method of assessing the value of the lost opportunity to assess the investment return which would have been received had the funds been available 3½ years earlier. However, that methodology assumes the use of the entire funds for investment.
2. The methodology adopted by Mr Rands was based on the premise that if the net positive cashflow had been received 3½ years earlier, all of that positive cashflow would have been used for investment. By way of contrast, the claim for interest on the Commonwealth Bank loan is underpinned by the assumption, proved in evidence, that the loan would not have been taken out if the funds had been available earlier. In other words, if the funds had been available earlier, part of those funds would have been used to pay ongoing development expenses, thereby avoiding the necessity of taking out the loan from the Commonwealth Bank. It follows that the amount borrowed from the Commonwealth Bank would not have been available for investment because it would have been used to fund ongoing development expenses.
3. To the extent of the Commonwealth Bank loan, there is positive evidence as to how the net positive cashflow would have been used if it had been received earlier. In these circumstances, the plaintiff having proved a specific loss arising from the breach of contract, namely, the interest paid on the loan, the amount of interest is the quantum of damage proved by the plaintiff in respect of that loan.
4. Subject to the issues raised in ground 7, therefore, Mr Rands should have made allowance for the outflow of funds to meet ongoing development expenses. The amount of that outflow is reasonably assessed as the amount borrowed from the Commonwealth Bank. The trial judge was in error in not making allowance for the outflow of funds and in accepting the assessment by Mr Rands which failed to take into account the outflow of funds which would have occurred to meet ongoing expenses rather than borrowing from the Commonwealth Bank.

1. As appears later in these reasons, the cross-appeal with respect to the counterclaim is dismissed. Ground 7 is, therefore, to be resolved and is as follows:

"7 His Honour erred in calculating and awarding damages to the plaintiff for loss of use of moneys without allowing for his finding that the Defendant was entitled to $440,000 by way of counterclaim.

The sum used to calculate the damages awarded to the Plaintiff for loss of use of moneys should have been reduced by $440,000 in accordance with the evidence accepted by His Honour as the basis of the allowed counterclaim."

1. In the proceedings before the trial judge the defendant pursued a counterclaim against the plaintiff for the amount of $440,000. The substance of the counterclaim was summarised by the trial judge:

"[4] There is a counterclaim. The contract required the plaintiff, subject to certain terms and conditions, to pay the defendant $800,000 plus GST in three instalments. The first instalment, amounting to $400,000 plus GST, was paid in 2005. The plaintiff has not paid the second and third instalments, each amounting to $200,000 plus GST. It contends that, on a proper construction of the contract, it was not required to do so because its liability to pay was conditional upon the defendant performing its obligations in relation to the roadway in a timely manner. The defendant contends otherwise, and has counterclaimed $440,000, comprising $400,000 plus 10% GST."

1. The relevant part of the contract was cl 5.8 which is set out in [10] of these reasons. The trial judge found that although compliance occurred much later than contemplated by the contract, the conditions set out in cl 5.8 which the defendant was required to meet before becoming entitled to the three instalments totalling $800,000, plus GST, were met. The trial judge rejected a contention by the plaintiff that the failure of the defendant to comply with the conditions within the time specified in the contract meant that the defendant was not entitled to the outstanding payments. His Honour gave judgment for the defendant against the plaintiff in the amount of $440,000. That part of his Honour's decision is the subject of a cross-appeal which is discussed later in these reasons.
2. The substance of the defendant's contentions pursuant to ground 7 is found in the following written submissions:

"[44] The [defendant] submits that in calculating the plaintiff's damages, the honourable trial judge should have, but did not, make allowance for the inevitable outflow of monies which ought to have occurred by payment of the monies which his Honour held were payable under cl 5.8 of the Connector Park Agreement. The issue was raised by the Court in closing submissions [AB 728] but is not addressed in his Honour's reasons.

[45] The appellant submits that it necessarily follows from the success of its counterclaim that the plaintiff's cashflows and profits and losses were necessarily required to be reduced, in consequence of the payments under cl 5.8 falling due."

1. It is common ground that neither Mr Blackwood nor Mr Rands made allowance for the amounts that the trial judge found were payable upon satisfaction of the conditions in cl 5.8. In closing submissions before the trial judge, counsel for the plaintiff came very close to conceding that allowance should have been made for payment of $400,000 (AB 728):

"HIS HONOUR: What do you say to the proposition that in Mr Rands' calculations, or perhaps - no, sorry - Mr Blackwood's calculations, in the no breach scenario, should he have allowed for an outflow of funds of $400,000?

MR McELWAINE SC: The calculations being necessarily hypothetical, that is a prospect that your Honour may well take into account in assessing the various contingencies.

MR McELWAINE SC: If there had been no breach, then at some time after January 2005, there would have been imposed upon the plaintiff a lawful payment obligation, I'd have to accept that, yes, your Honour."

1. On appeal, referring to the defendant's submission that the trial judge had failed to take into account the amount of $400,000, counsel for the plaintiff said:

"He [the defendant's counsel] might be right about that depending on the cross-appeal so I can put that to one side but your Honour's will have seen from my submissions, once you apply an MPV calculation, it can't be $400,000, it has to be something else."

1. In written submissions the plaintiff submitted that the sum of $400,000 or $440,000 inclusive of GST, "does not bear a direct mathematical relationship with the range of losses calculated by Mr Rands". After referring to the explanation by Mr Rands that he quantified the loss by having regard to the return which would have been received on the investment of funds had the funds been received 3½ years earlier, the submission continued:

"73 As might be expected, Mr Rands made a number of assumptions (which were not effectively challenged in cross-examination) as to the types of investments, and the rates of return. In each of his calculations, set out at appendices 3-5, he adopted different earning rates and applied a discounted cash flow analysis. As is well understood by accountants, a discount rate is applied to determine the time value of money. A dollar held by a person today is worth more than a dollar held by that person in April 2019.

74 It is for this reason that additional expenditure by the respondent of either $200,000 or $400,000 in 2005, is not to be translated to a reduction in the quantum of damages awarded in either sum: by definition, it is a lesser sum. What it might be will ultimately need to be reassessed by Mr Rands, in the event that this ground succeeds.

75 There are several other points. Blow CJ increased the quantum of the counter claim by $40,000, to allow for GST. In proceeding in this way, his award was plainly excessive. If the correct analysis of His Honour's reasoning is that the appellant, as the supplier, is entitled to receive payment from the respondent, then the appellant is obliged to deliver a tax invoice which includes the GST amount. Upon payment of that amount, the appellant is obliged to account to the ATO for the GST component. The effect of His Honour's order is either that GST has been added twice, or if not the primary amount payable to the appellant has been impermissibly increased, before accounting for GST.

76 The alternative analysis is that no GST is payable upon the award made in favour of the appellant and accordingly His Honour erroneously included GST in the award.

77 Finally, it does not follow that a failure to make allowance for either sum demonstrates reviewable error. The respondent particularised, and Blow CJ correctly understood, the damages claim as one for lost opportunity. The respondent framed the claim within a range of $1,879,840 to $2,710,776, in accordance with the opinion of Mr Rands. Appendix 6 of his report sets out his summary of his various calculations, based on different assumptions about investment rates and discount rates.

78 As is well understood, an assessment of damages for lost opportunity is not required to be proved on the balance of probability. Blow CJ accepted the methodology of the respondent's delayed cash flow calculation and the opinion of Mr Rands. The appellant does not contend that he erred in either respect. He set out the range of figures at [91] and returned to them at [102]. His Honour found that the discount rate was arrived at by Mr Rands as 'the product of what I would call an intuitive synthesis' at [104]. He then found that each of the assumptions made by Mr Rands and Mr Blackwood 'were so conservative that the strict adoption of an earnings rate of 6.2% or 6.6% would not do justice to the plaintiff' at [105] and from this finding he undertook a familiar analysis by doing the best that he could to provide fair compensation to the respondent. He adopted an earnings rate nearer to 9% and a discount rate 'more or less halfway' between 22% and 30% to derive his figure of $2.2M calculated as at September 2014 which he found 'appropriate to compensate the plaintiff for its lost commercial opportunity'.

79 This analysis is an example of the familiar approach to the assessment of damages for a lost, and necessarily hypothetical, opportunity. It was for His Honour to evaluate the relative prospects and to do the best that he could based on the evidence. Accordingly, it does not follow from the fact that because additional expenses of either $200,000 or $400,000 were not taken into account in the evidence of Mr Rands, that the appellant must succeed on this point. The appellant fails to identify how it is said that a failure to take into account the payments would have resulted in a different award. Often it is said that an appellant faces the difficult task of demonstrating that the award is 'out of proportion' to the damage suffered. It is insufficient for the appellant to point to an expense which was not allowed for in the schedule prepared by Mr Blackwood as the award is not framed by reference to a precise mathematical calculation. His Honour reached a value judgment, assisted by the expert opinion evidence, as to an amount of appropriate compensation for the lost commercial opportunity. He was assisted by the evidence of Mr Rands, but ultimately adopted an intuitively reasoned figure which sits well within the possible upper and lower ranges arrived at by Mr Rands. The essential problem for the appellant is that the ground of appeal, and the submissions in support, fail to grapple with the obvious force of the fact that in a lost opportunity assessment, the quantum of damages is necessarily a broad brush assessment involving, a 'degree of speculation and guesswork'.

80 For these reasons, the failure to include an item of expense does not compel the conclusion that in calculating the damages amount his Honour misapprehended the facts or that the amount awarded is so inordinately high as to be a 'wholly erroneous estimate of the damage suffered'." [Footnotes omitted.]

1. In oral submission on the appeal, counsel for the plaintiff conceded there is "some merit" in ground 7, but emphasised that there is not "a direct mathematical relationship between $400,000 or $440,000 in the net present value analysis". Counsel then contended that if ground 7 was to succeed, "it really should be sent back to Mr Rands to adjust his report and then if there's any dispute about that we could have some cross-examination". Counsel emphasised that the adjustment was something less than $400,000 or $440,000.
2. As to the issue of $40,000 for GST, counsel submitted that if the judgment was an award of damages, no GST is payable. In that event it would be an error to allow the amount of $440,000 to stand. If, however, the judgment was not an award of damages, but a "payment for supply", counsel submitted the defendant was obliged to provide the plaintiff with a tax invoice for $440,000 which is then paid. In the submission of the plaintiff, the trial judge had "double counted for GST".
3. The entitlement of the defendant to payment upon satisfaction of specified conditions arises by reason of cl 5.8. Judgment in that regard was not an award of damages. It was a finding that the conditions in cl 5.8 had been satisfied and the defendant was, therefore, entitled to payment of the balance outstanding. The terms of cl 5.8 provided that the defendant was entitled to the specified amounts "plus GST". The judgment of the trial judge was correct in this regard.
4. As to whether allowance should have been made by Mr Rands for the liability to pay the outstanding amount of $440,000, it is common ground that if the defendant had not breached the contract and the plaintiff had received the net positive cashflow 3½ years earlier, from that cashflow the plaintiff would have been obliged to pay to the defendant the outstanding amount of $440,000. It follows that the cash available for investment would have been reduced by that amount.

1. For the reasons discussed, in his assessment of the net positive cashflow that would have been available for investment if it had been received 3½ years earlier, Mr Rands should have made the following allowances:
   • The amount borrowed from the Commonwealth Bank would have been used to pay ongoing development costs and would not have been available for investment.
   • The plaintiff would have been obliged to pay $440,000 to the defendant thereby reducing the amount available for investment by $440,000.
2. The trial judge accepted the evidence of Mr Rands and did not make allowances for these amounts. In these circumstances, should this Court endeavour to undertake the re-assessment?
3. In respect of the payment of $440,000, the plaintiff submitted that it is not a simple mathematical calculation based on deducting the amount of $440,000 from the figures used by Mr Rands. Presumably the plaintiff would advance the same proposition in respect of the amount of the Commonwealth Bank loan. Given the methodology adopted by Mr Rands, I agree with the plaintiff's submission that the matter should be remitted to the trial judge for re-assessment and, if necessary, further evidence from Mr Rands.

1. As discussed, the trial judge upheld the defendant's counterclaim for $440,000. His Honour found that the defendant was entitled to be paid pursuant to cl 5.8 of the Connector Park Agreement for completing construction of the Connector Park Roadway and doing all things necessary to ensure the road was taken over as a road maintainable by council in accordance with cl 5.6 of the agreement.
2. The trial judge gave his reasons for accepting the counterclaim:

[8] It is convenient to deal with the counterclaim before addressing the plaintiff's claim. The outcome of the counterclaim depends upon the interpretation of the introductory words of cl 5.8, namely, 'In consideration for Connector Park completing its obligations as set out in this clause 5 ...'.

[9] The defendant contends that, because it undertook all the work required by cl 5.6, it completed 'its obligations as set out in this clause 5', and is therefore entitled to the payment of the two sums totalling $400,000 plus GST. The plaintiff contends that, because the required construction work was not completed by 6 January 2005 as required by cl 5.6, and because the defendant did not do all things necessary to ensure that the roadway was taken over as a road maintainable by the council by 6 July 2005 as required by that clause, it cannot be said that the defendant completed 'its obligations as set out in this clause 5'. It contends that the defendant completed its obligations after the deadlines provided for in cl 5.6, and thus not 'as set out in' cl 5.

[10] The proper approach to the interpretation of the critical words in cl 5.8 is as stated by Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ in Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52, 219 CLR 165 at [40], where their Honours said:

'The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction.'

[11] The purposes and objects of the parties' transaction are clear. The defendant agreed (a) to terminate its contract for the purchase of about 3.17 hectares of land near Ernest Street, enabling the plaintiff to acquire that land from Mr Holyman's executors; and (b) to construct the Connector Park roadway and arrange for it to be taken over as a public road maintainable by the council, so that there would be much better road access to the land that the plaintiff hoped to subdivide. The plaintiff proposed to make money from a large residential subdivision. The acquisition of the 3.17 hectares and the construction of the roadway would help it to achieve that objective. In return, the plaintiff promised to pay the defendant a total of $600,000 plus GST, or $800,000 plus GST if the rezoning of the rural land went through, as well as allowing the defendant a temporary right of way between its Connector Park land and Ernest Street. The amounts that the plaintiff promised to pay may well have been determined by reference not only to the value of the 3.17 hectares and the cost of constructing the roadway, but also by reference to the commercial advantages accruing to the plaintiff as a subdivision developer as a result of the availability of road access to the subdivision site from both Ernest Street and the Kings Meadows Connector. It is significant that the defendant had been proposing to construct the Connector Park roadway in accordance with its subdivision permit of 29 December 1998. The construction of that roadway resulted in advantages to both parties as subdividers of their respective lands.

[12] The plaintiff's contention as to cl 5.8 is that a reasonable person would have understood both parties to have intended that the defendant would become entitled to either $200,000 or $400,000, plus GST, if it fulfilled the various obligations imposed by cl 5.8 within the time limits specified in that clause, but that it would be entitled to none of that money if any such obligation was not performed on time, even though the defendant would have a continuing duty to fulfil every such obligation. That is to say, if the defendant completed the construction of the roadway, but did so later than the contract required, then its right to receive payment in respect of the work and materials involved, and in respect of the commercial advantage thereby conferred on the plaintiff, would be lost. The consequences for the defendant would be so extreme in such a situation that I do not think that any reasonable person would regard the parties as having intended cl 5.8 to have the meaning contended for by the plaintiff.

[13] An analysis of the text of the clause gives some support to the interpretation contended for by the defendant. There is no express reference to time limits in the introductory words of cl 5.8. If the parties had intended monies to be payable under that clause only if contractual obligations were fulfilled on time, they could very easily have used words that made such an intention clear. They could have referred to the defendant 'completing its obligations as and when required by this clause 5'. Further the use of the word 'consideration' suggests an intention that the defendant was to be paid for doing what it promised to do, rather than getting paid a bonus, or two bonuses, if its contractual obligations were fulfilled within a certain time.

[14] In my view a reasonable person would not have understood the introductory words of cl 5.8 as meaning that the defendant was to become entitled to payments under that clause only if it completed its relevant contractual obligations in accordance with such time limits as were specified in cl 5.

[15] The Connector Park roadway was taken over by the council. The area zoned rural was rezoned as residential under the Launceston Interim Planning Scheme 2012. Although cl 5.8(b) expressly provided for a payment of $200,000 plus GST only in respect of rezoning 'under Part 3 of the Launceston Planning Scheme 1996', the plaintiff accepts that the superseding of that planning scheme by the 2012 interim scheme makes no difference to its obligations. Once the roadway was taken over by the council, the plaintiff became liable to pay the defendant $200,000 plus GST pursuant to cl 5.8(a). Once the rezoning took effect, the plaintiff became liable to pay the defendant a further $200,000 plus GST pursuant to cl 5.8(b). Those amounts have not been paid.

[16] The defendant is therefore entitled to judgment for $440,000 on the counterclaim. It made no claim for interest."

1. The plaintiff advanced five grounds in the amended cross-appeal:

"1 At [9-14], he [the trial judge] misconstrued the express provisions of the agreement in writing between the Appellant and the Respondent in that, properly construed, the consideration for the making of payments by the Respondent to the Appellant pursuant to clause 5.8 was conditionally expressed upon satisfaction by the Appellant of each, and every, obligation imposed upon it to construct and dedicate the Connector Park road, as a highway;

1. At [13-14], he [the trial judge] misconstrued the agreement between the Appellant and the Respondent in that, upon a proper construction, clause 5.8 operated as a condition precedent to the making of any payment obligation by the Respondent to the Appellant, and which required strict performance by the Appellant before it became entitled to receive either, or each, of the payments provided for at clause 5.8;
2. At [14], he [the trial judge] impermissibly interpreted the contract by reference to the understanding of a reasonable person, when such interpretation is contrary to the express text of the agreement;
3. At [13-15], he [the trial judge] failed to interpret the agreement between the Appellant and the Respondent by reference to its entire text and purpose and, in so doing, failed to understand that the payments, alone or in combination, provided for at clause 5.8 of the agreement operated as an incentive for the Appellant to complete its contractual obligations within the time specified in the agreement.
4. At [15-16] he [the trial judge] increased the quantum of the counterclaim by $40,000 to allow for GST which was erroneous because:

(i) if the appellant is the supplier pursuant to the Connector Park agreement, then it is entitled as a matter of law to charge and receive payment from the respondent for the GST component of the supply, upon delivery of a tax invoice which includes the GST amount. On this basis, the effect of His Honour's reasoning is to calculate the GST twice; or

(ii) in the alternative analysis, if no GST is payable upon the counterclaim as an award of damages, then His Honour ought not to have made allowance for it."

1. The main issue for determination on the cross-appeal is whether the amounts due under cl 5.8 remained payable, notwithstanding that the defendant delayed in the construction of the road. There is also an issue concerning whether the GST components of the amounts in cl 5.8 should have been payable.
2. The plaintiff submitted that the amounts payable under cl 5.8 were an incentive, or in the nature of a bonus, to the defendant to complete the road on time. It submits that it was a precondition for the payment of the amounts under cl 5.8 that the road be completed on time.
3. During the submissions of counsel for the plaintiff, it was put to him that on his construction of the agreement, no payment would be payable under cl 5.8 if the road was completed one day late. Counsel replied that cl 6.11 of the agreement provided that time was not of the essence unless a notice was given by a party to another party making time of the essence.
4. On 12 December 2005, Mr Cocker of the plaintiff wrote to Mr Pintarich of the defendant making time of the essence for completion of the roadway by 24 April 2006. Counsel for the plaintiff contended that to complete its obligations under cl 5, the defendant would have had to complete the roadway by that new deadline. On that construction of the effect of the agreement, no payment would be made under cl 5.8 if the roadway was completed on 25 April 2006.
5. Nothing in cl 5.8 ties the concept of completion of obligations to any particular timeframe. The obligations were to complete the construction of the roadway in accordance with council specifications and do all things necessary to ensure the roadway was taken over as a road maintainable by council.
6. The defendant ultimately completed the roadway and did all things necessary for it to be taken over as a road maintainable by council. It also provided the tax invoices referred to in cl 5.8. The trial judge rightly characterised a situation where the defendant completed all the work under cl 5.6, but was not entitled to be paid for it, as "extreme". Counsel for the plaintiff correctly observed that such a result discloses a capricious, unjust and unreasonable interpretation which the Court should avoid. As Gibbs J (as he then was) said in Lewis Construction (Engineering Pty Ltd v Southern Electric Authority of Queensland) (1976) 11 ALR 305 at 315:

"... if the language is open to two constructions, that will be preferred which will avoid consequences which appear to be capricious, unreasonable, inconvenient or unjust ...".

1. Counsel for the plaintiff submitted that cl 5.8 is unambiguous and is dependent on completion by the defendant of all its obligations. However, as the trial judge pointed out, cl 5.8 does not itself make time an issue. It does not, but could have, referred to completion of obligations as and when required by cl 5. The fact that time was not of the essence supports the trial judge's construction of cl 5 because completion of an obligation cannot include a duty to perform a task within a time which was not mandatory. To say that it became mandatory later is unhelpful when attempting to discern the intention of the parties in drafting cl 5.8
2. For the above reasons, and the reasons expressed by the trial judge, this aspect of the amended cross-appeal fails.
3. The plaintiff claims that the trial judge wrongly increased the quantum of the counterclaim by $40,000 to allow for GST. Its argument is succinctly set out at ground 5 of the amended cross-appeal which is quoted at par [16] of these reasons.
4. The plaintiff's submission is inconsistent with the text of cl 5.8 which refers twice to the payment of $200,000 plus GST.
5. This issue appears not to have been developed at trial and is not considered in the trial judge's reasons on the counterclaim. However, cl 5.8 of the agreement, by including a reference to GST, appears to acknowledge that the construction of the road is a supply for the purpose of A New Tax System (Goods and Services Tax) Act 1999 (Cth), under ss 9 and 10 thereof. The amount of $40,000 would, in any event, be a sum which the defendant would have been entitled to claim from the plaintiff in respect of its supply of the road.
6. Clause 6.3 of the agreement refers to GST, and provides:

Any consideration provided for in this document for a Supply is expressed to be exclusive of GST, and in the event of GST being payable on a Supply made pursuant to this document:

(a) the Recipient of the Supply will reimburse to the Supplier the amount payable by the Supplier as GST on the Supply; and

(b) the Supplier will give to the Recipient a Tax Invoice for the Supply in a form which complies with the GST Act."

1. The subclause contemplates GST being payable "on a Supply made pursuant to this document", and cl 5.8 so provides. The plaintiff cannot avoid its obligations to pay GST to the defendant on the amounts referred to in cl 5.8.
2. For these reasons the cross-appeal is dismissed.

1. Leave to amend ground 6 is refused.
2. The order of the trial judge awarding damages to the plaintiff in the amount of $2,520,000 is set aside.
3. The matter of assessment of damages is remitted for further hearing and determination by the trial judge in accordance with these reasons and, in particular, in accordance with pars [243]-[266].
4. The cross-appeal is dismissed.