95 Although it is not necessary to do so, I will nevertheless consider (on the hypothesis that Lyon's conduct was in breach of the JVA) whether Crown has established any damage.
Did Crown suffer any damage?
96 In submissions Crown restricted its damages claim to the economic value of the opportunity it says it lost by Lyon not having considered the proposal on its commercial merits.
97 Crown put that it lost the value of the prospect that had Lyon considered the proposal on its commercial merits, Lyon would have acceded to it by agreeing to the appointment of one additional open agent, Mr Cho.
98 Crown put that had an additional open agent been appointed, the JVA would have achieved an accelerated rate of sales of units in the Development.
99 Crown sought to quantify what the value to it would have been if such an accelerated rate of sales had been achieved.
100 Crown's initial position was that it was entitled to the full value of what it contends would have been the benefit of an accelerated rate of sales. This was put on the basis that it would prove that each of the steps leading to the alleged loss would have, on the balance of probabilities, occurred. This position was correctly abandoned as not being sustainable on the evidence.
101 Crown put that the ultimate value of the lost opportunity should be derived by:
a assessing the likelihood that Lyon would have agreed to the appointment of an additional open agent;
b then assessing the likelihood that, and the extent to which such an agent would have, achieved a better rate of sales; and
c finally, applying the ultimate likelihood so derived to what it says is the economic value of the accelerated rate of sales.
102 The end point (or on one view the starting point) is the contention that a higher rate of sales would have been achieved by the appointment of an additional agent. Crown sought to establish this by expert evidence of two witnesses.
103 Firstly, Crown relied on the evidence of Mr Stuart Cox, of CB Richard Ellis Pty Ltd, a valuer, who prepared a "property data report on residential developments comparable" to the Development. Mr Cox identified ten other developments within close proximity to railway facilities providing direct transport to the Sydney CBD, in which units were sold around the same period as the Development.
104 In respect of the Development and each of the other developments, Mr Cox took the number of units sold and divided it by the number of months over which the units were sold to derive a monthly sales rate.
105 Thirty-four units in the Development were sold over 22 months yielding a sales rate of 1.55 units per month.
106 The other 10 developments yielded monthly sales rates ranging from 0.82 to 4.17.
107 Mr Cox then took the sales rates of the Development and the other 10 developments and averaged them, which resulted in a monthly sales rate of 2.13.
108 Secondly, Crown relied on the evidence of Mr David Viarella, a valuer. Mr Viarella gave evidence of what in his opinion were the project marketing and responsibilities that would have been carried out by a reasonably competent agent from 31 March 2007 onwards in order to properly market the Development.
109 He was then asked to opine, on the assumption that the Development was properly marketed in the manner identified by him, on the number of sales which ought to have been achieved from 31 March 2007 to 10 March 2009.
110 The starting point for Mr Viarella's opinion was Mr Cox's data report, the correctness of which he assumed.
111 Mr Viarella opined that there are generally two main reasons why projects should sell within expected time frames and that both were the responsibility of the project market selling agents. The first is that the agent is totally "on top" of his project marketing responsibilities and the second is that the price point of the units being sold is correct and meets "the market's price acceptance."
112 Relying on Mr Cox's evidence (which he referred to as the "CBRE report") Mr Viarella observed that from March 2007 to November 2007, 19 units in the Development were sold producing a monthly rate of 2.11 and that from December 2007 to December 2008 15 units were sold producing a monthly rate of 1.15.
113 Mr Viarella's view was that the rate of sales having practically halved during the two periods, "very serious alarm bells should have been ringing for the project marketing selling agents early into this 2008 period."
114 He went on to opine that the project marketing agents were not on top of their responsibilities given the fact that this poor rate of sales was allowed to continue for so long without a price point correction to increase sales rates.
115 Mr Viarella opined, that the overall sales of the Development had not performed well when compared with the majority of other the developments identified by Mr Cox.
116 He expressed the opinion that the Development needed to obtain more sales during the period March 2007 to December 2008. He opined that that
"Whilst a number of projects showed rates of sale greater than 2 units per month, it is a fair expectation, in my opinion, to determine that the agent for the subject Genesis development would be selling at least an average of 2 units per month. It is my opinion that rate would have been achieved if the agent was on top of his marketing responsibilities, constantly monitoring the market, monitoring the subject and reviewing price points to maintain this necessary momentum."
117 He concluded as follows:
"Based on the advice from the CBRE report identifying that 34 units sold over the 22 month period from March 2007 to December 2008, it is my opinion that 44 units should have sold (2 unit average/month x 22 months), this shows a loss in sales of 10 units during this period."
118 Thirdly, Crown relied on the evidence of a forensic accountant Mr Smith who calculated the difference between the joint venture's financial position on the basis of the sales of units in the Development that took place and the financial position in which it would have been had the accelerated rate of sales of two units per month been achieved. From this he derived the position Crown would have been in had the accelerated rate of sales been achieved.
119 Mr Smith carried out calculations based on two scenarios. Scenario 1 was that the units sold in the Development would have achieved the same prices but at the accelerated rate of two apartments per month and that the remaining unsold apartments would be sold either at 10% or 15% below their list price.
120 In Scenario 2 Mr Smith assumed that the units sold would have achieved sale prices at the average discount to the joint venturers' price list which units sold at an earlier time had been sold (that is, on the footing that the higher rate of sales had been achieved) and again on the basis that the remaining unsold apartments would be sold either at 10% or 15% below their list price.
121 In both scenarios, holding costs of $128,778 were avoided and interest charges depending on the prices assumed for the units, were avoided. In Scenario 2 the adoption of historical prices meant that some units would in fact have sold at higher prices, producing what would have been an additional loss of investment income of $119,734.
122 Finally, the amount of the avoided interest and holding costs were the subject of evidence from the Crown's Chief Financial Officer Mr Chris Fung, which was not challenged.
123 On Scenario 1 Crown's 50% share of the loss was calculated to be $425,633 if the remaining unsold apartments sell at 10% below their list price and $413,670 if they sell at 15% below their list price. On Scenario 2 Crown's share of the loss is $487,129 if the remaining unsold apartments sell at 10% below their list price and $475,166 if they sell at 15% below their list price.
124 For the reasons which follow, I have concluded that Crown has not established:
a on the probabilities that any commercially valuable opportunity was lost as a consequence of Lyon's alleged breach; or
b if an opportunity was lost, that it had some value.
125 For Crown to have lost any commercial opportunity it would need to have established, as a matter of causation, that Lyon would have agreed to the appointment of an additional agent had it disregarded its view of the operation of cl 18, and considered the proposal having regard to other commercial considerations.
126 It was put that it was most likely that Lyon would so have agreed because to have done so involved "no downside".
127 A threshold difficulty inherent in Crown's position is the premise (which I consider to be incorrect) that Lyon was not entitled as part of its consideration of the proposal to have regard, as a commercial matter, to its view of how cl 18 was intended to operate and how the agency arrangements were to work, even if its view was legally incorrect. Its view of those matters were as much commercial considerations as were Crown's views about the benefits of appointing an additional agent.
128 Leaving that aside, in my view Crown failed to establish that it was a realistic possibility, let alone more probable than not, that Lyon would have agreed to allow another agent to operate independently and not on a conjunction basis even if Lyon were to have disregarded its views of how cl 18 operated.
129 It was not put (nor could it properly have been) that Lyon was contractually obliged to agree to the proposal. Lyon took a different commercial view of BLL's performance (or asserted lack of performance) to that taken by Crown.
130 Lyon's related company BLL had the commercial benefit of practical exclusivity.
131 I do not consider that the evidence established any realistic prospect that Lyon would have agreed to dilute BLL's position.
132 Properly viewed, the opportunity which Crown says it lost was in reality no more than the opportunity that Lyon would not breach the JVA. It was not the loss of a commercial opportunity in the sense in which that term is used in the authorities.
133 Seeking to characterise it as the loss of a commercial opportunity does not overcome the threshold difficulty that Crown must establish loss as a matter of causation. It has failed to establish any loss as a fact.