Gadens Lawyers Sydney Pty Limited v Symond

Pty Ltd [2013] NSWSC 955 Wardley Australia Ltd v Western Australia [1992] HCA 55; 175 CLR 51 Water Board v Moustakas [1988] HCA 12; 180 CLR 491 Category: Principal judgment Parties: Gadens Lawyers Sydney Pty Limited (Appellant) John Joseph Symond (Respondent) Representation: Counsel: J de Wijn QC / D McInerney (Appellant) AJ Payne SC / JO Hmelnitsky SC / MS Symon (Respondent)

Solicitors: DLA Piper Australia (Appellant) Baker & McKenzie (Respondent) File Number(s): 2013/355150 Decision under appeal Court or tribunal: Supreme Court Citation: Symond v Gadens Lawyers Sydney Pty Ltd [2013] NSWSC 955 (19 March 2013) Symond v Gadens Lawyers Sydney Pty Ltd (No 2) [2013] NSWSC 1578 (31 October 2013) Date of Decision: 31 October 2013 Before: Beech-Jones J File Number(s): 2009/297612

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.] HEADNOTE [This head is not to be read as part of the judgment] In 2003, the respondent (who was the founder of Aussie Home Loans) sought legal advice from a tax partner of the appellant as to the tax consequences of a revised ownership structure of the business which would involve its corporatisation. One aspect of that advice concerned a tax effective means by which the respondent could continue to borrow funds from the business to construct his home at Point Piper. The appellant provided the respondent with advice and a restructure was effected in 2003 and 2004. Part of the restructure included a mechanism whereby the respondent could withdraw funds from the Aussie Home Loans Group by redeeming preference shares issued to him by the new corporate vehicle, AHL Holdings Pty Ltd (Holdings), that owned the entities making up the Group. During the financial years ending 30 June 2004, 2005 and 2006, the respondent drew down around $57 million. The manner in which the respondent had extracted funds out of the business attracted the ATO's attention and in 2007 it commenced an audit of the respondent's affairs. This led to a deed of settlement with the Commissioner of Taxation in December 2007 in which the respondent agreed to pay the sum of $7,018,864 (comprising tax, penalties and interest). As part of the settlement, Holdings agreed to deduct the amount of $5,014,286 from its franking account, which it maintained in accordance with s 200.15 of the Income Tax Assessment Act 1997 (Cth). In 2009 the respondent instituted proceedings against the appellant seeking damages due to the appellant's negligence, breach of contract and contravention of provisions of the Trade Practices Act 1974 (Cth). The appellant argued that the respondent had suffered no loss because the benefit of the restructure as implemented exceeded the amount paid by the respondent under the settlement and related expenses. The "benefit" of the restructure was said to arise because profits in the 2005 and 2006 years were not distributed to the respondent in those years and accordingly tax was not paid by the respondent in those years on such profits; whereas if the respondent had pursued the alternative structure that should have been recommended by the appellant, profits in the 2005 and 2006 years would have been distributed to the respondent in those years and tax paid thereon. The primary judge rejected the "no loss" argument and found in favour of the respondent and awarded $4,979,800 in damages. The appellant appealed against the primary judge's assessment of damages. The 3 issues on appeal were: (1) Did the primary judge err in concluding that the respondent had suffered loss when the comparing the respondent's financial position in the events that transpired under the restructure with the financial position the respondent would have been in if he had received and followed competent advice to pursue an alternative structure? (2) Did the primary judge err in concluding that the respondent had suffered a loss as a consequence of the forfeiture of the franking credits in Holdings' franking account? (3) Did the primary judge err in determining the amount of pre-judgment interest to be included in the respondent's damages? Held, per the Court allowing the appeal in part In relation to (1) The primary judge did not err in undertaking the comparison of the respondent's financial position in terms of the actual tax, penalties, interest and expenses imposed over the 2004 to 2011 years with the hypothetical cost to the respondent if he had pursued the alternative structure that should have been recommended by the appellant. The benefit of the restructure was the value to the respondent of the delay in payment of tax on dividends distributed by Holdings under the restructure. That benefit was a timing difference, not a permanent tax saving: (at [77] - [78]). Applied: Commonwealth of Australia v Amann Aviation Pty Ltd [1991] HCA 54; 174 CLR 64; Wardley Australia Ltd v Western Australia [1992] HCA 55; 175 CLR 514; Murphy v Overton Investments Pty Ltd [2004] HCA 3; 216 CLR 388. Further, it was not open to the appellant to raise a new point on appeal that the comparison undertaken by the primary judge in respect of the 2004 to 2011 years was flawed because, it was said, his Honour did not compare "like" business with "like": (at [80]-[85]). Applied: Water Board v Moustakas [1988] HCA 12; 180 CLR 491; Suttor v Gundowda Pty Ltd [1950] HCA 35; 81 CLR 418; Multicon Engineering Pty Ltd v Federal Airports Corporation (1997) 47 NSWLR 631; Metwally v University of Wollongong [1985] HCA 28; 60 ALR 68; Mamo v Surace [2014] NSWCA 58; 86 NSWLR 275; D'Orta-Ekenaike v Victoria Legal Aid [2005] HCA 12; 223 CLR 1. In any event, the appellant had not demonstrated on appeal that the relevant comparison undertaking by his Honour for the assessment of the respondent's loss was flawed: (at [90]). In relation to (2) The primary judge erred in awarding as an integer of the respondent's damages the amount of $1,291,178.50 together with pre-judgment interest of $290,710 as representing the respondent's loss due to the forfeiture of franking credits by Holdings in the amount of $5,014,286. The respondent did not establish that he sustained any loss or detriment as a consequence of the forfeiture of those franking credits: (at [166]). Applied: Brookfield Multiplex Ltd v Owners Corporation Strata Plan 61288 [2014] HCA 36; (2014) 88 ALJR 911; McCrohon v Harith [2010] NSWCA 67; Johnson v Perez [1988] HCA 64; 166 CLR 351; Miliangos v George Frank (Textiles) Ltd [1976] AC 443; Golden Strait Corporation v Nippon Yusen Kubishika Kaisha [2007] UKHL 12; [2007] 2 AC 353; Ng v Filmlock Pty Ltd [2014] NSWCA 389. In relation to (3) The primary judge was correct in observing that the benefits of the restructure and the relevant integers thereof which would attract pre-judgment interest were of an entirely different character to those amounts which the respondent was required to pay pursuant to the settlement together with the professional fees he incurred for that purpose. The latter involved actual payment by the respondent from the respondent's own funds; the former did not. Accordingly, there was no error by the primary judge in compensating the respondent for the loss of use of his own funds at court rates and in calculating interest on the benefit of the restructure at Holdings' rate of earnings acquired on its own funds: (at [173] and [185]). In relation to relief, as the appellant had already paid the judgment, which included the amount referred to in (2) above, the appellant had overpaid the respondent $1,581,889. The appellant had a right to restitution for the amount overpaid together with interest on restitution moneys: (at [190]-[191]). Applied: Heydon v NRMA Ltd (No 2) [2001] NSWCA

Judgment

1. THE COURT: In 1992 the respondent founded a business known as Aussie Home Loans (the business). Over time the business was owned and conducted by a variety of entities, generally in the form of unit trusts, all of which were ultimately owned or controlled by the respondent or entities over which he had control.
2. In 2003 the respondent sought legal advice from the appellant and, in particular, from one of its tax partners, as to the tax consequences of a revised ownership structure of the business which would involve its corporatisation. One aspect of the advice was directed to the means by which the respondent could continue to borrow funds from the business for the purpose of completing the construction of his home in Point Piper.
3. The appellant, through the relevant partner, provided the respondent with the advice he sought and a restructure was effected in 2003 and 2004 (the Restructure). As part of the Restructure, a mechanism was put in place by which the respondent could withdraw funds from the Aussie Home Loans Group (the Group) by redeeming preference shares issued to him by the new corporate vehicle, AHL Holdings Pty Ltd (Holdings), that owned the entities making up the Group. During the financial years ending 30 June 2004, 2005 and 2006, the respondent drew down around $57 million. The ultimate source of those funds was the external financier to the Group, the Australia and New Zealand Banking Group Ltd (ANZ).
4. In January 2005 the relevant partner left Gadens and joined the law firm Abbott Tout. He continued to provide advice and assistance to the respondent. Later that year the Australian Taxation Office (ATO) commenced a review of the respondent's taxation affairs as part of a process of scrutinising the taxation affairs of high net worth individuals. The manner in which the respondent had extracted funds out of the business attracted the ATO's attention. In 2007 it commenced an audit of the respondent's affairs. This led to a deed of settlement on 21 December 2007 with the Commissioner of Taxation (Settlement Deed) in which the respondent agreed to pay the sum of $7,018,864 (comprising tax, penalties and interest), although it seems to be common ground that the settlement sum subsequently paid by the respondent on 5 September 2008 was $7,018,866.10. As part of the settlement, Holdings agreed to deduct the amount of $5,014,286 from the franking account that it maintained in accordance with s 200.15 of the Income Tax Assessment Act 1997 (Cth) (the 1997 Act).

The Background Facts

1. Prior to the transactions which were the subject of the appellant's advice, the business was owned and operated by Aussie Home Loans Limited as trustee of the Aussie Home Loans Unit Trust (AHLUT). When the respondent commenced building his home at Point Piper, he obtained funds by borrowing from the AHLUT. The AHLUT was not profitable at that stage but it was able to borrow funds from the ANZ which it on-lent to the respondent. The respondent owned or controlled 100 per cent of the units in the AHLUT. At the time of the restructure he owed the AHLUT some $15.5 million which he had borrowed for the purpose of funding the construction of his home.
2. The respondent desired to corporatise the business so that it was owned by a company the shares in which might be traded more readily. In the course of advising the respondent how that specific outcome could be achieved, the appellant also advised the respondent to implement a series of circular or "round robin" transactions which, so it was said, would provide a tax effective means by which the respondent could continue to borrow funds from the business to construct his home.
3. In essence those transactions resulted in the respondent borrowing some $75 million from a new unit trust known as the "Alice Trust" which was controlled by the respondent; using part of those funds to repay his outstanding borrowings in the sum of $15.5 million from the AHLUT; and using the balance to lend to the AHLUT and then, as part of a later refinement to the structure, to invest in certain redeemable preference shares (RPS) issued by Holdings. The implemented Restructure as at 1 July 2004 can be diagrammatically represented as follows:
4. Thus the Restructure, which was implemented in June and September 2003, culminated in the respondent applying for and being issued 57,738,001 $1 RPS in Holdings. The funds for his acquisition of the RPS came from the interest free loan of $75 million to the respondent from the Alice Trust, which was only required to be repaid by agreement between that Trust and the respondent. The Alice Trust in turn had received the funds by issuing 75 million $1 units to the AHLUT. The respondent used the balance of the loan to him of $75 million from the Alice Trust to repay his existing loan of $15.5 million to the AHLUT.
5. During the period 30 June 2004 to early 2006 the respondent obtained $57,662,999.70 from Holdings by redeeming the RPS as follows: (a) $20,652,804.70 in the year ended 30 June 2004 (2004 income year). (b) $16,251,485.00 in the year ended 30 June 2005 (2005 income year). (c) $20,758,710.00 in the year ended 30 June 2006 (2006 income year). (the redemption amounts) On advice, the respondent treated the redemption amounts as non-assessable returns of capital.

The respondent's loss as determined by the primary judge

1. Relevant to the appeal there were three heads of loss awarded to the respondent by the primary judge. The first was constituted by his finding that if the respondent had been given competent advice, he would have paid less tax in the 2004 to 2011 years of income compared to the amounts that were in fact paid during that period; but that he would have paid most of that lesser amount during the 2005 and 2006 income years. The extent to which the incompetent advice permitted the respondent to delay or reduce the payment of tax was taken into account in undertaking this comparison. In this respect his Honour found that the respondent benefited from this delay until 30 June 2011. He thereby concluded that the respondent suffered a loss of $6,916,222 (of which the appellant was liable for $4,979,800) which represented the amount of the tax, penalties, interest and costs that would have been avoided if Scenario 2 had been adopted, less the value to the respondent of any delay or overall reduction in his tax payments that resulted from following the incompetent advice.
2. The issue raised by the appellant with respect to this head of loss is whether it ought to be calculated on the basis of comparing the Actual Tax Cost (plus certain incidental costs being audit fees and the value of franking credits) and the Scenario 2 Tax Cost (plus those incidental costs) in full or, alternatively, the Actual Tax Cost (plus incidental costs) and the Scenario 2 Tax Cost in part only.
3. In other words, the appellant argued that the primary judge should have undertaken an entirely different exercise to that which he adopted, limiting himself to a comparison of the amount of tax paid by the respondent in two years of income only, namely the 2005 and 2006 years of income, without regard to whether there would also have been any other change in the respondent's financial position in those years or in later years if he had followed competent advice and adopted Scenario 2. On the appellant's approach, the Restructure placed the respondent in a permanently better financial position than if he had adopted Scenario 2.
4. Accordingly, it was contended that the primary judge "incorrectly calculated the 'benefits' of the Restructure by assuming that the quantum of tax saved by undertaking the Restructure would be eroded by the hypothetical non-payment of dividends (under Scenario 2) when those dividends were actually received by [the respondent] and were not paid as a consequence of the advice tendered by the appellant."

1. Apart from the calculation of pre-judgment interest on each of the items set out in the above table, the only items in issue on the appeal were those under the heading "Principal" relating to the 'Benefit of Restructure' and the 'Value of franking credits deducted on settlement with ATO'.

The Grounds of Appeal

1. Although we have summarised the issues contested on the appeal, it is instructive as a lead in to the analysis and consideration of those issues to record the grounds of appeal that were pressed on the appeal.
2. Grounds 1 and 2 relate to the Restructure loss. They are as follows: "1 Having concluded that if the respondent had not received the advice he had received from the appellant then the respondent and entities under his control would not have undertaken the transactions they in fact undertook (the 'Restructure' transactions) but would have instead undertaken transactions described as 'Scenario 2', the [primary judge] erred in concluding that the respondent suffered: (a) any loss or damage as a consequence of following the appellant's advice; or (b) loss or damage in the sum of $4,979,800.00. 2 In deciding whether the respondent suffered any loss or damage the primary judge should have: (a) calculated the loss arising from the adoption of the advice received by comparing the actual cost to the respondent of receiving $57,662,999.70 from the entities under his control (the 'Restructure Receipts' during the course of the years ended 30 June 2004, 30 June 2005 and 30 June 2006 with the hypothetical costs of receiving that amount under Scenario 2; and (b) concluded that the respondent had not incurred any loss because the actual cost of receiving the Restructure Receipts (assuming that the loss arising in connection with franking credits was $1,291,178, which is not conceded - see ground 3 below) was $9,678,703, which was less than the hypothetical cost of receiving the Restructure Receipts under Scenario 2, being a sum of $10,212,979 plus an amount attributable to having to pay the sum of $10,212,979 earlier than sum of $9,678,703."
3. Grounds 3 and 4 relate to the franking credit issue. They state: "3 The [primary judge] erred in finding that the respondent had suffered a loss in the sum of $1,291,178.50 in connection with the reduction of franking credits of AHL Holdings Pty Ltd pursuant to the terms of the respondent's settlement of his taxation audit with the Commissioner of Taxation in circumstances where: (i) the ledger of AHL Holdings Pty Ltd recorded franking account balances on 30 June 2005, 30 June 2006, 30 June 2007, 30 June 2008, 30 June 2009 and 30 June 2010 of $9,887.00, $5,940,175.00, $15,316,251.00, $20,663,251.00, $19,357,091.00 and $13,975,038.00 respectively (the last of which reflected the reduction required by the settlement with the Commissioner of Taxation); (ii) there had been no payment of unfranked dividends by AHL Holdings Pty Ltd and there was no evidence that AHL Holdings Pty Ltd would be likely to pay unfranked dividends in the foreseeable future; (iii) at all material times after December 2007 AHL Holdings Pty Ltd's surplus of franking credits meant that even after reducing the franking credits in accordance with the settlement there was no reasonable likelihood that all of the surplus would be used in declaring fully franked dividends; (iv) there was no evidence that the consideration paid to the respondent for one third of his shares in AHL Holdings Pty Ltd by the Commonwealth Bank of Australia was lower than it would have otherwise been but for the reduction in franking credits; (v) there was no or no proper evidence on which to support a finding that the respondent had suffered a loss of $1,291,178.50 as a consequence of AHL Holdings Pty Ltd agreeing to reduce its franking account balance; and/or (vi) under Scenario 2, the franking account balance of AHL Holdings Pty Ltd would have been reduced by $661,546 in respect of the year ended 30 June 2005 and by $8,282,870 in respect of the year ended 30 June 2006 resulting in a greater reduction in the franking account than occurred as a result of the settlement. 4 The [primary judge] ought to have concluded, having regard to the circumstances identified at ground 3(i)-(vi) above, that the respondent had not suffered any loss or any measurable loss in connection with AHL Holdings Pty Ltd agreeing to reduce its franking credits."

The primary judge's decision

1. The primary judge was confronted with competing assessments of loss prepared by the expert accountants - Mr Potter for the respondent and Ms Jones for the appellant - which his Honour set out in tabular form at [320]-[321]. It is sufficient to reproduce the table set out at [321] (omitting the column for "Ms Jones - Alt B") which his Honour noted was taken from an annexure in the joint experts' report, where Ms Jones set out her response to Mr Potter's table for Scenario 2, omitting interest. Components Mr Potter Ms Jones - Alt A Tax $5,674,500 $5,674,500 Penalties $567,450 $567,450 GIC $391,620 $391,620 Professional fees $1,853,955 $1,780,178 Franking credits $2,582,357 -- Less benefit of the Restructure ($1,201,833) ($10,212,989) Total $9,868,049 ($1,799,241)

1. Critical to the appellant's "no loss" argument is the item in the calculation described as the "benefit of the Restructure" which was deducted from the amount paid by the respondent under the settlement and related expenses. Mr Potter assessed the "benefit" as $1,201,883 whereas Ms Jones assessed the "benefit" as $10,212,989. As will be seen, his Honour adopted a different calculation of the benefit of the Restructure to that proposed by both experts.
2. At [336]-[337] the primary judge explained what the parties meant by the "benefit of the Restructure". This was that in the "real world" the respondent did not pay the Scenario 2 Tax cost in the 2005 and 2006 years because the profits in those years were not distributed to the respondent in those years. The fact that the respondent did not pay the Scenario 2 Tax Cost, was said to be the "benefit" accruing to the respondent from pursuing the Restructure.
3. At [338]-[339] the primary judge recorded the issue between the parties in the following terms: was the "benefit" of pursuing the Restructure, as compared with Scenario 2, only a temporary one, or did it result in the respondent obtaining a permanent tax saving of $10,212,979?
4. As his Honour noted (at [340]), the respondent's case was that the only value to be attributed to the benefit of the Restructure was a timing difference, that is, the advantage to the respondent of delaying the payment of tax under the Restructure compared to Scenario 2, rather than avoiding its payment forever. This was because the "loss"' under Scenario 2 associated with the payment of tax on dividends at an earlier point of time, cannot be a permanent loss because the profits which led to those dividends being distributed were, would be, or should be taken to be ultimately distributed to shareholders in the events that occurred. Mr Potter's contention as recorded by his Honour was that the cessation of that "loss" depended upon when the actual dividends that were paid "caught up" with the level of (hypothetical) dividends paid under Scenario 2. He further contended that the higher dividends paid in earlier years necessarily meant that at some later point lower dividends would be paid. This must be so (according to Mr Potter) because in Scenario 2, Holdings will have less retained earnings and cash as at 30 June 2006 than in the events that actually transpired: see at [341].

The appellant's submissions

1. The appellant contended that his Honour erred in concluding that the respondent suffered any loss at all as a consequence of following its advice (Ground 1) and that his Honour should have concluded that the respondent was in fact better off under the Restructure than if he had pursued Scenario 2 (Ground 2). The premise of these contentions is that his Honour undertook the wrong comparison exercise.
2. The appellant's primary position was that, in calculating whether the respondent suffered any loss, the correct comparison was between the actual cost to the respondent of receiving the redemption amounts of $57 million from Holdings (in 2004 to 2006) as a consequence of the Restructure as implemented, with the hypothetical cost of receiving the same amount (in 2004 to 2006) under Scenario 2, being $57 million in loans from AHLUT. It was not in dispute that the Scenario 2 Tax Cost (plus incidental costs) exceeded the Actual Tax Cost (plus incidental costs) of the respondent receiving the redemption amounts totalling $57 million under the Restructure. Thus the appellant argued that the respondent had suffered no loss.
3. Alternatively, if it was appropriate to consider a wider period from 2004 to 2011, the appellant challenged his Honour's assumption that the making of the hypothetical dividend payments of approximately $30 million under Scenario 2 in respect of profits derived in the 2005 and 2006 years, would have led to lower dividend payments under Scenario 2 in the 2007 to 2011 years. The appellant pointed to the fact that the actual dividends paid to the respondent in the 2007 to 2011 years amounted to $50 million (in fact, $51,525,102). It was submitted that there was no basis on which his Honour could conclude that those actual dividends would not have been paid "but for" the Restructure, that is, would not have been paid under Scenario 2 if it had been pursued.
4. The appellant advanced the further argument, which had not been raised at trial, that in considering the wider period of 2004 and 2011, the primary judge erred in focusing only on distributions in the legal form of dividends. It was argued that his Honour should have looked at total "distributions" in whatever form, whether by way of redemption of share capital or a distribution of profits, and looked at the economic consequences of those distributions.

The respondent's submissions

1. The respondent contended that the primary judge adopted the correct approach when comparing the respondent's financial outcome in the "real world" with the hypothetical outcome under Scenario 2 - namely, that the amount distributed by Holdings should be the same over a specified period of time. It was said that this approach enabled a measurement of the costs of extracting the same level of net profit out of Holdings under Scenario 2, to be compared with the costs which were in fact incurred under the Restructure.
2. The respondent accepted that, at a superficial level, a comparison of the Actual Tax Cost of receiving the redemption amounts of $57 million (in 2004 to 2006) was less than the Scenario 2 Tax Cost of receiving the same amount (in 2004 to 2006) as loans from AHLUT. The respondent submitted however that this comparison erroneously disregarded the manner and legal form in which the respondent obtained funds for the construction of his home.
3. The respondent further submitted that the primary judge was correct to proceed on the basis that if the same business had distributed some $30 million in profits in 2005 and 2006, the business would have correspondingly distributed less in later years, so that over the years 2004 to 2011 the total amount distributed would be approximately the same. The respondent contended that the alternative approach suggested by Ms Jones, that the business would have distributed $51 million in dividends between 2007 and 2011 in Scenario 2, in addition to the $30 million distributed in 2005 and 2006, implied a fundamentally different company than the one being modelled.
4. The respondent pointed to a number of suggested difficulties with the appellant's wider approach to "distributions". These included that the appellant's submissions on appeal departed from the way the case was run at trial and the approach of the appellant's expert valuer (Ms Jones), including in the joint expert report. The matter that had divided the experts at trial was said to be the extent to which the benefit of the Restructure was permanent, not whether his Honour should have taken into account "distributions" other than in the form of dividends.
5. Counsel for the respondent argued that what was in issue at trial relating to the benefit of the Restructure had nothing to do with either the form of the payments made to the respondent during the 2004 to 2006 years, or whether the loans under the Restructure or in Scenario 2 were genuine or otherwise. Counsel emphasised that it was common ground between the parties and the experts (at Black 65J-N), as the primary judge recorded (at [327] and [329]), that the existence of the loans made no difference to the respondent's ultimate net position.

Did his Honour err in his determination of the relevant comparison?

1. In our view, the primary judge adopted an orthodox approach to determining whether the respondent suffered any loss by following the negligent advice of the appellant. His Honour compared the financial position that the respondent was in as a result of following the negligent advice, to the financial position he would have been in if he had received and followed competent advice.
2. In this regard, it was not suggested on appeal that there would be any different outcome if the respondent's damages are assessed in contract - to put the respondent in the position he would have been in had the contract been performed: Commonwealth of Australia v Amann Aviation Pty Ltd [1991] HCA 54; 174 CLR 64, or in negligence or for misleading conduct - how much worse off is the respondent than he would have been had he not relied on the appellant's negligent and misleading advice: Wardley Australia Ltd v Western Australia [1992] HCA 55; 175 CLR 514 at 535.

The relevant comparison

1. The starting point in the analysis of loss is to identify the loss and damage that has been suffered by the respondent: Murphy v Overton Investments Pty Ltd [2004] HCA 3; 216 CLR 388 at [52]. No issue arises in the present case in relation to loss and damage that "will likely be suffered" for the purposes of the claim for damages under s 82 of the Trade Practices Act. Here the respondent's loss is the amounts of tax, penalties, interest, and expenses that had been incurred as a result of following the appellant's negligent advice, compared to the tax that would have been imposed had the respondent pursued Scenario 2; there being no challenge to his Honour's finding (at [318]), that the most likely alternative scenario "but for" the appellant's negligence was that the respondent would have pursued Scenario 2.
2. The primary judge found that under Scenario 2, Holdings would have distributed the same amount of dividends as were actually distributed to the respondent, but that the respondent would have received his dividends, and paid tax on them, earlier in Scenario 2 than was the case in the "real world". The appellant's contention that there was "no basis" to conclude that the actual dividends paid to the respondent in 2007 to 2011 would not have been paid "but for" the Restructure must be rejected. This ignores the concession by Ms Jones in cross-examination that the company she modelled in addressing, relevantly, Scenario 2 (the "hypothetical world") was different to the company in the "real world" under the Restructure.
3. The relevant part of the cross-examination of Ms Jones, some of which is set out by the primary judge at [355], is as follows: "PAYNE: In the assumptions that you have made in comparing the hypothetic and actual worlds, what else is different other than these distributions to Mr Symond upon which he has paid tax that you have assumed? WITNESS JONES: There is no differences. PAYNE: So the only difference between the actual and hypothetical company is this amount of tax difference? WITNESS JONES: That's correct. PAYNE: And you say that's permanent? WITNESS JONES: That's right. PAYNE: What I'm asking you for your consideration is as a valuer in those circumstances, do you agree with me that you have assumed a company in the hypothetical world which is worth less than the company in the actual world? WITNESS JONES: In those circumstances, yes. PAYNE: And that's the basis of your assumption of this permanent taxation difference you describe? WITNESS JONES: That would be correct."

New point on appeal

1. As already mentioned, the appellant's contentions on appeal sought to advance a new argument to that relied upon at trial. This was that when undertaking the comparison of the respondent's financial position over the 2004 to 2011 years, the primary judge erred in focusing upon "distributions" by Holdings in the form of dividends. It was said that he should have considered distributions in whatever form they may take, such as the redemption amounts under the Restructure.
2. This wider view of "distributions" was the premise of the appellant's contention that the comparison undertaken by the primary judge in respect of the 2004 to 2011 years was flawed because, it was said, he did not compare "like" business with "like".
3. As mentioned above, the respondent objected that this was not the case advanced at trial, and not the case addressed by the experts. So much should be accepted. Indeed, the appellant's contentions on appeal depart from the approach advanced by Ms Jones, the appellant's expert, at trial. This was that, in addition to the hypothetical dividends in the 2005 and 2006 years, the business would have distributed the same dividends in Scenario 2 over the 2007 to the 2011 years as in fact was the case.
4. In accordance with well-established principle, the appellant is not entitled to advance a fresh argument on appeal if that argument "could possibly have been met by the calling of evidence below": Water Board v Moustakas [1988] HCA 12; 180 CLR 491 at 497; Suttor v Gundowda Pty Ltd [1950] HCA 35; 81 CLR 418 at 438, or if, had the ground been raised below, the other party might have conducted the case differently at trial: Multicon Engineering Pty Ltd v Federal Airports Corporation (1997) 47 NSWLR 631 at 645. The present is such a case.
5. The new point raised issues concerning the change in value of the respondent's shareholding in the Group and whether the loans from the Alice Trust or AHLUT (as the case may be) were an integer in the calculation of loss which, as we have mentioned already, was not the way the case was run at trial. We have described the Restructure as implemented at [8]-[11] above. The "distributions" in the form of the redemption amounts received by the respondent under the Restructure cannot be separated from the $75 million interest free loan from the Alice Trust. This is because without the $75 million loan from the Alice Trust, the actual structure by which the respondent invested in the RPS issued by Holdings, and subsequently received the redemption amounts by redeeming the RPS, could not have been implemented. The "value" of the redemption amounts cannot be measured in isolation from the loans from the Alice Trust.

Conclusion as to Appeal Grounds 1 and 2

1. In our view, the appellant has failed to demonstrate any error in the primary judge's approach or conclusion when determining the respondent's financial position under the Restructure compared to Scenario 2. Accordingly, Appeal Grounds 1 and 2 should be rejected.

Appeal Grounds 3 and 4 - the franking credits issue

The primary judge's decision

1. As already noted, part of the settlement involved the deduction of $5,014,286 from Holdings' franking account (the forfeited credits). The primary judge held (at [414]) that the value to be attributed to those forfeited credits was $1,291,178.50 on the assumption that Holdings, over time, would have distributed one half of its franking credits. His Honour reasoned (at [410]-[413]) that a loss of $1 in franking credits in those circumstances would lead to additional tax of 25.75 cents payable by a resident shareholder such as the respondent (who was paying the highest marginal rate of tax). His Honour therefore held that the respondent suffered a loss equivalent to the value to be attributed to the forfeited credits.
2. At [378] of his reasons the primary judge adopted the explanation as to the nature of franking credits and the franking account maintained by a company of Gageler J in Mills v Commissioner of Taxation of the Commonwealth of Australia [2012] HCA 51; (2012) 250 CLR 171 at [12]-[13] where his Honour remarked (omitting citations): "[12] The imputation system in Pt 3-6 of the [1997 Act] partially integrates the income tax liabilities of Australian corporate tax entities and their Australian members. The main object of the Part is expressed to be 'to allow certain corporate tax entities to pass to their *members the benefit of having paid income tax on the profits underlying certain distributions'. Other objects of the Part are expressed to be to ensure that the imputation system it establishes is not used 'to give the benefit of income tax paid by a *corporate tax entity to *members who do not have a sufficient economic interest in the entity' or 'to prefer some members over others when passing on the benefits of having paid income tax' as well as to ensure that 'the *membership of a corporate tax entity is not manipulated to create either of [those] outcomes'. An asterisk is used in the [1997 Act] to indicate that the relevant term is defined elsewhere. [13] By operation of Pt 3-6 of the [1997 Act], every corporate tax entity has a 'franking account', which is 'used to keep track of income tax paid by the entity, so that the entity can pass to its members the benefit of having paid that tax when a distribution is made'. A corporate tax entity, if not a mutual insurance company and if not acting in a capacity of trustee, is a 'franking entity'. The franking account of a franking entity that satisfies an Australian residency requirement for an income year typically receives a 'franking credit' when the entity pays income tax or receives a franked distribution in respect of the year, and typically receives a 'franking debit' when the entity receives a refund of tax or franks a 'frankable distribution' A franking entity franks a distribution by allocating a franking credit to it in which case the amount of the franking credit is to appear on a statement that accompanies the distribution. As a general rule, an amount equal to the franking credit on the distribution is included in the member's or the equity holder's assessable income and the member or equity holder is entitled to a tax offset equal to the same amount."

1. Although the ledger records the deduction of $5,014,286 as having been made on 30 June 2010, his Honour considered that it should be taken to have occurred as at the date of the settlement, namely, 21 December 2007. It therefore follows that the forfeited credits should be reflected in the ledger balance as at 30 June 2008. Accordingly, the balance of $20,663,251 should be reduced by $5,014,286 and the balance of $13,975,038 increased by that amount.
2. The respondent contended below that the deduction of $5,014,286 from Holdings' franking account as a result of the settlement caused compensable damage to him which should be valued at its "full face value" in the manner calculated by Mr Potter, the respondent's expert. Having rejected the appellant's argument that a comparison of the respondent's position in the events that happened with his position under Scenario 2 confirmed that he had not suffered any loss as a result of the deduction of the forfeited credits from Holdings' franking account, the issue then became whether that deduction effected a loss to the respondent and, if so, how its value should be assessed.
3. At [390] his Honour noted that Mr Potter had concluded that the loss of the forfeited credits was a matter that was capable of affecting the free cash flow to shareholders and thus represented a loss of value to them. He also concluded that 33 per cent of that lost value was crystallised by the sale by the respondent to the CBA on 31 October 2008 of that percentage of his shares in Holdings. He considered that the balance of the loss would crystallise at some time in the future, when there was a distribution of dividends to which franking credits did not attach (presumably because there were none available) or on the sale of the remaining stake of the respondent's shareholding in Holdings.
4. The primary judge then described (at [391]) Mr Potter's method of calculating the value to a shareholder of the forfeited credits in the following terms: "Mr Potter calculated the value to a shareholder of the lost franking credits as the difference in their tax position on the basis that they were a resident taxpayer paying tax at the highest marginal rate who received a dividend that was fully franked as compared with the same dividend that was wholly unfranked. In the case of the former, the shareholder would pay 46.5% of the grossed up dividend (ie the net dividend and the franking credit). In the case of the latter the shareholder would pay 46.5% of the net dividend. In the case of a franking credit of $5,014,286.00 he calculated the difference to the taxpayer as $2,582,357.00. At this stage I note that this amount assumes that all of the lost franking credits were or would have been distributed. Mr Potter regarded the uncertainty about the time frame over which that distribution would have occurred as being reflected in the absence of any allowance by him for pre-judgment interest."

Gross-up dividend $16,714,286 Gross-up dividend $11,700,000 Tax payable at 48.5% $8,106,429 Tax payable at 48.5% $5,674,500 Less franking credit $5,014,286 Less franking credit Nil Net tax payable $3,092,143 Net tax payable $5,674,500 Excess tax payable on unfranked dividend $2,582,357

Thus according to Mr Potter, the theoretical excess tax of $2,582,357 constituted the value to the respondent of the forfeited credits.

1. At [388] his Honour recorded the appellant's submission that the respondent had not suffered any loss because the evidence suggested that it was unlikely that Holdings would ever pay an unfranked dividend. His Honour then noted that the appellant's expert, Ms Jones, stated in her report that "no loss has been suffered whilst there are sufficient franking credits to distribute full[y] franked dividends". Ms Jones noted that Holdings' franking account would only have gone into debit as at 30 June 2008 if it had fully distributed all profits as at that date, a circumstance that she regarded as unlikely given the cash needs of the business and the then forthcoming sale to the CBA. She stated that she had no basis for verifying what she said was Mr Potter's assumption that the debit to Holdings' franking account materially impacted CBA's purchase of 33 per cent of Holdings.
2. However at [389] his Honour considered that in cross-examination Ms Jones had conceded that the forfeited credits meant that there was a loss to the respondent of some value. The relevant exchange was as follows: "PAYNE: As a valuer, if a resident taxpayer and [sic] came to you and said as a valuer, Ms Jones, all things being equal this company in the actual world having $5 million less in its franking account than in the hypothetical world, you would tell them: Buy the hypothetical company, wouldn't you? WITNESS JONES: Yes. PAYNE: It's worth more? WITNESS JONES: That's correct, yes."
3. However it was common ground that there was no evidence that the CBA, when acquiring 33 per cent of the respondent's shareholding in Holdings, had taken into account in the price it paid the fact that Holdings had been required to forfeit franking credits in the amount of $5,014,286 in the year prior to the acquisition. This notwithstanding, at [394] the primary judge, presumably on the basis of the concession of Ms Jones referred to in the preceding paragraph, concluded that the shares in Holdings represented a less attractive proposition to a potential purchaser of the entire company than they would if the same company had an additional $5,014,286 in its franking credits account. In theory this may be correct given that the exchange with Ms Jones was in the form of a hypothetical only. As such, it had no relationship to actual events.

The Appellant's submissions

1. In its written submissions the appellant submitted that the primary judge erred in two respects in holding that the respondent suffered a loss as a result of Holdings forfeiting the franking credits as required by the settlement. First, regardless of their value his Honour should have concluded that Holdings' franking account balance would have been greater under the Restructure and the settlement than under Scenario 2 with the consequence that there could be no loss to the respondent as a result of a reduction in available franking credits due to the settlement.
2. Thus, having found that if the respondent had not undertaken the Restructure he would have undertaken Scenario 2, his Honour also appeared to accept at [281]-[282] of his reasons that the Holdings franking account under Scenario 2 would have been reduced by a total of $8,944,416 in the 2005 and 2006 income years. This is because under Scenario 2 for the 2005 income year the respondent would have received a dividend of $7,162,814 and franking credits of $661,546. For the following year, he would have received dividends in the sum of $23,392,553 and franking credits of $8,282,870. Although these dividends would have been in each case only partly franked, nevertheless the total of $8,944,416 in franking credits would have effected a reduction in that amount in Holdings' franking account whereas under the Restructure and settlement the amount of any reduction would only be $5,014,286. Therefore, the Restructure and settlement left Holdings with an additional $3,930,130 in franking credits than it would have had under Scenario 2. On this basis it was impossible to conclude that the deduction of the forfeited credits pursuant to the settlement caused the respondent any loss. This argument (being Appeal Ground 3(vi)) was not elaborated upon in the appellant's oral submissions. Rather, those submissions were confined to the second reason as it clearly had greater force.
3. The second reason advanced by the appellant (and encapsulated in Appeal Grounds 3(i)-(iii)) related to his Honour's assumption that there was a loss on the footing that Holdings would have declared sufficient dividends to use up one half of its franking credits over time. Even if it was assumed that sufficient dividends would have been declared to use up one half of the available franking credits including the forfeited credits, an assumption for which there was no evidence, at all times there was more than enough franking credits in Holdings' franking account to fully frank such dividends with the consequence that the respondent would not have incurred any additional top-up tax and, accordingly, suffered no loss.

The Respondent's Submissions

1. In his written submissions the respondent addressed both errors asserted by the appellant and recorded at [117]-[118] above. However, we confine ourselves to the second error for the reasons referred to at [118] above.
2. As to the second error, the respondent contended in his written argument that notwithstanding the appellant's submission that no loss due to the forfeited credits was proved as Holdings had sufficient franking credits to fully frank dividends declared in the foreseeable future, there was comprehensive evidence from the respondent's damages expert, Mr Potter, who expressed an opinion according to orthodox valuation theory which was addressed and accepted by the primary judge at [389]-[395] and [414]. (We will return to these passages below.).
3. The respondent further contended that the appellant's submission proceeded on the incorrect basis that companies do not ever reduce their franking accounts to nil. He asserted that this was wrong in principle for reasons explained by Edmonds J (in dissent, but whose ultimate decision was upheld in the High Court) in Mills v Commissioner of Taxation (2011) 198 FCR 89 at [28] and referred to by the primary judge at [380]. In that paragraph Edmonds J did no more than explain one of the ways in which a company could use franking credits from prior years, namely, where it has had a period of losses but then returns to profit in which case it could use franking credits earned during an earlier period to frank dividends out of profits earned during a later period. The primary judge referred to this possibility at [395] to which we shall also return.
4. The respondent relied upon the evidence of Mr Potter that there are other ways in which a shareholder might enjoy franking credits even in the absence of a distribution of current year profit, such as by selling shares back to the company, an example also referred to by the primary judge at [394]. It was submitted, therefore, that the proposition accepted by the primary judge that the deduction of the forfeited credits represented a loss to the respondent could not in the circumstances be described as guesswork or conjecture.
5. In support of the foregoing the respondent also relied upon the following cross-examination of Ms Jones, the appellant's expert: "PAYNE: Franking credits are kept in a franking account? WITNESS JONES: Yes. PAYNE: If you were to assume, for example, a company earns $100 profit in year 1. It pays tax on that, 30 per cent, $30, to franking? WITNESS JONES: That's right. PAYNE: In year 2 that company makes a loss of $100. In year 3 the company makes another $100 profit. So there is no tax payable, correct? WITNESS JONES: Year 3, 100 profit, yes. PAYNE: Yes, and a $100 profit the year before. No tax payable. Nonetheless, that company, should it choose to do so, can pay a dividend and frank that dividend with the $30 in the franking account? WITNESS JONES: Yes"

Did the Respondent suffer a loss with respect to the forfeiture of the franking credits?

1. At [395] the primary judge advanced three reasons for his conclusion that the debit of the forfeited credits represented a loss to the respondent. Although we have extracted that paragraph at [106] above, it is appropriate to summarise them in order to consider their validity. The first reason was that the higher franking account balance meant that the shares in Holdings were at least more attractive to a potential corporate purchaser who may want to acquire the whole company and distribute them. The respondent accepted that that reason addressed the 80 per cent acquisition by CBA, as well as a potential buyer of 100 per cent. The same difficulties with this reason that have already been explained at [105], [112], [115], [123] and [141]-[142] above in relation to CBA also apply to a potential buyer of 100 per cent. There was no evidence to support it.
2. The second reason was that a higher franking account balance may have made Holdings more inclined to distribute a higher level of dividends than might otherwise be the case. Again there was no evidence to support this theoretical possibility. The first reason, if it went beyond speculation, would be a loss to the respondent as shareholder in selling his shares; the second, if available on the evidence, would be a loss to the respondent continuing to hold his shares.
3. The third reason was that a higher franking account balance meant that the company had more scope to distribute franked or partly franked dividends from existing profits even if losses were subsequently incurred. Accordingly, had Holdings incurred losses for a period of time (which it did not, his Honour again entering the realm of speculation), it would still be able to declare fully franked dividends when it became profitable by calling upon a larger franking account which included the forfeited credits. However, notwithstanding the circumstance that Holdings subsequently earned substantial taxable profits and did not distribute all of its profits as dividends thereby acquiring a substantial franking account balance, the forfeited credits still had value. According to his Honour (at [369]), the question was to determine what it was.
4. The respondent drew the Court's attention to [380] and [390] as supporting his Honour's first reason (see [95] and [100] above). That reason, so it was submitted, was supported by both experts as a matter of "valuation theory". In other words, as a matter of valuation theory Holdings was worth more to the respondent, as the 100 per cent shareholder, with a larger franking credit account than a diminished one. His Honour thus held (at [394]) that shares in Holdings represented a less attractive proposition to a potential purchaser of the entire company than they would if the same company had an additional $5,014,286 in franking credits. As we observed at [105] above, this may be so in theory, but was inconsistent with the evidence as to the reality of the situation.

Conclusion as to Appeal Grounds 3 and 4

1. In our view the primary judge erred in awarding as an integer of the respondent's damages the amount of $1,291,178.50 together with pre-judgment interest of $290,710 as representing the respondent's loss due to the forfeiture of franking credits in the amount of $5,014,286. The respondent did not establish that he sustained any loss or detriment as a consequence of the forfeiture of those franking credits. Appeal Grounds 3 and 4 should therefore be upheld.

Appeal Grounds 7 and 8 - the pre-judgment interest issue

The primary judge's decision

1. At [320] the primary judge set out the following table summarising Mr Potter's assessment of the loss allegedly suffered by the respondent following the Restructure rather than pursuing Scenario 2: "Components of damage Principal Interest Total Tax $5,674,500 $2,103,801 $7,778,301 Penalties $567,450 $210,380 $777,830 GIC $391,620 $46,708 $438,328 Professional fees $1,853,955 $588,479 $2,442,433 Franking credits $2,582,357 - $2,582,357 Less benefit of the Restructure ($1,201,833) - ($1,201,833) Total $9,868,048 $2,949,368 $12,817,416"

1. The middle column of the table sets out interest on each of the first four integers pursuant to s 100 of the Civil Procedure Act 2005 (NSW) at what his Honour referred to in the supplementary judgment as the "Court rates" applicable at the time and, in respect of each integer (the amount of which was in dispute), for the period commencing on the date each amount was paid or otherwise incurred by the respondent and ending on the date of judgment on 31 October 2013.
2. Although Mr Potter assessed the benefit of the Restructure in the sum of $1,201,833, his Honour accepted the recalculation of that figure to $6,033,725 which Mr Potter was required to undertake after publication of the primary judgment. This figure included his Honour's calculation of timing benefits under the Restructure that he based on Holdings' internal rate of return which was an interest rate considerably less than the Court rates. At [45] of the supplementary judgment the primary judge therefore adopted the case put by the respondent that: "allowed interest on the amount paid to the Commissioner in tax and penalties (and associated professional costs) at Court rates and included in the Benefit of the Restructure a component to be calculated by using an earnings rate equal to that achieved by Holdings on its own funds."
3. In so doing his Honour rejected the appellant's submission that the Court rates should only be imposed on the "net loss" suffered by the respondent from time to time. His Honour illustrated this submission at [35] of the supplementary judgment referring to part of a spreadsheet prepared by Ms Jones which provided for interest to be calculated "on the cumulative net position" of the respondent from time to time to which a consistent rate of interest was to be applied at either the Court rates or Holdings' earnings rate, a matter Ms Jones left to his Honour to determine.
4. The primary judge rejected Ms Jones' approach as he considered (at [36] of the supplementary judgment) that it involved a misconception about the two integers that were sought to be combined, namely, the extra tax and expenses paid by the respondent represented by the first four items in the table referred to at [167] above and what was said to be the benefit of the restructure. Certainly the benefit of the restructure involved a quantification of the (offsetting) value to the respondent on the adoption of the Restructure. At [37] of the supplementary judgment his Honour noted that he had determined that that value should be measured by calculating the lower tax cost paid on the distribution of the net dividends distributed by Holdings in the period up to 30 June 2011 under the Restructure compared with what would have been paid had the same dividends been distributed by Holdings under Scenario 2.

The Appellant's Submissions

1. The appellant submitted that there were various integers that the primary judge was required to take into account in working out whether the respondent had sustained a loss which would sound in damages; there were credits and debits going into this analysis. His Honour erred by applying the Court rates of interest to the integers on one side of the balance sheet but not to the net loss. This was said to be impermissible because s 100 interest is to be paid on the damages awarded to a plaintiff, which in the context of the present case involved a net concept.
2. The primary judge calculated interest at the higher, statutory rate (being the Court rates) on the gross integers utilised by him for the purpose of calculating the respondent's damage but when it came to the other side of the balance sheet he applied a lower rate of interest. What his Honour should have done was to have worked out the net loss and then determined the pre-judgment interest on that amount. In this respect it was submitted that based on Ms Jones' spreadsheet no actual loss would have arisen until about April or possibly July 2009. It was only at this point of time that the respondent sustained damage and, therefore, it was only from that point of time that pre-judgment interest accrued.
3. His Honour was therefore in error in taking each of the relevant integers, determining when each amount was paid and then calculating interest at the Court rates from that moment of time to the date of judgment. It was wrong in principle for his Honour to calculate interest at the Court rates on all outgoings and only calculate interest at Holdings' internal rate of return in respect of the benefit of the restructure which was to be offset against the detriment constituted by the amounts required to be paid pursuant to the settlement as well as the professional fees incurred by the respondent.
4. The appellant accepted that it was appropriate to apply Holdings' internal rate of return to the relevant integers of the benefits of the restructure. It submitted that that rate should have been used in respect of the integers that made up the ultimate calculation up to a particular point in time and it was only after that point of time was reached (determined as being April or July 2009) that the Court rates of interest should then be applied for it was only at that point that the net damages sustained by the respondent could be determined.

The Respondent's Submissions

1. The respondent submitted that by about September 2008, as a result of the appellant's negligent advice, the respondent paid tax, penalties and interest pursuant to the settlement and had incurred considerable professional costs. Those amounts were paid out of his own funds. At that time he had neither received dividends nor paid the tax that he would have paid under Scenario 2. He had not avoided the payment of tax altogether but had merely delayed it. His loss was the avoidable outgoings (tax, penalties, interest and expenses) less the benefit to him of keeping funds invested in his business for longer than would have been the case under Scenario 2.
2. The benefit of the Restructure was the time value of keeping funds invested in the business for longer than would otherwise be the case at a rate of return below the Court rates. In the meantime the respondent suffered a loss by paying the tax, penalties, interest and expenses associated with the Restructure and the settlement, which were caused by the appellant and were avoidable. The respondent was therefore always in a loss position as a result of those payments save only to the extent that he had the benefit of keeping funds invested in Holdings for a longer period.
3. It was therefore submitted that it was wrong to suggest that the respondent had no loss at that point or that the actual funds kept in the business, as opposed to the time value of keeping them there, represented a benefit to be "netted off" against the avoidable settlement payments. The respondent's "practical, economic loss" was making entirely avoidable payments that were more than he needed to make, less the benefit to him of being able to keep some funds invested in his business slightly longer.
4. In oral submissions the respondent pointed to [38] of the supplementary judgment in which his Honour found that in the "real world" (as a consequence of implementing the Restructure), the respondent suffered a loss by paying the amounts required by the settlement and incurring expenses in relation thereto, these being avoidable had the appellant not been negligent. It was therefore incorrect for the appellant to suggest that the respondent had no loss at the point that he paid these amounts to the Commissioner and equally incorrect to suggest that the actual funds kept in the business, as opposed to the time value of keeping them there, represented any benefit to be netted off against the avoidable settlement payments. The essence of his Honour's benefit of Restructure findings was that the respondent would have paid more tax sooner and less tax later but that was of an entirely different character to the loss he sustained by making what were entirely avoidable payments pursuant to the settlement which were more than he needed to make, less the benefit of being able to keep some funds invested in the business for a longer period.

Did his Honour err in the determination of pre-judgment interest?

1. In our view the respondent's submissions on this issue should be accepted and those of the appellant rejected. Although it is true that the ultimate amount of damages was dependent upon a number of integers (one of which was the benefit of the Restructure) that were not determined until judgment, nevertheless principle did not require that the respondent should not be compensated in the form of pre-judgment interest in respect of those amounts which he was required to pay out of his own funds as a consequence of the appellant's negligent advice.
2. Accordingly, the primary judge was correct in observing that the benefits of the Restructure and the relevant integers thereof which would attract pre-judgment interest were of an entirely different character to those amounts which the respondent was required to pay pursuant to the settlement together with the professional fees he incurred for that purpose. The latter involved actual payment by the respondent from his own funds; the former did not. Any "netting off" would involve netting actual payments against theoretical payments or, more strictly, non-payments. In these circumstances we detect no error in his Honour's approach to the payment of pre-judgment interest.

Conclusion as to Appeal Grounds 7 and 8

1. In our view the appellant has failed to demonstrate any error in the primary judge's approach as a matter of principle to the entitlement of the respondent to pre-judgment interest at Court rates. Accordingly, Appeal Grounds 7 and 8 should be rejected.

The Disposition of the Appeal

1. The appellant has only succeeded only on Appeal Grounds 3 and 4 and failed on Appeal Grounds 1, 2, 7 and 8. Appeal Grounds 5 and 6 were abandoned at the hearing. Appeal Grounds 1 and 2 were the primary grounds which the appellant needed to establish if it was to generally succeed on the appeal. It has failed to do so.
2. Nevertheless, the effect of the appellant succeeding on Appeal Grounds 3 and 4 is that the damages awarded by the primary judge in the amount of $4,979,800 must be reduced by $1,581,889 to $3,397,911. That reduction comprises $1,291,179 representing the primary judge's finding as to the value of the lost franking credits together with his award of pre-judgment interest on that amount in the sum of $290,710: see [29] above.
3. In the foregoing circumstances although the appeal succeeds in part, in our view the appellant has substantially failed and should therefore pay 75 per cent of the respondent's costs of the appeal. As at present advised we see no reason to disturb the primary judge's costs order in respect of the proceedings at first instance. However, the parties should have the opportunity, if they so desire, of seeking a variation of this order if they proceed to do so in accordance with the rules.
4. It is common ground that the appellant has paid the judgment debt to the respondent. The appellant has a right to restitution for any amount overpaid following the reversal, in part, of the judgment below. As a consequence of the orders to be made on appeal the appellant has overpaid the respondent $1,581,889. The appellant is entitled to interest upon restitution of moneys paid under a judgment that is later set aside. In this Court the practice is to award restitutionary interest at the rates payable on judgments unless special circumstances exist: Heydon v NRMA Ltd (No 2) [2001] NSWCA 445; 53 NSWLR 600 at [32] (Mason P; Beazley JA and Ipp JA agreeing).
5. The respondent did not dispute the appellant's right to restitution for any amount overpaid, nor its entitlement to interest upon restitution of moneys overpaid as claimed by the appellant in order 5 of its amended notice of appeal, pursuant to s 101 of the Civil Procedure Act 2005 (NSW). It is appropriate that a restitution order be made. As the parties have not had an opportunity to agree on the interest calculations at the rates prescribed by Uniform Civil Procedure Rules 2005 (NSW), r 36.7(1), a declaration will be made concerning interest. If it becomes necessary to enter judgment against the respondent with respect to interest, the effective date should be the date of these orders. Interest can thereafter accrue pursuant to s 101 of the Civil Procedure Act 2005 (NSW): Heydon v NRMA Ltd (No 2) at [55].

Amendments 19 March 2015 - Formatting amendments made to last line of Headnote and last sentence of [6] 03 November 2015 - Headnote (second holding), [161], [162], [166]-$5,014,285 should read $5,014,286. [4]-(the settlement) amended to (Settlement Deed). [19]-$37,327,429.70 amended to $37,320,429.70. [40], [43], [93], [123], [127], [151]-minor typographical amendments. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 03 November 2015