Liggins & Anor v Park Trent Properties Group Pty Ltd & Anor

Supreme Court of NSW|2021-08-09|Before: Slattery J

(1958) SR (NSW) 395 C. Czarnikow Ltd v Koufos [1969] 1 AC 350 Capello v Hammond & Simmons NSW Pty Ltd [2021] NSWCA 57 Carr v JA Berriman Pty Ltd (1953) 89 CLR 327 Chappel v Hart (1998) 195 CLR 232 Clark v Macourt (2013) 253 CLR 1 Commonwealth v Amman Aviation Pty Ltd (1991) 174 CLR 64 El Ali v Tritton [2019] NSWCA 111 Hadley v Baxendale (1854) 9 Exch 341 Johnson v Agnew [1980] AC 367 Johnson v Pérez (1988) 166 CLR 351 Liggins & Anor v Park Trent Properties Group Pty Ltd & Anor [2020] NSWSC 1113 March v E & MH Stramare Pty Ltd (1991) 171 CLR 506 McKenna v Richey [1950] VLR 360 Mobis Parts Australia Pty Ltd v XL Insurance company SE (2018) 363 ALR 730 Mills v Ruthol Pty Ltd (2004) 61 NSWLR 1 Ng v Filmlock Pty Ltd (2014) 88 NSWLR 146 Ogle v Comboyuro Investments Pty Ltd (1976) 136 CLR 444 Pacific National (ACT) Ltd v Queensland Rail [2006] FCA 91 Robinson v Harman (1848) 1 Exch 850 Ruxley Electronics & Constructions Ltd v Forsyth [1994] 1 WLR 650 Synergy Health (UK) Ltd v CGU Insurance Plc [2010] EW HC 2583 Tabcorp Holdings Ltd v Bowen Investments Pty Ltd (2009) 236 CLR 272 TC Industrial Plant Pty Ltd v Roberts Queensland Pty Ltd (1963) 180 CLR 130 Van Zonneveid v Seaton [2004] NSWSC 1223 Vieira v O'Shea [2012] NSWCA 21 Wenham v Ella (1972) 127 CLR 454 Wentworth v Woollahra Municipal Council (No. 2) (1982) 149 CLR 672 Texts Cited: ER Daniell, Daniell's Chancery Practice (5th ed, 1871, Stevens & Sons, London) JD Heydon, Heydon on Contract (Lawbook Co, 2019) JD Heydon, MJ Leeming and PG Turner, Meagher, Gummow & Lehane's Equity: Doctrines & Remedies (5th ed, 2014, LexisNexis Butterworths) W Lonergan, The Valuation of Businesses, Shares and Other Equity (4th ed, 2003, Allen and Unwin Sydney) D Glynn and T Rogers, Riley on Business Interruption Insurance (11th ed, 2021, Sweet and Maxwell - Thomson Reuters) Category: Consequential orders Parties: First plaintiff: Geoffrey Liggins Second plaintiff: Xiankun Wu First Defendant: Park Trent Properties Group Pty Ltd Second Defendant: Ronald Malcolm Cross Representation: Counsel: Plaintiffs: A. Gerard Defendants: R. Glasson

Solicitors: Plaintiffs: K. Papanicolaou Defendants: T. Barber File Number(s): 2017/00316458 Publication restriction: No

Judgment

This is the Court's second judgment in an ongoing dispute between the plaintiffs, Mr Geoffrey Liggins and his former wife, Ms Xiankun (Julia) Wu, and the defendant, ParkTrent Properties.
The matter first came before the Court on 31 October and 1 November 2019. On 25 August 2020, the Court delivered its first judgment in these proceedings on issues of liability: Liggins & Anor v Park Trent Properties Group Pty Ltd & Anor [2020] NSWSC 1113 ("the first judgment"). This judgment should be read with the Court's first judgment. Events, matters and persons are referred to in both judgments in the same way.
In the first judgment (at [154]), the Court found that ParkTrent breached the buyback agreement "probably after February 2013" when ParkTrent failed to enter into contracts to purchase the Bundoora property and the Kingaroy property for the price paid for them in 2009. As such, the Court found the plaintiffs were successful against ParkTrent on issues of liability but not against Mr Cross.
The plaintiffs sought the remedy of specific performance of the buyback agreement. But the Court found in the first judgment (at [123] - [133]) that specific performance should be declined on discretionary grounds, due to the plaintiffs' delay occasioning prejudice to ParkTrent. The plaintiffs were confined to their remedy in damages. The Court made directions, inter alia, that the parties consult with a view to preparing agreed directions for a short relief hearing based on documents to deal with issues of damages and to file submissions in relation to costs.
The parties were not able to agree upon a date for the assessment of damages resulting from the Court's determinations in the first judgment. They contended for different dates: the plaintiffs for 1 May 2013 and ParkTrent for a later date when specific performance became unavailable to the plaintiffs. This judgment decides that issue and decides the following four other issues posed by the parties relating to the calculation of the plaintiffs' claimed loss: 1. Whether less than the whole of the benefits received by the plaintiffs under the Commonwealth National Rental Affordability Scheme ("NRAS"), or similar State schemes in Queensland or Victoria, should be deducted from the claims made by the plaintiffs in respect of the Kingaroy property for damages for breach of contract, for any financial years between FY13 and FY20 on account of the market rent claimed to have been forgone by the plaintiffs under such schemes; 2. Whether the allowance for depreciation of the Bundoora property and the Kingaroy property as disclosed in the plaintiffs' tax returns for the years FY13 to FY20 should be eliminated from the plaintiffs' claim for damages for breach of contract; 3. Whether or not an allowance should be made in the plaintiffs' claim for damages for breach of contract, for the potential future tax savings in financial years after FY20, due to the plaintiffs' projected continued ownership of the subject properties; and 4. Whether or not an allowance should be made in the plaintiffs' claim for damages for breach of contract for potential capital gains in financial years between FY13 and FY20, due to the plaintiffs' ownership of the subject properties during that period.
In 2021, this matter came before me on four occasions for directions, being 23 February 2021, 26 April 2021, 8 June 2021, and 9 August 2021. Mr A. Gerard of counsel appeared for the plaintiffs, instructed by Mr Kon Papanicolaou of KP Lawyers. Mr R. Glasson of counsel appeared for the defendants, instructed by Barber Lawyers.
The Court received submissions from the plaintiffs on 5 February 2021 and 26 May 2021 and from ParkTrent on 11 February 2021 and 7 June 2021.
On 9 September 2021, once all material was received in the matter, the Court reserved judgment. The parties agreed that if the Court determined these four issues that they would bring in damages calculations consequent upon the determination.
The Court was informed in early February 2022 that Mr Liggins had died. As this has happened only very recently, understandably instructions have not been able to be obtained to formalise the representation of his estate. The Court has power to authorise the taking of further steps in the proceedings without his estate being represented. The Court has decided to make orders under Uniform Civil Procedure Rules ("UCPR"), r 7.10(2)(a) permitting the proceedings to continue in the absence of a representative of Mr Liggins' estate. But in the longer-term orders will need to be made under UCPR, r 7.10(2)(b) for someone to represent Mr Liggins' estate for the purposes of these proceedings. That can occur, as it commonly does, even before a grant of probate or administration of Mr Liggins' estate.
In the first judgment the Court made some preliminary observations about the calculation of damages for breach of contract in these proceedings. The Court made clear (at [153]) that it had not heard submissions on the issue of damages and described what it said as "a possible analysis of how damages should be assessed", and something which "may assist the parties", so they could "focus on an assessment based upon the Court's actual findings in the first judgment" (at [153]). Those preliminary observations were as follows (at [154]- [155]). [153] Prima facie the measure of the plaintiffs' loss for ParkTrent's breach of its promise made in the buyback agreement starts with the loss of the money consideration the plaintiffs would have received if the agreement had been performed, less the value (at that time) of the two properties that would have been conveyed to ParkTrent, if it had performed the buyback agreement. If damages are to be assessed at the time of the breach of this contract, that exchange of value and assessment should probably take place when the properties would have been conveyed back to ParkTrent sometime after May 2012. It may be that as events occurred that would have been shortly after February 2013, not long after the plaintiffs had provided formal side contracts to ParkTrent. [154] Even if the buyback agreement had been performed, Mr Liggins and Ms Wu would have held the two properties themselves until sometime after May 2012, and indeed probably after February 2013. Expenses and income from the properties up until then should probably be to their account. But their income and expenses received and incurred in relation to the properties after February 2013 can be said to flow from ParkTrent's breach of contract. Detailed adjustments are required to take account of all the taxation benefits they have in fact received from holding the properties during the period after the breach. The Court may appoint an accounting expert to undertake this exercise if the issues are complex and beyond the parties' easy calculations. [155] The transfer of the properties between the plaintiffs does not extinguish or diminish the plaintiffs' loss of the consideration promised to them both. It will probably only slightly affect (if at all) the calculation of the collateral benefits received by them from holding the properties since ParkTrent's breach. The plaintiffs' case in damages is not significantly affected by the Family Court orders. And the terms of buyback agreement as reflected in the 24 August 2009 letter say nothing about Mr Liggins and Ms Wu's relative interests in the two properties. The buyback agreement requires ParkTrent to take the whole of both properties back. Although it is to be remembered that Ms Wu only had a 1% interest in these properties."
The Court now has the benefit of detailed submissions from the parties in relation to the legal issues only touched on in the first judgment. And those submissions have referred the Court to authority that reshapes the contest between the parties. The Court decided not to appoint an accounting expert to undertake calculations in respect of taxation benefits and other adjustments in respect of the calculation of damages.
The issue of the date for the assessment of damages and the other four accounting issues that emerged from the parties' submissions on damages were legal issues that the Court decided it should determine first, so that the scope of any accounting task was defined before it commenced.
Moreover, these four issues first require the Court to address the basis on which damages for breach of contract should be assessed in this case. Application of the legal principles for the assessment of damages for breach of contract provides a straightforward answer to the four issues that the parties isolated for determination in this case.

Principles for the Assessment of the Plaintiffs' Damages

It should be noted in introduction that the plaintiffs' Amended Statement of Claim (at [14]) pleads that ParkTrent has "failed or refused to carry out the terms of the [buyback agreement]" and (at 23) that ParkTrent long had the intention of not honouring it. In the first judgment (at [120]) the Court found that breach of the buyback agreement occurred when ParkTrent failed to respond to the contracts for sale the plaintiffs had sent to it, "shortly after February 2013". The damages hearing was conducted on the basis of this finding of breach. For the purposes of valuing the properties, at the damages hearing, the date of breach was fixed at 1 May 2013.
But the parties do not agree as to the date for the assessment of damages for breach of contract. That question is resolved later in these reasons. This section discusses the principles relevant to that question and wide issues about the scope of the plaintiffs recovery of damages.
As the Court explained in the first judgment, prima facie the measure of the plaintiffs' loss for ParkTrent's breach of its buyback agreement promise starts with the loss of the money consideration the plaintiffs would have received if the buyback agreement had been performed, less the market value (at that time) of the two properties that would have been conveyed to ParkTrent, if it had performed the buyback agreement.
Ordinarily damages should be assessed at the time of the breach of the buyback agreement. Other dates may be justified, if a selection of a different date is necessary to fairly compensate the plaintiff for the wrong suffered.
In the first judgment the Court did not determine the precise date of breach of the buyback agreement. In the first judgment (at [120]) the Court indicated that the time of breach of the buyback agreement may have been "shortly after February 2013, when ParkTrent failed to respond to the contracts of sale sent to it, formally seeking its performance of the buyback agreement".
To answer the questions posed here it is necessary to state the applicable legal principles, to restate the Court's relevant findings and to make any additional findings; and then to apply the relevant principles to the findings.
Applicable Legal Principles. The applicable legal principles may be shortly stated. Where a party sustains a loss by reason of a breach of contract he or she is so far as money can do it, is to be placed in the same situation with respect to damages as if the contract had been performed: Robinson v Harman (1848) 1 Exch 850, at 855; 154 ER 363 at 365, and El Ali v Tritton [2019] NSWCA 111 ("El Ali").
But this general formula should be qualified in several ways: JD Heydon, Heydon on Contract (Lawbook Co, 2019) ("Heydon") at [26.10]. Such modifications relevantly include exclusions due to the remoteness of damage and the duty to mitigate which may make it irrecoverable: Heydon at [26.40).
The law seeks to give the plaintiff the economic value of the performance of the contract at the time when that performance has been promised, hence as a general rule damages for breach of contract are assessed as at the date of breach but the rule will yield in particular circumstances if some other date is necessary to provide adequate compensation and to prevent injustice: Johnson v Agnew [1980] AC 367 ("Agnew") at 401; Johnson v Pérez (1988) 166 CLR 351 at 367, per Wilson, Toohey and Gaudron JJ and Heydon at [26. 220]. Qualification may be assisted by taking into account post-breach events: Heydon at [26. 220].
The general rule is based upon what will be appropriate in the ordinary case of sale, for example of property or shares, where a party may from the date of breach of the contract act upon the knowledge that the party will not receive the property or consideration, which the party had expected to get, and so may proceed immediately, if the party wishes to do so, to obtain similar property elsewhere: Wenham v Ella (1972) 127 CLR 454 ("Wenham") at 467, per Walsh J.
As Keane J explained in Clark v Macourt (2013) 253 CLR 1; [2013] HCA 56 at [108] - [110], the assessment of damages at the date of breach serves an important purpose of bringing finality and certainty to commercial dealings. "[108] The ruling principle governs the assessment of damages, not only in the case of a failure to supply goods in accordance with the requirements of a contract for the sale of goods, but also in a case where, as here, the goods are supplied as an aspect of performance under a contract for the sale of assets of a business. The application of the ruling principle does not depend on characterising the Deed as a contract for the sale of goods. The rule in s 54(3) of the Sale of Goods Act 1923 (NSW), whereby a purchaser is "prima facie" entitled to recover "the difference between the value of the goods at the time of delivery to the buyer and the value they would have had if they had answered to the warranty", is a statutory expression of the ruling principle, but it does not exhaust its operation. [109] The value to be paid in accordance with the ruling principle is assessed at the date of breach of contract, not as a matter of discretion, but as an integral aspect of the principle, which is concerned to give the purchaser the economic value of the performance of the contract at the time that performance was promised. In this way, the measure of damages captures for the purchaser the benefit of the bargain and so compensates the purchaser for the loss of that benefit. [110] The application of the ruling principle to measure value lost at the date of breach of contract serves the important end of bringing finality and certainty to commercial dealings. It ensures that whatever might befall the purchaser after the date of breach, for good or ill, and whether by reason of the purchaser's acumen, or lack of it, in dealing with other persons who were not party to the contract, and whatever movements may occur in the market, these developments have no bearing on the entitlement of the purchaser and the liability of the seller."
The general rule depends upon there being a marketplace in which the wronged party can resell, for example defective goods, or in this case unwanted land. As the High Court explained in Tabcorp Holdings Ltd v Bowen Investments Pty Ltd (2009) 236 CLR 272; [2009] HCA 8 at [13] ("Tabcorp"), citing Ruxley Electronics & Constructions Ltd v Forsyth [1994] 1 WLR 650 at 655; [1994] 3 All ER 801 at 806, the prima facie measure of damages for the supply of defective goods is the difference in value between the contract goods and the goods supplied but that measure of damages seeks only to reflect "the financial consequences of a notional transaction whereby the buyer sells the defective goods on the market and purchases the contract goods". This thereby places the buyer in the same situation as if the contract had been performed, with the loss being the difference in market value. But as the High Court further explained in Tabcorp (at [13]): "However, in cases where the contract is not for the sale of marketable commodities, selling the defective item and purchasing an item corresponding with the contract is not possible. In such cases diminish in value damages will not restore the innocent party to the 'same situation… As if the contract had been performed'".
But situations can arise in which the general rule must give way in the interests of justice, because another approach is necessary to give the plaintiff damages which will appropriately compensate for the breach of contract: Vieira v O'Shea [2012] NSWCA 21 at [45] ("O'Shea"). One example given in O'Shea, is where a plaintiff has acquired an asset which would not otherwise have been acquired and the asset is not readily marketable at the time of acquisition. The rationale for a later date of assessment of loss in such circumstances is that the plaintiff may not have acted unreasonably in retaining the asset.
Situations where the general rule must give way can arise in relation to the sale of land. In Ng v Filmlock Pty Ltd (2014) 88 NSWLR 146; [2014] NSWCA 389 at [55] - [59] ("Ng"), Gleeson JA (Tobias AJA agreeing) emphasised that in some circumstances the general rule may need to be displaced where the subject matter of the sale is real property and he dealt with one example. His Honour said: "[55] The date of breach rule assumes that there is a market in which the innocent party can resell the subject matter of the sale in question (or buy a replacement as the case may be). Where there is no such market, a later date may be appropriate to give the plaintiff an amount of damages which will compensate for the breach of contract: Johnson v Perez at 357; Wenham v Ella [1972] 127 CLR 454 at 467; and Tabcorp Holdings Ltd v Bowen Investments Pty Ltd [2009] HCA 8; [2009] 236 CLR 272 at [13]. [56] Accordingly, I would not exclude the possibility that, in an appropriate case, the interests of justice may require that "the date of breach" rule should not apply and damages may be assessed by reference to a later date, such as the contract price on resale. [57] Two further matters should be mentioned. First, under the standard form of contract for sale of land in New South Wales, provided that the vendor has resold the property within 12 months after the termination, cl 9.3.1 entitles the vendor to recover the deficiency on resale and the reasonable costs and expenses arising out of the purchaser's non-compliance with the contract. In this circumstance, there is no need to resort to any argument concerning the date of breach rule. [58] Secondly, whether a market value may be assessed in the case of land as at 'the date of breach' is ultimately a question of fact. Of necessity, the sale of land will generally require a period to elapse for proper marketing. Unsuccessful attempts by a vendor to resell the property are not determinative as to whether there is no market for the land. Much will depend on the usual method of sale for the land in question having regard to its location, particular characteristics, the range of likely interested purchasers, and the time usually required for proper marketing of land of that type. Expert valuation evidence is likely to have a significant role. [59] It needs to be emphasised that departure from the general rule is not a matter of discretion: Clark v Macourt at [109] (Keane J). A vendor claiming damages assessed at a date later than 'the date of breach' must demonstrate that there are particular reasons on the facts which would make it unjust to apply the prima facie or 'usual' measure of damages."
These statements of Gleeson JA in Ng at [55] - [59] were cited with approval in El Ali at [46], (Payne JA, Macfarlan and Leeming JJA agreeing).
The decision of the House of Lords in Agnew is an example of the displacement of the general rule with respect to the sale of real property. It was a case in which the purchaser failed to complete the sale of land contract and the vendor successfully obtained an order for specific performance. The purchaser failed to comply with that order and the mortgagee of the land sold it to a third party for a price that was lower than the original contract price. The vendor later applied to the court for dissolution of the order for specific performance and in lieu thereof an award of damages. The House of Lords held the damages should be assessed as at the date the remedy of specific performance was aborted and the contract was lost, because the vendor had acted reasonably in pursuing the remedy of specific performance. The reasoning of the House of Lords on this subject is set out in the following passage (at p 400-401): "(2) The general principle for the assessment of damages is compensatory, i.e., that the innocent party is to be placed, so far as money can do so, in the same position as if the contract had been performed. Where the contract is one of sale, this principle normally leads to assessment of damages as at the date of the breach - a principle recognised and embodied in section 51 of the Sale of Goods Act 1893 . But this is not an absolute rule: if to follow it would give rise to injustice, the court has power to fix such other date as may be appropriate in the circumstances. In cases where a breach of a contract for sale has occurred, and the innocent party reasonably continues to try to have the contract completed, it would to me appear more logical and just rather than tie him to the date of the original breach, to assess damages as at the date when (otherwise than by his default) the contract is lost. Support for this approach is to be found in the cases. In Ogle v. Earl Vane (1867) L.R. 2 Q.B. 275; L.R. 3 Q.B. 272 the date was fixed by reference to the time when the innocent party, acting reasonably, went into the market; in Hickman v. Haynes (1875) L.R. 10 C.P. 598 at a reasonable time after the last request of the defendants (buyers) to withhold delivery. In Radford v. De Froberville [1977] 1 W.L.R. 1262, where the defendant had covenanted to build a wall, damages were held measurable as at the date of the hearing rather than at the date of the defendant's breach, unless the plaintiff ought reasonably to have mitigated the breach at an earlier date. In the present case if it is accepted, as I would accept, that the vendors acted reasonably in pursuing the remedy of specific performance, the date on which that remedy became aborted (not by the vendors' fault) should logically be fixed as the date on which damages should be assessed. Choice of this date would be in accordance both with common law principle, as indicated in the authorities I have mentioned, and with the wording of the Act 'in substitution for … specific performance'."
The assessment of damages in this case involves several potential heads of loss. It involves a lot of the expected benefit under the buyback agreement: often described as "expectation damages": Heydon at [26. 270]. And may also involve wasted expenditure uselessly incurred in performing the contract caused by the other party's breach, which are often called "reliance damages": Heydon at [26.280]. Where in the course of performance of the contract breached by the defendant the plaintiff actually and reasonably incurs liabilities to third parties or makes payments to third parties which would not have been incurred or made but for that breach and the plaintiff terminates the contract for breach the plaintiff can recover damages to meet the liabilities or payments: TC Industrial Plant Pty Ltd v Roberts Queensland Pty Ltd (1963) 180 CLR 130. A plaintiff will ordinarily bear the burden of establishing the making of payments to third parties. But any value flowing to a plaintiff from the liability incurred or payment made it goes in reduction of damages the burden of which lies on the defendant: Heydon at [26.450].
But important controls exist on the recovery of damages two of which are relevant in this case, the controlling factors of causation and remoteness of damage. It is not necessary in this case to consider other controls on the recovery of damages such as contributory negligence or mitigation of loss.
As to causation, it is a precondition to the recovery of non-nominal damages for breach of contract that there be a causal connection between the breach and the plaintiff's loss: Heydon at [26.510]. That is, or can be, a question of fact on which the plaintiff bears the burden of proof: Chappel v Hart (1998) 195 CLR 232; [1998] HCA 55 at [93]; and Heydon at [26.510]. The question of fact must be determined by a value judgment involving ordinary notions of language and common sense: March v E & MH Stramare Pty Ltd (1991) 171 CLR 506 at 524, per Deane J; and Heydon at [26.510].
As to remoteness of damage, the rule in its classic form, being constituted of two limbs, was stated by Baron Parke in Hadley v Baxendale (1854) 9 Exch 341 ("Hadley") at 354; 156 ER 145 at 151. "Where two parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract should be such as may fairly and reasonably be considered either arising naturally, ie, according to the usual course of things, from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it."
In Wenham (at 471), Gibbs J cited with approval Lord Reid's exposition of this rule, in C. Czarnikow Ltd v Koufos [1969] 1 AC 350 at 385, which synthesised it into a single principle, as follows: "The crucial question is whether, on the information available to the defendant when the contract was made, he should, or the reasonable man in his position would, have realised that such loss was sufficiently likely to result from the breach of contract to make a profit to hold that the loss flowed naturally from the breach or that loss of that kind should have been within his contemplation."
In Wenham (at 466) Walsh J pointed out that the purpose of the principles laid down in Hadley is to achieve the result which he identified in the following way when commenting upon an argument propounding too rigid an application of rules which were intended only as guidance: "In my opinion the error that is contained in the arguments for the appellants consists in treating rules which constitute useful guidance in the ascertainment of damages as rigid rules of universal application, instead of treating them as prima facie rules which may be displaced or modified whenever it is necessary to do so in order to achieve a result which provides reasonable compensation for a breach of contract without imposing a liability upon the other party exceeding that which he could fairly be regarded as having contemplated and been willing to accept."
A range of views exist as to whether damage which is capable of being held too remote is a question of fact, or of law or of mixed fact and law: Heydon at [26.560]. But that is not a matter that needs to be decided in this case.

Some Additional Findings Relating to Damages Issues

The parties have filed additional evidence, which allows the Court to make further findings beyond those in the first judgment about events and matters relating to damages.
During several directions hearings held after the first judgment and during 2021, the Court permitted the parties to adduce evidence about the market value of each of the Kingaroy property and the Bundoora property as at the date of breach in May 2013 and as at the present time. ParkTrent submitted the plaintiffs had not advanced evidence as to their claimed loss. But the Court permitted the adducing of valuation evidence at various dates as this seemed to be the fairest course in the circumstances. The parties were in contest as to whether May 2013 or the date of the hearing was the correct date for assessing the plaintiffs' loss and it was appropriate for the parties to be able to contest valuation evidence at both dates, something which it was not realistic to do at the principal hearing in October - November 2019. Some valuation evidence had been adduced by the time of that hearing and is referred to in the first judgment (at [92]). But by the time of the damages hearing that evidence was out of date and it did not cover the alternative valuation date of May 2013.
In the first judgment the Court directed the parties to consult with one another to isolate the further issues for determination in the damages hearing. That consultation was unsatisfactory and on 23 February 2021 the Court made further directions for a more disciplined consultation process to occur.
To save the parties costs in relation to a valuation issue which should not ultimately have been contentious, on 26 April 2021 the Court appointed pursuant to UCPR, r 31.37(1) two valuers (one each for the Kingaroy property and the Bundoora property) as Court experts to value the properties as at 1 May 2013 and 21 April 2021. The first date was a nominal date close to the date of breach of the buyback agreement. The second date was a nominal date close to the Court's determination of the assessment of damages. The Court directed the experts to provide written reports and directed the parties to exchange submissions in relation to those reports.
The solicitors for the plaintiffs became the primary point of contact with the experts to engage them to undertake their tasks. But upon delivery of the reports, the Court permitted the solicitors for ParkTrent to put questions to the experts in relation to the valuations. These questions and their answers are dealt with below.
Ms Rizabelle Sarenas of Valuations Vic, a division of the Valuation and Advisory Group (Australia) Pty Ltd was appointed as Court expert to value the Bundoora property. Ms Serenas valued the Bundoora property as at 1 May 2013 at $325,000 and as a 22 April 2021 at $420,000. The Court has reviewed her valuations and is satisfied that it should adopt them as the market value of the Bundoora property at each of those dates.
ParkTrent challenged her valuations seeking an explanation as to "precisely why" she did not value the Bundoora property in the range $340,000-$350,000, rather than at $325,000 as at 1 May 2013. Pursuant to the Court's directions on 15 July 2021 ParkTrent took advantage of the procedure available under UCPR, r 31.41 to seek clarification of her report and its rights were reserved to cross examine her depending upon her answer. But once her clarification was received ParkTrent did not seek to cross examine her on her report.
Ms Serenas answered ParkTrent's challenge to the Court's satisfaction in respect of both valuation dates. She explained that she did not value the Bundoora property in the $340,000 - $350,000 range as at 1 May 2013. She pointed out that an almost identical property in the same street was sold for $325,000 in April 2013. And she regarded a valuation of $340,000 as falling outside the market parameters of value per square foot that all the market evidence she had collected indicated for the Bundoora property at that date.
ParkTrent also suggested that when reaching her April 2021 valuation that Ms Serenas should examine four other potentially comparable properties. Ms Serenas examined each of the properties suggested and gave her opinion based on a clear explanation of their differentiating factors from the Bundoora property that each of them was not comparable to it. She maintained, and the Court accepts, her $420,000 valuation as at 22 April 2021.
Mr Blair Patterson Fuller of IPN Valuers of Noosaville Queensland was appointed as Court expert to value the Kingaroy property. Mr Fuller valued the Kingaroy property as at 1 May 2013 at $260,000 and as at 21 April 2021 at $275,000. The Court has reviewed his valuations and is satisfied that it should adopt them as the market value of the Bundoora property at each of those dates.
ParkTrent challenged Mr Fuller's valuations but the Court adopted the same procedure under UCPR, r 31.41 to allow it to seek clarification of Mr Fuller's reports. But again, as with Ms Sarenas, ParkTrent did not seek to cross examine him on his report.
Mr Fuller also clearly answered ParkTrent's challenge to the Court's satisfaction. ParkTrent suggested, based on a Raine and Horne letter of 18 February 2021 that the Kingaroy property had an estimated sale value of $285,000 -$295,000 as at May 2013. But Mr Fuller rejected that on the basis that "the most comparable sales data and market conditions at the time did not support a figure within that value range". ParkTrent also asked him to examine sales of nominated properties in the area between June 2012 and March 2013 but Mr Fuller regarded the suggested comparable sales as superior to the Kingaroy property.
ParkTrent asked Mr Fuller to examine four additional April - May 2021 sales in the range $310,000 - $355,000 of properties that it suggested were comparable to the Kingaroy property. But Mr Fuller maintained his opinion that the 21 April 2021 valuation of the Kingaroy property was $275,000. He considered that each of these four additional properties was superior in some respect in comparison to the Kingaroy property and that none of them was comparable to it. The Court accepts this evidence.
The Court received further evidence in relation to the income and outgoings of the Kingaroy property and the Bundoora property between May 2013 and 2020. But it is not necessary to examine that evidence for the purposes of these reasons, which only consider general categories of income and expenditure. The parties should be able to use these reasons to calculate the plaintiffs' losses from that evidence.

The Plaintiffs' Claim for Damages and the Assessment Date

Applying these legal principles to the findings in the first judgment and the additional findings assists in determining the date for assessment of the plaintiffs' claim for damages. The the four issues for determination are individually addressed.
As the Court found in the first judgment, the buyback agreement was probably breached some time shortly after February 2013 when ParkTrent failed to respond to the contracts of sale sent to it. A reasonable time for ParkTrent to respond is approximately three months. That was the grace period that Mr Liggins allowed before he followed up Ms Mangan in mid-May 2013 to ascertain whether the forwarded contracts would be signed: first judgment at [79] - [83]. ParkTrent breached the buyback agreement in about mid May 2013.
Prima facie, the plaintiffs are entitled to damages at the date of breach measured by the money consideration they would have received if the buyback agreement had been performed less the value (at that time) of the Kingaroy property and the Bundoora property that would have been conveyed to ParkTrent. There are issues as to whether the plaintiffs have established damages as at that date, but the principle of recovery as at that date is not seriously in contest.
But the plaintiffs' claim for losses after that date is more controversial, as is the question of how any such losses should be measured. The plaintiffs say that they should be able to recover the expenses they incurred from holding the two properties after ParkTrent's refusal to complete, and the expenses should be recoverable at least up to the date of the hearing of these proceedings. ParkTrent says that the plaintiff cannot recover such expenses and in any event their claim for such expenses is valueless, because the claimed expenses are outweighed by the benefits they received from holding the two properties after mid-May 2013.
In Wenham (at 465), a case involving a vendor's failure to convey shares and interest in land by a due date, Walsh J presented this kind of problem as one in which ordinarily there would be "no warrant for allowing what would amount in effect to damages for delay in performing the contract, as well as damages for the failure to perform it at all". But he made clear that in his opinion such damages could be recovered, provided they "were capable of being regarded as within the contemplation of the parties".
Issues of causation and remoteness must be considered in relation to the plaintiffs' claims for outlays during the period after mid-May 2013 during which they held both properties.
The important relevant feature of this case is that despite ParkTrent's refusal to complete in mid-May 2013, occasioning breach, the plaintiffs continued to insist on performance of the contract, ultimately pursuing the remedy of specific performance. They did so less than vigorously, so that a decree of specific performance was denied to them on discretionary grounds. But they did not elect to terminate the contract and sell the two properties elsewhere at the best price they could obtain. Their continued holding of the two properties is explained by the requirement for them to be ready, willing, and able to perform the buyback agreement.
As to causation, the argument against the plaintiffs recovering any expenses they incurred in relation to the two properties after mid-May 2013 is that the plaintiffs were free to go into the marketplace and sell the Kingaroy property and the Bundoora property at market value and recoup their losses by pursuing ParkTrent for the difference between the market value thereby obtained and the consideration promised under the buyback agreement. Therefore, holding the properties any longer was their own choice and was not caused by ParkTrent's breach of contract.
Theoretically, they were free to do this. But not in reality, because selling the properties would have been inconsistent with their decision to affirm the contract and to seek specific performance. To take the course they did, they needed to continue to hold both properties.
But if the plaintiffs' decision to pursue specific performance was an unreasonable one, then it is difficult to infer any causal relationship between ParkTrent's breach of contract and these expenses. Apart from qualifying them to seek specific performance, there was no other justification for the plaintiffs to continue to hold either of these two properties. There is no evidence that either of these two parcels of land could not find a ready market in mid-May 2013.
The plaintiffs' decision to seek specific performance was reasonable, even though they were unsuccessful in gaining a decree in the first judgment. Their claim was well arguable. The subject matter of the contract was real estate. After ParkTrent's breach they had maintainable rights in Equity to seek specific performance. They faced a single discretionary defence, delay causing prejudice to ParkTrent. They had some excuses for their delay, their relationship difficulties. It cannot be said that their decision to seek and then continue to seek specific performance of the buyback agreement was unreasonable. ParkTrent did not signal that it suffered any other supervening obstacle to specific performance. On the contrary, ParkTrent's early correspondence encouraged the idea that it would perform the buyback agreement. Consequently, the plaintiffs' decision to hold both properties until the determination of their specific performance suit was reasonable and any losses they suffered as a result of holding the properties were caused by the plaintiffs' breach.
As to remoteness, it should hardly be surprising to either party to this contract for the sale of land that the plaintiffs would seek specific performance, if ParkTrent did not honour the buyback arrangement. To use the language of the cases on remoteness, (see Wenham at 471, per Gibbs J) such a thing was "a serious possibility" or "not unlikely" to occur. Indeed, it was quite likely to occur with this contract because the plaintiffs had gone to the additional trouble of securing the buyback agreement before they completed the acquisition of the two properties. This strongly indicates that they were attracted by the value and convenience of reselling to ParkTrent through the buyback agreement, rather than taking their chances in the broader marketplace. But any losses suffered after the correct date for assessment of damages would be too remote. The next question is what is that date?
The House of Lords decision in Agnew (at p 400-401) gives close guidance to the Court as to the correct date for the assessment of damages in this case. These proceedings present an analogous situation to that faced by the vendor in Agnew. Here, as in Agnew, the purchaser failed to complete contracts for the sale of land. But in Agnew the vendor was successful in obtaining a decree and ultimately sought its dissolution and pursued damages in lieu due to the purchaser's non-compliance with the decree. Here the vendor was unsuccessful in obtaining the decree.
But success in obtaining a decree in specific performance is not the touchstone for deciding whether to displace the general rule about the time for assessment of damages in an action against a purchaser of land in breach of contract. It is sufficient that the plaintiff has sought specific performance. As O'Bryan J explained in McKenna v Richey [1950] VLR 360 at 372, in a passage cited in Agnew (at p 397), once it is clear that the plaintiff cannot have specific performance, whether that is before or after the decree, the plaintiff can pursue an alternative remedy in damages.
In substance, the party who commences specific performance is submitting the dispute to the Court in its equitable jurisdiction: Ogle v Comboyuro Investments Pty Ltd (1976) 136 CLR 444; [1976] HCA 21 ("Ogle") at 461-462 (per Gibbs, Mason and Jacobs JJ). In the exercise of that jurisdiction, a party who has sought specific performance but who is faced by a defendant who has by his conduct shown and continues to show an intention never to complete the contract, the first party may be permitted by the Court to rescind and seek damages for repudiation: Ogle at 461-462. Although the nature of the breach here was not analysed in the parties' submissions, ParkTrent's conduct was of that character: see Carr v JA Berriman Pty Ltd (1953) 89 CLR 327 at 349-350. In substance, that is what is happening here, once specific performance was refused and the plaintiffs continued their claim for breach of contract.
As Agnew itself states, the question of the time for assessment depends on whether the vendor has acted reasonably in pursuing the remedy of specific performance. The vendor's lack of success in obtaining a remedy can indicate unreasonableness in pursuing it. But it is not the only indicator. And here, despite the plaintiffs' lack of success in the first judgment, for the reasons given their pursuit of the remedy was nevertheless reasonable.
And Agnew indicates that if it was reasonable for the plaintiffs to await the outcome of the remedy of specific performance then the appropriate date for assessment of damages can be the date that the remedy was denied. That is the date of the first judgment, 25 August 2020. In the Court's view, that is the date at which damages should be assessed in this case.
That date is approximately eight months away from the date that the Court experts have been asked to assess the value of the two properties. That outcome is regrettable, but it is not the fault of either party. Rather it is the consequence of the Court ordering the production of the expert evidence before the precise date for assessment was clear. But the parties disagreed about many damages issues and getting clarity at an early stage about the range of their disagreements was also important.
But without much further expenditure on the part of either party there may be a ready solution to this. A comparison of the valuations in the first judgment and the valuations of the Court appointed experts are close to 25 August 2020 and, fall within a reasonably narrow period, October 2019 and April 2021. And there is only modest variation in the valuations within that period. In respect of the Bundoora property the 25 October 2019 valuation is $405,000 and the 21 April 2021 valuation is $420,000, a difference of only $15,000. It should be possible for the parties to reach agreement about the valuation of the Bundoora as at 25 August 2020 without further contest. If an agreement is not reached about this differential, the parties will need to explain to the Court why in the age of Civil Procedure Act 2005, ss 56 and 57 they should be permitted to argue about a differential which represents only 3.6% ($15,000 divided by $420,000 x 100) of the value of the Bundoora property.
Similar logic applies to the valuation of the Kingaroy property. The 25 October 2019 valuation for that property is $235,000 and the 21 April 2021 valuation is $275,000, a slightly wider range of $40,000 than for the Bundoora property. Although this represents 14.5% ($40,000 divided by $275,000 x 100) of the value of the Kingaroy property, it is still not a wide margin and one that calls for compromise to avoid the misallocation of resources.
It is premature for the Court to calculate damages. That will await the parties' calculations. But if the approach suggested above were to be taken, and the calculation of the plaintiffs' outgoings and benefits for the period 1 May 2013 to 25 August 2020 were deferred, the primary damages assessment would be as follows. The Bundoora property was to be resold to ParkTrent for $396,000 if the buyback agreement had been performed but at 25 August 2020 it was worth $412,500 the plaintiffs have suffered no loss. Indeed, on any of the competing views as to the market value of the Bundoora property between October 2017 and August 2020 the plaintiffs would have suffered no loss, before outgoings and benefits are taken into account.
As to the Kingaroy property it could have been sold to ParkTrent for $369,000. In August 2020 it may have had a market value of $255,000, representing a loss of $114,000, excluding consideration of expenses.

A Note on Lord Cairns Act Damages

The plaintiffs might have framed their claim for damages under Lord Cairns Act but the outcome would be no different.
Courts of Equity have had the power to award damages since the passing of Lord Cairns Act in 1858, which was later reproduced in New South Wales as the Equity Act 1880 and now exists in the Supreme Court Act 1970, s 68. The introductory words of s 68, "where the court has the power… to order the specific performance of any covenant contract or agreement… the Court may award damages to the party injured", have led to a debate about the scope of section: Wentworth v Woollahra Municipal Council (No. 2) (1982) 149 CLR 672 and see JD Heydon, MJ Leeming and PG Turner, Meagher, Gummow & Lehane's Equity: Doctrines & Remedies (5th ed, 2014, LexisNexis Butterworths).
The narrow view of Lord Cairns Act damages, exemplified by ER Daniell, Daniell's Chancery Practice (5th ed, 1871, Stevens & Sons, London) and decisions such as Boyns v Lackey (1958) SR (NSW) 395, at 505 is that damages will be declined if equitable relief is not awarded. On this view, as the Court has declined specific performance, Lord Cairns Act damages must also be declined here.
The broader view of the availability of Lord Cairns Act damages, affirmed by Palmer J in Mills v Ruthol Pty Ltd (2004) 61 NSWLR 1; [2004] NSWSC 547 at [61], and favoured by the learned authors of JD Heydon, MJ Leeming and PG Turner, Meagher, Gummow & Lehane's Equity: Doctrines & Remedies (5th ed, 2014, LexisNexis Butterworths) at [24 - 035] is that the Court will have power to award damages, if at the date proceedings are commenced the Court could but not necessarily would have decreed specific performance. On this broader view, also supported by O'Bryan J's judgment in McKenna, the Court would have the power here to award Lord Cairns Act damages in a case such as the present, notwithstanding the plaintiffs' failure to obtain a decree of specific performance.
Assessment of damages for breach of contract in accordance with common law principles as at the date of breach here leads to a clear outcome, which is capable of ready calculation. No obvious reason exists here why the assessment of damages under Lord Cairns Act would be any different.
These reasons now deal with the four issues for determination.
The result which the Court has reached here is different from that set out in the first judgment (at [153] - [155]). The parties' submissions in relation to these four issues tended at times to treat the Court's first judgment as an existing determination of how damages should be calculated. But the Court made clear in the first judgment (at [152]) that the Court was "yet to hear full submissions on the matter of damages" and described the subsequent paragraphs as a "possible analysis of how damages should be assessed" (emphasis added).

(1) Benefits received by the plaintiffs under the NRAS

The defendant initially contended that the whole, or in the alternative part, of the benefits received by the plaintiffs under the Commonwealth NRAS, or the similar State schemes in Queensland or Victoria, should be deducted from the claims made by the plaintiffs for damages over the financial years between FY13 and FY20. The plaintiffs at first resisted this contention but later accepted it. The plaintiffs then argued that a reduced amount of the actual NRAS benefit should be brought to account, because the plaintiffs had to forgo market rent in order to receive the benefits of the NRAS scheme. ParkTrent opposed this contention.
The plaintiffs accept that the NRAS incentives received in respect of the Kingaroy property should reduce the plaintiffs' damages. This submission seems only to be put in respect of the Kingaroy property. But if required, the same logic would apply to the Bundoora property.
The plaintiffs' submissions set out the dual components of the NRAS scheme, which impacted upon the plaintiffs' tax returns in each financial year. These were the following: (1) a Commonwealth component, provided as a "tax offset" within the meaning of that term in the Income Tax Assessment Act 1997 ("ITAA 1997"), ss 995-1 and 4-10; and (2) a State government component in the form of a direct financial payment; this latter component does not form part of the recipient's assessable income and is not reflected in the plaintiffs' tax returns: ITAA 1997, s 380-35.
The plaintiffs accept that the Commonwealth component of the NRAS scheme is not, for tax purposes to be treated as a deductible expense, reducing the recipient's taxable income. Rather it is to be treated as a "tax offset" reducing the amount of income tax the recipient otherwise pays by the amount of the offset: ITAA 1997, ss 380-10(1) and 4-10(3). The plaintiffs acknowledge that the relevant benefit to be brought to account is the NRAS tax offset applied (the Commonwealth component) and payment received (the State component).
The plaintiffs argue that they should not have to deduct from their damages claims the full benefits they have received under the NRAS scheme. They contended that the amount of the deduction should not include market rent forgone due to their participation in the NRAS schemes. They developed their argument in the following way: "10. Nevertheless, the Plaintiffs contend that a lesser part of the full benefits received under the NRAS Scheme should be deducted from the claims made by the Plaintiff in the calculation of damages. That is because in order to receive the NRAS incentives Mr Liggins was required to let the Kingaroy property for rent at only a maximum of 80% of the Kingaroy property's market value rent: namely, at a price at least 20% less than the market value: Regulation 16(1C)(b) National Rental Affordability Scheme Regulations 2008; Regulation 12(1) National Rental Affordability Scheme Regulations 2020. 11. That is relevant to what proportion of the NRAS benefits received should be deducted from the damages. It would be artificial and unsound to reduce the claim for Plaintiffs damages simply by the amounts of the NRAS benefits received without taking account of the loss/price paid in each year in order to receive those benefits. 12. The loss/price paid is able to be appropriately measured. Mr Liggins' Tax Returns disclose the total rent received in each financial year from the letting of the Kingaroy property. Those annual rent figures are only, at the absolute maximum, 80% of what would have been achieved or achievable had the Kingaroy property not been part of the NRAS (by reason of which the NRAS incentive was then received). 13. In that way the Plaintiffs contend that a lesser part of the full benefits received under the NRAS Scheme should be deducted from the claims made by the Plaintiff in the calculation of damages with the overall calculation taking account of the rent foregone in order to receive those benefits. Precise calculations could be addressed subsequently (DS at [22) takes the same approach)."
The plaintiffs' submissions note that the NRAS incentive is only available for 10 years and would cease at the latest at the end of FY22. But for the reasons analysed earlier, the plaintiffs' claim must be assessed before that, as at 25 August 2020, shortly after the start of FY21.
ParkTrent's submissions in answer to this claim are persuasive. The Court's reasoning below accepts ParkTrent's submissions.
First, the plaintiffs did not lead any direct evidence as to the actual market rental of the Kingaroy property that they contend has been forgone since May 2013. The plaintiffs say that the quantum of this rent can be inferred from the requirement under the applicable regulations that the Kingaroy property could only be rented at a maximum of 80% of the market rent. But the existence of the regulations does not itself prove that any rent was actually forgone. It only proves what was the plaintiffs' obligation.
Despite a legal obligation on the plaintiffs to rent only to a maximum of 80% of the market rent a prospective landlord must still encounter actual market conditions. It may be that the plaintiff could not have obtained a market rent in any event. The plaintiffs' objective may have been to rent at 80% of market value but due to some quirk of the market the rent achieved was the only rent that could be obtained at that time. In such a case the plaintiffs would not have forgone any rent. It is not possible to reverse engineer an obligation to rent at 80% of market rent to infer that the rent actually achieved must always be 80% of market rent.
Moreover, damages for breach of contract are assessed on the basis of actual benefits received, less actual benefits gained, based upon the bargain actually made by the plaintiffs. The benefits received in the form of NRAS tax offsets and payments were part of an overall compact that the plaintiffs made to acquire and let the properties in circumstances where part of the landlord's leasing risk would be underwritten by the Commonwealth and the States. The plaintiffs gained the certainty of the NRAS benefits to reduce the risk of not being able to lease the property. But these benefits always came at the price of receiving a slightly lower rental. The two only exist together. It is not possible to say that any market rent was "forgone", when the plaintiffs' decision to lease under the NRAS scheme gave a measure of certainty to a potential lessor, incentivising the leasing of an otherwise unleased property.
Finally, to invite consideration of rent allegedly forgone is to invite an entirely hypothetical assessment of the plaintiffs' alleged damage, divorced from the transactions that the Court has found plaintiffs entered. The basis of the plaintiffs' purchase of these two properties was that NRAS benefits were to be received, with all the financial consequences that came with such a purchase. To point to rent "forgone" is to ask the Court to examine a purchase that would be quite different from the one that the plaintiffs have established in these proceedings.

(2) Deduction of allowances for depreciation

ParkTrent contends that the allowances for depreciation of the buildings on the Bundoora property and the Kingaroy property (disclosed as having been claimed in the plaintiffs' tax returns for FY13 to FY20) should be wholly or partly eliminated from the plaintiffs' calculation of damages, thereby reducing the plaintiffs claimed loss.
The plaintiffs resist this contention and say that building depreciation as claimed by them should be brought to account as part of their damages claim. They put the following submissions: "15. Once the value of the properties as at 1 May 2013 is determined (and the difference between the respective contract prices and those values is determined) the most appropriate measure of the balance of the Plaintiffs' loss suffered by retained ownership of the properties is the loss declared in each Tax Return, identified by the "Net rent" position for each financial year (subject to accounting for concomitant tax benefits from tax losses and the NRAS benefits): Judgment at [154]. 16. In relation to this issue and the depreciation of the buildings as disclosed in the Plaintiffs' Tax Returns, the relevant figures are identified by the "Capital works deductions" in each Tax Return: see generally Division 43 of the ITAA 1997. 17. Contrary to OS [20] the "Net rent" position for each financial year is indeed a real measure of actual loss in each year. A description of the "Net rent" position disclosed in the Tax Returns as merely an "accounting loss" ignores the fundamental principle underpinning depreciation as a genuine expense (loss) incurred to be taken into account on profit/loss. 18. Whilst depreciation is not an item that has a direct impact on cash flow (and to that extent is a "non-cash item'') depreciation represents a (proper) systematic allocation of the amount expended on an asset over that assets useful life; put another way, an allocation of the cost of the use of the asset during the period in question. It is indeed a proper measure of a cost incurred by the Plaintiffs from retained ownership of the properties after May 2013: see, for example, Australian Accounting Standard 116, made under s 334(1) of the Corporations Act 2001."
The plaintiffs' submissions are predicated upon an assumption that the assessment of damages would be calculated as at 1 May 2013. But the submissions equally apply in relation to an assessment of damages as at 25 August 2020.
ParkTrent seeks to answer these submissions in several ways. First it submits that depreciation is a non-cash accounting item. It is a not a loss actually suffered by the plaintiffs as a result of their continued ownership of the two properties, even though it generated tax savings for the plaintiffs as a deductible expense, or an offset as a benefit for tax purposes. Depreciation can be an allowable expense for the purposes of claiming tax deductions. But that does not make it an actual loss recoverable as damages for breach of contract. The acceptance of depreciation as part of the Australian Accounting Standards does not support the plaintiffs' contention that depreciation should be treated as a cash loss.
Second, ParkTrent points to authority on this subject, which commonly adds back or disregards depreciation in calculating actual loss, damage or economic value. ParkTrent referred the Court to Van Zonneveid v Seaton [2004] NSWSC 1223 at [24], ("Van Zonneveid") Campbell J (as his Honour then was), a case that considered depreciation issues in a claim for adjustment of property interests between former de facto partners under the Property (Relationships) Act 1984. In order to assess the plaintiff's earnings from his assets, a home unit, Campbell J added back depreciation to the net profit or loss that the plaintiff had declared for tax purposes, declaring "no matter how property depreciation charges might be for accounting calculations of profit or loss, they are not an immediate cash expense" (at [24]). ParkTrent also referred to Pacific National (ACT) Ltd v Queensland Rail [2006] FCA 91 at [847]-[850] ("Queensland Rail") Jacobsen J said that expert evidence excluding depreciation from a calculation of detriment as an element of an estoppel claim, was a proper exclusion in the circumstances.
But Park Trent's submissions are not persuasive. First, it is too simplistic to say, as ParkTrent does, that depreciation is a non-cash accounting item and therefore it is not a loss suffered and claimable in an action for breach of contract. Both sides rightly accept that the rent the plaintiffs received for the two properties should be brought to account as a benefit in reduction of the plaintiff's claim for damages. But the plaintiffs could not have earned that rent in each accounting period between FY13 and FY20 without the buildings being located on the two properties (as distinct from the land itself) and without those buildings actually being occupied, used and suffering wear and tear and deterioration in the process. And the Australian Accounting Standard recognises that an allowance for the effect that usage is appropriate in financial accounts, quite apart from what might be recognised for taxation purposes.
Second, it is difficult to understand why depreciation of the buildings would not be brought to account as part of the plaintiff's claim. The usual argument not to allow a particular accounting item in damages in contract is that it may involve double counting. The corollary of the principle in Robinson v Harman that a plaintiff is not entitled by the award of damages upon breach to be placed in a superior position to that which he or she would have been in had the contract been performed: Commonwealth v Amman Aviation Pty Ltd (1991) 174 CLR 64 at 82; [1991] HCA 54; and Capello v Hammond & Simmons NSW Pty Ltd [2021] NSWCA 57. Recognising depreciation in the plaintiffs' financial accounts for each financial year does not involve double counting for that financial year.
And there is no double counting by reason of the valuation of the properties as at 25 August 2020. The recognition of depreciation on buildings in the Australian Accounting Standards means that buildings subject to allowable building depreciation carry the benefit of those allowances regardless of the values at which the buildings are sold: W Lonergan, The Valuation of Businesses, Shares and Other Equity (4th ed, 2003, Allen and Unwin, Sydney) at 647. Thus, allowing depreciation in the financial years between FY13 and FY20 would not lead to double counting in relation when the properties were valued for damages purposes as at 25 August 2020.
Third, the need to bring depreciation to account in respect of assets used to earn income, where the income is also being brought to account, is well recognised for example in the field of business interruption insurance: Synergy Health (UK) Ltd v CGU Insurance Plc [2010] EW HC 2583 (Comm); D Glynn and T Rogers, Riley on Business Interruption Insurance (11th ed, 2021, Sweet and Maxwell - Thomson Reuters) at [13.38]. Although the wording of individual policies may break the link: Mobis Parts Australia Pty Ltd v XL Insurance company SE [2018] NSWCA 342; (2018) 363 ALR 730.
Fourth, neither Van Zonneveid nor Queensland Rail is a case in which a claim for damages for breach of contract is considered. Neither case contains any analysis of applicable principles. And Van Zonneveid seems to have been directed to ascertaining the cash position of the parties rather than any more complex accounting.
The building depreciation that the plaintiffs' claim in their tax returns on the Bundoora property and the Kingaroy property should be brought to account as part of their damages claim.

(3) Allowances for potential future tax savings in financial years after FY20

ParkTrent initially contended that an allowance should be made in reduction of the plaintiffs' calculation of damages for breach of contract, for their potential future tax savings in financial years after FY20, because of their continued ownership of the subject properties. The plaintiffs resisted this contention.
The Court's application of Agnew here means that ParkTrent's submission would have had to be rejected in any event. The assessment of damages as at the date of the first judgment, on 25 August 2020, when specific performance became unavailable, means that the Court should not consider any benefits to or outlays by the plaintiffs after that date.
The parties advanced various alternative contentions were the Court to allow the present-day value of potential future tax savings in financial years after FY20 to be taken into account against the plaintiffs. For example, the plaintiffs submitted that an appropriate period into the future to consider the effect of tax savings was three years, with a discount of approximately 30 per cent. ParkTrent advanced an argument that it should be a five-year period into the future. But the Court does not now need to consider any of those arguments. Rather they illustrate the imprecision involved in speculating about whether there would be future tax savings.
The plaintiffs' primary contention is therefore accepted: the Court will not take into account the present value of the plaintiffs' potential future tax savings due to their continued ownership of the properties, as their damages are being assessed as at 25 August 2020.

(4) Allowances for Capital Gains FY13-FY20

The parties agreed that no allowance should be made in the calculation of damages for the potential future capital gains in financial years after FY20. But they addressed the following capital gains issues for the period FY13 to FY20 in their submissions: (a) should capital gains on the two properties, if any, be taken into account from May 2013; and, (b) if so, should potential capital gains tax be taken into account as if upon a notional sale of the properties.
The answer to both these questions is straightforward. As the plaintiffs submit, neither the Kingaroy property nor the Bundoora property was sold between 1 May 2013 and 25 August 2020. Whatever be the capital gain or capital reduction during this period, it has not been realised through a sale. No capital gains tax has been incurred during that period. It is not necessary to infer a putative sale, attracting capital gains tax, to make a proper assessment of damages, in circumstances where a sale has not taken place and there is no evidence that a sale will take place.
But capital gains and losses are not irrelevant here and will be considered in the plaintiffs' damages calculations as at 25 August 2020. As the illustrated sample calculation earlier in these reasons shows, the plaintiffs' damages as at 25 August 2020 will include the effect on the plaintiffs' financial position of capital gains and losses between the date of the buyback agreement and 25 August 2020.
But the incidence of capital gains tax in relation to either of these properties in the circumstances that have been found by the Court can be ignored.

Conclusions and Orders

In addition to the Court's answers to these four questions the Court has determined the date at which the assessment of damages should occur. If any party wishes to formalise this determination into the form of a declaration draft minute of the declaration should be sent to my chambers before the matter next returns to Court.
As a result of the determination of these four issues, each party should be able to bring in an agreed damages calculation, or if agreement is not possible, they should bring in their competing damages calculations. The Court will direct that to occur. Once the final calculation of damages is known the Court can consider submissions for costs orders. The parties should provide to the Court an agreed timetable for the consideration of costs submissions.
For these reasons the Court makes the following orders and directions. 1. Order pursuant to Uniform Civil Procedure Rules 2005 ("UCPR"), r 7.10(2)(a) that these proceedings continue in the absence of a representative of Mr Liggins' deceased estate; 2. List the proceedings for further directions on 5 April 2022 at 9am, or such other mutually convenient date as the parties may arrange with the Associate to Slattery J; 3. Direct the solicitors for the plaintiff to obtain instructions and to report to the Court at the directions hearing on 5 April 2022 about a proposal for the making of orders under UCPR, r 7.10(2)(b) for someone to be a representative of Mr Liggins' estate for the balance of the proceedings; 4. Direct the parties to provide to the Associate to Slattery J an agreed calculation of the plaintiffs' damages for breach of contract, and if they cannot agree upon the calculation, they should bring in their respective competing calculations, by 28 March 2022; 5. Direct the parties to provide to the Associate to Slattery J an agreed timetable for the making of submissions in relation to costs issues in these proceedings; and 6. Grant liberty to apply.

Amendments 27 June 2022 - [103] first sentence deleted "ParkTrent ultimately abandoned this contention during the exchange of written submissions." 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: 27 June 2022

At a glance

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