Lindfield NSW Pty Ltd v Netdeen Pty Ltd trading as GJ Gardner Homes

JUDGMENT

1. In the briefest of terms, the plaintiff has sued the defendant for breach of a Master Franchise Agreement (MFA), but in particular for the refusal of the defendant to renew the agreement in accordance with an option exercised by the plaintiff.
2. If the MFA had been renewed it would have been for a term of 10 years, commencing on 1 July 2024 and ending on 30 June 2034. If the renewal had proceeded the plaintiff would have continued to derive monies arising from the implementation of the MFA, in particular, through building work carried out by sub-franchisees.
3. The plaintiff, as an alternative to the breach of agreement case, says that the defendant acted unconscionably, in contravention of the Australian Consumer Law. The defendant denies any breach of the MFA and rejects the notion that it acted unconscionably. These two issues are issues of liability.
4. If the plaintiff succeeds on liability, it has proposed two methods of approaching damages. One of these methods is to estimate the royalties it would have received, derived from the work of the sub-franchisees (the builders) during the above ten-year period. This is essentially a loss of chance approach.
5. In order to assess the value of the lost chance the plaintiff relies on a report of a forensic accountant, Mr Potter. Mr Potter's primary report is dated 3 May 2024. There is a report from a Mr Ross, dated 3 July 2024, which responds to Mr Potter's report, and then a report in reply from Mr Potter dated 17 July 2024.
6. The defendant has objected to the admissibility of Mr Potter's reports. The starting point for the objection was by reference to the decision of the New South Wales Court of Appeal, and in particular the judgment of Heydon JA, in Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705; [2001] NSWCA 305, at [85]: "In short, if evidence tendered as expert opinion evidence is to be admissible, it must be agreed or demonstrated that there is a field of "specialised knowledge"; there must be an identified aspect of that field in which the witness demonstrates that by reason of specified training, study or experience, the witness has become an expert; the opinion proffered must be "wholly or substantially based on the witness's expert knowledge"; so far as the opinion is based on facts "observed" by the expert, they must be identified and admissibly proved by the expert, and so far as the opinion is based on "assumed" or "accepted" facts, they must be identified and proved in some other way; it must be established that the facts on which the opinion is based form a proper foundation for it; and the opinion of an expert requires demonstration or examination of the scientific or other intellectual basis of the conclusions reached: that is, the expert's evidence must explain how the field of "specialised knowledge" in which the witness is expert by reason of "training, study or experience", and on which the opinion is "wholly or substantially based", applies to the facts assumed or observed so as to produce the opinion propounded. If all these matters are not made explicit, it is not possible to be sure whether the opinion is based wholly or substantially on the expert's specialised knowledge. If the court cannot be sure of that, the evidence is strictly speaking not admissible, and, so far as it is admissible, of diminished weight. And an attempt to make the basis of the opinion explicit may reveal that it is not based on specialised expert knowledge, but, to use Gleeson CJ's characterisation of the evidence in HG v R (1999) 197 CLR 414, on "a combination of speculation, inference, personal and second-hand views as to the credibility of the complainant, and a process of reasoning which went well beyond the field of expertise".