Lindsay-Owen v HWL Ebsworth Lawyers

Category: Procedural rulings

Parties: Gregory Hamilton Willoughby Lindsay-Owen (First Plaintiff)
Dairycorp Pty Limited (Second Plaintiff)
Martin Downing & Ors Trading as HWL Ebsworth Lawyers (First to One Hundred and Sixth Defendants)

Representation: Counsel:
P Afshar with S Hernandez Kaiko (Plaintiffs)
C Bannan SC (Defendants)
Solicitors:
Gadens (Plaintiffs)
Gilchrist Connell (Defendants)

File Number(s): 2016/85879

Publication restriction: Nil

Judgment

1. HIS HONOUR: By motion filed on 19 August 2026, the plaintiffs seek the following orders:

“1. ORDER pursuant to UCPR 20.24(a) that the report of Tony Samuel and Paul King dated 1 May 2026 be adopted in relation to issues 1, 2, 3 and 5.

2. ORDER pursuant to UCPR 20.24(a) that the report of Tony Samuel and Paul King dated 14 July 2026 be rejected.

3. The Court decide on the basis of the evidence before the Referees and pursuant to UCPR 20.24(d) that:

(a) the correct figure in cell N124 in the ‘Inputs’ tab and CH74 of the ‘Cash Flows’ tab of JKM7, and elsewhere as appropriate, to be $8,828,066;

(b) the correct figure in cell M199 in the ‘Inputs’ tab of JKM7, and elsewhere as appropriate, to be $1,513,625; and

(c) the calculations concerning the plaintiffs’ carried forward losses ought to be removed from JKM7.

4. ORDER that JKM7 be updated accordingly, including as to the resultant gross up for each plaintiff.

5. ORDER that judgment be entered for the plaintiffs in the amounts disclosed in JKM7 as updated.”

2. These proceedings have a relatively long history: see, for example, Lindsay*‑*Owen v HWL Ebsworth Lawyers [2023] NSWSC 68; Lindsay-Owen v HWL Ebsworth Lawyers (No 2) [2024] NSWSC 541; Lindsay-Owen v HWL Ebsworth Lawyers [2025] NSWSC 829. Following the delivery of these judgments, four areas of disagreement between the parties remained. These were:

3. taxation of the pre-tax hypothetical cashflows and the proper approach to the calculation of loss;

4. tax actually payable on the sale of the land;

5. allocation of cost base; and

6. tax treatment of the award of damages.

7. On 12 August 2025, I ordered pursuant to UCPR 20.14 that these issues be referred to Mr Paul King and Mr Tony Samuel (the referees) for enquiry and report: Lindsay-Owen v HWL Ebsworth Lawyers [2025] NSWSC 891. The referees delivered three reports, dated respectively 17 October 2025 (the first report), 1 May 2026 (the second report) and 14 July 2026 (the third report).

8. Familiarity with my earlier judgments and the referees’ reports is assumed for the purposes of these reasons.

9. There is no longer any issue with respect to either the first or the second report: both reports have been adopted in full. However, the plaintiffs dispute three findings made by the referees in the third report because:

(a) their decision to accept the calculation of Mr Lindsay-Owen’s tax without adjusting it to remove the tax benefit of the Winton payment and other payments was inconsistent, both conceptually and factually, with the referees’ own findings in the first and second reports (Issue 1); (b) their decision to add legal fees to the cost base only and assuming the plaintiffs would get no costs order in their favour was not only inconsistent with the parties’ common position on that issue (the “cost base position”) but was also manifestly unreasonable (Issue 3); and (c) their decision to adopt the assumptions made by Mr McGuiness to apply all carried forward losses to reduce the plaintiffs’ damages was never referred and was thus ultra vires. Further, the assumption had no factual foundation (carried forward losses findings).

6. The plaintiffs maintain that I should reject the third report in the exercise of my discretion upon the basis that certain of the referees’ findings were perverse and involved manifest unreasonableness in that:

7. With respect to Issue 1, the decision to affirm the figure of $4,368,871 for the actual tax paid (paragraph 18(b) of the third report) was:

(a) directly inconsistent with the referees’ findings in relation to Issue 3 of the first report, which the Court adopted; (b) directly inconsistent with the approach and reasoning that underlay the findings in relation to Issue 2 of the second report; and (c) directly inconsistent with the approach and reasoning that underlay the findings set out at paragraph 18(a) of the third report.

2. Issue 3 was:

(a) directly inconsistent with the cost base position; (b) the finding in relation to Issue 3 was directly inconsistent with the assumption that the full amount of costs of $5,302,452 would form part of the cost base; and (c) the assumption that the plaintiffs would be awarded no costs lacked proper or reasonable basis.

3. The assumptions in JKM7 as set out in paragraphs 14(c), 14(d), 14(e) and 14(f) of the third report were beyond the referees’ jurisdiction, were perverse and involved manifest unreasonableness, in that:

(a) the question of carried forward losses had not previously been determined by the Court or the referees; (b) the question of carried forward losses was not referred to the referees as they had identified in the second report; and (c) there was no proper factual basis for the assumption that the plaintiffs had to or would use any carried forward losses to reduce any tax payable.

7. The defendants oppose the relief sought by the plaintiffs and maintain that the third report should be adopted in full. They submitted that the applicable legal principles set out later in these reasons have particular application in this case. In short, there is a high bar before a court will reject a referee’s report, especially in a case such as the present which involves technical matters of tax and accounting which have been determined by experts in those fields. The submissions made by the plaintiffs on this application were also made to the referees and rejected. The defendants submitted that the plaintiffs have not established error, let alone error of the requisite kind.

8. The defendants submitted that this is not a case where no reasonable tribunal of fact could have reached the conclusions reached by the referees on the three matters agitated by the plaintiffs. The conclusions of the referees on those matters were not only open but plainly correct. The defendants reasoned as follows.

9. First, it would have been erroneous for the referees to use a hypothetical figure for the tax paid by Mr Lindsay-Owen in his actual (not hypothetical) cashflow. That is especially so given that the figure propounded by the plaintiffs was simply assumed. While the plaintiffs asserted that their assumed hypothetical figure had something to do with the Winton payment, they never explained why. There is in fact no basis for the assertion that the adjustment has something to do with the Winton payment. Dairycorp Pty Ltd made the Winton payment, not Mr Lindsay-Owen. Dairycorp Pty Ltd has been compensated for the tax effect of making the Winton payment (paragraphs 19-33 of the second report). The undisputed tax actually paid by Mr Lindsay-Owen of $4,368,871 was tax payable on the sale of the land. It appears in Mr Lindsay-Owen’s amended notice of assessment. The referees were right to use that figure rather than a notional figure, the provenance of which is entirely unclear.

10. Secondly, it would have been erroneous for the referees to accept the plaintiffs’ proposed assumption that they will recover all of their legal costs. On any view, that will not occur. It can never occur. Even if the plaintiffs secured an indemnity costs order in their favour, they would not recover all of their legal costs. More fundamentally, there is likely to be a debate about interest and costs. That may require evidence (for example, as to relevant settlement offers) and submissions (for example, as to the extent to which the plaintiffs failed and succeeded on different issues). The referees could not make an assumption that the plaintiffs would secure a costs order in their favour, let alone the assumption for which the plaintiffs contended (that the plaintiffs would recover every dollar spent on legal costs). The defendants never agreed that the referees could make that assumption. The defendants’ position was, and remains, that no assumption can be made about the costs order that will be made, much less what quantum of costs the plaintiffs might recover on assessment if some order is made in their favour. The contention that the defendants agreed that legal costs should be excluded from the plaintiffs’ cost base (and that the plaintiffs somehow relied on that agreement) is unsustainable. It is the polar opposite of what the defendants in fact said. The referees were right to reject that contention.

11. Thirdly, it would have been erroneous for the referees to ignore the fact that Mr Lindsay-Owen has substantial tax losses. The effect of the tax losses is that Mr Lindsay-Owen will not pay tax on a damages award, and it would have been incorrect to give Mr Lindsay-Owen a gross up to pay tax that will never become payable. Again, the referees were right to reject that argument. The plaintiffs submit that there was no evidentiary foundation for the finding as to tax losses. However, the tax loss figure appears in Mr Lindsay-Owen’s own tax return.

Applicable legal principles

12. There was no dispute concerning the correct principles to apply when the court is asked to consider the adoption of a referee’s report.

13. The court has a broad discretion under UCPR 20.24 to adopt, reject or vary a referee’s report. That discretion is guided by the question whether taking any of those courses best serves the interests of justice: Woolf v 52 Birriga Road Pty Ltd [2012] NSWSC 921 at [29].

14. McDougall J set out the principles that govern the exercise of that discretion in Chocolate Factory Apartments v Westpoint Finance [2005] NSWSC 784 at [6]‑[8]:

“[6] The principles to be applied, in exercising the discretion conferred upon the Court by Pt 72 r 13 to adopt, vary or reject in whole or in part a report of a referee, are well established. There are a number of cases to which, customarily, reference is made. They include Super Pty Ltd v SJP Formwork (Aust) Pty Ltd (1992) 29 NSWLR 549; the unreported proceedings in that case before Giles J (19 May 1992: the relevant considerations referred to by his Honour are sufficiently extracted in the decision of the Court of Appeal); Chloride Batteries Australia Ltd v Glendale Chemical Products Pty Ltd (1988) 17 NSWLR 60; White Constructions (NT) Pty Ltd v Commonwealth of Australia (1990) 7 BCL 193; and Foxman Holdings Pty Ltd v NMBE Pty Ltd (1994) 38 NSWLR 615. As to the nature and content of the referee’s obligation to give reasons, the relevant authorities include Xuereb v Viola (1989) 18 NSWLR 453 and Hughes Bros Pty Ltd v Minister for Public Works (Rolfe J, 17 August 1994, unreported; BC 9402885).

[7] The relevant principles, distilled from those decisions, can be stated as follows:

(1) An application under Pt 72 r 13 is not an appeal either by way of hearing de novo or by way of rehearing.

(2) The discretion to adopt, vary or reject the report is to be exercised in a manner consistent with both the object and purpose of the rules and the wider setting in which they take their place. Subject to this, and to what is said in the next two sub paragraphs, it is undesirable to attempt closely to confine the manner in which the discretion is to be exercised.

(3) The purpose of Pt 72 is to provide, where the interests of justice so require, a form of partial resolution of disputes alternative to orthodox litigation, that purpose would be frustrated if the reference were to be treated as some kind of warm up for the real contest.

(4) In so far as the subject matter of dissatisfaction with a report is a question of law, or the application of legal standards to established facts, a proper exercise of discretion requires the judge to consider and determine that matter afresh.

(5) Where a report shows a thorough, analytical and scientific approach to the assessment of the subject matter of the reference, the Court would have a disposition towards acceptance of the report, for to do otherwise would be to negate both the purpose and the facility of referring complex technical issues to independent experts for enquiry and report.

(6) If the referee’s report reveals some error of principle, absence or excessive jurisdiction, patent misapprehension of the evidence or perversity or manifest unreasonableness in fact finding, that would ordinarily be a reason for rejection. In this context, patent misapprehension of the evidence refers to a lack of understanding of the evidence as distinct from the according to particular aspects of it different weight; and perversity or manifest unreasonableness mean a conclusion that no reasonable tribunal of fact could have reached. The test denoted by these phrases is more stringent than ‘unsafe and unsatisfactory’.

(7) Generally, the referee’s findings of fact should not be re-agitated in the Court. The Court will not reconsider disputed questions of fact where there is factual material sufficient to entitle the referee to reach the conclusions he or she did, particularly where the disputed questions are in a technical area in which the referee enjoys an appropriate expertise. Thus, the Court will not ordinarily interfere with findings of fact by a referee where the referee has based his or her findings upon a choice between conflicting evidence.

(8) The purpose of Pt 72 would be frustrated if the Court were required to reconsider disputed questions of fact in circumstances where it is conceded that there was material on which the conclusions could be based.

(9) The Court is entitled to consider the futility and cost of re-litigating an issue determined by the referee where the parties have had ample opportunity to place before the referee such evidence and submissions as they desire.

(10) Even if it were shown that the Court might have reached a different conclusion in some respect from that of the referee, it would not be (in the absence of any of the matters referred to in sub para (6) above) a proper exercise of the discretion conferred by Pt 72 r 13 to allow matters agitated before the referee to be re-explored so as to lead to qualification or rejection of the report.

(11) Referees should give reasons for their opinion so as to enable the parties, the Court and the disinterested observer to know that the conclusion is not arbitrary, or influenced by improper considerations; but that it is the result of a process of logic and the application of a considered mind to the factual circumstances proved. The reasoning process must be sufficiently disclosed so that the Court can be satisfied that the conclusions are based upon such an intellectual exercise.

(12) The right to be heard does not involve the right to be heard twice.

(13) A question as to whether there was evidence on which the referee, without manifest unreasonableness, could have come to the decision to which he or she did come is not raised ‘by a mere suggestion of factual error such that, if it were made by a trial judge, an appeal judge would correct it’. The real question is far more limited: ‘to the situation where it is seriously and reasonably contended that the referee has reached a decision which no reasonable tribunal of fact could have reached; that is, a decision that any reasonable referee would have known was against the evidence and weight of evidence’.

(14) Where, although the referee’s reasons on their face appear adequate, the party challenging the report contends that they are not adequate because there was very significant evidence against the referee’s findings with which the referee did not at all deal, examination of the evidence may be undertaken to show that the reasons were in fact inadequate because they omitted any reference to significant evidence.

(15) Where the court decides that the reasons are flawed, either on their face or because they have been shown not to deal with important matters, the court has a choice. It may decline to adopt the report. Or it may itself look at the detail of the evidence to decide whether or not the expense of further proceedings before the referee (which would be the consequence of non adoption) is justified.

[8] The twelfth point restates the aphorism of Mahoney JA in Super at 567. The thirteenth, fourteenth and fifteenth points are drawn (and include direct quotations) from the judgment of Hodgson CJ in Eq (with whom Priestley JA agreed and with whom, as to the relevant principles, Fitzgerald AJ also agreed) in Franks & Anor v Berem Constructions Pty Ltd (NSWCA 2 December 1998, unreported; BC 9806367). If I may say so with respect, I regard what his Honour said as giving content, on the facts of the particular case, to the operation of relevant principles rather than as stating any new principle.”

15. In Super Pty Ltd v SJP Formwork (Aust) Pty Ltd (1992) 29 NSWLR 549 at 562‑4 and Ryde City Council v Tourtouras [2007] NSWCA 218 at [22]-[23], the Court of Appeal identified several grounds for rejecting a referee’s report, or part thereof. These grounds range from errors of law to perversity or manifest unreasonableness.

16. Howsoever the error is framed, the judicial task requires the court to analyse what the referees were asked to do, the materials and submissions with which they were provided and the conclusions that they reached. Internal inconsistency in a referee’s findings, inconsistent application of principles or findings by the referee or the making of findings that lack evidentiary support are all circumstances in which courts have rejected a referee’s findings.

17. In Dubel Pty Limited v G&A Constructions Pty Limited [2007] NSWSC 934, Hammerschlag J rejected part of a referee’s report and varied the amount awarded where the referee’s later findings were internally inconsistent with his earlier findings (at [12]).

18. In Bowden v Bowden (No*.* 2) [2021] NSWSC 1625, Slattery J rejected some aspects of a referee’s report where the referee had applied inconsistent standards to the parties’ evidence, requiring documentary corroboration from one party while accepting unvouched assertions from the other (see [106] ff).

19. In Blackmore Design Group Pty Ltd v Mudge [2006] NSWDC 160, Rein SC DCJ adopted a referee’s report with modifications but rejected one aspect of it on the basis that some of the findings had been based on an unpleaded case (see [38]-[41]).

The third report

20. The referees’ third report is relatively concise, having regard to the complexity of the issues raised for their consideration in these proceedings. It is convenient, therefore, to include the terms of that report in full:

“Introduction

1.In accordance with the Order pursuant to UCPR 20.14 of Harrison J (undated) (the Order) we, Paul King of MinterEllison and Tony Samuel of Sapere Forensic, provide this report after making the appropriate enquiries.

2. This report is a joint report. The conclusion has been reached as a consequence of the expertise of both referees.

3. This report addresses the Final Issue in the Order only.

4. We adopt the abbreviations used in our report of 1 May 2026 (Our Second Report).

The Final Issue

5. The issue addressed in this report is the Final Issue in the Order of the Court which states ‘determine the amount of damages for each plaintiff including prejudgment interest to the date of the referee’s [sic] report’.

6. One preliminary matter had to be resolved, see ‘The Starting Position’ below.

The Starting Position

7. We advised the parties by email on 9 May 2026 that the issues we were asked to resolve do not identify the starting position from which adjustments should be made for the resolution of the issues in our Second Report. The parties agreed by consent to make submissions on this issue.

8. The Plaintiffs submitted that the starting position must be:

(a) the Plaintiffs’ workbook provided to the referees. We reject this submission. The Plaintiffs’ workbook is an amended version of the model prepared by Mr McGuiness, who has stated, and we accept, that the Plaintiffs’ workbook caused significant disruption to the logic in his model; and

(b) as an alternative to (a), (1) a version of the model described as Mr McGuiness’ workbook and provided on 26 March 2026 (the JKM6 Model) adjusted to reflect our recent findings, or (2) a version of the JKM6 Model already amended by us. We refer to the model in (1) as the Plaintiffs’ Model.

9. The Defendants submitted that the starting position should be the JKM6 Model.

10. As both parties accept the JKM6 Model (albeit as an alternative for the Plaintiffs) as the starting position, we have adopted it for that purpose.

11. The Defendants provided a version of the JKM6 Model that made the amendments proposed by us on a preliminary basis for Issues 1, 2 and 5 and corrected for one minor error, which we accept.

12. Following our directions of 2 July 2026:

(a) the Defendants updated that model to include interest up to 10 July 2026 (the JKM7 Model), and made no other submissions; and

(b) the Plaintiffs updated their version of Mr McGuiness’ model and made some further submissions.

13. For the purpose of determining the amount of damages, we have therefore started with the JKM7 Model.

14. As we explain below, we accept the JKM7 Model except for the calculation of the ‘Gross Up for Income Tax on compensation for Loss’ in respect of DPL (cell G67) and, consequently, the ‘Estimate of loss after gross up for income tax and interest’. The JKM7 Model includes the following assumptions, which we accept:

(a) the damages claim is calculated as at 28 November 2025;

(b) there are no amounts payable to the Plaintiffs under a costs order. Our findings below recognise the possibility of this circumstance changing;

(c) the calculations should adopt the carry forward tax losses (if any) as at 30 June 2023 for GLO and 30 June 2024 for DPL;

(d) the tax losses are available to the respective Plaintiffs to offset against any taxable gain arising in respect of the claim;

(e) GLO has no costs; and

(f) the Plaintiffs are not entitled to compensation for the loss of a tax benefit of a carried forward tax loss where damages received reduce such a loss.

Issue 1

15. The JKM7 Model amendments are set out under the heading ‘Eighth Report’.

16. The JKM7 Model amends the actual cash flows for DPL to include the SIC charge of $608,955 (i.e. Issue 1), which was an actual cash payment by DPL arising in respect of tax liabilities. This adjustment has been made by adding $608,955 to the actual tax paid figure of $4,368,871, see cell N124 of the ‘Inputs tab’.

17. The Plaintiffs’ Model uses an actual tax paid figure of $8,219,111, before adding the SIC charge. They submitted that this was the appropriate manner to adjust the actual tax payable to exclude the Winton payment and its tax consequences. We reject the figure of $8,219,111 as:

(a) it was not the actual tax paid; and

(b) as stated in our Second Report at [33], the appropriate adjustment was to allow for tax payable in May 2016 of $554,540.

18. We therefore agree with the Defendants that the damages model should show:

(a) an actual tax payment of $554,540 in May 2016 (see ‘Inputs’ tab at N125 and ‘Cash Flows’ tab at AL73); and

(b) the actual tax paid in May 2020 of $4,368,871 plus the SIC charge of $608,955 (see ‘Inputs’ tab at N124 and ‘Cash Flows’ tab at CH74).

19. We find that the JKM7 Model adjusted for Issue 1 correctly.

Issue 2

20. JKM7 amends for our findings on Issue 2 by adding $554,540 to cell M125 of the ‘Inputs’ tab. The Plaintiffs’ Model made an adjustment with the same effect.

21. We find that the JKM7 Model adjusted for Issue 2 correctly.

Issue 5

22. The JKM7 Model amends for our findings on Issue 5. For this issue:

(a) the parties had agreed the rate of 8.35% for 30 June 2025 instead of 8.10%. The figure of 8.35% can be seen at cell M300 of the ‘Inputs’ tab, and E48 and E118 of the ‘Loss Analysis’ tab. The Plaintiffs’ Model made an adjustment with the same effect; and

(b) we found that the Schedule 5 rate should apply for the period up to 30 June 2010, which was 9.0%. To give effect to this finding, the JKM7 Model amends cell M270 of the ‘Inputs’ tab to 9%. This adjustment flows through to cells E18 and E85 of the ‘Loss Analysis’ tab.

23. Following our directions of 2 July 2026, the Defendants updated their model to include interest up to 10 July 2026, using rates of:

(a) 7.6% for the period 1 January to 30 June 2026; and

(b) 8.35% for the period 1 July to 10 July 2026.

24. The Defendants submitted an amended model in response to our directions of 2 July which adopted the same interest rates of 7.6% and 8.35% respectively, consistent with the application of Practice Note SC Gen 16.

25. We find that the JKM7 Model adjusted for Issue 5 correctly.

Issue 3

26. We advised the parties by email on 9 May 2006 [sic, 2026] of the information required to resolve the gross up calculations. The parties agreed by consent to make further submissions on this issue.

27. The Plaintiffs submitted that unrecovered legal costs should be amended from $5,302,452 to $1,513,625, ‘as the parties agreed after the first referees’ report that unrecovered legal costs should not form part of the cost base’. The Defendants rejected the assertion that the unrecovered legal costs was agreed.

28. The Defendants submitted that ‘the Referees’ quantification exercise must be completed before the extent of unrecovered legal costs are known’, as ‘the quantification drives the outcome on costs, not the other way around’. We accept these submissions. We also agree with the Defendants that awarding costs is a matter of discretion for the Court. It follows that no determination can be made on this figure by us.

29. The Parties agree that the amount of the damages payable by the Defendants should include a ‘gross up’ such that both Plaintiffs receive a net amount (after tax) equal to the damages assessed. The after-tax amount payable is to be determined having regard to the actual tax payable by the Plaintiff on the amount received with no allowance to the Plaintiff for a loss of benefit represented by the losses (if any) utilised.

Gross-up calculation: General

30. The amount payable to the Plaintiffs in respect of their claims will be the sum of

(a) the amount payable in respect of the loss which is calculated as the NPV of the Loss as at 29 March 2010, increased by an amount of pre-judgment interest which represents the NPV to the date the Final Orders are made in these proceedings, calculated by applying a statutory rate of interest applied to the NPV of the Loss (pre-judgment interest);

(b) an amount payable (if any) under a costs order of the Court; and

(c) any gross up amount.

31. From a tax point of view, we have concluded that the amount receivable by the Plaintiffs in respect of the claims will be treated as being on capital account (refer Issue 5: Opinions of Referees dated17 October 2025). Therefore, in order to calculate their tax liability in respect of the claim, the Plaintiffs will need to calculate the capital gain arising from the claim which will require a calculation of both (a) the cost base, and (b) the capital proceeds, received in respect of the claim. Although interest is normally treated as being received on revenue, rather than on capital account the amount referred to as the pre-judgement interest is treated as having the same character as the underlying damages amount. The basis for this is that there is no underlying debt and the pre-judgment interest calculation is only applied to calculate the current value of an existing NPV amount calculated up to an earlier date, and therefore, although calculated by applying an interest rate, it does not constitute interest on a debt. The ATO accept this characterisation (refer Edited Private Advice 1012753801555).

32. Therefore, the damages claim calculated as at 28 November 2025 as per the model is the sum of the NPV as at 29 March 2010 plus an amount calculated as the pre-judgement interest. This represents part of the capital proceeds in determining the capital gain (excluding any amount payable under a costs order). Any amount of pre-judgment interest calculated up to the date of the Court Order will have the same treatment.

33. The JKM7 Model assumes that there is no costs order in favour of the Plaintiffs and therefore the Plaintiffs are not receiving any further capital proceeds (i.e. they don't receive an amount in respect of the legal costs) and the cost base of the claim is represented by unrecovered legal costs.

Gross-up calculation: DPL

34. In the case of DPL, on the basis that the income tax losses at 30 June 2024 are $1,513,625 (Tax Losses), the Net Present Value of the loss at 29 March 2010 is $3,914,258 (Loss NPV), the pre-judgment interest calculated to 10 July 2026 is $4,160,663 (Interest) and the legal costs are $5,302,452 (Legal Costs), then the gross up amount, before the costs order, will be based on a net capital gain of $1,258,844 (the sum of the Loss NPV and the Interest less the sum of the Tax Losses and the Legal Costs).

35. The JKM7 Model concludes that the loss is the sum of the pre-judgment Interest and the Loss NPV but does not include a gross up amount. We consider that this is incorrect.

36. On the basis of the assumptions in the JKM7 Model, the gross up would be $539,505 and would be calculated as:

(capital gain divided by 0.7) less capital gain

i.e. ($1,258,844 divided by 0.7 ) less $1,258,844 = $539,505.

37. The gross up figure assumes that there are legal costs of $5,302,452 and the prejudgment interest is calculated to 10 July.

38. We consider it likely that the legal costs will exceed this assumed legal costs amount (Additional Legal Costs) and accordingly the capital gain will be reduced to extent of these additional expenses (as it increases the cost base) and therefore the gross up will be reduced by an amount calculated by the formula:

(Additional Legal Costs divided by 0.7) less Additional Legal Costs

39. As noted at para 43 below, to the extent that DPL receives a costs order in respect of any Legal Costs resulting in a cost recovery on these costs this will increase the capital gain (and therefore the gross up) as it will increase the capital proceeds. This increase in the gross up will be calculated as follows:

(amount of costs order divided by 0.7) less (amount of costs order)

Gross-up calculation: GLO

40. Due to the fact the GLO has no, and will not have any, legal costs, the gross capital gain (i.e. ignoring any entitlement to a discount on the capital gain) arising to GLO will equal the capital proceeds (being the NPV Loss of $752,137 plus the pre-judgment interest calculated to 10 July 2025 of $799,484) (a total of $1,551,621) less than the amount of the tax losses available to GLO ($2,459,370). Therefore, there will be no taxable capital gain arising to GLO, and consequently, there will be no entitlement to gross up arising to GLO. It follows that it will not be necessary to determine if GLO is entitled to a discount capital gain.

Treatment of Recognised Legal Costs in DPL’s Gross Up Calculation

41. The interaction between the costs order and DPL's damages claim needs to be considered in light of our conclusions above in respect of the capital gain, and the starting position that there will be a taxable capital gain arising to DPL. As identified by both the Plaintiffs and the Defendants, the extent of the capital gain arising to the Plaintiffs, and consequently the gross up, will depend on the extent of any costs order.

42. As noted above, based on no costs order being made, the gross up entitlement of DPL would be $539,505.

43. If the costs order were to be made, then the amount of the recovered costs would be treated for tax purposes as either a reimbursement of expenditure incurred by DPL (and therefore reduce the cost base of the relevant asset) or as additional capital proceeds in respect of the capital gain. In either case the capital gain arising to DPL would increase by the amount paid to DPL in respect of the costs order and this additional capital gain would be taxable. Accordingly, the amount of the costs order would need to be grossed up based on the following calculation:

(amount of costs order divided by 0.7) less (amount of costs order)

Final Issue Conclusions re Damages Claim

44. In summary, we determine that the overall damages claim for DPL, calculated as at 10 July 2026 and based on the assumptions above, should be $8,614,426, comprising the sum of the following:

(i) NPV of loss at 29 March 2010: $3,914,258;

(ii) Pre-judgment interest: $4,160,663; plus

(iii) Gross up (excluding costs recovery): $539,505.

45. This amount may be increased or decreased by any of the following:

(a) Increased by an amount being the gross up of the costs recovery amounts, calculated as (amount of costs order divided by 0.7) minus (amount of costs order) (refer paras 39 and 43 above); and/or

(b) A reduction to the gross up for non-deductible costs in excess of $5,302,452 (refer para 38 above); and/or

(c) Increased by additional prejudgment interest for the period from 10 July to the date of the Court Order.

46. In summary, we determine that the overall damages claim for GLO calculated as at 10 July 2026 and based on the assumptions above should be $1,551,621, comprising:

(a) NPV of loss at 29 March 2010: $752,137; plus

(b) Pre- judgment interest: $799,484.

47. This amount may be increased by an amount equal to the pre-judgment interest for the period from 10 July to the date of the Court Order.”

Issue 1

21. The plaintiffs complain that the referees’ decision to accept the calculation of Mr Lindsay-Owen’s tax without adjusting it to remove the tax benefit of the Winton payment and other payments was inconsistent, both conceptually and factually, with the referees’ own findings in the first and second reports. The starting point must therefore be the relevant portions of these reports.

22. The referees dealt with this question in their first report in the following way:

“Issue 3: Tax actually payable on the sale of the land

Both Tony Samuel and Paul King think this conclusion is correct.

Issue 3: Tax actually payable on the sale of the land.

Plaintiffs’ version

Is the tax actually paid by the plaintiffs relevant to the calculation of the post-tax losses? If so, how?

Defendants’ version

If the defendants’ position on Issue 1 is accepted, are any adjustments required to the tax actually payable on the sale of the land to derive the actual post-tax cashflows? If so, what adjustments are necessary?

24. The Plaintiffs submitted that Issue 3 does not arise on the Plaintiffs’ calculations. On their case, the tax actually paid is irrelevant. The Defendants also submitted that Issue 3 only arises in the event that their position on Issue 1 is adopted.

25. As we have found that the Defendants’ submissions for Issue 1 are correct, Issue 3 does arise.

26. It is common ground that the actual tax paid was $4.4 million. The Defendants submitted that there should be no adjustments to that figure. The Plaintiffs submitted that adjustments are required to take account of the Court’s findings.

27. It is not in dispute that the Court excluded certain costs from the calculation of the loss in the actual scenario, the most material being the Winton payment (see Lindsay-Owen v HWL Ebsworth Lawyers [2023] NSWSC 68 at [182]).

28. The Defendants’ position is that although the adjustment requires that the payment to Winton should be excluded from the actual cashflows to arrive at the revised actuals (thereby increasing the revised actual profit), the tax benefit derived from the payment should not be excluded from the calculation of the revised actual tax payable. In our view, that position is not sustainable. The tax benefit arose only as a consequence of the payment. To exclude the payment but not the tax consequence is inconsistent.

29. In our view, in order to return the Plaintiffs to the position they would have enjoyed absent Ebsworth’s negligence, it is necessary to exclude both the Winton payment and the consequential tax benefit from the calculation of the actual tax cashflows and the actual tax payable, respectively.

30. Whilst the submissions focused on the Winton payment, conceptually the same treatment would apply to other costs excluded from the calculation of the loss in the actual scenario.”

23. The referees returned to this issue in their second report as follows:

“Issue 2: The tax paid by Dairycorp Pty. Limited

Tony Samuel and Paul King have reached this conclusion.

19. Issue 2 is described in DS1 as follows:

In their workbook, the plaintiffs have made a unilateral change relating to the tax actually paid by Mr Lindsay-Owen. That is, the plaintiffs have assumed that Dairycorp Pty Limited (Dairycorp) actually paid tax of $554,540 in May 2016. It is not clear why. No payment of that amount (or any other amount) was made on that date, or at all.

20. We note here that the Defendants’ submissions on this issue reiterate that:

(a) there was no tax actually paid;

(b) there is no basis to suggest that the loss should be calculated on the basis that an amount was paid when it was not in fact paid; and

(c) DPL has had tax losses from FY15 onwards.

21. We note that DPL was a member of the Lindsay-Owen Holdings Tax Consolidated Group (Lindsay-Owen Holdings TCG) and therefore was not a separate taxpayer.

22. In our view, the defendants have not engaged with the finding in Our First Report that the tax benefit derived from the Winton payment should not be excluded from the calculation of the revised actual tax payable. The implementation of our previous finding is that the calculation of the loss should exclude both the Winton payment (as found by the Court) and the tax consequence of excluding that payment. The consequence of excluding the Winton payment (only) in FY15 is that the tax loss of Lindsay-Owen Holdings TCG at that date of $1,608,498 would become taxable income of $4,106,219 (assuming the Winton payment was deductible in calculating the tax loss of $1,608,498).

23. The Plaintiffs explained that the figure of $554,540:

... is the adjusted liability of Dairycorp for tax in light of the findings made by the Court and ultimately by the referees in the report. It is evidenced in table 3 (RB 351) of KPMG’s report dated 27 February 2025.

24. We note here that the KPMG calculation does exclude the Winton payment in calculating the figure of $554,540, which is apparent when the commentary at paragraphs 4.1b (including Table 1) and 4.1e, and Table 3 (which calculates the $554,540) of that report are taken together. It follows that the other matters in Table 1 have also been taken into account in that calculation.

25. We agree with the Defendants that the Plaintiffs’ approach replaces the actual with a hypothetical, however, in our view, that is the necessary consequence of the Court’s conclusions that actual payments should be excluded from the loss calculation.

26. The plaintiffs make three submissions on this issue, which we address in turn.

Submission 1

27. The first submission is that KPMG’s calculation of the $554,540 is sound and neither EY nor Mr McGuiness contradict it.

28. In reply, the Defendants state that ‘The Referees concluded (at [29] Referees’ Report) that it is necessary to exclude the Winton payment and the consequential tax benefit that arises from the making of that payment. There is no such benefit.’ This is incorrect. There was a benefit to Lindsay-Owen Holdings TCG in FY 15, as the Winton payment meant that there was no taxable income and tax would have been payable. (This conclusion assumes that the Winton payment was deductible when determining the available tax losses in FY15).

29. We consider that our remit does not extend to opining on every element of the calculation of $554,540, and note that we do not have any detailed submissions on the other components of that calculation. Conceptually, however, we agree that the actual cash flows need to be amended to reflect the tax that would have been payable by Lindsay-Owen Holdings TCG after taking into account the Court’s findings on actual cash flows that should be excluded from the loss.

Submission 2

30. The second submission is that the calculation was based on assumptions, which are now the subject of findings in Our First Report (at [24] to [30]), namely that the actual tax benefit from the Winton payment (and by extension other similar payments) ought to be excluded from the actual tax payable.

31. We repeat our findings from Submission 1. If the other assumptions made in the KPMG calculation (Table 1) properly reflect the Court’s findings, then the approach adopted by the plaintiffs is correct.

Submission 3

32. The third submission is that the amount of $554,540 should be brought to account in May 2016 consistently with the tax payable by GLO (for the reasons set out by the Plaintiffs in respect of Issue 1).

33. We agree that the tax that should have been paid after allowing for the Court’s findings should be included in the cash flows in May 2016 for the reasons set out in paragraph 25 above (as distinct from the reasoning relied on by the Plaintiffs for Issue 1, which we rejected.

34. The Plaintiffs also reiterated their approach in PS2, but did not raise any new issue that needs to be addressed.”

24. The referees’ third report dealt with this issue at paragraphs 15-19, as set out earlier in these reasons.

25. It will be recalled that there was a contest between the parties about whether this issue should even be referred to the referees. In deciding on 12 August 2025 in Lindsay-Owen v HWL Ebsworth Lawyers [2025] NSWSC 891 that it should be referred, I reasoned as follows at [49]-[54]:

“Issue 3

[49] Issue 3 relates to the tax actually paid on the sale of the land. It only arises if the defendants’ position on Issue 1 is preferred: the tax actually paid is irrelevant on the plaintiffs’ approach.

[50] The defendants accept that there is no debate about the tax actually paid. However, the plaintiffs now suggest that I should disregard tax benefits associated with certain payments actually made. The result is to amend the figure for tax in fact paid and replace it with a notional figure.

[51] The defendants contend that this issue has been dealt with and should not be referred to experts: the parties led evidence as to the actual cashflows and it was common ground that the tax actually paid by the plaintiffs was $4.4 million. Paragraph [1.3.23] of Mr Murphy’s first report confirmed that the amended notice of assessment for 30 June 2015 records an actual tax liability for that amount.

[52] The plaintiffs wish to suggest that the figure of $4.4 million should be replaced with a notional figure of $8.7 million for actual tax paid. The defendants contend that it was incumbent on the plaintiffs to have brought this argument forward earlier, and at least before the second hearing in November 2023.

[53] The very nature of the dispute raises questions of tax accounting practice and procedure. The question of whether this issue raises a matter that was not but should have been referred to earlier appears to depend on tax accounting expertise.

[54] I consider that Issue 3 should be referred.”

26. Before deciding this issue, the referees asked the parties for further assistance. That correspondence is attached to the third report and included an email dated 2 July 2026 which indicated that, in order for the referees to finish the reference, they required, among other things, the plaintiffs’ confirmation that they agreed that the actual tax paid by Dairycorp Pty Ltd was $4,368,871, and not $8,219,111, or provide the evidence that the actual tax paid was $8,219,111.

27. The plaintiffs submitted before me that the referees’ request suggested that they were in effect on the verge of committing an error. That is because it was clear on the materials before them that the plaintiffs had not paid $8,219,111 in tax. That position had been common since at least 2022. Further, Dairycorp Pty Ltd had never paid $4,368,871: it had paid $0. Moreover, the plaintiffs submitted that the fact that both Mr Lindsay-Owen and Dairycorp Pty Ltd had received tax benefits relating to the Winton fee had never been challenged. Nor were Mr Murphy’s calculations challenged. The conceptual question had been resolved and adopted. In that context, the question of what actual tax had been paid was irrelevant.

28. That referees’ 2 July 2026 request clearly picked up the question raised by the defendants’ submissions lodged with them on 18 June 2026 in these terms:

“5. First, the plaintiffs use a figure of $8,828,066 for the actual tax payable by GLO (Cell L124 ‘Inputs’ worksheet in the plaintiffs’ spreadsheet). There is no explanation for the use of this figure. It is contrary to the figure of $4,977,826 adopted by the Referees (Cell M124 ‘Inputs’ worksheet in the Referees’ spreadsheet). There ought to be no controversy about the figure of $4,977,826. It is comprised of actual tax paid of $4,368,871 plus the statutory interest charge of $608,955. The plaintiffs’ attempt to inflate the figure should be rejected.”

29. The plaintiffs responded on 8 July 2026 in the following relevant terms:

“2. The first problem is the way the seventh model deals with the adjusted tax payable by GLO. The seventh model scenario adopts a figure of $4,977,826 at cell M124 of the ‘Inputs’ worksheet. That figure comprises actual tax paid of $4,368,871 and statutory interest of $608,955. That amount is what was remitted under the amended assessment, not the adjusted actual tax payable after excluding the Winton payment and its tax consequences.

3. Thus, the adjusted tax payable by GLO should be the basis of the further calculations in the seventh model. That figure proffered by the plaintiffs, $8,828,066, is already reflected at cell N124 of the seventh model. Cell M124 should therefore be changed from $4,977,826 to $8,828,066 to reflect the correct position as found by the referees.”

30. In their submissions in this Court, the plaintiffs submitted in support of this complaint that, by the time the matter was ripe for determination by the referees, “it was clear to everyone that the issue was whether the figure for tax actually paid should be replaced with a ‘notional’ or adjusted figure”.

31. Specifically with reference to paragraphs 16-19 of the third report, the plaintiffs submitted as follows:

“64. In several respects, those findings are simply wrong:

(a) The reference at [16] to ‘DPL’ is wrong. DPL was not charged SIC. That was Mr Lindsay-Owen. He, not DPL, had paid the SIC.

(b) [17(b)] is wrong, because the figure of $554,540 had nothing to do with Mr Lindsay-Owen. It was LOH / Dairycorp’s adjusted tax. That it was payable in 2016 was simply related to the fact that unlike Mr Lindsay-Owen, LOH / Dairycorp had actually paid no tax at all, so 2016 was the appropriate date to record the adjusted payment.

(c) [18(a)] is wrong because $554,540 was not an ‘actual tax payment’ (It is inconsistent with Annexure 6 to the third report at [6] where the referees state ‘in order to effect the tax that would have been paid by DPL, we have added $554,540 to the actual tax paid of 0’ (emphasis added)).

65. More fundamentally (and critically), the rejection of Mr Lindsay-Owen’s adjusted tax as an indicium of the calculation was manifestly unreasonable / perverse because:

(a) it was inconsistent with the finding at [29] of the first report that the plaintiffs’ (plural) actual tax should be adjusted to remove the benefit of the Winton and other payments.

(b) it was inconsistent with the finding at [22] ff of the second report.

(c) the finding on issue 3 of the first report had been adopted leaving no room for the referees to implement it.

(d) the plaintiffs never claimed $8,219,111 was the tax Mr Lindsay-Owen actually paid.

(e) Dairycorp / LOH had never paid $554,540.

(f) it discriminated between the position of Mr Lindsay-Owen and Dairycorp/LOH.

66. In those circumstances, the third report’s rejection of the figure of $8,219,111 cannot withstand scrutiny and should be rejected.”

32. Properly understood, this issue does not concern whether the plaintiffs could establish how they arrived at the calculation of $8,219,111. Clearly they could. To that extent the defendants’ concern that no expert has said that the figure of $8,219,111 is appropriate or has explained how the figure was arrived at is not well founded. The figure is not, as the defendants have submitted, mysterious despite their repeated complaints that there was no proper basis for the figure.

33. But that does not matter. The issue was, as the plaintiffs have identified, whether the figure for tax actually paid should be replaced with a ‘notional’ or adjusted figure. There had always been a debate about that. Without wishing or intending inappropriately to resort to the vernacular, that issue has been debated and picked over endlessly in lengthy written and oral submissions since 2023, with both parties relying as they did on equally long and detailed experts’ reports. The referees were the significant beneficiaries of these competing contentions, refined further by the parties’ responses to their requests for clarification. The proposed notional tax figure was rejected by the referees in their first report. It was rejected by the referees in their third report. There does not seem to me to be any inconsistency, let alone any perversity, in the referees’ conclusions in the third report by reference to anything contained in the second report. Whether to decide the final issue called up by the reference which was the subject of the third report using the actual or notional figure was always a matter for expert accounting and taxation expertise. That is what the referees possessed.

34. I drew attention to the parties during the oral arguments on this application to the fact that, somewhat unusually but by no means uniquely, the referees have prepared not one but three reports, incrementally narrowing in focus, to the position where these reports constituted a unified whole. It is not, as the parties submissions before me have confirmed, logical or possible to understand the plaintiffs’ current complaints without reference to, and an appreciation of, all of the reports. It seems to me that, so understood, it is clear that the referees drew upon and gave effect to considerable expertise, applied carefully to the issues at hand. It is not difficult in such circumstances to conclude, having regard to the principles that I am required to observe, that it is undesirable to attempt closely to confine the manner in which to exercise my discretion. The referees’ reports clearly show a thorough, analytical and professional approach to the assessment of the subject matter of the reference. It is not appropriate in such circumstances to try to second-guess their conclusions in the absence of a compelling basis for doing so. The reason for my decision to refer the matter to the referees was because they possessed expertise and professional skills to determine the issues that I did not have. I remain very mindful of the matters referred to by McDougall J in Chocolate Factory Apartments set out earlier.

35. The plaintiffs contended that the referees’ rejection of the figure of $8,219,111 was “hopelessly wrong”. The defendants in contrast described it as “unassailable”. It was in my view entirely open to the referees to reject the figure of $8,219,111 on the basis that “it was not the actual tax paid”. That was no more or less that an expert preference for the use of actual figures over notional figures. Minds may well differ about which approach to take but the referees were well equipped to indicate their preference.

36. The defendants contended that the referees’ decision to adopt the actual figure of $4,368,871 and reject the notional figure of $8,219,111 was “plainly correct”. It will be apparent that I am not in a position to agree or disagree with that strident assertion. It is unnecessary that I do so. I do accept, as explained in the preceding paragraph, that it was at least open to the referees to form that view. It was Dairycorp Pty Ltd, not Mr Lindsay-Owen, that made the Winton payment. It was Dairycorp Pty Ltd, not Mr Lindsay-Owen, that derived a tax benefit from making the payment. The making of the Winton payment by Dairycorp Pty Ltd says nothing about why a figure for actual tax paid by Mr Lindsay-Owen on the sale of the land should be amended.

37. Finally with respect to this issue I should note that the plaintiffs also argued that in the course of the toing and froing between themselves and the referees, the defendants somehow conceded or accepted the correctness of the plaintiffs approach and Mr Murphy’s assumed figure of $8,219,111. It is clear that howsoever one interprets the material in the submissions upon which the plaintiffs rely to source this concession, it never became binding or enforceable and if it was ever drawn to the referees’ attention they were perfectly entitled to give it no prominence.

Issue 3

38. The plaintiffs complain about the way the referees dealt with the treatment of their legal costs in these proceedings.

39. At paragraph 58 of the first report, the referees said this:

“58. In order for a capital gain to arise there must be a CGT event. The Plaintiffs held an asset (being their right to damages pursuant to the cause of action) which was acquired after 19 September 1985. The Plaintiffs disposed of the asset for consideration, being that part of the damages payment received by the Plaintiffs referable to the cause of action. This would result in CGT event C2 (which relates to surrender or cancellation of rights) occurring and therefore, since the parties are acting at arm’s length, a capital gain will arise to the Plaintiffs to the extent that the consideration received (i.e., the damages payment received referable to the cause of action which is otherwise not income) exceeds the cost base of the right to damages. The cost base of this right may include, for example, unrecovered legal costs in pursuing the cause of action. Based on the application of the CGT provisions, a capital gain would arise to the Plaintiffs.

40. The plaintiffs do not complain that the referees somehow departed from this this analysis in the third report. Indeed, the plaintiffs raise no issue of taxation accounting practice or principle. The parties are agreed that there is a direct and legitimate relationship between the plaintiffs’ potential capital gains tax liability and the amount of their unrecovered legal costs. Only unrecovered legal costs can be added to the cost base. The smaller the unrecovered costs, the smaller the cost base. The smaller the cost base, the larger the capital gains tax liability. The larger the capital gains tax liability, the larger the damages gross up. It is therefore in the plaintiffs’ interest that the unrecovered costs be low and it is in the defendants’ interests that the unrecovered costs be high: the amount of any unrecovered costs is in that way directly referable to the amount of the gross up that must occur as the result of my earlier determination.

41. The referees took the position that they did not know and that, for all purposes relevant to their determination of the final amount of damages, they could never know what those costs might be. The referees agreed at paragraph 28 of the third report that their quantification exercise must be completed before the extent of unrecovered legal costs is known. The referees’ quantification of the plaintiffs’ damages amount necessarily preceded, and presumably will inform, my determination of the question of the plaintiffs’ entitlement to costs. It is not, as the referees correctly characterised it, “the other way around”. The referees specifically noted that an award of costs is a matter of discretion for me and that they played no role in the exercise of that discretion or in the decision about what those costs might be. The referees concluded, therefore, “that no determination can be made on [the costs] figure by us”. That conclusion reflected the approach adopted by the defendants in their submissions to the referees.

42. It is common ground that legal fees are only be excluded from the cost base if they are recovered. Put another way, the parties agreed that only unrecovered costs could be included in the plaintiffs’ cost base. It is obvious that I will be required in due course to make orders for the costs of these proceedings. It is no secret, because both parties adverted to the fact, that offers that have been made to settle the proceedings will be drawn to my attention in that context. I do not presently know what those offers were or who made them. I have no present way of knowing what the outcome of the competing arguments as to costs will be. I am in the same position now as the referees were when they produced the third report.

43. The plaintiffs have submitted that they will recover the whole of, or perhaps more realistically, a significant proportion of their legal costs. The defendants have submitted that there is every prospect that the plaintiffs may recover no legal costs and that there is even a prospect that they may be ordered in some fashion or another to pay the defendants’ costs. The exercise that I will be asked to perform will be conducted upon the basis of a series of known integers. That series will include the referees’ decision about the final amount of damages payable to the plaintiffs, my decision about the plaintiffs’ entitlement to interest, among other things, and whether there is any basis upon which to order that costs should not follow the event of the plaintiffs’ success.

44. Nor is it as if this issue had not been both specifically raised between the parties and placed before the referees for the purposes of preparing the third report. The following email, dated 17 November 2025 from the defendants’ solicitors to the plaintiffs’ solicitors, makes this plain:

“We agree the proceedings should be re-listed. However, it seems to us that the proceedings should be listed no earlier than Friday, 28 November 2025 in order to allow the parties an opportunity to reach agreement in relation to the quantum of the award of damages in favour of the plaintiffs.

The other matter you have raised is that it is possible that there will be uncovered [sic, unrecovered] costs of the proceedings which form part of your clients’ cost base for the purpose of assessing capital gains tax payable on the award of damages. That is based on the statement in paragraph 58 of the referees’ report that the cost base may include unrecovered legal costs.

While we agree that is possible that unrecovered legal costs may form part of the cost base for the purpose of determining capital gains tax, in our view, it is not necessary to quantify unrecovered legal costs, and it is not possible to sensibly quantify such costs at this stage in any event. We therefore suggest that no quantification should occur. That is despite the fact that such quantification could only operate in our client’s favour – because it could only have the effect of reducing the damages award in favour of the plaintiffs (by reducing the amount of the gross up).

This latter point can be demonstrated by using a simple example, using simplified figures rather than attempting to use actual figures. Let it be assumed that your client were awarded $10 million in damages, but it would be obliged to pay $3 million in tax (including as a result of the tax implications of the gross up amount). If so, it would be necessary to gross up the award of damages to $13 million. Let it now be assumed that your client had $1 million in recovered [sic, unrecovered] legal costs. If those legal costs were taken into account as part of the cost base, then those costs would increase the cost base – and thereby reduce the plaintiffs’ capital gains tax liability – resulting in a smaller gross up for tax (that is, the gross up would necessarily be less than $3 million) and ultimately a smaller award of damages in favour of the plaintiffs.

As to the former point (that costs cannot be sensibly quantified now), in our view, it is necessary for three things to occur before unrecovered costs can be quantified: the amount of the damages award in favour of the plaintiff must be determined; a costs order must be made; and costs must be agreed of assessed. While it would be theoretically possible for our client to agree upon a figure for unrecovered costs before those things have occurred, we do not believe that there is any sensible basis on which a quantification could be undertaken at this stage.”

45. Acceptance of the plaintiffs’ position requires a conclusion now, before the questions of interest and costs have been determined, that the plaintiffs would get a costs order in their favour and that they would recover all, or a substantial proportion, of those costs. The referees were not prepared to reach that conclusion. They did not err in taking that course. It cannot in my opinion be correct to say that the referees ought to have guessed or assumed or hypothesised about what costs the plaintiff might have been expected to recover. The referees’ conclusion at paragraph 28 of the third report must be correct. It was neither perverse, unreasonable nor contrary to the facts. It was inevitable. There is in the circumstances no basis either to reject the third report or to amend it.

46. Without more, the decision of the referees has the obvious potential to cause a practical disadvantage to the plaintiffs. For all anyone knows at this time, the outcome of my costs determination could possibly be that the plaintiffs’ unrecovered costs are small enough hypothetically to have reduced their cost base, thereby increasing their potential capital gains liability and causing a corresponding need to increase the amount of the gross up. However, the entry of a judgment that fails to take account of that possibility could mean that the plaintiffs would recover a smaller damages award than they might otherwise receive. Neither party referred me to any authority dealing with this conundrum.

47. Clearly enough, depending on the costs argument, this problem may never achieve significance. I would, however, be interested to hear submissions, at some appropriate and convenient time, about whether I could or should postpone the making of any final orders until the question, of whether the issue was real or only hypothetical, had been clarified.

Carried forward loss findings

48. It came to the referees’ notice before they produced the third report that Mr Lindsay-Owen had carried forward tax losses of $2,459,370. The referees took those losses into account in arriving at the final amount of damages payable by the defendants. The result of this according to the third report is that Mr Lindsay‑Owen will pay no tax on the award of damages so that there will be no requirement for a gross up in the circumstances. The plaintiffs complain that Mr Lindsay-Owen’s tax losses were never referred to the referees for comment or decision so that they acted ultra vires by incorporating them into their calculations.

49. The plaintiffs do not dispute the fact that Mr Lindsay-Owen’s available tax losses were $2,459,370: the figure appears in his tax return. It was drawn to the referees’ attention on 9 July 2026 by email copied to the plaintiffs in the following terms:

“We refer to your email below and confirm that the evidentiary basis for this figure is page 9 of GLO’s income tax return for the year ended 30 June 2023. Specifically the Tax Losses Worksheet, which records non-primary production losses carried forward in the amount of $2,459,370.

For ease of reference, we attach a copy of the tax return. The tax return was previously annexed to the defendant’s [sic] submissions dated 19 March 2026 and was identified by Mr McGuiness’s sixth report of the same date. The figure has remained unchanged in the subsequent iterations of Mr McGuiness’s model.”

50. The plaintiffs did not specifically take issue with that email or otherwise somehow respond to it to suggest that the matter of the tax losses was not relevant to the referees’ deliberations. The plaintiffs did, however, ultimately contend that Mr Lindsay-Owen’s tax losses were not one of the matters specifically identified for referral to them. They urged the referees to ignore these losses for that reason. The referees rejected that invitation.

51. The plaintiffs’ objection is therefore one of procedure rather than substance. As the defendants have emphasised, the final issue referred to the referees on 4 February 2026 for determination was “the amount of damages for each plaintiff including prejudgment interest to the date of the referees’ report”. Taking account of the amount of any gross up was a necessary component of that calculation. The defendants submitted that it was entirely appropriate for them to consider the available tax losses and that it would have been an error on the part of the referees to ignore them. To do otherwise would potentially compensate Mr Lindsay-Owen at the defendants’ expense for a tax liability that will never arise.

52. Moreover, as the defendants also emphasise, it is not as if the plaintiffs were taken by surprise: they raised their procedural objections with the referees as long ago as 17 April 2026. The referees invited the parties to make further submissions about it by email on 9 May 2026. The plaintiffs took up that invitation. While the plaintiffs maintained their procedural objection, they never disputed that Mr Lindsay-Owen had tax losses of $2,459,370.

53. The plaintiffs also contend that the defendants’ failure to cross-examine Mr Lindsay-Owen about his tax losses has some present significance. I disagree. Mr Lindsay-Owen had given no evidence about the extent of such losses by the time of the first and second hearings. The issue of quantification had not even arisen. There was nothing about which to cross-examine him. The plaintiffs’ solicitors did not provide his 2023 tax return until 25 March 2025, by which time the hearings had concluded. It is in any event difficult to see what any cross-examination could have been directed to beyond the quantum of the losses which was not in dispute.

54. The several matters informing both the prospect and quantum of a gross up of damages for tax purposes has been a central theme in these proceedings. Carried forward tax losses are but one of several potential matters to be considered in that context. It would be unrealistic and legally wrong to expect the referees to ignore either the relevance or the effect of such losses in arriving at a final figure for damages. I cannot accept that the plaintiffs have sustained a fundamental procedural disadvantage in the circumstances. Tax losses were clearly in play at all times and this must have been obvious to the plaintiffs. The parties have had ample opportunity to place before the referee such evidence and submissions as they desire. As McDougall J observed, the right to be heard does not involve the right to be heard twice. The referees were correct to take the evidence and submissions into account, informed by the specialist expertise they were asked to bring to their task.

Conclusion

55. It follows in my view that the third report should be received without amendment. That is subject only to the query I have raised with respect to the possibility that the entry of judgment for the final damages amount should await a consideration of whether the quantum of any costs to which the plaintiffs might become entitled, and the amount of any unrecovered costs, will have a bearing on the plaintiffs’ entitlement to a gross up. I propose that the parties arrange for the proceedings to be listed before me for directions at some convenient time when they have had an opportunity to consider these reasons.

*************