Loss of Opportunity to Negotiate Case
337 Mrs Lloyd submits that Belconnen was willing to compromise by paying stamp duty and for new blinds. As noted above, Belconnen had agreed to negotiate the Price by allowing a "stamp duty rebate" and a "window treatment rebate" that reduced the Price by $18,545 and $3,000 respectively. Mrs Lloyd relied upon the evidence, dealt with above, that Mr Ryan acknowledged that such discounts were provided on numerous occasions, and that it was a negotiation strategy to achieve a sale. Further, it is said Mr Ryan conceded that although Belconnen would try to maintain as much of a margin as it could, as a result of the Altitude Private Ruling, Belconnen had a greater margin to play with in setting the Price because it did not have to remit any GST. It is further contended by Mrs Lloyd that the objective evidence of discounts establishes that Belconnen would have compromised on Price to the extent of their windfall gain of the GST (that they had factored into their feasibility analysis and Price) and that "[s]elf-serving evidence of Mr Ryan to the contrary should be given no weight".
338 In response, Belconnen submits that the Court cannot infer that just because Belconnen provided some discounts that it would have provided discounts in the event Mrs Lloyd had been apprised of the change in GST treatment. Mr Ryan's evidence was that there are a multitude of factors that would influence whether a discount would be offered or not. Although it is true that Belconnen unsurprisingly would attempt to maintain its margin, it does not follow that the Price would be adjusted to maintain a "desired" margin. Indeed, Belconnen submits it would not be economically rational to adjust the Price for a particular Altitude Unit unless the entire market had moved. Given the nature and size of the residential market, it is implausible to suggest that a change in the tax treatment of one development would have any bearing on the market price.
339 Belconnen contends that Mr Ryan's evidence should be accepted; that Belconnen would not have compromised on the Price of units, including that of Mrs Lloyd, to the extent of any perceived "windfall" gain of GST. It is said that this "proposition is at odds with the very purpose of Belconnen applying for the private ruling in the first place". The fact that Belconnen compromised on other concessions (such as stamp duty rebates and other inclusions) is irrelevant as it is not uncommon for developers to provide such inclusions and rebates without compromising on price.
340 Of course, as would have already been evident from my detailed findings relating to the evidence of Mr Ryan, I do not accept Belconnen's submissions in this regard having found that Belconnen would have likely been willing to discount price, at least at the relevant time.
341 In the light of this finding, it is necessary to examine the principles that inform the determination of a claim for statutory compensation based on a loss of a commercial opportunity.
342 Although an applicant may only recover compensation for actual loss or damage (as distinct from potential or likely damage), a breach which denies the applicant of a commercial opportunity is compensable. But as was made clear in Sellars v Adelaide Petroleum NL (1994) 179 CLR 332, damages for lost commercial opportunity are to be ascertained by reference to the prospects of success, had the opportunity been pursued and the value is to be determined based on the degree of probabilities or possibilities. It is up to Mrs Lloyd to prove, on the balance of probabilities, that she lost an opportunity of real value; that is, of more than theoretical or negligible value.
343 This is evident from Badenach v Calvert [2016] HCA 18; (2016) 257 CLR 440 (a case concerning alleged professional negligence), in which, at 454 [39]-[40], French CJ, Kiefel and Keane JJ said in summarising the principles in Sellars:
It may be accepted that an opportunity which is lost may be compensable in tort. But that is because the opportunity is itself of some value. An opportunity will be of value where there is a substantial, and not a merely speculative, prospect that a benefit will be acquired or a detriment avoided.
It remains necessary to prove, to the usual standard, that there was a substantial prospect of a beneficial outcome. This requires evidence of what would have been done if the opportunity had been afforded.
(footnotes omitted)
344 Before revisiting the pleading and then an examination of the claim in more detail, it is worth making a few relevant points about the general principles that inform the determination of such a claim.
345 First, it is important to bear in mind the distinction between the fact of loss, and the value of loss, both to the proper determination of liability and quantum. As Young CJ and Kaye J noted in Waribay Pty Ltd v Minter Ellison [1991] 2 VR 391 at 398 error is sometimes seen where the trier of fact has "not separated from the question, what has the plaintiff lost, the question what is the value of that which he is satisfied has been lost".
346 Secondly, in general, the question whether a commercial opportunity has some value, and the extent of that value, requires subjective probability assessments to be made; as to the question of whether there is some value, the court must form a belief as to the existence of a valuable opportunity, with the strength of that belief satisfying the balance of probabilities in accordance with s 140 of the EA; as to the question of the extent of value, the court must form a belief as to the extent of the value of the opportunity: see Hodgson, D H, "The Scales of Justice: Probability and Proof in Legal Fact-finding" (1995) 69 ALJ 731.
347 Thirdly, a claim for loss of a commercial opportunity represents a claim for the value of a chance or opportunity to receive an expected benefit or to avoid an expected loss or liability; it is not a claim for the value of the expected benefit or loss or liability itself, and the opportunity to receive an expected benefit is the probability that the benefit would accrue in the manner expected: Darvall McCutcheon v H K Frost Holdings Pty Ltd [2002] VSCA 85; (2002) 4 VR 570 at 578 [29] (Chernov JA; Ormiston and Callaway JJA agreeing); Falkingham v Hoffmans (a firm) [2014] WASCA 140; (2014) 46 WAR 510 at 522 [39] (Pullin and Murphy JJA).
348 Fourthly, in order for a commercial opportunity to have some value the opportunity must have a non-negligible value in the sense that it must be real or '"substantial" and not "negligible" or "speculative": see Sellars at 355 (Mason CJ, Dawson, Toohey and Gaudron JJ); 364 (Brennan J); Badenach v Calvert at 454 [40] (French CJ, Kiefel and Keane JJ).
349 Fifthly, more specifically, the three steps to be taken were summarised by the Victorian Court of Appeal (Santamaria, Ferguson and Kaye JJA) in Masters Home Improvement Australia Pty Ltd v North East Solutions Pty Ltd [2017] VSCA 88 at [411] observed:
In considering damages for loss of a commercial opportunity, the court asks first whether there was a commercial opportunity of some value (which is more than speculative or negligible); that is, was there a chance? Secondly, the court looks to whether that opportunity has been lost; that is, would the plaintiff have pursued the opportunity? The third step is to consider what amount should be awarded having regard to the prospects of success if the opportunity had been pursued. In taking this third step, the courts' task is to apply a discount which reflects the prospects of success. This is sometimes referred to as a Sellars discount.
(footnotes omitted)
350 It is useful to examine the case of Mrs Lloyd by reference to these three steps. But before I do so, I should make some comment about the pleading. In Graham & Linda Huddy Nominees Pty Ltd v Byrne [2016] QSC 221 at [50]-[51], Jackson J noted:
First, it is necessary for a plaintiff who alleges loss of a valuable commercial opportunity to plead that the loss it has suffered is a loss of a valuable commercial opportunity, identifying the opportunity with some particularity. Second, it is also necessary that the plaintiff pleads what it would have done, where what the plaintiff would have done if the defendant had not been in breach of duty is a necessary causal condition to deciding factual causation. Third, it is necessary for a plaintiff who alleges such a loss to plead the percentage or proportion of the opportunity that was lost, in assessing value on the possibilities, in order to plead the amount of the damages claimed, as is specifically required. Fourth, where a plaintiff alleges a loss of a 100 per cent possibility or the certainty that they would have obtained the hoped for or expected benefit under a transaction which did not occur, it is to be expected that the plaintiff will allege with some particularity the facts by which that certain outcome would have been achieved.
…
In a similar vein, in my view, where a plaintiff alleges loss of a valuable commercial opportunity, the plaintiff should in most cases also allege the extent of the loss it says it suffered on the possibilities. It is not sufficient for a plaintiff simply to allege a 100 per cent possibility of obtaining the hoped for or expected benefit, leaving it open to contend that the issue to be decided by the court is the actual degree of likelihood anywhere between 100 per cent and 1 per cent…
351 As to the Loss of Opportunity to Negotiate Case, it seems to me to be within the pleading (as particularised in particular (iii) subjoined to ASOC [51(a)] extracted at [330] above). Stripping away irrelevancies and inserting reference to the Post-ruling Representation, the relevant part of the pleading (at ASOC at [43], [50]-[51]) was a pleading that: (a) by reason of the continuing Post-ruling Representation, Mrs Lloyd, upon completion of the Lloyd Contract, paid the Price to Belconnen, which included an amount equivalent to the component of the Price referable to GST; and (b) suffered loss in that if the Post-ruling Representation had not been made, Belconnen "would have accepted a price which did not include an amount equivalent to the component of the Price referable to GST"; and (c) loss "is an amount equivalent to the component of the Price referable to GST" (emphasis added).
352 Although Mrs Lloyd has pleaded a loss of an identified commercial opportunity, she has not pleaded with specificity what she would have done; and although Mrs Lloyd alleges she would have, in any negotiation, secured a total capitulation of Belconnen (in achieving a discount equivalent to the entire amount referable to GST), it seems, contrary to the admonitions of Jackson J, Mrs Lloyd has, among other things, simply left it to the Court to decide the actual degree of likelihood as anywhere between 100 per cent and 1 per cent if this case was not accepted. Although the generality of the pleading is not ideal, I do not consider that there has been any relevant denial of procedural fairness in relation to the Loss of Opportunity to Negotiate Case generally. The pleading outlined, in general terms, the Loss of Opportunity to Negotiate Case and the forensic battleground marking out this aspect of the case (which was the only part of the misleading and deceptive conduct case that was run with enthusiasm) was opened upon, cross-examined upon, was defined by the end of the case, and was the subject of competing submissions. If the claim did not founder at an earlier stage, it was always necessary for the Court to take the "third step" in a loss of opportunity case to consider what amount should be awarded and to apply a discount which reflects the prospects of success if appropriate to do so (notwithstanding an alternative case as to the appropriate "Sellars discount" was not specifically pleaded by Mrs Lloyd).
353 Having said that, the determination of this aspect of the case has not been assisted by reason of both parties providing submissions as though they were running and resisting a case mounted by all Altitude Group Members rather than the individual case of Mrs Lloyd. In any event, the generalised pleading was reflected in the final submissions of Mrs Lloyd and the response of Belconnen was to contend that there was no loss and that Mrs Lloyd "has led no evidence as to the value of the 'loss of opportunity'": Final Submissions of Belconnen in Reply (SBR) at [481]. Further, Belconnen made the submissions I have already summarised at [338] above (SBR at [482]-[486]).
354 Before leaving the pleading and submissions, it is important to be specific about the opportunity the subject of the claim and when it arose. Although the submissions of Mrs Lloyd did not abandon a case premised on a counterfactual whereby the true position was revealed prior to exchange, I am satisfied that any such case is unavailable. Mrs Lloyd settled upon her intention to purchase her flat without any reference whatsoever to GST. She entered into negotiations with Belconnen through Mr Wykes, was satisfied with the result, and decided to proceed and pay an initial deposit following the call with Mr Wykes on 16 February 2015. If the draft Lloyd Contract subsequently provided to her had revealed the true position and its provision had not amounted to conduct conveying the Post-ruling Representation, I am not satisfied that it would have made any difference to her decision to exchange and then later settle and pay the Price for which she had bargained (indeed I would go further and say I am affirmatively satisfied it would have made no difference).
355 However, the Post-ruling Representation was a continuing representation, and the question I deal with below is whether the proven contravening conduct materially contributed to Mrs Lloyd, upon completion of the Lloyd Contract, paying the stipulated Price to Belconnen and suffering an identified loss (being the loss of opportunity to negotiate post-exchange but before completion). This is the loss of opportunity to which I now turn, by reference to the three steps identified in Masters Home Improvement.
Was there an Opportunity of Some Value?
356 In Section D.2 above, based primarily on the evidence of Mr Ryan, I explained why I was satisfied that the position during the relevant period (that is, between exchange on 10 March 2015 and settlement less than a month later on 7 April 2015) was such that it is more likely than not that Altitude was a willing vendor and hence potentially open to renegotiation as to the price for securing or keeping a sale. The opportunity to negotiate with Belconnen has been proved, on the balance of probabilities, to have a non-negligible value, in that it was real and more than speculative.
Would Mrs Lloyd have pursued the Opportunity?
357 Additionally, I am comfortably satisfied that if Mrs Lloyd had been apprised of the true position during the relevant period that the Lloyd Contract incorrectly indicated that the supply was taxable (and hence the Post-ruling Representation was wrong), this would have been of real significance to her. Mrs Lloyd was evidently no shrinking violet. She not only was someone who was not coy about negotiating, but gave unchallenged evidence she was prepared to walk away if Belconnen "had refused to make any adjustment" to the amount payable. Importantly, she was a person who obviously had a relatively acute sensitivity about business ethics giving the following (again unchallenged) evidence in her affidavit at [68]:
(c) I dislike dishonesty and bad ethics, and I would have seen [Belconnen's] attempt to keep the GST component for itself as bad practice. I have had bad experiences with real estate agents before, in Lismore, and the justice of these situations is important to me; and
(d) I have been a Justice of the Peace in both the ACT and New South Wales, and I believe that businesses should treat their customers honestly and fairly and should ensure their contracts are correct, accurate and compliant with relevant laws. I pride myself in being ethical as a person and as a Rotarian, so expect others to act the same.
358 In the relevant counterfactual Mrs Lloyd would have had concerns about what she subjectively would have perceived as bad practice and would have tried to reopen negotiations. But even if she was somehow assuaged as to her concerns that Belconnen had attempted to do something wrong (for example, by reason of Belconnen voluntarily correcting the Post-ruling Representation and revealing the true position prior to settlement), I do not think there is any real doubt she would have attempted to use this information revealed belatedly to her advantage and tried, to use Mr Ryan's words, to "drive the price down from [Belconnen]" (T175.22 2.5.19). In this way, causation is established because the contravening conduct deprived Mrs Lloyd of the opportunity to negotiate a better bargain: see Bullabidgee Pty Ltd v McCleary at [57] per Allsop P (Basten and Young JJA agreeing).
What Amount should be awarded having regard to the Prospects?
359 It is the third aspect of the analysis that is more complicated, involving an assessment of the prospect of a beneficial outcome, or as the plurality (Mason CJ, Dawson, Toohey and Gaudron JJ) put it in Sellars at 355, the value of the lost opportunity determined "by reference to the degree of probabilities or possibilities". As explained above, proof on the balance of probabilities has no part to play in the evaluation of such probabilities or possibilities, and the evaluation "is a matter of informed estimation": see Brennan J in Sellars at 368.
360 As noted above, Mrs Lloyd's submissions assumed, without any elaboration, that Belconnen would have simply agreed to accept less than the Price on settlement by an amount equivalent to the GST component by, in effect, reducing the sale price. This strikes me as somewhat jejune. Belconnen had a real interest in maintaining nominal sale prices. As Mr Ryan frankly conceded in cross-examination (see T171 2.5.19), notwithstanding "discounts" were offered which had the practical effect of reducing the amount paid for the transfer to be effected (for example, stamp duty rebates) or the value of what was transferred was augmented by incentives (for example, window treatments or appliances), the nominal contract price remained the same. This reflected the reality that from Belconnen's perspective there was an important commercial reason for this: the price paid was public and was "published on some website for sales that have occurred" as the nominal price; it hence became a comparison for future sales. Belconnen had a real interest in providing any "discounts" in a way which did not undercut price maintenance, particularly at a time when as Mr Ryan's evidence revealed, no-one was prepared to purchase the remaining Altitude Units at the listed prices (T174.5).
361 Moreover, with respect, Mrs Lloyd's submissions did not really recognise that a claim for loss of a commercial opportunity represents a claim for the value of the opportunity, not a claim for the value of the expected benefit (and the opportunity is the probability that the benefit would accrue in the manner expected).
362 Belconnen's submission (SBR [485]) was simply that the evidence is insufficient to support the proposition that it would have compromised on price to the extent of any "windfall gain" of GST; it also went so far as to submit (SBR [486]) that the fact Belconnen compromised on other concessions (such as stamp duty rebates and other inclusions) "is simply irrelevant". Although, for reasons I will explain, there is some substance in the first of these submissions, the second has no merit at all. It is wrong because there clearly was a recognition that to secure sales, at least towards the end of the project, Belconnen was prepared to move away from the listed prices and negotiate. Although the evidence as to how these negotiations on an individual basis were conducted, and how far Belconnen was prepared to go is opaque (because of the forensic decision of Belconnen not to call anyone directly involved in the negotiations, or in the ongoing meetings discussing pricing with the selling agent), the picture of a willing vendor is clear. And it is picture which stands in contrast to that which emerges in relation to Stage 1 of the Governor Place development. This willingness to treat prior to exchange with individual purchasers, (including, importantly, Mrs Lloyd), together with the "soft" market for the remaining flats, provides important context in assessing the degrees of probability or possibility of Mrs Lloyd securing a commercial advantage if she became armed with information that allowed her to "drive the price down from [Belconnen]" between exchange and completion.
363 Unlike many loss of opportunity cases, here Mrs Lloyd can point to a particular opportunity which has been lost as a result of contravening conduct with an identified maximum benefit. As such, as Jacobsen and Besanko JJ explained in La Trobe Capital & Mortgage Corporation Ltd v Hay Property Consultants Pty Ltd [2011] FCAFC 4; (2011) 190 FCR 299 at 323 [112], she has "an easier path to establishing what is necessary for the purposes of recovery" than when the opportunity is more difficult to identify and the extent of the financial benefit is less readily quantifiable. In the same case, Finkelstein J, at 321 [97]-[98], found it convenient to calculate the value of the lost opportunity mathematically so as to provide an analytical framework for the assessment (although recognising that the assessment of damages in this kind of case was not precise). This approach has limited utility in the present case because of the nature of the opportunity and the ability to identify its maximum value with some precision. But still it is an exercise of identifying the value of the opportunity and discounting it by reference to the probability of realising the opportunity.
364 The maximum value that could be achieved in the negotiation was the amount of $46,759, being the agreed amount equivalent to the component of the Price referable to GST pursuant to the terms of the Lloyd Contract. Although this is the maximum value of the expected benefit of any negotiations, as I have explained, even if Mrs Lloyd was successful in securing a discount to the extent of the maximum value, it is far from clear that this would have been reflected in a reduction of the Price. I think it far more likely in the counterfactual that Belconnen would not have agreed to a reduction in the "nominal" sale price but rather there would have been some "abatement" of the sum paid over at settlement, and it may have been accompanied by a variety of incentives of perceived value which would have been more readily agreed to by Belconnen.
365 When one comes to the probability of realising the opportunity, I have to do the best that I can, notwithstanding the lack of clarity as to the circumstances in which the negotiation would have taken place. The context in which the negotiations took place would have been of some importance. For example, even in the absence of evidence from Mrs Lloyd's conveyancing or family solicitor, it is possible to conclude that any competent legal advice given to Mrs Lloyd during the relevant period is that the incorrect information given to her pre-exchange, more likely than not, gave her a basis to at the very least threaten Belconnen with the prospect Mrs Lloyd would seek statutory relief to relieve her of her obligations under the Lloyd Contract and seek recovery of an amount representing that paid over by way of deposit. For reputational reasons, as well as for more specific reasons relating to a potential loss of the individual sale, I do not consider that this is a prospect that Belconnen would have faced with equanimity. This would have dealt Mrs Lloyd a very powerful hand in doing a deal. But another scenario is possible, that is, the negotiations took place following an unsolicited approach from the agent Mr Wykes explaining that an innocent mistake had been made and that Belconnen were willing, in all the circumstances, as a gesture of goodwill, to "throw in" better quality appliances and other miscellaneous benefits. Although, in either of the scenarios I have outlined, I am confident that: (a) Mrs Lloyd would have approached any negotiation with some competence and without being shy seeking out the best deal she could; and (b) Belconnen would have been keen to do what it could do to not jeopardise the completion of the sale to Mrs Lloyd, these are very different, yet equally plausible scenarios.
366 Further, much might depend upon Mrs Lloyd's subjective reaction to the circumstances in which the information was revealed. Her Rotarian mission of maintaining high ethical standards in her professional and personal life was evidently of importance to Mrs Lloyd. Although implicit in her unchallenged evidence is that upon understanding the true position she would have allowed Belconnen the opportunity "to make any adjustment" to the amount payable before considering walking away (hence leading me to conclude she would have pursued the opportunity), the vigour with which she would have pursued the negotiations may have been rationally affected by her sense of how far she thought Belconnen had strayed from playing with a straight bat in its dealings with her.
367 The uncertainties of context, unavoidable in a case of loss of opportunity to negotiate such as the present, demonstrate the difficulties with the task of informed estimation. But the inherent difficulties and the impossibility of precision do not mean the task cannot be assayed.
368 Having regard to the circumstances proved in the evidence, and recognising that giving a percentage figure gives a patina of precision to a task which is no more than informed estimation, the degrees of probabilities or possibilities are such that if the true position had been revealed post-exchange and prior to completion, then I expect that Mrs Lloyd and Belconnen would have done a deal to secure settlement of the Lloyd Contract and that this would have involved Mrs Lloyd securing a benefit. But given the inherent uncertainties, I consider that having identified the maximum value of the opportunity at $46,759, it should be discounted and the sum awarded should reflect a 50% probability of realising the opportunity.
Conclusion on the Loss of Opportunity to Negotiate Case
369 In the circumstances, for the above reasons, Mrs Lloyd is entitled to an award of statutory compensation in an amount calculated as explained above together with interest from the date of settlement, being 7 April 2015.