North East Solution Pty Ltd v Masters Home Improvement Australia Pty Ltd [2016] VSC 1

265 The documentary evidence does demonstrate that by the conclusion of the open book review process - at least as far as that process involved a line by line comparison of costs between a generic Bunnings and a generic Masters store - Rider Hunt and Vaughan Constructions had estimated that Masters' contribution would be $3,247,195.[799] A subsequent review by Rider Hunt of the Vaughan Constructions estimate, between 12 April 2010 and 18 April 2010, resulted in Rider Hunt and Vaughan Constructions arriving at a Landlord's Works Cost estimate of $11,516,809.[800] This equated to a Masters contribution of $2,941,169,[801] as set out in the revised NES contribution notice. No discussions took place between Rider Hunt and Vaughan Constructions after this time. NES contends that it may therefore be inferred because agreement had been reached and Rider Hunt's comments incorporated into the revised contribution notice.[802]

266 NES submits that as both estimates arrived at by Rider Hunt and Vaughan Constructions equalled or exceeded the revised contribution amount sought by NES of $2,941,169,[803] it is open for the Court to find, and the Court should find, that had Woolworths not been working to an undisclosed budget, they would have agreed to pay the revised contribution amount. In light of all these circumstances, matters which have been discussed in the preceding reasons, I am of the opinion that the parties would have agreed to pay the revised contribution amount. Moreover, having regard to the terms of the Letter of Offer, particularly cl 13, and the Agreement for Lease, it is, in my view, likely that in spite of disagreement between the parties in this respect, the "contribution" would have been paid as a lump sum at the completion of the Strathdale development. Had this not been the case, then NES may have been required to borrow some or all of that amount to complete the construction, in which case it would have incurred interest on these borrowings until that contribution had been paid by Woolworths.

267 Finally, NES submits that if, contrary to its submissions, the Court finds that other adjustments ought to have been agreed,[804] Mr Blake's evidence is that had he been satisfied that the Landlord's Works Costs was properly calculated, then NES would have accepted the lesser contribution.[805]

Would Bendigo Bank have funded the development?

268 Obviously, without funding, the Strathdale development could not proceed and however vehemently Mr Blake sought, through NES, to pursue the opportunity, it would have been beyond reach and not a relevant consideration were the position to be that the Bendigo Bank would not have funded the development.

269 The position of Woolworths in this respect is that as NES would have been funding the development by loans from Bendigo Bank, the development would have been unlikely to proceed because, it is said, it is evident that Bendigo Bank was extremely keen for the Maxi Foods group to reduce its indebtedness and would have been unlikely to consider new finance, especially where the relevant entity had little equity in the project.

270 In support of its submissions in this respect, Woolworths provides a summary of contemporaneous documents which are said to be the best reflection of Bendigo Bank's position and speak to the serious risk that NES would not have obtained funding for the development. The summary is as follows:[806]

Credit memorandum dated 13 January 2010[807]

This credit memorandum was made in respect of an application by the Blake ... group for $450,000 of finance for the Kennington Village development (an unrelated development in Bendigo).

The financial figures set out in the memorandum indicate that the group was extremely highly leveraged and did not have the capacity to accommodate more debt. Examples of this include:

(a) the Group's TAE/XTV ratio. This is the ratio of total asset exposure against the total extended value of security, which effectively measures the total value of the securities that the bank holds as against its debt exposure to the Group. The group's TAE/XTV was 141.64 per cent. well outside of the bank's policy of 100 per cent;

(b) the Group's sensitised debt cover in the previous three periods were 1.25x, 1.19x and 0.63x. Sensitised debt cover is the amount by which the income of the group exceeds the interest repayments required to be paid to the bank. Ordinarily it is expected that this figure is in excess of 2.0x.

Recommendation from Tony Bellizia, Senior Manager, Group Credit Bureau dated 5 February 2010[808]

In his recommendation to the Credit Committee for this application Mr Bellizia, who was Mr McGregor's senior manager:

(a) imposed a series of stringent conditions on the approval by the bank of any additional finance to the group; and

(b) further downgraded the Blake Group's credit rating, from EQ5 (as proposed by Mr Blake's banking manager, Mr McGregor) to ES7, reflecting concern from the bank's perspective.

The Credit Committee confirmed and further introduced stringent conditions on the provision of finance to the group in 2010 which were required to be satisfied before any additional finance would be granted:

• Risk Grade to be amended to 7;
• Blake Group to be placed on Watch status and Asset Management to [be] involved from a monitoring perspective;
• Updated Valuations to be obtained within 60 days (noting condition precedent that written instructions for the bank to instruct a panel valuer to undertake revaluations);
• Registered Mortgage Debenture and Interlocking Guarantee and Indemnity to be taken from Maxi Group Holdings Pty Ltd;
• Investigation into ability of the ATO to set-off any tax liability against the GST refund;
• 2 year cashflow forecasts to be provided by the group within 60 days;
• Direct charge to be taken over a liquor licence;
• A negative pledge/written confirmation that the directors will not raise any further liabilities, excluding the $6.4m Woolworths debt, against Kennington Village Pty Ltd;
• Provision of an unconditional contract of sale over Maxi Food Redan supermarket by no later than 31 March 2010; and
• Provision of ATO integrated Client Statements on a quarterly basis in line with quarterly management accounts.

Placing the group on Watch status and involving Asset Management is generally reserved only for high risk clients.[810]

Email chain from Graham Hackett to Andrew McGregor[811]

Graham Hackett states that "David & I have discussed this and neither of us believe you will get the Credit Committee support for this transaction on a standalone basis. The issue is that Blake has little equity in this transaction and believe that the other items should be corrected before we advance any further debt to this group."

MCC/BCC - Submission Fate issued by Neil Brunner[812]

A submission was approved but noted that "An appropriately worded Formal letter is to be issued to the customer highlighting the banks continuing concerns over his group financial position and our requirement that an additional significant asset sale program needs to be agreed to (in addition to the expected reduction to come from the Horsham, Mansfield & Kennington securities/property sales) before the bank will agree to further facility extensions at our next review in February 2012." It went on to note that if those conditions weren't complied with, the bank would put either Bunnings Ballarat or Mr Blake's family home in Toorak on the market immediately.

Credit reporting memo dated 12 December 2011[813]

"While the closure of Horsham and sale of the Kennington Village property has resulted in a significant improvement in the cash flow of the group, as was noted by ECC, there remains [an] unhealthy reliance on the trading performance of the Castlemaine supermarket and the group still has too many non income producing assets."

271 The Minutes of the Woolworths Property Committee and the contemporaneous notes of Mr Champion do reflect a belief - a mistaken belief contends NES - on the part of Woolworths that NES had funding issues and would be unable to secure funding for the development.[814] As discussed previously, it seems likely that this mistaken belief came about as a result of Mr Macmillan having been told that there had been issues in relation to the Kennington Village development.[815] As submitted by NES, Mr Macmillan's evidence to the effect that Mr Blake told him that NES had funding issues is not reflected in any contemporaneous documents passing between Woolworths and NES.[816] Moreover, Mr Blake's evidence is that he had never said NES had funding issues and that it would have been premature for NES to have sought funding prior to planning approval having been obtained for the Strathdale development.[817] Having regard to the lack of contemporaneous documentary evidence and Mr Blake's evidence, I am of the view that the Court should find that Mr Blake did not say that NES had funding issues.

272 Woolworths' contentions in relation to its claim that NES had funding issues are on the basis of a breach of covenant and various other Bendigo Bank documents that the Bank had imposed strict conditions upon Mr Blake's Maxi Foods Group which would have prevented NES from obtaining funding from the Bank.[818] Nevertheless, the evidence of an employee and former employee of the Bank, Mr McGregor and Mr Stockwell respectively, would indicate that this is not a correct understanding of the Bank's position with respect to Mr Blake and the Maxi Foods Group.

273 The evidence of Mr Stockwell was that an application by NES for funding from the Bank would have fallen within the Bank's lending parameters[819] and would have been regarded positively,[820] particularly given the presence of a blue chip, long term tenant such as Masters, a Woolworths company,[821] and the Blake Group's positive record in relation to developments of this kind, including the development of a Bunnings store in Ballarat.[822] The evidence of Mr Stockwell is that the one breach of a covenant by the Maxi Foods Group and the decision to walk away from the Kennington Village development would have had no material impact upon the ability of the Group or Mr Blake to borrow further funds.[823] Despite an email exchange expressing concern over the Kennington Village development, Mr Stockwell gave evidence that the Bank would still strongly consider advancing funding to Mr Blake.[824] At no time was the Group considered to be "a client that was in distress or unable to qualify for credit from the Bank."[825] In fact, to the contrary, Mr Stockwell considered that the Group had a good credit performance, a good credit history and a stable credit rating.[826]

274 Woolworths, in its submissions, describes the evidence of both the Bank witnesses, Mr McGregor and Mr Stockwell, as quite unsatisfactory.

275 In relation to Mr McGregor, Woolworths says that he was an advocate for his customer; adding that to an extent, there is no criticism in this as his job was to advocate for his client to obtain new credit. It is said that Mr McGregor did not seem to be able to distance himself from this role in giving evidence and that this was apparent generally from the prolix and argumentative answers given to simple questions. An example given in support of this contention is the question asked of Mr McGregor, namely whether, in considering new finance, for the Maxi Foods Group, the Bank would consider the overall indebtedness of the Group. It is said by Woolworths that Mr McGregor, having previously accepted the simple proposition that in assessing the applicable risk grade for a customer, the Bank would consider the overall indebtedness of the customer to the Bank and that, when asked if the Bank would consider the overall indebtedness of the Group in considering new finance, his answer was, as he said, more like a response to a "job interview".[827] In my view, however, such a characterisation of Mr McGregor's evidence and the manner and nature of his responses as applied by Woolworths is disingenuous and not supportable both in terms of the transcribed text of his evidence and having heard the witness and observed his demeanour. It is true that some of his answers were lengthy and it is fair to say that he appeared to have a high regard for Mr Blake and his Maxi Foods Group businesses, but, otherwise, Mr McGregor did, in my view, seek to present a fair view of the Bank's assessment of the Group and the likelihood of its financing the Strathdale development.

276 Woolworths also contends that Mr McGregor was at pains to get across that, in his view, if the transaction made sense on a standard loan basis and would improve the overall position of the client, then the new finance ought to be approved.[828] Moreover, it is said that Mr McGregor was reluctant to accept that the Bank's Credit Committee might take a different view.[829] The basis for this submission is a question and answer, as follows:[830]

The Credit Committee may take a different view, mightn't they, Mr McGregor?---No, I - not in my experience, no. I think Bendigo Bank - - -.

It was then put to Mr McGregor that the Bank was concerned about the overall indebtedness of the Group, wanting the Group to reduce its debt and would be unlikely to consider new finance until it did so, especially where the relevant entity had little equity in the project. In any event, Mr McGregor maintained his position and as an experienced and longstanding employee of the Bank, I am of the view that his evidence should be accepted in spite of the view underlying the Woolworths submissions that the Bank was unlikely to finance the project because of the level of indebtedness of the Group. Woolworths' position in this respect is, however, a matter of inference and supposition which is not unequivocally established by the documents to which Woolworths refers in its submissions and stands in the face of evidence to the contrary by Mr McGregor and Mr Stockwell; witnesses who are independent of NES though, of course, they had known and dealt with Mr Blake and the Group over many years.

277 Woolworths then turns in its submissions to the detail of the Kennington Village transaction:[831]

1. In discussing the particulars of the Kennington Village transaction, Mr McGregor:

(a) volunteered, at length, his own summary of why he believed the transaction would have been approved;[832]

(b) expressed his "very keen" desire for the Court to understand why he recommended the loans;[833] and

(c) endeavoured to explain away why the bank had downgraded [the] group's security position from D to E, on the basis that it was just a change in interpretation in a policy, before accepting that it was a change in the policy.[834]

1. However, Mr McGregor's advocacy was perhaps most clearly demonstrated in his approval of the outline of evidence filed on his behalf. That is:

(a) Mr McGregor was taken to the memorandum prepared by Tony Bellizia, Senior Manager Group Credit Bureau, which was attached to an email to Mr McGregor dated 5 February 2010.[835] This memorandum was Mr Bellizia's comments on the Credit Memorandum that was to be submitted to the Credit Committee in respect of the Kennington Village loans;[836]

(b) despite initially saying that he had not seen Mr Bellizia's memorandum before preparing his outline of evidence,[837] Mr McGregor also said that he had sent all of the bank documents to NES's solicitors with "specific instructions to make sure that the documents I provided coincided with what was required ... so I had to go through document by document";[838]

(c) in his outline[839] Mr McGregor actually quoted[840] Mr Bellizia's summary conclusion that: "despite some negative aspects, the writer believes that the group are well placed to turning things around in the short term. We have supported the group to date ... and the group is worthy of our ongoing support"; [841]

(d) however, while being apparently happy to quote the favourable summary referred to above, Mr McGregor did not attach a copy of this memorandum to his outline and did not refer to the much less favourable comments that Mr Bellizia had added in bold at the end of the memorandum,[842] which had been added after Mr Bellizia had become aware of a tax arrangement that the group had entered into. These comments recommended a further downgrade of the security rating for the group and the imposition of stringent conditions subsequent to the loan approval, aimed at reducing the group's debt; and

(e) Mr McGregor said he didn't include a reference to the "bold" comments as the outline was his "witness statement in terms of how I view the situation"[843] and that he "didn't think it was necessary."[844]

The reference in the submissions to the "bold" comments of Mr Bellizia are to comments as follows:[845]

I have also provided the committee with a project security/servicing position should we be asked to refinance the Woolworth debt in 6 months:

- * Projected DSC includes the proposed Woolworths exposure of $6.4mil @ 9 per cent

- ** Assumes Mortgage of Lease is in place prior to or around the same time Maxi Foods Redan sale settlement occurs, we only receive $5mil from the sale proceeds and the GST loan of $790k will have been cleared

- ***Refinance Woolworths debt ($6.4mil) with the bank to take a first mortgage over the property with the purchase price of $7.9mil utilized within the above figures, albeit property will be revalued at the time

- Projected serviceability remains tight therefore it is imperative the closure of Horsham and sale of non income producing assets also be considered by the group.

TONY BELLIZIA

SENIOR MANAGER, GROUP CREDIT BUREAU

DISCLOSURE BY THE BBM AFTER MY RECOMMENDATION HAD BEEN LODGED OF A TAX ARRANGEMENT OF $400K ($25K PER MONTH UNTIL 2011) THE FOLLOWING CHANGES WILL NOW BE RECOMMENDED:

- RISK GRADE ES7 TO NOW APPLY

CONDITIONS SUBSEQUENT TO NOW INCLUDE:

- PROVISION OF AN UNCONDITIONAL CONTRACT OF SALE FOR MAXI FOOD REDAN BY NO LATER THAN 31 MARCH 2010 WITH FULL SALE PROCEEDS TO BE PLACED TOWARDS PERMANENT DEBT REDUCTION OF THE BANKS FACILITY

- PROVISION OF AN EXECUTED MORTGAGE OF LEASE OVER IGA CASTLEMAINE BU NO LATER THAN 30 APRIL 2010

- PROVISION OF ATO INTEGRATED CLIENT STATEMENTS ON A QUARTERLY BASIS

Nevertheless, there is no evidence that the Bank took any particular action with respect to these "bold" comments or that Mr McGregor was incorrect in his assessment that the Maxi Foods Group and Mr Blake would be supported by the Bank in the future.

278 Woolworths observe in their submissions that Mr Stockwell is no longer employed by the Bank and adds that it might be suggested that he had no reason to advocate in favour of Mr Blake. However, it is submitted that, apart from any sense of lingering loyalty that Mr Stockwell might feel towards Mr Blake, it was apparent that Mr Stockwell had "painted himself into a corner with the opinions he had expressed in his outline of evidence, which had been prepared based solely upon his memory and impressions of the group over a large number of years and without the benefit of reviewing any of the contemporaneous documents" to which Woolworths refers.[846] Moreover, Woolworths submit that Mr Stockwell was unwilling to consider the significance of these contemporaneous documents with an open mind and moved beyond the generally favourable recollections he had of dealings with the Group. It is said that "[h]is evidence was, in effect, a reflection of the unsatisfactory way his outline had been prepared."[847] The point is emphasised by submissions that Mr Stockwell's evidence was starkly at odds with the contemporaneous documents.[848] Moreover, it is submitted that Mr Stockwell's view that the Bank's sense of loyalty to its client would ultimately override the numerous concerns expressed in the documents[849] is, it is said, simply not consistent with contemporaneous internal communications. In relation to the latter, particular reference is made to the email exchange between Mr McGregor and Mr Hackett[850] which, Woolworths contends, represented the position of the Bank at that time (in September 2010) as well as in February 2010,[851] and that the principal focus of the Bank throughout the relevant period was in seeking debt reduction.[852]

279 Again, in my view, these submissions merit the same response to the similar submissions made with respect to the evidence of Mr McGregor. The submissions by Woolworths are based upon its inferences and assertions on the basis of various bank documents, but they are inferences and assertions which fly in the face of the evidence of long-term and experienced employees of the Bank. Moreover, these witnesses are independent of Mr Blake and the Maxi Foods Group, and to say that their evidence should be, in effect, disregarded on the basis that their dealings with Mr Blake and the Group would have produced some overriding loyalty which would have tainted their evidence and objectivity is disingenuous and, in my view, must be rejected.

280 Nevertheless, as Woolworths contend, the Bank was concerned to reduce the indebtedness of Mr Blake and the Group, as is clear from the documents to which reference is made and the evidence that at one stage the Bank had considered requiring Mr Blake to sell his private home in Toorak to reduce debt.[853]

281 In spite of the submissions by Woolworths with respect to the Bank's desire for debt reduction and problems that occurred with respect to the Kennington Village Development,[854] the position remains that in spite of the "bold" comments in Mr Bellizia's memorandum, the conclusion in the 13 January 2010 credit memorandum as per the responses dated 5 February 2010 was, as set out above with reference to Mr McGregor's outline:[855]

Despite some negative aspects the writer believes that the Group are well positioned to turning things around in the short to medium term. We have supported the group to date and in the overall scheme the request represents a permanent increase of 1.3 per cent to the current exposure and is worthy of our ongoing support.

282 By early 2010, the Maxi Foods Group had taken tangible steps to improve its financial position[856] and, rather than being concerned about the increase in debt, an application for funding for the Strathdale development would have been supported by the Bank as part of a long-term strategy of diversification into long-term investments.[857] Mr Stockwell gave evidence that in relation to a client such as Mr Blake, who had strong assets and a strong business, involvement in a diversification project would have been in line with what the Bank wanted and would in fact have helped the Bank feel more comfortable in advancing further money to the Maxi Foods Group.[858] Mr Stockwell's evidence was that any application by NES would have progressed to the Credit Committee, with negligible chance that it would have been dismissed before that stage.[859] Moreover, it was the evidence of Mr Stockwell that the Credit Committee would have supported the Strathdale development.[860] Mr Blake was, Mr Stockwell said, regarded as one of the most valued customers in the Bank's head office business centre, and a customer whom the Credit Committee wished to keep supporting.[861] As such, Mr Stockwell said it would have taken something "quite extraordinary" for the Bank to have refused to finance the proposed development.[862] More specifically, Mr Stockwell gave evidence that if he had been presented with an application by NES for a loan of approximately $17 million to fund the purchase of the Strathdale site land and construct the proposed development, he would have supported the application and recommended that the loan be approved, as would, he believed, the Credit Committee[863] and other banking institutions including Bank West.[864]

283 For the preceding reasons, as submitted by NES, it is open to the Court to find, and the Court should find, on the basis of the evidence of Mr Stockwell and Mr McGregor, that an application for funding to the Bendigo Bank was highly likely to have been granted and that funding of the Strathdale development would not have prevented the development of the Strathdale site by NES or have precluded NES from leasing that site to Masters.

Would flood inundation issues have prevented the development?

284 It is common ground that the Strathdale site was subject to two environmental overlays. The first was an Environmental Significance Overlay - Schedule 1 (Watercourse Protection) ("the Environmental Significance Overlay"), and the second, a Land Subject to Inundation Overlay ("the Inundation Overlay"). These overlays required that any development on the Strathdale site must have regard to the sensitivities of the adjoining watercourse, minimise flood damage and allow for the free passage and temporary storage of flood waters.[865] The inclusion of the Strathdale site within a land subject to inundation overlay required that any application for development be referred to the relevant flood plain management authority pursuant to cll 44.04-5 and 66 of the City of Greater Bendigo Planning Scheme. The relevant flood plain management authority is the North Central Catchment Management Authority ("NCCMA").[866] The question is, therefore, whether the requirements of these overlays could be met in such a way as to allow the Strathdale development to proceed.

285 NES was aware of the Inundation Overlay from at least 12 June 2008.[867] Further information from the NCCMA in relation to flood impacts on the Strathdale site was sought by NES on 25 February 2009. On 27 February 2009, the NCCMA advised that - [868]

in the event of a 100 year ARI flood it is unlikely that the existing dwelling would be affected by flooding. It is possible though that a significant portion in the north-east of the property adjacent to the Racecourse Creek may be subject to inundation ...

The NCCMA recommended that a licensed surveyor be engaged to determine the exact effect of the applicable flood level on the property.

286 On 18 May 2012, the NCCMA responded that before it could give formal consent to the development on the site, plans outlining how the following minimum conditions would be achieved would be required to be submitted for approval:[869]

1. Any new development must be set back a minimum of 30 metres from Racecourse Creek, in accordance with Clause 14.02-1 of the State Planning Policy Framework of the Greater Bendigo Planning Scheme.
2. New development adjacent to the waterway must exhibit an appropriate waterway interface i.e. new lots should not have rear boundaries adjacent to the waterway reserve.
3. All new allotments must be filled to at least the declared 1 per cent AEP flood level(s).
4. The finished floor level of any future dwellings must be constructed a minimum of 300mm above the declared flood level.

287 The evidence is that Woolworths' Site Selection Criteria required that the site not be prone to flooding.[870] Woolworths did, nevertheless, approve the development of the Strathdale Site in spite of the apparent flood risk.[871] NES submits that the Court should infer that Woolworths believed that any inundation issues that affected the site could be managed. For the reasons which follow, I am of the view that this is a reasonable inference and one to which reference should be made and, particularly, as the evidence does, in my view, establish that any inundation issues that affected the site could in fact be managed satisfactorily.

288 Despite having approved the site and despite not having raised any concerns with NES with respect to flooding or inundation issues while the Agreement for Lease was on foot, Woolworths did, in May 2012, seek to obtain further advice from the NCCMA in relation to whether flood inundation issues would preclude the development. The advice was sought by Mr Milinkovic of Urban Design & Management, and was provided by the NCCMA on 18 May 2012. This advice was, of course, provided well after the Agreement for Lease had been terminated by Woolworths and at the time when the present dispute was, NES contends, within the contemplation of Woolworths. NES also observes that no person from Urban Design & Management or the NCCMA was called by Woolworths to give evidence in the proceeding. More particularly, NES objects to Woolworths relying on the letter of 18 May 2012 from the NCCMA as evidence of its contents or as proof of the position that the NCCMA may have taken to any application by NES for planning approval. Woolworths has chosen not to put into evidence the letter and proposal to which the 18 May 2012 letter from the NCCMA responded or to call either the NCCMA or the author of the proposal to which the letter responded. In any event, the letter, on its face, appears to relate to a proposed multi lot residential subdivision and not a large box home improvement centre with a large car-park area.

289 Having regard to the matters raised by NES in support of its objection to the receipt of the 18 May 2012 NCCMA letter into evidence as evidence of its contents or as proof of the position that the NCCMA may have taken to any application by NES for planning approval, its apparent reference to a multi lot residential subdivision and the lack of critically important contextual evidence, namely, the letter from Woolworths requesting this advice, I am of the view that the objection is made out. Consequently, the evidentiary value of the 18 May 2012 letter from the NCCMA is no more than that appropriate flood mitigation measures would be required, depending upon the nature of the development contemplated on the Strathdale site and in conformity with the State Planning Policy Framework of the Greater Bendigo Planning Scheme ("the State Planning Objectives"). Importantly, in the present circumstances, the letter is not, in my view, evidence of any issue with respect to flooding which was seen as imposing an obstacle to the proposed Strathdale site development. This position is reinforced by other evidence and matters to which I now turn.

290 Woolworths contend that the condition that any development must be set back a minimum of 30 metres from the nearby watercourse, Racecourse Creek, in accordance with cl 14.02-1 of the State Planning Objectives would have precluded NES from constructing the store on the Strathdale site without changes to the design of the store, which changes Woolworths said would not have been approved. In any event, Mr Macmillan admitted in cross-examination that planning and flooding issues were characteristic of a number of sites Woolworths was involved in and that these were simply issues to be worked through by the landlord.[872] In any event, in my view, it is not necessary to decide this issue as, for the reasons which follow, the evidence supports a finding that the store could have been constructed on the Strathdale site without the need for any such modification. In any event, I accept that even if this were not the case, it is, as NES submits, open to the Court to infer, and that the Court should infer, that had Woolworths acted reasonably and in good faith and with the contractual object of progressing the development in mind, they would have agreed to any changes to the design that were reasonably necessary to mitigate the flood inundation issues.

291 The only expert called by the parties to address the question of whether the Strathdale development could be constructed in a way that would mitigate any impact on the adjoining watercourse, minimise flood damage and allow for the free passage and temporary storage of flood waters was Mr Chris Thomas of WorleyParsons. Mr Thomas' evidence was that proximity to a watercourse does not usually preclude developments of this kind.[873] In his second expert report, Mr Thomas provided examples of a number of big box hardware stores and warehouse distribution centres that had been constructed in locations near watercourses or in areas prone to inundation or flooding.[874]

292 Although Mr Thomas' evidence was that the proposed development could not be constructed in accordance with the Catchment Planning and Management objectives set out in the State Planning Objectives,[875] his evidence is that a setback of 30 metres was "excessive" and that a lesser setback could have been negotiated.[876] Mr Thomas' evidence was that the costs of implementing a solution that would meet the requirements of the planning scheme would not have been prohibitive to the development of the site.[877] Mr Thomas' evidence was also that setbacks are not imposed solely having regard to hydrological considerations.[878] In this respect, Mr Thomas noted that: "In my opinion, the imposition of a strict 30 metre setback from Racecourse Creek is not relevant to potential flooding issues arising from the proposed development."[879] Setback requirements, he said, also offer benefits in relation to inundation risks and water quality by filtering sediment and pollution from the runoff from developed areas before it enters a natural creek.[880] Again, this evidence is, in my view, supportive of the position that meeting the requirements of the planning scheme with respect to flood inundation issues would not have been prohibitive to the development of the site. For these and the reasons which follow, the submissions by Woolworths that the store could not, relevantly, have been built as designed must be rejected.[881]

293 The evidence of Mr Biacsi, the planning expert called by NES, was that the 30 metre setback referred to in the NCCMA letter was not a requirement that must be met in order for the site to be developed. It was Mr Biacsi's opinion that cl 14.02-1 of the State Planning Objectives applied as a guideline and not as a statutory requirement mandating strict or absolute compliance.[882] It is, as Woolworths submit, "quite apparent" to Mr Biacsi that flooding would have been an issue of concern to the advisory committee in assessing any planning application in respect of the Strathdale site.[883] In this respect Mr Biacsi noted:[884]

The suitability of the site and potential flooding and water quality impacts are matters about which the Advisory Committee would have been keenly interested and needed to be convinced.

294 Mr Biacsi noted that, in his experience, inundation risks can raise a number of other considerations of relevance to the planning process, including maintaining stream habitats, large trees, native grass and wildlife corridors, and preventing the erosion of stream banks.[885] Additionally, Woolworths submit that it is important to note that the proposed development was inconsistent with the condition of the State Planning Objectives requiring that any development be set back 30 metres from Racecourse Creek,[886] which provides:[887]

Retain natural drainage corridors with vegetated buffer zones at least 30m wide along each side of a natural waterway to maintain the natural drainage function, stream habitat and wildlife corridors and landscape values, to minimise erosion of stream banks and verges and to reduce polluted surface runoff from adjacent land uses.

Nevertheless, as both Mr Biacsi and Mr Thomas said in their evidence, development within 30 metres of the waterway may be permitted on a case-by-case basis, said Mr Biacsi,[888] and that a lesser setback could have been negotiated, said Mr Thomas.[889] Again, this is consistent with the evidence of Mr McGurn, the Woolworths planning expert, who acknowledged that while the Inundation Overlay posed challenges to the development of the site "these physical constraints could potentially be overcome".[890] Mr McGurn's evidence was to the effect that he could not say "with any certainty" whether an acceptable layout could be achieved, given the lack of resolved plans.[891] It is contended by Woolworths that this should lead to the view that the proposition that physical constraints could potentially be overcome is of little assistance to the Court. In my view, the position is quite the contrary. The lack of resolved plans, together with the evidence from the various experts whose evidence has been referred to in the preceding reasons that flood inundation issues are most likely able to be overcome, and the "fluid" - no pun intended - nature of the development negotiation and planning process at this time would tend to suggest even greater potential for overcoming flood inundation problems, particularly where all parties concerned act reasonably and in good faith and with the contractual object of progressing the development in mind.

295 Woolworths, in their submissions, also raise a number of other issues said to be relevant to the assessment of the alleged loss of NES on the basis of the evidence of these experts:[892]

1. This raises several questions that are relevant to the assessment of NES' alleged loss:

(a) would a permit have issued which permitted the store to be constructed within the 30m setback? (If not, the development could not have proceeded);

(b) if development within the 30m setback was permitted, what measures would need to be taken to:

(i) address the risk of the store (and carparks) being inundated during flood events;

(ii) to implement any mitigation strategies required to address potential impacts downstream or to adjacent properties; and

(c) what would the costs of such measures be? (noting that associated costs would be outside the scope of the [Landlord's Work's Costs], and therefore fall entirely on NES).

1. As to the first question, Mr Biacsi was unable to offer an opinion on what, if any, conditions would have been imposed on the development as a result of the proximity to Racecourse Creek to the site.[893] In Mr McGurn's opinion, it is likely that the conditions set out in the NCCMA's letter ... including the 30m set back requirement, would form part of any planning permit that may have been issued for the site.[894] This opinion was not challenged in cross-examination.
2. In relation to the risk of inundation, NES's inundation expert, Mr Thomas, gave evidence that the development would encroach on the 1 in 100 year ARI flood level, rendering it likely that part of the development footprint would be inundated during a 100 year ARI flood if constructed at current elevations.[895]
3. Mr Thomas warned that this may result in damage to the structure and contents of the building.[896] He also gave evidence of the dangers that a 100 year flood event could pose if persons entered flood waters on the site,[897] and the risk that vehicles parked on the northern boundary of the site may float during flooding events (of depths at or greater than 30cm), causing damages to structure, blocking flow paths and heightening the risk of injury to persons.[898]
4. Mr Thomas was unable to offer an opinion on the relevance of ecological considerations to the Strathdale site.[899] He also did not inspect the site, instead relying on photos and Google street view imagery.[900] (It is not clear whether the images he has relied on were taken during dry or non-dry periods.) Despite this, Mr Thomas was able to form the opinion that some form of setback would be necessary to meet the State Planning Objectives.[901]
5. These matters demonstrate that the risks arising from the flood zone and set back would have been of considerable concern to the Council and, if addressed in a planning approval, would have been addressed subject to conditions.

In my view, these matters do not take this particular aspect of the matter any further and, moreover, do not provide evidence upon which it ought properly be concluded that it was not more likely than not that the proposed Strathdale development would proceed in spite of the inundation issues which have been discussed.

296 Finally, there is the evidence of Mr Troon, from Troons, which has constructed more than 40 big box hardware stores for Bunnings, in relation to the NCCMA conditions. Mr Troon's evidence is that:[902]

The conditions in the development approval for the Masters store are conditions quite often applied to developments such as this.

We regularly engineer situations to comply with these conditions.

The application of these conditions has never resulted in our projects becoming unviable.

Catering for 100 [year] rain events is a common condition for a [development approval].

297 Mr Troon also gave evidence as to how these conditions could be accommodated and estimated that the cost to comply with the conditions would be around $350,000.[903] No builder or engineer was called by Woolworths to give evidence that the store could not have been developed as a result of the Inundation Overlay. Indeed, such evidence would have directly contradicted Woolworths' representations to the State Government that the site was "shovel ready" subject only to planning approval.[904]

298 Having regard to the preceding reasons and the evidence to which reference has been made, it is, in my view, as NES submits, open to the Court to find, and the Court should find, that, just as proximity to flood prone areas had not precluded the development of other big box hardware stores,[905] the proximity of the Strathdale site to Racecourse Creek would not have precluded the site from being developed in accordance with the Plans and Specifications. Moreover, to the extent that engineering solutions were required to mitigate any flood-related issues, these solutions could have been incorporated into the construction at a total cost of less than $350,000.[906]

Would the requisite planning approvals have been obtained?

299 The development of the Strathdale site could not proceed unless it was rezoned under the Greater Bendigo Planning Scheme ("the Planning Scheme"), as part of the site was zoned residential. An application was made seeking to have the entire Strathdale site rezoned as Business 1 to enable the development to occur. That application was subsequently withdrawn after the Agreement for Lease was terminated. If the application had not been withdrawn, it would have been considered by an advisory committee which had been appointed by the Minister under s 151 of the Planning and Environment Act 1987 for the purpose of considering a number of proposed Masters stores across Victoria.

300 Woolworths sought, in its submissions, to rely particularly on the evidence of the NES planning expert, Mr Andrew Biacsi, in support of the position that obtaining the necessary planning permission for the Strathdale site development would have been doubtful to say the least:[907]

1. NES's planning expert, Mr Andrew Biacsi and the Defendants' planning expert, Mr Stuart McGurn, agreed that it is not possible, on the basis of information currently available, to predict with certainty how the advisory committee may have regarded any applications lodged in relation to the Strathdale site. Mr Biacsi, for example, indicated that he could not form a concluded view on this issue without having regard to a range of expert reports (including economic analysis, traffic and access reports, urban design reports, environmental impact reports, flooding and water management reports), which were never prepared for the Strathdale site.
2. It was apparent from the evidence given by the experts (for both parties) that there was a real risk the advisory committee would not have recommend granting the rezoning and planning approvals necessary to undertake the development.
3. The fact that the development did not have the support of the ... Council would have weighed against the rezoning application. The advisory committee's determination in relation to the proposed North Geelong Masters store (in relation to which Mr Biacsi had acted for the Defendants in respect of the rezoning application) is instructive in this regard. The proposed North Geelong store was the only proposed Masters site that was put to the advisory committee that was not approved. It was also the only proposed site that did not have council support.
4. Mr Biacsi suggested in his report that there might have been economic arguments in favour of the Strathdale development which could have counterbalanced or outweighed the opposition by the City of Greater Bendigo in the mind of the advisory committee. However, during cross examination he accepted that the committee did not recommend granting the rezoning sought for the North Geelong site, despite recognising the North Geelong proposal offered real economic benefits.
5. Another factor that would have weighed against the required approvals being granted is the fact that of the rezoning application was outside the scheme framework. Mr Biacsi noted that this added an element of uncertainty. According to Mr Biacsi, the fact that the scheme discouraged allowing single use facilities to be located outside of activity centres would have weighed against the likelihood of the advisory committee recommending the application.
6. Ten of the eleven proposed Masters sites that were put to the Advisory Committee received approval. Of those 10, a majority were in or at the edge of recognised activity centres, and the balance had local council support. These are all, on this basis, distinguishable from the Strathdale site, which did not satisfy either of those criteria.

While there must always be some risk associated with seeking permissions or permits with respect to planning matters, the "doubtful prospects" picture as sought to be painted by Woolworths is, in my view, far too bleak and, for the reasons which follow, I am of the view that it was more likely than not that planning permission would have been granted to allow the Strathdale development to proceed as planned - or relevantly substantially as planned.

301 Woolworths Site Selection and Negotiation Criteria stated that sites would only be selected if they were appropriately zoned or had "good prospects of rezoning".[908] That the Strathdale site was selected and approved does evidence that Woolworths believed that the site had a good prospect of rezoning. Moreover, for the reasons which follow, this appears to be a reasonable assessment on the part of Woolworths.

302 On 24 November 2009, the Council informed Woolworths and representatives of the Department of Innovation, Industry and Regional Development ("DIIRD"), who were assisting Woolworths with the Oxygen rollout, that, while the Council was very supportive of having a Masters store in Bendigo, it had a number of concerns with the store being located at the Strathdale site.[909] Woolworths contends that the position taken by the Council would have precluded NES from obtaining the planning approvals necessary to develop the Strathdale site. Nevertheless, for the reasons which follow, I do not accept that there is any basis for this contention.

303 Mr Champion's evidence confirmed that Council support was not necessary in order to obtain planning approval. According to Mr Champion, local councils were not supportive of a Masters development in as many as 40 to 50 per cent of cases.[910] Despite opposition from the relevant council, which Mr Champion acknowledged Woolworths had experienced "many times in the past", he admitted that "in many instances [Woolworths had] succeeded in overcoming" [that opposition].[911] Mr Champion accepted that while Council opposition was of some concern, it was just another issue that needed to be worked through.[912] As observed by NES, no witness gave evidence that Council opposition presented an insurmountable obstacle to obtaining planning permissions.

304 Moreover, the evidence is that, far from being deterred by the position taken by the Council,[913] Woolworths sought the assistance of the Minister for Planning to "fast track" the planning approval process for each of the key Oxygen stores across Victoria, including the Strathdale site.[914] This approach of seeking Ministerial assistance was consistent with the Site Selection strategy which expressly contemplated that Senior Management would lobby the State and Federal authorities to obtain planning approval where appropriate.[915] This decision to lobby the Minister was also consistent with the recommendations that had been made by the DIIRD[916] and the planning advisers to Woolworths, namely, Urbis.[917]

305 In any event, on 22 February 2010, the Minister appointed an Advisory Committee, pursuant to s 151 of the Planning and Environment Act 1987 to report on issues concerning the proposed location of 12 Woolworths' hardware concept stores, including the store to be developed on the Strathdale site.[918] The Terms of Reference for the Advisory Committee stated that:[919]

The Minister for Planning considers that the proposed new stores are of State significance given their potential to deliver significant economic and employment benefits, as well as greater retail choice to the Victorian community by increasing retail competition in this sector.

The Terms of Reference for the Advisory Committee stated that the majority of the sites identified by Woolworths required either a rezoning and, or alternatively, a planning permit to allow construction of the proposed stores. The Terms of Reference stated that Woolworths would prepare draft planning scheme amendment and planning permit documentation to be considered by the Advisory Committee. Woolworths, together with the relevant councils, government authorities and affected landowners, were then entitled to make submissions and to be heard by the Advisory Committee. The Advisory Committee was to make recommendations to the Minister in relation to the form and appropriateness of the proposed planning scheme amendments and planning permit applications in a report. The report was to be made within eight weeks of the completion of hearings.[920]

306 On 25 August 2010, following hearings into each of the proposed sites, the Advisory Committee recommended the rezoning of ten of the eleven sites that had been referred to the Committee by Woolworths.[921] On 25 October 2010, the Minister approved each of the stores that had been recommended. The application for planning approval for the Strathdale site was not considered by the Advisory Committee, as it was withdrawn by Woolworths on 6 May 2010 following its termination of the Agreement for Lease.[922] Having withdrawn its application in respect of the Strathdale site, NES submits that Woolworths now seeks to rely on the uncertainty of its own creation in order to submit that NES can have suffered no loss and damage as a result of Woolworths' termination of the Agreement for Lease, because the development would not have been approved or constructed. This submission, it is said, stands in stark contrast to the contemporaneous statements made by Woolworths in relation to the risks associated with planning approval having been obtained and the development being realised.

307 In this vein, NES makes reference in its submissions to a letter to the Department of Planning and Community Development which was sent at a time when Woolworths had no direct financial incentive to overstate the risks associated with the project. In that letter, Woolworths said:[923]

Our planning consultants, Urbis, have undertaken a detailed review of the relevant planning and economic considerations applicable to each of the above sites and consider that each site is consistent with the key planning directions Policy, including Melbourne 2030, Melbourne @ 5Million and the key directions Retail Policy Review.

As per our original request, it is now Woolworths intention to formally seek assistance from the State Government to provide support for a coordinated and expedient planning approval process to facilitate and "fast track" all necessary planning approvals for the above first "block" of development sites.

308 On 14 August 2009, Urbis prepared an advice to Woolworths in relation to obtaining planning approval for the Strathdale site.[924] In that advice, Urbis noted that an out of centre development would be considered where it could be demonstrated that the development will be of net benefit to the community.[925] Urbis also noted that while the Strathdale site did not form part of an existing activity centre,[926] the majority of the site was zoned Business 1 and therefore anticipated this sort of development. Thus, Urbis concluded that "while the quantum of retail floor space will need to be justified by an economic analysis due to its out of centre location, we consider the principle of the development of the Product on this site to be acceptable."[927] Urbis stated that consent could be obtained from the floodplain management authority by demonstrating that the development will allow the free passage of floodwaters and will minimise flood damage.[928] Urbis said that it was essential that any application be supported by a robust economic analysis that confirms both the need for additional restricted retail space and that its introduction will not detrimentally impact nearby centres such as the Bendigo CBD.[929] More detailed analysis was provided to Woolworths by Urbis in November 2009 in a report entitled "Oxygen - Economic Issues Review".[930] The September 2009 Urbis report concluded that there were not any particularly significant economic issues in relation to the site; the sequential test of alternative locations recommended in the Retail Policy Review appeared to be met, as did the strategic assessment of the proposal. Urbis concluded that there were no other appropriate sites in centre, it was highly unlikely there were appropriate sites in an edge of centre location, the proposed site was appropriate for this type of development, the site provided access to a sufficient catchment, there was a need for the development, the development would not impact on the established Activity Centre Hierarchy and that the proposed development would improve and not adversely impact the availability of goods and services.

309 Despite Urbis having been engaged by Woolworths to prepare the draft planning documentation for the Advisory Committee and having advised Woolworths in relation to the likelihood of the planning amendments being recommended by the Advisory Committee in relation to the Bendigo site, and despite Woolworths having relied on the "detailed review" prepared by Urbis of the relevant planning and economic considerations applicable to the Strathdale site in submissions to the State Government at the time, Woolworths elected not to call Urbis to give evidence in this proceeding. Thus, NES submits, it must be assumed that - applying the rule in Jones v Dunkel[931] - any such evidence would not have assisted in its case and would have at least supported the views set out in its report[932] and Woolworths' own contemporaneous documents.[933] Instead, Woolworths seeks to rely on the expert evidence of Mr McGurn, whose principal conclusion is that "a lack of detailed analysis and expert reports supporting the proposal ... has the effect of creating uncertainty with respect of the likely success (or otherwise) of any application being supported by the 'Project Oxygen' Advisory Committee."[934] The evidence of Mr McGurn included evidence that he was instructed that, as a consequence of Masters giving written notice to terminate the Agreement for Lease on 6 May 2010, Woolworths advised the Advisory Committee that it no longer intended to proceed with the proposed development of the Strathdale site. As a result, comprehensive plans, reports and analyses normally required to assess such a proposal were not prepared.

310 Given the unavailability of more detailed information, Mr McGurn relies on what he describes as preliminary reports and site planning undertaken by Urbis and Pitney Bowes for Woolworths in 2009. While both the Urbis and Pitney Bowes reports support the rezoning of the Strathdale site, Mr McGurn states in his report that:[935]

[W]hilst it is claimed in the Urbis report that the sequential test was likely to be satisfied there is no detailed analysis underpinning this opinion. Indeed a number of detailed reports would have been required to be prepared, such as economic analysis, traffic and access, urban design and environmental impacts to support any proposal.

311 Despite being limited by the information provided to him, Mr McGurn nevertheless concludes in his report that:

(a) The (residential) zoning of part of the Bendigo site appeared to be an anomaly that created uncertainty in relation to the use and development of the land;[936]

(b) While the site was not within an established activity centre,[937] there were a number of locational factors that can be considered positive attributes for the intended use of the site;[938]

(c) In the four out-of-centre locations supported, the Advisory Committee was satisfied that the sequential test could be achieved as well as the overarching matters set out in Mr McGurn's report;[939]

(d) The Urbis report concluded that the proposal would likely have passed the sequential test;[940]

(e) On the basis of the analysis prepared by Urbis and Pitney Bowes in economic terms the proposal may well have been successful and would not have compromised the role and viability of other stores and centres;[941]

(f) The Project Oxygen rollout program was considered to be of State Significance but this did not mean the proposals would have been supported "at any cost";[942] and

(g) While "there was no certainty" that the Advisory Committee would have supported the proposal,[943] there would have been some obvious locational advantages of the site and some support for the proposal in relation to the economic and competition benefits.[944]

312 It appears, however, that the only material obstacles to obtaining planning approval identified by Mr McGurn, who did not disagree with the conclusions reached by Urbis or Pitney Bowes, were that the site was not located within an established activity centre,[945] which concern is addressed by the application of the sequential test, Council's concerns about adjacent residents[946] which Mr McGurn admitted was not determinative, and what can only be inadmissible speculation about limitations that may or may not have been imposed by the NCCMA as a result of the Inundation Overlay.[947] NES also emphasises that these conclusions are based solely on the contents of the NCCMA letter of 18 May 2012, to which it objects,[948] and other documents said to be inadmissible, including an email of 24 October 2012 and a plan from Urban Design and Management which are also objected to.

313 On the other hand, the evidence of Mr Biacsi, the planning expert called by NES, is that:

(a) There would have been a good case for supporting the rezoning of the subject land to facilitate an Oxygen store on the site;[949]

(b) The proximity of a nearby residential development was not a constraint upon the rezoning of the land;[950]

(i) The land already being substantially zoned for commercial development with the majority of the land being zoned as Business 1;

(ii) Despite the land being in an out-of-centre location, rezoning could reasonably have been justified on "net community benefit" grounds under the planning scheme;

(iii) The land was proximate to the homemaker market and developing areas of Greater Bendigo and enjoyed good access;

(iv) The land is of approximate size and proportions to reasonably accommodate the Oxygen store development;[951]

(d) Had the application for rezoning been maintained and actively supported by Woolworths it is likely that the Advisory Committee would have supported the rezoning to facilitate the Oxygen store;[952]

(e) Had the Advisory Committee recommended the rezoning, the Minister would likely have acted on that recommendation;[953]

(f) In the event that Woolworths had maintained its commitment to the rezoning application and resourced it to the same extent it resourced other Oxygen store applications, and had the Advisory Committee supported the rezoning, it is likely that the rezoning would have occurred;[954]

(g) Any concerns raised by the Council would have been assessed in the context of planning policy and the public interest. The economic arguments favouring the Oxygen program were persuasive and would have been a significant factor in convincing the Advisory Committee of the acceptability of rezoning;[955] and

(h) In order to determine what (if any) conditions may have been imposed by the NCCMA as a result of the proximity of the land to Racecourse Creek it would first be necessary to clarify the NCCMA's position. The reference to a setback of 30 metres per cl 14.02-1 of the State Planning Objectives would also need to be clarified. This clause identifies strategies intended to guide decision making and must be read in the context of applicable planning controls. It is a guideline and not a statutory requirement mandating strict or absolute compliance. The applicable planning controls contemplate circumstances where development may be acceptable within this setback.[956]

I accept that, as submitted by NES, cross-examination of Mr Biacsi on whether it was not possible to predict how the Advisory Committee would have acted "with any certainty"[957] can be of no assistance to the Court whose task it is to ascertain what NES has lost by reference to degrees of possibilities or probabilities, not certainties.[958]

314 It is also submitted by NES that it is open to the Court to find, and the Court should find, that had it not been for Woolworths' breaches of cl 2.2 of the Agreement for Lease which resulted in Woolworths withdrawing its application for planning approval for the Strathdale site prematurely, Urbis would have completed its task of preparing the draft planning scheme amendment in permit documentation and submissions to the Advisory Committee. Those documents would, it is said, have been consistent with the Urbis Report of November 2009, to which reference has been made, and Woolworths' letter to the State Government.[959] The fact that the preparation of these detailed reports was not completed is an issue of Woolworths' own creation which was brought about by its own breach that has been further exacerbated by its election not to call evidence from Urbis in this proceeding. As submitted by NES, it is well established that a party cannot, either directly or indirectly, benefit from its own wrongdoing[960] or rely on any event brought about by his or her own breach of contract.[961] In New Zealand Shipping Co Ltd v Société des Ateliers et Chantiers de France, Lord Chancellor Finlay described this principle as a principle of law that "no one can ... take advantage of the existence of a state of things which he himself produced."[962] This principle is not limited to cases in which a party relies on its own wrongdoing to avoid a contract.[963] Thus, having brought about this state of affairs by their own breach of contract, it would be unjust to permit Woolworths to rely on the absence of the reports that it had committed to prepare in order to reduce the damages that would otherwise be payable to NES. To do so would, in my view, be to permit Woolworths to benefit from their own wrongdoing.

315 For the preceding reasons, on the basis of the evidence, it is open to the Court to find, and the Court should find, that, had Woolworths acted in accordance with its contractual obligations, planning approval would more likely than not have been obtained for the Strathdale site; just as approval had been obtained for all but one of the key Oxygen stores in other parts of Victoria.[964]

Would NES have realised the opportunity to develop and lease the Bendigo site?

316 Woolworths' contention that any opportunity lost by NES was of no value as NES could not have developed the site should, for the preceding reasons and those which follow, be rejected. Woolworths' submissions to this effect do, in my view, overstate the risks associated with the development of the Strathdale site. In this context, NES submits that Woolworths' submissions to this effect are a recent invention and for the purpose of reducing Woolworths' liability in this proceeding. For the reasons which follow, I am of the view that these submissions are justified.

317 The present position contended for by Woolworths is in marked contrast to the position taken in relation to the risks of development as stated by Woolworths in its correspondence with the Department of Planning and Community Development, namely:[965]

We are pleased to advise that Woolworths have now secured 13 development sites ... within Victoria for which we intend to lodge formal development applications. ...

We advise that each of these sites are "shovel ready" subject to planning approval. ... We also advise that the developers responsible for construction of the above leasehold sites are also in a position to commence construction immediately following planning approval.

318 In relation to the prospects for obtaining planning approval, Woolworths relied on its advice from Urbis that the application in respect of each site was "consistent with the key planning directions Policy, including Melbourne 2030, Melbourne @ 5Million and the key directions Retail Policy Review."[966] On the material before the Court, it does appear that the pessimistic view of the prospects for the development which are now taken by Woolworths are self-serving and are not divorced from the relationship, the direct relationship, between Woolworths' liability for damages in this proceeding and the risks of the development being completed.

319 For the preceding reasons, NES submits, in my view correctly, that it is open to the Court to find, and that the Court should find, that but for the withdrawal of Woolworths' support for the development, the development would have proceeded and the benefits promised under the Agreement for Lease would have been realised. Thus, I turn to the remaining question, what is the value of that lost opportunity?

If NES has lost a valuable opportunity, what was that opportunity worth?

320 The central and critical question in determining the quantum of loss and damage is what amount of compensation is necessary to put the injured party in the same position it would have been in had the breach of contract not taken place.[967] Where the loss is the loss of a commercial opportunity, the question becomes what is the value of that commercial opportunity and what discount should be applied to reflect the risks that the commercial opportunity may not have been realised. To this point, the ground is common between the parties. Woolworths, however, contend that in any event, NES has not lost any commercial opportunity of meaningful value. In relation to the applicable methodology in the present circumstances, Woolworths submit that, as a starting point, it is necessary to ascertain the value of the commercial opportunity in the - as it says - highly unlikely event it would have transpired. In this respect, Woolworths say that the evidence shows that NES would have made a loss in undertaking the development.

321 Secondly, Woolworths submit that the evidence demonstrates that there was a high probability that NES would have been unable to complete the development at all, as it would have been unable to obtain the necessary finance and planning permits for the development and for other reasons advanced in the Woolworths submissions which have already been considered in these reasons. As indicated in the preceding reasons, I do not accept that there was a high probability that NES would have been unable to complete the development at all.

322 Thirdly, it is submitted that, in accordance with the principles set out in Sellars, a significant discount needs to be applied to the determined value of the commercial opportunity.[968]

323 As discussed previously, NES contends that the opportunity that it has lost is the opportunity to realise the rental returns promised under the Lease to Masters, along with the value of the Site at the conclusion of the Lease. Moreover, it says that NES has saved, and must account for, the costs of completing the development and maintaining the site for the duration of the Lease. For the reasons indicated previously, I accept that this is the proper characterisation of the opportunity lost, thus the question becomes, how should that loss be valued?[969] Clearly assessment of value and associated risks almost 40 years into the future is difficult and carries a degree of uncertainty.[970] Nevertheless, this reality is, in my view, accommodated in the methodology adopted.

Appropriate methodology for assessing value of lost opportunity

324 The experts called by the parties agreed as to the appropriate methodology to be applied to assess the value of any commercial opportunities lost by NES. The evidence of the valuation expert called by NES, Mr Owain Stone, is that the appropriate methodology to assess the value of the alleged lost opportunity to NES is to compare the cash flows NES would have incurred or earned if the development had gone ahead, with the actual cash flows it did incur ("actual versus but for analysis").[971] Mr Stone expressly stated that this methodology is the appropriate one, even though he understood that NES had no intention of selling the site upon completion of the development.[972] The alternative methodology relied upon by NES, which is discussed in the reasons which follow, was put to, but Woolworths submits not accepted by, Mr Stone as an appropriate methodology. Woolworths' valuation expert, Ms Dawna Wright, agreed that the actual versus but for analysis adopted by Mr Stone is the appropriate methodology,[973] and criticised the alternative methodology put forward by NES.[974] Woolworths do, however, submit that while Mr Stone applied the correct methodology, his assessment of the value of the commercial opportunity is wrong as it relied upon a number of assumptions that are inaccurate.[975] However, for the preceding reasons, I am of the opinion that Mr Stone's assumptions are reasonable in the circumstances, particularly with respect to the quantum and payment of the Landlord's Works Costs.

325 In its particulars of loss dated 4 May 2015, NES asserted that the value of its loss should be calculated by adding the net present values of:

(a) the "loss of rental surplus", being the net rental income NES would have achieved during the term of the Lease (assuming all six options to renew were exercised and the Lease ran for the maximum 42 years); and

(b) the "capital loss" or "net equity", being the capital value of the land less any loan balance as at the conclusion of the Lease (assuming all options were exercised and the Lease ran for the maximum 42 years).

326 Woolworths contends that there is no evidence to support adopting the Alternative Methodology for assessing loss. Assessing the future value of a property by separately valuing the rental income expected to be earned in the intervening period and the land as at a future date, that is, at 2052, is said not to be a normal approach to property valuation. Moreover, it is submitted by Woolworths that in almost 30 years' experience as a property valuer, Woolworths' expert property valuer, Mr Jackson, gave evidence that he had never heard of such an approach being applied to a property such as the Strathdale site.[976] Moreover, Woolworths contends that it is telling that:

(a) the Alternative Methodology was put to Mr Stone by a supplementary letter of instruction issued on the same date that he provided his initial report;[977] and

(b) while the Alternative Methodology was put to Mr Stone, he did not adopt it.[978]

327 In accordance with his supplementary instructions, Mr Stone simply performed an act of calculation by applying the basic formula put to him - Loss = NPV of A + NPV of B - to inputs that he was instructed to assume. Woolworths say, however, that it is clear that Mr Stone does not regard the sum he derived by applying the Alternative Methodology to be reflective of the loss suffered by NES.[979] Additionally, Woolworths submits that the Alternative Methodology is dangerous and unreliable because, among other defects, it requires the Court to rely on projections of income that will be earned over a long period and to rely on an estimate of the value that a particular property will have over 40 years into the future.

328 Finally, Woolworths observe that NES did not lead any evidence as to the value of the property at the end of the Lease - that is, in 2052 - or the appropriate risk rate to apply in projecting the income that may be earned over a 42 year period.

329 As has been observed, Mr Stone gave evidence that in his opinion, an appropriate methodology for assessing the loss and damage suffered by NES was to determine the difference between the cash flows which NES would have incurred had the development gone ahead and the actual cash flows it did incur. Ms Wright agrees with this approach,[980] as does Mr Jackson.[981] As set out below Mr Stone uses the value of the completed development as a proxy for the cash flows the property could have achieved. To this he added Masters' contribution amount as an estimate of the total revenues the property would have generated.

330 Mr Stone derives this value by identifying the total cash flows that NES would have earned had the development been completed and deducting the costs that NES has saved by the development not proceeding.[982]

Valuing the cash flows that would have been achieved

331 It is the appropriate method of valuing the cash flows that NES would have earned which is in dispute. Mr Stone estimates the value of the cash flows that NES would have earned by two different methods. Question 6, which was put to Mr Stone in the initial instruction letter dated 20 March 2015, asked:[983]

In your opinion what types of costs (excluding those that are in your opinion minor) would have been incurred by NES in order to complete the development and to lease the site to Woolworths (including the cost to purchase the land, the Landlord's Works Costs and the finance costs)?

In his answer to this question, Mr Stone estimates the value of the development on the date of completion, applying the Discounted Cash Flow method, as a "proxy" for the future cash flows the property may have generated.[984] Question 9, as set out in the additional letter of instructions dated 1 May 2015, asked:[985]

In your opinion, what net equity (being the difference between the capital value of the land less any loan balance) would there have been in the Bendigo Property as at the conclusion of the 42 year lease?

And in the same additional letter of instructions, Question 10 asked:[986]

What would the net present value of the answer to [Question 9] be at 6 May 2010 (applying the same discount rate as in answer to [Question 2] above to reflect the time value of money)[?]

Mr Stone, in his answers to Questions 9 and 10, estimates the value of the cash flow directly, using the Discounted Cash Flow method for the rent earned over the Lease and the Capitalisation of Income method for the residual value of the property at the end of the lease.[987] In both cases, where Mr Stone uses the Capitalisation of Income method he arrives at an "illustrative" value of the property by applying a notional yield. In this respect, Mr Stone says in his report: "I understand that property values are often derived by dividing rental value by an assumed yield."[988] The valuation is illustrative as, while Mr Stone is an experienced business valuer, he is not a property valuer and does not have the expertise to determine what yield should be applied.[989]

332 Similarly, Ms Wright is not a specialist property valuer and it is for this reason that Mr Jackson and Mr Sutherland provide expert opinions as to the yields that may be applied to the calculations performed by Mr Stone and Ms Wright. There is, in my view, no difficulty with this approach as it is well accepted that the Court can accept the evidence of one expert in relation to one issue, such as methodology, and the evidence of another expert in relation to a separate issue, such as the applicable yield;[990] all the more where their expertise is complementary.

333 Question 8 as set out in the additional letter of instructions to Mr Stone dated 1 May 2015 asked:[991]

What would the net present value of that stream of net revenue or surplus rent have been as at 6 May 2010?

In performing this calculation, please apply a discount rate that you consider to be reflective of the time value of money over this period.

In his answer to this question, Mr Stone values the stream of net rent that could have been earned under the lease using the Discounted Cash Flow methodology. This methodology, which is common, involves calculating the net present value of pre-tax cash flows. Moreover, in addressing this question, Mr Stone says, with respect to tax on lost cash flows:[992]

1. It is necessary to consider whether the plaintiff would have paid tax on the estimated Lost Cash Flow. In addition, consideration should be given to the rate at which tax would have been paid, the availability of any tax losses, and the timing of any tax payments.
2. I have not been provided with any details relating to NES's tax position.
3. If the Lost Cash Flows would have been subject to income tax then in my opinion the loss and damage should be based on post-tax cash flows since that is what the plaintiff has lost.

More particularly, Mr Stone answers Questions 7 and 8 as follows:[993]

1. I have set out the surplus rent calculations that NES would have achieved over the 42 year term of the Lease in Appendix C.
2. The net present value of that stream of surplus rent as at 6 May 2010 is $11.073 million.[994]
3. In performing this calculation I have applied a discount rate reflective only of the time value of money over this period. I have assumed this rate to be 5.4 per cent per annum, based on the 10-year Commonwealth Bond rate as at 6 May 2010.

1. In estimating the above figures I have made the following assumptions based on instructions provided to me (these are in addition to the assumptions set out at para 8):
   1. That NES would have incurred running costs of $32,000 per annum; and
   2. That construction would have commenced around October 2010 and would have completed eight months later ie around June 2011.
2. In estimating the above figures I have made the following assumptions which are additional to the assumptions I have been instructed to make:

1. That the lease period would have commenced on 1 July 2011; 2. That cash flows would have occurred on average half way through each year;

1. That the rental receipts would have been increased at actual CPI[995] up to June 2014 and 2.5%[996] per annum thereafter.

1. That NES would have incurred no other costs associated with holding the property; 2. That NES would not have used the surplus rent to reduce the outstanding loan from Bendigo Bank; and 3. That Bendigo Bank would have capitalised the interest on the loan during the construction phase.[997]

Mr Stone calculates the end or exit value of the property at the end of the Lease - when the land may be sold - using the Capitalisation of Income method based on the rent that the property would have earned in the last year of the Lease and the yield that applied on the date of his report.[998] This assumes that the property would have been properly maintained and could continue to have realised that level of rent. Where the Lease required the property to be maintained and the rent was fixed to the lesser of CPI or 4 per cent - which does not even preserve the real value of the rent - NES submits that this assumption is not unrealistic.

334 Ms Wright values all cash flows from the property - both the future and rental income and the end value of the property - using the Discounted Cash Flow method, using the rent during the first year of the Lease and the yield applicable as at the date of completion of the development.[999]

335 Moreover, NES makes reference in its submissions to material with respect to the Discounted Cash Flow method by Lonergan in the text, The Valuation of Businesses, Shares and Other Equity:[1000]

Returns from property comprise net income plus capital appreciation. However certain types of property are purchased primarily for their potential to increase in capital value (for example, land suitable for sub-division, vacant CBD sites etc.) while others are purchased primarily for their annual net income (for example, fully let shopping centres in fully developed areas). The former are generally valued using the hypothetical development method of valuation. The latter are valued as the present value of the expected future cash flow from net rental income plus the expected end or exit value of the property at the end of the period.

Thus it is said that the Hypothetical Development method to which reference is made, which is a derivative of the Discounted Cash Flow methodology, which is used to value property acquired with the intention of developing and then selling it, involves deducting the costs of development from the estimated proceeds of sale as at the date of completion. The proceeds of sale may be calculated by discounting the expected cash flows or capitalising those cash flows to arrive at a value at completion of the development.[1001]

336 The Capitalisation of Income method involves valuing the property by capitalising the (pre-tax) net rental income the property produces at a capitalisation rate based on the yield reflected in contemporaneous sales of comparable income producing properties.[1002] Lonergan comments in The Valuation of Businesses, Shares and Other Equity, that the Capitalisation of Income method assumes a continuation of the rental income at the date of the valuation.[1003] For this reason NES submits this method is not applicable for valuing the rent, which was not fixed under the Agreement for Lease. The Capitalisation of Income method also assumes that the potential for rental and capital growth risks associated with investing in the property and any tax deductions available to an owner are all reflected in the yield.[1004] While it is accepted that the yield[1005] will implicitly incorporate some discount to reflect the purchaser's - or the market - perception of the risks associated with the cash flows from the property being achieved, at the point of sale, it will also necessarily incorporate other dynamics of the market (such as supply and demand, interest rates etc.) at the time of sale.[1006] It is for this reason that market yields change over time. These market dynamics bear no relationship to the risks associated with achieving the particular cash flows in question.[1007]

337 This is not to say that the Capitalisation of Income method has no application. On the contrary, NES does accept that where the property is to be sold, or the cash flow capitalised, at or near the time of valuation, at which point the dynamics of the market will be highly relevant to the price achieved, the valuation of the property by this method may be appropriate. It is for this reason that the method is appropriate to value the property at the end of the Lease when it may realistically be sold. In contrast, where the property is to be sold, and the income capitalised, at a much later point in time, under different market conditions, the application of this method, which assumes the risk of cash flows being achieved is reflected in the yield, which yield is derived under different market conditions, may not be appropriate. It is for this reason that NES does not accept the use of the Capitalisation of Income method to value the cash flows of the property "at the date of completion of the development".[1008] Another reason that the selection of a yield that is reflective of the underlying risks of achieving the cash flows in question is that the Capitalisation of Income method of valuation is extremely sensitive to the yield selected with a percentage change in the yield having a disproportional effect on value.[1009]

338 The Capitalisation of Income method is also highly dependent on there being sufficient sales of "truly comparable properties" at or around the valuation date to allow an appropriate yield to be identified.[1010] The evidence reveals that there had been no sales of Masters stores at the time when Woolworths contend NES's cash flows should be valued. There had been a small number of sales at the date Mr Sutherland derives his yields for the purpose of Mr Stone's end value estimate.

339 In applying the Capitalisation of Income method the yield to be applied is selected based on observable market yields from the sale of comparable properties. The yield is determined by dividing the price by the rental return.

340 Given the relationship between the market dynamics and yields, and the critical role that yields play in this methodology, Lonergan, in The Valuation of Businesses, Shares and Other Equity, states that in determining the yields property valuers should consider the underlying supply and demand dynamics of the market including the level of development activity.[1011]

341 In selecting the yields that Woolworths' submit should be applied as at the date of completion, Mr Jackson appears to have given no consideration to these matters including the time at which the property was likely to be sold, the level of interest rates, foreign investment or falling yields which are a significant contributing factor to the yield selected, but may be entirely inapplicable when the property is eventually sold and the equity in it realised. Mr Sutherland has taken those matters into account in selecting an appropriate yield at the date of his report, as a proxy for the yield that might apply at the end of the Lease.[1012]

The validity of the Discounted Cash Flow method for valuing the cash flows

342 In circumstances where NES purchased the Strathdale site for the purpose of earning and retaining the annual net income from Masters, and did not intend to sell the site during the life of the Lease, NES submits that the more appropriate method of valuing its loss is to value the stream of net rent NES would have earned over the life of the Lease - using the Discounted Cash Flow method which has been described - and adding the net present value of the end value of the property using the Capitalisation of Income method at the end of the Lease. This involves calculating the present value of the expected future cash flow from the net rental income plus the exit value of the property at the end of the Lease. This is consistent with valuing the loss as the loss of the value of the Lease plus the loss of the residual value of the land as an income producing property.

343 Mr Jackson accepted in cross-examination that valuing the net present value of income under the lease and the exit value of the property was a valid alternative to the Capitalisation of Income method.[1013] Ms Wright also accepted in cross-examination that valuing the stream of cash flows using the Discounted Cash Flow method may be appropriate where the cash flows are known - as is the case here with net rental.[1014] In order to ensure that risks associated with achieving the cash flows from the development were not double-counted, Mr Stone was asked to apply a risk-free discount rate which reflects only the time value of money. Ms Wright also accepted in cross-examination that the incorporation of the same risks into a discount rate and Sellars discount may result in double counting of those risks.[1015] It follows that the risks would be double counted if the same risks are incorporated into the discount rate applied under the Discounted Cash Flow method and then a Sellars discount were to be applied by the Court.

344 NES accepts that where a risk free discount rate has been used (as is the case for Mr Stone's estimate of the value of net rent in answer to Questions 7 and 8 of his report[1016]), a Sellars discount will be applied by the Court to reflect the risks of the cash flows not being achieved.[1017] Where the Capitalisation of Income method is applied, a Sellars discount should apply to only those risks that preceded the valuation date as all post-valuation risks are assumed to have been incorporated into the market yield; assuming the properties from which the yield is derived are truly compatible.

The application of the Discounted Cash Flow method

345 On this basis, and in answer to Questions 7 to 11 of his instructions, Mr Stone calculated the net present value - as at the date of breach - of the stream of surplus rent NES would have earned under the Lease. The net present value of that stream of revenue was estimated to be $11.073 million using a risk-free discount rate of 5.4 per cent being the 10 year Commonwealth Bond Rate.[1018] Ms Wright gave evidence that the 10 Year Bond Rate as at 6 May 2010 was 5.54 per cent,[1019] which was accepted by Mr Stone[1020] and incorporated in the amended calculations provided to the Court. According to Mr Stone's amended calculations, using the Discounted Cash Flow method, the net present value of the net rent over the life of the Lease, as at the date of breach, was estimated to be $10,722,842.[1021] Mr Stone then calculated an illustrative net present value of the exit value of the property as at the end of the Lease (using the Capitalisation of Income method). The estimate was illustrative as it was based on an assumed yield.[1022]

346 When the yields identified by Mr Sutherland (of 6.5 per cent to 6.75 per cent) as at the date of his report - being the date closest to when the property would realistically have been sold - were incorporated into this calculation, along with the rental return in the last year of the Lease, the net present value of the exit value of the property at the end of the Lease was estimated to be between $3,705,216 and $3,906,035.[1023] This results in a net present value of stream of surplus rent and net present value of the exit value of the land, using the Discounted Cash Flow method, of between $14,428,058 and $14,628,876 or approximately $14.5 million.

347 NES submits that this estimate accurately reflects the true value of the lost opportunity suffered by NES as a result of the wrongful termination of the Agreement for Lease by Woolworths. It does follow, of course, that, being the loss of an opportunity, an appropriate discount must be applied to this estimate of loss, in accordance with the principles in Sellars, to reflect the possibility that the outcome may not have been achieved.[1024] The appropriate discount to be applied to NES's risk-free loss of $14.5 million is considered in detail in the reasons which follow.

Valuing the cash flows together as at the date of completion

348 Question 1, which was put to Mr Stone in the initial letter of instructions dated 20 March 2015, asked:[1025]

In your opinion, what is the appropriate methodology to assess the loss and damage suffered by NES as a result of the development not proceeding?

In answer to Question 1, Mr Stone estimates the value of the development on the date of completion, applying the Capitalisation of Income method, as a "proxy" for the future cash flows the property may have generated.[1026] On the basis of an assumed yield of 7 per cent Mr Stone then arrives at an illustrative estimate of NES's loss and damage[1027] as at the date of termination of the Agreement for Lease.[1028] Mr Stone says he believes yields range between 6 per cent and 9 per cent, but that there is no publicly available data in relation to yields on properties such as this one.[1029] When Mr Sutherland's yield of between 6.5 per cent and 6.75 per cent[1030] is applied, this method results in an estimate of NES's loss and damage as between $4,005,701[1031] and $4,739,923.[1032] That is, at least $4 million. NES submits that this is the lowest measure of NES's loss and damage open.

349 The principal reason that this method results in an estimate of loss and damage that is materially lower that the Discounted Cash Flow method as discussed is that, by applying a yield to all cash flows the Capitalisation of Income method heavily discounts both the net rental return and the residual equity in the property to reflect the market conditions and (it is assumed) the market's perception of the risks of the cash flows not being achieved, as at the date of completion. This method would apply where NES intended to sell the property as at the date of completion. By comparison, the Discounted Cash Flow method leaves the Court to apply a Sellars discount to the risks associated with NES achieving the net rent promised under the Lease (a task NES says the Court is better placed to do than the "market" for purchasers of Bunnings stores as at the completion date) and applies the discount the market would apply to the residual value of the land (the yield) as at the date of the proceeding which NES says is more reflective of the market into which it may have sold.

350 If, however, the Capitalisation of Income method is applied and the cash flows capitalised as at the date of completion, NES submits that any Sellars discount should be limited as this method implicitly incorporates into the yield a discount for risks associated with the underlying cash flows being achieved.[1033] As such, any Sellars discount should be limited to any pre-completion risks. However, for the reasons which follow, I am of the view that the Capitalisation of Income method as at the date of completion is not the most appropriate method of estimating NES's loss and damage in this case as it would not fully compensate NES for the opportunity that it has lost.

Issues with valuing cash flows as at the date of completion

351 Although the Capitalisation of Income method is a common method - and a simple method - of valuing income producing properties, it is not the only method nor is it the most appropriate method in every circumstance. Thus, in Challenger Property Asset Management Pty Ltd v Stonington City Council, I said:[1034]

It is clear from the authorities that, depending on the particular circumstances, different methods of valuation may be appropriate. The courts have not adopted a prescriptive position with respect to valuation methodology and care should be taken to ensure that no single process of reasoning is elevated into a statement of principle.

Consequently, in selecting and applying a valuation methodology careful consideration must be given to the reality of the marketplace including the circumstances in which the property to be valued would have been sold.[1035]

352 In the present case, one fact that is critical to the valuation of NES's lost opportunity, is that NES did not intend to sell the Strathdale site upon completion but instead intended to hold onto the Strathdale site for the duration of the Lease in order to realise the full benefits of the rent payable by Masters under the Lease and any capital appreciation over that time.[1036] This fact is of particular significance given that the market yields for investment properties have been decreasing over time. The evidence of Mr Sutherland was that:[1037]

It is evident from a review of the sales evidence that capitalisation rates [(yields)] have continued to decline due to the historically low interest rate environment and as a result of the extremely competitive investment market, including a strong involvement of offshore, largely Chinese purchasers.

Moreover, Mr Stone states in his report:[1038]

I understand that it was not the intention of the Plaintiff to sell this property. However it is appropriate to use the illustrative value of the property at completion as a proxy for the present value of all future cash flows which NES would have incurred/earned after the completion of the development (other than the repayment of the loan itself), risk adjusted for the time value of money and the likely risks (as estimated by the market) regarding the future cash flows likely to be enjoyed by the owner ...

While Mr Stone is correct in stating that it may be appropriate to use the market value of a property at a particular point in time as a "proxy" for the stream of revenue - including from the ultimate sale of the land - that the property may generate over time, this is not always so and careful consideration should be given to the date of valuation.

353 NES submits that where the injured party intends to sell the property at or around the date at which the value is assessed, so as to capitalise that income, or where the property is to be held but the market yield[1039] is stable, the Capitalisation of Income method may be appropriate. However, for the reasons set out below, where the injured party intends to hold onto the property and the market yields are not stable, as is the case here, the Capitalisation of Income method has the real potential to undercompensate the injured party when yields are falling or overcompensate the injured party when yields are rising by fixing the injured party with a yield that reflects the dynamics of the market and not any inherent risk associated with the cash flows that are intended to be valued. I turn now to the reasons which, in my view, support this proposition.

354 The Capitalisation of Income method views an investment or income producing property as no more than the stream of revenues that it may generate and values those revenues based on the market price for the property at a particular point in time. In this sense, this method uses the estimated market value of a property at a particular point in time as a "proxy" for the value of all future cash flows generated by the property including from its ultimate sale. Importantly, this method does not directly seek to identify or value the cash flows that the property will generate or identify and measure the risks associated with those cash flows being achieved.[1040] Instead, the Capitalisation of Income method looks to the relationship between the market price of comparable properties relative to their rent (the yield), which is assumed to incorporate whatever discount that the market would apply to reflect time value of money and investment risks at the time of purchase. The Capitalisation of Income method then applies that same relationship between market price and rent (yield) to the known rental return on a property to estimate the market price for that property, being the value the market would place on the stream of cash flows the property would generate at that point in time. As already observed, the Capitalisation of Income method of valuation is extremely sensitive to the yield selected such that a very small change in the yield will have a disproportionally large effect on value.

355 The difficulty with the Capitalisation of Income approach, in this case, is that the yield that an investment property is capable of commanding in the market is a reflection of the market's perception of investment risk of the property relative to its income stream as well as other dynamics of the market at a particular point in time when a property is sold. Features of a property such as its location, specifications, age, tenants, rent and outgoings, as well as the dynamics of the market and investor sentiment, will all influence the market value of a property to an investor and therefore the applicable yield.[1041] By dividing the expected rental return by a yield based on comparative sales at the date of completion of the development, as a proxy for the value of all future cash flows and residual equity that would be earned by NES, the Capitalisation of Income method implicitly discounts those future cash flows, including the equity that would have been available at the end of the Lease, on the basis of the dynamics of the property market, including the sentiments of purchasers of comparative properties, as at the date of completion.

356 As stated in the preceding reasons, the evidence is that the Strathdale site would not have been sold on completion of the development. Accordingly, it is not, in my view, appropriate to fix the loss and damage intended to compensate NES by reference to an implicit discount based on market dynamics and sentiment at a time when the property would not have been sold, or the income capitalised. Instead, the Court should, in my view, look to value the actual cash flows NES would have achieved, having regard to when these would have been achieved and the risks of those cash flows not being achieved. Where it is necessary or desirable to apply a yield, for example to determine the market value of the land at the end of the Lease, the yield that should be applied is the yield that best reflects the market dynamics and sentiment at that time, being the time at which the property may otherwise have been sold. In this case, the yields of Mr Sutherland, which are the most up-to-date yields available, should be applied.

357 Moreover, to fix NES's loss and damage by reference to a yield as at the date of completion, while simple and expedient as a means of valuation, is inappropriate and unrealistic in the circumstances. The effect of capitalising NES's expected income at the date of completion, by reference to the yield that prevailed at that date, when this date has no relation to the date on which the property might have been sold, and where yields are increasing, will have the effect of undervaluing the cash flows that NES would in fact have obtained from the property. This is particularly so for the residual (capital) value of the land which would not have been sold for some time. In doing so, this method would put NES in a far worse position than the position that it would have in fact been in had NES held onto the Strathdale site, and enjoyed the full cash flows and capital at a lesser discount, as it intended.

358 The Capitalisation of Income method is also inappropriate in the present case for other reasons, including that the rental income under the Lease was not fixed;[1042] there were no comparable sales of Masters stores from which to select a yield;[1043] and the assessment of the applicable yield did not, and could not have, taken into account the risks associated with investing in the property and underlying market dynamics as at the likely date of sale, which date had not yet arrived.

The evidence of Ms Wright and Mr Jackson on valuation

359 Ms Wright agreed with Mr Stone's methodology of measuring loss and damage by comparing actual and expected cash flows.[1044] Ms Wright also agreed with Mr Stone that the "value of the completed development" should reflect the value of the lease and anticipated cash flows under it as at a particular valuation date.[1045] Ms Wright expressed no opinion about what the valuation date should be, nor did she express an opinion on the accuracy of Mr Stone's calculations of the value of the completed development.[1046]

360 Mr Jackson agreed that the Capitalisation of Income approach is "one of" the most used and preferred methods for determining the value of property and is "an" appropriate approach to determine the value of the Property at the time of valuation.[1047] Mr Jackson agreed that the calculation of the net present value of income under the lease and the exit value of the property was a valid alternative to that method.[1048]

361 Ms Wright calculated what the impact would be on Mr Stone's (Capitalisation of Income) estimate of NES's loss if different assumptions were made about the amount of Masters' contribution and higher yields (of 7 per cent and 8.4 per cent).[1049] For the preceding reasons, the assumption that had Woolworths acted reasonably and in good faith they would have paid a contribution amount of less than $2.94 million - being the revised NES contribution amount[1050] - which was less than the Rider Hunt estimate at the conclusion of the open book process,[1051] can safely be rejected. Likewise, for the reasons which follow, yields of 7 per cent, 8 per cent and 8.4 per cent should also be rejected. It is noted that the assumed yield of 8.4 per cent is materially higher than any yield identified by any expert in this proceeding save for the sale of one re-branded Dahlsens store in Warragul identified in Mr Sutherland's report ("Bunnings Warragul").[1052] That sale is not comparative given that it had only recently been rebranded as a Bunnings store and has different building specifications. Accordingly, this yield can safely be rejected.

362 Ms Wright also expresses the opinion that when calculating the net present value of a stream of cash flows (the Discounted Cash Flow method) a discount rate is ordinarily applied to take into account both the time value of money and the risk profile of the cash flows.[1053] This much is accepted. Ms Wright also says that, by only discounting for the time value of money, Mr Stone has not made allowances for inflation or the risks associated with underlying cash flows. Mr Stone accepts that his Discounted Cash Flow calculations did not make any allowance for risk. NES accepts that the purpose of the discount rate used is to account for both the time value of money and the risks to cash flow inherent in such a business.[1054] A risk free discount rate has been used merely to avoid double counting when a Sellars discount is applied by the Court to reflect the same risks.

363 Mr Stone, in my view rightly, said in his Supplementary Report:[1055]

In my experience it is not uncommon for courts to start with a net present value figure which has only been discounted at the risk-free rate and to adjust that figure based on the court's view of the inherent risks associated with those cash flows, which may be subject to separate evidence.

Ms Wright more particularly identifies the following risks that she says have not been accounted for in the discount rate:[1056]

(b) The possibility that agreement would not have been reached in relation to the Landlord's Works Costs or Masters' contribution;

(c) The possibility of variations, delays, cost increases or unforeseen costs or fees associated with construction;

(d) The possibility that Masters may not have exercised one or more of its options to renew the Lease (including for reason that competitors may have affected the viability of the Masters store);

(e) The possibility that NES may not have been able to exercise its options to purchase the land comprising the Strathdale site either within time or at all;

(f) The possibility that NES would not have obtained funding for the development;

(g) The possibility that NES would not have been able to obtain planning approval for the development.

It is clear from this list of risks, being precisely the same risks that the Court must consider when determining what Sellars discount to apply, that it was appropriate for Mr Stone to have determined the net present value of the stream of rent and equity on a risk-free basis. Had Mr Stone done otherwise, there would have been duplication once the Court applied a Sellars discount to any estimate of loss and damage. Ms Wright agreed that where discounts were applied for the same risks, this may result in a double-counting of risk.[1057]

364 Finally, Ms Wright's evidence is that the net equity calculation by Mr Stone (being his estimate of the exit value of the property at the end of the Lease) is flawed because by valuing the equity by reference to the rental income in the last year of the lease, it assumes an ongoing rental income even though no lease agreement would exist.[1058] In essence, Ms Wright says the Capitalisation of Income method is not appropriate where the rent is not known.

365 Mr Jackson also gives evidence that in his opinion the value of the Strathdale site at the end of the Lease should be assessed on the basis that there is no lease in place and that it is potentially a vacant site.[1059] Mr Jackson says it would be reasonable to assume that at the end of the Lease the warehouse would have reached the end of its economic life and would need upgrading, refurbishing or demolition. If the property was to be upgraded, a considerable allowance would need to be made for capital expenditure. NES contends to the contrary and, in my view correctly, that while the rental figure used by Mr Stone to determine the exit value of the property is the amount that would have been payable for the last year of the Lease, which by definition would have been terminated as at that point, the rental amount is nevertheless the best estimate of what the market rent is likely to be at that time. This is particularly so where the rent under the Lease is fixed at the lesser of CPI or 4 per cent which does not even preserve the real value of the current market rent. It is appropriate for Mr Stone to have calculated the exit value in the way that he did and his estimate should be accepted.

366 Moreover, Mr Jackson's concerns about the need for capital expenditure to upgrade the site in order for it to be rented are misconceived in that they fail to take into account that more than $2.3 million of "additional costs" of maintaining the property have already been built into Mr Stone's Discounted Cash Flow calculations.[1060] Ms Wright conceded in cross examination that it was likely the Lease required the landlord to maintain the premises in good order.[1061] When cross-examined on the basis of his conclusion that the appreciation of the underlying land value of the Strathdale site coupled with the depreciation of the building would likely mean that the highest and best use of the property at the end of the Lease would be as vacant land for redevelopment purposes, Mr Jackson was not able to estimate the rate at which the underlying land might appreciate.[1062] Mr Jackson admitted that he had not considered that point.[1063] Mr Jackson was also unable to estimate what the appreciation of the land might be from his own experience. Having not considered the appreciation of the land or the obligation to maintain the premises, it is difficult to see how Mr Jackson can have drawn the conclusions that he did that the best use of the land at the end of the Lease would be for redevelopment.

367 I do, however, accept, as a general proposition, when considering the exit value of the Bendigo site, the conclusion of Mr Jackson that, in addition to the net income NES would have earned under the Lease, there would likely have been "some considerable appreciation in land value" over the term of the Lease which NES would have been entitled to the benefit of at the conclusion of the Lease.[1064] Mr Stone's estimate of the end value of the property at the conclusion of the Lease of $19,824,000 million[1065] compared with $52,082,527 million at the date of completion[1066] is approximately 2.5 per cent (compound) increase in the value of the land each year. I accept that, as a matter of common experience, such an assumption is conservative and far from unrealistic.

368 In the result, there is nothing in the reports of Ms Wright or Mr Jackson that should dissuade the Court from accepting Mr Stone's estimate of NES's loss and damage, based on Mr Sutherland's yield, being approximately $14.5 million before the application of a Sellars discount to reflect the risks of the opportunity not being realised.

369 As discussed previously, where the Capitalisation of Income method is to be used to calculate the value of a lost opportunity, the choice of yield applied can be critical.

370 The evidence of Mr Sutherland was that the appropriate capitalisation rate (or yield) as at the date of his report (being 27 May 2015) was in the range of 6.5 per cent to 6.75 per cent.[1067] In contrast, Mr Jackson concludes that the applicable yield as at 1 July 2011 would be 8 per cent.[1068]

371 In my view, the yield selected by Mr Sutherland should be accepted and the yield chosen by Mr Jackson should be rejected for a number of reasons; matters to which I now turn.

What date should be used when determining the applicable yield?

372 Where market yields are decreasing (or increasing) over time and the Capitalisation of Income method is highly sensitive to the choice of yield, careful consideration must be given to the date at which the yield is selected. As discussed previously, an injured party who has suffered damage as a result of a breach of contract is entitled to such a sum as will put him in the position he would actually have been in but for the breach of contract. It is this governing principle and not any temporal rule that determines what is to be taken into consideration in assessing loss and damage and what is not. An application of this principle requires "an appreciation of the plaintiff's actual position in comparison with the position he would have been in but for the [breach of contract]".[1069] It is for this reason that the general rule is that damages for torts and breach of contract are assessed as at the date of breach or when the cause of action arises[1070] is not absolute[1071] or universal and must "give way in particular cases to solutions best adapted to giving an injured plaintiff the amount in damages which will most fairly compensate him for the wrong he has suffered."[1072]

373 Where there is some good reason that the usual measure of loss and damage assessed as at the date of breach is inapposite then:[1073]

the court is entitled simply to assess the loss flowing directly from the transaction without any reference to the date of transaction or indeed any particular date. Such a course will be appropriate whenever the overriding compensatory rule requires it.

The Court's power to depart from the general rule whenever it is necessary to do so in the interests of justice applies equally in both contract and tort cases.[1074]

374 One category of cases in which it is common for loss and damage to be assessed at a later date than the date of breach is where to assess the damage at the date of breach would leave the injured party exposed to deleterious effects (such as inflation or foreign exchange risk). In such cases, the selection of a later date is intended to reduce the burden (for example of inflation) on the victim and prevent any windfall to the wrongdoer. There are other cases including where damages are awarded in lieu of specific performance.[1075] There are various reasons that loss may be assessed at a later point in time, where it is necessary to properly compensate a plaintiff.[1076] These reasons include that the assessment of loss at a later point may enable the Court to take into account evidence relevant to the assessment of loss that has materialised since the date of the breach and facts that would have been mere speculation as at the date of breach.[1077] It may also be desirable to assess damages at the date of trial where compensation is for losses into the future and there is no compelling reason to select one point in time rather than another along the continuum over which the damages extend.[1078] A compelling reason for selecting a particular time along a continuum of loss and damage is often the point at which the plaintiff is able to mitigate its losses. Where there is a contract to purchase a good and there is a ready market for that good the usual point will be the point of breach.[1079]

375 In the present case, the opportunity for NES to develop and lease the Strathdale site to Masters was a unique opportunity. The evidence was that NES had acquired options to purchase the site[1080] and the development was to be fully funded from borrowings.[1081] There was no evidence to suggest that NES could or should have minimised its loss by purchasing or exploiting some other opportunity. To the contrary, NES explored alternative uses for the site but was unable to find any.[1082] Having explored all other alternatives, NES ultimately let the options to purchase the land expire so as to avoid incurring ongoing option fees.[1083] In the circumstances, there is no point of time at which it can properly be said that NES could have or should have mitigated its losses nor is there any particular point at which NES's ongoing losses (being the ongoing loss of rent and capital appreciation over the life of the lease) should be fixed having regard to notions of fairness to the Defendants as the parties at fault.[1084] Where the market conditions for the sale of land were improving over time (yields were decreasing) there is no principled reason that NES should be fixed with the value of the Strathdale site at the completion of the development when it in fact had no intention of selling the development at that time. There is no dispute between the parties that any damages payable to NES must be discounted to the date of breach. The disagreement relates to the date on which the property should be valued. NES does not accept that this should be at the date of completion of the development. The choice of the date of valuation, as distinct from the date of assessment of loss and damage, determines the choice of comparative properties and applicable yields (which reflect the sentiment of purchasers in the market at a particular point in time). As even a small change in yield can have a disproportionate effect on value, the choice of valuation date can be, and in this case is, critical.[1085] Woolworths submit that the value should be assessed as at the date the development would have been completed. NES submits that the value should be assessed as at the earlier of the date when the property would have been sold or otherwise the date of the proceeding.

376 NES submits that, in fixing the valuation date, the Court should take into account (as set out above) that NES intended to lease the Strathdale site to Masters for between 12 and 42 years and did not intend to sell the site at the completion of the development. NES says that in these circumstances fixing its loss based on sales and yields set by the market as at the date of the completion of the development, when it had no intention of selling, would be unjust and contrary to the overriding compensatory rule.[1086] NES also submits that the choice of the later date for valuation enables the Court to take into account, for comparison purposes, the sales of Masters' stores which NES submits are "truly comparable"[1087] to the Strathdale site rather than the Bunnings store sales available at the earlier date. NES submits that yields as at the date of the proceeding also take into account the increased supply of stores in the market arising from the Masters rollout, whereas the comparative sales at the date chosen by Woolworths does not.

377 For the preceding reasons and on the basis of the material to which reference is made, I accept the submissions of NES that it is open to the Court to find, and the Court should find on the basis of the evidence of Mr Sutherland, that the appropriate date on which to capitalise the net income NES would have earned, for the purposes of fixing loss and damage, is at the date of judgment. As such, the most recent yield estimate, being that of Mr Sutherland, should be applied. The application of this yield, and Mr Stone's Discounted Cash Flow methodology, results in the loss and damage estimate of approximately $14.5 million before a discount is applied for risk.

378 Even if, contrary to the position I have found, the loss suffered by NES is calculated by reference to yields that applied as at 1 July 2011 (as Woolworths contend) the yield of 8 per cent selected by Mr Jackson should not be accepted as it is not supported by adequate comparable sales at that date.

379 The use of sales of comparative properties to infer value is well accepted but it is not without its difficulties. In Redeam Pty Ltd v South Australian Land Commission, Jacobs J said:[1088]

It is unnecessary for me to say very much about the use and evidentiary value of comparable sales. The method of determining market value by comparison with sales of similar land is widely accepted. The advantages and pitfalls of the method are expounded in many texts and cases. As Lord Wilberforce pointed out in Aik Hoe & Co Ltd v Superintendent of Lands and Surveys:[1089]

In the search for evidence to show the market price of a given property on a given date, there may be a continuous spectrum of cases varying from contemporaneous sales of precisely similar properties (unlikely to be found in many cases) to sales at different dates of properties differing greatly in nature and development.

The greater the difference between the two properties, the less reliable is the evidence of the sale of the allegedly comparable property. But that does not mean that the evidence is totally irrelevant, if there remain significant points of similarity. I adopt, with respect, the summary of Wells J in Crompton v Commissioner of Highways:[1090]

Upon reading some works on comparable sales, one might be pardoned for supposing that, within narrow limits of tolerance, sales of land similar to the subject land must fall into two rigid categories: comparable sales and non-comparable sales. Such a supposition would, in my opinion, be an over-simplification and could lead to error. It seems to me that, ideally, the valuer should, in the first instance, look at the sales of land over a wide geographical and temporal range, and from these select those that appear potentially useful as a basis for comparison. Those selected should then be carefully analysed by reference to an extensive list of characteristics of land sales the compilation and assessment of which fall clearly within the province of the experts. Whether or not one or more of those sales is, and how it or they ought, to be compared with the subject land becomes then a matter of degree, and a final decision is reached, often by those same experts drawing a series of nice distinctions. Obviously, no two sales of land will be found to be the same, or even similar in all respects. Those that bear a close similarity to the assumed sale of the subject land will be more reliable than those whose similarity is less proximate and in respect of which adjustments or allowances must be made before they can be safely introduced into the valuation process. At a particular point it will be found that, in respect of the remaining available sales, the adjustments and allowances that would need to be made are of such a magnitude that it ceases to be safe or sound to treat them as sufficiently similar to the assumed sale of the subject land, and they must thenceforward be rejected.

Where the valuation method employed involves the use of comparative sales, adjustments must be made to ensure, as nearly as possible, the sales are "truly comparable" and that the valuer is comparing "like with like".[1091] The extent to which a sale can be relied upon as a comparative sale is a question of fact and degree.[1092]

380 As the Strathdale site was to be one of the first Masters stores in Victoria, there were no comparative sales of Masters stores as at 1 July 2011 from which to derive a reliable yield.[1093] As a result, in selecting a yield of 8 per cent, Mr Jackson relied solely on sales of Bunnings stores. While there are obvious similarities between the stores - both stores being "big box" hardware stores - there are many material differences between Bunnings stores and Masters stores, including the cost and quality of construction and lease terms that are likely to have had a material impact on the yields available.[1094] No adjustment was made for these differences.

381 Indeed, the only sale of a Masters store identified by either expert valuer was the sale of the Masters store in Williams Landing in April 2015 which attracted a yield of 6.04 per cent. This is considerably lower than any of the yields relied upon by Mr Jackson. That no Masters stores were on the market until April 2015 also serves to reinforce NES's contention that it would not have sold the Strathdale site at that time and should not be fixed with a yield from that date. It is well established that in selecting comparative sales a valuer must not be unreasonably selective in circumstances where a fair estimate can only be made where there is a reasonably representative group of comparable sales.[1095] Even non-comparable sales may be helpful for checking the valuation and its underlying assumptions.[1096]

382 In reaching his yield of 8 per cent, Mr Jackson selects only three "comparative sales" being sales of Bunnings stores in Caroline Springs, Craigieburn and Pakenham. These sales are to a single purchaser, Bunnings Warehouse Property Trust. Notably, not one of those sales achieved a yield of 8 per cent or more.[1097] Mr Jackson then identifies four other "further sales" in New South Wales and Queensland which he says provide further evidence of the yield a purchaser would accept.[1098] These sales were also all made to Bunnings Warehouse Property Trust and were the four highest yielding sales in any year between 2011 and 2015.[1099] Other sales in Newcastle NSW, Gaven QLD, Singleton NSW, Ulladulla NSW and Kempsey in NSW, all of which had yields of materially less than 8 per cent were also not included. Mr Jackson does identify a sale of a Bunnings store in Bendigo, which yield was less than 8 per cent, but excludes that sale on the basis that inter alia the yield was "lower than all of the other evidence set out in the tables above."[1100] Mr Jackson then speculates about the possible reasons for the lower yield, namely that he believed the store had been "under let" at the time.[1101] In cross examination, it was evident that Mr Jackson had no first-hand knowledge of the reasons for that yield.[1102] Mr Jackson also did not take into account yields achieved in 2013 or onwards (which are materially less than in 2011) despite this timeframe being a far more realistic assessment of when NES was likely to in fact capitalise its cash flows by selling the site. In all likelihood, NES would continue to hold the site had it not been for Woolworths' wrongful termination of the Agreement for Lease.

383 It is well established that the location of a property is the key determinant of the value of a property[1103] and is potentially significant in identifying the comparative sales to be relied upon.[1104] Sales in the local area may, with appropriate adjustments, be more helpful than comparative sales in that they are indicative of the state of the market for properties of a similar location.[1105] In this regard, it is notable that neither Mr Jackson nor Mr Sutherland identified a single sale in the whole of Victoria (comparative or otherwise) that achieved a yield of 8 per cent or more (being the yield adopted by Mr Jackson). In order for Mr Jackson to justify his selection of such a high yield, it was necessary for him to rely as "further sales" on the four highest yielding sales[1106] that occurred in Australia between 2011 and 2015, each of which were to a single purchaser in New South Wales and Queensland.

384 Whether it be deliberately or inadvertently, Mr Jackson appears to have made a questionable selection of properties from which to derive his yield, which had the effect of diminishing the value of his assessment of NES's loss and damage.[1107] The limited sample size and nature of the sites selected for (and excluded from) comparison by Mr Jackson, which included the four highest yielding sales nationally and which were limited to sales to a single purchaser, calls into question the validity of the yield arrived at even if the 1 July 2011 date was selected.[1108]

385 In my view, there is no reasonable justification for Mr Jackson restricting consideration to such a limited number of stores or including high yielding but not comparable sales in New South Wales and Queensland while excluding low yielding but more comparable sales in Victoria (such as the Masters store in Williams Landing or the Bunnings store in Bendigo, Torquay and Hastings). By contrast, the approach adopted by Mr Sutherland was far more comprehensive both in terms of the number of stores and the range of yields considered and should be preferred to that of Mr Jackson. Mr Sutherland's comparison involved a sample of 19 of the most directly comparable Bunnings and Masters stores with yields ranging from 6.04 per cent to 8.55 per cent, including eight Bunnings stores from Victoria.[1109] The stores within non-capital city locations were considered to be the most comparable. It is notable that the interstate stores upon which Mr Jackson based his analysis have significantly higher yields than any Victorian based stores considered in the analysis.[1110] Given the more comprehensive analysis undertaken by Mr Sutherland, including the inclusion of Victorian stores and a wider range of yields, as well as the absence of Masters sales or comparable sales in 2011 and the fact that NES would not have sold the site at that time all lead to the same conclusion: that the yield selected by Mr Sutherland should be preferred to the yield selected by Mr Jackson. Moreover, given the absence of comparable sales in 2011, Mr Sutherland's evidence and conclusion as to yield should be preferred.

386 For the preceding reasons, the submission by NES that the Discounted Cash Flow method[1111] used in Mr Stone's second calculation should be preferred to the Capitalisation of Income method[1112] used in Mr Stone's first calculation and adopted by Ms Wright is accepted. Whatever model is adopted, where cash flows are capitalised based on comparative sales, the Court should, in my view, find that the appropriate time for that capitalisation (and selection of the applicable yield) is as close to the date of judgment as is reasonably practicable. In this case, the yields of Mr Sutherland should apply. To do otherwise, in circumstances where NES is not a developer who intended to sell the development on completion, but is an operator of supermarkets and stores[1113] who intended to hold the Bendigo site for the duration of the Lease, would have the effect of undervaluing the actual loss suffered by NES and depriving NES of the full benefits of the Lease and the capital appreciation that it would have obtained had it held onto the site for the period of the Lease. In circumstances where NES intended to hold the land and to retain the net income under the Lease as well as the capital appreciation of the land, what the market may have paid for the Strathdale site had it been sold (or the cash flows capitalised) at completion of the development is immaterial.

387 In the result, I accept the submissions of NES that it is open to the Court to find, and the Court should find that the value of the opportunity that NES has lost (before applying an appropriate discount for risk) is at least $14.5 million.[1114]

388 The question remains what discount the Court should apply to adjust the measure of loss and damage so as to reflect the Court's assessment of the prospects of that opportunity had it been pursued in accordance with the principles in Sellars.[1115]

389 In reaching that determination, the Court will assess "the degree of probability that an event would have occurred, or might occur" and adjust the award of damages accordingly.[1116]

390 The same body of evidence, referred to earlier in these reasons with respect to establishing the existence of loss, is also relevant to establishing the amount to be recovered.[1117] Having regard to the preceding reasons and the material relied upon, I accept that:

(a) The risk of the parties not reaching agreement in relation to the Landlord's Works Costs or Masters' contribution if Woolworths acted reasonably and in good faith was very low;

(b) There was no more than the usual risk of delays associated with the development or risks of inflation;

(c) No allowance should be made for the risk of variations or unforeseen cost increases associated with the development (as the risk of cost increases was borne by Vaughan Constructions who provided a fixed price contract[1118] and the risk of variations was borne by Woolworths who would have been responsible for funding any such variations);

(d) There was a risk that Masters may not have exercised one or more of its options to renew the Lease (over its entire term). This risk may increase slightly with each consecutive term. However, given Woolworths' public commitment to Masters, the importance of Bendigo as a regional centre and the fact that no Woolworths witness gave evidence that the Lease was unlikely to be renewed, NES submits that the overall risk of the Lease not being renewed was no more than moderate;

(e) Having regard to the statement of Mr Svanosio, the risk that NES may not have been able to exercise its options to purchase the land comprising the Strathdale site was extremely low;

(f) Having regard to the evidence of Mr Stockwell and Mr McGregor the risk that NES would not have obtained funding for the development was also low. The Court should find that Bendigo Bank would not have turned down the opportunity to fund such an important development in Bendigo, for a key client, with a blue chip tenant, in circumstances where the transaction in question served NES's and the Bank's interest that NES diversify its investments; and

(g) The risk that NES would not have been able to obtain planning approval for the development is real; however, in light of the evidence of both planning experts, and the absence of evidence from Urbis, as well as the support of the State Government and the results of the other applications for planning approval made to the Minister, the Court should find that this risk was also very unlikely to eventuate.

391 While these risks are cumulative, NES submits that the total discount should be more than the 20 per cent applied in Fenridge Pty Ltd v Retirement Care Australia (Preston) Pty Ltd,[1119] but significantly less than the 70 per cent applied in Reading Entertainment Australia Pty Ltd v Whitehorse Property Group Ltd.[1120] On balance, I accept that, as NES contends, a discount of 25 per cent would be appropriate. Applying that discount to NES's loss and damage, as set out above, the damages amount should, in my view, be fixed at $10.875 million - being 75 per cent of $14.5 million - plus interest.

392 For the preceding reasons, there will be judgment for NES for damages in the sum of $10.875 million plus interest.

393 I otherwise reserve the question of costs and will hear the parties further on this issue.

394 The parties are to bring in orders to give effect to these reasons.

[1] References in the evidence to "WOW" should be read as referring to "Woolworths".

[4] In these reasons, for convenience, the firm Rider Levett Bucknall is referred to as "Rider Hunt". In the evidence, it is variously referred to as "Rider Levett Bucknall", "RLB", "Riders" and "Rider Hunt".

[5] Expert Report of Owain Stone (1 May 2015) and Expert Report of Owain Stone (22 May 2015) were tendered by consent, without the need for Mr Stone to be called: Transcript 543.

[6] Outline of Evidence in Reply of Peter John Svanosio (17 March 2015) was tendered by consent, without the need for Mr Svanosio to be called: Transcript 519.

[7] [2010] EWHC 358 (Ch).

[8] Foodco Uk LLP v Henry Boot Developments Ltd [2010] EWHC 358 (Ch), [3]-[5] (citations omitted) ("the Henry Boot case").

[9] Onassis v Vergottis [1968] 2 Lloyd's Rep 403 at 431.

[13] See Masters v Cameron [1954] HCA 72; (1954) 91 CLR 353 at 360. See also John W Carter, Contract Law in Australia (LexisNexis Butterworths, 6th ed, 2013) [5-02]-[5-04].

[25] Transcript 1124, 1143. See Court Book 1212.

[32] Court Book 4448: Project Jupiter - Home Improvement (Project Oxygen) - Board Presentation (26 February 2009.

[36] [1982] HCA 24; (1982) 149 CLR 337 at 347-52.

[37] [2001] NSWCA 61; (2001) 53 NSWLR 153 at 163 [24].

[43] Both the expression "Briefing Kit" and the expression "Site Plan" are defined in clause 1.1 of the Agreement for Lease: See above [15].

[45] Bettini v Gye (1876) 1 QBD 183 at 188; Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd (1938) 38 SR (NSW) 632 at 641.

[46] Bytan Pty Ltd v BB Australia Pty Ltd (2012) 41 VR 46 at 65 [96].

[47] Pan Foods Co Importers & Distributors Pty Ltd v Australia and New Zealand Banking Group Ltd [2000] HCA 20; (2000) 170 ALR 579 at 584 [24].

[48] Codelfa Construction Pty Ltd v State Rail Authority (NSW) [1982] HCA 24; (1982) 149 CLR 337 at 352.

[49] Codelfa Construction Pty Ltd v State Rail Authority (NSW) [1982] HCA 24; (1982) 149 CLR 337 at 352.

[50] Prenn v Simmonds (1971) 1 WLR 1381 approved by the High Court in DTR Nominees Pty Ltd v Mona Homes Pty Ltd [1978] HCA 12; (1978) 138 CLR 423 at 429.

[51] Bytan Pty Ltd v BB Australia Pty Ltd (2012) 41 VR 46 at 50 [12] citing Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99 at 109.

[52] Bytan Pty Ltd v BB Australia Pty Ltd (2012) 41 VR 46 at 50 [12] citing Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99 at 109.

[53] Memery v Trilogy Funds Management Ltd [2012] QCA 160, [14] quoting Elderslie Property Investments No 2 Pty Ltd v Dunn [2008] QCA 158, [20]-[22].

[54] Memery v Trilogy Funds Management Ltd [2012] QCA 160, [14] quoting Elderslie Property Investments No 2 Pty Ltd v Dunn [2008] QCA 158, [20]-[22].

[55] Hankey v. Clavering [1942] 2 KB 326 at 329-30.

[56] See, eg, Gollin & Co Ltd v Karenlee Nominees Pty Ltd [1983] HCA 38; (1983) 153 CLR 455 at 464.

[57] See, eg, Concut Pty Ltd v Worrell [2000] HCA 64; (2000) 176 ALR 693 at 708-9 (practical, businesslike and commercially realistic interpretation); Attaleia Marine Co Ltd v Bimeh Iran (Iran Insurance Co) (The Zeus) [1993] 2 Lloyd's Rep 497 at 500 (construction of insurance policy so as to achieve sensible business efficacy).

[58] Watson v Phipps (1985) 60 ALJR 1 at 3; Fitzgerald v Masters [1956] HCA 53; (1956) 95 CLR 420; Secured Interest Real Estate (Australia) Ltd v St Martins Investments Pty Ltd [1979] HCA 51; (1979) 144 CLR 596.

[59] Upper Hunter County District Council v Australian Chilling & Freezing Co [1968] HCA 8; (1968) 118 CLR 429; Meehan v Jones [1982] HCA 52; (1982) 149 CLR 571; Booker Industries Pty Ltd v Wilson Parking (Qld) Pty Ltd [1982] HCA 53; (1982) 149 CLR 600 at 616-17. See also Trawl Industries of Australia Pty Ltd v Effem Foods Pty Ltd (1992) 27 NSWLR 326.

[60] Riverwood International Australia Pty Ltd v McCormick [2000] FCA 889; (2000) 177 ALR 193 at 208.

[61] See Nick C Seddon, Rick A Bigwood and Manfred P Ellinghaus, Cheshire & Fifoot Law of Contract (LexisNexis Butterworths, 10th ed, 2012) [10.18].

[62] Hawkins v Clayton (1988) 164 CLR 539 at 570; Byrne v Australian Airlines Ltd (1995) 185 CLR 410 at 422; Breen v Williams (1996) 186 CLR 71 at 91.

[63] For example, if it was necessary to determine whether the contribution payment was to be paid as a "lump sum" as provided by cl 13 of the Letter of Offer.

[64] Porters v Cessnock City Council [2005] NSWSC 1275; (2005) 12 BPR 23,209; Re Anstis (1886) 31 Ch D 596; De Beers Consolidated Mines Ltd v British South Africa Co [1912] AC 52 at 65-6; Frederick v Frederick (1721) 93 ER 632.

[65] Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd [1986] HCA 14; (1986) 160 CLR 226 at 244; Davis v CGU Insurance Ltd [2009] SASC 220; (2009) 104 SASR 422; Alpha Wealth Financial Services Pty Ltd v Frankland River Olive Co Ltd [2008] WASCA 119; (2008) 66 ACSR 594 at 602 [27], 629 [164].

[66] Further Amended Statement of Claim (25 May 2015) [4], [7]-[8].

[67] Defendants' Closing Submissions (3 September 2015) [42].

[69] Further Amended Statement of Claim (25 May 2015) [10].

[70] Maybury v Atlantic Union Oil Co Ltd [1953] HCA 89; (1953) 89 CLR 507.

[71] As the "specification briefing kit to be provided in accordance with clause 2.1".

[73] Further Amended Statement of Claim (25 May 2015) [12]-[15].

[74] Further Amended Statement of Claim (25 May 2015) [12].

[75] In its further and better particulars, NES says that Rider Hunt's "verification ... on behalf of Masters and Woolworths is particularised in" a report that Rider Hunt prepared for Mr Macmillan on or about 22 April 2010. See Answers to the Request by the Defendants for Further and Better Particulars of the Plaintiff's Statement of Claim and Reply (27 August 2012) [4]: Court Book 59.

[76] Further Amended Statement of Claim (25 May 2015) [13].

[77] Further Amended Statement of Claim (25 May 2015) [14]-[15].

[78] See also Further Amended Statement of Claim (25 May 2015) [15(viii)].

[84] See Agreement for Lease, cl 2.2(b).

[85] See Agreement for Lease, cl 2.2(c).

[87] [2009] NSWCA 177; (2009) 74 NSWLR 618 at 639 [74].

[88] See generally Elisabeth Peden, Good Faith in the Performance of Contracts (LexisNexis Butterworths, 2003).

[89] Sir Anthony Mason, "Contract, Good Faith and Equitable Standards in Fair Dealing" (2000) 116 Law Quarterly Review 66. See Strzelecki Holdings Pty Ltd v Cable Sands Pty Ltd [2010] WASCA 222; (2010) 41 WAR 318 at 335-6 [49], 348 [92]; Alcatel Australia v Scarcella [1998] NSWSC 483; (1998) 44 NSWLR 349; Burger King Corporation v Hungry Jack's Pty Ltd [2001] NSWCA 187; (2001) 69 NSWLR 558 at 570 [169]-[173]; Overlook Management BV v Foxtel Management Pty Ltd [2002] NSWSC 17, [64].

[90] Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service [2010] NSWCA 268, [12] citing Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234, Hughes Bros Pty Ltd v Trustees of the Roman Catholic Church for the Archdiocese of Sydney (1993) 31 NSWLR 91, Burger King Corporation v Hungry Jack's Pty Ltd [2001] NSWCA 187; (2001) 69 NSWLR 558, Alcatel Australia Ltd v Scarcella [1998] NSWSC 483; (1998) 44 NSWLR 349 and United Group Rail Services Ltd v Rail Corporation New South Wales [2009] NSWCA 177; (2009) 74 NSWLR 618. See also the important judgment of Kirby P (as he then was) in Coal Cliff Collieries Pty Ltd v Sijehama Pty Ltd (1991) 24 NSWLR 1; Chief Justice James Allsop, "Some Reflections on Good Faith in Contract Law" (Speech delivered to the Oxford University Obligations Group, 2012); Chief Justice Marilyn Warren, "Good Faith: Where Are We At?" [2010] MelbULawRw 10; (2010) 34 Melbourne University Law Review 344.

[91] Strzelecki Holdings Pty Ltd v Cable Sands Pty Ltd [2010] WASCA 222; (2010) 41 WAR 318 at 348 [92].

[92] Central Exchange Ltd v Anaconda Nickel Ltd (2002) 26 WAR 33 at 50-1 [56], referring to commentary to S2-103(1)(b) of the United States Uniform Commercial Code. See also the brief survey of "persuasive cases in influential jurisdictions in the United States" given by Allsop CJ in Paciocco v Australia and New Zealand Banking Group Ltd [2015] FCAFC 50; (2015) 321 ALR 584 at 651 [291].

[93] Gary Rogers Motor (Aust) Pty Ltd v Subaru (Aust) Pty Ltd [1999] FCA 903, [37].

[94] Alcatel Australia v Scarcella [1998] NSWSC 483; (1998) 44 NSWLR 349 at 368; Far Horizons v McDonald's Australia [2000] VSC 310, [120].

[95] Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234 at 268.

[96] Paciocco v Australia and New Zealand Banking Group Ltd [2015] FCAFC 50; (2015) 321 ALR 584.

[97] Paciocco v Australia and New Zealand Banking Group Ltd [2015] FCAFC 50; (2015) 321 ALR 584 at 649-51 [287]-[293] (citations omitted).

[98] Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234; Hughes Aircraft Systems International v Airservices Australia [1997] FCA 558; (1997) 76 FCR 151; Nick C Seddon, Rick A Bigwood and Manfred P Ellinghaus, Cheshire & Fifoot Law of Contract (LexisNexis Butterworths, 10th ed, 2012) [10.41]-[10.47]. Cf Commonwealth Bank of Australia v Barker (2014) 253 169 at 195-6 [42], 214 [107].

[99] [2009] NSWCA 177; (2009) 74 NSWLR 618 at 634 [58] (citations omitted).

[100] (1992) 26 NSWLR 234.

[101] (1993) 31 NSWLR 91.

[102] [2001] NSWCA 187; (2001) 69 NSWLR 558.

[103] [1998] NSWSC 483; (1998) 44 NSWLR 349.

[104] [2009] NSWCA 177; (2009) 74 NSWLR 618.

[105] [1991] USCA7 746; (1991) 941 F 2d 588.

[106] Market Street Associates Ltd Partnership v Frey [1991] USCA7 746; (1991) 941 F 2d 588 at 595.

[107] Daitch Crystal Dairies Inc v Neisloss 190 NYS 2d 737 (Appeal Div 1959); Harbor Insurance Co v Continental Bank Corp [1991] USCA7 69; 922 F.2d 357 (7th Cir 1990).

[108] Industrial Representatives Inc v CP Clare Corp [1996] USCA7 9; 74 F.3d 128 (7th Cir 1996).

[109] See the discussion in Edward Allan Farnsworth, Farnsworth on Contracts (Wolters Kluwer, 3rd ed, 2004) Vol 2 s 7.17 p 362, s 8.6, 8.15.

[110] Larson v Larson 636 NE 2d 1365 (Mass App Ct 1994); AMPAT/Midwest Inc v Illinois Tool Works Inc [1990] USCA7 125; 896 F.2d 1035 (7th Cir 1990). See generally Edward Allan Farnsworth, Farnsworth on Contracts (Wolters Kluwer, 3rd ed, 2004) s 7.17-7.17b; Director General of Fair Trading v First National Bank Plc [2001] UKHL 52; [2002] 1 AC 481 at 494, 500, 505.

[111] Lionel Smith, "Fiduciary Relationships: Ensuring the Loyal Exercise of Judgement on Behalf of Another" (2014) 130 Law Quarterly Review 608.

[112] Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service [2010] NSWCA 268, [12]-[13].

[113] See United Group Rail Services Limited v Rail Corporation New South Wales [2009] NSWCA 177; (2009) 74 NSWLR 618 at 625-6 [28]-[29].

[114] (1992) 26 NSWLR 234 at 265.

[115] [2002] VSCA 177; (2002) 6 VR 326 at 345 [47]-[48]. Police Regulation Act 1958, s 123(1) provides: "A member of the force or a police recruit is not personally liable for anything necessarily or reasonably done or omitted to be done in good faith in the course of his or her duty as a member of the force or police recruit."

[116] Victoria v Horvath [2002] VSCA 177; (2002) 6 VR 326 at 345-6 [50].

[117] [2002] VSCA 177; (2002) 6 VR 326 at 345 [47] (emphasis in original).

[118] [2010] NSWCA 268, [15].

[119] [2010] NSWCA 268, [14], [15]. See also [9].

[120] Elisabeth Peden, Good Faith in the Performance of Contracts (LexisNexis Butterworths, 2003) 159-99. See especially 162-99. See also Edward Allan Farnsworth, Farnsworth on Contracts (Wolters Kluwer, 3rd ed, 2004) 400.

[121] Elisabeth Peden, Good Faith in the Performance of Contracts (LexisNexis Butterworths, 2003) 162-4, [7.5] (citations omitted).

[122] [1932] UKHL 2; [1932] All ER Rep 494 at 507.

[123] [2001] NSWCA 187; (2001) 69 NSWLR 558.

[124] See, eg, Burger King Corporation v Hungry Jack's Pty Ltd [2001] NSWCA 187; (2001) 69 NSWLR 558 at 568 [159], 569 [163]-[164].

[125] Burger King Corporation v Hungry Jack's Pty Ltd [2001] NSWCA 187; (2001) 69 NSWLR 558 at 570 [169]-[170]. For other examples of combining of "reasonableness" and "good faith", see, eg, Elfic Ltd v Macks [2000] QSC 18, [109]; Commonwealth Bank of Australia v Renstel Nominees Pty Ltd [2001] VSC 167, [47]. In NSW v Banabelle Electrical Pty Ltd [2002] NSWSC 178; (2002) 54 NSWLR 503 at 530 [72], Einstein J hinted there might be a difference between reasonableness and good faith, but then cited Burger King Corporation v Hungry Jack's Pty Ltd [2001] NSWCA 187; (2001) 69 NSWLR 558, which states there is no difference.

[126] (1992) 26 NSWLR 234 at 263.

[127] See, eg, Michael G Bridge, "Does Anglo-Canadian Contract Law Need a Doctrine of Good Faith?" 1984) 9 Canadian Business Law Journal 385, 409.

[128] See Meehan v Jones [1982] HCA 52; (1982) 149 CLR 571. The distinction is recognised in the area of a mortgagee's power of sale as well. See Gerard Kelly, "The Mortgagee's Duty of Sale: Retracing some Well Worn Paths" (1998) 6 Australian Property Law Journal 1.

[129] [1961] UKHL 5; [1962] AC 413.

[130] (1992) 26 NSWLR 234.

[131] L J Priestley, "Contract - The Burgeoning Maelstrom" (1988) 1 Journal of Contract Law 15, 28.

[132] Jane Stapleton, "Good Faith in Private Law" (1999) 52 Current Legal Problems 1, 8.

[133] Compare the many legislative definitions of good faith that will permit negligent behaviour, which would arguably not be sanctioned by a standard of reasonableness.

[134] Garry Rogers Motors (Aust) Pty Ltd v Subaru (Aust) Pty Ltd [1999] FCA 903, [37]. See also Lay v Alliswell Pty Ltd [2001] VSC 385; (2002) V Conv R 54-651, [31].

[135] See, eg, Paragon Finance Plc v Staunton; Paragon Finance Plc v Nash [2002] 2 All ER 248 at 267, where a mortgage company had a discretion to vary interest rates, and it was held the company had to behave reasonably, but this did not extend to requiring the company to set reasonable rates.

[136] Reid v Rush Tompkins Group Plc [1989] EWCA Civ 10; [1990] 1 WLR 212 at 230.

[137] [2001] NSWCA 187; (2001) 69 NSWLR 558.

[138] [2005] VSCA 228, [2]-[4] (citations omitted).

[139] See, eg, Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234 at 263-4. See also, Service Station Association Ltd v Berg Bennett & Associates Pty Ltd [1993] FCA 445; (1993) 45 FCR 84 at 96.

[140] See, eg, Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd [1979] HCA 51; (1979) 144 CLR 596 at 607; CSS Investments Pty Ltd v Lopiron Pty Ltd (1987) 16 FCR 15; Adelaide Petroleum NL v Poseidon Ltd (1990) 98 ALR 431; Australian Mutual Provident Society v 400 St Kilda Road Pty Ltd [1990] VicRp 56; [1990] VR 646.

[141] See, eg, Hughes Aircraft Systems International v Airservices Australia [1997] FCA 558; (1997) 76 FCR 151 at 191; Alcatel Australia v Scarcella [1998] NSWSC 483; (1998) 44 NSWLR 349 at 369; Far Horizons Pty Ltd v McDonald's Australia Ltd [2000] VSC 310.

[142] See, eg, Forklift Engineering Australia Pty Ltd v Powerlift (Nissan) Pty Ltd [2000] VSC 443, [91], [94].

[143] See, eg, Forklift Engineering Australia Pty Ltd v Powerlift (Nissan) Pty Ltd [2000] VSC 443, [91], [94].

[144] See, eg, Playcorp Pty Ltd v Taiyo Kogyo Ltd [2003] VSC 108, [267].

[145] See Electronic Industries Ltd v David Jones Ltd (1954) 91 CLR 288 at 297.

[146] See Nick C Seddon and Manfred P Ellinghaus, Cheshire & Fifoot Law of Contract (LexisNexis Butterworths, 8th ed, 2002) 428 [10.48].

[147] Expectation Pty Ltd v Pinnacle VRB Ltd [2004] WASCA 261, [32]. See also [7].

[148] [2011] FCA 1031; (2011) 283 ALR 720 at 731 [68].

[149] Garry Rogers Motors (Aust) Pty Ltd v Subaru (Aust) Pty Ltd [1999] FCA 903, [37].

[150] [2006] NSWSC 1235, [56]. See also [13] where the relevant clauses of the agreement are extracted.

[151] Maitland Main Collieries Pty Ltd v Xstrata Mt Owen Pty Ltd [2006] NSWSC 1235, [57].

[152] [2010] WASCA 222; (2010) 41 WAR 318.

[153] Strzelecki Holdings Pty Ltd v Cable Sands Pty Ltd [2010] WASCA 222; (2010) 41 WAR 318 at 351-2 [108].

[154] Strzelecki Holdings Pty Ltd v Cable Sands Pty Ltd [2010] WASCA 222; (2010) 41 WAR 318 at 339 [62] (citations omitted).

[155] See Strzelecki Holdings Pty Ltd v Cable Sands Pty Ltd [2010] WASCA 222; (2010) 41 WAR 318 at 351-2 [108].

[156] See Defendants' Closing Submissions (3 September 2015) [94]-[100].

[157] (1991) 24 NSWLR 1 at 26-7.

[158] See AMCI (IO) Pty Ltd v Aquila Steel Pty Ltd [2009] QSC 139; [2010] 2 Qd R 101; Jobern Pty Ltd v BreakFree Resorts (Vic) Pty Ltd [2007] FCA 1066; United Group Rail Services Ltd v Rail Corporation New South Wales [2009] NSWCA 177; (2009) 74 NSWLR 618.

[159] [2002] NZCA 191; [2002] 3 NZLR 486 at 495-6.

[160] [2009] QSC 139; [2010] 2 Qd R 101.

[161] Trevor Thomas, "The Enforceability of Agreements to Negotiate in Major Constructions Projects" (2009) 25 Building and Construction Law Journal 94, 95.

[162] [2009] NSWCA 177; (2009) 74 NSWLR 618. This is to be contrasted with Strzelecki Holdings Pty Ltd v Cable Sands Pty Ltd [2010] WASCA 222; (2010) 41 WAR 318, which concerned a Memorandum of Understanding containing an obligation to negotiate a contract for a sale of land "in good faith". The court there did not consider whether such a term was enforceable - rather, it seems to have been assumed by the parties that it was.

[163] Coal Cliff Collieries Pty Ltd v Sijehama Pty Ltd (1991) 24 NSWLR 1 at 27.

[164] Coal Cliff Collieries Pty Ltd v Sijehama Pty Ltd (1991) 24 NSWLR 1 at 27.

[165] Defendants' Closing Submissions (3 September 2015) [98]-[100] (emphasis in original and citations omitted).

[166] Sir Anthony Mason, "Contract, Good Faith and Equitable Standards in Fair Dealing" (2000) 116 Law Quarterly Review 66.

[167] See Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234 at 263.

[168] Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640 at 659 [41].

[175] Outline of Evidence of Timothy Stuart Macmillan (27 February 2015) [16]-[25]; Outline of Brendan Edward Blake (6 March 2015) [75]-[76], [78]-[79].

[179] Outline of Evidence of Timothy Stuart Macmillan (27 February 2015) [51]-[52]; Further Outline of Evidence of Ewen Kenneth McDonald in Reply (31 March 2015) [3]-[5].

[181] Outline of Brendan Edward Blake (6 March 2015) [143].

[182] By Slattery Pty Ltd and Rider Hunt: Court Book 2194, 2295-6.

[184] This estimate was for a 13,465 square metre store, which is larger than the 10,923 square metre store at the Strathdale site. It was on this basis that Woolworths' expectations were that the Strathdale store would cost roughly $1 million: Transcript 692.

[186] Outline of Evidence of Timothy Stuart Macmillan (27 February 2015) [60]-[63].

[187] Outline of Evidence of Ewen Kenneth McDonald (27 February 2015) [9].

[193] Outline of Evidence of Timothy Stuart Macmillan (27 February 2015) [39].

[197] Court Book 3422. Cf the interpretation of this email by Woolworths with respect to termination which is at odds with the words, content and structure of this email (see Defendants' Closing Submissions (3 September 2015) [182].

[198] Outline of Brendan Edward Blake (6 March 2015) [372].

[218] Court Book 4722, 4724, 4738, 4743.

[227] Court Book 3421. Cf the interpretation of this email by Woolworths with respect to termination which is at odds with the words, content and structure of this email: Defendants' Closing Submissions (3 September 2015) [182].

[232] The specifications consisted of Design Brief Revision B (Court Book 1982), Construction Brief Revision D (Court Book 2112) and Site Plan SK04 (Court Book 1773).

[238] Outline of Evidence of Ewen Kenneth McDonald (27 February 2015) [7]; Court Book 2194, 2296.

[239] Outline of Evidence of Ewen Kenneth McDonald (27 February 2015) [9]; Court Book 2759, 2844.

[240] See, eg, Defendants' Closing Submissions (3 September 2015) [132]-[133]. See also below [195]-[207].

[241] Court Book 3077 (emphasis in original).

[242] See, eg, Plaintiff's Closing Submissions (3 September 2015) [60].

[245] Court Book 1844; Transcript 255.

[247] See above [90].

[249] Transcript 257. While Troons later provided an email that, on its face, quoted $780 per square metre with full height panels, Mr Troon accepted this was probably a mistake: Transcript 514. There was no attempt to clarify why there was a discrepancy between the two Troons quotes. Mr Troon provided a further price on 17 March 2010 in which he added $200,000 for the full height panels: Court Book 3156; Transcript 515-6. Mr Blake said that he assumed the additional $200,000 was for the full height panels (Transcript 282), which, Woolworths submit, means that Mr Blake knew the rate of $780 per square metre did not include such panels.

[250] Court Book 2978; Transcript 258.

[251] It is to be noted that in their memorandum of 22 April 2010, Rider Hunt adopted the latter approach: Court Book 3883.

[252] Court Book 3074; Outline of Evidence of Timothy Stuart Macmillan (27 February 2015) [76].

[255] Outline of Evidence of Timothy Stuart Macmillan (27 February 2015) [71]-[75].

[257] Court Book 2295; Outline of Evidence of Timothy Stuart Macmillan (27 February 2015) [72(c)]; Transcript 692.

[258] Court Book 3074; Outline of Evidence of Timothy Stuart Macmillan (27 February 2015) [76].

[259] An example given is Vaughan Constructions' design being larger than the size stipulated in the Agreement for Lease, and the "cost saving" alternatives proposed by Vaughan Constructions which Woolworths regarded as unsatisfactory.

[260] Outline of Evidence of Timothy Stuart Macmillan (27 February 2015) [77]. Cf Defendants' Closing Submissions (3 September 2015) [145].

[262] Defendants' Closing Submissions (3 September 2015) [139] (emphasis omitted).

[280] Cf Transcript 315. See also Defendants' Closing Submissions (3 September 2015) [60].

[283] Outline of Evidence of Timothy Stuart Macmillan (27 February 2015) [77].

[286] Transcript 1325 - this being a proposition that was not put to Mr Macmillan.

[291] Defendants' Closing Submissions (3 September 2015) [142].

[293] Outline of Brendan Edward Blake (6 March 2015) [199]; Transcript 250-2.

[294] Further Outline of Evidence of Timothy Stuart Macmillan in Reply (31 March 2015) [20]; Transcript 689.

[296] Transcript 308. See also NES's oral submissions at Transcript 80.

[298] Defendants' Closing Submissions (3 September 2015) [144].

[300] Defendants' Closing Submissions (3 September 2015) [145].

[303] Outline of Evidence of Ewen Kenneth McDonald (27 February 2015) [11]; Court Book 3113.

[304] Court Book 3109, 3117; Outline of Evidence of Ewen Kenneth McDonald (27 February 2015) [14].

[305] Outline of Evidence of Ewen Kenneth McDonald (27 February 2015) [15].

[306] Outline of Evidence of Ewen Kenneth McDonald (27 February 2015) [16]; Court Book 2421, 3111, 3125-6.

[307] Outline of Evidence of Ewen Kenneth McDonald (27 February 2015) [17]; Court Book 3121.

[308] Outline of Evidence of Ewen Kenneth McDonald (27 February 2015) [20]; Court Book 3146, 4234.

[309] Outline of Evidence of Ewen Kenneth McDonald (27 February 2015) [17]; Court Book 3121.

[315] Outline of Evidence of Ewen Kenneth McDonald (27 February 2015) [8].

[316] Further Outline of Evidence of Ewen Kenneth McDonald in Reply (31 March 2015) [13(b)].

[317] Court Book 3163; Transcript 1265.

[323] Outline of Evidence of Ewen Kenneth McDonald (27 February 2015) [21].

[326] Mr Troon provided a further price on 17 March 2010 in which he added $200,000 for the full height panels: Court Book 3156; Transcript 515-6.

[327] Court Book 3133; Transcript 286.

[328] Defendants' Closing Submissions (3 September 2015) [156].

[329] Defendants' Closing Submissions (3 September 2015) [157].

[331] Outline of Evidence of Ewen Kenneth McDonald (27 February 2015) [8].

[336] Outline of Evidence of Timothy Stuart Macmillan (27 February 2015) [90]; Transcript 910.

[338] Outline of Evidence of Ewen Kenneth McDonald (27 February 2015) [15(c)].

[339] Outline of Evidence of Ewen Kenneth McDonald (27 February 2015) [27](b); Court Book 3384.

[340] Outline of Evidence of Ewen Kenneth McDonald (27 February 2015) [28]; Court Book 338-6.

[342] Outline of Evidence of Ewen Kenneth McDonald (27 February 2015) [21].

[350] Outline of Evidence of Ewen Kenneth McDonald (27 February 2015) [11(c)], [17], [19], [27].

[352] Outline of Evidence of Ewen Kenneth McDonald (27 February 2015) [27(b)]; Court Book 3384.

[353] Outline of Evidence of Ewen Kenneth McDonald (27 February 2015) [15(c)].

[356] Outline of Evidence of Ewen Kenneth McDonald (27 February 2015) [14], [21].

[357] Outline of Evidence of Ewen Kenneth McDonald (27 February 2015) [27(b)]; Court Book 3384.

[359] Outline of Evidence of Ewen Kenneth McDonald (27 February 2015) [28(a)]; Transcript 1331.

[362] Outline of Evidence of Ewen Kenneth McDonald (27 February 2015) [15(c)].

[363] Outline of Brendan Edward Blake (6 March 2015) [232].

[365] Further Outline of Evidence of Ewen Kenneth McDonald in Reply (31 March 2015) [13(j)]; Transcript 1298-9.

[369] Defendants' Closing Submissions (3 September 2015) [163].

[374] Court Book 3345 (emphasis in original).

[375] Defendants' Closing Submissions (3 September 2015) [164].

[382] Court Book 3367. See also Outline of Evidence of Ewen Kenneth McDonald (27 February 2015) [13], [25].

[383] Outline of Evidence of Ewen Kenneth McDonald (27 February 2015) [26].

[384] Defendants' Closing Submissions (3 September 2015) [165].

[392] Outline of Evidence of Ewen Kenneth McDonald (27 February 2015) [27]; Court Book 3384.

[393] Outline of Evidence of Ewen Kenneth McDonald (27 February 2015) [28]; Court Book 3385-6.

[394] Outline of Evidence of Ewen Kenneth McDonald (27 February 2015) [28(a)].

[395] Outline of Evidence of Ewen Kenneth McDonald (27 February 2015) [28(b)]-[28(c)].

[396] Outline of Evidence of Ewen Kenneth McDonald (27 February 2015) [29].

[397] Outline of Evidence of Ewen Kenneth McDonald (27 February 2015) [28(a)].

[398] Outline of Evidence of Ewen Kenneth McDonald (27 February 2015) [25]; Court Book 3367.

[399] Outline of Evidence of Ewen Kenneth McDonald (27 February 2015) [29]; Court Book 3393.

[400] Defendants' Closing Submissions (3 September 2015) [171]-[173] (emphasis and citations omitted).

[403] Cf Defendants' Closing Submissions (3 September 2015) [218]-[219].

[404] Defendants' Closing Submissions (3 September 2015) [174].

[405] As this was the termination date under the Agreement for Lease.

[408] Court Book 3396. See also Transcript 300-1.

[409] Outline of Evidence of Timothy Stuart Macmillan (27 February 2015) [102]; Transcript 590, 844.

[410] Outline of Evidence of Timothy Stuart Macmillan (27 February 2015) [103]; Transcript 845.

[411] Outline of Evidence of Timothy Stuart Macmillan (27 February 2015) [105].

[413] Court Book 4745. See also Transcript 428-9, 735.

[414] Foodco Uk LLP v Henry Boot Developments Ltd [2010] EWHC 358 (Ch), [3]-[5]. See above [11]-[12].

[415] Defendants' Closing Submissions (3 September 2015) [176] (emphasis omitted).

[435] See, eg, the question of who made the suggestion that matters might come off the Bunnings specification: Transcript 463-4.

[436] Transcript 478. Cf Court Book 3416.

[442] As evidenced by the requests for updates as to progress given emphasis by NES, discussed above.

[446] The Defendants objected to the production of the typed notes on several grounds. First, the notes are not contemporaneous notes of the meeting and were prepared only in the year prior to Mr Fetter giving evidence on 20 May 2015: Transcript 323. The lapse of time has the effect that any weight that could be given to Mr Fetter's notes is significantly reduced. Second, the notes were not prepared by Mr Fetter himself, but were prepared by NES's former counsel, Dr Hanak, in an interview with Mr Fetter some time before trial: Transcript 323. Finally, and most importantly, it is clear that these notes are not mere transcriptions of Mr Fetter's file notes, but contain opinions and inferences from the meeting, as well as statements that address the evidence given by the Defendants' witnesses. One example of this includes the statement' "I therefore refute the statement that it was obvious therefore that a counter offer based on the amount determined by [Rider Hunt] and the payment terms outlined in the letter of 9 April 2010 would not be agreed and no agreement could or would be reached": Court Book 3409. The Defendants submit that it is inappropriate to rely on such notes as an objective account of what took place at the 22 April 2010 meeting.

[453] Outline of Evidence of Timothy Stuart Macmillan (27 February 2015) [107(a)].

[467] Transcript 855. Mr Blake gave examples in his oral testimony of the same negotiating strategy, including in relation to the negotiations as to the rental amount for the Strathdale site: Transcript 169.

[468] Outline of Brendan Edward Blake (6 March 2015) [232].

[469] The Defendants again note that NES ought to be fixed with Vaughan Constructions' knowledge obtained through the process with Rider Hunt. This includes that Woolworths had advice from Rider Hunt that the difference in cost between a generic Masters store of 13,465 square metres and an equivalent Bunnings store ought to be $1.176 million. Even apart, therefore, from the evidence that Mr Macmillan said at the meeting that Woolworths' expectation was that the difference should be approximately $1 million, [the Defendants submit that] the Court should find that NES already knew this, or are otherwise deemed to have known it.

[470] Court Book 3411-7; Transcript 857-9.

[475] Transcript 1026-8. See also Transcript 1053-4.

[478] Transcript 1057-60. It should also be noted that there was, quite possibly, some confusion as to what was being discussed at this time: see Transcript 1065-9; Court Book 3416.

[485] Court Book 3417; Transcript 857-9.

[489] Plaintiff's Closing Submissions (3 September 2015) [127].

[490] Court Book 3343; Transcript 589.

[496] Transcript 245, 465, 592-3, 2030-1.

[497] Defendants' Closing Submissions (3 September 2015) [240]-[246].

[498] Defendants' Closing Submissions (3 September 2015) [247]-[251].

[499] Defendants' Closing Submissions (3 September 2015) [177].

[500] Cf Defendants' Closing Submissions (3 September 2015) [297]-[300]; Transcript 1485-6.

[507] Court Book 3407; Transcript 963.

[509] Court Book 3293, 3393, 4744; Transcript 103-7; Outline of Evidence of Ewen Kenneth McDonald (27 February 2015) [29].

[513] Court Book 4046 (Plaintiff's emphasis).

[516] See above [160] (quoted para (x)).

[519] Outline of Evidence of Ewen Kenneth McDonald (27 February 2015) [13].

[520] Court Book 3367 (emphasis in original). See also Court Book 3393.

[521] Outline of Brendan Edward Blake (6 March 2015) [232]. Court Book 322.

[523] As a cost per square metre. The target was $12 million for a 13,500 square metre store. The Landlord's Works Costs was $11,516,809 (Court Book 3393) for a 10,923 square metre store.

[524] Outline of Brendan Edward Blake (6 March 2015) [199].

[531] Transcript 249. See also Transcript 250-2.

[536] Email dated 29 March 2010 from Mr McDonald of Rider Hunt to Mr Killesteyn of Woolworths and copied to Mr Macmillan also of Woolworths: Court Book 3293.

[537] See Transcript 1274, 1276, 1314.

[538] Court Book 3094, 3137, 3164, 3170, 3176, 3288, 3370. See also Transcript 289, 306, 316.

[541] Outline of Brendan Edward Blake (6 March 2015) [207]; Outline of Evidence of Timothy Stuart Macmillan (27 February 2015) [79]. See also Transcript 581; Court Book 3090, 3074.

[542] Outline of Brendan Edward Blake (6 March 2015) [193]; Court Book 1160. See also Transcript 1044-5.

[543] Outline of Brendan Edward Blake (6 March 2015) [220].

[544] Outline of Evidence of Timothy Stuart Macmillan (27 February 2015) [91]; Outline of Brendan Edward Blake (6 March 2015) [219]. See also Transcript 714.

[548] Outline of Evidence of Michael David Fetter (6 March 2015) [64]-[65].

[549] Outline of Evidence of Michael David Fetter (6 March 2015) [56], [64]-[65]; Outline of Evidence of Gerald Peter Davis (6 March 2015) [86]; Outline of Brendan Edward Blake (6 March 2015) [228]. See also Transcript 155, 326, 483, 848-9, 853, 1070.

[554] See above [160]-[165] as to the evidence of discussions at the 22 April 2010 meeting.

[556] Outline of Evidence of Michael David Fetter (6 March 2015) [61]. See also Transcript 493.

[557] Transcript 700-1, 846. See also Outline of Evidence of Timothy Stuart Macmillan (27 February 2015) [107].

[558] Defendants' Closing Submissions (3 September 2015) [223]-[239].

[561] Outline of Brendan Edward Blake (6 March 2015) [232]. See also Transcript 888; Outline of Evidence of Gerald Peter Davis (6 March 2015) [88].

[562] Outline of Brendan Edward Blake (6 March 2015) [233].

[568] Transcript 699-700, 907-8, 960-2.

[570] See Amended Defence (28 November 2013) [15].

[571] Gino Dal Pont, Law of Agency (LexisNexis Butterworths, 3rd ed, 2014) 7-8 [1.5]; Colonial Mutual Life Assurance Society Ltd v Producers and Citizens Co-operative Assurance Co of Australia Ltd [1931] HCA 53; (1931) 46 CLR 41 at 48.

[572] Gino Dal Pont, Law of Agency (LexisNexis Butterworths, 3rd ed, 2014) 7-8 [1.5].

[573] Gino Dal Pont, Law of Agency (LexisNexis Butterworths, 3rd ed, 2014) 5-6 [1.4], 81-9 [4.1]-[4.13].

[574] Gino Dal Pont, Law of Agency (LexisNexis Butterworths, 3rd ed, 2014) 5-6 [1.4], 87 [4.12].

[575] NMFM Property Pty Ltd v Citibank Ltd [2000] FCA 1558; (2000) 107 FCR 270 at 387 [522].

[576] 789Ten Pty Ltd v Westpac Banking Corporation Ltd [2005] NSWSC 123; (2005) 215 ALR 131 at 147 [62].

[577] Jones v Bouffier [1911] HCA 7; (1911) 12 CLR 579 at 611.

[581] Court Book 3083 (emphasis in original).

[591] Transcript 245. See also Transcript 239, 246.

[595] See Court Book 3094, 3137, 3164, 3170. See also Transcript 289, 306.

[602] See Defendants' Closing Submissions (3 September 2015) [214].

[604] Cf Morgans v Launchbury [1972] UKHL 5; [1973] AC 127 at 140-1.

[605] Bonette v Woolworths Ltd [1937] NSWStRp 15; (1937) 37 SR (NSW) 142 at 150.

[606] NMFM Property Pty Ltd v Citibank Ltd [2000] FCA 1558; (2000) 107 FCR 270 at 387 [522].

[607] ACN 007 528 207 Pty Ltd v Bird Cameron [2005] SASC 204; (2005) 91 SASR 570 at 595 [110].

[609] Court Book 3134-5 (emphasis in original).

[610] See Outline of Brendan Edward Blake (6 March 2015) [207].

[613] Cf Defendants' Closing Submissions (3 September 2015) [214]-[221].

[614] See Defendants' Closing Submissions (3 September 2015) [215].

[631] Court Book 5698. See also Transcript 1278, 1284, 1288, 1311, 1352.

[633] See the letter from Fetter Gdanski to Allens Arthur Robinson dated 6 April 2010: Court Book 3345.

[637] See the email of 29 March 2010 from Mr McDonald of Rider Hunt to Mr Killesteyn, copied to Mr Macmillan, of Woolworths: Court Book 3293.

[652] Court Book 3141. See also Court Book 3138.

[655] Court Book 3422 (Plaintiff's emphasis).

[662] Outline of Evidence of Timothy Stuart Macmillan (27 February 2015) [85]. See also Transcript 902-3.

[664] Court Book 3138, 3141, 3153, 3142, 3148, 3357, 3348, 3351.

[667] CAJ Investments Pty Ltd v Lourandos (1996) 83 FCR 189 at 198; Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298.

[677] Defendants' Closing Submissions (3 September 2015) [252]-[260].

[686] Transcript 1214. See also Court Book 4046.

[687] Cf Defendants' Closing Submissions (3 September 2015) [292]-[296].

[694] See Court Book 2854, 2856, 3072. See also Defendants' Closing Submissions (3 September 2015) [194]-[200].

[696] Court Book 3138. See also Transcript 1176.

[698] See Defendants' Closing Submissions (3 September 2015) [194]-[213].

[699] See Defendants' Closing Submissions (3 September 2015) [210]-[211].

[700] Court Book 3138, 3141, 3143, 3153, 3142.

[713] Outline of Evidence of Richard Charles Douglas Champion (27 February 2015) [21].

[720] Such as the successful tenders for (Court Book 4795) Burnside, Coolaroo, (Court Book 4694) South Morang, Dandenong and Keysborough.

[721] Outline of Evidence of Timothy Stuart Macmillan (27 February 2015) [184]-[185], [220].

[736] Cf Defendants' Closing Submissions (3 September 2015) [261]-[291]. See also Transcript 1480.

[737] [2009] FCA 242; (2009) 254 ALR 273 at 281-4 [27] (emphasis in original and citations omitted).

[738] [2009] HCA 8; (2009) 236 CLR 272 at 285-6 [13].

[739] [1848] EngR 135; (1848) 1 Ex 850 at 855.

[740] Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54; (1991) 174 CLR 64 at 116.

[741] (1854) 9 Ex 341 at 342. See also Nick C Seddon, Rick A Bigwood and Manfred P Ellinghaus, Cheshire & Fifoot Law of Contract (LexisNexis Butterworths, 10th ed, 2012) 1165-9 [23.39].

[742] Alexander v Cambridge Credit Corporation Ltd (1987) 9 NSWLR 310 at 365-6 (citations omitted).

[743] Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54; (1991) 174 CLR 64 at 118.

[744] Alexander v Cambridge Credit Corporation Ltd (1987) 9 NSWLR 310 at 315 [4]-[5] (emphasis in original and citations omitted). See also at 350.

[745] Chappel v Hart (1998) 195 CLR 232 at 243 [24].

[746] Alexander v Cambridge Credit Corporation Ltd (1987) 9 NSWLR 310 at 315 [11] citing Koufos v C Czarkinow Ltd [1969] 1 AC 350.

[747] Nick C Seddon, Rick A Bigwood and Manfred P Ellinghaus, Cheshire & Fifoot Law of Contract (LexisNexis Butterworths, 10th ed, 2012) 1159 [23.34] citing Reg Glass Pty Ltd v Rivers Locking Systems Pty Ltd [1968] HCA 64; (1968) 120 CLR 516.

[748] [1960] HCA 58; (1960) 108 CLR 158 at 160.

[749] [2001] HCA 52; (2001) 206 CLR 459 at 507 [148].

[750] Hadley v Baxendale (1854) 9 Ex 341.

[751] Hadley v Baxendale (1854) 9 Ex 341 at 354.

[752] Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54; (1991) 174 CLR 64 at 91-2 (citations omitted). See also at 102-3.

[753] [1990] HCA 20; (1990) 169 CLR 638 at 642-3 (citations omitted). See also the reasons of Brennan and Dawson JJ at 639-40.

[754] [1990] HCA 20; (1990) 169 CLR 638.

[755] Sellars v Adelaide Petroleum NL [1994] HCA 4; (1994) 179 CLR 332 at 350 (citations omitted).

[756] Johnson v Perez [1988] HCA 64; (1988) 166 CLR 351 at 355-6.

[757] Wenham v Ella [1972] HCA 43; (1972) 127 CLR 454 at 466. See also Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54; (1991) 174 CLR 64 at 119.

[758] Wenham v Ella [1972] HCA 43; (1972) 127 CLR 454 at 473.

[759] Fink v Fink [1946] HCA 54; (1946) 74 CLR 127 at 143. See also New South Wales v Moss [2000] NSWCA 133; (2000) 54 NSWLR 536 at 554 [72].

[760] [2013] VSC 464, [214]-[216]. See also Reading Entertainment Australia Pty Ltd v Burstone Victoria Pty Ltd [2004] VSC 546, [461]-[462] (emphasis in original).

[761] [1994] HCA 4; (1994) 179 CLR 332.

[762] Sellars v Adelaide Petroleum NL [1994] HCA 4; (1994) 179 CLR 332 at 355.

[763] Sellars v Adelaide Petroleum NL [1994] HCA 4; (1994) 179 CLR 332 at 355.

[764] Sellars v Adelaide Petroleum NL [1994] HCA 4; (1994) 179 CLR 332 at 355-6 (emphasis in original).

[765] [1990] HCA 20; (1990) 169 CLR 638.

[766] [1994] HCA 4; (1994) 179 CLR 332.

[767] Sellars v Adelaide Petroleum NL [1994] HCA 4; (1994) 179 CLR 332 at 364-5 (emphasis added by Hargrave J in Fenridge Pty Ltd v Retirement Care Australia (Preston) Pty Ltd [2013] VSC 464, [215]).

[768] [1996] VicRp 22; [1996] 1 VR 346 at 354 (citations omitted).

[769] Sellars v Adelaide Petroleum NL [1994] HCA 4; (1994) 179 CLR 332 at 365 (emphasis added by Hargrave J in Fenridge Pty Ltd v Retirement Care Australia (Preston) Pty Ltd [2013] VSC 464, [216]).

[770] Defendants' Closing Submissions (3 September 2015) [372].

[771] [2010] EWHC 251; [2010] PNLR 22.

[773] [2013] NSWSC 1287.

[774] (2014) 102 ACSR 557 at 600 [212], 601 [216].

[775] [2006] EWCA Civ 1104.

[776] As to the principle that damages must be adapted to fairly compensate an injured party for the wrong he has suffered see Johnson v Perez [1988] HCA 64; (1988) 166 CLR 351 at 355-6.

[777] [1988] HCA 64; (1988) 166 CLR 351 at 355-60.

[778] Fenridge Pty Ltd v Retirement Care Australia (Preston) Pty Ltd [2013] VSC 464, [335] quoting British Westinghouse Electric and Manufacturing Co Ltd v Underground Electric Railways Co of London Ltd [1912] AC 673 at 691.

[779] Fenridge Pty Ltd v Retirement Care Australia (Preston) Pty Ltd [2013] VSC 464, [335].

[780] [1998] HCA 38; (1998) 192 CLR 603 at 654 [134] (citations omitted).

[781] Johnson v Perez [1988] HCA 64; (1988) 166 CLR 351 at 360.

[782] Johnson v Perez [1988] HCA 64; (1988) 166 CLR 351 at 359-60.

[783] [1903] AC 426.

[784] Bwllfa and Merthyr Dare Steam Collieries (1891) Ltd v Pontypridd Waterworks Co [1903] AC 426 at 428.

[785] [1945] 2 DLR 609.

[786] Hoefle v Bongard & Co [1945] 2 DLR 609 at 620 (citations omitted).

[787] Johnson v Perez [1988] HCA 64; (1988) 166 CLR 351 at 356.

[788] It is well established that cognate with the compensatory principle, a plaintiff cannot recover more than he or she has lost: Haines v Bendall [1991] HCA 15; (1991) 172 CLR 60 at 63; Fenridge Pty Ltd v Retirement Care Australia (Preston) Pty Ltd [2013] VSC 464, [308].

[789] Zoneff v Elcom Credit Union Ltd (1990) 94 ALR 445.

[791] Sellars v Adelaide Petroleum NL [1994] HCA 4; (1994) 179 CLR 332.

[792] [2007] VSCA 309, [26].

[793] Sellars v Adelaide Petroleum NL [1994] HCA 4; (1994) 179 CLR 332 at 362.

[794] [1994] HCA 4; (1994) 179 CLR 332 at 355 (emphasis in original).

[795] Defendants' Closing Submissions (3 September 2015) [430].

[796] Defendants' Closing Submissions (3 September 2015) [430].

[801] The amount would have been $2,783,739 had the Vaughan Constructions estimate of the cost to construct a Bunnings store been applied. For the reasons set out below the Troons estimate should be preferred.

[802] Mr McDonald's oral evidence to the effect that Rider Hunt ceased working unless specifically asked to continue should be rejected. If there were matters to be agreed, such as the items in the Rider Hunt 22 April 2010 letter, these would have been put to Vaughan Constructions. They were not.

[804] Such as the $123,497 for fit-out.

[805] Outline of Brendan Edward Blake (6 March 2015) [232].

[806] Defendants' Closing Submissions (3 September 2015) [379].