North Sydney Leagues' Club Ltd v Synergy Protection Agency Pty Ltd

North Sydney Leagues' Club Ltd v Synergy Protection Agency Pty Ltd - [2010] NSWSC 52 - NSWSC 2010 case summary — Zoe

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viii. if there are two or more ways in which a contract might have been performed, the Court adopts the mode of performance which is most beneficial to the party in breach [ Amann Aviation at 92.8] . The way forward 7 To my mind the more profitable mode of moving forward is to directly treat with the third question for decision by way of separate questions. 8 Plainly what the parties [consistently with the authorities], have endeavoured to do concerned putting submissions to the Court in working out expectation damages. The task for the Court is to determine the amount of money that would put Synergy in the position it would have been in, had the contract being performed, namely the net profits it would have received. 9 It has to be acknowledged that the parties furnished the Court with a number of detailed schedules, certain of which for one reason or another, were said to have been updated. Both counsel addressed from the schedules. Both also assisted the Court by briefly analysing one another's schedules. Synergy used the schedules marked MFI-D1. North Sydney used the schedules marked MFI P5 subject to the replacement documents numbered 3 and 4 respectively [being replacements for parts of MFI P-5] 10 It is inappropriate to append the schedules to these reasons but they have been left in the Court file. By reason of the separate question orders close comparisons between the respective schedules are effectively sidelined by the need with a Court in particular to determine the separate question 3. This was the preferred position put to the Court by the parties who indicated that following the Court answering the separate questions, there should be no difficulty in the parties agreeing upon the ultimate result. 11 It seems convenient to repeat so much of the submissions put by Synergy as first identify qua lost profits, matters of common ground as between the parties and then to go on to deal with points of differences. 12 However at the outset it needs to be understood that Synergy never sought to make a case of reliance loss this having been made explicit during the initial hearing. It was put as a case about the amount of money needed to make good their net profits. Lost profits: common ground 13 As counsel for Synergy contended:

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iii. The difference between these two is the measure of damages: $400,000. 25 However if the absorption method were to be applied, this approach would not be followed. Despite the fact that X's actual (i.e. in fact incurred) costs remained $400,000, and its actual (i.e. in the hand) profits were nil, it would be required to treat its costs as if they were really $200,000, and so its profits as if they were $200,000. A moment's reflection will show that X would thereby in fact be under-compensated by $200,000. 26 This simplified example will hold good for any set of starting values. 27 It can be made more complex (right up to the point where it is the same as the present case, or even substantially more complex), without altering the point of principle. It shows that there is really only one enquiry involved, and it is a factual one -- which costs would X (or Synergy) had to have incurred in any event (that is, regardless of B's - or Norths - contractual performance or lack thereof). 28 This example also shows why Dart (and any case dealing with profits actually made, rather than those foregone), is the mirror image of the present - it will generally be appropriate to apply the absorption method regardless of whether the costs would have been incurred or not. 29 In my view these submissions, which came forward from Synergy, were of substance. Clearly enough Synergy was not surprisingly, a company which had certain fixed costs [for example rent of its headquarters and the salary of its CEO]. These types of costs were going to be incurred in any event. On the evidence Synergy was set up with its premises, with its CEO, with its other fixed costs and that structure continued up to the end of the relevant time. The relevant question has always been what was the consequence for Synergy of not receiving the revenue stream in terms of its profits. In the present proceedings the breach was the failure to take the services being provided out of the business structure where the plaintiff had paid the overheads. Decision on separate question 3 30 Separate question 3 should be answered in the affirmative:

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So that what we had was JM2 which was this massive data which no one ever looked at in the trial, your Honour didn't look at it, my opponent at that time didn't look at it and I didn't look at it, perhaps other than just in a cursory sort of way and it used different software and so on. The compromise was to provide this JM3 which provided the intermediate report detail standing between JM1 and JM2, so that you had the raw data, a set of reports generated to a certain level of detail and then JM1 which was the greater degree of detail and it was JM3, this intermediate level of detail, that facilitated the cross-examination of Mr Merhi, because it was the means by which we had some capacity to test the data. 41 With regard to one of the submissions addressed to the Court by North it seems to me that there is substance in the defendant's submissions. In this regard Synergy contended that a construction issue is raised relating to the words "it is presumed (unless evidence sufficient to raise doubt about the presumption is adduced)". 42 It does seem to me that the notion of "sufficiency" here (in the context of a facultative provision) appears relatively straight forward, and appears to operate like a common law evidential presumption - the presumption applies unless the evidence leads to the conclusion that the presumption is not warranted. 43 I accept that implicit in the credit findings made in the first judgment (see at paras [55]-[58]) is a conclusion that the attempt to impeach the reliability of Synergy's business records had not got very far. 44 Furthermore the instant hearing provides a proper occasion to find, as the Court does, that in the somewhat unusual manner in which the original hearing went forward in terms of the evidentiary matrix [and the accommodation earlier referred to], the evidence given by Mr Merhi by way of the reports produced [subject to the extent to which he qualified his evidence], may be regarded as an accurate rendition of the manner in which the documents in question came into existence. 45 In particular the re-examination of Mr Merhi [commencing at transcript 252 and ending at transcript 265] carefully conducted by Mr Forster SC was impressive in its detail and generally answered and qualified certain matters which did require to be explained following the cross-examination. That had been an occasion when overnight Mr Merhi in a businesslike fashion, had spent some hours in addressing the various concerns which had been raised with him. 46 Further and as Synergy has contended, in a sense, s.146 (and s.48) of the Act may be beside the point. To my mind Mr Merhi's evidence is sufficient to show that the records in question (in effect, those comprised by JM2) were Synergy's business records and the effect of the cross-examination in respect of those records confirms, rather than undermines, their general adequacy and reliability. I accept that in those circumstances, there would seem to be no need for a presumption (whether under s.146 or otherwise). 47 As Synergy has further submitted, there is a further aspect to admissibility and/or weight. That matter may be put as follows:

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Judgment (78 paragraphs)

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Cases Cited (10)

Cited By (3)