Plaintiff v Defendant

142 It is also the position, as highlighted by the plaintiff, that it is significant that despite some assertions by the directors of the defendant that they were concerned about a risk of insolvency of the defendant between November 2019 and June 2020, there is no evidence that any advice was sought as to the directors' obligations in this respect. It is also pertinent, as the plaintiff says, that any short‑term cashflow issues facing the defendant could have been fully addressed by the exercise of the Option by the plaintiff which would have generated a lump‑sum receipt, in the form of the Price, of around $9 million within 90 days after the Option was exercised.[337] True it is that the defendant raises issues as to the financial capacity of the plaintiff to raise such a sum, as is discussed later in these reasons, but were the defendant so pressed financially this would have been a possible course of financial 'salvation' from perceived insolvency. And if, as events turn out, the plaintiff was unable to raise the funds to pay the Price then the defendant would have needed to pursue other possibilities to fund its operations.

143 It is common ground between the parties that the defendant faced a short‑term cashflow shortage in October 2019. However, as the plaintiff observes, there can be little doubt that this issue was resolved by the injection of $1 million produced by the Secondary Loan in November 2019. This was, as the plaintiff says, not only demonstrated in the December 2019 cashflow report and forecast,[338] but also in the Board's confirmation of its intention to repay $2.6 million to ER Properties by May 2020. The evidence of Phillip Ellis,[339] Tony Vescio,[340] and Duncan Johnston support the view that the 'cashflow crisis' at that time was averted by the $1 million loan injection.[341]

144 The cashflow projections by Tony Vescio in December 2019, February 2020, March 2020 and April 2020 do, as the plaintiff submits, disclose that the defendant had, and would continue to have, sufficient available cash on hand to pay its builder for the costs of completing Villas 51 and 52, if those works were fully undertaken prior to the Option Expiry Date. Moreover, in addition to the cash on hand, it would have additional funds at its disposal if repayments to ER Properties were not made as proposed so that these deferred repayment funds could be used to pay the costs of completing Villas 51 and 52, if those works were fully undertaken prior to the Option Expiry Date. The removal of projected sales from the cashflow budgets from February 2020, other than unconditional and conditional sales, only gave greater certainty as to the defendant's ability to pay the costs of completing Villas 51 and 52, if those works were fully undertaken prior to the Option Expiry Date. In my view, this is clear from the cashflow budgets of the defendant, also having regard to the position that Tony Vescio sought to maintain a $300,000 buffer in early 2020 in the cashflow forecasts.[342]

145 The plaintiff contends that the defendant could have reduced the payments actually made to ER Properties in each of April 2020 or May 2020 by $150,000 or $200,000 in order to pay its builder for the cost of completing Villas 51 and 52. It says that the defendant knew, or at the very best could be highly confident, that ER Properties was never going to issue a default notice in respect of the ER Properties loan, by reason of lesser payments being made to ER Properties.[343]

146 The defendant, on the other hand, resists the proposition by the plaintiff that it was open to defer or reduce payments made to ER Properties under its secured loan. In so doing it highlights the propositions put by the plaintiff that principal payments were not due and payable on the strict terms of the 6 November 2018 Deed of Variation No. 2 of the secured loan until 7 May 2020 and, additionally, there was no real commercial pressure on the defendant to make such repayments before that due date. The defendant submits that this argument and these two propositions must be assessed in the context of the commercial realities that the defendant found itself in throughout the Relevant Period, having exhausted its secured lender's patience, as it says, over a protracted period of time having regard to the position that:[344]

(1) the loan was originally intended in 2013 to be a 3-year loan, to have been repaid in full by 6 November 2016, to coincide with the then-anticipated completion of the Development;[345]

(2) it had then been extended for a further two years to 6 November 2018, which date had also passed;[346]

(3) it had then been extended for a further 18 months to 7 May 2020, which date was fast approaching;[347]

(4) Eastwood was aware that it did not have the funds to repay the $2.6 million principal by 7 May 2020;

(5) Eastwood had been unable to comply with various repayment timelines to ER Properties;

(6) the investors behind the ER Properties loan were elderly - 'if they're not in their 80s, they're certainly well into their mid‑70s' and 'might never, ever see it before death, so they won't actually get their hands on their money';[348] and

(7) ER Properties was pressing Eastwood to repay the ER Loan.

147 More particularly, the defendant addressed this issue in terms of the, so-called 'Deadline Argument', that payments were not due and payable until the due date under the secured loan and the argument, the so‑called 'Pressure Argument', that there was no real commercial pressure to make repayments prior to the due date, as follows:[349]

5.21 In response to the Deadline Argument, the reality is that Eastwood:

(a) was contractually entitled to make repayments of principal prior to the ER Loan expiry date, under the terms of the ER Loan;[350]

(b) was contractually or commercially obliged to make repayments of principal prior to the ER Loan expiry, by virtue of having provided undertakings to make repayments in accordance with the repayment schedules set out below (Undertakings). Such Undertakings found support in the contract as between Eastwood and ER Properties, whether by virtue of the express terms of the ER Loan,[351] or pursuant to common law principles of inferred contract.[352] Even if the obligation were not found to be strictly contractual, it was clear that Eastwood was commercially obliged to honour the Undertakings, including so as to seek to obtain the ongoing support of ER Properties. Both Eastwood and ER Properties plainly regarded there to be such an obligation. Indeed, when the principal payments set out May 2019 Undertaking was not met, ER Properties wrote to Eastwood asking 'why penalties should not occur';[353]

(c) frequently did make repayments of principal prior to the ER Loan expiry date in order to comply with the Undertakings, and to reduce significant quarterly interest bill that was otherwise payable.[354] The loan balance could not otherwise have reduced from $6.1 million in 2013 to 2.6 million by October 2019. The ledger at CB 953 records that in the 19 months between 11 October 2017 and 11 May 2019, Eastwood had paid down the principal by $3 million (ie. well prior to the Relevant Period commencing); and

(d) was well aware during the Relevant Period, particularly in early 2020, that it was not going to be in a position to repay the $2.6 million ER Loan balance by the fast approaching and twice extended expiry date of 7 May 2020. The directors made a commercial decision that what repayments it could make should be made 'as a sign of good faith',[355] be made to avoid a situation where ER Properties' limited patience finally ran out and sought to exercise its security when the loan was not paid in full by the due date. As Mr Stephenson expressed to his fellow directors at the time 'it is frustrating I know but I just don't like the thought of our current lender making it difficult for us.'[356]

Pressure Argument

5.22 In response to the Pressure Argument - in view of the nuances of the ER Properties / Eastwood relationship, and the small regional town context of Bairnsdale, Section 76 notices and solicitors' demands are not the only applicable indicia of pressure in this context.

5.23 Rather, the evidence shows that pressure from the secured lender was a very real and relevant commercial driver for Eastwood, particularly throughout the tight cashflow environment of the Relevant Period. The evidence records that:

(a) on 1 March 2016, Eastwood wrote to ER Properties to inform it that 'bank refinancing late last year has been unsuccessful with the Commonwealth Bank' and that 'The Board still has a desire to refinance the loan with a major bank although this appears to be taking a lot longer than anticipated.'[357]

(b) on 12 May 2017, Eastwood wrote to ER Properties to inform it that it was 'now in a position to commence a program of repayments', enclosed a cheque of $500,000, and outlined a budget to 'repay a further $1,500,000 by December 2017';[358]

(c) on 30 October 2017, Eastwood wrote to ER Properties with a revised loan repayment schedule;[359]

(d) on 26 March 2018, Eastwood wrote to ER Properties with an 'update of the program of repayments', on a loan with a balance at the time of $4.6 million;[360]

(e) on 8 November 2018, Eastwood wrote to ER Properties requesting an 18‑month extension, and advising that a cheque for $500,000 had been provided that day;[361]

(f) on 11 December 2018, Eastwood wrote to ER Properties with a further revised loan repayment schedule;[362]

(g) on 14 March 2019, Eastwood wrote to ER Properties with a further 'update of the program of repayments', on a loan with a balance at the time of $3.6 million, advising that Eastwood was 'targeting to repay the balance of $2,6000,000 [scil. $2,600,000] progressively by December 2019' [ie. before the 7 May 2020 technical deadline in the second Deed of Variation];[363]

(h) on 29 May 2019, ER Properties issued an information circular to its unitholders, advising that 'it is anticipated that the last payment for $700,000 will be paid in November';[364]

(i) on 15 October 2019, Eastwood now received a letter from ER Properties which stated that the repayments promised by Eastwood had 'not eventuated', and refers to being 'questioned by two directors for an explanation of why the proposed loan repayments have not occurred, when they will occur, if there is a revised date for the completion of the loan, and specifically why penalties should not occur', noting that its unitholders were 'requiring answers';[365] and

(j) on 29 October 2019, Eastwood wrote to ER Properties to respond to its 15 October 2019 letter, setting out a 'revised program of repayment that will be achievable', with payments of $500,000 in February 2020, $300,000 in March 2020 and final payments of $900,000 in each of April and May 2020.[366]

5.24 All of this sets the scene for the context in which Eastwood found itself by the beginning of the Relevant Period. Properly analysed, the Pressure Argument is not made good as a matter of commercial reality, rather than legal form.

148 In my view, these arguments as put by the defendant do not advance its position in terms of its obligations, formal obligations, under the provisions of the Option Deed; particularly having regard to the relationship between the defendant and ER Properties and the relatively informal dealings which had been undertaken between them with respect to the ER Properties Loan, as discussed previously.[367] At their highest, these arguments do indicate a laudable desire on the part of the defendant to seek to repay monies to ER Properties as soon as possible and, as the evidence indicates, to facilitate its repaying monies to its investors so that they could apply funds elsewhere. Also, it should be observed that the interest rate being paid on the ER Properties Loan was 10% per annum and there is no evidence to suggest it was not regarded as a significant interest rate, particularly as there was evidence that the defendant also sought to make repayments under this loan to reduce its interest burden. Moreover, one can well understand, as it was put in evidence, that these financial dealings in a local community have and raise elements of honour rather than 'mere' legal obligation. However, in my view, these considerations do not provide any justification for disregarding obligations, formal obligations, under the Option Deed with respect to the completion of the Development.

149 In many respects the submissions by the defendant in relation to the relevance of the ER Properties repayments do, in my view, reaffirm the position that the defendant itself regarded adherence to the repayment schedule provided to ER Properties as desirable but by no means imperative. The defendant's submissions as to the relevance of these payments are set out as follows:[368]

5.25 Finally, the two payments which were made to ER Properties during the Relevant Period were $300,000 on 2 April and $400,000 on 11 May 2020 (ER Repayments). As Table 2 below illustrates, not only were the ER Repayments made pursuant to a payment schedule which was issue prior to the start of the Relevant Period, but both of the ER Repayments were also made after the end of the reasonable endeavours 'window' (after which it would have been too late to complete the remaining villas in any event). Accordingly, nothing ultimately turns on the question of the necessity or otherwise of the ER Repayments.

Table 2 - The ER Repayments in context

Payment schedule provided to ER Properties (Schedule), promising payments in February, March, April and May 2020 to pay down the $2.6m balance.

'Relevant Period' begins (for the purpose of the Reasonable Endeavours Claim)

$500,000 repayment due under the Schedule, but not paid

$300,000 repayment due under the Schedule, but not paid

13 weeks prior to the then 30 June 2020 expiry date under the Option Deed

$900,000 repayment due under the Schedule, but only $300,000 is paid (on 2 April 2020). $2.3 remains outstanding

$900,000 repayment due under the Schedule, but only $400,000 is paid (on 11 May 2020), reducing the debt to $1.9m.

I do, however, in the context of these submissions, reject the proposition that the ER Properties Loan repayments were not relevant with respect to the issue of completion of the Development prior to the Option Expiry Date, for reasons indicated subsequently.

150 In relation to the defendant's financial viability during the Relevant Period the plaintiff asserts that it would have been well able to raise sufficient funds to cover the building cost of completing Villas 51 and 52, citing a sum of $153,352.24 (including GST) on further borrowing had it sought to do so. In this respect, the plaintiff points to: the speed with which Eastwood was able to obtain the $1 million in loans in November 2019 - on an unsecured basis (indeed Duncan Johnston was confident that he would eventually get repaid in full);[369] the fact that the board knew that Phillip Ellis had expressed a willingness to lend money to Eastwood, in November 2019; the obvious fact that Eastwood had substantial net assets available against which to secure any borrowings,[370] and ER Properties had previously consented to second mortgages being given over the Land; the fact that Thomas Camp and Tony Vescio had both previously provided short term loans to Eastwood;[371] the fact that Eastwood had previously arranged a $500,000 loan from a resident, Leigh Venables, in 2014, on a two‑year term;[372] and the fact that the Bank of Queensland had expressed interest to Thomas Camp in lending funds on the Development. While, it is said, the Court ought to assume the Bank would have required a first mortgage, it is submitted that the indicative willingness of the Bank to lend 60% Loan to Value Ratio ("LVR") reveals an avenue by which Eastwood could have fulfilled its desire to pay out ER Properties (which as at December 2019 had a balance of $2.6 million)[373], the 'Secondary Loan' (of $1 million), and obtain sufficient funds to complete the construction of the Villas. This assertion is, however, disputed by the defendant.[374]

151 The defendant submits that the 'Further Borrowings Argument' advanced by the plaintiff is without merit and that the evidence does not support the position that the defendant failed to use reasonable efforts by not obtaining further borrowings during the Relevant Period and, legally, it overstates the obligation in that a reasonable endeavours clause does not require the defendant to absolutely raise funds to enable it to undertake the task in question.

152 In relation to the factual aspects of the, so‑called, 'Further Borrowings Argument' the defendant submits that its inability to obtain further borrowings is well established in the evidence.[375] In this respect it says that it could not refinance the ER Loan, with its onerous 10% per annum interest rates, having embarked on various unsuccessful attempts to do so in the past. It could not simply obtain further bank overdrafts, as the NAB come‑and‑go facility had been obtained using a title that was not the defendant's to give.[376] In relation to the notion that the defendant should have asked the secured creditor, ER Properties, to lend it further funds in 2020 produced a response from Michael Sadler that ER Properties:

... had reached exhaustion about being told they were going to be repaid, and here we are on the path of, of repayment, only in part of a promised schedule, only to give it on one hand and take it out on the other, I think, was the absolute demonstration of hypocrisy. I just couldn't see that. They would have laughed us out of the building. They'd have seen it almost as a sign of a red flag, distress, that we really, we were just drowning in debt.[377]

153 The defendant also made reference to the plaintiff's significant reliance on the fact that Phillip Ellis had not been asked to participate in the $1 million Secondary Loan which were raised in November 2019,[378] which were said to have been 'organised without putting it to the Board first'.[379] The defendant submitted that the proposition that Phillip Ellis would have lent further money to the defendant is pure conjecture. In support of this submission reference was made to the circumstances surrounding the Secondary Loan, as follows:[380]

(a) on 15 October 2019, Mr Vescio presented cashflow forecasts to the Board which reported the alarming situation that the company would have 'a shortfall of available cash of $7k commencing at the end of October increasing to a shortfall of $700k by November and December.' The Board (including Mr Ellis) then agreed that 'Michael Sadler, as Chairman, would explore avenues to borrow funds to cover the potential cash shortfall and any agreement that the Chairman enters into will be ratified at the next Board Meeting';[381]

(b) following that meeting, Mr Sadler, Mr Johnston & Mr Stephenson held an urgent discussion to see how much in the way of operating capital they could raise between them 'to keep the company afloat;'[382]

(c) Mr Sadler did not ask Mr Ellis to participate 'because his ill health, combined with what [he] understood to be his conservative risk profile, led [him] to believe that this effectively unsecured lending would not have been something Mr Ellis would be in a position to participate in, particularly given the urgency with which the borrowing needed to be obtained by Eastwood.'[383]

(d) Mr Ellis nonetheless authorised the lending, in both the October 2019 and December 2019 Board meetings, and by email on 20 November 2019 in which he stated 'I am supportive of your arrangement however I do think that existing borrowers should have been offered the opportunity as a first option';[384]

(e) Mr Sadler responded to Mr Ellis that he had discussed the matter with 'ER Properties Chairman, Chris Martin' and 'he was not interested in taking up the opportunity and advised their key interest at this time is to see their loan paid out';[385] and

(f) Mr Ellis responded, not asking to himself contribute, but endorsing the steps that the directors had taken: 'thanks for your email and I fully understand your concerns with ER Properties. Under the circumstances I am comfortable that you have done the right thing and most importantly you have secured the cash flow until the end of the project.'[386]

As the defendant observes, the plaintiff led no evidence, by way of bank statements for Phillip Ellis at the time, or otherwise, in support of the argument that he could have contributed funds if he wished to. I accept the defendant's submissions that the evidence before the Court does in fact show that Phillip Ellis had the lowest value investment in the project, through ER Properties, in the sum of $50,000 in contrast to the $250,000 for all other investors.[387] Moreover, the other matters the subject of the evidence referred to by the defendant with respect to the actual circumstances surrounding the Secondary Loan, in particular with respect to Phillip Ellis, supports the defendant's position rather than the plaintiff's position.

154 On various occasions concern was raised by the defendant with respect to the need to find funds to pay outgoing residents and that, more generally, the financial uncertainties raised by the possible departure of residents was a matter for ongoing concern. The plaintiff, however, submits that the asserted concerns about the need for funds to pay outgoing residents are unfounded because the defendant knew with certainty what its 'worst case' obligation to outgoing residents would be, with not less than six months' notice. It is observed that in his statement, dated 30 May 2023, Michael Sadler asserted that the defendant was facing urgent funding requirements in mid‑2020 because of upcoming obligations to repay outgoing resident loans.[388] However, as Tony Vescio noted, those payments had already been made by the defendant.[389] Having regard to the evidence of Tony Vescio, the long‑time trusted financial advisor to the defendant, his evidence, in my view, should be accepted.

155 More generally, the plaintiff submits that the defendant had at all times the funds, in cash at bank, required to pay the costs of completing Villas 51 and 52, between November 2019 and July 2020. In support of this submission reference was made to the following matters:[390]

(1) Eastwood did not actually need the funds in hand in order to instruct its builder to complete Villas 51 and 52;

(2) Eastwood was historically content to incur building costs on the expectation that funds would be received from upcoming settlements - this is evidenced by the Practice itself;

(3) to the extent Eastwood was concerned that it might have found itself in a position where it did not have the funds immediately available to pay its builder the $150,352.24 upon completion of the Villas:

(a) short term liquidity issues do not in and of themselves create financial viability issues, as noted above. Further:

"Practical experience teaches that creditors will often allow a debtor some indulgence before insisting on payment. Where a company is suffering a temporary liquidity shortage, the hypothetical director of ordinary competence may reasonably expect that a discreet reliance upon such indulgences, paying those creditors who are becoming insistent and delaying payment to those who have not yet become insistent, may well enable the company to trade successfully through its difficult period."[391]

(b) there is no evidence that delaying payment to the builder would have had any effect on the financial viability of Eastwood;

(c) delaying payment to the builder was a known and well-used tool by the board to resolve cashflow issues in the Development;

(d) indeed, the relationship between Eastwood and builder was such that delayed payments were commonplace (and had never before affected the financial viability of Eastwood);

(e) unlike in other circumstances where the Eastwood board sought to delay payment to the builder, there is no discussion or resolution by the Eastwood board at its December 2019 or March 2020 meetings (or in any email correspondence for that matter) which evidences they even contemplated the idea of asking the builder to delay payment in order to achieve completion of Villas 51 and 52 by the Option Expiry Date.

156 As indicated previously, Tony Vescio was the long‑term trusted financial advisor to the defendant. In my view, it follows that his evidence in respect of what the defendant could have done ought to be given very significant weight. Tony Vescio made it clear that his role, as the defendant's financial accountant, was to provide information to the Board. He did not normally express a recommendation or disagree with the Board as he did not consider that this was his role.[392] Critically, he gave evidence, including that: he was not concerned about the non‑payment of the ER Properties loan by 7 May 2020;[393] the defendant could have made the decision to make smaller payments to ER Properties and used those funds to build Villas 51 and 52;[394] and that he had been instructed by the Board as to what the ER Properties repayments should be in the cashflow forecasts and had he been instructed to use different figures for the proposed repayments to ER Properties, as he would have done so.[395] To the extent that it is said by the defendant that Tony Vescio never recommended that the defendant apply any of its funds to construct Villas 51 and 52 between December 2019 and June 2020, there is no evidence that, save for on 27 April 2020,[396] he was ever asked to opine on the matter. His evidence is that the defendant could have paid the builder for the completion of Villas 51 and 52[397] and it was a matter of business judgment for the Board, not himself.[398] Michael Sadler conceded in his evidence that nothing in his email to Tony Vescio on 27 April 2020 suggested any potential urgency regarding the decision to construct the Villas.[399]

157 The point was also made by the plaintiff that simply because Tony Vescio's witness statements were prepared with hindsight does not mean the opinions expressed in them were not held at the time.[400] In my view, there is nothing in the evidence which would suggest that this was not the position. In any event, the plaintiff says that ultimately this is irrelevant as Tony Vescio's evidence, as an experienced accountant to the defendant, merely affirms the plaintiff's contention that, objectively, there was no real barrier to the defendant instructing its builder to complete Villas 51 and 52 at any time between November 2019 and May 2020. In my view, this correctly states the position.

158 In light of the matters to which reference has been made, the plaintiff submits that the evidence comfortably establishes a disregard by the defendant of its obligations under clauses 5.1 and 9 of the Option Deed - provisions which, in the case of clause 5.1, require the defendant to use 'reasonable endeavours' to complete the Proposed Development before the end of the Term of the Option and, in the case of clause 9, in summary, to do everything reasonably necessary or desirable to give the full effect to the provisions of the Option Deed. More particularly, the plaintiff says that there was a state of continuing breach by the defendant of these obligations between November 2019 and May 2020 by failing to give the necessary instructions to cause the completion of Villas 51 and 52; though, as I have found, late April of that year was the critical time.[401]

159 The plaintiff contends that the Court can be strengthened in the conclusion that the defendant did not do everything reasonably necessary or otherwise to make all reasonable endeavours to construct Villas 51 and 52 before the Expiry Date under the Option Deed in circumstances where, it says, its directors undertook no endeavours at all after receiving the Madgwicks Letter. The specific matters relied upon in support of this contention are as follows:

(1) there is no evidence of discussion of the issues raised by the Madgwicks Letter;

(2) legal advice on the issues raised by the Madgwicks Letter was not obtained, despite acknowledgment of the need to do so;[402]

(3) neither the issue nor relevant correspondence was raised or discussed at the December 2019 or March 2020 Board meetings despite the impact of the Option Deed having been expressly stated at the 10 December 2019 ERUT annual general meeting;

(4) the defendant never requested the builder accept late payment in respect of the final two stages of Villas 51 and 52 (despite a history of such a practice);[403]

(5) the question of completion of construction of Villas 51 and 52 was never engaged by the directors of the defendant when Tony Vescio expressly raised it in his 28 April 2020 advice to Michael Sadler,[404] which was then provided by Michael Sadler to the other three directors;

(6) the defendant never sought additional finance from outside sources to meet the cost of completing Villas 51 and 52;[405]

(7) when Michael Sadler was asked why he instructed Tony Vescio to move the construction costs in the cashflow budget in February 2020 from June to September 2020 - his response was '[t]he preservation of cash and the ability to meet our loan repayments, was a higher, higher order to me than creating more stock to compete against the stock that we had at the time';[406] and

(8) Duncan Johnston gave evidence that even as late as 11 May 2020, he did not appreciate the defendant may have had a contractual obligation to bring Villas 51 and 52 to completion[407] (which is consistent with the defendant never obtaining any legal advice on the Option and its obligations under the Option Deed).

160 The plaintiff stressed throughout the trial that it is not a necessary element in its case to establish an intent by the defendant to deprive it of the benefit of the Option Deed. Maintaining that position the plaintiff does, however, say that a variety of matters, which are now considered, speak in favour of such a conclusion and further erode the defendant's contention that its 'financial viability considerations' justified it in not giving instructions to its builder to complete Villas 51 and 52. I turn now to those matters in detail but in doing so treat them only as indicia of matters objectively rather than from any prism with respect to intention on the part of the defendant.

161 On 10 December 2019 Michael Sadler reported to unitholders that 'we can only spend the cash we have' which occurred only hours after the defendant's Board had affirmed that it expected to have sufficient positive cashflow between December 2019 and May 2020 to enable it to repay the entire $2.6m owing to ER Properties by May 2020.[408] Reference was also made to Duncan Johnston's email to Michael Sadler on 21 January 2020:[409] 'I have attached two lots of minutes and highlighted in Yellow where we have made decisions on building progress solely related to available cashflow. Hope that helps.' The plaintiff says that Michael Sadler's lack of denial of wrongdoing in respect of this email is damning. Indeed, it is said, trying to justify a course of conduct to avoid the exercise of the Option is the only reasonable explanation for the email. It is said that this is reinforced in light of the fact that only a month before the defendant had averted its cashflow issues with the injection of $1 million; it had affirmed its expectation that it would be able to repay the entire $2.6 million owing to ER Properties by May 2020; and that it had not rescinded its instruction to its builder to hold Villas 51 and 52 at lockup stage having previously decided to complete all Villas to completion. Moreover, reference is made to the statement by Michael Sadler to Ken White in mid‑April 2020 that: 'I'm not going to give Tom Camp a free kick'.[410]

162 Approximately 2 weeks after the HWLE Letter was sent, on 24 April 2020, Michael Sadler met with Thomas Camp and Ken White to discuss the Option.[411] Thomas Camp records in a letter to Michael Sadler on 8 May 2020: 'I now write to outline a proposal to you to facilitate the completion of the construction of the Villas by the 30th June 2020 and enable the orderly exercise of the option. You have indicated that a major stumbling block is that the Option pricing does not specifically detail the way in which to deal with Villa assets owned by Eastwood other than the Deferred Management Fee (DMF) calculation' (plaintiff's emphasis).[412]

163 Reference is also made by the plaintiff to what is said to be the unilateral direction by Michael Sadler to the other directors of the defendant on 7 May 2020 that '[t]he commencement of the completion of this Villa [52] will not commence until the sale becomes unconditional'[413] in circumstances where the defendant was acting inconsistently with the Practice since March 2019; it had the cash in hand to complete construction, having the next day decided to retain more than sufficient funds from the proposed ER Properties payment; and on 29 June 2020, when the defendant was not at risk of completing the villas prior to the Expiry Date, the defendant abandoned the decision to wait until an unconditional contract was signed and instructed the builder to complete Villas 51 and 52. In the same email that Michael Sadler directed that construction of Villas 51 and 52 will not occur until after an unconditional contract is signed, Michael Sadler reported to the other directors of the defendant: 'I have recently had an informal discussion with Tom Camp regarding the current Option Agreement. I confirmed with him that I had grave concerns that the current Option Agreement did not arrive at a correct purchase price if the only definition of the price was based on the "first time DMF established for each Villa' (plaintiff's emphasis).[414]

164 Continuing, on 4 June 2020, despite the Board never raising the Madgwicks Letter or the Option Deed in any of the December 2019 to May 2020 Board meetings, or in their email communication between meetings, Duncan Johnston emailed the defendant's Board about a meeting he had with Tim Liston 'regarding the best way to sell the village from the point of view of the current unit holders' in which he proposed a sale process and price as if the defendant could disregard the Option Deed.[415] This is, of course, notwithstanding that the plaintiff had informed the defendant that it intended to exercise the Option and the Option Expiry Date had then not yet arrived.

165 Additionally, and significantly, Michael Sadler conceded, contrary to the remainder of his evidence, that the decision not to instruct the builder to complete Villas 51 and 52 was not because of a risk of running out of cash.[416] His assertion that the reason not to construct was to get the best possible price for Villas 51 and 52 is, as the plaintiff contends, not supported by any other evidence.

166 Finally, in terms of the matters the plaintiff highlights as indicating a strategy to deprive the plaintiff of the benefit of the Option Deed, it is contended that Michael Sadler conceded that the Board intentionally decided not to pursue the plaintiff's offer to purchase a Villa, which would have resolved all issues raised by the defendant, because to do so would have allowed the plaintiff to exercise the Option at a price which was not favourable to the defendant. When asked whether the Board resolved to accept or reject the plaintiff's offer to purchase a Villa, Michael Sadler conceded that: 'we just, as a Board, felt it was an unnecessary complication to our orderly sales program to um, manipulate a sale, ah, just simply for the completion. It was an easier option just to, ah, reject the proposal and deal with the option potentially by negotiation.'[417] Michael Sadler subsequently explained that the 'complication' he spoke of was: 'We would have had, um, just another villa not of our, not of our making, um, competing against the ones we already had... putting in another villa where the option agreement didn't communicate [scil. "contemplate"] us being paid for the seven we had as stock. It was far better to speak to the option holders and so... he said he was prepared to consider how we might adopt - address the villas that were basically free carry.'[418] Additionally, the plaintiff observes that the defendant amended its defence, denying that between November 2019 and July 2020, it failed to use reasonable endeavours to achieve Completion in circumstances where Villas 51 and 52 were already at lockup stage, because 'Eastwood's financial viability considerations guided construction timing.'[419] Nevertheless, for the preceding reasons advanced by the plaintiff which have been set out, it contends that the defendant's financial viability was not in jeopardy during November 2019 to July 2020 such that it was not reasonable for it not to instruct its builder to complete Villas 51 and 52.

167 The defendant in its submissions highlights that in opening, the plaintiff made the serious allegation that 'the conduct of the directors of Eastwood was quite clearly intentional in not seeking to complete or give that necessary instruction because they had perceived that it was indeed a very bad bargain, with hindsight, that they had made' and that 'there is indeed a compelling inference that that was a deliberate course of conduct on the part of the directors'; which is described by the defendant as the 'Intention Allegation'.[420] The defendant also observes that the plaintiff sought to clarify that the Intention Allegation was made 'although it is not a necessary element of our case'.[421] In this respect the defendant submits that the Intention Allegation ought to be rejected on the basis that it was not made out on the evidence, let alone to the standard of proof required for such a serious allegation.[422] Each of the defendant's directors were, it is said, subjected to extensive cross‑examination and no element of intention was established; or compatible with the surrounding factual matrix, which it says squarely contradicts any Intention Allegation including, it says, the defendant having provided various extensions to the Option Expiry Date ("Extensions Argument").

168 With respect to the, so‑called, Extensions Argument the defendant says that it is common ground that each time the defendant was asked by the plaintiff to extend the Option Expiry Date, it did so without hesitation, despite being under no obligation to do so. Two of these extensions - the extension from 30 June to 13 July which was granted on 23 June 2020,[423] and the extension from 13 to 20 July, which was granted on 13 July 2020[424] - were given during the Relevant Period itself; being the period in which the plaintiff alleges that the defendant failed to use reasonable endeavours.[425] Moreover, the defendant contends that the plaintiff sought to downplay the Extensions Argument at trial, referring in opening to: 'a further couple of extensions, one to 13 July 2020 and one to 20 July 2020, after which there was not an agreement for an extension, and therefore, the expiry date had passed'[426] (defendant's emphasis). Rather, the defendant says that the reality is there was not a request for a further extension and nor was any evidence led by the plaintiff as to why it did not request a further extension on or around 20 July, it having asked for and obtained two extensions in the previous month, and there being no reason to suggest that further extensions would not have been given.

169 In my view, as indicated previously in these reasons, the plaintiff's case was not pursued on the basis of a, so‑called, Intention Allegation although in the plaintiff's submissions, as considered, it is suggested that having regard to the April matters identified such a conclusion could be made. Nevertheless, I have, as indicated, treated those matters as going to objective evidence with respect to the issue of 'reasonable endeavours' and not intention even though one might wonder with respect to some of the matters raised, including: Michael Sadler's statement to Ken White in mid‑April 2020 that he was not going to give Thomas Camp a 'free kick'; the lack of evidence of any Board discussion of the Madgwicks Letter or instructions as to the HWLE Letter; and concern about the Option Price and the process of repayment of the ER Properties Loan in spite of considerations as to the completion of the Development. Nevertheless, these and other matters, in the present context, go to 'reasonable endeavours' rather than any other consideration.

170 In terms of the question whether the defendant failed to use reasonable endeavours in the period November 2019 to 20 July 2020, which has been referred to as the Relevant Period, the defendant's submission is that the focus of the Court's enquiry must be on the reasonableness of the defendant's endeavours during that period. In this respect it is emphasised that the decision to slow construction preceded the Relevant Period, as it was made at the Board meeting held on 13 August 2019. It was, it is said, at this meeting that 'it was agreed that construction of villas would need to be slowed to accommodate the cashflow' and that Villas 51 and 52 'progress to slab' and 'may have to progress to lockup as the frames have already been ordered', but not progress further. The defendant says that this critical decision is not sought to be impugned in this proceeding, nor is the Board's decision at the 15 October 2019 Board meeting where it was agreed 'that construction of villas would need to be slowed to accommodate the cash flow.'[427] Whilst accepting that this is the critical period for considering whether reasonable endeavours were made to complete the project, it is not controversial on the evidence that during this period the defendant relied upon its lack of financial capacity to progress to Completion. In my view, any decisions made by the Board prior to the Relevant Period do not affect the position as put by the plaintiff with respect to the reasonable endeavours or otherwise by the defendant during this period. The critical question on the plaintiff's case is whether the evidence as to what the defendant did or did not do or might have done during this period establishes lack of reasonable endeavours on the part of the defendant. This is the critical and proper focus of the Court's enquiry. Consequently, the approach in these reasons is not at odds with the position as to the proper focus as contended by the defendant. More particularly, it does follow, as the defendant submits, that the prevailing question in this proceeding was not whether the Board acted unreasonably in halting construction of the remaining villas in August and October 2019, but rather whether it was unreasonable for the Board, at the Board meetings held on 10 December 2019 or 17 March 2020, to the extent that this was not already too late, to give the instruction to complete,[428] not to reverse decisions made prior to the Relevant Period. Further, in this context, reference is made by the defendant to evidence as to the time to complete and, in this respect, reference should be made to the preceding reasons.[429]

171 As the defendant observes, the plaintiff has criticised its reliance on 'financial viability considerations' as a defence to the Reasonable Endeavours Claim on the basis that its directors 'haven't offered any exposition of what they mean by solvency.'[430] It is then said that the plaintiff did not ask the directors in cross‑examination 'what they mean by solvency'. The plaintiff did, as the defendant says, advance its own definition of solvency, with reference to the 'legal definition of solvency, namely, an inability of a company to pay their debts as and when they fall due and payable under s95A of the Corporations Act. And also taking into account the well‑known definition of solvency and exposition on solvency, which was undertaken by the High Court in Sandell v Porter'.[431] The plaintiff elaborated that 'a temporary cash flow crisis is not insolvency' and 'tight cash flow is not to be mistaken for insolvency.'[432] It further submitted, with the full benefit of hindsight, that: 'what is important is that they never ran out of cash'.[433] The vice in this submission, the defendant says, is that this is not an insolvent trading case. The question for the Court, it is said, is not whether the defendant was in fact insolvent, with the benefit of hindsight, by reference to the definition of 'insolvency' which the plaintiff propounded or by reference to the broader definition which appears in clause 1.8 of the ER Properties Loan.[434] Rather, the defendant submits the question for the Court is whether or not it exercised reasonable endeavours throughout the Relevant Period with respect to the timing of the completion of the Development, having regard to its solvency concerns at the time. As further observed, one cannot know that a cash flow crisis is a 'temporary cash flow crisis' until it has passed, if indeed it does ultimately pass.

172 The defendant addresses the financial capacity issues with reference to a number of Board meetings which are said by the defendant to provide evidence of the defendant's lack of financial capacity in the critical sense during the Relevant Period.

173 In terms of the October 2019 Board meeting reference is made to a cashflow forecast tabled at that meeting which shows a $702,836 cashflow deficit for the next month, and a $703,294 deficit the following month which would give rise to valid and significant cashflow concerns for a company facing that forecast at the time. So too it is said would an email from the company's accountant on 2 October 2019 which warned: 'It looks like we are going to run out of cash' and 'we will be at least $500,000 short during the period from the end of October to January unless we obtain additional settlements.'[435] Similarly, it is said by the defendants, with respect to the 20 December 2019 Board meeting, the circumstances in which the defendant found itself remained precarious, with three previously forecast settlements having not occurred, and bank balances well below Tony Vescio's recommended $300,000 cash reserve minimums.[436] The cashflow position by the March 2020 Board meeting remained tight, with COVID‑19 then thought set to be impacting the already bushfire‑affected region and bank balances remaining below Tony Vescio's recommended $300,000 cash reserve minimums.[437] Similarly, it is said, by the May 2020 Board meeting, the cashflow outlook remained 'dire', with one forecast settlement having fallen over and no new unconditional settlements imminent and COVID‑19 restrictions in effect. Again, it is emphasised that the closing bank balances forecast remained well below Tony Vescio's recommended $300,000 minimums.[438]

174 Concluding with respect to the so‑called capacity argument, the defendant submits that it is not permissible to assess the reasonableness of its conduct with hindsight.[439] It must be assessed, it is said, at the relevant time. In this respect it is said that it is easy for the plaintiff to say, with the benefit of hindsight, that the defendant did not in fact ultimately run out of cash, and could, as Tony Vescio stated: 'have easily completed the construction'.[440] It is said by the plaintiff, however, that this is not what Tony Vescio said at the time as that was not what the evidence showed at the time and, in any event, Tony Vescio concedes that he did not disagree with the Board's decisions at the time, given the uncertainty of COVID‑19,[441] and would indeed have supported maintaining even higher cash reserves at the time.[442]

175 The defendant in its submissions addressed the further borrowings argument by the plaintiff and also the arguments with respect to the ER Properties Loan. These issues have been addressed previously in these reasons[443] but are also relevant in the present context.

176 In my view, the submissions put by the defendant with respect to its financial capacity within the Relevant Period do not support its position that reasonable endeavours were made to complete the project within the provisions of the Option Deed, particularly clauses 5.1 and 9. In my view, it is clear from the evidence and matters referred to and relied upon in the plaintiff's submissions, which have been discussed previously in these reasons, that there was financial capacity to complete the Development prior to the Option Expiry Date and that reasonable endeavours were not made to do so. More particularly, I do not regard Tony Vescio's evidence as being given with the benefit of hindsight. He was, as the evidence clearly indicates, a person relied upon by the defendant for his knowledge and financial expertise over a long period of time and also, on his own evidence, a person who saw his role as giving the Board of the defendant financial information as best he saw it at the time and he did not see his role in any way as advocating a position or second guessing the decisions made by the Board, whether or not its members had regard to the information he had provided.[444] In my view, this is not an unsurprising position for anyone in Tony Vescio's position to take. Moreover, having regard to his extensive knowledge and experience in financial matters, particularly in the context of providing advice to the defendant, his evidence in this respect is not to be regarded as mere hindsight that there was the financial capacity to complete Villas 51 and 52 prior to the Option Expiry Date.

177 It should be noted at this point that there was some controversy between the parties in relation to the cost to complete the Development, in the sense of completing Villas 51 and 52. Tony Vescio's evidence was that the actual cost to complete from lockup to completion was $150,352.24.[445] The plaintiff relied on a $150,000 round figure in its opening[446] and in cross‑examination Tony Vescio gave evidence that the total cost to complete, including landscaping, was $200,000.[447] The defendant's position is that the cost to complete as understood at the relevant time was approximately $300,000,[448] a figure derived from its 2019 AGM minutes. Even if one accepted that the defendant proceeded on the basis that completion would cost $300,000, this does not, in my view, on the evidence, particularly from Tony Vescio as to the defendant's capacity to complete the development in a relevantly timely fashion, detract from that position.

178 Finally, I am of the view that the defendant failed to act reasonably in not considering, in front of mind so to speak, its formal obligations under the Option Deed with respect to completion of the Development. The Board minutes of the defendant during the Relevant Period, all of which were accepted as being an accurate record of discussions at these meetings, make no reference to any discussion with respect to these obligations. This is significant in itself in the context of 'reasonable endeavours' and, in my view, even more significant given that there is no evidence of any consideration of these obligations in spite of receipt of the Madgwicks Letter and the process, or lack of it, in responding and preparing instructions which led to the HWLE Letter in response. In my view, the evidence clearly establishes that had the defendant had regard to its actual obligations under the Option Deed as distinct from its desire to make repayments under the ER Properties Loan, though without any legal obligation to do so prior to the contractual due date of that loan, Villas 51 and 52 would have been completed well before the Option Expiry Date. This is not to say that 'obligations' of honour with respect to the ER Properties Loan and its investors are not of significance and ought not be departed from as far as possible but it cannot be regarded as reasonable not to give priority to the actual formal obligations, previously freely entered into, under the Option Deed.

179 The authorities on the meaning and effect of 'endeavours' clauses have already been considered at some length in the preceding reasons.[449] Various attempts have been made to articulate the meaning and minimum threshold requirements of such clauses in the variety of linguistic iterations in which they are to be found; particularly the 'reasonable endeavours' and 'best endeavours' formulations. As the cases do show, the various formulations must be construed in their contractual and factual contexts. It is an entirely mistaken approach to treat such a formulation as something akin to a term of art at general law or as some 'quasi-legislative' term carrying a fixed meaning devoid of any context.

180 Particularly apposite in the present circumstances is, in my view, the consideration of the two common formulations, to which I have referred, by Stevenson J in Wang v Kaymet Corp Pty Ltd.[450] In that case, having considered the authorities, his Honour indicated that he saw little difference in meaning; a view consistent with the position taken by the High Court in Electricity Generation[451] and by the New South Wales Court of Appeal in Cypjayne Pty Ltd v Babcock & Brown International Pty Ltd[452] and other authorities considered.[453] On this basis, the position in the present context is that 'reasonable endeavours' required the defendant to do everything reasonable to achieve the 'contractual object' of the Option Deed,[454] short of going beyond the bounds of reason such as imperilling its own financial solvency or survival.[455]

181 In the present circumstances, the application of the approach applied in the various cases considered does not require determination of fine points of contractual construction and analysis because, as discussed in the preceding reasons, the fact-specific reasonable endeavours which the defendant was obliged to take were to complete the Development - specifically, Villas 51 and 52 - prior to the Option Exercise Date, as fixed at the relevant time. As discussed, there is no basis or explanation which provides any real reason as to why it could not do so; whether for cash-flow, solvency or other reasons. Rather, the evidence shows that, at best, it paid no heed to its actual, formal, obligations under the Option Deed.

182 The plaintiff contends that as a result of the defendant's breach of its obligations under clauses 5.1 and 9 of the Option Deed it has suffered loss.

183 As to the critical principles relevant to the issue of causation the plaintiff refers to the applicable principles as recently summarised in KSG Investments Pty Ltd v Open Markets Group Ltd[456] that the plaintiff is required to establish causation - that is, that the breach has caused it to suffer a loss - on the balance of probabilities, by application of the principles discussed in March v Stramare;[457] and the statement in that case:[458] 'The rule in Hadley v Baxendale prescribes the condition on which damages can be awarded, namely that '[w]here two parties have made a contract which one of them has broken, the damages which the other party ought to receive ... should be such as may fairly and reasonably be considered either arising naturally, i.e., according to the usual course of things, from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it.'

184 The defendant also refers to authority, particularly as to the levels of analysis required to be undertaken in the present context. As set out in the judgment of Beach J in Directed Electronics OE Pty Ltd v OE Solutions Pty Ltd (No 8)[459] as follows:[460]

1. Factual causation is generally resolved through an application of the "but for" test. The "but for" test entails a determination on the balance of probabilities that the particular harm that in fact occurred would not have occurred absent the conduct of the party in breach. The question is whether a particular act or condition was one of the conditions or relations necessary to complete the set of conditions which represent the cause posited. This is the basis of the "but for" test of causation. But the "but for" test is not the exclusive test of factual causation.

Beach J continued, setting out three levels of analysis required to be undertaken:[461]

1. First, what is the context within which and why is the question of causation being posed? In the present context one of the perspectives being addressed is an alleged breach of contract. Another perspective is a breach of fiduciary duty. What is then being considered is whether that breach was a or the cause of the relevant damage or loss. So, the lens through which causation is to be assessed starts from the proper identification of the relevant perspective for why the inquiry is being undertaken. The perspective from which causation is then to be addressed is not some diffuse or decontextualised inquiry. The lens through which causation is to be assessed must identify the act, omission, state of affairs or circumstance said to constitute the breach of the relevant normative standard. That identification is not to be described in the language of "common sense". Further, questions of causation require identification of the particular harm that was suffered. Identification of the damage sustained by a claimant will assist in identifying the acts or omissions that were its cause.
2. Second, once that contextual lens has been identified, the question then arises as to whether factual causation has been established in terms of the usual "but for" or necessary condition test by reference to linking the act, omission, state of affairs or circumstance referred to with the alleged damage or loss. But even here, to use the vernacular of "common sense" is conceptually unhelpful in a case involving forensic complexity. Moreover, it is otiose in a case where the facts are simple and factual causation obvious.
3. Third, once that factual question has been analysed, the legal question arises, if factual causation has been established, as to whether the relevant party should be held legally responsible for that loss or damage. Alternatively expressed, is the damage within the relevant scope of liability? But this is a legal question depending in part upon the nature of both the breach and the damage alleged. It is difficult to see how the vernacular of "common sense" has utility for this third level of analysis. One is not talking of the common sense of the layman. Moreover, one is not truly talking of the "common sense" of the lawyer, but rather a conceptual and evaluative legal question upon which reasonable minds might differ. Indeed, lawyers have struggled with this conceptual question and have sought refuge in adjectives such as "direct", "natural and probable", "direct and natural", "proximate", "real effective" and so on to categorise potential cause(s) to address the legal question. And even where they have agreed on the label, differences have arisen in their application. Further, other problems have arisen with scenarios that have had to deal with concurrent sufficient causes, causes that are neither necessary nor sufficient conditions with or without other elements, and novus actus interveniens questions. March v E & M H Stramare Pty Ltd [1991] HCA 12; (1991) 171 CLR 506 at 515 per Mason CJ is authority for a common sense test or a common sense value judgment, but it was a tort case not a contract case. The value of such a test in my context may be doubted. Finally, on one view, this third level of analysis is not a causation question at all, but rather a legal responsibility question once factual causation has been answered (the second level of analysis) through the relevant lens (the first level of analysis). It has been suggested that the substantive meaning of causation has been inappropriately comingled with this latter question of legal responsibility or the associated phrase "scope of liability", as Professor Jane Stapleton in "Cause‑in‑Fact and the Scope of Liability for Consequences" (2003) 119 Law Quarterly Review 388 explains. Her views may be said to resonate with those of trial judges mining facts from the coal face of forensic inquiry.

185 Additionally, the defendant makes reference to issues with respect to a loss of opportunity claim and the decision in ACN 115 918 959 Pty Ltd v Hoeys Lawyers Pty Ltd[462] as follows:

When the loss allegedly suffered by a plaintiff is the loss of a valuable opportunity, the plaintiff must establish causation of that loss by proving on the balance of probabilities (in accordance with ss 51 and 52 of the Wrongs Act) that the wrongful conduct by the defendant caused the loss of a valuable opportunity. The assessment of the value of that lost opportunity is then undertaken by reference to the value of the opportunity if it had materialised and the level of probability that it would have materialised (involving, depending on the case, either two assessments or a single integrated assessment). The latter is not regarded as forming part of the assessment of causation of loss but rather as part of the assessment of quantification of loss. Nevertheless, drawing the line between causation and value can be difficult in practice.

186 The defendant put causation squarely in issue in this proceeding,[463] as stated in oral opening.[464] It contended that the plaintiff would not establish that, on the balance of probabilities, it had the funds to exercise the Option.

187 The plaintiff submits that, unless the Court rejects its evidence in respect of causation, it will, no matter how weak, in the absence of any competing position, make out causation on the balance of probabilities. Further, it contends that this case is not one where significant nuance is required in respect of the test for causation. It says that it must demonstrate that, on the balance of probabilities, it would have: exercised the Option on or before 20 July 2020; subsequently entered into a binding contract of sale in respect of the Retirement Business on terms including the terms prescribed by the Option Deed; and completed the sale.

188 More particularly, the plaintiff says that it was not of any material cost or difficulty for the plaintiff to exercise the Option and enter into a binding contract of sale. It had stated its intention to exercise the Option in the Madgwicks Letter, on 29 November 2019.[465] The known difference between the plaintiff's then understanding of the Price, which was circa $11,800,000,[466] and the value of the Retirement Business by June 2020 estimated by the plaintiff to be not less than $18,138,000[467] is said to provide compelling evidence that the plaintiff would have exercised the Option and entered into the 'Sale Agreement' described in the Option Deed. I do not understand that the defendant would doubt the attractiveness from the plaintiff's point of view of exercising the Option. Rather, the issue raised by the defendant was, principally, that the plaintiff did not establish that it had the financial means to exercise the Option and carry the sale through to completion.

189 In respect of completion of the sale, it was put to Thomas Camp, and he agreed, that he was not ready to complete the purchase of the Village in July 2020.[468] The Option Deed provided, however, that settlement of the purchase occur 90 days from the Exercise Date.[469] It follows that, assuming that the plaintiff exercised the Option in mid‑July 2020, Completion would have been due in mid‑October 2020. The plaintiff submits that the Court should find that the plaintiff would have completed the Sale Agreement. It says that it should do so by reference to the actual evidence, and also to the logical inference that this would have occurred given the difference between the Price and the value of the Retirement Business being obtained by the plaintiff in exchange for the payment of the Price. Nevertheless, however attractive exercise of the Option may have been, the plaintiff would still require finance and, in this respect, the plaintiff makes reference to a Bank of Queensland facility, possible finance from Curry Securities Pty Ltd and other means; including a distribution from the ERUT unitholding of Thomas Camp.

190 In relation to the Bank of Queensland facility the evidence is that from at least October 2019 Thomas Camp engaged with Heidi Samoilenko of the Bank of Queensland to obtain funding for the purchase of the Village.[470] The emails reveal, it is said, that the Bank not only was interested in lending on the purchase but also had a familiarity with lending on for such projects (referencing the DMF income as part of its request for information).[471] In June 2020, Heidi Samoilenko advised Thomas Camp that the Bank of Queensland would lend up to 60% LVR against the value of the village and may be able to apply a higher LVR of up to 80% on empty stock (on the basis that once an empty villa is filled, the full incoming resident loan is used to pay down the debt).[472] There was $3.8m of empty stock.[473] Plainly, as conceded by the plaintiff, this is not a formal offer of finance, but it was submitted that the Court ought to conclude, particularly in the absence of any evidence to displace it, that the Bank would, after valuation, have proceeded as it had said it would - noting that, as the plaintiff observed, this was not a passing comment by the bank officer. Thomas Camp gave evidence of having actively engaged with Bank of Queensland well prior to the likely date the plaintiff would have been required to complete a purchase.[474]

191 The Bank never proceeded to valuation as the plaintiff did not have the opportunity to exercise the Option (and the Disclosure Material was not provided[475]). In my view, it is a reasonable inference, particularly in the absence of any contrary evidence or any cross‑examination which materially challenged the following facts, that the valuation would have been consistent with the defendant obtaining 'a market valuation received from a qualified independent valuer during 2017' which valued the Village at $15 million;[476] the defendant obtaining an indicative valuation from the same valuer, which gave Michael Sadler the confidence to report to unitholders at the 2018 ERUT AGM an indicative value of $18 million, which equated to $4,500 per unit (it follows that there are 4,000 units in the ERUT);[477] that on 8 November 2019, the defendant wrote to the ERUT unitholders confirming that the valuation of $3,750 per unit (being a total valuation of $15 million) currently represents a fair market valuation for the units; and that the Board of the defendant reported to unitholders that it considered the Village was 'worth $16m or $18m' in December 2019.[478]

192 It follows that a facility of 60% on a valuation of at least $15 million would provide the plaintiff with the full $9 million purchase price. This, as the plaintiff, observes is before even considering the amount which might be borrowed against the value of the stock.

193 The plaintiff contends that it has demonstrated that Thomas Camp has a longstanding relationship with Curry Securities Pty Ltd and Ron Curry, and that Curry Securities Pty Ltd has been prepared over several years to lend multiple millions of dollars on development projects associated with Thomas Camp,[479] including regional retirement villages.[480] Thomas Camp gave evidence that he had spoken with Curry Securities Pty Ltd in respect of funding the purchase price for Eastwood Retirement,[481] and was keeping Ron Curry up to date regarding the plaintiff's progress with resolving the purchase of the Village with the defendant.[482] Further, his evidence was that these discussions did not progress to formal documentation because there was no contract of sale.[483]

194 The plaintiff submits that given Thomas Camp's longstanding history of lending, the documentary evidence that this lender, Curry Securities Pty Ltd, has advanced substantial amounts of money, including for regional retirement developments, for projects associated with Thomas Camp, and the fact that there was engagement in respect of this particular purchase until the sale fell over that the Court should infer that, on the balance of probabilities, the plaintiff would have been able to source funds from Curry Securities Pty Ltd for the purchase. Moreover, the plaintiff contends that merely because the loans with Curry Securities Pty Ltd are generally of a short term nature,[484] this is not relevant because once the Court is satisfied that the plaintiff would have completed the Sale Agreement, causation is proved. In any case, the plaintiff submits, it had a variety of options open to it after settlement of the Sale Agreement regarding refinancing the debt required to complete the settlement.

195 Additionally, Thomas Camp gave evidence that he controlled 25% of the unitholding in ERUT.[485] This is uncontested evidence. It follows, that upon repayment by the plaintiff of the $9 million Purchase Price, Thomas Camp's interests were set to receive 25% thereof, given that the only assets of the ERUT would then be cash, distribution within a short time would be likely, after discharge of the ER Properties Loan and the Secondary Loans. Additionally, Thomas Camp gave evidence that he had his 'own funds and debt facilities'.[486] The plaintiff concedes that this evidence will necessarily be given limited weight, but says it is unchallenged.

196 The defendant contends that the evidence does not permit the Court to conclude on the balance of probabilities that the plaintiff would have obtained the necessary funds to complete the purchase, even assuming that the Option Price was in the order of $9 million, a sum that the plaintiff would have needed to have within 90 days of signing of the Sale Agreement (which itself would have been due within seven days of the Exercise Date).[487] This is particularly so, the defendant submits, in light of the evidence that the defendant had been unable to obtain finance with respect to the Village over the previous decade[488] including for amounts in the order of $1.2 million as recently as May 2020 which is less than one‑eighth of the amount that the plaintiff would have needed to borrow;[489] the substantial amount of interest that the defendant had to pay to service a significantly lower sum than $9 million by way of a loan at 10% per annum; the paucity of evidence said to have been adduced by the plaintiff on the point comprising two email chains with Bank of Queensland[490] which rise no higher than the Bank inviting Thomas Camp to provide a range of information for an 'indicative' loan application which would need to be assessed by the Bank's internal process, including by credit, and that Thomas Camp did not provide the requested information to enable it to determine whether it had the lending appetite to lend any money;[491] and a bundle of high‑interest short term, 12 months or less, loan agreements from a company which term would not have assisted the plaintiff which needed a long‑term loan;[492] there being no evidence of the Bank's loan assessment process and criteria, including by credit, in respect of retirement villages or otherwise; there being no evidence of any other bank's lending assessment process and criteria, including by credit, in respect of retirement villages or otherwise; there being no evidence of the state of the lending market at the relevant time, which was shortly after the onset of the COVID‑19 pandemic; and there being no evidence that the plaintiff or Thomas Camp held any valuable assets as at July 2020; prior association of Thomas Camp with a failed retirement village project in Tarneit, which might present a red flag to potential financiers;[493] and admission from Thomas Camp that he was in fact 'not ready to complete the purchase of the retirement village and the land in July of 2020.'[494]

197 The defendant's submissions by way of response to the plaintiff's submissions in relation to the latter's capacity to complete purchase of the Village raise issues which, in my view, are symptomatic of the position the plaintiff found itself in; namely, unable to exercise the Option and, consequently, unable to take a firm and readily documented proposal to Bank of Queensland or any other potential lenders. In relation to bank lending, I do not find it persuasive that the defendant had incurred difficulty in obtaining further finance from NAB or another bank or banks, both because the evidence is very general and unclear why that was the case save for the reference to a particular bank or banks not being disposed to lend on retirement villages as security. It does not follow that this reluctance applies to all banks and, on the evidence, Bank of Queensland was prepared to lend for the purchase of such businesses and freehold. Indeed, as a matter of obvious logic, it is clear that all banks do not have a 'no lending' policy with respect to retirement villages or it would not be possible to develop finance for these businesses at all. As to the other claimed 'deficiencies' with respect to the plaintiff's evidence they are, in my view, well answered by the matters and reasons advanced in support of its position by the plaintiff and, again, are due to difficulties that the plaintiff found itself in with respect to the circumstance of providing the range of matters which the defendant says should have been put in evidence having regard to its position in being unable to exercise the Option.

198 In relation to evidentiary matters, mention should be made of a Jones v Dunkel[495] point raised against the plaintiff with respect to the state of its evidence on financial capacity by the defendant. Briefly, the defendant's position put in this respect is that in the absence of the more detailed and comprehensive evidence which it says should have been provided in support of the plaintiff's claim that it had the financial capacity to complete the purchase resulting from the exercise of the Option, an inference should be drawn against it on this issue. However, in my view, there is no point in this respect because as I made clear in Tenth Vandy Pty Ltd v Natwest Markets Australia Pty Ltd,[496] no inference is to be drawn against the defendant in circumstances where a submission was made that the plaintiff had not made out a case for the defendant to answer:

Applying the reasoning in Jones v Dunkel, I am of the opinion that no inference can be drawn in the present circumstances unless and until the party bearing the burden of proof of its case (the plaintiff) has by the evidence it relies upon established a case for the defendant to answer. If and when the plaintiff were to establish its case, then the defendant may, if it did not call evidence to rebut the case, be left in the position of arguing its case against the plaintiff's unchallenged or uncontradicted evidence. This may of itself, or with the aid of inferences according to the rule in Jones v Dunkel, establish the plaintiff's case. However, I am of the opinion that the rule in Jones v Dunkel may not be resorted to by a party, in effect, to fill in the facts of its case before the threshold for the operation of the rule is reached ...

In this instance the defendant has not, for the preceding reasons, made out a case for the plaintiff to answer.

199 For the preceding reasons I am satisfied that causation is established by the plaintiff in the present circumstances.

200 The defendant submits that the appropriate assessment of damages in the present case is an assessment by way of loss of opportunity damages. In this respect reference is made to Masters Home Improvement Pty Ltd v North East Solution Pty Ltd[497] where the Court of Appeal said:[498]

In considering damages for loss of a commercial opportunity, the court asks first whether there was a commercial opportunity of some value (which is more than speculative or negligible); that is, was there a chance? Secondly, the court looks to whether that opportunity has been lost; that is, would the plaintiff have pursued the opportunity? The third step is to consider what amount should be awarded having regard to the prospects of success if the opportunity had been pursued. In taking this third step, the courts' task is to apply a discount which reflects the prospects of success. This is sometimes referred to as a Sellars discount.

And as to the standard of proof required, reference is made to the following statement in ACN 115 918 959 Pty Ltd v Hoeys Lawyers Pty Ltd:[499]

It is necessary first to identify the valuable opportunity that the plaintiff has lost by reason of the defendant's breach. Invariably this will require the plaintiff to prove on the balance of probabilities that, as a result of the defendant's breach, the plaintiff did not or could not take that opportunity and otherwise would have taken it. Thus, the issue of causation will turn on what the plaintiff would have done. However, if this is established, and the court has proceeded to the stage of assessing the value of the lost opportunity, the position is different. At that stage, the mere fact that the assessment may turn to some degree on the hypothetical conduct of the plaintiff in a specific respect does not necessarily entail that the plaintiff must prove on the balance of probabilities that the plaintiff would have so acted.

In Hoeys, the Court, in applying the above principles, ultimately applied a discount for the contingencies that the parties may not in fact have proceeded with the sale as 'despite a willingness in principle to proceed, some event would have occurred that resulted in Marina Cove not in fact executing Contracts of Sale' (40% prospect).[500] Blue AJ then applied a further discount reflecting the 60% prospect that finance would not have been obtained, stating as follows:[501]

[1305] The defendants observe that Pearl Hill did not call anyone from Banner or any of EMS's private investors. The evidence given by Mr Triantos is not inadmissible hearsay because it comprises evidence of communications to EMS of the prospective lenders' (non‑legally binding) agreement to participate in the lending transaction. It is unlikely that they could have given any useful evidence given the passage of 10 years since the events in question. Evidence from EMS' lenders confirming their (non‑legally binding) agreement to participate in the lending transaction would have given me additional confidence in assessing the degree of probability of Pearl Hill obtaining finance. However, its absence is not fatal to Pearl Hill's case.

[1306] On the one hand, based on Mr Triantos' evidence, there was a very high prospect that Banner or EMS' private investors would have provided the requisite finance to Pearl Hill. On the other hand, given the hypothetical nature of the question and the difficulty of obtaining conclusive evidence, there are various contingencies that need to be taken into account in determining the prospect of such finance being provided. EMS' lenders were not legally committed to provide the finance and might have decided not to proceed on being provided with further details. There are risks that a finance transaction would not have proceeded for various other reasons.

...

[1325] I assess the prospects of Pearl Hill obtaining finance via EMS as being somewhat higher than its prospects of obtaining finance from Westpac. However, it is necessary to assess the prospects of obtaining finance from either source because either source would have been sufficient. Taking into account the contingencies to which the provision of finance was still subject and the uncertainties associated with the provision of finance, I assess the relevant prospects of obtaining finance at 60%.

Applying these discounts, Blue AJ then assessed the plaintiff's net loss as follows:[502]

[1326] The gross loss is $4,990,000. I apply the successive contingencies of the Commonwealth Bank and Marina Cove agreeing to proceed (40%) and Pearl Hill obtaining the necessary finance (60%) to give a net loss of $1,197,600.

201 As submitted by the defendant, the Sellars v Adelaide Petroleum NL[503] principles have been applied in an option deed context, with reference to the Queensland Court of Appeal decision in Principal Properties Pty Ltd v Brisbane Broncos Leagues Club Ltd.[504] In that case, the appellant lost the opportunity to acquire and develop certain land pursuant to an option due to the respondent's repudiation of the deed. The Court of Appeal ultimately applied a series of discounts to reflect the uncertainties which would have arisen had the option been exercised, resulting in a total discount of 93.75% to the damages claim. The Court of Appeal found that the prospect of the appellant:

(1) obtaining a compliant development permit was 50%. The permit needed to allow for at least 149 parking spaces, and the appellant's and respondent's experts gave opposing views in this regard. It was also unknown whether the Council would have required a buffer zone for the parking spaces;[505]

(2) being able to acquire the land using personal finances was 50%. The Court considered that the appellant's evidence established a 'reasonable prospect' that his personal relationships would have secured him borrowings for the purchase price of $1 million;[506]

(3) achieving the required pre-sales was 60%. In order to obtain development finance, at least 70% of the units needed to be pre‑sold. The Court agreed with the trial judge's view that there was a risk this would not occur, especially given that the expert valuation of the units showed that the price of the pre‑sales would have incurred a loss rather than profit, and that the appellant was unlikely to sell units at a loss;

(4) not obtaining finance was 30%, based on the evidence led at trial;[507] and

(5) making an overall loss on the project was a possibility, warranting a further allowance.

On this basis the Court of Appeal found as follows:[508]

[112] Consequently, this Court should assess the worth of that opportunity. In that assessment, the Court must assess, at best it can, the extent to which the potential profit (on my assessment, $4,000,000), should be discounted to allow for the various possibilities that could have prevented that profit from being derived. The trial judge referred to several contingencies: the 50 per cent chance that a complying development permit would not be obtained, the 50 per cent chance that the land would not have been acquired, and the 60 per cent chance that the required pre‑sales would not have been reached at Mr Clune's prices. His Honour said that that would represented "an overall possibility of 10 per cent of that amount (the adjusted profit) before discounting for any other risks including the financing and sales risks." The appellant's argument criticises that approach. But, in my view, had it been applied, it would have been logical.

[113] The prospects of achieving a profit of the order of $4,000,000 were less than 10 per cent, on his Honour's findings. The "financing ... risks" to which his Honour referred was the 30 per cent chance that development finance would not be obtained. Further, some allowance must be made for the prospect, although relatively small, that this project would have resulted in an overall loss. A project with, say, a 10 per cent chance of a profit of $4,000,000, but no risk of a substantial loss, would be a more valuable opportunity than the present one.

[114] In my conclusion, the appellant should be awarded an amount of $250,000 as damages. There should be interest on that sum, calculated from 30 September 2013 which was the date of termination of the contract, to the date of this judgment.

202 In the present case the plaintiff opened its case, as the defendant observes, as a loss of opportunity case, that is: 'it says that it suffered the loss of the opportunity to exercise [the] option'.[509] On that basis, the defendant submits that if the plaintiff were to succeed on establishing liability, and assuming causation is limited to the exercise of the Option, the Court must start by valuing the lost opportunity, then apply Sellars discounts to account for the vicissitudes and contingences that the plaintiff would have secured the funds to complete the purchase, having regard, as the defendant puts the position, to the lack of probative evidence before the Court on these issues. However, for the preceding reasons I do not accept this proposition as to the evidence on this issue but, nevertheless, accept that damages should be assessed on a loss of opportunity basis having regard to the nature of this claim and the authorities to which reference has been made. This assessment process must have regard to both the option price and the terms of the Option Deed and also the market value of the property.

203 As the plaintiff observes, it is trite that a difficulty in assessing damages is no bar to relief and a court will do the best it can with the evidence before it.[510] More particularly, with respect to land, the approach, as indicated in McGregor on Damages, is that:[511]

...with a buyer of land it is now becoming recognized that he is not required, on the seller's default by failure to complete, to buy other land in replacement...until such time as he has received his damages if inflationary trends have made it too difficult for him to finance a repurchase. Here again, there is justification for awarding damages based upon market value at a point in time after the date of breach and even up to the date of judgment.

204 It follows that the Court has flexibility in determining the date for determining the value of a property when assessing damages. In a case where a party seeks damages as an alternative to specific performance of a contract for the sale of land, and elects not to proceed to seek specific performance, the Court may readily choose the date at which that election was made as the date at which damages are to be assessed for the breach of contract.[512] In the present case the date of that election was 19 September 2023.[513]

205 The gravamen of the defendant's submissions in relation to the option price is that the 'Price' cannot be ascertained on the evidence before the Court.

206 More particularly, the defendant observes that the plaintiff opened its case with the proposition that 'the price that was required to be paid was in the order of $9 million'.[514] However, it says that the plaintiff does not provide any explanation for this figure in its pleadings or written opening though in oral opening, it submitted that 'price equals 20 percent of the refundable component of the in-going contributions .... so it means 20 percent of the 80 percent in simple terms.'[515] The defendant says that, nevertheless, this is not what the Option Deed stipulates; as it submits in more detail, which is now considered.

207 Turning to the provisions of the Option Deed itself, the defendant makes reference to the Option price which is to be ascertained by undertaking the calculation prescribed by the definition in clause 1.8 of that Deed, namely:

"Price" means an amount equal to 20% of the total amount of refundable in-going contributions paid by or on behalf of residents of the Retirement Village up to and including the Completion Date, less any amount which has before that date been refunded to residents, such price to be inclusive of GST.

The expressions 'refundable in-going contribution' and 'in-going contribution' have their particular statutory meanings under the provisions of s 3 of the Retirement Villages Act 1986 (Vic) as follows:

"in-going contribution" means the payment made -

(a) by way of donation because of an understanding between a person and an owner or manager to the effect that, on the making of the donation, the person will be entitled to become a resident of the village; or

(b) in consideration of acquiring shares in a company, if those shares confer on the holder the right to become a resident of a retirement village; or

(c) in consideration of the right to become a resident -

whether paid by or on behalf of the person who wishes to become a resident and whether in a lump sum or by instalments but does not include rent;

...

"refundable in-going contribution" means so much of an in-going contribution as is under a residence contract or this Act -

(a) refundable to the resident if the resident leaves the retirement village; or

(b) payable to the resident's estate if the resident dies ...

It follows from these definitions that an 'in-going contribution' is the sum of money which a resident pays when a person becomes a resident of a retirement village and a 'refundable in-going contribution' is the sum of money they receive back when they leave the retirement village.

208 The defendant contends that when regard is had to these provisions the effect is, as indicated at the outset, that the Option 'Price' is not ascertainable. More particularly, it is said that a refundable in-going contribution cannot be quantified until after a resident has left the Village. This is because, as the Magree Report confirms, departing residents received a share of 'any capital gain (or loss) realised' and 'a vacating resident is generally responsible for refurbishment costs and selling expenses'.[516] Dan Magree explains that 20% of the original contribution plus an administration fee of 2.5% is retained by the defendant, and states that: 'The amount of the departure fee depends on the length of stay in the village and capital appreciation of the unit (as the resident receives 50% of the capital gain of the ILU [Independent Living Unit]). The departing resident also pays a 3% refurbishment fee which is held in the long‑term sinking fund.'[517] The costs are illustrated in the 'Outgoing Resident's Deed',[518] which confirms that the 'Refunded Loan Amount' takes into account an Administration Fee, Long Term Maintenance Fee, Deferred Management Fee, refurbishment costs, monies owing, an Appreciation Payment, valuation costs and payments on account of interest accrued on an unpaid residential care accommodation bond. Thus the defendant submits that if one were, for the sake of argument, to read the reference to 'refundable in-going contributions' in the definition of 'Price' as meaning just 'in-going contributions', then such amounts would be readily ascertainable at any given point in time but otherwise reliance upon 'refundable in-going contributions' as an essential integer in the definition of 'Price' means that it is not ascertainable. Additionally, the defendant submits that the fact that the total quantum of 'refundable outgoing contributions' is unascertainable at any given point further supports the defendant's, so‑called, Incompleteness Defence. However, I have in the preceding reasons found that there is no basis in this defence and so the defendant's submissions with respect to it do not raise any relevant matters in the present context.[519]

209 The plaintiff, on the other hand, submits that the use of the expression 'refundable in-going contributions' in the definition of 'Price' instead of merely using 'in-going contributions' does not create the necessary absurdity which would empower the Court to rewrite the bargain struck in the Option Deed or, more generally, to render calculation of 'Price' impossible hence its determination 'unascertainable'. More particularly, the plaintiff submits that the distinction between the two expressions, 'refundable in-going contribution' and 'refundable out-going contribution', as used in the Act,[520] is clear and that the distinction is preserved in the choice of the phrase 'refundable in‑going contribution' in the definition of 'Price' in the Option Deed. As to the contention that the use of the phrase 'refundable in‑going contribution' creates a commercially absurd result in the performance of the Option Deed, it is said by the plaintiff to be unsustainable, applying the principles of contractual interpretation, to which reference is made in the reasons which follow. Rather, it is said that the effect of the definition is that a lower 'Price' is provided for than would be calculated if the alternative phrase 'in‑going contribution' had been used. Finally, it is noted that years later, Tony Vescio misread or misapplied the definition of 'Price' when writing his email on 3 December 2020.[521] In any event, the plaintiff submits, and in my view correctly, that this is irrelevant, noting in any event that it was never put to Tony Vescio.

210 As indicated, in relation to this particular issue, the plaintiff made submissions in relation to the principles of contractual interpretation in respect of the potential for rectification by construction; principles which, as it says, are well settled.[522] More particularly, in terms of these principles, a court may not depart from the ordinary meaning of the words used by the parties merely because it regards the result as inconvenient or unjust.[523] A court is not justified in disregarding unambiguous language simply because the contract would have a more commercial and business‑like operation if an interpretation different to that dictated by the language were to be adopted.[524] Thus a court is not permitted to engage in a judicial 're‑writing' of the contract to overcome the language that the parties chose to record their agreement at the time so as to achieve an outcome that one party considers to be more convenient and 'fair'.[525] A court must give effect to the language chosen by the parties unless to do so would give the contract an absurd operation.[526] In summary, a court's ability to give commercial agreements a commercial and business‑like interpretation is constrained by the language used by the parties considered in the context of the contract as a whole and the background circumstances known to both parties.

211 In the event of the language used by the parties creating an absurdity a court may intervene in limited circumstances. The ability of a court to rectify a contract on account of absurdity, known as 'rectification by construction', was summarised by the Court of Appeal in Perpetual Limited v Myer Pty Ltd,[527] in a detailed analysis of the then existing authorities.[528] The Court of Appeal in Perpetual agreed with the trial judge's caution before engaging in rectification by construction:[529]

[126] The trial judge ... expressed the caution required before a court engages in rectification by construction in the following terms:

The courts are, of course, cautious to warn of the limits of this type of reasoning, lest it be considered a means - by way of a loose definition of 'absurdity' - to avoid contracts that a party might have come to regard as commercially onerous or unreasonable. Accordingly:

(a) '[a] court is not justified in disregarding unambiguous language simply because the contract would have a more commercial and businesslike operation if an interpretation different to that dictated by the language were adopted';

(b) '[i]f the words used are unambiguous the court must give effect to them, notwithstanding that the result may appear capricious or unreasonable, and notwithstanding that it may be guessed or suspected that the parties intended something different. The court has no power to remake or amend a contract for the purpose of avoiding a result which is considered to be inconvenient or unjust';

(c) '[t]he courts have no mandate to rewrite agreements, so as to depart from the language used by the parties, merely to give a provision an operation which, as it appears to the court, might make more commercial sense';

(d) the 'test of absurdity is not easily satisfied'; and

(e) the principle requires a very strong level of conviction that a mistake has been made.

Recently, in Apple & Pear Australia Ltd v Pink Lady America LLC, the Victorian Court of Appeal said:

[W]hile a court should construe a commercial contract to avoid absurdity it is not part of its role to construe an agreement that otherwise has an explicable commercial result in a manner that increases the commercial benefits to one party to the agreement.

212 In this respect, the plaintiff emphasises that the defendant has not pleaded that the written definition of 'Price' requires rectification, or that the Option Deed does not reflect the bargain struck between the parties to it. Additionally, it is observed that the defendant has not filed any counterclaim enlivening the Court's jurisdiction to consider that issue. Further, it is submitted that no evidence has been adduced to support such a contention and apart from the written terms of the Option Deed, no evidence has been adduced of the intention of the original parties to the Option Deed (being Lifestyle Retirement Pty Ltd and Eastwood) at all in respect of this issue.

213 In relation to this issue, I accept the plaintiff's submissions for the reasons advanced in support of those submissions. In so doing, I do not discount some of the difficulties highlighted by the defendant with respect to the calculation of 'refundable in‑going contributions' for the purpose of determining the 'Price'. However, in my view, it follows from the provisions of the Option Deed, particularly clause 3.2, that once the 'Exercise Date' is fixed as a result of the plaintiff delivering a notice pursuant to clause 3.2[530] or, in the present circumstances, the date upon which breach of the provisions of the Option Deed occurred, the accounts of the defendant would enable determination of the value of the 'refundable in‑going contributions' at this time.

214 The plaintiff contends that the purchase of the Retirement Business pursuant to the Option Deed constituted a 'supply of a going concern' on which GST was payable. The effect of this is said to be, noting that the 'Price' is inclusive of GST, that the plaintiff would have received an input tax credit for the GST component of the Price. On this basis the plaintiff contends that the 'Price' would have been $9,053,343.24 so that the net effect would be that the plaintiff had to pay $8,230,312.04 plus GST and it could expect a rebate for the GST of $823,031.20. Thus it is said that in the plaintiff's hands, the Retirement Business has a value of $19,200,000. The plaintiff says further that it is not entitled to damages for an amount by reference to the GST which may be payable by a purchaser on the current value.

215 In support of this position, the plaintiff makes reference to the foundational provisions upon which GST is payable found in Parts 2‑1 and 2‑2 of A New Tax System (Goods and Services Tax) Act 1999 (Cth) ("the GST Act"). More particularly, it is submitted that whether or not the sale of a going concern is GST‑free is dependent upon satisfaction of s 38‑325 of the GST Act, which provides (and provided at all relevant times) that:

(1) The supply of a going concern is GST-free if:

(a) The supply is for consideration; and

(b) The recipient is registered or required to be registered; and

(c) The supplier and the recipient have agreed in writing that the supply is of a going concern.

(2) A supply of a going concern is a supply under an arrangement under which:

(a) The supplier supplies to the recipient all of the things that are necessary for the continued operation of an enterprise; and

(b) The supplier carries on, or will carry on, the enterprise until the day of the supply (whether or not as a part of a larger enterprise carried on by the supplier).

Reference was also made to the decision of the Administrative Appeals Tribunal in Brookdale Investments Pty Ltd v Commissioner of Taxation[531] where the Tribunal stated:

In Midford v Deputy Federal Commissioner of Taxation [2005] AATA 623 the Tribunal (Member Barton) said, at [7], that the supply of a going concern is not ipso facto GST‑free, but only if the supplier and recipient have wittingly agreed, in writing, that the supply is a GST‑free supply of a going concern in the manner set out in s 38-325(1)(c) of the GST Act.

216 Turning to the particular aspects of this matter the plaintiff submits that the hypothetical sale from the defendant to it of the 'Retirement Business'[532] would have been a 'supply of a going concern' pursuant to s 38‑325(2) as clearly this business was going to continue to be operated by the defendant until transferred to the plaintiff. However, it submits that this hypothetical sale would not be GST‑free as it could not satisfy s 38‑325(1) of the GST Act because:

(1) As per the observations in Brookdale, a supply of a going concern is not GST‑free per se, the requirements of s 38-325(1) of the GST Act must be satisfied; and

(2) There was no agreement in writing that the transaction would be GST‑free as required by s 38‑325(1)(c) (as per the statement in Brookdale) - to the contrary, the Option Deed expressly stated that the Price is inclusive of GST.

The consequence of such a finding, as indicated previously, is that the plaintiff would have had to pay $9,053,343.24 but received a GST input tax credit for $823,031.20 leaving an actual cost of $8,230,312.04. In this context, the plaintiff observes that there is no evidence as to whether it was registered for GST, however it is submitted that the Court can readily infer, based on the fact being registered would entitle the plaintiff to a GST rebate of $823,031.20 but if it were not already registered for GST it would have registered itself so as to be entitled to the rebate. I accept that this follows as a matter of commercial reality and the inference should be made also noting the plaintiff's submission that the plaintiff was entitled to be registered for GST pursuant to s 23‑10(2) and 9‑20(1)(a) of the GST Act.

217 The defendant prefaces its submissions in this context on the basis that the plaintiff appears to adopt a GST‑inclusive valuation figure, without establishing any basis to do so. In light of the plaintiff's submissions to which reference has been made I do not find any force in this criticism as, in my view, the plaintiff has established a basis to do so. Moreover, the Magree Report did not value the village having regard to GST as Dan Magree expressly disavowed holding any expertise on the issue, stating: 'In relation to any potential GST liability, we advise that we are not taxation or legal experts and we recommend competent and qualified advice be obtained'.[533] In any event, the defendant's criticisms and observations with respect to the plaintiff's submissions in this respect appear to me to be addressed, as indicated previously in these reasons. Also, regard should be had to the plaintiff's concession that the Court should assess damages using Dan Magree's valuation on an exclusive GST basis of $19,200,000, which is a figure also put forward as the appropriate sum by the defendant.[534]

218 For the preceding reasons I accept that the plaintiff is entitled to an input tax credit with respect to GST. Moreover, if the plaintiff's entitlement to an input tax credit were not accepted, its loss would be the difference between the Price of $9,053,343.24 and the current value of $19,200,000, and it would reduce the loss of $10,146,656.76. However, accepting such entitlement, it follows that, on the basis of the Magree Report's valuation on an exclusive GST basis, loss would amount to $10,969,687.96.[535]

219 The plaintiff seeks to adopt the valuation contained in the Magree Report, being a valuation as at 3 October 2022, of $19,200,000 plus GST.[536] As to the valuation date, the defendant makes reference to the plaintiff's opening where the valuation date of 'February 2022' was adopted relying upon the Magree Report which, as it is observed, has a valuation date of 3 October 2022. In any event, the defendant contends that the normal date of assessment would be mid‑2020, being the date on which, in its hypothetical counterfactual, the plaintiff would have acquired the Village. The defendant criticises the plaintiff on the basis that it seeks to use the valuation date more than two years later and, consequently, would need to establish this date as a departure from the normal position[537] and account for the significant amount of interest that it would have needed to have been paying for the previous two years, but has done neither. Neither, it is said, did the plaintiff lead any expert evidence on the valuation of the Village as at the Option Expiry Date. The closest thing to an independent valuation contemporaneous with the Expiry Date in evidence is said to be the indicative valuation of '$12.5mill- $13mill' from Jones Lang LaSelle on 26 May 2020, upon which Thomas Camp relied in his email to the Bank of Queensland on 25 June 2020.[538]

220 The plaintiff, on the other hand, submits that the most recent evidence as to the market value of the Retirement Business is that contained in the Magree Report. Moreover, it observed that Dan Magree was not cross-examined on his opinion as set out in this Report. As to the appropriate date for the valuation, the defendant's criticism of the use of a date more than two years after the Expiry Date is, in my view, addressed by the plaintiff's contention that where, as in the present case, it seeks damages as an alternative to specific performance, the date of the election of that course is the critical date, rather than the Option Expiry Date. On the basis the valuation date as stated in the Magree Report is only approximately 11 months prior to that election date and, having regard to the authorities requiring the Court to do the best it can with the evidence before it in calculating damages, the Magree Report valuation is appropriately accepted. Further, in relation to the Magree Report it is the position that Dan Magree, the author of the report, was not cross-examined on his opinion and, additionally, the Court does not have the benefit of any evidence as to how the valuation of the Village may have changed - by way of increase or decrease - between 3 October 2022 and the election date. Hence, the Court must do the best it can, as indicated.

221 For the preceding reasons I am of the opinion that the calculation of damages is properly set out in Annexure B to the Plaintiff's Supplementary Closing Submissions[539] as follows:

Annexure B

Damages arising from the difference between Purchase Price and the value of the Retirement Business

1. Option Price: $9,053,343.24 (incl. GST) (that is $8,230,312.04 excluding GST)

"Price" means an amount equal to 20% of the total amount of refundable ingoing contributions paid by or on behalf of residents of the Retirement Village up to and including the Completion Date, less any amount which has before that date been refunded to residents, such price to be inclusive of GST.

Eastwood maintained Resident Loans ledgers wherein:

(a) upon a resident's entry to the village, the loan ledger is debited;

(b) upon a resident's exit from the village, the loan ledger is credited (with 80% being refunded to the outgoing resident and the 20% DMF being attributed to Eastwood).

Reduce to 80%, which is the refundable component of the in‑going contributions, to the outgoing residents

1. Value of Retirement Business: $19,200,000 (excluding GST) $21,120,000 (incl GST)[543]
2. Damages on purchase price: $10,969,687.96 $12,066,656.76 (incl GST)[544]

In terms of the Sellars discount it is, in my view, reasonable to apply a 10% Sellars discount[545] to reflect such risk as may arise in relation to the plaintiff obtaining finance to complete the purchase of the Village having exercised the Option. As indicated previously, I accept that the plaintiff has provided evidence as to its ability to secure the funds to complete the purchase but, nevertheless, it could not sensibly be taken as 100% assurance that this finance might ultimately be obtained. Nevertheless, I am of the opinion that the evidence that is available to the Court together with the commercial incentive to exercise the Option having regard to the value of the Village and the Option Price, are factors which would, in my view, also weigh in the mind of a financier.

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

223 I reserve the question of costs and will hear the parties on this issue as required.

[1] Amended Defence at [13(b)] and [23], CB45-CB47.

[2] Amended Defence at [23], CB46-CB47.

[3] Amended Defence at [25]-[26], CB47-CB48.

[4] Amended Defence at [25]-[26], CB47-CB48.

[15] Defendant's Outline of Opening Submissions (4 October 2023), [45].

[17] CB131 ("Second Sadler Statement").

[19] CB150 ("First Johnston Statement").

[20] CB1686 ("Second Johnston Statement").

[22] T105.25-105.31 (Defendant's opening).

[23] First Camp Statement at [7], CB51-52.

[24] This is the defined term used in the Retirement Villages Act 1986 (Vic), which in various respects governs the rights of a resident and an owner or manager of a retirement village such as the Village.

[25] Second Vescio Statement at [18], CB128.

[26] This is also a defined term used in the Retirement Villages Act 1986 (Vic).

[27] Minutes of Eastwood board meeting on 10 December 2019, CB821; Minutes of ERUT AGM on 10 December 2019, CB1231.

[28] Builder's Report dated 26 March 2019, CB1028-1029.

[29] See Builder's Report dated 5 March 2019, CB1026-1027; Builder's Report dated 26 March 2019 , CB1028-1029; Builder's Report dated 23 July 2019, CB1030-1031; Builder's Report dated 27 August 2019, CB1058-1059; Builder's Report dated 11 September 2019, CB1060-1061; Builder's Report dated 2 October 2019, CB1062-1064; Builder's Report dated 12 November 2019, CB1071-1073; Builder's Report dated 26 November 2019, CB1093-1095.

[30] See Builder's Report dated 23 July 2019, CB1030-1031, which still recorded an instruction to build all remaining villas to completion; Builder's Report dated 27 August 201, CB1058-1059, by which that instruction had been amended so that Villas 51, 52, 60 and 61 were to proceed to build to lockup stage only.

[31] First Camp Statement at [24], CB57; see also Builder's Report dated 12 November 2019, CB1071-1073.

[32] Builder's Report dated 3 February 2020, CB1110-1112.

[33] First Camp Statement at [24], CB57.

[34] First Sadler Statement at [20], CB67.

[35] First Sadler Statement at [20], CB67.

[37] First Sadler Statement at [21], CB67.

[38] CB577; T33.23-28 (Plaintiff's opening).

[39] CB550; T483.25-484.2 (Johnston XXN).

[42] First Johnston Statement at [12], CB152.

[43] First Johnston Statement at [10]-[11], CB152.

[49] First Sadler Statement at [67], CB82; T379.2-10 (Sadler XXN); CB699.

[51] CB614; T86.21-87.9 (Plaintiff's opening).

[52] First Sadler Statement at [113], CB99; CB793-809.

[64] Defendant's Outline of Closing Submissions (18 October 2023), [5.22]-[5.24]; and see further below [146]-[148].

[65] First Sadler Statement at [125], CB105-106.

[68] Second Vescio Statement at [10], CB125-126.

[72] Second Johnston Statement at [17], CB1690; T491.14-491.15.

[73] Supplementary Johnston statement at [17].

[79] Second Camp Statement at [30], CB117; First Sadler Statement at [21(b)], CB67.

[80] Second Camp Statement at [30], CB117.

[81] Second Camp Statement at [30], CB117; CB788; CB810.

[82] T370.22-370.29; CB633; T372.9-372.14; CB636; CB641.

[84] First Sadler Statement at [63], CB81.

[85] First Johnston Statement at [25], CB156.

[86] First Sadler Statement at [15], CB65.

[87] First Camp Statement at [5]-[6], CB51; CB245.

[88] First Vescio Statement at [1], CB121.

[89] First Camp Statement at [10]-[11], CB52; CB682-683.

[90] SOC at [14] and [16]; CB891; CB925; Admitted in the Amended Defence at [14] and [16].

[96] Amended Defence at [25(c)(iii)].

[98] [1954] HCA 72; (1954) 91 CLR 353.

[99] [1954] HCA 72; (1954) 91 CLR 353 at 360.

[100] [1929] HCA 34; (1929) 43 CLR 310.

[101] The Edge Development Group Pty Ltd v Jack Road Investments Pty Ltd [2019] VSCA 91 at [22].

[102] [2018] NSWSC 1330 at [32]-[48].

[103] [2018] NSWSC 1330 at [35] (citations omitted).

[104] Mount Bruce Mining v Wright Prospecting Pty Ltd [2015] HCA 37; (2015) 256 CLR 104 ("Mount Bruce Mining") at 116, [47].

[105] Gu v Hong [2018] NSWSC 1330, [40].

[106] Mount Bruce Mining at 116, [48].

[107] See generally Mount Bruce Mining at 117, [49].

[108] Gu v Hong [2018] NSWSC 1330, [44].

[109] Gu v Hong [2018] NSWSC 1330, [46].

[110] Gu v Hong [2018] NSWSC 1330, [48].

[111] Toll (FCGT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165, 181 (at [46]).

[112] Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61; (2001) 53 NSWLR 153 at [25] (per Heydon JA).

[113] Australian & New Zealand Banking Group Ltd v Frost Holdings Pty Ltd [1989] VR 695 at 700 (per Kaye J citing Thorby v Goldberg [1964] HCA 41; (1964) 112 CLR 597 at 607).

[114] Seddon & Bigwood, Cheshire & Fifoot Law of Contract (LexisNexis Butterworths 11th Australian ed. 2017), [6.2].

[115] Australian & New Zealand Banking Group Ltd v Frost Holdings Pty Ltd [1989] VR 695 at 701 (per Kaye J citing May and Butcher Ltd v R (H.L.) [1934] 2 K.B. 17 at 21).

[116] Booker Industries Pty Ltd v Wilson Parking (Qld) Pty Ltd [1982] HCA 53; (1982) 149 CLR 600 at 604; Mushroom Composters Pty Ltd v IS & DE Robertson Pty Ltd [2015] NSWCA 1 at [62]-[64] (per Sackville AJA, MacFarlan and Gleeson JJA agreeing).

[117] [1982] HCA 53; (1982) 149 CLR 600.

[118] Booker Industries Pty Ltd v Wilson Parking (Qld) Pty Ltd [1982] HCA 53; (1982) 149 CLR 600 at 604-605 (Gibbs CJ, Murphy and Wilson JJ) (citations included).

[119] [1973] HCA 38; (1973) 129 CLR 629 at 645 (Gibbs J).

[120] Booker Industries Pty Ltd v Wilson Parking (Qld) Pty Ltd [1982] HCA 53; (1982) 149 CLR 600 at 606 (Gibbs CJ, Murphy and Wilson JJ).

[121] Twynam Pastoral Co Pty Ltd v Anburn Pty Ltd (1989) 6 BPR 13,448 at 13,455.

[122] Mushroom Composters Pty Ltd v IS & DE Robertson Pty Ltd [2015] NSWCA 1 at [62]-[64] (per Sackville AJA, MacFarlan and Gleeson JJA agreeing).

[123] [2021] VSC 851 at [338]-[339] (Delany J) (citations included).

[124] Thorby v Goldberg [1964] HCA 41; (1964) 112 CLR 597, 607, quoting the dissenting judgment of Sugerman J in the NSW Court of Appeal.

[125] Upper Hunter District Council v Australian Chilling and Freezing Co Ltd [1968] HCA 8; (1968) 118 CLR 429.

[127] Lewison and Hughes, The Interpretation of Contracts in Australia (Thomson Reuters), [7.15].

[128] Upper Hunter County District Council v Australian Chilling & Freezing Co Ltd [1968] HCA 8; (1968) 118 CLR 429 at

436-437 (per Barwick CJ); see also Delaney v Delaney [2021] VSC 365 at [326] (citing submissions at [2(h)]).

[129] [2021] VSC 365 at [333].

[130] Sir Kim Lewison, The Interpretation of Contracts (Thomson Reuters (Professional), 6th ed, 2015) 466 [8.13] and cases referred to therein.

[131] Watpac Construction NSW Pty Ltd v Taylor Thompson Whitting (NSW) Pty Ltd [2015] NSWSC 780 at

[135] Minutes of meeting of directors dated 17 May 2010, CB329 at CB332.

[136] Minutes of meeting of directors dated 17 May 2011, CB399; Minutes of meeting of directors dated 23 August 2011, CB409.

[137] First Camp Statement at [10]-[11], CB52.

[140] T14.13-14.23 (Plaintiff's opening).

[141] [1982] HCA 53; (1982) 149 CLR 600; and see above [46].

[142] [1982] HCA 53; (1982) 149 CLR 600.

[144] [1982] HCA 53; (1982) 149 CLR 600.

[145] [2015] NSWSC 780.

[146] [2014] HCA 7; (2014) 251 CLR 640 ("Electricity Generation").

[147] Electricity Generation at [40]-[43] (footnotes omitted).

[148] Paltara Pty Ltd v Dempster (1991) 6 WAR 85 ("Paltara") at 89 (per Malcolm CJ, Pidgeon J agreeing).

[149] [2008] WASC 36; (2008) 36 WAR 197 ("O'Rourke").

[151] [2011] NSWCA 173; (2011) 282 ALR 152 ("Cypjayne").

[153] [2012] NSWCA 122.

[154] Foster v Hall [2012] NSWCA 122 at [33].

[155] Electricity Generation at [40].

[156] Electricity Generation at [40].

[157] Artesian Hospitality Pty Ltd v Tsuen Fung Holdings Pty Ltd [2021] QSC 288 at [101]-[102]; Australian Securities and Investments Commission v Dover Financial Advisers Pty Ltd [2019] FCA 1932 at [54].

[158] [2015] NSWSC 1459 ("Wang").

[160] [2019] VSC 559.

[161] Electricity Generation at [42].

[162] IBM United Kingdom Ltd v. Rockware Glass Ltd [1980] F.S.R. 335 at 343.

[163] [1990] 1 Qd R 135 ("Hawkins").

[165] [2012] VSCA 113; (2012) 38 VR 241 ("Joseph Street").

[167] Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64; (1984) 156 CLR 41, [64]-[65] (Gibbs CJ).

[168] Sheffield District Railway Company v Great Central Railway Company (1911) 27 TLR 451, 452 (Lawrence J); Paltara Pty Ltd v Dempster (1991) 6 WAR 85, 100 (Kennedy J); Rehins Pty Ltd v Debin Nominees Pty Ltd [No 2] [2011] WASC 168, [145] (Murray J).

[173] [1984] HCA 64; (1984) 156 CLR 41 ("Hospital Products") at 64.

[175] [2014] VSCA 246; (2014) 48 VR 503 ("ICM Investments Limited").

[176] ICM Investments Limited at [75].

[177] [2002] NSWCA 215 ("Wardy").

[178] [2001] NSWSC 1141.

[180] [1984] HCA 64; (1984) 156 CLR 41.

[181] Hospital Products at 64; see also Joseph Street at [41]-[49].

[182] (1980) 144 CLR 83.

[183] (1980) 144 CLR 83 at 101 per Barwick CJ.

[184] (2013) 95 ACSR 179 ("Stepping Stones").

[185] Stepping Stones at [299]-[300] per Refshauge J.

[186] Stepping Stones at [292] per Refshauge J (citations omitted).

[187] Stepping Stones at [283] per Refshauge J.

[190] Second Johnston Statement at [8], CB1688.

[194] Builder's Report dated 27 August 2019, CB1058-1059.

[204] T274.21-274.24 (Vescio XXN); but cf below, [124].

[210] First Vescio Statement at [3], CB122.

[216] Second Johnston Statement at [15]-[16], CB1689.

[224] CB21-825; Second Johnston Statement at [19], CB1690.

[229] T280.15-18 (Vescio XXN); but cf below, [125].

[235] Board Pack for 17 March 2020, CB1504-1531; Minutes of Meeting for 17 March 2020, CB849-854; Board Pack for 26 May 2020, CB1541-1567; Minutes of Meeting for 26 May 2020, CB881-886.

[239] Second Sadler Statement at [126], CB106.

[240] Third Vescio Statement at [9], CB172; CB826-845.

[242] Third Vescio Statement at [9], CB172; CB826-845.

[254] The cashflow report was omitted from the board pack in the Court Book but is found at CB846-848.

[259] Aide memoir: COVID-19 restrictions, dated 11 October 2023.

[260] T71.27-71.28; T315.16-315.20 (Vescio XXN).

[262] The Board minutes of 23 August 2019 (at CB769) expressly stated that "construction of villas would need to be slowed". The Practice was effectively abandoned in March 2019, when instructions were given by the defendant to bring all remaining villas to completion: CB1028-1029. Far from there being a "large volume of Villas currently available for resale", there were four (see the cashflow report on 12 March 2020 at CB846). As to Michael Sadler's evidence, see First Sadler Statement at [112].

[282] Third Vescio Statement at [7], CB171; CB1156; CB937.

[288] The letter is found at CB855 and is dated 24 March 2020, however it is common ground between the parties that the letter is the attachment to the email of 21 May 2020: T454.2-454.4.

[295] CB872; CB855; CB887; CB891; CB923; CB925.

[301] First Sadler Statement at [122], CB105.

[302] The Expiry Date was 30 June 2020 until 23 June 2020, when an extension until 13 July was agreed: CB891.

[303] Defendant's Outline of Closing Submissions (18 October 2023), [5.3].

[304] Defendant's Outline of Closing Submissions (18 October 2023), [5.4]-[5.10] (footnotes included).

[305] First Camp Statement, paragraph 23 [CB 57].

[310] Second Johnston Statement, paragraph 8 [CB 1688] (s 136 use limitation applies).

[312] Second Johnston Statement, paragraph 13 [CB1689].

[313] The occupancy permit for lot 52 was issued on 23 September 2020 [CB 717].

[314] The occupancy permit for lot 51 was issued on 26 October 2020 - it is not in the Court Book, but it is common ground between the parties: see Defence, particulars to paragraph 8(b) [CB 43] and the First Camp Statement at paragraph 32 [CB 59].

[316] First Sadler Statement at [30], CB71.

[317] First Sadler Statement at [30], CB71.

[318] T28.18-19 (Plaintiff's opening).

[319] T28.10-11 (Plaintiff's opening).

[320] Second Camp Statement at [8], CB112-113.

[324] Second Sadler Statement at [34], CB148.

[325] CB769; T41.2-6 (Plaintiff's opening).

[326] T28.6-11 (Plaintiff's opening). As for departures from the Practice, see the Second Sadler Statement at [134], CB147.

[327] Plaintiff's Written Closing Submissions (18 October 2023), [147]-[148] (footnotes included).

[329] HWLE letter to Madgwicks dated 7 April 2020 (underlining added) (CB858-CB859).

[330] Witness Statement of Michael Sadler dated 16 September 2022 at [30] (underlining added) (CB71).

[331] Builder's Report dated 26 March 2019 (CB1028-CB1029).

[332] HWLE letter to Madgwicks dated 7 April 2020 (CB858-CB859).

[333] Builder's Report dated 27 August 2019 (CB1030-CB1031).

[335] See Chronology: Email from Jeanette Davidson to Builder dated 29 June 2020 at 2:27pm (CB1198); Sale of Villa 51 and 52 not conductional until 30 July 2020 and 2 December 2020 respectively.

[336] (1966) 115 CLR 666 at 670 per Barwick CJ.

[337] As to calculation of the Price, see below [221].

[344] Defendant's Outline of Closing Submissions (18 October 2023), [5.20].

[349] Defendant's Outline of Closing Submissions (18 October 2023), [5.21]-[5.24] (footnotes included).

[350] CB 553 (clauses 2.1.2 and 2.1.5).

[351] As for the contractual nature of such obligations, clause 1.8 of the ER Loan provides that if 'the Borrower breaches any undertaking at any time given to the Lender', that is deemed to constitute an 'Act of Insolvency', and a 'Default' under the ER Loan. Further, the memorandum of common provisions which governs the ER Loan (MCP AA689) provides at clause 1(1)(a) that the mortgagor is required to pay to the mortgagor 'at the time or times agreed upon from time to time between the Mortgagor and Mortgagee', and at (2) that the failure to do so constitutes a default. Clause 15 of the MCP provides that in the event of a default, the mortgagee may, among other things, take possession of and sell the Property.

[352] See, eg: Adnunat Pty Ltd v ITW Construction Systems Australia Pty Ltd [2009] FCA 499 at [39] per Sundberg J: 'A contract may in certain circumstances be inferred from conduct, even where no offer and acceptance can be identified. However the existence or otherwise of an enforceable agreement depends ultimately on the manifest intention of the parties, objectively ascertained. Where mutual promises are sought to be inferred, the conduct relied upon must, on an objective assessment, evince a tacit agreement with sufficiently clear terms. It is not enough that the conduct is consistent with what are alleged to be the terms of a binding agreement. The evidence must positively indicate that both parties considered themselves bound by that agreement' (citations omitted).

[354] CB 553 (clause 2.1.5 of the ER Loan stipulates that interest is 'calculated to the date of repayment only').

[368] Defendant's Outline of Closing Submissions (18 October 2023), [5.25].

[370] Reference is made to the ERUT financial statements for the year ended 30 June 2020, at CB1326. The balance sheet disclosed net assets at 30 June 2019 of $4.798 million. The notes stated (Note 1(b)) that the valuation of the Village was at cost, that the Village had an estimated value in 2017 of $15 million, and the increase on valuation over cost was not recorded in the balance sheet.

[372] See the minutes of meeting of directors dated 24 July 2014, CB616 at CB620-621.

[374] Defendant's Outline of Closing Submissions (18 October 2023), [12.17]-[12.21].

[375] First Sadler Statement at [86], [88], [91], [101], [121(c)], CB89-105; First Johnston Statement at [19], CB155.

[378] T51.24-52.18 (Plaintiff's opening).

[379] T52.8-52.9 (Plaintiff's opening).

[380] Defendant's Outline of Closing Submissions (18 October 2023), [12.19] (footnotes included).

[382] Second Johnston Statement, paragraph 15 [CB 1689].

[383] Second Sadler Statement, paragraph 6(c) [CB 133].

[388] Second Sadler Statement at [22(a)] and [23], CB142-144.

[389] Third Vescio Statement at [5] and [7], CB171; CB1156; CB937.

[390] Plaintiff's Written Closing Submissions (18 October 2023), [139] (footnotes included).

[391] Southern Cross Interiors Pty Ltd v Deputy Commissioner of Taxation [2001] NSWSC 621; (2001) 53 NSWLR 213 at [46] and [54(c)]. See also Guthri v Radio Frequency Systems Pty Ltd [2000] WASC 152; (2000) 34 ACSR 572 at [11]-[13].

[392] T261.14-262.31; and see, above, [125].

[394] T301.20-301.31. It should be noted that Mr Vescio was mistaken insofar as it was cashflow forecasts prepared from 18 February 2020 onwards that proposed construction costs in September 2020.

[396] By Michael Sadler, by email dated 27 April 2020 (see above [121]).

[403] Michael Sadler confirmed that he did not make any such enquiries and was not aware of any being made by anyone else: T456.12-456.25.

[405] Michael Sadler confirmed that he did not make any such enquiries and was not aware of any being made by anyone else: T455.15-456.11. Mr Johnston said he made some general inquires with "a couple of private people": T547.9-548.1.

[408] ERUT AGM minutes, CB1231 at CB1234.

[410] White Statement at [9], CB109. It is noted that Michael Sadler did not give evidence in response to this allegation, despite being aware of it. An inference can reasonably be drawn that Michael Sadler's evidence would not have been a denial: see Commercial Union Assurance company of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389.

[411] First Camp Statement at [26], CB58; CB863-864.

[419] Amended Defence at [23], CB46-47.

[420] Defendant's Outline of Closing Submissions (18 October 2023), [5.14].

[421] T8.2-8.8; T9.4-9.9 (Plaintiff's opening).

[422] Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336 at 361-362 (Dixon J).

[426] T17.18-17.20 (Plaintiff's opening).

[430] T28.28-28.29 (Plaintiff's opening).

[431] T29.1-29.7 (Plaintiff's opening); and see above [140].

[432] T30.2-3; T30.12-30.13 (Plaintiff's opening).

[433] T31.11-31.12 (Plaintiff's opening).

[434] CB552. Clause 1.8 of the ER Properties Loan defines "Act of Insolvency" to include '[a]ny indebtedness or obligation of the Borrower to any person including the Lender not paid, met or satisfied when due or becomes due and payable ... [or] the Borrower ... breaches any undertaking at any time given to the Lender...'.

[436] Defendant's Outline Of Closing Submissions (18 October 2023), [12.13].

[437] Defendant's Outline Of Closing Submissions (18 October 2023), [12.14].

[438] Defendant's Outline Of Closing Submissions (18 October 2023), [12.15].

[439] Stepping Stones at [294] per Refshauge J.

[440] Second Vescio Statement at [15], CB127.

[442] T293.17-293.18, T285.2-285.6 (Vescio XXN).

[445] Second Vescio Statement at [14], CB126-127.

[446] T82.14-82.23 (Plaintiff's opening).

[448] T115.6-115.21 (Defendant's opening).

[450] [2015] NSWSC 1459; and see above [70].

[451] [2014] HCA 7; (2014) 251 CLR 640.

[452] [2011] NSWCA 173; (2011) 282 ALR 152.

[454] See Joseph Street at [41]; and see above [76].

[455] See Electricity Generation, applying Hospital Products and the observation of Gibbs CJ in Hospital Products at 64; and see above [82].

[456] (2021) 151 ACSR 124 ("KSG Investments").

[457] KSG Investments at [104] citing March v E & M H Stramare Pty Ltd [1991] HCA 12; (1991) 171 CLR 506 at 525 (McHugh J), and also at [112]-[117] and [124].

[459] [2022] FCA 1404.

[460] [2022] FCA 1404 at [300] per Beach J.

[461] [2022] FCA 1404 at [305]-[307].

[462] [2021] VSC 79 ("Hoeys") at [754] per Blue AJ.

[463] Defendant's Outline of Opening Submissions (4 October 2023), at [42].

[464] T122.6-123.10 (Defendant's opening).

[476] Notes to ERUT FY2020 Financial Statements, CB1332; T571.18-571.20.

[477] ERUT AGM minutes dated 13 December 2018, CB1219 at CB1221.

[478] ERUT AGM minutes dated 10 December 2019, CB1231 at CB1234.

[485] First Camp Statement at [34], CB59-60.

[486] First Camp Statement at [34], CB59-60.

[487] Option Deed, clauses 1.8 and 3.2, CB338-339.

[488] Second Sadler Statement at [15], CB137.

[489] First Sadler Statement at [121(c)], CB105.

[495] [1959] HCA 8; (1959) 101 CLR 298.

[496] [2010] VSC 2 at [17]; a passage approved by the Court of Appeal in Tenth Vandy Pty Ltd v Natwest Markets Australia Pty Ltd [2012] VSCA 103 at [154]-[156] (Nettle and Neave JJA; with whom and Bell AJA agreed).

[497] [2017] VSCA 88; (2017) 372 ALR 440.

[498] [2017] VSCA 88 at [411] (Santamaria, Ferguson and Kaye JJA) (citations omitted).

[499] [2021] VSC 79 at [765] (Blue AJ) ("Hoeys").

[501] Hoeys at [1305]-[1306] and [1325].

[503] (1994) 179 CLR 332 ("Sellars").

[504] [2017] QCA 254; [2018] 2 Qd R 584 ("Principal Properties").

[505] Principal Properties at 593-596, [39]-[53].

[506] Principal Properties at 597, [59]-[60].

[507] Principal Properties at 598, [64].

[508] Principal Properties at 610, [112]-[114] (citations omitted).

[509] T6.20-6.21 (Plaintiff's opening).

[510] Seddon & Bigwood, Chesire & Fifoot Law of Contract (LexisNexis Butterworths 11th Australian ed 2017), [23.24].

[511] McGregor, McGregor on Damages (Sweet & Maxwell, 19th ed.), [19-004].

[512] Emeness Pty Ltd v Rigg [1983] 1 Qd R 172, following Domb v Isoz [1980] 1 All ER 942.

[515] T18.4-18.11 (Plaintiff's opening).

[520] The Act was in force at the date of the Option Deed, on 3 June 2010.

[522] Mount Bruce Mining at [46]-[51].

[523] Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99 at 109.

[524] Jireh International Pty Ltd (t/as Gloria Jean's Coffee) v Western Exports Services Inc [2011] NSWCA 137 at [55].

[525] In the matter of Peak Invest Pty Ltd [2022] NSWSC 1288 at [95].

[526] Newey v Westpac Banking Corporation [2014] NSWCA 319 at [91] per Gleeson JA (with whom Basten and Meagher JJA agreed).

[527] [2019] VSCA 98 ("Perpetual").

[529] Perpetual at [126]-[127] (citations omitted).

[530] See the definition of "Exercise Date" in clause 1.8 of the Option Deed: CB338.

[531] [2013] AATA 154; (2013) 91 ATR 976.

[534] See Plaintiff's Supplementary Closing Submissions (2 November 2023), [20] and Defendant's Outline Of Closing Submissions (18 October 2023), [18.12].

[535] And see Plaintiff's Supplementary Closing Submissions (2 November 2023), Annexure B (which is set out below at [220]).

[537] Cargill Australia Ltd v Viterra Malt Pty Ltd (No 28) [2022] VSC 13 at [3915] per Elliot J.

[539] Dated 2 November 2023 (footnotes included).

[540] Supplementary Statement of Tony Vescio dated 5 April 2022 at [20] (CB129-130); CB937.

[541] Supplementary Statement of Tony Vescio dated 5 April 2022 at [20] (CB129-130); CB937.

[542] The court might note that in the correspondence in 2020, individuals, including Tony Vescio, missed this step in the mechanism, erroneously taking 20% of the Loan Ledger and not 20% of that part of the Loan Ledger which was refundable (CB820).

[543] Expert report of Dan Magree dated 28 October 2022, valuation as at 3 October 2022 of $19,200,000 plus GST. (CB175-231).

[544] Calculated by deducting the Price from the value of the Retirement Business.

[545] See T652.24-653.26 as to the plaintiff's submissions in this respect.