Plaintiff v Defendant by Counterclaim

Plaintiff v Defendant by Counterclaim - [2012] VSC 39 - VSC 2012 case summary — Zoe

[66]

...we consider that acceptance of the principle enunciated in Malec requires that damages for deprivation of a commercial opportunity, whether the deprivation occurred by reason of breach of contract, tort or contravention of s. 52(1), should be ascertained by reference to the court's assessment of the prospects of success of that opportunity had it been pursued. The principle recognized in Malec was based on a consideration of the peculiar difficulties associated with the proof and evaluation of future possibilities and past hypothetical fact situations, as contrasted with proof of historical facts. Once that is accepted, there is no secure foundation for confining the principle to cases of any particular kind.

On the other hand, the general standard of proof in civil actions will ordinarily govern the issue of causation and the issue whether the applicant has sustained loss or damage. Hence the applicant must prove on the balance of probabilities that he or she has sustained some loss or damage. However, in a case such as the present, the applicant shows some loss or damage was sustained by demonstrating that the contravening conduct caused the loss of a commercial opportunity which had some value (not being a negligible value), the value being ascertained by reference to the degree of probabilities or possibilities. It is no answer to that way of viewing an applicant's case to say that the commercial opportunity was valueless on the balance of probabilities because to say that is to value the commercial opportunity by reference to a standard of proof which is inapplicable.

The conclusion which we have reached on this question finds support in other considerations. The approach results in fair compensation whereas the all or nothing outcome produced by the civil standard of proof would result in the vast majority of cases in over-compensation or under-compensation to an applicant who has been deprived of a commercial opportunity. Furthermore, it is an approach which conforms to the long-standing practice of taking into account contingencies in the assessment of damages.[12]

[73]

If someone had told you at or prior to 16 December 2005 that by mixing the funds in the way they were mixed you would be breaching your director's duties would you have done anything differently? --- Absolutely.

What would you have done? --- I would have ensured that there was absolutely no breach of either the duties as a director or any other duty.

How would you have done that? --- One option would be to ensure that only NAB funds were applied to the real properties and GE funding was applied to the businesses.

How could you have achieved that if the price for the properties was more than the money being lent by the National Bank? --- Changed the face value of the contracts.

How would you have done that? --- The face value of the contracts would be reduced for the real properties.

When you say "the contracts", what contracts do you mean? --- The real property contracts. That is for Liam, Mail and Huon Corporation and their respective trusts and the reduction in the purchase price achieved for the land sale contracts would then be reflected in an increase ...

...

Going back to what you said a couple of minutes ago about reducing the face value of the properties, if you had done that what would the purchase price for the three properties have been? --- It wouldn't have exceeded the available funds less the stamp duties required and other expenses.

How would you calculate that? --- I would have to rely on my advisors but I would suggest that stamp duty could be calculated at the market value and the expenses, if there were outgoings for the properties, they should be known and any additional fees and charges, they would be known. The aggregate of all of those would be then aggregated up and reduced from the available funds from the National Australia Bank and the net of those two figures would then be reflected in the land sale agreements, face value.

Whom would you have had to speak to to renegotiate that aspect of the transactions? --- Nylex.

Who would you have spoken to at Nylex? --- Sorry, I may have been a little preemptive there. I would have sought advice in the first instance. In the second instance it would have been Nylex.

From whom would you have sought those? --- Glen Casey.

At Nylex? --- Correct. He was the CEO and managing director at the time.

Do you think you would have discussed it with anybody else? --- At Nylex?

Anywhere? --- Well, I certainly would have discussed it with my lawyers. I would have gone to them in the first instance because it's they who in that scenario would have raised the issues that are now before me.

[188]

[omitting formal parts]

Dear John,

44-80 Sinclair Rd Dandenong valuation 27th July 2005

300 Frankston Dandenong Rd Frankston valuation 27 July 2005

48-86 Powell St Bendigo valuation 1st August 2005

Further to our telephone conversation, I have reviewed our valuations of the above properties all undertaken by CBRE at this time last year and I can confirm that in my experience as a specialist Industrial agent of over 10 year experience, the majority of which was in the south east industrial market, the rents established for both Dandenong and Frankston are conservative, my analysis is as follows;

Dandenong;

Assessed rent as per the above Valuation $205,793 per annum net

Actual rent $153,000 shortfall $52,793 per annum.

Achievable rent at arms length in current Market; $250,000 per annum plus outgoings.

Shortfall on current assessment $97,000 Per annum

Frankston

Assessed rent as per valuation $363,906 per annum net

Actual Rent $363,000 shortfall $906 per annum.

Achievable rent at arms length in current market $450,000 per annum plus outgoings.

Shortfall on current assessment $86,094 Per annum

Bendigo

Assessed rent as per valuation $352,913 per annum net

Actual rent $297,000 shortfall $55,913 per annum

Achievable rental unknown due to lack of comparable current data, assume Valuation amount.

Total Shortfall as at 2005 Valuation $109,612 per annum

The shortfall highlighted immediately above is based only on the assessed rentals from our valuations set one year ago, and in the absence of concrete rental evidence for the Bendigo site, and adopting the valuation amount, plus the estimated current market rental for Frankston and Dandenong,

I estimate the actual rental shortfall from the rent paid to true assessed market rental to be in the order of an additional $187,000, this is without any allowance for what Bendigo may be underlet by.

Total shortfall on current 2006 assessment $296,000 Per annum

In my experience, it is unusual for a property owner to underlet assets where they are the owner of both the business and the real estate, in this case, the properties are underlet in my estimation by at least $296,000 per annum, in addition to the fact that the rents are based on the building areas alone and make no allowance for each of the properties being underdeveloped.

To illustrate this, a common approach to assessing rentals is to base them as a percentage of the total capital value, which in this case, as per the above valuations is a total combined amount of $11,600,000 a conservative investor would be happy with a return of 11% for older style facilities, which would calculate at $1,276,000 per annum net.

The total rent paid under the current leases is $810,000, which represents only a 6.99% yield on the capital value of the real estate.

I am available to clarify any of the above if required.

Yours sincerely

CB Richard Ellis (V) Pty Ltd

[signed]

Ralph Paruit

Senior Manager | Industrial Services

We draw your attention to the fact that this correspondence is not a statutory valuation, the opinions, estimates and information given herein or otherwise in relation hereto are made by CB Richard Ellis (V) Pty Ltd to their best judgment, in good faith and as far [as] possible based on data or sources which are believed to be reliable. CB Richard Ellis (V) Pty Ltd, its officers, employees and agents expressly disclaim any liability and responsibility to any person whether a reader of this document or not in the respect of anything and of the consequence of anything done or omitted to be done by any such person in reliance whether wholly or partially upon the whole or any part of the contents of this document.

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