Reading Entertainment Australia Pty Ltd & Anor v Whitehorse Property Group Pty Ltd & Ors [2007] VSCA 309

**2 In April 1996 Burstone Australia became the assignee of two 99 year leases of the Centre and its car park that terminated on 21 November 2072. The amount payable for the assignments - $16,250,000 - was not due until 11 April 1997. In order to finance this acquisition, in May 1997 WPG borrowed $12.3 million from the Bank of Melbourne ('BOM') for a term of two years on the basis that it would repay $500,000 of the loan at the expiration of 12 months.

3 On 21 November 1997 Reading Australia entered into a written joint venture agreement with Burstone Victoria, Khor, Burr and WPG to redevelop the Centre in the manner described later. WPG became the joint venture vehicle. In accordance with the terms of the joint venture agreement, three other relevant agreements were executed. First, Reading Properties entered into an agreement to lease from WPG the cinema complex that was to be built by Reading Properties at the Centre.[1] Secondly, a loan agreement was made between Reading Australia, as lender, and Khor and Burr, as borrowers, that was guaranteed by Burstone Victoria, whereby Khor and Burr borrowed $2.2 million from Reading for a period of two years. The loan was made in order to enable Burstone to enter into the joint venture and match Reading's 50 per cent interest in WPG and the Trust. The third document was a guarantee, whereby Reading Australia guaranteed to BOM one half of WPG's obligation under its $12.3 million loan. In the result, each of the Reading and Burstone interests became equal 'owners' of WPG and beneficiaries of the Trust. Each group appointed two directors to WPG. Thus, from a practical perspective, in order to be effective, any decision by the directors had to be unanimous.

4 Recital A of the joint venture agreement provided that the parties entered into the agreement for the principal purpose of redeveloping the Centre by the construction of a state of the art cinema complex, supported and complemented by the introduction of new general retail shops and various entertainment, food, lifestyle and leisure retail shops and restaurants. The relevant clauses of the agreement were clauses 7 and 15, which were in the following terms:**

7.1 The parties agree that the construction of cinemas by Reading (as provided in this Agreement) is a fundamental term of this Agreement, provided that on or before the date of commencement of construction thereof WPG has agreed to a mutually acceptable proposal and program for the refurbishment of the Property, including but not necessarily limited to a specific scope of works and construction program.

7.2 Subject to Clause 7.1 Reading agrees that it shall construct at its own cost and expense on the Property a first class state-of-the-art cinema complex ('the Cinema Complex') of not less than 5000 square metres with between 10 and 14 full size cinema screens and with no less than 2300 seats at an anticipated cost of no less than ten million dollars ($10,000,000) plus the usual cinema operator's fit-out costs and Reading further acknowledges and agrees that such construction is a fundamental term of this Agreement and that any failure to so construct the Cinema Complex for reasons other than those reasonably beyond its control shall constitute a fundamental breach of this Agreement rendering Reading liable for damages to the other parties.

In the event that a determination is made to raise additional capital for the purposes of the development of the Property, then the parties agree that as far as is possible such capital shall be borrowed from third parties (upon the usual commercial and prudential basis and to the extent that the Property can reasonably and commercially bear), and that to the extent that borrowing is not possible the parties themselves shall contribute capital in proportion to their respective interests in the Trust whether by way of loans to the Trust, the issue of additional units in the Trust or otherwise.

**5 During 1998 various steps were taken by the parties to progress the project, including filing applications for town planning and like approvals for the development. On 23 December 1998, WPG acquired the freehold of the Centre from the City of Box Hill for $6 million, to be paid in two years. The subsequent events relating to the redevelopment of the Centre will be described in more detail later, but it is convenient to give now an overview of what transpired. Differences between Reading and Burstone began to emerge in late 1998 and became more serious and entrenched during 1999. The venture also encountered significant problems in 1999, principally in repaying or refinancing the BOM facility when it fell due and in obtaining alternative finance for the proposed redevelopment. Some time in the latter part of 1999 Reading effectively decided not to proceed with the project and informed Burstone of this decision in October 1999. In the result the repudiation was accepted by Burstone on 6 December 1999 (as his Honour found). The Centre was eventually sold in November 2001, after significant conflict between the joint venturers and at a considerable loss to them. The eventual sale was not made by WPG but by a Reading subsidiary, namely, US International Property Finance Pty Ltd ('USIPF'). That company acquired the secured debt owed by WPG to BOM, took possession of the property as controller and sold it to a developer named Centro Properties Ltd ('Centro').

6 The primary responsibilities for progressing the various aspects of the development were distributed between the parties such that, for example, the Reading executives were primarily responsible for development of the Centre and Burstone was primarily responsible for its operation and like matters. The redevelopment meant that it was necessary to persuade tenants to vacate the Centre and, in the case of suitable tenants, to have them return upon completion of the works. Lessees began to move out in April 1998 and this meant that the cash flow to the project progressively declined over time. In late 1998 a dispute arose between Burstone and Reading concerning the proposed Coles supermarket in the redeveloped Centre. Coles Myer Ltd ('Coles') was then an existing tenant at the Centre. Burstone saw it as critical to the successful operation of the new Centre that, upon its completion, Coles resumed as lessee. In August 1998 Coles made an offer to lease premises and Khor was anxious that the offer be accepted. Reading, however, took the view that before this could be done the parties should be satisfied that the redevelopment that was earmarked for Coles was financially feasible. It also considered that, if such redevelopment were to proceed, the parties should contribute equally $8 million towards the cost of such redevelopment. This impasse between the parties continued into 1999. Reading argued that the diminishing cash flow made it difficult to borrow the necessary funds and maintained that, should it become necessary, each of the parties provide one half of the necessary capital funds for the proposed redevelopment. This proposal was unacceptable to Burstone which insisted that any necessary funds had to be obtained in accordance with clause 15 of the joint venture agreement, namely, to the extent possible, from outside sources. This deadlock in approach to the matter proved to be, if not fatal, at least a major stumbling block to a sound working relationship between the parties.

7 The relations between the parties became strained for other reasons, actual and perceived, and the situation was not helped by the adversarial approach adopted by Burstone. As the period progressed, threats were made by Khor and Burr that they would instigate litigation against Reading. For instance, when Khor signed for WPG, on 8 December 1998, the application for the town planning permit, she noted that, as far as she was concerned, several matters remained unresolved, including the design of the Centre, the estimated costs of the proposed development of it, the estimated proportion of the costs between Burstone and Reading and the tenancy mix. Thus, she said, her signing of the application was not to be taken as a 'consent or approval by Burstone to any of the matters as yet unresolved between us'. As will be seen, like comments where made throughout 1999.

8 Financial problems also confronted the project. On 14 December 1998 BOM informed Reading that it was 'not able to finance the project' because of its 'reservation' about Khor and Burr. This, too, did little to engender a sound working relationship between the parties, or confidence in Reading that BOM would change its view and refinance the loan.

9 As has been noted, on 23 December 1998 WPG purchased the freehold interest in the Centre for $6 million, payable by a deposit of $60,000 with the balance to be paid in two years. The contract of sale was subject to a number of conditions, including WPG being granted, within two years, a town planning permit and it entering into an agreement with Coles which would became unconditional within 180 days, save for the issue of a planning permit. In December 1998 Khor put further pressure on Reading to accept the Coles offer. She wrote saying that her execution of the contract of sale on behalf of WPG was conditional upon Reading agreeing that if WPG did not enter into an unconditional agreement with Coles within the time specified in the letter, either Reading or Burstone would be entitled to avoid the contract. She concluded that the execution of the contract and its exchange 'shall be taken as agreement by [Reading] to the matters set out in the letter'. Unsurprisingly, Reading responded by saying that it did not agree to those conditions. As the learned trial judge said, Reading had every reason to be 'disturbed' by Khor's letter which, his Honour said, was designed to 'position' Burstone with a view to a possible dispute in the future.

10 By the end of 1998 the joint venture faced three significant problems. First, the WPG loan was due for repayment in June 1999 and Westpac (which took over BOM) was in dispute with Khor and Burr in relation to another matter and did not look favourably upon them. Hence, there was some concern by Reading that the loan would not be refinanced. Secondly, Reading was not prepared agree to make a commitment to Coles unless the capital required to pay for the redevelopment of the area that would be made available to Coles was in place. Thirdly, the personal relations between the joint venturers were progressively deteriorating.

11 These problems became more serious in 1999. On 17 February 1999 Reading requested Burstone to pay approximately $184,000 in interest due under the loan agreement. By way of response, Khor merely complained about the delay in the project, which she attributed to Reading, and said that she would 'consider her options' in relation to the loan in November, when it fell due. But the interest was not paid. During February and early March 1999 the parties were also in dispute as to the characterisation of their respective interests in the proposed cinemas. Notwithstanding this, as his Honour said, Reading was still prepared to proceed with the development (contrary to the claims by Khor and Burr made during the trial). On 15 March 1999 the Council granted the planning permit for the redevelopment of the Centre but, as the parties expected, an appeal was taken to the Victorian Civil and Administrative Tribunal. At the same time the vacancies at the Centre were increasing and income was declining.

12 In April 1999 a finance institution, the Colonial State Bank, indicated to the joint venturer that it might provide a construction facility of $26.3 million converting to a term facility at the end of the construction period. The financing of the freehold acquisition, however, was to be included in the term facility so that, it seems, that funding would not have been forthcoming until completion of the new complex.

13 By about mid 1999 the then present and former tenants of the Centre were tiring of waiting to be informed as to when the redevelopment was likely to be completed, the income from it continued to decline, and the stand off between Reading and Burstone in relation to the Coles development continued. Throughout the balance of 1999 Reading continued to offer Burstone its preparedness to pay out 50 per cent of the BOM loan if Burstone would do the same. Consistently with its earlier attitude as to funding, Burstone continued to reject the proposal and insisted that the finance should be obtained in accordance with clause 15 of the joint venture agreement. Khor and Burr also continued to position Burstone as if there was an expectation that litigation between the parties would ensue. Thus, Burr's letter to Reading of 15 July 1999 was, as his Honour said, the first of many letters sent during the balance of that year in which he raised the spectre of litigation if his proposed course was not adopted by Reading. In the circumstances, Cotter became concerned, with some justification, his Honour said, that Reading not be put in a position where it became the financier for the whole project, an outcome which Khor and Burr may well have had in mind when dealing with Reading in the above manner.

14 In about mid July 1999, an approach for funding was made by the parties to GE Capital Finance Pty Ltd ('GE'), the Australian arm of the US corporation, General Electric Corporation, to enable WPG to discharge the BOM loan and provide further capital to finance the development. For the purpose of progressing this application, a valuation was obtained in August 1999 from Landmark White, a firm of valuers and property consultants. It concluded that the project, valued on an 'as is' basis, had a value of $17.75 million, but if valued on an 'as if complete' basis would have a value of approximately $56 million. His Honour considered that the valuation was of some relevance to the resolution of a number of the issues before him. His Honour analysed the valuation in some detail in his reasons and concluded that it was the most reliable guide to the assessment of the value of the project.

15 During this period, and into the latter part of 1999, there was frequent correspondence between Cotter and Burr concerning various aspects of the project. His Honour considered that Cotter was justifiably concerned to ensure that the situation would not arise whereby WPG undertook an obligation to Coles which the venture could not meet. As has been noted, Burstone stuck to its position that it would not provide any capital for the redevelopment of the Coles site and Coles, in turn, refused to accept a proposed lease that was subject to finance. It was plain, his Honour said, that the Coles lease was vital to the redevelopment of the Centre.

16 In July 1999 the dispute between the parties over the Coles matter came to a head. Burr complained that Reading refused to commit itself in relation to Coles and threatened litigation. His Honour considered that Burstone was correct in saying that the Coles lease was crucial to the development but, equally, the learned judge said that Reading acted reasonably in insisting that WPG ought not to take up the obligation it might not be able to fulfil. In August 1999 Coles made a revised offer to take up premises, subject to conditions that included WPG accepting, by 20 December 1999, finance for the redevelopment of the Centre or notifying Coles that it had accepted its offer unconditionally.

17 By August 1999, Westpac was seeking to recover the BOM loan from WPG, although it offered a limited extension of it. Burr sought to assure Westpac that he had a positive response from GE and realistically expected an indicative letter in about two weeks. Unfortunately, this did not occur. At the end of August 1999 Reading was becoming concerned about the future of the project and assumed that Westpac would not provide the finance, largely because of its poor relationship with Khor and Burr. His Honour found that by 19 August 1999 Reading was considering an 'exit strategy'.

18 In September 1999 GE was analysing a proposal that it provide to the joint venture a facility of $42.6 million, being 100 per cent finance for the entire development (albeit on the basis that 'equity from Reading will be available throughout the redevelopment to meet the cinema contribution'). Notwithstanding that Reading never considered the provision of such 'equity', Khor and Burr informed the financier that Reading would be prepared to do so.

19 Taking stock as at September 1999, his Honour concluded that Reading knew of the following, namely, that Westpac was then not insisting on strict adherence to the terms it had earlier outlined as to the repayment of the loan, that Westpac believed that Khor and Burr were making progress with financiers, and that the bank would not take recovery action without first warning Reading of its intention to do so. Indeed, at about that time the bank rolled over the loan to 14 October 1999. Nevertheless, it continued to put pressure on WPG to refinance the loan. More specifically, it encouraged it to obtain an unconditional letter of offer from financiers by 8 October 1999 on the basis that if that were to be obtained it would be prepared to roll over the loan to 30 November 1999. On 7 October 1999 Westpac agreed to extend the BOM facility to 1 December 1999 to allow it to be refinanced provided it received a letter of offer from a substituted lender by 25 October 1999. On 26 October 1999 GE advised that it would consider providing a forward commitment/guaranteed take out facility converting to a fully drawn cash advance in the sum of $42.6 million.

20 By about September 1999 Reading found that there were at least two significant, negative, aspects of the venture from its viewpoint. First, it concluded that the yield on its investment in the Centre would be substantially less than anticipated, namely, 11.1 per cent as distinct from 14.1 per cent it had calculated at the outset. Secondly, it received advice at or about that time that cinema visitations to the redeveloped Centre would be substantially less than what had been estimated at the time of the creation of the joint venture. In the result, as his Honour found, Reading told Burstone in about mid October 1999 that it would not proceed with the joint venture. Such conduct, said his Honour, amounted to anticipatory breach and a repudiation of the joint venture agreement. And the judge rejected Reading's submission that Burstone did not accept its repudiation and that, by its words and conduct, it elected not to terminate performance. His Honour concluded that when Burr and Khor joined in the resolution of WPG, made on or about 6 December 1999, to sell the property there was an unequivocal election to treat the joint venture as being at an end.

21 His Honour accepted the evidence of Khor and Burr that they agreed to the sale of the joint venture property only because they could see no alternative at the time. But the sale process itself created a further frustration for the parties. During the period that it was being marketed, WPG had to meet its obligations under the BOM loan and, to that end, each joint venturer was required to contribute approximately $1 million to enable it to do so. Unsurprisingly, Westpac was concerned at the apparent lack of progress. Eventually, in June 2000 Centro made an offer to purchase the property for $12.5 million (which it later increased to $13 million) albeit subject to a number of conditions. At or about the same time, Burstone offered to purchase the interests of the respondent in the property for $6.5 million upon certain conditions which Reading found unacceptable because 'they involved acceptance by third parties and the provision of funding to support the offer'. In the result, throughout July and August 2000 the parties engaged in acrimonious negotiations about the terms upon which Burstone might acquire Reading's interest that produced no result in that regard.

22 His Honour found that, at or about this time, there was a genuine apprehension amongst the Reading executives that the appointment of a receiver by Westpac was imminent. There was some justification for that concern because, by letter dated 31 August 2000, Westpac advised the parties that the WPG facilities would not be extended beyond 29 September 2000 and, on 10 October 2000, it made a formal demand for the payment of the amount then outstanding, being $11,349,048. In the result, on 1 December 2000 Reading instituted a winding up proceeding of WPG seeking, amongst others, an order for the sale of the Centre. In March 2001 USIPF purchased all of the securities held by Westpac.

23 Eventually, in late 2001 USIPF transferred the property to Centro. We mention for completeness that the redevelopment of the Centre that was undertaken by Centro did not involve the construction of a cinema complex. Rather, the development took advantage of the synergies that were available to Centro by reason of its proximity to the Box Hill Central Shopping Centre, which was owned by Centro. His Honour concluded that the price achieved for the property was the best that could have been obtained in the circumstances.

24 In the result, on 30 October 2000, Reading commenced the proceeding to recover its loan from Burstone. Burstone counterclaimed for damages for repudiation of the joint venture agreement by Reading and joined WPG as defendant to the counterclaim on the basis that Burstone, as the beneficiary of the Whitehorse Property Unit Trust in respect of which WPG was trustee, sought to enforce the rights of WPG held by it as trustee in circumstances where the trustee failed, refused, or was incapable of instituting proceedings. There were related proceedings which are not relevant to the appeal and they can be disregarded for present purposes. So far as is relevant, on 10 May 2005 the learned trial judge gave judgment for Reading against Burstone in respect of the Reading loan for $2.2 million with interest in the nature of damages of approximately $1.95 million. He also gave judgment for WPG against Reading on the counterclaim for breach of contract for $3 million with interest in the nature of damages of a little under $1.5 million on the basis that it was wrongfully deprived by Reading's repudiation of a commercial opportunity to develop the Centre, assessing the degree of probability of WPG realising the benefit of the redevelopment at 30 per cent of the value of that benefit. His Honour ordered Reading to pay 60 per cent of the costs of Burstone of the proceedings.

25 One of Reading's primary arguments below in support of the claim that Burstone could not rely on any anticipatory breach by it to found a claim for damages was that it was not ready and able to perform its obligations under the agreement. As has been noted, his Honour was satisfied on the evidence that Burstone was not substantially incapacitated in its willingness and readiness to perform the agreements and on that basis concluded that it was entitled to rescind the contract and claim damages.**

**26 As has been mentioned, Burstone's primary claim for damages was a derivative claim made on behalf of WPG as trustee of the trust of which Burstone was a beneficiary. As his Honour observed, it was a claim for loss of the benefit of the redevelopment, being a claim for a capital loss rather than one for continuing income. More specifically, it was a claim based on loss of commercial opportunity to benefit in the future from the redevelopment of the Centre. Such a claim brought into play, as his Honour recognised, the principles of assessment of damages for loss of a commercial opportunity that are set out in the well known passage in the reasons for judgment of Mason CJ, Dawson, Toohey and Gaudron JJ in Sellars v Adelaide Petroleum NL ('Sellars').[2] Applying those principles to the case before him, his Honour concluded that the commercial opportunity of which WPG was deprived had some value. Thus, it was necessary to assess the value of the redevelopment to WPG as at October 1999, and his Honour did so on an 'as if completed' basis, and he then compared that outcome with that which occurred consequent upon Reading's repudiation. It was also necessary, as his Honour realised, to adjust the net value of the redevelopment to reflect the degree of probability of the project being successfully completed. In the result, as will be explained, his Honour assessed at $10 million the value of the redevelopment to WPG if it had been completed, net of the outcome that was in fact produced as a result of Reading's repudiation, and making all other adjustments that the judge considered necessary. He then reduced that amount to $3 million to reflect the 30 per cent degree of probability he considered that WPG had of realising the benefit of the project.

27 More particularly, his Honour assessed the value of the redevelopment as at October 1999 by reference to the Landmark White valuation which, as has been noted, he considered to be the most reliable material he had on that issue. In that context, he concluded that, had the redevelopment been completed successfully, WPG would have had an asset worth $56.5 million less outgoings, which his Honour assessed essentially by reference to the expenses that Landmark White had adopted, at a little over $31 million. Thus, his Honour said the value of the property to WPG upon completion, less the total cost of completion and net outgoings, would have been a little under $25.5 million.

28 His Honour recognised that, prima facie, the loss to the venture would be calculated by deducting from its net value upon completion of approximately $25.5 million the proceeds of sale of $13 million, producing a figure in the order of $12.5 million. Such a calculation, however, said his Honour, overstated 'the true value of the $13 million sale price' given that, during the two year period between the termination of the agreement and the sale, WPG's position deteriorated, it was unable to meet its obligations and unit holder loans of approximately $1 million were required to be advanced. His Honour considered that the deterioration in WPG's position over the two years between the repudiation and the completion of the sale was no less than $2 million. Accordingly, his Honour concluded that the difference between the redevelopment as planned and the price achieved was in the order of $14.4 million.

29 His Honour then dealt with the attribution of a value to the risk that ordinarily accompanies property developments. In that context, his Honour rejected Landmark White's deduction, as if it were an expense, of the developer's margin of 20 per cent of the project cost - approximately $8.7 million. The judge considered that the developer's margin was not an expense like a construction cost; it represented potential profit that the developer had the opportunity of earning as compensation for risk. In other words, it was regarded by his Honour as being an allowance for, or being reflective of, the risk of the development, in respect of which Landmark White attributed a value of approximately $8.7 million. In order to reflect WPG's potential to earn that margin and 'to reflect an allowance for risk implicit in that figure', his Honour concluded that a deduction of half of that sum - approximately $4.3 million - was required from the net figure of $14.4 million, thereby producing a figure, rounded off, at $10 million. This amount, said his Honour, represented his calculations of the difference between the value of the redevelopment to WPG if it had been completed as planned and the outcome for WPG as a result of Reading's repudiation, the consequent termination of the joint venture arrangements and the sale of the Centre to Centro after a delay of two years and after discounting for the ordinary risk of property development of this kind.

30 There were, however, other risks, said his Honour, that were peculiar to this development which necessitated some discounting from this sum because they bore on the probability of WPG ever obtaining the benefit of the development. For that purpose, the judge took into account matters such as the obvious risks of not obtaining finance from GE or the banks, or being delayed in that respect, the Coles arrangement not becoming unconditional on 20 December 1999, BOM losing patience and appointing a receiver or otherwise forcing the sale and Burstone refusing to repay the loan. Moreover, there may have been other disputes between the parties. On the other hand, said his Honour there were also circumstances suggesting that the redevelopment might have reached completion. The judge said that if he were deciding the matter on the balance of probabilities he would conclude that WPG would not have realised the benefit of the development, but he considered that, where the opportunity lost had some value, as here, the authorities required him to assess the degree of probability of realisation. Recognising that he was required to do the best he could, his Honour assessed the degree of probability of WPG realising the benefit of the redevelopment at 30 per cent (of the value of that benefit after making allowance for the ordinary risks of property development) thereby reducing, in round terms, the figure of $10 million to $3 million as has been noted earlier.**

**31 It is necessary to explain more specifically the proceedings and the claims made by each of the parties. As previously noted, the action was commenced by Reading Australia against Khor and Burr as borrowers, and Burstone Victoria as guarantor, to recover its loan to which reference has been made. The Burstone parties counterclaimed for damages for breach by Reading of the joint venture agreement. WPG became a defendant by counterclaim. Subsequently, the Burstone parties obtained leave of the court to prosecute their claim for damages as a derivative action in the name of WPG. There were two other related proceedings that were instituted by Reading but, as has been noted, they are not relevant for present purposes.

32 Since there was essentially no dispute between the parties about the existence and extent of the debt due by Burstone to Reading, the matter before his Honour was concerned almost wholly with the counterclaim by Burstone that was centred on the claim for damages that were said to have arisen out of the repudiation by Reading of the joint venture agreement and the lease. In a most comprehensive set of reasons that span approximately 150 pages his Honour made a series of findings, including those that are the subject of appeal. As has been mentioned, on 10 May 2005, his Honour ordered that there be judgment for Reading against Burstone for the loan of $2.2 million with interest in the nature of damages in the order of $1.95 million and that there be judgment for WPG against Reading on the counterclaim for breach of contract for $3 million with interest in the nature of damages of approximately $1.45 million. His Honour also made subsequent orders that Reading pay 60 per cent of Burstone's costs of the proceeding.

33 Reading challenged his Honour's decision in two principal respects. First, it was contended that the judge erred in concluding that Burstone[3] was ready, willing and able to perform the agreements as required by their terms and was thus entitled to terminate the agreements for anticipatory breach and claim substantial damages. The second principal error made by the judge, argued Reading, was to conclude that the loss by WPG of an opportunity to acquire the ultimate benefits from the venture was caused by Reading's breach and that the opportunity was not speculative or valueless. Burstone attacked his Honour's decision by way of a cross-appeal, contending that his Honour erred in his assessment of damages of $3 million as described above and in rejecting its claim for indemnification.

34 We now turn to consider the parties' respective submissions.**

Grounds 1, 2 and 3: claimed error in application of test

**35 Briefly, Reading's essential argument under cover of grounds 1 to 3 was that, in determining that Burstone[4] was entitled to rescind the contract and claim substantial damages as a result of Reading's repudiation of it, his Honour applied the wrong test and, in any event, erred by considering this question at the date of the repudiation rather than the date of acceptance. It was effectively accepted by Reading that it had repudiated the joint venture agreement by way of renunciation of it (rather than in breaching it so as to justify its termination by Burstone).[5] It seems clear enough that, ordinarily, a party to a contract is entitled to rescind it for repudiation by the other party by accepting the repudiation and establishing that, up to the time of the acceptance, it was ready and willing (and able) to perform its part of the contract.[6] Such readiness and willingness may be established by the innocent party by showing that, at the time of acceptance of the repudiation, it was not substantially incapacitated in its ability to perform the contract and had not determined not to do so (the lower threshold).[7] But such an innocent party can also ordinarily sue the other party for damages for breach of contract.[8] In order to recover substantial, as distinct from nominal, damages, however, it must also prove that it would have had the capacity and willingness to perform its part of the contract when it would have been called upon to do so by its terms ('the higher threshold').[9]

36 It is apparent, however, that his Honour considered the question whether Burstone had the relevant readiness and willingness to perform the contract, not at the time of acceptance of the repudiation (on or about 6 December 1999[10]) but as at the time of Reading's communication of its repudiation (in or about mid October 1999). Moreover, as will be apparent from what is said below, the learned trial judge applied the lower threshold in considering whether Burstone was entitled to rescind the agreements and properly claim substantial damages for breach.

37 It seems from his Honour's reasons, however, that the principal dispute before him in this regard was the correctness or otherwise of Reading's claim that, as a matter of fact, Burstone was not ready and willing to perform its obligations under the joint venture agreement. It was on that basis that Reading contended that Burstone was not entitled to rely on Reading's repudiatory conduct to claim damages for that breach. There seems not to have been any separate argument addressed to his Honour on the question whether Burstone was entitled to rescind the contract. This is apparent enough from his Honour's articulation in his reasons for judgment of what he thought was the issue that had to be resolved, namely: 'if ... Burstone ... [was] not willing and able to perform [its] obligations under the agreements, it would be impermissible for Burstone to be compensated for the consequences of that repudiation'. It was in the context of determining if Burstone was entitled to claim substantial damages for Reading's breach that his Honour said that Foran[11] 'makes clear that the onus falls on the claimant to demonstrate readiness and willingness to perform its obligations under the contract at the time of the repudiation'. And his Honour went on to say that it was made plain in Rawson[12] that the threshold for demonstrating willingness and readiness by Burstone to perform the contract (for the purposes of a damages claim) was low, mainly, the demonstration that it was not substantially incapacitated to perform it and that it had not resolved not to perform the contract at the time prescribed by it. His Honour concluded that Burstone has demonstrated that, on its part, there was not substantial incapacity to perform or definitive resolve not to perform the agreement and that, therefore, it was entitled to claim substantial damages for breach.

38 It is apparent enough, therefore, that by applying for the purposes of the damages claim the low threshold for determining Burstone's readiness and willingness to perform the contract (and doing so by reference to the date of repudiation) his Honour erred. [13] We consider, however, that this error does not vitiate his Honour's ultimate decision because, as we explain below, his Honour found in any event, as it was open for him to do, that on the balance of probabilities Burstone would have been ready and willing to perform its obligations under the agreement when the time came for performance. The relevant obligations of Burstone under the joint venture agreement that were outstanding as at 6 December 1999 were:**

- to pay out the Reading loan;

- to pay out, or refinance, 50 per cent of the BOM loan;

- as will be explained, to contribute between $3 million and $5.5 million by way of capital in order to secure the necessary refinance for the development.

**39 Before examining his Honour's findings as to Burstone's capacity to satisfy those obligations at the relevant time, it is convenient to dispose of its claim that those obligations did not arise under the joint venture agreement but did so independently of it, namely, pursuant to the separate agreements that severally related to those matters, to which reference has been made at the outset of these reasons. It was put for Burstone that these obligations were distinct from those it undertook under the joint venture agreement. Thus, it was said, even if Burstone could not demonstrate ability to perform those obligations at the relevant time, this would not have constituted an inability on its part to perform the terms of the joint venture agreement. We cannot accept this submission which, we think, is based entirely on an artificial distinction between the several agreements and the joint venture agreement. It is plain, we think, from the terms of the documents and the circumstances of their execution that the obligations in question were to form part of the joint venture agreement notwithstanding that they were recorded in separate instruments. The joint venture agreement expressly imposes those obligations on the parties and requires them to execute separate agreements undertaking to carry them out.

40 We now turn to his Honour's findings about Burstone's capacity to meet the three obligations to which we have referred. In relation to its ability to pay the Reading loan, his Honour found that it probably could have raised sufficient funds to do so, and this finding is not challenged on appeal. But the judge also found that if Burstone repaid the Reading loan it would not have had sufficient funds of its own to repay the BOM loan in the latter part of 1999. Nevertheless, his Honour concluded, the project could probably have been refinanced. In that context, his Honour examined in some detail the evidence concerning the facility that was being sought by WPG from GE and concluded that there was a prospect that this could have been obtained, although, for reasons that need not be examined here, his Honour noted a number of impediments to the securing of this facility. The judge also said that proceeding with this application for funding would have meant that separate finance arrangements would have to have been put into place to repay the BOM loan.

41 The judge also concluded that WPG would probably have been able to obtain bank finance of approximately $35 million if the application for it had been pursued diligently and competently. He said that the Landmark White valuation would have formed a substantial basis for a lender's decision to issue a letter of offer and that he was fortified in his view about this by the interest in the proposal shown by the Colonial State Bank in April 1999 and by the fact that BOM's objection to refinancing the project was not based on its fundamentals, which it considered to be sound, but rather on Westpac's dealings with Burr and Khor in relation to another project. Such traditional finance, his Honour noted, would have required an injection of between $3 million - $5.5 million from each joint venturer.

42 In addressing this question, however, his Honour found that the evidence of Khor and Burr on the financial position of Burstone was unreliable and rejected Khor's claim that she had access to substantial funds from her family in South-Asia. His Honour found that the Burstone assets in Australia were either illiquid or already mortgaged. Nevertheless, he concluded that by May 2000 Burstone would have had available to it (as it did) approximately $6 million from its investment in the company called Charactec Pty Ltd ('Charactec'). The evidence showed that, in the latter part of 1999, Burstone's investment in that company was valued at $400,000 although, as Reading's counsel pointed out, there was no evidence that in late 1999 there was an expectation that the asset would rise considerably in value within a matter of months. The judge noted that any injection of capital that would have been required of Burstone would had to have been provided in about May 2000, by which time it would have had the capacity to make the equity contribution. It is plain enough, we think, that his Honour came to the above conclusion on the balance of probabilities.

43 It was said for Reading that, in determining this matter, the $6 million that became available to Burstone in early 2000 through Charactec should be disregarded as a windfall that could not have been taken properly into account for relevant purposes in December 1999. We consider, however, that in assessing the value of Burstone's financial position in December 1999 for the purpose of determining if it could meet its relevant obligations under the contract as and when they fell due it was permissible for his Honour to take into account the amount for which the investment was realised. The subsequent realisation of it shed light on its value in December 1999, making plain that the $400,000 that was attributed to it in late 1999 materially undervalued the asset.

44 It follows that, on his Honour's findings, Burstone probably had the capacity to meet its relevant obligations under the joint venture agreement as and when called upon to do so. Hence, it was entitled to rescind the agreements, as it did, and claim damages from Reading for breach of contract. His Honour's error, as we have said, in applying the lower test for determining the issue was not material such as to vitiate his decision.

45 Consequently, grounds 1, 2 and 3 which relate to this complaint must fail.**

Grounds 4 and 5: causation and assessment of opportunity

**46 As has been noted, Reading also claimed under cover of grounds 4 and 5 respectively that his Honour erred in concluding that its repudiation of the agreement was causative of Burstone's loss of opportunity to acquire benefits from the redevelopment of the Centre and that such opportunity was not speculative or of no value. It is convenient to consider together the submissions advanced under these grounds.

47 Reading argued that the case before his Honour was not one where damages might be recovered by reason of a breach which results in the loss of a promised chance or where chance is the object of the contract. Rather, it was said, the case before his Honour was one in which the general standard of proof on the balance of probabilities governed the issue of causation, and the determination of the value of any loss suffered. Reading claimed that, in order to recover damages, Burstone had to establish that it was more likely than not that, were it not for the breach by Reading, it could have and would have acted on the opportunity to complete the redevelopment. In this context, it was submitted by Reading, that two principal errors can be found in his Honour's reasoning. First, it is contended that his Honour merely 'assumed a causal relationship between loss and breach'. Secondly, it was submitted that his Honour's factual findings as to the difficulties and uncertainties that stood in the way of the project succeeding as of October 1999 necessitated the conclusion that the prospect of Burstone acquiring an ultimate benefit of the redevelopment of the Centre was so low as to be speculative. It was said by Reading that well before October 1999 the prospect of successful completion was nowhere in sight and that the facts found by the judge compelled him to conclude that Burstone lost nothing by the repudiation of the agreement by Reading.

48 Reading argued that, since the question of prospective liability in the law of contract involves both cause and an inquiry into what might have been, the ascertainment of whether or not a loss has resulted from a breach of contract depended upon the selection of competing hypotheses. In this regard counsel pointed to what Brennan J said in Sellars:**

Unless it can be predicated of an hypothesis in favour of causation of a loss that it is more probable than competing hypotheses denying causation, it cannot be said that the plaintiff has satisfied the court that the conduct of the defendant caused the loss. Where a loss is alleged to be a lost opportunity to acquire a benefit, a plaintiff who bears the onus of proving that a loss was caused by the conduct of the defendant discharges that onus by establishing a chain of causation that continues up to the point when there is a substantial prospect of acquiring the benefit sought by the plaintiff. Up to that point, the plaintiff must establish both the historical facts and any necessary hypothesis on the balance of probabilities. A constant standard of proof applies to the finding that a loss has been suffered and to the finding that that loss was caused by the defendant's conduct, whether those findings depend on evidence of historical facts or on evidence giving rise to competing hypotheses. In any event, the standard is proof on the balance of probabilities.[14]

It was put for Reading that in this case his Honour was effectively faced with competing hypotheses as to whether or not Burstone would suffer loss as was demonstrated by his Honour's finding that:

If this venture had continued there were a number of matters upon which the joint venture partners would have needed to co-operate. In my view, there is a significant prospect that, even if Reading had decided to continue in October 1999 and even if the other hurdles such as finance had been overcome, some further major dispute or disputes would have brought the venture to an end before its conclusion. It is impossible to predict what issue might have led to that result but it was a significant risk.

It was said that this finding rendered the hypothesis that Burstone's loss of an opportunity to acquire the ultimate benefit of the venture was caused by Reading's breach to be 'glaringly improbable'.

49 Burstone, on the other hand, claimed that Reading's submission in this regard was inconsistent with a plain reading of his Honour's reasons. First, it pointed to the fact that his Honour specifically referred to Sellars as setting out the relevant legal principles in circumstances where there has been a deprivation of a commercial opportunity by reason of breach of contract. In that case Mason CJ, Dawson, Toohey and Gaudron JJ said in their joint reasons for judgment: [15]

... we consider that acceptance of the principle enunciated in Malec requires the 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 ... [T]he general standard of proof in civil actions would 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.

**50 Secondly, Burstone argued, it was apparent from a reading of the whole of his Honour's reasons that he properly applied these principles to the case before him, including the recognition that it must be established, on the balance of probabilities, that some loss or damage has been caused by the anticipatory breach by Reading. In this regard, Burstone pointed to the definition by the judge of the 'principal issues' in the proceeding as including 'what loss, if any, was suffered, and by which entity, as a result of any such breach or repudiation'. Furthermore, it was submitted, the plain words used by his Honour after he concluded that the commercial opportunity of which Burstone was deprived did have some value made it clear that he properly assessed the loss by comparing the value of the redevelopment as at October 1999 with the outcome 'that did occur consequent upon Reading's repudiation'. It was said for Burstone that a fair reading of the reasons demonstrated that there is no basis for Reading's claim that the judge had simply 'assumed' the existence of a causal relationship between loss and breach.

51 We agree that his Honour did not merely assume for the purposes of determining if Burstone was entitled to damages that there was a causal nexus between Reading's breach and the loss claimed. We note in this regard that Reading's written submissions below, that were provided to his Honour, specifically addressed this issue; Reading submitted that the demise of Burstone and its failure to carry out the redevelopment would have occurred regardless of Reading's breach. And it is apparent that this submission was rejected by the judge. In that context, his Honour made a series of factual findings on the probabilities, which led him to conclude that the commercial value of which Burstone was 'deprived' by the breach of contract had 'some value'. He said that the proper approach was to compare the likely outcome of the project if completed as planned with the outcome 'that did occur consequent upon Reading's repudiation'. In the circumstances, we consider that it cannot fairly be said that his Honour merely 'assumed' a causal relationship between breach and loss. Moreover, we can see no basis upon which it can reasonably be said that, in dealing with this issue, his Honour did not follow the principles outlined in Sellars. More particularly, he satisfied himself, on the balance of probabilities, that Burstone suffered some loss in consequence of the breach of contract by Reading and, having done so, he proceeded to value that loss by reference to the degree of possibility or probability.

52 In support of its argument that his Honour erred in not holding that the chance of opportunity was so low as to be speculative or negligible, Reading relied upon a number of factual findings of his Honour that it said made plain that it was not open to him to conclude that the chance or opportunity of Burstone redeveloping the Centre was a real and valuable chance. On the other hand, Burstone pointed out that, when the matters relied upon by Reading are considered properly, they either do not support the proposition relied upon by it or, on the contrary, are consistent with the judge taking a proper approach to the ascertainment of loss. In particular, Burstone argued that the difficulties facing the project to which his Honour referred were unremarkable in a redevelopment of the kind under consideration here. Moreover, Burstone said, his Honour's specific findings in that regard, upon which Reading relied for its claim that they necessitated a finding by the judge that the chance or opportunity was so low as to be speculative, in fact support the contrary conclusion, namely, that the repudiation caused a loss of opportunity of some value.

53 More specifically, the first matter upon which Reading relied in that regard was his Honour's finding that approval of venture finance by GE Capital was not certain and would have taken months, rather than weeks, to obtain. In the course of his reasons on this issue, however, his Honour analysed carefully the evidence that had been given before him in relation to the possible provision of finance by GE. His Honour heard evidence from Mr Notaras who held the position of director of property finance and investment with GE, and who was responsible for the negotiations between GE and Burstone in relation to the possible GE take-out facility. Mr Notaras said that he considered the proposal had merit, that it had prospects of success, and that he was serious about funding the proposal. He said that such concerns as he had were 'normal concerns' and that they were not 'insurmountable'. His Honour accepted that evidence, concluding:**

The proposed take-out facility, which was the subject of the GE letter of 26 October 1999, had prospects of being approved. Approval was not certain and considerable further work would have had to have been done in order to obtain an approval. Mr Notaras' cautious optimism was well-founded.

It is clear that in relation to this matter his Honour was satisfied on the balance of probabilities that there were prospects that the GE finance would have been obtained. Such a conclusion was plainly open to him.

54 Reading also relied upon the finding of his Honour that, pending any approval of the GE Capital proposal, separate finance arrangements would have to be put in place to repay the Bank of Melbourne. His Honour made the following specific findings in relation to this:

On the other hand, there are also circumstances suggesting that the redevelopment might have reached completion. GE was interested in the take out finance proposal and there were prospects that it would have been obtained. The project was one that was capable of obtaining traditional bank finance. Whilst the Coles arrangement theoretically needed to be consummated by 20 December 1999, in fact Coles remained interested in leasing premises in a redeveloped Whitehorse Plaza shopping centre after December 1999 and eventually did so from Centro. The Bank of Melbourne probably had no immediate intention of taking recovery action in the latter part of 1999, notwithstanding the reservation of their position in their correspondence. Ms Khor and Mr Burr could have repaid the Reading loan, if they had been prepared to make a major effort to do so, and could have contributed substantial capital to the project provided they were not required to do so before mid-2000. Given the time needed for the finance arrangement and the time needed to comply with the speciality leasing pre-commitment requirement, this is probably when any substantial equity contribution would have been required.

But, generally, once Reading had been put in a position where third parties, whether they be banks or prospective tenants or others, had been given commitments, Reading probably would have forced the project through.

**55 In our view each of those findings was open on the evidence. In so far as the ultimate financing of the project is concerned his Honour analysed the evidence given by two finance experts, Mr Roberts and Mr Franzese. He concluded that if the matter had been diligently and competently pursued it was probable that Burstone would have obtained finance of $35 million from an Australian bank. It is true that his Honour considered that, to obtain traditional bank finance, the parties would each have to make equity contributions of between $3 million and $5.5 million. But his Honour concluded that, taking into account the funds which subsequently became available in May 2000, Burstone would have had the capacity to make such contribution by about mid May of 2000. That finding was also open on the evidence. Likewise, the finding of his Honour that, as of October 1999, the project was still in the town planning phase, a matter on which Reading relied, has to be considered in the context of the findings that drawings, feasibilities and programs which were appropriate at that stage had been finalised. Furthermore, the evidence before his Honour was that, although Reading had anticipated a difficult process involving objectors, a favourable final decision by December 1999 was predicted. In fact, Burstone succeeded in obtaining town planning approval in mid November 1999. True it is that, as Reading pointed out, his Honour regarded the 40 per cent speciality leasing pre-commitment requirement as an area of uncertainty. Nevertheless, the evidence of Mr Snow, a land economist, was that the 40 per cent pre-commitment requirement was a common requirement and could have been achieved within five to six months. This evidence was supported by that of Mr Close, the expert valuer called by Reading, who said in cross-examination that meeting the 40 per cent pre-commitment 'would be reasonable'. His Honour accepted that evidence and concluded that the 40 per cent special leasing pre-commitment requirement was usual and achievable within a five to six month period. In so far as the construction costs were concerned, the evidence of Mr Beattie, the managing director of Davis Langdon Australia Pty Ltd, the quantity surveyor for the project, was that the various cost plans produced represented the accurate cost estimates based upon the material which was then available, although he conceded that, as of October 1999, that material was limited. It was in this context that his Honour considered that the estimate of construction costs should include a contingency allowance of up to 10 per cent.

56 It is true that his Honour did conclude that, as at October of 1999, the relationship between the joint venture partners was not satisfactory and that if the venture had continued there were a number of matters on which they would have needed to co-operate, and he expressed the opinion that there was a significant prospect that, even if Reading had decided to continue in October 1999 and even if the other hurdles such as finance had been overcome, some further major dispute would have brought the venture to an end before its conclusion. He described that matter as a significant risk. In our view, however, these findings do not lead to the conclusion that the prospect of Burstone acquiring the ultimate benefits of the venture was improbable, speculative and of negligible value. His Honour gave careful attention to the abovementioned risks which the redevelopment proposal faced, concluding that they went beyond the ordinary risks of property development. It was in that context that his Honour proceeded to assess the degree of probability of Burstone realising the benefit of the development and concluded, as has been noted, that the degree of probability was in the order of 30 per cent of the value of the benefit (after making allowance for the ordinary risks of property development). In doing so, his Honour plainly had regard to the principles set out in Sellars. In the circumstances, we would reject grounds 4 and 5.**

**57 We now turn to Burstone's cross-appeal under cover of which it is argued that his Honour erred first, in a number of respects in his assessment of damages of $3 million in favour of WPG and secondly, in his rejection of the claim that WPG indemnify Burstone Victoria, Khor and Burr for the costs they incurred in the proceeding. The key steps in his Honour's assessment of damages have already been summarised. And Burstone did not contend that his Honour misdirected himself with respect to the legal principles for the assessment of damage for 'loss of chance', which are set out in his Honour's reasons. The principles include the requirement that, where a commercial opportunity that has more than merely negligible value has been lost, the court assesses damages reflecting the value of that opportunity by assessing the probability of its occurrence.[16]

58 Before considering the specific complaints it will be helpful to examine in more detail than we already have the method adopted by his Honour in calculating the lost opportunity, as to which there was no complaint by Burstone. As we have already noted, the trial judge regarded the proper approach to the assessment of Burstone's loss was to calculate the net value of the redevelopment as at October 1999 if completed as planned and to compare that outcome with that which in fact occurred, and then adjust the resultant figure to reflect his Honour's assessment of the degree of probability that the redevelopment would have been brought to a successful end. In making these assessments, the judge accepted, as has been noted, the value of Landmark White as a reliable starting point and, subject to what follows, also accepted the assessment of expenses which it had adopted. Both at trial and on appeal, Burstone accepted that an assessment of the claim for loss may begin with the 'as if completed' value followed by deduction of development costs in the manner undertaken by Landmark White to reach the residual or 'as is' value. Save for the matters that are the subject of the cross-appeal, however, no complaint is made about the trial judge's employment of the methodology which had been used by the valuer to arrive at the 'as is' value.**

**59 Under cover of ground 1 Burstone claimed that, after accepting that total development costs were approximately $25.7 million, his Honour erred in adding an additional $1 million as contingency for cost overruns. In its assessment of total expenses, Landmark White had allowed a contingency for construction cost overruns of 5 per cent on the basis of the costings of Clifton Project Management, the project manager, and Davis Langdon Australia, the project quantity surveyor. His Honour, however, considered that it would be appropriate to add a further $1 million to the expenses to allow for an increase in the contingency for cost overruns from 5 per cent to 10 per cent. His Honour said that he did so on the basis of the evidence of Mr Beattie from Davis Langdon and Mr Fox, one of the authors of the Landmark White valuation, both of whom had been called by the Burstones.

60 In his evidence, Mr Beattie said that the preliminary cost plans he had produced were based upon sketchy information and that the project was a difficult one to cost accurately due to its changing nature and uncertain scope. He then gave evidence that, in considering the margin for error in the calculation of costs for the project, an allowance 'in the order of 10 per cent' for cost overruns should be made. Mr Fox, in his oral evidence, said that the effect of a 10 per cent cost contingency allowance on the Landmark White valuation would be to reduce the 'as is' valuation by $1 million.

61 Burstone contended that his Honour erred in deducting the full $1 million without making any findings about the actual likelihood of any construction cost increases. In our view this contention is without substance. It was Burstone's expert witnesses who had assessed this contingency and their conclusion was reflected in their evidence. Moreover, it is plain that in arriving at the impugned contingency the judge had regard to the potential for such cost increases. In that respect, his Honour had regard, for example, to the evidence of Mr Beattie that the number of changes, the extensive time lapse, and other aspects of the project, indicated that a contingency allowance on his costings of 10 per cent was more appropriate than the usual 5 per cent. The trial judge accepted evidence of that witness that a 10 per cent allowance, rather than a 5 per cent allowance, should be made. His Honour also accepted the evidence of Mr Fox as to the effect that the increased allowance would have on the valuation, and deducted $1 million from the value of the development accordingly. We note that it was not suggested on appeal that the experts' estimate of how much should be allowed by way of contingency had been contested at the trial. In the circumstances, it was plainly open to his Honour to act upon this evidence and to deduct in full the additional $1 million reflecting the 10 per cent cost overrun contingency.**

62 The second complaint raised by Burstone under ground 1 was that the trial judge erred in deducting approximately $4.3 million, to which reference has been made, being half of the developer's margin, from the gross value of the development as planned, being the difference between the net value of the project as planned - approximately $25.5 million - and the net price achieved, leaving the amount of approximately $14.4 million. We consider that this complaint is also without substance. We have already summarised his Honour's reasons in coming to the impugned conclusion. It will be recalled that the Landmark White report deducted from the 'as is' value of the project the amount of $8.7 million, described as a 'Developer's Margin (Profit and Risk)'. The developer's margin was 20 per cent of the total project costs and was the subject of oral evidence from Mr Simon Fox of Landmark White, one of the report's authors. Mr Fox described the allowance for the developer's margin as follows:

Now, your developer's margin, there - - - ? - - - Yes. $7,727,502, what are you reflecting there? What is the item it is not really an expense? - - - No, no, that - - -

What are you reflecting there? - - - Well, I think that is the, the return that a developer would seek in undertaking the risk of the project, and achieving the end result, based on the assumptions that are outlined.

Right? - - - In ascertaining that 20 per cent, 20 per cent would be, if you like, a standard profit and risk allowance, or developer's margin. They would want a rate of return that would be accepted by developers of retail property in the marketplace.

Right. So that is your assessment of an allowance for the standard risks of projects of this type? - - - The profit risks, and I gather, looking through the breakdown, I don't think it is being able to achieve the leasing of the specialty tenancies, being able to secure the tenants, being able to complete the construction in the timeframe calculated, being able to achieve the end realisation, being the 'as is' complete valuation.

So it is everything that might stop the developer getting to a successful conclusion? - - -Yes; what would they be willing to accept as a return for taking on that risk.

Yes. So if, in a particular development, the risks were higher than standard, you could reflect that by increasing the developer's margin? - - - You could. You could. Obviously, in arriving at that 20 per cent, it was obviously a consideration of mine as to, if this project was returned to the marketplace what would a developer adopt as a, as an allowance for profit and risk, reflecting the nature of the development proposed, the location of the property, the underlying demand for an asset of that nature?

The 20 per cent margin allowed by Mr Fox was based upon 'the breakdown' or assumptions that the redevelopment would have been completed. The trial judge viewed the developer's margin used in the Landmark White report as evidencing the 'ordinary risks' of any property development on that basis.

63 But as we have noted, his Honour did not accept that the 'developers margin' was properly characterised as a cost of the project. Rather, as has been mentioned, he treated part of that amount as reflecting the value of the risk that was inherent in the redevelopment and, therefore, an amount that should be deducted from the 'as if complete' value. Thus, after deducting the expenses which would have been incurred in completing the project, his Honour deducted only half of the sum allowed by Landmark White for the 'developer's margin' on the basis that it reflected the development risk of the project. His Honour said in this respect:

All property development involves risk. It is for that reason that, when Landmark White calculated their 'as is' value they deducted, exactly as if it were an expense, the item 'Developer's Margin (Profit and Risk)', which they calculated at 20% of the project costs. The deduction Landmark White made was $8,727,502.

It might have been contended that the developer's margin ought to be included as a cost, exactly the same as every other cost, representing as it does the normal profit and risk allowance that a developer would require. On the other hand, the developer's margin could be treated as an asset of WPG, as if its realisation was certain, the developer being WPG itself. Mr Smith adopts this approach. Indeed he goes even further and recalculates the developer's margin so as to arrive at a significantly higher figure.

In my view, both these approaches are wrong. The developer's margin is not an expense like the construction cost. It represents potential profit and it is compensation for risk. It is a profit that WPG had the opportunity to earn. It is not an expense. Nor is it a certain asset. If it were, property development would be guaranteed to be profitable. It is not.

The usual developer's margin calculation does give some guide to the dimensions of the ordinary risks of property development. In effect, Landmark White are expressing the opinion that this project would not be worthwhile unless a profit of at least $8,727,502 was there to be realised as recompense for the risk being undertaken.

In order to reflect both WPG's potential to earn the developer's margin, as calculated by Landmark White at $8,727,502, and to also reflect the allowance for risk implicit in that figure, I consider that a deduction of half that sum, $4,363,751, is required.

**64 Burstone contended that it was not open to make such a deduction. We note, however, that although valuation evidence was given by at least four witnesses including Mr Fox, one of the authors of the Landmark White report, Burstone's present claim was not explored with any of them and no submission to that effect appears to have been made to the trial judge. The evidence at trial proceeded upon the basis that the developer's margin should be treated in the same way as development costs and that an allowance for profit and risk as well as potential expenditure should be deducted from the 'as if completed' value. This approach reflected the fact that a purchaser will not pay the end realisation value as they have to incur risk and expend money to achieve the 'as if completed' value.[17] There is some force in the contention of counsel for Reading that had Burstone raised this argument in the course of the testimony of any of the expert witnesses, it might have been answered by evidence and cannot now be raised.[18]

65 While Burstone accepted that ordinary risks may be allowed for as part of the probability of realisation, it claimed that the deduction of the developer's margin resulted in 'double counting' because his Honour also considered that the project had only a 30 per cent chance of reaching completion. This argument, however, incorrectly assumes that the risks included in the developer's margin were again taken into account at that point of the assessment. His Honour, however, did not make such a fundamental mistake. The learned trial judge made the impugned decision for the purpose of determining the base 'as if completed' figure before proceeding to discount it to reflect WPG's chance of achieving such completion.[19]

66 The calculation of the 20 per cent risk allowance rested on assumptions unrelated to completion risks that were identified in the Landmark White report all of which were made on the basis that the development would be completed. The 'ordinary risks' allowed for by the developers margin were those explained in the evidence of Mr Fox concerning the completion of construction on time and the letting of specialty tenancies and the assumptions set out in his report, all of which assumed a completed project.

67 The ordinary risks were to be contrasted with what the trial judge described as 'peculiar risks' facing the joint venture when he came to assess the probability of it realising the benefit of the completed development. They were risks that the project would not be completed and were essentially those that have been described earlier. All of these risks were not catered for by the Landmark White valuation.

68 Burstone submitted that the developer's margin, while relevant to the calculation of the 'as is' valuation of the redevelopment, did not inform the calculation of the value of the project to the developer for the purpose of assessing damages. It contended that the Landmark White 'as if complete' valuation was not in any respect a function of the developer's margin, so that in assessing damages 'as if the contract had been performed',[20] for the 'plaintiff's expectation of receiving the defendant's performance',[21] the developer's margin was irrelevant. In our view, however, in order to assess the projected value of the contractual benefit to WPG, it was appropriate for his Honour to take into account that, had the development proceeded to completion, WPG would have incurred costs and taken the risks which had been identified in the Landmark White valuation. Damages are to be assessed at the time of breach by reference to events which have occurred or could reasonably be expected to occur as at that date.[22] The developer's margin represented valuation of the risk to be incurred in realising the expected benefit. In the circumstances, it was properly deducted from the projected end value.[23]

69 Burstone complained that his Honour never identified the 'ordinary risks' of property development to which he had regard in deducting half of the developer's margin. But the existence of these risks, as identified by the valuers, was not in issue at the trial. There was no need for the judge to identify the nature of these risks. His Honour made clear that the full profit margin included in the valuation should not be allowed as a matter of common experience and common sense as there was no guarantee that this margin would be realised. As we have said, in the circumstances, the value of the risk to be incurred in realising the expected benefit − represented by the developer's margin − was appropriately deducted by his Honour to arrive at a base figure before proceeding to discount that figure for the chance of that benefit being acquired.**

Claimed error in 70 per cent 'discount' in calculating loss of chance

**70 Burstone further alleged that the trial judge erred in discounting the value of the development 'as if complete' by as much as 70 per cent, having regard to the particular risks the development project faced. It is perhaps more accurate to say that his Honour assessed the probability of the full value of the redevelopment being realised at 30 per cent.

71 Be that as it may, in assessing the chance of the development proceeding to completion, the judge had regard to the 'peculiar risks' this particular project faced which we have already mentioned. Burstone argued that his Honour did not analyse any of the peculiar risks associated with the redevelopment, contending that it would not support an assessment of the chance of the development being completed at anything less than 50 per cent and that the figure his Honour arrived at was inconsistent with his own reasoning concerning each individual peculiar risk.

72 In support of this submission Burstone cited examples of where, in their view, the language used by the judge in describing the nature and extent of a risk was inconsistent with the finding that the risk would probably be realised. For instance, Burstone submitted that his Honour's statement that 'GE was interested in the finance proposal and there were prospects that it would have been obtained' indicates that his Honour found that it was more probable than not that GE would provide finance. But that is not what his Honour said, nor do we understand it to have had that meaning. His Honour's use of the word 'would' in the sentence quoted does not mean that he regarded the chances of finance being obtained from GE as being greater than 50 per cent. The judge was not concerned, in that passage, to quantify the risk. Simply to say that there was a 'prospect' that something 'would' happen does not imply that the prospect is greater than 50 per cent.

73 All of the other examples set out by Burstone in support of this submission involving the use of words such as 'might', 'could' or 'would' face the same difficulty. They unjustifiably attributed an exact, or quantifiable, meaning to the conditional language used by the judge which was, intentionally not of that character. We consider that the following passage provides a more reliable guide to his Honour's reasoning in assessing the value of the lost chance:

I have to do the best I can to assess the probabilities of WPG realising the benefit of the redevelopment. If I were deciding this issue on the balance of probabilities, I would conclude that WPG would not have realised the benefit of the redevelopment. The authorities require, however, that where the opportunity lost has some value, which this one does, I must assess the degree of probability of realisation. When dealing with hypothetical events this is never easy. Doing the best I can, I assess the degree of probability of WPG realising the benefit of the redevelopment at 30 per cent of the value of that benefit ...**

The overall assessment recorded in this passage is not contradicted by other observations his Honour made about the particular risks the project faced. Reading rely heavily upon this finding that it was unlikely that WPG would overcome a number of contingencies and realise the financial benefits of the redevelopment.[24] The risk of a premature failure because of disputation between the parties was very real. The course followed by Reading was a direct consequence of the relations between the joint venturers. Unsurprisingly, the trial judge rejected submissions that the relationship between the joint venturers was satisfactory or that there was little scope for serious disagreement.

**74 Burstone's challenge to his Honour's assessment that the development had a 30 per cent chance of proceeding to completion must also fail on a more fundamental ground. Its submissions assume that the individual risks can, and must, be considered independently. We do not accept that one can dissect the reasons of the trial judge and assign a degree of probability to each risk to contradict his Honour's conclusions.[25]

75 Burstone further assumed that each risk must be regarded as more likely to occur than not if the judge's assessment is to stand. These assumptions were evidently not shared by his Honour, who said:**

I have canvassed the facts of this matter in detail. One of the reasons for doing that is because it seems to me that that process reveals the nature and significance of these peculiar risks. It is impossible to catalogue and assess these risks individually because they bear upon and compound one another. There are myriad circumstances that may have occurred which would have prevented WPG from ever obtaining the benefit of the redevelopment. (Emphasis added).

Thus, Burstone's submissions do not engage directly with this aspect of his Honour's reasoning, which is grounded in his assessment of the facts based on the evidence before him, and which this Court is in no position to gainsay. Further, there is nothing to suggest the judge made any error of principle. So long as the risks bore upon each other, his Honour was driven to make an overall assessment of the chance of the development being completed, which could not rest simply on the analysis of the risks considered individually. Such a hypothetical evaluation does not ordinarily admit of precise calculation but is a matter of impression.[26]

**76 Even if Burstone was correct in its assertion that 'the individual findings made in the judgment concerning each of [the peculiar risks] is that it was more likely than not that the risk would not materialise,' this would not necessarily mean that his Honour erred as alleged. Basic probabilistic reasoning makes plain that if there were a number of risks to completion, each of which has less than a 50 per cent chance of occurring, the overall risk to the project could well be greater than 50 per cent.

77 Thus, we see no error in his Honour's assessment of the probability of the full value of the development being realised.[27]**

**78 As noted, the learned primary judge ordered that Reading pay 60 per cent of the costs of WPG and Burstone incurred in litigating their counterclaim. At trial and on appeal Burstone contended that an order should have been made that WPG indemnify the Burstone parties for all costs and expenses reasonably and properly incurred by them in the counterclaim brought against Reading in the proceedings below. In his reasons of 10 May 2005, the trial judge noted that beyond an assertion that such an order would be fair, no submission or authority was cited in support of that contention. His Honour was not prepared to make such an order.

79 Burstone seeks leave[28] to argue that the trial judge erred in principle or failed to take account of a relevant consideration in refusing to make an indemnity costs order against WPG in Burstone's favour. It was submitted on the appeal that a joint venturer who sues in the name of the joint venture vehicle should receive indemnity costs. Burstone relied on his Honour's finding that it brought the counterclaim against Reading as beneficiaries of the Whitehorse Trust to enforce the rights of the trustee where the trustee had refused to initiate proceedings. In this respect, his Honour cited Bhagat v Australian Securities Commission,[29] Lidden v Composite Buyers Limited[30] and Lamru Pty Ltd v Kation Pty Ltd.[31] This finding was not challenged on appeal. Thus, Burstone submitted, WPG should indemnify it for all costs incurred in litigating their counterclaim.

80 Burstone cited Wallersteiner v Moir [No 2],[32] McDonald v Horn[33] and Farrow v Registrar of Building Societies[34] in support of this contention. In Wallersteiner the plaintiff, being a minority shareholder who was suing on behalf of the companies, obtained an order that he should be indemnified by the companies for the past and future costs of the action. Lord Denning drew upon the judgments of Sir James Wigram VC in Foss v Harbottle[35] and Sir William Page in East Pant Du United Lead Mining Co Ltd v Merryweather[36] and more recent decisions in reciting the right of a minority shareholder to commence a derivative action as the company's representative to obtain redress on its behalf.[37] Where that circumstance pertains, Lord Denning found that the minority shareholder as the agent acting on behalf of the company was entitled to all of the costs reasonably incurred by him in the course of the agency. The Master of the Rolls and Buckley LJ regarded it as significant that if the action succeeded the whole of the benefit would go to the company.[38] Buckley LJ also thought that in a minority shareholder action properly and reasonably brought and prosecuted, it would normally be right for the company to be ordered to pay the costs of the plaintiff so far as he does not recover them from any other party.[39]

81 In McDonald, a member of a trust fund sought to compel the trustee to account to the fund and sought pre-emptive indemnity costs. Hoffman LJ, with whom the other members of the Court agreed, recognised that the Court of Appeal in Wallersteiner had treated the derivative action, in which the minority shareholder could sue, as analogous to a trustee suing on behalf of a fund with the same entitlement to be indemnified out of the assets.[40] His Lordship concluded that the procedure in Wallersteiner could be applied to the action before him because it was sufficiently analogous to a derivative action by a minority shareholder on behalf of a company.[41] His Lordship considered the analogy between company and shareholders, on the one hand, and members and trustee of a pension fund, on the other, as much stronger than in the case of an ordinary trust because the pension fund was a special form of trust in which the member was alleging injury to the fund as a whole and was seeking restitution on behalf of the fund, more importantly both shareholders and members of a fund had given consideration for their interest.[42] They were not recipients of the settlor's bounty, nor was the control of the trust entrusted to the trustee of the settlor's choice. The relationship between members of a fund and trustee was a commercial one. The court distinguished such relationships from trust proceedings where the beneficiary has his, her or their own cause of action and makes a hostile claim against a trustee or another beneficiary. In those circumstances costs usually follow the event.[43]

82 There are other illustrations of beneficiaries of a fund who have initiated proceedings to enforce the rights of a trustee who was unwilling to take proceedings, and who have been indemnified by orders that their costs be paid out of the trust fund.[44] But we were not referred to any authority in which such an analogy has been drawn in the case of beneficiaries of an ordinary trust where, as here, the proceeding was brought essentially for the benefit of the claimant.[45] As we have mentioned, before the trial judge, no attempt was made to establish that the position of Burstone as a joint venturer was sufficiently analogous to those derivative actions in which indemnity costs were ordered. In its present claim, Burstone simply asserted in its outline of submissions that Wallersteiner, McDonald and Farrow are authority for the proposition that such an order should have been made by the trial judge. As we have said, such a conclusion does not necessarily follow from those authorities.

83 There is some force in Reading's written submission that the action should not be characterised as one brought by Burstone for the benefit of WPG. Burstone sought to acquire a direct benefit from the action in seeking a half interest in the claim brought in the name of WPG, and in their independent claim for reliance loss. Both of these claims were pleaded and failed as a set off against the Reading claim. Whether the claim could be said to have been brought 'essentially for the benefit' of WPG[46] so as to provide reason to award indemnity costs is one about which we have serious doubt. But, as no oral argument addressed the question whether the nature of the claim by Burstone in respect to the joint venture vehicle was sufficiently analogous to an action by a minority shareholder or a member of a fund, we express no concluded view on this issue.

84 In Wallersteiner, McDonald and Farrow a pre-emptive costs order was sought and granted. When WPG was joined as a defendant to counterclaim, the amendment for which leave was given stated that WPG was joined as a 'defendant as a necessary and proper party but no relief is sought against it'. No order was sought at the time of joinder for Burstone to have indemnity costs for bringing the action in the name of WPG.[47]

85 Be that as it may, we consider that, even if it be assumed that the nature of Burstone's claim against WPG gave rise to a potential right to indemnity costs and that Burstone could raise the matter for the first time at the conclusion of the trial, it remained the case that his Honour possessed a broad discretion to award costs in civil proceedings.[48] And it is apparent that, in ordering that Reading pay 60 per cent of the Burstone parties' costs, his Honour carefully took into account a variety of factors in arriving at his decision. First, his Honour considered the Loan Agreement entered into between Khor and Burr as borrowers and Reading Australia as lender, as earlier explained. The loan, in the amount of $2.2 million, was integral to the joint venture agreement as it enabled Khor and Burr to match Reading's 50 per cent interest in the WPG Trust. Reading submitted that it was contractually entitled to its costs on an indemnity basis pursuant to the provisions of the Loan Agreement[49] in relation to its claim and in resisting Burstone's claimed set-off . His Honour found that the costs incurred by Reading fell within the contractual provisions[50] but did not include those costs incurred by Reading in resisting the successful claim made on behalf of WPG by Burstone in the counter claim. His Honour's decision that the costs to which Reading was entitled should reflect the contractual entitlement of Reading under the Loan Agreement was not challenged on appeal.[51] As discussed below, his Honour took Reading's contractual entitlements under the Loan Agreement into account in apportioning costs between the parties in arriving at the final costs Order.

86 Secondly his Honour took into account the fact that on 25 July 2002 Reading made an offer of compromise to Burstone. The offer was divided into two parts. The first part related to the payment by Reading to WPG of $400,000 in respect of the town planning costs claim.[52] His Honour pointed out that 'on any view less ha[d] been recovered'[53] by Burstone, which prima facie entitled Reading to an order that Burstone pay its costs in respect of that claim after 25 July 2002 on an indemnity basis pursuant to r 26.08(3). The second part of Reading's offer of compromise offered to pay Burstone $100,000 to settle the remainder of its counterclaim. While Burstone did not recover anything for itself as a result of the counterclaim, the amount ultimately recovered by Burstone in the counterclaim on behalf of WPG was considerably more than the $100,000 offered by Reading.

87 In sum, the judgment in favour of Burstone on the counterclaim against Reading was less favourable than the first part of the Reading offer of compromise but more favourable than the second part of the offer of compromise. His Honour was of the opinion that Reading should have the benefit of the operation of r 26.08(3) in relation to the first part of the offer of compromise. As to the second part, his Honour viewed the offer as less favourable to Burstone than the judgment on the counterclaim, and in any event was prepared to 'order otherwise' under r 26.08(3) so that it was not engaged.

88 Relying upon the rationale for the principle stated in Wallersteiner, counsel for Burstone submitted that in the absence of an indemnity costs order Reading, the repudiating party, would make a profit from its wrong doing. We do not agree. The trial judge was careful to ensure that a costs order was made that reflected the justice of the entire proceedings. Even in Wallersteiner, where an indemnity costs order was made before trial, Buckley LJ recognised that the trial judge is the proper person to decide what portion of costs should be awarded where the other party has been successful on some issues.[54] Lord Denning and Buckley LJ also observed that for the costs to be recoverable they cannot have been recovered from another party and must have been reasonably incurred. Marks J expressed a similar view in Farrow.[55]

89 Although Burstone succeeded on the principal issue in its counterclaim, there were a number of issues which Burstone abandoned and a number which failed. His Honour was entitled to conclude that the ultimate costs order should reflect that position. In cases where neither party is wholly successful there are clearly practical difficulties in awarding costs on an issue by issue basis which would involve making separate costs orders. His Honour took a pragmatic approach, which has much to commend it, of apportioning the costs between the parties.

90 His Honour commenced the apportionment assessment by recognising that Burstone was substantially successful on the principal issues on the counterclaim. He then reduced the costs to which Burstone would be entitled on the counterclaim by 20 per cent to make allowance for Reading's contractual entitlements to indemnity cost under the loan agreement. His Honour made a further reduction in the costs to which Burstone was entitled of a further 20 per cent to make allowance for the issues Burstone raised in its counterclaim and later abandoned or upon which it failed. These were claims, some in WPG's name and some in Burstone's name, for consequential and reliance loss. His Honour also made an allowance for Readings' entitlement to a costs order in relation to the first part of their offer of compromise under r 26.08(3). There is no challenge to this exercise of the trial judge's discretion. That is to say, Burstone has not disputed the apportionment conclusion that they should have only 60 per cent of their costs from Reading.

91 Thus, even assuming that the present circumstance was sufficiently analogous to those derivative actions in which an order for indemnity costs has been made, an order that WPG indemnify Burstone for all of their costs on their counterclaim would undermine the purpose and effect of the costs order that was made. Reading was obliged to pay Burstone 60 per cent of their costs. It could not have those against WPG. And the order sought would defeat the purpose of the apportionment undertaken by his Honour in which the costs to which Reading was entitled from its claim and the failed claims of Burstone were set off against the costs that Burstone should have on the counterclaim. The order sought would result in Burstone receiving a larger proportion of its costs than his Honour thought appropriate and would require Reading, through its interest in WPG, to contribute more towards Burstone's costs than his Honour thought just. In the circumstances, therefore, no error has been shown which would justify interfering with the costs order pronounced. Accordingly, we would refuse the leave sought.**

92 For the stated reasons, we would dismiss the appeal and cross-appeal.

[1] Unless otherwise indicated, for convenience, we shall refer hereafter to the joint venture agreement and the agreement for lease as 'joint venture agreement'.

[2] [1994] HCA 4; (1994) 179 CLR 332, 355.

[5] Koompahtoo Local Aboriginal Land Council v Sampine Pty Ltd [2007] HCA 61 [44]-[45] (Gleeson CJ, Gummow, Heydon and Crennan JJ).

[6] Rawson v Hobbs [1961] HCA 72; (1961) 107 CLR 466, 480-1 (Dixon CJ) ('Rawson'); DTR Nominees Pty Ltd v Mona Homes Pty Ltd [1978] HCA 12; (1978) 138 CLR 423, 433 (Stephen, Mason and Jacobs JJ); Foran v Wight [1989] HCA 51; (1989) 168 CLR 385, 402, 406-7 (Mason CJ), 424-5, 427 (Brennan J), 450-2 (Dawson J) ('Foran').

[7] Rawson [1961] HCA 72; (1961) 107 CLR 466, 481 (Dixon CJ); Foran [1989] HCA 51; (1989) 168 CLR 385, 408-9 (Mason CJ), 425 (Brennan J), 452-3 (Dawson J).

[8] McDonald v Dennys Lascelles Ltd [1933] HCA 25; (1933) 48 CLR 457, 476-7 (Dixon J); Victorian Economic Development Corporation v Clovervale Pty Ltd [1992] VicRp 40; [1992] 1 VR 596, 603 (Tadgell J).

[9] Hensley v Reschke [1914] HCA 88; (1914) 18 CLR 452, 462-3 (Barton J), 467-8 (Isaacs and Rich JJ); Foran [1989] HCA 51; (1989) 168 CLR 385, 402-3, 406 (Mason CJ), 430-1 (Brennan J), 454-5 (Dawson J).

[10] We reject Burstone's argument that it accepted Reading's repudiation in its letter to Reading of 19 November 1999. It is apparent from its terms that Burstone did not purport thereby to accept Reading's intimation that the agreement was at an end.

[11] [1989] HCA 51; (1989) 168 CLR 385.

[12] [1961] HCA 72; (1961) 107 CLR 466, 481 (Dixon CJ).

[13] As has already been noted, the position for which Reading now contends as to the appropriate test, and which we accept, was not put to his Honour by Reading and was only raised for the first time in the appeal. Given that no objection was taken to this course by Burstone, we proceeded to hear and deal with the appeal on the basis now explained.

[14] [1994] HCA 4; (1994) 179 CLR 332, 367-8.

[15] Sellars [1994] HCA 4; (1994) 179 CLR 332, 355.

[16] Sellars [1994] HCA 4; (1994) 179 CLR 332, 355 (Mason CJ, Dawson, Toohey and Gaudron JJ); Malec v J C Hutton Pty Ltd [1990] HCA 20; (1990) 169 CLR 638, 642-3 (Deane, Gaudron and McHugh JJ).

[17] Alan A Hyam, The Law Affecting Valuation of Land in Australia (2004, 3rd ed) 96-7, 124-6.

[18] Counsel for Reading referred to Water Board v Moustakas [1988] HCA 12; (1988) 180 CLR 491, 498.

[19] As to the difference between particular loss contingencies and loss of a chance see Fightvision v Onisforou (1999) 47 NSWLR 473, 505-6; Norris v Blake [No 2] (1997) 41 NSWLR 49, 66. See also Jacobs, Damages in a Commercial Context, 15.13; Chappel v Hart (1998) 195 CLR 232, 262-3; Sellars [1994] HCA 4; (1994) 179 CLR 332, 349-50, 358-9; Wynn v New South Wales Insurance Ministerial Corporation [1995] HCA 53; (1995) 184 CLR 485, 497-500.

[20] Robinson v Harman [1848] EngR 135; [1848] 1 Ex 850, 855; ER 363, 365 (Parke B).

[21] The Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54; (1991) 174 CLR 64, 80 (Mason CJ and Dawson J).

[22] Johnson v Perez [1988] HCA 64; (1988) 166 CLR 351, 355, 367, 372.

[23] Alan A Hyam, The Law Affecting Valuation of Land in Australia (2004, 3rd ed) 196 citing Executors of the Will of Lady Hay v Valuer General (1931) 2 The Valuer 52, 53 (Pike J).

[24] Sellars [1994] HCA 4; (1994) 179 CLR 332, 358-9.

[25] Adelaide Petroleum NL v Poseidon Petroleum Ltd (1990) 98 ALR 431, 531.

[26] Wynn v New South Wales Insurance Ministerial Corporation [1995] HCA 53; (1995) 184 CLR 485, 499; Malec v JC Hutton [1990] HCA 20; (1990) 169 CLR 638, 640.

[27] CSR Readymix v Payne (1998) 2 VR 505, 508 (Winneke P).

[28] Leave is required under s17A(1)(b) of the Supreme Court Act 1986 to appeal against an order as to costs.

[29] (1995) 16 ACSR 536.

[30] (1996) 67 FCR 560.

[31] (1998) 44 NSWLR 432.

[32] [1975] QB 373.

[33] [1995] 1 All ER 961.

[34] [1991] VicRp 96; (1991) 2 VR 589.

[35] [1843] EngR 478; (1843) 2 Hare 461, 491-2.

[36] [1864] EngR 824; (1864) 2 Hem & M 254; Atwool v Merryweather (1867) L.R. 5 Eq.464, 467-8.

[37] Wallersteiner v Moir [No 2] [1975] QB 373, 390-1.

[38] Ibid 389, 391-2 (Denning MR), 399 (Buckley LJ).

[40] [1995] 1 All ER 961, 972.

[44] Dal Pont, Law of Costs, [10.1], [10.18] citing Permanent Trustee Co v Redman (1917) SR(NSW) 353, 360; Perkins v Williams (1905) 22 WN (NSW) 107.

[45] [1995] 1 All ER 961, 972-3.

[46] [1991] VicRp 96; (1991) 2 VR 589, 590.

[47] As to the procedure for making such an application: See Dal Pont, Law of Costs [14.10]-[14.15]; Chancery Division Practice note on Prospective Costs Orders [2001] 3 All ER 574.

[48] Section 24(1) of the Supreme Court Act 1986 and r 63.02 of the Rules of the Supreme Court.

[49] Clause 14 of the loan agreement provided that Burstone Victoria guaranteed payment of the 'Monies Advanced'. The term 'Monies Advanced' was defined to include all costs, expenses and fees calculated on a full indemnity basis, incurred by the lender...in acting in or about recovery' of the Monies Advanced

[50] Reading Entertainment Australia Pty Ltd v Burstone Victoria Pty Ltd (No 2) [2005] VSC 137 [21], [24].

[52] See paragraphs 30 to 41 of the Second Further Amended Defence and Counterclaim

[53] Reading Entertainment Australia Pty Ltd v Burstone Victoria Pty Ltd (No 2) [2005] VSC 137, [28].

[54] [1975] QB 373, 403.

[55] Farrow v Registrar of Building Societies [1991] VicRp 96; (1991) 2 VR 589, 595-6.