39 Mr Garling submitted that the statements in the Consultant's report may not amount to statements of the defendant. This is not a matter that is necessary to decide, however I am of the view that the contents of the Report and the defendant's solicitors' letters are relevant to the assessment of the reasonableness of the plaintiff's conduct in holding on to the Property. It seems to me that the plaintiff was led to believe throughout the period that not only would it be able to develop the Property but that it could enlarge its vision and create a more profitable development by the consolidation of 145 Russell Avenue and the Property . I am satisfied that it was reasonable for the plaintiff to hold on to the Property in the hope that the defendant would rezone it. However that does not mean that the plaintiff was entitled to willingly slow down the progress of its developments and then look to the defendant to compensate it for that deceleration." (emphasis added)
51 I have emphasised in this passage the sentences which under ground 7 were said to express an erroneous factual finding. The words "throughout the period" in the second of the sentences meant the period of correspondence from Micro's solicitors, that is, from January 2004, and the sentence was in relation to that period entirely justified. It is not so clear that the first sentence referred to the same period. If referring to earlier times, it was correct to the extent that Mr Daniel gave evidence of contacting Council members, although they told him that the Council did not want to rezone the property.
52 I do not think it necessary to resolve whether the trial judge made a slip in this regard, as I consider that her conclusion was correct. I should say of the trial judge's summary of Mr Daniel's evidence at [37] that I do not see the inconsistency which troubled her Honour, because the comparator with the 1999 value of $660,000 was the 1997 value of the property zoned 2(b1), not its purchase price in the belief that it was zoned 2(c2).
53 The important time for whether Micro failed to mitigate its loss was the latter part of 1999, after Micro had confirmed that the property was zoned 2(b1). The Council submitted, beyond its submission as to an erroneous factual finding, that it was not enough that Mr Daniel anticipated rezoning at some future time and was optimistic that it would occur, and that the Council should not have to bear the consequences of Micro's decision to take the risk of a future rezoning; and it said that prior to 2004 there were no favourable discussions between Micro and the Council in relation to the prospect of the property being rezoned from which Mr Daniel could have been optimistic.
54 Micro was obliged to take reasonable steps to mitigate the loss suffered by the Council's negligence in representing that the property was zoned 2(c2); not meaning that it was subject to a legal duty, but meaning that it could not recover damages for loss which it could have avoided by reasonable steps which it failed to take. The Council bore the burden of establishing that Micro had acted unreasonably and failed to mitigate its loss.
55 Whether Micro failed to take reasonable steps to mitigate its loss is a question of fact. However, mitigation of loss involves a plaintiff's obligation (in the sense above) to act in the interests of the defendant. As was succinctly said of what is required of a plaintiff in Sacher Investments Pty Ltd v Forma Stereo Consultants Pty Ltd (1976) 1 NSWLR 5 at 9 per Yeldham J, "the standard is not a high one, since the defendant is a wrongdoer". In the classic case of Banco de Portugal v Waterlow & Sons Ltd (1932) AC 452, in part concerned with recovery of the costs of remedial steps, Lord Macmillan said at 506 -
"Where the sufferer from a breach of contract finds himself in consequence of that breach placed in a position of embarrassment, the measures which he may be driven to adopt in order to extricate himself ought not to be weighed in nice scales at the instance of the party whose breach of contract has occasioned the difficulty. It is often easy after an emergency has passed to criticise the steps which have been taken to meet it, but such criticism does not come well from those who have themselves created the emergency. The law is satisfied if the party placed in a difficult situation by reason of the breach of a duty owed to him has acted reasonably in the adoption of remedial measures, and he will not be held disentitled to recover the cost of such measures merely because the party in breach can suggest that other measures less burdensome to him might have been taken."
56 Micro could have sold the property in the latter part of 1999, although at a loss taking into account holding costs. Its funds would have been restored to the extent of approximately $660,000. But its development activities had already been disrupted. In the belief that the property was zoned 2(c2), it had spent about two years with the property as a development project: hence the damages in respect of loss of the Hypothetical 1997 development.
57 So far as the reasonableness of retaining the property as a future development project turned on the likelihood of rezoning, that was less critical if, as the trial judge found, Micro had funds to use in the development of other properties and repayment of the $710,000 did not stymie its capacity to proceed with future developments. The reasonableness of Micro's retention of the property involved the consequences of not regaining the $660,000, and the Council was in something of a dilemma in contending, as in substance it did, both that Micro should have sold the property in order to restore its funds and that Micro had not been impeded in its development activities by lack of the $660,000. Equally, in asserting loss measured at over $5,000,000 from lack of funds, Micro gave support to unreasonableness of its conduct. As will appear, in my opinion the trial judge's findings as to Micro's capacity to proceed with future developments should be upheld, and the effect on Micro's development activities was not a compelling factor in addressing unreasonableness.
58 Mr Daniel gave evidence that at all material times three-storey blocks of home units adjoined the property at the rear and on one side, with a two-storey block of town houses on the other side. He said in an affidavit that Micro had always been "hopeful" that the property would be rezoned 2(c2) and that "[i]t would seem to me the appropriate zoning due to the nature of the buildings immediately adjacent to its boundaries and in the general vicinity of the Property". In oral evidence he said that he believed Micro had no choice but to hold onto the property because a replacement site was so expensive, but also that it was kept in order eventually to build on it and make a profit and he hoped to persuade the Council to change the zoning so that home units could be built. He agreed that later in 1999 Micro's solicitors were told that the Council did not want to rezone the property, and said that he "contacted a couple of the council" who told him the same, but also said that "[w]hen we found out we proceeded with court cases in which occurred a year later or whatever to have the council change their mind to rezone that land". He said that although he was told that the Council was not interested in rezoning, Micro went to court "so maybe to rezone the land".
59 The Council relied particularly on Mr Daniel's evidence -
"Q. And having been told that the council was unwilling to apply to rezone the land, you were not given any later information about rezoning until some years later, were you?
A. That's correct.
Q. So at the very latest, about three months after or four months after you saw the zoning plan you knew that the council was not interested in having the land rezoned?
A. Well, according to the council, yes.
Q. You knew at that time that Micro could sell the land if it wanted to?
A. Yes.
Q. What you did, that is, what Micro did, was to keep the land in the hope that the council might later change its mind. Is that right?
A. That's correct.
Q. Do you accept that what Micro did in that respect was to take a risk as to whether or not the council might change its mind?
A. You could put it that way.
Q. It was a commercial risk?
A. Yes."
60 I do not think that these questions in the terms of hope and risk, although agreed to, fully characterised Micro's conduct. There is no doubt that in 1999 the Council was against a 2(c2) zoning - in the mistaken belief that the property was zoned 2(c2), it proposed rezoning to 2(b2). But the adjacent development gave reason to question that zoning for low density and medium density development was appropriate or would continue; the consultant's report, although later, described in some detail the residential flat buildings in the surrounding area and the consultant thought that medium density development of the property would be difficult due to site constraints (that being one reason for the preferred option). In fact the Council deferred the zoning of the property from the 2000 Local Environmental Plan, and did rezone it. Whether or not with some effect from Micro's proceedings - and the Council plainly considered that rezoning was material to Micro's damages - Mr Daniel was proved right. The hope that the property would be rezoned was rationally based and was justified; the measure of the reciprocal risk that the property would not be rezoned was found in the fact that it was rezoned.
61 Micro's business included holding land for opportune development, see the Kings Road development and the Harp Street land. So far as the trial judge's reference to numerous discussions with Council may have referred to the period from the latter part of 1999 until the end of 2003, favourable discussion was not borne out in the evidence, but in my opinion the Council failed to establish that Micro unreasonably retained the property.
62 The Council referred to Patel v Hooper & Jackson (1999) 1 WLR 1792 as an illustration of a plaintiff's failure to mitigate loss by selling a property purchased in reliance on the defendant's negligent advice. The case does not add to the principles, and is an illustration on its own facts.
63 The Council also submitted to the effect that it should be found that the cause of Micro's loss, at least beyond that referable to the lost Hypothetical 1997 development, was Micro's unreasonable failure to sell the property. It follows from what I have said that the submission should not be accepted.