Spralja v Bullard & Ors

3 On the issue of quantum, I have determined that Mr Spralja is entitled to damages in the sum of $247,557.68, plus interest pursuant to s60 of the Supreme Court Act 1986 (Vic) from the date of the commencement of the proceeding (13 February 2014), at the rate prescribed from time to time by s2 of the Penalty Interest Rates Act 1983 (Vic). On costs, my present view is that the defendants should pay Mr Spralja's costs of the proceeding on the standard basis, in the same proportions as the damages (one third each). However, I will invite the parties to seek a different order on costs should they be so advised.

4 The path to that determination has not been straightforward. The unusual facts of this case have given rise to some complex and apparently novel issues in the application of the principles concerning the assessment of damages for negligence. The questions that enliven those issues are as follows:

• What is the nature of Mr Spralja's lost opportunity?

• How and when is that lost opportunity to be valued?

• What is the dollar value of that lost opportunity?

• What (if any) discount should be applied to that value to allow for contingencies?

5 But before turning to each of those questions, I should say something about the procedural steps leading up to the hearing on quantum and briefly reiterate the findings in my earlier reasons that directly inform the analysis in these reasons.

6 On 14 September 2018, I made orders that I had hoped would facilitate a settlement of the quantum question or, failing that, expedite the hearing and determination of that question. Those orders included:

• an order for the appointment of a single joint expert or experts pursuant to s65L of the Civil Procedure Act 2010 (Vic), including orders facilitating the choice of experts and the settling of questions for the experts; and

• an order for mediation, timed to take place after the joint experts had provided their reports.

7 There were a number of delays in completing the steps contemplated by those orders, leading to several extensions of the orders over ensuing months. Some of the circumstances of those delays were referred to in an affidavit by Mr Tuohey of Colin Biggers & Paisley (the defendants' solicitors) sworn 26 April 2019 in the lead up to a directions hearing scheduled for 29 April 2019. Among other things, the affidavit discussed the difficulties experienced by the parties in identifying an expert who was suitably qualified and experienced to provide expert evidence concerning the capital and lease value of Mr Spralja's Shark Quota. The parties were eventually able to retain Mr Anthony Ciconte in around mid-April 2019.

8 A dispute about the consequences of the delays at the directions hearing on 29 April 2019 was averted and orders were ultimately made by consent on the papers on 29 April 2019, fixing new dates for the joint experts reports and mediation. The parties were unable to settle the quantum issue at mediation, and there was a final directions hearing on 24 June 2019 when the hearing on quantum was set for 16 September 2019 and orders were made for (among other things) the appointment of a further single joint expert (Mr Peter Trimbos) to prepare a report on legal costs, and for a court book and written submissions.

9 Despite the difficulties and delays in engaging the single joint experts, it seems to me that this was ultimately a worthwhile exercise. I understand the cost of engaging Mr Ciconte was high, but the cost of two experts in this field would no doubt have been commensurately higher. And the difficulties apparently encountered in identifying even one expert with the necessary expertise and experience to value the Shark Quota, suggests that finding two appropriately qualified experts of similar standing would have been far greater.

10 Further, the parties were required as part of retaining both single joint experts to agree on the questions for their reports, the assumptions they should make and the documents they should consider. This avoided the perennial problem of having two experts opine on different source documents, varying or inconsistent assumptions or in response to different questions. Indeed, experience suggests it is not uncommon for competing expert reports to suffer from all three of these problems.

11 In my experience (and self-evidently), an important additional advantage in parties jointly engaging a single expert is that a single joint expert report can promote settlement and, where that fails, significantly narrow the issues and shorten the time spent on expert evidence during the trial. But not all controversy over the expert evidence is avoided, as this proceeding demonstrates.

12 Generally speaking, although a party has jointly retained an expert, they are not precluded from challenging that expert's evidence. Such a challenge can be made in a number of ways. For example, orders appointing a single joint expert will usually accommodate a party seeking leave to call evidence in opposition, where they are dissatisfied with the single joint expert's report. There may even be cases where both parties seek to adduce further expert evidence. If such leave is granted, the dynamic in relation to the expert evidence will shift, so that it has more in common with the traditional trial, with each party championing a particular expert or experts. Another option is for a party to challenge all or part of the evidence of the single joint expert, without relying on the contrary opinion of another expert, as occurred in this case.

13 Whatever approach a party chooses, it raises questions as to how any challenge to the evidence of the single joint expert should be managed in the trial. In particular, should a party be entitled to cross-examine their own (joint) witness? The short answer is that it is a matter for the trial judge to determine appropriate ground rules for the examination of the single joint expert, depending on the circumstances of the case. In dealing with a query about this on behalf of the defendants in this proceeding, I notified the parties that:

"[A]s a general rule, unless orders are made to the contrary, it is open to a party to disagree with the report of a single joint expert and test the evidence of that expert, including by cross-examination. They can also, with leave, seek to adduce other or additional expert evidence. Obviously, any party that seeks to contradict the evidence of a jointly retained expert is at a significant forensic disadvantage, particularly if they do not propose to call other or additional expert evidence, as appears to be the case here. But they are not precluded from doing so."

14 Similarly, the approach to any cross-examination of the single joint expert raises both trial management issues for the court and (subject to any directions from the trial judge) potentially delicate tactical decisions for counsel. In my view, in the interests of both fairness and efficiency, neither party should be entirely precluded from cross-examining the single joint expert, despite the expert being (in part) that party's witness. But it may be appropriate to canvass with counsel in advance the general subject matter of any proposed cross-examination and set some limits on the scope of cross-examination accordingly. The trial judge might also be more inclined to intervene directly to discourage hostile or tightly closed questions or to ask clarifying questions.

15 Except where a party is seeking to discredit an entire report, cross-examining counsel themselves would need to take care that a challenge to one part of an expert's evidence does not undermine those parts of the report that suit their client's case. And any questions that directly or indirectly criticise the expert questions, assumptions or source material are likely to be problematic (and objectionable), given these will have been either agreed by the parties or settled by the court (or both). Thus, it would be expected that a decision by counsel to embark on the cross-examination of a single joint expert would not be taken lightly and is more likely than not to be significantly more confined than where parties have engaged competing experts. That is what occurred in this case, and only in respect of the evidence of Mr Ciconte. The report of Mr Trimbos was accepted by both parties without demur.

16 After setting out the evidence and authorities relevant to Mr Spralja's repudiation case in the Kelly proceeding, I found that[2] Mr Spralja had good prospects of establishing that the conduct by and on behalf of Mr Kelly summarised in my earlier reasons,[3] amounted to a repudiation of the sale agreement. I later added: "Indeed, if it were necessary to go that far, I would be inclined to agree with Mr Spralja's submission that he had a strong repudiation case".[4]

17 However, I also accepted that Mr Bullard's and Mr Casement's concerns about Mr Spralja's prospects of success in the Kelly proceeding were not unreasonable. Parties to proceedings often do not make good witnesses in their own cause, and Mr Spralja's strong convictions concerning Mr Kelly's claim to the Boat SFR could have adversely affected how his evidence was viewed by the court. On the other hand, I noted that my analysis of the issues in the Kelly proceeding showed that it was primarily a documents case. Thus, concerns about witness performance were subordinate to what was revealed by those documents and played only a relatively minor part in the overall review of prospects.[5]

18 When I later turned to consider what loss Mr Spralja had suffered, I began by outlining the principles governing the question of causation.[6] I noted that the High Court in Badenach v Calvert[7] discussed the importance of taking care not to allow the question of causation to become distorted by speaking of the loss as the loss of a chance. After setting out the relevant passage from Badenach v Calvert,[8] I found that, had the defendants given more balanced, complete and correct advice about Mr Spralja's prospects in the proceeding, his reluctance to settle would have been both more pronounced and clearly stated. This in turn would, in my judgment, have led to no settlement agreement being reached and the original proceeding progressing to a trial in May 2008. Thus the loss sustained by Mr Spralja in this case was the loss of the opportunity to run the original proceeding to trial and determination.

19 I also found based on my assessment of Mr Spralja's prospects of succeeding in the Kelly proceeding, that he had substantial and not merely speculative prospects of improving on what he recovered under the settlement terms. The settlement terms did little more than restore what Mr Spralja was entitled to under the sale agreement, which Mr Kelly was seeking to specifically enforce. I accepted that it also clarified Mr Spralja's entitlement to the Boat SFR and avoided exposure to an adverse costs order and alleged damages, but it left him with the burden of his own costs and made no allowance for his prospects of recovery in respect of each of the matters identified in Mr Spralja's heads of damage document.[9]

20 I concluded on this issue as follows:[10]

"In contrast, it follows from my finding that Mr Spralja had generally good prospects of success in the original proceeding (including on his repudiation case), that he also had good prospects of (as a minimum):

• retaining his Shark Quota and either selling it at a materially higher price than $645,000 (plus GST) or leasing it out and thereby generating income into the future;
• defeating Mr Kelly's claim for damages; and
• securing an order for his costs of the original proceeding.

Those three factors alone are in my view sufficient to support my conclusion that the value of Mr Spralja's lost opportunity to run the case to trial and determination was substantial and not merely speculative. Any additional benefit that Mr Spralja may have secured in relation to the other heads of damage identified by him (inability to lease the Shark Quota prior to trial and recovering costs from WGM) would merely serve to enhance that benefit. I accept that the evidence about these matters was more sketchy and the outcome on these claims thus less certain, but I do not accept Bullards' criticism of Mr Spralja for failing to adduce evidence on (in particular) his inability to lease the Shark Quota. As discussed, these are matters for further elucidation and evidence on the question of quantum, not liability."

21 I note in passing that in the course of the settlement negotiations, Mr Bullard had been pressing Mr Spralja to nominate something that Mr Spralja was prepared to accept. Mr Spralja said he would be happy with $850,000 and Mr Bullard took a page out of his court notebook and wrote up the settlement instruction, that Mr Spralja then signed. He said that he told Mr Spralja that Mr Kelly would not accept the offer; "it was too high". It was common ground that Mr Bullard also said words to the effect that it would be like winning the lottery or "Tattslotto".[11]

22 I mention this because it evidences Mr Spralja's subjective belief at the time that the value of his Shark Quota had increased significantly since his 2005 sale agreement with Mr Kelly (that is, from $645,000 in November 2005 to $850,000 by February 2008). In that sense, it is similar to the correspondence sent by Mr Spralja to Mr Kelly in May 2006, in which Mr Spralja stated that Mr Kelly had been given more than sufficient time to finalise the sale agreement and that, if Mr Kelly still wished to buy the Shark Quota, the price was now $700,000 (net of GST).[12] As discussed below, this evidence is relevant to what Mr Spralja is likely to have done with his Shark Quota had he run and won the Kelly proceeding, and thus the value of Mr Spralja's lost opportunity to do so.

What is the nature of Mr Spralja's lost opportunity

23 By the point of final submissions in the quantum hearing, the answer to this question was essentially not in dispute. As my earlier reasons show, like many cases involving claims in negligence against legal advisers, Mr Spralja's lost opportunity was the opportunity to run the Kelly proceeding to trial and secure a favourable outcome. However, that is where the similarity with the typical lawyers' negligence case ends. Unlike the typical case, a favourable outcome for Mr Spralja in the Kelly proceeding did not involve a judgment for a money sum (whether for personal injury or otherwise). Rather, as the defendants submitted, Mr Spralja was seeking an outcome involving orders to the effect of:

• an order for the dismissal of Mr Kelly's claim against him;

• a declaration the Mr Kelly had repudiated the sale agreement; and

• an order for his costs (including both the claim and counterclaim).

24 Thus calculating damages in this proceeding is not simply a matter of assessing what damages the plaintiff is likely to have recovered in the "trial within a trial", and applying a suitable discount (if any) for contingencies. Rather, it involves considering the value of the Shark Quota in the hands of Mr Spralja, once the impediment created by the sale agreement had been removed. There is then the subsidiary question of the value to Mr Spralja of a potential order for costs against Mr Kelly, again subject to a suitable discount for contingencies. The elements of the loss of opportunity ultimately pressed by Mr Spralja and contested by the defendants were therefore as follows:

• the value of the shark SFRs that would have been granted to Mr Spralja had he still held his Shark Quota on 1 May 2010 ("Shark SFRs") "in an amount of not less than $901,925.17";

• the leasing value of the Shark Quota (and, after May 2010, the Shark SFRs) in an amount of not less than $206,288.77; and

• an order that Mr Kelly pay Mr Spralja's costs of the Kelly proceeding incurred in the period up to 20 February 2008.

How and when is that lost opportunity to be valued?

25 In their written submissions on this issue, the defendants assert that the damages for Mr Spralja's lost opportunity are to be assessed as at the date that the notional trial would have taken place, but for the negligence of the legal practitioners. They argue that the doctrinally correct approach is that undertaken by Allsop P in Firth v Sutton[13] which the defendants distilled into the following steps:

• arriving at a notional award in respect of the earlier proceeding;

• applying a discount for the contingency of obtaining a favourable judgment;

• deducting the costs involved in obtaining the notional award;

• deducting any benefits obtained by the plaintiff in the earlier proceeding; and

26 The argument about legal costs essentially concerned only questions of calculation. I will deal with those as part of assessing the dollar value of the lost opportunity. On the question of the value of the Shark SFRs, the defendants accept that this is a necessary integer in the calculation of Mr Spralja's loss and damage, but dispute that the Shark SFRs were worth "not less than $901,925.17" at the time of a notional trial in May 2008. They submit that Mr Ciconte's opinion is that Mr Spralja's Shark Quota was worth $710,223.58 in 2007/08 and they accept and adopt that calculation. On the leasing value, the defendants submit that any putative leasehold value of the Shark Quota for the period from 2008 to 2011 forms no part of the quantification of Mr Spralja's loss and damage for the following reasons:

"First, in claiming the leasehold value of the Shark SFRs for a period subsequent to the date of the notional trial, Mr Spralja is confusing the consequential loss of entering the terms of settlement with the value to be given to the lost opportunity to obtain a successful outcome in the Original Proceeding.

Secondly, Mr Spralja made no claim to the future leasehold value of the Shark SFRs in the Original Proceeding. Therefore, the opportunity to obtain a judgment for the leasehold value of the Shark SFRs was not lost upon Mr Spralja's entry into the terms of settlement.

Thirdly, Mr Spralja has enjoyed the benefit of the settlement sum paid by Mr Kelly since May 2008. By claiming both capital and income as integers of his lost opportunity, Mr Spralja would have to bring to account the notional return on the settlement sum so as to avoid obtaining a windfall gain.

Fourthly, Mr Spralja's evidence regarding his intention to lease his Shark SFRs is vague, "bathed in hindsight" and "so hypothetical, self-serving and speculative as to deserve little (if any) weight" [citing Hoyts Pty Ltd v Burns [2003] HCA 61; (2003) 201 ALR 470 at 483 [54] per Kirby J, cited in Odisho v Bonazzi [2014] VSCA 11 at [41] per Beach JA and McMillan AJA].

Fifthly, the claim to the lease value of the Shark SFRs builds hypothetical upon hypothetical given that the gateway to quantification of Mr Spralja's claim is the premise that he would have succeeded in the Original Proceeding. There are so many imponderables on the path to valuing the leasehold value of the Shark SFRs that the Court would be embarking upon improper speculation."

27 In oral submissions, Mr Klempfner, counsel for the defendants, referred at length to the decision of the High Court in Johnson v Perez,[14] ("Johnson v Perez") primarily to the joint judgment of Wilson, Toohey and Gaudron JJ. Mr Klempfner began by reading the passage in that judgment referring to the decisions of Lord Evershed MR in Kitchen v Royal Air Force Association[15] and Bray CJ in Tutunkkoff v Thiele,[16] and concluding:

"In the light of the argument before us, we are not concerned with valuing a chance or prospect that the respondent might have lost; we are concerned with the proper basis for the assessment of the value of an entitlement to compensation which, it is acknowledged, the respondent had and which he did lose."[17]

28 Mr Klempfner then observed (and I agree) as follows:

"It's fundamental to bear in mind that many of these cases involving lost opportunity involve personal injury claims where a plaintiff has lost the ability to pursue their entitlement to either statutory or common law damages because of negligent advice to settle, or neglect conduct in respect of limitation periods such that the plaintiff is then barred in some way from pursuing what would otherwise be a strong or a valid claim. The distinction obviously in this situation is that Mr Spralja was a defendant to the proceeding. He was held ransom to a large extent to the whims and actions of Mr Kelly. Short of Mr Kelly capitulating in his entirety - and there's no evidence of that - short of Mr Spralja capitulating - and there's no evidence of that - Mr Spralja had to ride the case through to its end as a defendant."

29 Mr Klempfner next went to the part of the judgment where their Honours discussed the approach to assessing damages in cases involving personal injury as follows (citations omitted, emphasis added):

"The first component in that assessment is the amount of damages likely to have been awarded by the court before whom the action against the employer (as in this case) would have come. That loss crystallizes when the action is dismissed for want of prosecution and is then capable of assessment. The process of assessment may well require a broad brush approach in determining when, in the absence of negligence, the action would have come to trial and the evidence bearing on the quantum of damages that would or should have been available for tender to the court.

...

In each of the present cases the respondent would, but for the negligence of his solicitor, have recovered damages for personal injuries against his employer. It is that loss for which he is to be compensated; he is not to be compensated as if his claim against his solicitor was a claim for damages for personal injuries. As a general rule, "damages for tort or for breach of contract are assessed as at the date of the breach"...The rule will yield if, in the particular circumstances, some other date is necessary to provide adequate compensation. But, in the circumstances of the present appeals, there is no reason why an assessment of damages as at the date each action was dismissed for want of prosecution will not compensate the respondent adequately.

...

Again, the fact that the respondent's damages are to be assessed as at the time each action was dismissed for want of prosecution does not mean that evidence is excluded of events occurring since the dismissal. Such evidence may be relevant in a number of ways. In the first place, it may assist the court in placing itself in the position of the trial judge at the notional trial when a judgment was to be made of the likely losses that would be suffered by the respondent in the future and for which the employer was to be held responsible."[18]

30 After again referring to the importance of bearing in mind the distinction between this case and a personal injury case of the kind being considered by the High Court in Johnson v Perez, Mr Klempfner submitted:

"Just reiterating what I said earlier, the difficulty in the current case emerges because of the fact that it's not a monetary reward that Mr Spralja would have received if he had been successful on his counterclaim. But the position that he would have been in, if he had been successful, is that the court would have determined that he was entitled to retain his fishing quota, his shark quota or SFRs.

Given that the settlement had divested him of that asset, our case is quite straightforward...the manner of assessing Mr Spralja's damage in this proceeding is simply the difference between the value of the asset which he was divested and would have been held entitled to upon the judgment of the court in the primary proceeding and the amount that he would have received by way of entering into the settlement, less the contingencies, the discounts to be applied for the uncertainty of the outcome and the costs which necessarily would have had to have been incurred to obtain that judgment."

31 Finally on this issue, Mr Klempfner accepted that I had ruled definitively that the defendants were negligent in the way they dealt with Mr Spralja in relation to the settlement terms. But, he posited, what is the economic consequence? Did it leave Mr Spralja worse off than he may have been at the conclusion of the trial? He submitted that the evidence showed the settlement left Mr Spralja in a potentially better position financially, having regard to the uncertainties associated with the unknown outcome of the Kelly proceeding, then adding:

"The plaintiff can't play with the effect of inflation, or rising asset values with the benefit of hindsight and with the benefit of the amount of time that has elapsed, to say, well, no, the settlement was inadequate because two years later I would have got more, or that the asset had a greater value at a later point in time.

It's not the loss of the asset per se which forms the compensation, it is the loss of opportunity to obtain a favourable outcome and, in valuing that opportunity, it is the asset which comes into play."

32 Mr Kelmpfner's arguments in favour of adopting the orthodox approach of simply valuing the asset divested at the likely date of trial or judgment, were both persuasive and superficially appealing. However, on balance, I am satisfied that this approach (to borrow from an observation by Deane J in Johnson v Perez), "oversimplifies the problem and could be productive of injustice".[19] As Mr Klempfner emphasised, this is not the typical case where the plaintiff lost a potential monetary award. Instead, the settlement deprived Mr Spralja of his rights to an asset of considerable personal significance which had (by the time of the likely trial and judgment) some exceptional features. In my judgment, these factors demand a careful analysis of whether this is the kind of case where the general rule should yield.

33 In undertaking that analysis, I have been guided primarily by the reasons of Mason CJ in Johnson v Perez. The Chief Justice reached the same conclusion as the plurality and largely for the same reasons. Also, like the plurality,[20] the Chief Justice referred to both the general rule that damages for torts or breach of contract are assessed as at the date of breach or when the cause of action arises and to the principle that this rule is not universal: "it must give way in particular cases to solutions best adapted to giving an injured plaintiff that amount in damages which will most fairly compensate him for the wrong he has suffered".[21] But the Chief Justice was the only member of the court to expand on why, when and how that general rule will give way.

34 It is convenient to set out the Chief Justice's analysis at length, and draw attention in particular to His Honour's discussion of the decision of the House of Lords in The Bwllfa and Merthyr Dare Steam Collierie (1891) Ltd v Pontypridd Waterworks Co[22] ("Bwallfa"). His Honour begins his analysis by identifying the guiding principle in the assessment of damages, as follows (most citations omitted):[23]

"The guiding principle in the assessment of damages is compensatory. The object is to award the plaintiff an amount of money that will, as nearly as money can, put him in the same position as if he had not been injured by the defendant. However, the time as at which damages are assessed can significantly affect the amount actually awarded. This aspect of the assessment of compensation is particularly noticeable in the present era of inflation, with its fluctuating economic values. This is because in times of inflation the amount awarded is likely to be larger if it is assessed at a later rather than an earlier date.

When a court assesses damages, it converts the value of the injury into nominal terms; it fixes or liquidates that value. That conversion into monetary terms avoids the difficult task of inquiring into the value of goods and services over time and is necessary for the stability of economic legal relationships. The theory according to which damages are awarded by the courts is that a plaintiff's loss or injury can be adequately compensated by a lump or fixed sum of money which is not subsequently revised."

35 I pause to note that His Honour's acknowledgement of the effect of inflation on assessing damages, directly contradicts Mr Klempfner's submission above that: "The plaintiff can't play with the effect of inflation, or rising asset values...to say...the asset had a greater value at a later point in time". Although inflation was not a material consideration in this case, in my view the peculiar features of the Shark Quota as at mid-2008 (and notably the impending grant of the Shark SFRs) are analogous circumstances to those being discussed here by the Chief Justice. His Honour then refers to the general rule for assessment in the terms quoted above and continues:[24]

"The general rule that damages are assessed as at the date of breach or when the cause of action arose has been applied more uniformly in contract than in tort and for good reason. But even in contract cases courts depart from the general rule whenever it is necessary to do so in the interests of justice."

36 His Honour later gives an example of the approach taken in cases of contracts for the sale of goods, where there is no market in which the injured party can buy a replacement. His Honour observes that, in those cases: "a later date may be appropriate... the rationale behind this rule lies 'in the inquiry - at what date could the plaintiff reasonably have been expected to mitigate the damages by seeking an alternative to performance of the contractual obligation?'"[25] This observation in relation to cases in contract invokes the discussion of those principles in Wenham v Ella[26] ("Wenham v Ella"), discussed below. This decision was not cited by the Chief Justice, but it was the first case referred to by the plurality as authority for the proposition that the general rule will yield in particular circumstances.[27]

37 His Honour then turns to areas of tort law other than personal injury cases and observes that:[28]

"In other areas of tort law courts have tended to apply the general rule that damages will be assessed when the cause of action arose. This approach seems less than satisfactory in this era of high inflation. There may be occasions when mitigation is appropriate in the interests of limiting the harm for which the tortfeasor must compensate. On the other hand, the goal of compensation to the injured suggests a later date, particularly in the absence of a voluntary relationship, as in contract. It makes little sense to put the burden of monetary depreciation on the innocent tort victim and to allow the tortfeasor the windfall of paying off his obligation in depreciated currency. As I noted before, legal interest will often be inadequate to offset even a moderate level of inflation. Besides, even if legal interest were adequately indexed, it would not take account of all changes in the value of the injured goods or interests.

...

As a response to these problems many civil law jurisdictions have shifted the date of assessing the injury to the date of judgment."

38 The passages of the Chief Justice's reasons that are to my mind particularly relevant to the facts of this case, begin with His Honour's discussion of why a shift to the date of judgment is also not a solution, as follows (emphasis added):[29]

"Although a preference for a later date of assessment in tort cases may be appropriate, a wholesale shift to the date of judgment would not adequately achieve the goal of accurate compensation. Take, for example, a shipload of petroleum destroyed en route to the harbour where it was to be sold the next day. After the intended date of sale, oil prices rise. Because the object is to restore the injured party to the position he would have been in save for the mishap, the court should not necessarily use the date of judgment but rather should consider the use to which the petroleum was to be put. It was to be sold immediately and the damages should reflect the price the injured party would have obtained on the intended date of sale.

This in fact is what the House of Lords did in Bwllfa and Merthyr Dare Steam Collierie (1891) Ltd v Pontypridd Waterworks Co [1903] AC 426, a statutory compensation case. A waterworks operator had been empowered by a statute to prevent a landowner from working mines on his land if it would interfere with the waterworks. The statute also provided that "full compensation" would be paid in such instances to the landowner. After the issuance of the notice inhibiting mining but within the time necessary to extract the coal, the price of coal rose dramatically. The House of Lords held that the higher price was the appropriate one in assessing the statutory compensation. The Earl of Halsbury LC quoted with approval (at 428) the words of Phillimore J below: 'the true inquiry here is not what is the value of the coalfield or the coal, but what would the colliery company, if they had not been prohibited, have made out of the coal during the time it would have taken them to get it.'

Admittedly, where the injured party's intentions are not so patent as in these two examples, the determination of the time at which the injured goods would have been converted to currency may present a difficult task. In Hoefle v Bongard & Co [1945] 2 DLR 609 Rand J thought there was a conversion in breach of contract of a bailment of shares by the stockbroker bailees. In ascertaining the appropriate basis for the assessment of damages, his Lordship said [at 620]:

What [the bailor] would have done in the intervening time [between the dates of breach and judgment], if the security had remained, is the speculative basis from which the inferences must be drawn. We cannot say that he would have sold at the highest or at the lowest price or that he would have sold at all. But so far as the circumstances permit, they are to be the ground of conclusions of probability.

As the cases to which I have referred reveal, the principles governing the assessment of damages do not permit the application of rigid rules based on categories of actions. Instead, the injured party's intentions and the surrounding circumstances must be considered in light of the underlying principles in order to do justice between the parties. Where mitigation is possible, an early date for assessment may be appropriate. Where mitigation concerns are not relevant and the circumstances indicate that the injured party would have maintained possession of the goods had the accident not occurred, the date of judgment is the most appropriate date for assessment. Where the circumstances indicate that the property or interest would in some other way have been converted into monetary terms between the time of injury and date of judgment, the date as at which the injury is assessed should reflect the time of the intended conversion."

39 The decision in Bwllfa and Mason CJ's petroleum example, are the only cases that I have been able to locate in the authorities that bear any real resemblance to the circumstances of this proceeding. And the short passage above where the Earl of Halsbury LC cites the words of Philimore J at first instance, is in my judgment, the clearest and most apt statement of the approach that I should take. Observations in Bwllfa by Lord McNaughten and Lord Roberston provide further support for this approach. The former held:

"The mine owner prevented from working his minerals is to be fully compensated - the Act says so. That means that so far as money can compensate him he is to be placed in the position in which he would have been if he had been free to go on working. Here it has been proved to demonstration that if he had not been interfered with he would have made between 5000_l_ and 6000_l_."[30]

40 And Lord Robertson (like the Earl of Halsbury LC) cited with approval the passage from the decision at first instance of Phillimore J above, and added:

"After the notice of October 15, 1898, the appellants were disabled from working the coal. The resulting pecuniary obligation of the respondents was to pay compensation to the appellants for being thus prevented from working coal. It follows that what is due to the appellants is not the price on a transaction of sale, but compensation for a continuing embargo on working. The sum to be paid would thus be whatever sum could best be made out to be the profit that would have been made by the appellants if they had been free to work."[31]

41 As noted above, the plurality in Johnson v Perez, cited the High Court's decision in Wenham v Ella,[32] as authority for the proposition that the general rule for assessment of damages will yield in particular circumstances.[33] Although a decision concerning the assessment of damages in contract, it provides useful general guidance, as well as having one particular feature that is not unlike an issue in this case. The contract involved an agreement to procure the transfer to the respondent of a part interest in land, that the parties knew to be then producing income. The respondent performed his part of the contract, but the appellants failed to effect the transfer of the land. The respondent claimed damages comprising both the value of the interest in the land at the date of breach as well as damages to the date of judgment for loss of income from that interest.

42 In finding for the respondent, Menzies J held:

"The circumstances here are quite different from a case of uncontemplated loss or of a failure to mitigate a loss by the making of another purchase. Here it was obvious at the time of the making of the contract that the appellants' failure to secure a transfer to the respondent after payment would involve the respondent in loss and there was no evidence upon which it could have been found that the respondent could have mitigated his loss by buying other shares."[34]

43 Walsh J noted that, in many cases, there could be no justification for adding to the sum which would give to the purchaser the monetary equivalent of the asset which he should have received, a further sum representing the return which he might have obtained from the ownership of that asset, either throughout the "life" of the asset or for a more limited period. But His Honour recognised that there could be circumstances which would require that the purchaser be held entitled to some loss of profits in addition to an amount measured by the difference between the contract price and the value of the asset at the date of breach, if those circumstances were capable of being regarded as within the contemplation of the parties.[35]

"In my opinion the error that is contained in the argument for the appellants consists in treating rules which constitute useful guidance in the ascertainment of damages as rigid rules of universal application, instead of treating them as prima facie rules which may be displaced or modified whenever it is necessary to do so in order to achieve a result which provides reasonable compensation for a breach of contract without imposing a liability upon the other party exceeding that which he could fairly be regarded as having contemplated and been willing to accept."[36]

45 The decisions of each of Barwick CJ, and Gibbs and Stephen JJ were to similar effect. For example, Gibbs J held that it was difficult to see any reason why the respondent should not receive damages which would compensate him for the income he has lost as well as give him the value of the interest in the land which he was entitled to receive "since by reason of the breach he has lost both the income and the interest in the land and he was unable to mitigate the loss".[37]

46 Ms Berlic for Mr Spralja began her oral submissions by noting that this was an unusual case. I agree. First, as I have already noted, this is not a case where the "trial within a trial" involved a plaintiff seeking recovery of a money sum. Rather, the hoped for outcome was the repudiation of the sale agreement and the restoration to Mr Spralja of the asset constituted by his Shark Quota. Moreover, as I have also already noted, this was an asset that had a number of exceptional features. These were (in no particular order) as follows:

• The Shark Quota had represented Mr Spralja's livelihood for around 35 years by 2005 when he and Mrs Spralja decided to sell it and retire to Bateman's Bay, and live off the money gained from that sale.

• Mr Ciconte's evidence was that: "Fishing quotas and entitlements are regarded as an alternative asset from a financial perspective. They do not fall into the equity/income/cash category of assets and are generally illiquid and uncorrelated to those standard asset classes". I take this statement (read in the context of Mr Ciconte's report as a whole), to reflect that the asset is closely held within a limited geographical area, and thus the market for it is both restricted and opaque.

• It had been subject to considerable regulatory upheaval in the years leading up to 2008 - Mr Ciconte described it as "significant structural adjustment". The snapshot date had passed on 22 December 2006 (while Mr Spralja's dispute with Mr Kelly was still brewing), but the date for the grant of the Shark SFRs had been delayed, apparently because of unrelated proceedings in Victoria involving AFMA.

• Thus in around mid-2008, the industry knew that Shark SFRs would be granted in due course based on the ownership of Shark Quota as at 22 December 2006, but had no certainty as to when that would occur. The Shark SFRs were ultimately not granted until 1 May 2010.

• Also in 2008, AFMA was in the process of implementing a change to the fishing season, so that it ran from 1 May to 30 April, instead of for a calendar year. It did this by extending the 2007 calendar year fishing season so that it ran for an additional four months to 30 April 2008. Although (as Mr Ciconte explained) the cashflow effect of this was temporary, it injected further uncertainty into the industry in early to mid-2008 - Mr Ciconte described it as "a very confusing time period".

47 The matters referred to above are part of the broader objective framework for assessing Mr Spralja's evidence about his intentions. The other objective factors are more personal to him. His evidence was in substance that:

• he leased out all of his Shark Quota for the 2006 season and almost all of his Shark Quota (that is, all but about 4250kg of Saw Shark) for the 16 month season from 1 January 2007 to 30 April 2008;

• by 2008, he was still having health problems, especially with his ears, but his prostate cancer had stabilised and he was not as concerned as he had been in 2005 that he "would die and leave [Mrs Spralja] in the lurch"; and

• in early 2008, he did not know when the Shark SFRs were going to be granted by AFMA.

48 It was not in dispute that what Mr Spralja would have done if the breach had not occurred, is to be assessed subjectively. However, that does not mean that the objective factors are to be ignored. As Gleeson CJ explained in Rosenberg v Percival[38] (a case involving a failure to warn a patient of risks of treatment), the test is a subjective test, but "what a reasonable person would or would not have done in the patient's circumstances will almost always be the most important factor in determining whether the court will accept or reject the patient's evidence as to the course that the patient would have taken". Thus Mr Spralja's evidence of what he would have done is to be tested against what a reasonable person would have done in Mr Spralja's circumstances.

49 By his witness statement, Mr Spralja's evidence was (relevantly) that:

"If I had won the court case with Mr Kelly, and the Judge agreed with me that Mr Kelly had repudiated the contract, I would have kept my Shark Quota. This was very important to me. By early 2008 I knew that the Shark SFR's were going to be allocated to me as well. As I was the person who held the Shark Quota at the "snap shot date", I was the person that was going to be given the Shark SFR's. I definitely wanted to keep my Shark Quota until the Shark SFR's were granted by AFMA... In early 2008 I did not know when the Shark SFR's were going to be granted by AFMA.

If I had been able to keep my Shark Quota, I would have leased it out to other people like I had been doing from 2005. As I was not sick with cancer in 2008 and 2009 I did not need to sell my Shark Quota. I was not desperate anymore to look after the family. I would have continued to lease it out. I believe I would have leased the Shark Quota out to other people at least until the Shark SFR's were granted. In 2008 and 2009 I thought the Shark SFR's would be very valuable. I still think that they are very valuable.

I believe I would not have sold the Shark Quota before the Shark SFR's were granted by AFMA...The position with the Shark Quota and Shark SFR's changed very much in May 2010 when AFMA issued the Shark SFR's...From 1 May 2010 to 30 April 2011 was the first year of Shark SFR's...After 1 May 2010, I would have waited a little bit of time to see what happened with other fishermen and to see what their Shark SFR's were sold for before I made any decision...I do not exactly know when I would have sold the Shark SFR's. At the earliest, I would have sold them some time in the 2011 fishing year. It could have been later though."

50 Mr Spralja's evidence on this was essentially unchallenged. Mr Klempfner reminded Mr Spralja in cross-examination of his evidence in the liability hearing that the breach by Mr Kelly of the sale agreement had held up his retirement and prevented him from moving to a warmer climate. Mr Spralja agreed that the dispute with Mr Kelly stopped his retirement plans. He also agreed that his pursuit of his claims against the defendants has required him to stay in Victoria. It was put to him that "but for the dispute with the lawyers...you would have been able to move to Bateman's Bay once you received the money from Mr Kelly". Mr Spralja answered: "I, ah, felt cheated and I could not do it."

51 Based on this evidence, Mr Kelmpfner submitted that I should pay close attention to Mr Spralja's earlier witness statement referring to his intention to move to a warmer climate, "which appears to have been unrelated to his prostate troubles but more related to his hearing and difficulties with his ears". He argued that: "There's an element of opportunism about the evidence that's given in respect of intention to move at a later date because it's a way of, in effect, maximising the damages which are claimable. We put it as frankly as that".

52 The difficulty with this submission is that nothing to this effect was put to Mr Spralja in cross-examination. In particular, while Mr Spralja agreed that his plan in late 2005 was to move to a warmer climate and Mr Kelly stymied that plan, it was not put to him that this persisted throughout the period of his dispute with Mr Kelly and was still his intention in around mid-2008. Nor was Mr Spralja challenged on the veracity of his evidence set out above to the effect that by mid-2008 his health had stabilised and he was by then prepared to defer his retirement plans for a few years, in the hope of maximising the price for his Shark SFRs. Mr Klempfner did suggest to Mrs Spralja that her evidence to similar effect was coloured by hindsight. She responded:

"Well, after the problems we had with Peter Kelly, we never had dealings with dishonest fishermen before, it was always on a handshake, and after going through two years with Peter Kelly with arguments and taking us to court and so on, we were really wary, and it was once bitten twice shy, we wouldn't have - definitely wouldn't have sold it at the time."

53 Ms Berlic summarised the case on behalf of Mr Spralja on this issue in these terms:

"So my submission now, and as set out in my written submissions, is that the subjective evidence and the objective evidence all indicates that Mr Spralja would have acted in a certain way and that certain way is lease out the asset for a time and sell it at a later time...[The court should] pay particular attention to the fact of when the [Shark SFRs] were granted...It's a line in the sand of what a person in the position of Mr Spralja would do with that asset...He has a very firm opinion that they're going to be very valuable, so appropriately he would have sold them after [the Shark SFR's were granted]."

54 I agree. Turning first to Mr Spralja's evidence that he believed the Shark Quota was very valuable in 2008 and 2009, there was a consistent pattern in the way Mr Spralja approached the potential resolution of the Kelly proceeding as time went on that supports acceptance of this evidence. As set out in my earlier reasons, he made a number of attempts to hold Kelly to the agreement during 2006, providing Mr Kelly corrected the wrong permit reference and excluded the Boat SFR. Eventually, he effectively accepted Kelly's repudiation (constituted by Mr Kelly's insistence on a wrong interpretation of the sale agreement) and said Mr Kelly needed to pay more. I am satisfied that this was driven by Mr Spralja's recognition that the value of the Shark Quota was continuing to rise. And by the time of the negotiations resulting in the signing of the settlement terms (and after the snapshot date), Mr Spralja was seeking $850,000. Thus he was signalling to Mr Kelly (and indirectly to the defendants) that he wanted to extract full value for the asset. This is entirely consistent with the fact that it was an asset he had procured and managed over most of his working life, that was to be there to support Mr and Mrs Spralja in their retirement.

55 In relation to Mr Spralja's intention to continue to lease out his Shark Quota pending the granting of the Shark SFRs, I am in satisfied that this is what he would have done. It was his evidence. But more importantly, it is borne out by two key objective facts. First, he had been leasing out his Shark Quota continuously during the period since his dispute with Mr Kelly began, and this had been producing a significant and regular income for Mr and Mrs Spralja over that period. There is no reason to think that he would have suddenly ceased doing so, once the impediment created by the Kelly proceeding had been removed in around mid-2008.

56 Second, for the reasons listed above, the market for the sale of Shark Quota was in a state of considerable upheaval and uncertainty at that time, being the earliest point at which Mr Spralja might have been able to re-sell his Shark Quota. The snapshot date had passed, and the grant of the Shark SFRs was pending, but the timing was very uncertain. The fishing season had just been re-set from a calendar year to a year measured from 1 May to 30 April, by the creation of a temporary extension of the season to 30 April 2008. This unprecedented season was just concluding at the relevant time and quotas for forthcoming seasons were difficult to predict.

57 Against that background, it made good commercial sense for anyone wishing to sell Shark Quota to wait until the market had settled down, the Shark SFRs had been granted and sufficient time had passed to allow the market to absorb and respond to these changes. I also accept that Mr Spralja's bitter experience with Mr Kelly would have made him even more cautious than might otherwise have been the case. Taking all of these objective factors into account, I am left in no doubt that Mr Spralja's evidence of his intention to sell his Shark SFRs some time in the 2011 fishing year (1 May 2011 to 30 April 2012) and possibly later, should be accepted.

58 Applying the principles derived primarily from the decision of Mason CJ in Johnson v Perez to this finding (and paraphrasing Phillimore J), in my view, the true inquiry here is not what is the value of the Shark Quota in mid-2008, but what would Mr Spralja have made out of the Shark Quota in the aftermath of the Kelly proceeding? As Mason CJ urged: "the injured party's intentions and the surrounding circumstances must be considered in light of the underlying principles in order to do justice between the parties". In the unusual circumstances of this case, doing justice between the parties and finding a solution best adapted to giving Mr Spralja that amount in damages which will most fairly compensate him for the wrong he has suffered, requires a departure from the usual rule. I am satisfied that he is entitled to damages comprising both the likely income from leasing the Shark Quota for the period 1 May 2008 to 30 April 2012, plus the likely sale value of the Shark Quota in late 2011 or early 2012.

59 I am reinforced in my view that Mr Spralja's damages should extend to both the value of the asset and the income from the asset up to the likely date of sale by three other considerations. First, applying the approach of the High Court in Wenham v Ella discussed above (also adverted to by Mason CJ in Johnson v Perez), this is not a case where questions of mitigation arise. There was no suggestion that Mr Spralja could have purchased equivalent Shark Quota in the market, leased it out for a period and then sold it. On the contrary, the nature of the market for Shark Quota (particularly at the relevant time) would appear to have made such a transaction at least highly problematic, if not impossible.

60 Second, as Ms Berlic submitted (and as discussed in Wenham v Ella), I am satisfied that loss involving these two elements would have been in the contemplation of the parties in around February 2008. In his written reply submissions, Mr Spralja noted (and I accept) that:

"To assess the damage as the actual value of the Shark Quota at 2008 and not at a future point in time would ignore what was known to the parties at the time of the Terms of Settlement in 2008: that Mr Spralja held the Shark Quota as at the "snapshot" date, he would become entitled to the Shark SFR's, that Mr Spralja no longer wanted to sell his Shark Quota at that time, he wanted to lease it out and sell it after the Shark SFR's were granted."

61 Third, this is analogous to the result arrived at by the High Court in Wenham v Ella, and also gets express support from Mason CJ in Johnson v Perez, where His Honour recognised a range of possible outcomes. Where mitigation is possible (not the case here), an early date for assessment may be appropriate. At the other end of the scale, where mitigation concerns are not relevant and the circumstances indicate that the injured party "would have maintained possession of the goods had the accident not occurred", His Honour considered that the date of judgment is the most appropriate date for assessment. But most relevantly for present purposes, His Honour held: "Where the circumstances indicate that the property or interest would in some other way have been converted into monetary terms between the time of injury and date of judgment, the date as at which the injury is assessed should reflect the time of the intended conversion".

62 To my mind, the alternative approach advanced by Mr Klempfner on behalf of the defendants, falls into the trap identified by Walsh J in Wenham v Ella of "treating rules which constitute useful guidance in the ascertainment of damages as rigid rules of universal application, instead of treating them as prima facie rules which may be displaced or modified whenever it is necessary to do so in order to achieve a result which provides reasonable compensation".

What is the dollar value of that lost opportunity?

63 Mr Ciconte's assessment of the value of the Shark SFRs for each fishing year was not in dispute. His figures were essentially set for the relevant fishing year (that is, the year concluding on 30 April). His value for the fishing year ending 30 April 2010 (the day before the Shark SFRs were granted) was $828,560.11. As noted above, in my view, Mr Spralja would not have sold his Shark SFRs the moment they were granted on 1 May 2010 and would instead have waited until some time in the following fishing year (the fishing year concluding on 30 April 2012), or later. Mr Ciconte's value assessed for the 2011/12 fishing year is $961,081.13. In my view, that is the dollar value that should be given to Mr Spralja's Shark SFR.

64 On the question of the likely income from leasing the Shark Quota and Shark SFRs for the period from 1 May 2008 to 30 April 2012, on Mr Ciconte's calculations, the total value was $236,451.25. Mr Spralja argued that the figure should be materially higher, primarily because Mr Ciconte was wrong to apply an "exploitation rate" to the leasehold value. According to Mr Ciconte, the exploitation rate "is the measurement of the productivity of the fishery. This rate is effectively a proxy for value that determines what percentage of the quota has been actually caught, and therefore leased".

65 In both cross examination of Mr Ciconte and in submissions, Ms Berlic sought to establish that Mr Ciconte should not have applied the exploitation rate, essentially because Mr Spralja had historically leased out 100% of the value of at least his Gummy Shark. (Mr Spralja's Gummy Shark Quota was by far the most valuable part of his Shark Quota, being worth about 10 times the total of his Quota for all other shark species combined). Ms Berlic also sought to challenge Mr Ciconte's approach to the value of the Shark Quota for the 2008 year and questioned the consistency of his cross-referencing of leasing values for 2010 and 2011 against prices given by industry brokers.

66 Despite Ms Berlic's ingenuity and effort, I do not doubt Mr Ciconte's conclusions on any of these matters. His responses in cross-examination (and clarifications in re-examination by Mr Klempfner) were logical and persuasive. In particular, I am satisfied that Mr Spralja's success in earlier years to lease 100% of his Gummy Shark, was not a sufficient basis to assume he would do the same in later years. In my view, the dollar value to be given to the likely income from leasing Mr Spralja's Shark Quota and Shark SFR for the period from 1 May 2008 to 30 April 2012 is Mr Ciconte's figure of $236,451.25.

67 On legal costs, Mr Spralja ultimately did not pursue a number of claims in relation to the costs paid by him, with the result the arguments on legal costs distilled to two issues. The first concerns the legal costs incurred by Mr Spralja up to and including 19 February 2008, that he would have recovered had he run and won the Kelly proceeding. More particularly, the issue is whether Mr Spralja had proved that he had paid any legal costs for that period. The defendants argue that he had not, and he was thus precluded from making a claim for what he might have recovered from a costs order against Mr Kelly for those legal costs.

68 In response to this argument, Ms Berlic took me to a series of documents evidencing payments by Mr Spralja to WGM of legal fees and disbursements. These showed total payments to WGM by Mr Spralja for invoices dated 12 November and 19 December 2007 of $13,838 (including counsel's fees). The evidence was that Mr Spralja also paid $10,000 to Bullards on account of legal costs in the lead up to the trial, and that this was disbursed to cover Bullards' costs and Mr Scarfo's fees. Thus there was evidence that Mr Spralja spent at least $23,838 in respect of costs incurred on or before 19 February 2008.

69 There was a question whether an amount of around $5,113.80 paid by WGM in settlement of Mr Spralja's VCAT proceeding should be deducted from this total, but there was no evidence that this payment represented a refund of legal fees. I am therefore satisfied that there was sufficient evidence to support Mr Spralja's claim for the $22,366.40 assessed by Mr Trimbos as the amount Mr Spralja was likely to receive on a taxation of his costs in the Kelly proceeding up to and including 19 February 2008. Given that this sum would only have been recovered if Mr Spralja was successful in the Kelly proceeding, it seems to me that this figure should be subject to the same discount as is applied to the claims for the value of the Shark SFRs and leasing income, discussed below.

70 The second issue on legal costs was more difficult. It concerns the solicitor/own client costs that Mr Spralja would have incurred on and after 20 February 2008 had the Kelly proceeding gone to trial and judgment. In their written submissions, the defendants argue that the difference between Mr Spralja's hypothetical solicitor/own client and the hypothetical party/party costs he would have been awarded on a taxation in respect of the notional trial, must be deducted from the damages otherwise payable. They summarise the evidence of Mr Trimbos, which was to the effect that Mr Spralja would have been out-of-pocket in respect of solicitor/own client costs from 20 February 2008 in the sum of $23,333.10 for a three day trial and $30,083.10 for a five day trial. Relying on Mr Trimbos' calculations, the defendants submit that an allowance must be made in their favour of $30,083.10 on account of the unrecoverable costs that Mr Spralja would have necessarily incurred had he pursued the Kelly proceeding to judgment.

71 Ms Berlic argued there should be no such allowance. In support of that argument, she relied on the decision of the Court of Appeal in Rosa v Galbally & O'Bryan[39] and Rosa v Galbally & O'Bryan (No 2)[40] (together "Rosa"). In particular, she relied on a passage in the leading judgment of Tate JA, as follows (citations omitted):[41]

"However, I consider that the second of the factors is decisive; that is, Rosa has incurred no doubt significant solicitor and own client costs at trial, pursuing the appeal and in resisting the cross-appeal. The costs orders made by the judge at trial, while in Rosa's favour, were simply party/party costs. The trial occupied seven days of hearing. Before the judge, Galbally's relied on the evidence of Mr O'Bryan that the trial for damages in the County Court would have occupied about six or seven days. The fundamental principle governing compensatory damages, to put a plaintiff back in the position he or she would have been in but for the tort or breach of contract, implies that the actual position Rosa would have been in but for Galbally's negligence is the position of having incurred no costs with respect to the trial before the judge, or on this appeal, for the very reason that these proceedings would not have occurred. I consider that no deduction should be made for the solicitor/client costs Rosa would have incurred in pursuing either her serious injury application or her trial for damages".

72 Ms Berlic noted that Her Honour expressly acknowledged that other appellate courts had accepted that an allowance should be made for costs that would have been incurred by a plaintiff in pursuing a claim for damages.[42] However, Her Honour held (in substance) that this was simply an application in the particular case of the fundamental principles of compensation. In the circumstances of the decision in Rosa, those principles led to Tate JA deciding that there should be no deduction for solicitor/own client costs Rosa would have incurred in pursuing her trial at first instance. Ms Berlic urged that I should do likewise.

73 Mr Klempfner raised a number of arguments against applying Tate JA's analysis to the facts of this case. Some of those arguments were (respectfully) critical of Her Honour failing to allow for the differences between party/party and solicitor/own client cost and essentially elevating that difference to a discrete head of damage. The effect of Her Honour's analysis, he argued, was to use the unrecoverable costs that would have been incurred in the notional trial to "cross-subsidise" the costs of the plaintiff in her claims against her negligent lawyers. With the greatest respect, there seemed to me to be some force in these arguments. Of course, I would nevertheless be bound to follow the decision in Rosa, except that I am satisfied that applying the fundamental compensation principle to the facts of this case, leads to a different result.

74 As Mr Klempfner also argued, a fundamental distinction between this case and Rosa, is that Mr Spralja was a defendant in the Kelly proceeding. Incurring legal costs up to and including trial was the only means by which he could have achieved the result he was seeking, being the result for which he is now to be compensated. There was no suggestion that the Kelly proceeding could have been settled on terms involving bringing the sale agreement to an end, thus entitling Mr Spralja to put his Shark Quota or Shark SFRs back on the market for leasing or sale.

75 In my judgment, the compensation principle applied to the unusual circumstances of this case requires that there be an allowance for the solicitor/own client costs that Mr Spralja would necessarily have incurred in pursuing his strongly held desire to defend Mr Kelly's claims and recover his Shark Quota. The costs that he has incurred in this proceeding should not be set-off against his solicitor/own client costs of the notional trial. Rather, they will be the subject of the usual costs orders made in favour of a successful party, subject to any offers that may have been made or other similar discretionary considerations arising from the parties' conduct of this proceeding.

76 There is no occasion to apply any discount to this allowance; the unrecovered solicitor/own client costs only become part of the equation on the basis that Mr Spralja was successful in the proceeding. However, I am not persuaded that the allowance should be based on a five day trial. In my view, evidence and submissions is more likely to have concluded in three days, with the result that the sum of $23,333.10 will be deducted from the damages to which Mr Spralja is otherwise entitled.

77 Finally, the defendants argue that, in addition to the payment to Mr Spralja of the $645,000 under the settlement terms with Mr Kelly, there should be a further allowance in favour of Mr Spralja (that is, a deduction from the damages I award) in the sum of $8,647.29. This was what Mr Kelly paid to Mr Spralja under the settlement terms, in reimbursement of the fishing levies that Mr Spralja had paid in advance for the 1 May 2008 to 30 April 2009 fishing season. Mr Klempfner argued that if (as I have found) Mr Spralja were awarded damages representing the income from leasing his Shark Quota for that fishing season, then he would have been required to pay those levies. Thus failing to deduct the 2008/09 levies from Mr Spralja's damages in this proceeding, would give him a windfall equivalent to the cost of the levies for that year.

78 In her submissions on this issue, Ms Berlic confirmed (based on Mrs Spralja's evidence) that Mr Spralja had paid the levies for the 2008/09 year even though he was obliged to transfer his Shark Quota for that year (and into the future) to Mr Kelly, because they were payable in advance in about April 2008. Mr Kelly did reimburse the levies under the settlement terms, which meant that Mr Spralja was no longer out-of-pocket for the levies once his Shark Quota had been transferred. However, Mr Ciconte's calculations for the lease income made allowance for "fees" (that is, the levies), and so the figure he calculated for the 2008/09 year was net of the levies. Accordingly, deducting the sum reimbursed by Mr Kelly to Mr Spralja for the 2008/09 levies would effectively result in Mr Spralja paying twice for those levies.

79 Having reviewed Mr Ciconte's report in relation to this issue (and, in particular, his supplementary answer to Question 3, under the heading "Reduction for levies"), I agree with Ms Berlic. I am satisfied that the reimbursement of the levies by Mr Kelly to Mr Spralja under the settlement terms effectively restored to Mr Spralja the cost to him of facilitating Mr Kelly's use of the Shark Quota for the 2008/09 fishing season. I am also satisfied that Mr Ciconte's calculations of the lease income allowed for (by deducting) the levies for each of the years of lease income. Thus Mr Ciconte's figure of $236,451.25 for lease income for fishing seasons 2008/09 to 2011/12 (inclusive), includes a deduction for levies for the 2008/09 year. To make a further deduction for what Mr Kelly reimbursed to Mr Spralja would result in him paying twice for the levies for the 2008/09 fishing year.

80 The principles to be applied in relation to this issue are conveniently and accurately summarised in the defendants' written submissions, which I gratefully adopt. The defendants begin by confirming that in a case such as the present, the court must form an estimate of the likelihood that the hypothetical situation would have occurred.[43] In that respect, the Court must assess the degree of probability that such an event would have occurred and adjust any award of damages to reflect that degree of probability.[44] As Bell J noted in Goddard Elliott v Fritsch[45] (citations omitted):

"When conducting a notional trial of the claim, the court is not determining the actual outcome of the trial on the balance of probabilities as if the notional trial were the actual trial court for the claim. It is determining what the plaintiff's prospects of success were in that trial for the purposes of determining whether anything of value was lost by reason of the lawyer's negligence. Therefore, the court does not have to make a binary choice between the plaintiff's probable success or failure in the putative trial but rather must determine where in the spectrum of results the plaintiff's prospects did lie. The value of the plaintiff's lost opportunity is then ascertained 'by reference to the degree of probabilities or possibilities'."

81 Citing Johnson v Perez, the defendants then submit that a "broad brush approach" is therefore taken to the assessment of damages in cases arising from the lost opportunity to pursue or defend a claim. The broad brush approach may involve a discount reflecting the various risks facing a claimant if the matter had proceeded to trial, although the extent of any discount is a matter for the trial judge and depends on the facts and circumstances of the case.[46] But the defendants also note that even in cases where the plaintiff is very likely to have succeeded in the "lost" proceedings, it is appropriate for the court to make some discount on the basis that forensic experience indicates that the strongest cases can fail.[47]

82 Moving to consideration of the application of those principles to the circumstances of this case, the defendants submit as follows:

"Given the contingencies of litigation, and the fact that but for the settlement of the Original Proceeding, the Defendants would have continued to act for Mr Spralja in the Original Proceeding, the Defendants submit that an appropriate discount needs to be applied to account for the possibility that Mr Spralja may not have succeeded in the Original Proceeding.

As the Court noted in its reasons on the liability trial, 'Mr Spralja's prospects in the original proceedings are not 'very clear' in the sense discussed by Bell J in Goddard Elliot'.

Accordingly, the Defendants submit that the value of Mr Spralja's lost opportunity to obtain a successful outcome of the Original Proceeding needs to be reduced by 40% to allow for the possibility that Mr Spralja would not have achieved a successful outcome to the Original Proceeding in any event."

83 In his written submissions, Mr Spralja pointed to a number of factors which he said should lead to the court applying a minimal or nominal discount. In particular, he submitted that:

• at the trial of the proceeding, the defendants submitted that Mr Spralja would be a poor witness in the original proceeding and the parties now do not have the benefit of knowing what Mr Kelly and Mr Haslam would say in their evidence and how that would affect the outcome;

• however, these factors have limited relevance to the likely outcome of the original proceedings as it was primarily a documents case and oral evidence had limited relevance to the outcome;

• further, this court found that Mr Spralja was an honest witness and that the manner in which he gave his evidence did not cause the court to doubt his credibility; and

• on the whole, there are not factors creating a "climate of doubt" as to the prospects of success in the original proceeding warranting any material discount.[48]

84 In further written submissions in reply to the defendants' argument that a discount of 40% was appropriate, Mr Spralja urged that the "risks" identified by the defendants do not warrant a discount as high as 40%. He reiterated the finding by Bell J in Goddard Elliott v Fritsch, that whether a discount is called for "is very much a matter for the trial judge and depends on the facts and circumstances of the case".[49] He particularly took issue with the defendants' submission that the defendants would have continued to act for Mr Spralja and noted that the submission is premised on the assumption that, if they had, they would have done so poorly (or potentially negligently). Finally, he argued, the submission discounts the role of the court in making the determination in the original proceeding.

85 Turning to this last question first, I too am not persuaded that I should assume the defendants would have continued to act for Mr Spralja in the Kelly proceeding after 19 February 2008. Nor that, had they done so, they would have continued to overlook the importance of Mr Spralja's repudiation claim, and potentially in a manner that was negligent. The defendants did not cite any authority to support the contrary position. Further, as Ms Berlic argued in oral submissions, it seems both unfair and counterintuitive to accede to a proposition that effectively visits the defendants' negligence on Mr Spralja twice. I also agree with Ms Berlic's submission that the defendants' argument focuses too much on the role of counsel and ignores the potential for the court to re-balance a case towards the legally sound result.

86 In any event, Mr Spralja gave evidence that if the case had not settled on 18 or 19 February 2008, he would have changed his lawyers. He said in substance that he had lost all confidence in them, because he had originally been advised that he had a good case, but the defendants were saying on the eve of the trial he had no chance of winning. He was also unhappy with the pressure they put on him to sell his Shark Quota. I have no reason to doubt this evidence and therefore decline to make an allowance in any discount for the possibility that the defendants would have remained involved in the proceeding up to trial and continued to misunderstand or undervalue the importance of Mr Spralja's repudiation claim.

87 However, other factors raised in the defendant's submissions on the issue of discount have more force. As I note in my earlier reasons, Mr Bullard's and Mr Casement's concerns about Mr Spralja's performance as a witness were not unreasonable.[50] Also as discussed in my earlier reasons, the law relating to repudiation based on insisting on a wrong interpretation of a contract is not entirely settled.[51] And there were aspects of Mr Spralja's attitude to his claims that may have damaged both his credibility and the force of his claims. For example, I agree with Mr Klempfner that Mr Spralja's insistence on his entitlement to sell his Shark Quota but still retain an entitlement to the Shark SFRs when granted, was misconceived and had the potential to damage his counterclaim in the Kelly proceeding.

88 These and other factors relevant to Mr Spralja's prospects of success in the Kelly proceeding are discussed at some length in my earlier reasons, and I do not propose to reprise them. Those factors all led me to the view that Mr Spralja had good prospects of success, but the outcome was by no means certain. It was my tentative view at that time that those prospects translated to a discount of between 20% and 30%. It would have been premature to have stated that view in my earlier reasons, but nothing that has been put before me in evidence or submissions in this phase of the proceeding has caused me to revise that view. I would therefore set the discount at 25%.

89 In affirming my earlier tentative view and arriving at this discount, I have had careful regard to the decisions of the Court of Appeal in Rosa, and the importance of ensuring that a discount is based on specific identified deficiencies in the notional trial. I am satisfied that the factors referred to above are deficiencies warranting a material, but not substantial, discount. On the other hand, the figure of 25% that I have arrived at has not involved any attempt to arrive at precise or mathematical adjustments based on weighting the various factors. It is no more or less than a broad brush evaluative non-mathematical discount.

90 The analysis above results in an award of damages of $247,557.68, calculated as follows:

• the value of the Shark SFRs assessed for the 2011/12 fishing year: $961,081.13;

• plus the likely income from leasing the Shark Quota and Shark SFRs for the period from 1 May 2008 to 30 April 2012: $236,451.25;

• plus the amount Mr Spralja was likely to receive on a taxation of his costs in the Kelly proceeding up to and including 19 February 2008: $22,366.40;

• the total of the above sums ($1,219,898.78), discounted by 25% is $914,924.08;

• less the solicitor/own client costs of the notional trial ($22,366.40) and the sum paid to Mr Spralja under the settlement terms ($645,000 ), giving a total deduction of $667,366.40.

I certify that these 38 pages are a true copy of the judgment of His Honour Judge Woodward delivered on 8 November 2019.

[1] Spralja v Bullard & Ors [2018] VCC 437

[3] Commencing at [22]

[7] [2016] HCA 18; (2016) 257 CLR 440

[8] [2016] HCA 18; (2016) 257 CLR 440 per French CJ, Kiefel and Keane JJ at [38]-[41]

[11] See the earlier reasons at [159]-[160]

[13] [2010] NSWCA 90

[14] [1988] HCA 64; (1988) 166 CLR 351

[15] [1958] 1 WLR 563

[16] (1975) 11 SASR 148

[17] [1988] HCA 64; (1988) 166 CLR 351, at p364-5

[18] [1988] HCA 64; (1988) 166 CLR 351 at p366-8

[19] Johnson v Perez [1988] HCA 64; (1988) 166 CLR 351, per Deane J at p381

[20] Johnson v Perez [1988] HCA 64; (1988) 166 CLR 351, per Wilson, Toohey and Gaudron JJ at p367

[21] Johnson v Perez [1988] HCA 64; (1988) 166 CLR 351, per Mason CJ at p355-6,

[22] [1903] AC 426

[23] Johnson v Perez [1988] HCA 64; (1988) 166 CLR 351, per Mason CJ at p355

[24] Johnson v Perez [1988] HCA 64; (1988) 166 CLR 351, per Mason CJ at p356

[25] Johnson v Perez [1988] HCA 64; (1988) 166 CLR 351, per Mason CJ at p357

[26] [1972] HCA 43; (1972) 127 CLR 454

[27] Johnson v Perez [1988] HCA 64; (1988) 166 CLR 351, per Wilson, Toohey and Gaudron JJ at p367

[28] Johnson v Perez [1988] HCA 64; (1988) 166 CLR 351, per Mason CJ at p358-9

[29] Johnson v Perez [1988] HCA 64; (1988) 166 CLR 351, per Mason CJ at p359-60

[30] The Bwllfa and Merthyr Dare Steam Collierie (1891) Ltd v Pontypridd Waterworks Co [1903] AC 426, per Lord McNaughten at p431

[31] The Bwllfa and Merthyr Dare Steam Collierie (1891) Ltd v Pontypridd Waterworks Co [1903] AC 426, per Lord Robertson at p432

[32] [1972] HCA 43; (1972) 127 CLR 454

[33] Johnson v Perez [1988] HCA 64; (1988) 166 CLR 351, per Wilson, Toohey and Gaudron JJ at p367

[34] Wenham v Ella [1972] HCA 43; (1972) 127 CLR 454 at p464

[35] Wenham v Ella [1972] HCA 43; (1972) 127 CLR 454 at p465

[36] Wenham v Ella [1972] HCA 43; (1972) 127 CLR 454 at 466

[37] Wenham v Ella [1972] HCA 43; (1972) 127 CLR 454 at 473

[38] [2001] HCA 18; (2001) 205 CLR 434 at [24]

[39] [2013] VSCA 116; (2013) 42 VR 382

[40] [2013] VSCA 154; (2013) 42 VR 382

[41] Rosa v Galbally & O'Bryan [2013] VSCA 116; (2013) 42 VR 382 at [139]

[42] Rosa v Galbally & O'Bryan [2013] VSCA 116; (2013) 42 VR 382 at [133], citing Firth v Sutton [2010] NSWCA 90

[43] see Malec v JC Hutton Pty Ltd [1990] HCA 20; (1990) 169 CLR 638 at 640 per Brennan and Dawson JJ

[44] Malec v JC Hutton Pty Ltd (1990) 169 CLR 643 at 643 per Deane, Gaudron and McHugh JJ; See also Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 at 355 (Mason CJ, Dawson, Toohey and Gaudron JJ) and 368 (Brennan J); Goddard Elliott v Fritsch [2012] VSC 87 at [846]

[45] Goddard Elliott v Fritsch [2012] VSC 87 at [847]

[46] Goddard Elliott v Fritsch [2012] VSC 87 at [850] - [851]

[47] Feletti v Kontoulas [2000] NSWCA 59 at [65]; See also Kelly v Corston [1998] QB 686 at 700F per Judge LJ

[48] Golec v Scott & Ors (1995) 38 NSWLR 168, 171, [G], (Meagher AJA and Cole JA, Priestley JA not deciding)

[49] Goddard Elliott v Fritsch [2012] VSC 87 at [851].

[51] Earlier reasons at [75] and following