(i) Godwin's successful attempts to perpetrate fraud against Flynn would have been prevented,
(ii) TSM would not have permitted Godwin to remain associated with its business interests thereby avoiding the losses occasioned by the collapse of its business after the fraud against Flynn was discovered and the ANZ loan was called in,
(iii) the plaintiffs would have prevented the registration of mortgages and other securities to the ANZ over their assets.
92.3 Further, or in the alternative to 92.1 and 92.2, the plaintiffs say that had the truth emerged -
-
(i) with respect to Godwin's true asset position prior to TSM's entry into the finance agreement, the first plaintiff would have excluded Godwin from its business activities immediately thereby preventing any loss or damage to its business interests as pleaded herein,
-
(ii) with respect to the specific concerns held by the ANZ regarding Godwin after TSM entered into the finance agreement, the first plaintiff would have take immediate steps to exclude Godwin from its business activities thereby avoiding loss and damage consequent thereon,
-
(iii) with respect to the knowledge of the ANZ regarding the $570,000 and $460,000 cheque transactions, the first, third and fourth plaintiffs would have taken immediate steps to exclude Godwin from their business activities and prevented the registration of mortgages over the business and home properties thereby affording them the opportunity to secure finance from alternate sources and avoid the loss and damage which flowed as a consequence of the ANZ's requirement that they sell their assets and repay the ANZ loan,
-
(iv) TSM would have and/or would have had the opportunity to resist the ANZ's demand to call in the full amount of its loan to avoid or mitigate the loss flowing therefrom.
92.4 As a consequence of the withdrawal of finance by the ANZ and the adverse publicity associated therewith:
-
(i) suppliers ceased to supply materials to TSM other than on a cash only basis,
-
(ii) contracts by TSM for the sale and purchase of sheet metal homes and others sheet metal products diminished dramatically,
-
(iii) TSM was unable to secure finance to meet its work and capital requirements at all and/or at affordable and competitive market rates,
-
(iv) TSM's business continued to diminish between 1998 and May 2001 when the directors were forced to place TSM into voluntary liquidation.
[1574] The statement of claim then formally claims damages by way of what was said to be loss on value of properties sold, capital growth on property sold, real estate fees on sale, future developments, future developments of TSM, on patents and on core business, as well as interest and costs.
[1575] It will at once be seen that the rolled up form of pleading adopted in this case also presents difficulty in reviewing the plaintiffs' claims as to damages. It is difficult to extract from the pleadings precisely what it is that the plaintiffs are seeking to contend with respect to TSM, on the one hand, and the individual personal plaintiffs, on the other as to each alleged breach.
[1576] Against that background I turn to the specific heads of loss asserted by the plaintiffs.
[1577] I first address the paragraph 92.1 claims which, in turn, seek to incorporate the heads of loss or damage asserted in paragraph 74 of the pleading in relation to the alleged breaches of the provisions of s52 of the TPA.
[1578] I accept that, had the balance of the ANZ loan transaction not proceeded, certain costs, fees and expenses associated with the re-financing of the TSM indebtedness (including relevant fees and other charges raised by the ANZ in connection with the payout of the CBA, Esanda Finance and ATSIC loans) would not have been incurred and that such a direct loss to TSM was of a type that should have been in Baylis' contemplation. At this stage I have not been taken by the parties through the detailed figures involved.
[1579] By paragraph 74.5 of the statement of claim the plaintiffs assert loss of opportunity to exploit the specific products referred to, by reason of what is said to have been a requirement by the ANZ to sell their homes and business properties in order to comply with the demand by the bank to repay to it, inter alia, $940,858.82 drawn against its loan facility to pay out the liabilities to the CBA, Esanda Finance and ATSIC. In paragraph 74.6 it is pleaded that the relevant sales resulted in a loss of capital value or of appreciation of capital value in relation to the properties in question.
[1580] The defendant contends that this claim necessarily fails because not only were the relevant properties not the subject of forced sale, but also that any requirement to sell was not shown to have been caused by any breach of contract on the part of the bank.
[1581] Ms Kelly's riposte to the plaintiffs' plea is that it falsely rests on the proposition that the plaintiffs were required to sell the relevant properties as a consequence of the discovery of Godwin's fraudulent conduct, absent which that situation would not have arisen.
[1582] She submits that the evidence establishes that the requirement to conduct an orderly realisation of assets was, causally, quite unrelated to any fraudulent conduct of Godwin. It was, she said, a requirement that emerged prior to the discovery of that conduct, when the approach for further bridging finance was made to Baylis on or about 27 January 1998. The credit approval in relation to the additional $200,000 bridging finance was specifically conditioned on the sale of all properties within a three to six month time frame "to clear ANZ's debts in full".[562] That requirement was imposed even absent any knowledge by the ANZ of the indebtedness to NPG. It also reflected a realisation by DLS and ECD that they and TSM were overextended.
[1583] She argued that, in reality, nothing subsequently changed when Godwin's fraud was discovered. The ANZ permitted the plaintiffs to continue with the planned orderly sale of assets, to which they had already committed.
[1584] That contention is, of course, founded on events that occurred post 2 January 1998, which would not have taken place had the ANZ breaches of contractual duty in relation to the two impugned cheque transactions not have been committed. Nevertheless, what actually transpired to some extent illustrates the financial and practical situation with which the plaintiffs were confronted as at the beginning of 1998.
[1585] The evidence overwhelmingly indicates that, quite apart from its inability at the relevant times to secure funding from any source other than the ANZ, TSM was, as at 2 January 1998, faced with the problem that, not only was it unable to pay its existing trade liabilities as they fell due according to normal terms of trading, but, it was also committed to find $800,000 plus any accrued interest to satisfy its obligations to NPG, as well as the $500,000 FDA due to the ANZ - allegedly from the proceeds of sale of the second LTD development project. The terms of the FDA required repayment within six months of drawdown. TSM also had its continuing substantial obligations to the ATO.
[1586] The calculations made by the witness Edwards and the information provided by the Martin reports and TSM's relevant financial statements combine to indicate that, realistically, the only way in which it could have satisfied its then liabilities and possibly generated some working capital would have been by asset sales of the nature of those that DLS and ECD actually agreed with Baylis on 27 January 1998. I so find. The need for realisation of assets has not been shown to be causally related to either breach on 2 January 1998.
[1587] It must be said that, in any event, the contention in paragraph 74.6, that the sale of the homes of the personal plaintiffs resulted in a loss of capital value and of the appreciation of the capital value of those assets, necessarily founders on several bases.
[1588] The pleading presupposes that there was a forced sale of the homes in question at a time and in a manner that denied the obtaining of full value for them or otherwise denied the possibility of capital appreciation.
[1589] As I have already concluded, there was no forced sale in the relevant sense of that expression. The sales were effected on an orderly basis and achieved fair market value. They were sales that were, in any event, virtually inevitable at or about the time that they occurred.
[1590] There is no persuasive evidence that the timing of the sales was such that they took place in an unusually depressed market. Nor is there any evidence of substance that indicates what appreciation of capital value (if any) might have occurred over any specific relevant period.
[1591] What the evidence does disclose is that the Anula property was eventually sold for $188,000 (against a valuation of $170,000 as at 25 November 1997), whilst the Raffles Road property was sold for $220,000 (as against a valuation of $210,000 as at the same date).
[1592] It is not to be forgotten that ECD and SED obtained the benefits of the full discharge of their ATSIC loan ($219,796.06) and that SED also received $120,000 from the sale of the Brayshaw Crescent property, of which she retained $60,000.
[1593] Monies drawn on the TSM account were employed to pay out the mortgage liability of DLS and NKS to the CBA quite apart from the receipt of the $120,000 to which I have referred.
[1594] The basis on which DLS and NKS each purchased a display house has already been referred to. The evidence reveals that, subsequently, NKS was able to trade up to a much more substantial and valuable home.
[1595] For the sake of completeness I note that the TSM land and workshop premises were sold at a market value of $450,000, as against a valuation of $480,000 made on 25 November 1997.
[1596] In paragraph 74.7 of the statement of claim it is, in the alternative, averred that the personal plaintiffs lost the opportunity of applying the proceeds of sale of their home properties to the benefit of TSM or to their own benefit.
[1597] It is by no means clear to me how the plaintiffs seek to base this claim. Leaving aside the question of whether such a loss of opportunity could, in law, constitute a relevant loss of opportunity of the nature contemplated by the authorities to which I have referred, the evidence indicates that the proceeds of sale were applied for the benefit of TSM and LTD. Part went in reduction of the TSM balance due to the ANZ and part was applied in reduction of the liability to NPG.
[1598] Paragraph 74.8 of the statement of claim pleads a loss of business opportunity to source an honest and creditworthy co-guarantor with personal assets to the value of $630,000, to secure the loan the subject of the finance agreement.
[1599] This assertion is based on the proposition that such an opportunity "would or was likely to have been realised had the truth emerged to the plaintiffs or any of them regarding Godwin's true asset position and/or credit history".
[1600] As pleaded, this head of claim appears to have no direct nexus with the circumstances related to the processing of either the $570,000 cheque or the $460,000 cheque. It essentially complains of the consequences of a failure by the ANZ to disclose information obtained by it prior to the settling of the loan facilities -- a situation that I have held did not constitute a breach of contract.
[1601] Even if this was not the case the plaintiffs have not established that the relevant opportunity existed at the time of breach, that they would have pursued that opportunity and that the opportunity would have given rise to a different outcome.
[1602] The evidence singularly fails to disclose the availability of any alternative co-guarantor or funding source as at January 1998. TSM had previously tried and failed to procure either, other than the ANZ.
[1603] It must be remembered that the CBA had refused TSM additional financial accommodation on several occasions; Flynn had refused to enter into partnership in relation to the development projects; as at the beginning of 1998 he was plainly very reluctant to lend further money via NPG (as appears from the conditions imposed by him when approached by Godwin as to the $570,000 cheque); and applications for finance from various bank and non-bank lenders had been unsuccessful. There is no positive evidence indicating the existence of any lending source or likely co-guarantor to whom TSM or the other plaintiffs could confidently resort at the time in question.
[1604] It is fair comment to say that the ANZ had only been persuaded to approve loan facilities as a result of a deliberate misrepresentation to the bank by the group of its true financial position.
[1605] Even had it been otherwise, that was most unlikely to have altered the ultimate course of events, whereby (as DLS and ECD had seemingly failed to appreciate) LTD was trading at a loss. The group had been compelled to raise a large sum of money from NPG at a non sustainable, very high rate of interest to keep the relevant projects going.
[1606] This head of claim necessarily fails.
[1607] Paragraph 92.2 of the statement of claim contains what is, with respect, a curious pleading.
[1608] It contends that, but for the ANZ's "above" breach of duty, Godwin's successful fraud against Flynn would have been prevented; TSM would not have permitted him to remain associated with its business, thereby avoiding the losses associated with the collapse of that business after the fraud had been discovered and the loans called in; and that the plaintiffs would have prevented the registration by the ANZ of the mortgages and other securities over their assets.
[1609] It is by no means clear what is meant by the "above" breach of duty as, in fact, multiple breaches are referred to in the preceding phraseology.
[1610] I take the substance of the plea -- relevantly for present purposes -- to be an assertion that, had the ANZ made due enquiry of a director of TSM concerning the $570,000 cheque and/or the $460,000 cheque, Godwin's relationship with TSM would, inevitably, have been terminated, the ANZ loan transaction other than in respect of the already drawn FDA would not have gone ahead, the then unregistered ANZ securities would not have been registered over the relevant properties and the TSM business would have continued on a profitable basis and not have collapsed.
[1611] The loss said to have flowed is the "losses occasioned by the collapse of... [TSM's]... business after the fraud against Flynn was discovered". This appears to be a plea related to a suggested loss of capital value of TSM and of the opportunity to continue to conduct the business of TSM and to generate a substantial profit in so doing.
[1612] The practical situation at the relevant time was rendered more complex by the earlier decision of the ANZ to make available the $500,000 FDA by means of one drawdown of $250,000 on 27 November 1997 and the second of approximately the same amount on or about 15 December of that year, notwithstanding that the security situation in relation to the Raffles Road property and the alleged Godwin properties had not been resolved.
[1613] That FDA was, of course, by way of the short-term bridging finance to which I have referred, to be repaid in full within six months of the sale of the units comprising the second LTD development project. As earlier recited, it was provided on the basis of mortgage security registered over the units in question and (later) the Margaret Street property itself.
[1614] Any discovery of Godwin's fraudulent conduct could have had no bearing on the FDA transaction, which had already been carried into effect. The funds were urgently needed at the time and the evidence abundantly satisfies me that there was little or no chance of them being available from any other source. Certainly the CBA had declined to provide any additional credit facility.
[1615] The effect of any discovery of Godwin's fraud on 2 January 1998 would have been to effectively prevent a settlement of the other approved ANZ loan facilities and leave TSM/LTD in a continuing difficult situation with its creditors.
[1616] I have already made the point that the most likely scenario -- indeed, on the expert financial evidence, the only viable option -- would have been for the plaintiffs to adopt the strategy that they actually resolved to embark on in late January 1998. i.e. to effect an orderly sale of the relevant assets on the type of basis agreed with Baylis.
[1617] I consider that, in practical terms, discovery of Godwin's fraudulent conduct apropos Flynn (NPG) and its likely sequelae would not materially have changed that situation, given that the incurring of any additional debt to NPG (if TSM became legally liable for it) would have greatly exacerbated existing financial difficulties.
[1618] Due, no doubt, to a combination of the already incurred crushing high interest debt to NPG, Godwin's failure to contribute the capital promised by him and his actual negative drawings from TSM, that entity and LTD were over extended and LTD was incurring continuing losses and cash flow deficiencies.
[1619] I repeat that, quite apart from any effect of the $570,000 cheque transaction and what followed it, the expert financial evidence convinces me that, if TSM was to survive, the only option was to do what the plaintiffs ultimately essentially agreed to do -- retire as much debt as possible by means of asset sales, cease the operations of LTD, and then attempt to trade on with what modest working capital and/or credit they could muster.
[1620] Ms Kelly contended that it cannot properly be said that the events of January 1998 brought about or led to the eventual collapse of TSM some three years later. She submitted that the plaintiffs have not been able to prove, on the balance of probabilities, that any breach of contract by the ANZ caused TSM to fail at that time.
[1621] I am unable to accept those propositions.
[1622] The evidence indicates that what essentially brought TSM to its knees, albeit in the context of the difficult financial situation with which it was confronted in any event, was the impact of the public knowledge that Godwin had committed a serious fraud on TSM and which, in turn, generated a general fear by trade suppliers and potential customers that the company may not be able to pay its debts and/or fulfil substantial orders, if placed with it.
[1623] The graphic evidence of DLS as to the manner in which continuing credit was almost immediately declined by trade suppliers and how TSM was unable to accept substantial orders is lent strong support by the evidence of the various trade and technical witnesses that I have already recited.
[1624] That evidence also verified the unwillingness of those persons to entrust work to TSM because they feared that they might be let down.
[1625] The figures extracted by the witness Clark indicated that TSM's sales dropped 31 percent in the 1999 financial year, whilst net profit declined massively in the 1997-1999 period.
[1626] Whilst it is true that TSM did limp along for about three years after Godwin's fraud became apparent, the evidence renders it apparent that, from that time, it went into an almost immediate and thereafter constant financial decline. The material before me indicates that it was in a state of escalating debt and negative cash flow.
[1627] It is truly remarkable that DLS and ECD were able to continue the TSM operations for as long as they did. I accept that this was probably a consequence of both of them obtaining separate night employment, so that they, personally, could survive without drawing income from TSM.
[1628] In so saying I by no means ignore the fact that such a situation did generate in a context in which, for other reasons, TSM was already in a difficult financial situation of its own making, to which I have referred.
[1629] As I have recited, DLS and ECD embarked on major projects without any financing in place or in real prospect; they did so without having procured any security of title to the sites; they did not conduct any truly definitive costings of the unit development projects and did not later appreciate that the LTD projects, for a variety of reasons, were running at a loss and thereby further eroding their financial position; they desperately committed themselves to the NPG lending of last resort with its ruinous interest rate; they did not take effective steps to ensure that Godwin contributed his promised $400,000 in a timely manner and, in fact, allowed him to make substantial drawings which he never repaid; and they embarked on unwise expenditures in respect of four expensive vehicles for individual plaintiffs at a time when TSM/LTD were in desperate need of working capital. Added to that, of course, was the impact of the abortive Queensland venture and expenditure on developmental projects that were unlikely to produce (and did not produce) any substantial immediate return.
[1630] An extraordinary feature of the lack of appreciation by the principals of TSM and LTD as to the true financial outcomes of the two LTD development projects is reflected by the fact that DLS instructed the expert witness Clark to assume, as the basis for certain of his calculations that LTD had been making or would have made a 12.5 percent profit on each of the unit development projects, whereas those projects had, on the evidence, both returned a significant loss.
[1631] In truth, by 2 January 1998, the Rubicon had well and truly been crossed. The plaintiffs, as a total group, were certainly in financial difficulty.
[1632] That situation was, no doubt, exacerbated by TSM endeavouring to continue with house building projects and to develop the various special initiatives when, realistically, it did not have the working capital to render all that it was attempting financially viable and was not in a financial position to effectively market products or proposed products developed by it.
[1633] Had DLS and ECD thereafter merely reverted to a primary focus on their previous core sheet metal work, they would have had a better long-term chance of survival. I think it probable that, had the relevant breaches not been committed by the ANZ, they may well have had little option but to do so.
[1634] However, notwithstanding that scenario, I consider that the major factor in the ultimate demise of TSM was the immediate, direct and clearly foreseeable factor to which I have referred. It became virtually impossible, by reason of lack of credit facilities with trade suppliers engendered by the knowledge of Godwin's fraud and its sequelae, for TSM to conduct its business on other than a hand to mouth and certainly not on a truly profitable basis.
[1635] Notwithstanding the somewhat pessimistic views of Edwards as to the ability of TSM to have continued trading profitably in any event, I consider that the plaintiffs have proved a causal connection between the relevant breaches and the ultimate loss of the TSM business. The difficult task is a quantification of that loss, after making due allowance for relevant contingencies. I will return to that aspect in due course.
[1636] Paragraph 92.3 of the statement of claim contains pleas said to be alternative to those set out in paragraphs 92.1 and 92.2. The first two of those pleas complain of breaches of duty to inform the plaintiffs of matters as to which I have already concluded that no such duty existed. The third is based on what I have held to be breaches of duty in relation to the $570,000 cheque and the $460,000 cheque.
[1637] This alternative paragraph, the full terms of which are set out above, essentially repeats an assertion with regard to the third plea that the effect of any breaches was to deny the plaintiffs the opportunity of securing finance from alternate sources and of avoiding loss said to have flowed from the ANZ requirement that assets be sold and its loan facility be repaid. It is asserted that TSM would have had an opportunity of resisting the ANZ demand calling in the full amount of the ANZ loan facility and of avoiding or mitigating loss flowing from it.
[1638] I have already explored the likely scenario that would have arisen, leaving aside the ANZ's breach of duty in relation to the $570,000 cheque. There is no need to retrace the same ground.
[1639] As I have indicated, the likelihood of the plaintiffs obtaining alternative finance was questionable and, in the circumstances, an almost immediate sale of the relevant assets was well nigh inevitable.
[1640] It is impossible, on the evidence as it stands, to perceive how any disadvantage flowed from the actions of the ANZ when it required repayment of its loan facilities, beyond that which was bound to flow from the situation that would have arisen if the plaintiffs had become aware of the true situation as at 2 January 1998 and/or following the agreement in relation to bridging finance made on or about 27 January 1998.
[1641] The final head of claim relied on by the plaintiffs is that pleaded in paragraph 92.4 of the statement of claim.
[1642] This, in effect, asserts that the [wrongful] withdrawal of finance by the ANZ, and what was said to be the adverse publicity associated with it, caused the eventual demise of TSM.
[1643] There are several points that need to be made concerning that plea.
[1644] The evidence does not establish that any express or implicit requirement for loan repayment was wrongful. True it is that, unsurprisingly, the additional bridging finance of $200,000 approved on 27 January 1998 was not proceeded with. Beyond that, however, the ANZ was, at least in the short term, content to sit back and permit the orderly sale of assets that had already been mutually agreed on between the parties on 27 January 1998.
[1645] Moreover, there is no persuasive evidence that there was adverse publicity associated with the withdrawal of finance by the ANZ, as such. The evidence of witnesses such as Valastro, Marcroft and others was that there were rumours that, as a result of fraudulent activities by a person associated with TSM, it was in financial difficulties and might have to close down. There were general concerns about TSM's ability to pay its debts due to the fraudulent activities in question.
[1646] In reviewing the pleadings as to loss and damage to this point, I have not directed detailed attention to the issue of what separate loss (if any) may have stemmed from the ANZ breach of duty in relation to the clearance of the $460,000 cheque. As I have indicated, a practical problem arises from the rolled up form of pleading in the statement of claim and a failure to separately identify and plead what heads of loss and damage are said to have arisen by reason of specific breaches of duty, such as that associated with the cheque in question.
[1647] In all fairness it must be conceded that, in attempting a review of the evidence on the basis mandated in Sellars,[563] it is both convenient and necessary to view the impact, as to any issue of causation, of both impugned cheque transactions considered together. Those transactions occurred on the same day within a very short space of time and were, in a practical sense inextricably interlinked.
[1648] As already appears, the bulk of the $460,000 was applied in extinguishment of the amounts due under the mortgages over the alleged Godwin properties in favour of the NAB. It is not clear to me how the residual balance of $48,286.25 paid to the credit of Godwin's account with the NAB was expended. I infer that he probably applied it for his own purposes.[564]
[1649] I understood Ms Kelly to argue that any breach on the part of the ANZ in clearing the $460,000 cheque did not result in loss to any of the plaintiffs because TSM obtained a benefit of like value, in that the titles to the alleged Godwin properties became available to provide first mortgage security to support the ANZ loan facilities and those securities were ultimately so dealt with as, in effect, to realise full value to TSM and/or the other plaintiffs.
[1650] The Brayshaw Crescent property was sold for $240,000, the whole of the proceeds being paid to TSM. Those proceeds were then disbursed, as to $120,000 each, to NKS and SED respectively, and applied by them as elsewhere discussed. It is said by the defence that the payment of the proceeds of sale remained a benefit to TSM, because the monies paid to NKS and SED represented a reimbursement of liabilities of the company to the ANZ that they had met.
[1651] The situation concerning the Wells Street property was a little more complex. As I understand the evidence, Walter Lew-Fatt retained ownership of this property on payment of $50,000 to TSM. The precise ramifications concerning that property and its ultimate disposition are not entirely clear to me. I assume that Walter Lew-Fatt retained it as beneficial owner.
[1652] What then was the practical effect of the breaches of contract committed by the ANZ?
[1653] Those breaches clearly enabled Godwin to commit the fraud on TSM and NPG which would otherwise not have occurred.
[1654] That fraud gave rise to a prima facie increase in the indebtedness of TSM (as recipient of that sum) to NPG of $570,000, given that all but $48,286.25 was applied in retiring indebtedness over properties that then became available by way of security for TSM's purposes, and on the disposal of which that entity received the benefit of the relevant proceeds of sale.
[1655] Had the two cheque transactions not have been processed and Godwin's association with TSM/LTD been terminated, as almost inevitably it would have been, TSM would, as of 2 January 1998, have been in the situation referred to in my analysis of the evidence of Edwards. That is to say, subject to some degree of forbearance on the part of its creditors, it would have continued to labour under a chronic shortage of working capital, but may well have been able, by virtue of an orderly sale of assets, to continue its core business -- at least on a modest scale. TSM has suffered financial loss as a consequence of the loss of opportunity to do so in the environment that would have existed but for the ANZ breaches.
[1656] Importantly, its situation would probably not have attracted the almost immediate severe credit restrictions that were imposed on TSM by trade suppliers, due to the rumours of Godwin's fraud with the resultant impact on TSM that, in the long-term, so adversely affected its capacity to trade. An orderly sale absent public knowledge of the actual commission of fraud was likely to have improved its cash flow and also its working capital situation to some extent.
[1657] As I have pointed out, the practical effect of what actually occurred was to seriously inhibit the ability of TSM to conduct its core business and certainly its housing and unit construction initiative. The crippling inability to obtain credit from trade suppliers must have been a situation in the reasonable contemplation of Baylis as a possible outcome, had he directed his mind to the probable consequences of his actions.
[1658] I consider that, had the breaches not occurred and had the resultant consequences to which I have referred not taken place, DLS and ECD would have been compelled by the circumstances with which they were then faced, to reappraise (and would have reappraised) their priorities and focus on TSM's core business, absent adequate working capital to do otherwise.
[1659] TSM may well have been able, in that context, to continue a modest degree of building construction on a job by job basis, but would not, at least in the short term, have had the capacity to engage in further major development projects. Given the extreme problems that they faced at the time, in the context that actually occurred, that is exactly what it sought to do.
[1660] It is difficult to see how, at least in the short term, DLS and ECD would have been able to significantly progress their desired expansion of activities in the development of major production in the specific areas of specialty to which earlier reference has been made.
[1661] On the other hand, some allowance needs to be made for the possibility that they may, in time, have been able to engage with a co-venturer outside the Territory in a wider production of rain water tanks and, perhaps, flashings and awnings.
[1662] I am not so convinced in relation to the areas of battenless and screwless cladding. The evidence strongly indicates the market dominance of existing suppliers of competing products and the inherent conservatism of those engaged in or having resort to the relevant market.
[1663] Given the foregoing situation, the evidence leads me to the conclusion that any possible escalation and/or expansion of the activities of TSM would have had to have been incremental over a substantial period of time and certainly not exponential. The figures espoused by Martin and Clark are, for the reasons I have already expressed, quite divorced from reality.
[1664] Having regard to my foregoing findings and conclusions I find it unnecessary to embark upon a further detailed, in depth discussion of the evidence given by the expert financial witnesses. I have recited the highlights of that evidence and concluded that the calculations of Martin and Clark simply cannot provide any reliable basis for assessment of damages by way of loss of opportunity to make future profits via the business of TSM that may be compensable in accordance with the relevant authorities.
[1665] I content myself with reiterating that I generally prefer the views expressed by Edwards as to quantum wherever those conflict with the evidence of the other expert witnesses, given any concessions that Edwards was prepared to make.
[1666] The plurality judgment in a Sellars[565] made the point that, where there has been a breach of contract giving rise to "actual loss of some sort", the common law does not permit evidentiary or other difficulties of estimating that loss in money to defeat an award of damages. Those damages must then be ascertained by reference to the degree of probabilities, or probabilities, inherent in the plaintiffs realising the relevant commercial advantage had the plaintiff been given the chance that it would otherwise have had. The Court is required to assess the degree of probability that a relevant event would have occurred, or might occur, and adjust any award of damages to reflect the degree of probability (Sellars).[566]
[1667] The plurality in Sellars[567] therefore concluded that the acceptance of the principle enunciated in Malec v J. C. Hutton Proprietary Limited[568] requires that damages for deprivation of a commercial opportunity should be ascertained by reference to the Court's assessment of the prospects of success of that opportunity had it been pursued.
[1668] In a case such as that now before me there can be little pretence at precision, because of the need to address a hypothetical situation that is itself fraught with many considerations and contingencies.
[1669] I take as my commencement point for consideration the evidence of Edwards that, in the year ended 30 June 1997 the actual NPAT of TSM was 3.2 percent, generated by sales of the order of $1.8 million. I also accept Martin's evidence that such a result may well have been adversely affected by "one off" type factors such as disruption associated with acquiring and setting up new business premises and some, but not all, of the "one off" expenses identified by him -- an aspect that I did not take Edwards to challenge, save as to the extent to which such expenses ought to be written back.
[1670] I also note that the Martin report (Exhibit P37) indicates that TSM recorded sales for the year ended 30 June 1998 were $2,282,122. That figure is consistent with the point that I have just made.
[1671] I also proceed on the basis that, historically and bearing in mind the disruption factor that just referred to, it would not be unreasonable to have expected an annual sales increase approaching 6 percent.
[1672] Nevertheless, some allowance ultimately needs to be made for the contingency that, incrementally, it may have been possible for TSM to have both escalated that rate of increase to a modest extent and also improved its NPAT percentage by reason of greater levels of production and sales, at least in relation to rain water tanks and flashings.
[1673] I further consider that, on such a basis, it would be not unreasonable as a fairly conservative starting point calculation to adopt an overall average percentage annual increase in sales of 6 percent over (say) a 10 year period and an average NPAT of the order of 3.5 percent. In so concluding I do not pretend to any degree of precision, because of the obvious imponderables involved, but I have had particular regard to the various figures referred to in the expert reports and evidence and the prior historical situation. Of course, that approach does not reflect any possible incremental improvement in the NPAT performance of TSM over time.
[1674] Even acknowledging the disruptive situations impacting on both the 1996/1997 and 1997/1998 I am of the view that it is appropriate (on a conservative basis) to adopt, as a baseline, the actual sales in respect of the year ended 30 June 1998 of the order of $2,282,100 (being the rounded off actual sales figure for the year ended 30 June 1998 referred to in Exhibit P37 p 11).
[1675] On such a basis, if TSM had successfully continued to trade on the basis that I have identified, the figures adopted by me would have given rise to the following approximate results over a 10 year period as espoused by the financial experts: