Manwelland Pty Ltd v Dames & Moore Pty Ltd
[2001] QCA 436
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- Unreported Judgment
- Appeal Determined - Special Leave Refused (HCA)
- Manwelland Pty Ltd v Dames & Moore Pty Ltd[2001] QCA 436
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Manwelland Pty Ltd v Dames & Moore Pty Ltd[2001] QCA 436
Manwelland Pty Ltd v Dames & Moore Pty Ltd[2001] QCA 436
SUPREME COURT OF QUEENSLAND
CITATION: | Manwelland P/L v Dames & Moore P/L [2001] QCA 436 |
PARTIES: | MANWELLAND PTY LTD ACN 057 291 406 (plaintiff/appellant) v DAMES & MOORE PTY LTD ACN 003 293 696 (defendant/respondent) |
FILE NO/S: | Appeal No 470 of 2001 SC No 134 of 1997 |
DIVISION: | Court of Appeal |
PROCEEDING: | General Civil Appeal |
ORIGINATING COURT: | Supreme Court at Rockhampton |
DELIVERED ON: | 16 October 2001 |
DELIVERED AT: | Brisbane |
HEARING DATE: | 20 September 2001 |
JUDGES: | McPherson and Thomas JJA, Douglas J Separate reasons for judgment of each member of the Court, each concurring as to the order made |
ORDER: | Appeal dismissed with costs |
CATCHWORDS: | TRADE AND COMMERCE GENERALLY – TRADE PRACTICES AND RELATED MATTERS – CONSUMER PROTECTION – ACTIONS FOR DAMAGES – ASSESSMENT OF DAMAGES – DAMAGES ARISING OUT OF PURCHASE OR LEASE – whether damages should be assessed as the difference between the purchase price and the market value or the amount required to place the plaintiff in the position they would have been had the transaction not taken place DAMAGES – GENERAL PRINCIPLES – MITIGATION OF DAMAGES – PLAINTIFF’S DUTY TO MITIGATE – whether plaintiff could recover the difference between the purchase price and the market value, despite having developed and sold part of the land at a profit – whether the development and sale was part of a continuous transaction of which the purchase of the land was the inception – whether the plaintiff may recover for work and labour expended by directors in mitigating the loss EVIDENCE – COURSE OF EVIDENCE AND ADDRESSES – COURSE OF EVIDENCE – RE-OPENING CASE AND RECALLING WITNESSES – BY PARTIES – whether plaintiff could re-open its case for the purpose of addressing damages after judgment and reasons had been delivered Trade Practices Act 1974 (Cth), s 52, s 82 Contaminated Land Act 1991 (Qld) Sale of Goods Act 1896 (Qld), s 51(3), s 52(3) Clarke v Japan Machines (Australia) Pty Ltd [1984] 1 Qd R 404, applied Czarnikow v Roth Schmidt & Co [1922] 2 KB 478, considered Gardner v Marsh & Parsons [1997] 1 WLR 489, distinguished Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1, considered Gould v Vaggelas (1985) 157 CLR 215, applied Haines v Bendall (1991) 172 CLR 60, considered Henville v Walker [2001] HCA 52, considered Hussey v Eels [1990] 2 QB 227, distinguished Kenny & Good Pty Limited v MCICA (1992) Limited (1999) 199 CLR 413, considered Kizbeau Pty Ltd v W C & B Pty Ltd (1995) 184 CLR 281, considered McAllister v Richmond Brewing Co (NSW) Pty Ltd (1942) 42 SR (NSW) 187, distinguished Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494, considered Potts v Miller (1940) 64 CLR 282, considered Ray Teese Pty Ltd v Suntex Aust Ltd [1998] 1 Qd R 104, considered Smith v New South Wales Bar Association (1992) 176 CLR 256, considered Tate & Lyle Food & Distribution Ltd v Greater London Council [1982] 1 WLR 149, considered Tay v Koh (1998) WA Full Court; Appeal No 132 of 1997, 28 May 1998, distinguished Toteff v Antonas (1952) 87 CLR 647, considered Urban Transport Authority v Nweiser (1992) 28 NSWLR 471, distinguished Wardley Australia Ltd v Western Australia (1992) 175 CLR 514, applied |
COUNSEL: | J C Bell QC with K A Barlow for the appellant B O’Donnell QC for the respondent |
SOLICITORS: | S R Wallace & Wallace for the appellant McCullough Robertson for the respondent |
- McPHERSON JA: The judgment in the action from which this appeal is brought concerns a parcel of land 1.2 ha in area located in Shakespeare Street on the fringe of the central business district of Mackay in North Queensland. It formerly belonged to Gasworks Corporation of Queensland, which, until some 20 or 30 years ago, used the site for the production of gas. In consequence, it became infected with high levels of polynuclear aromatic hydrocarbons, which have contaminated the soil and the groundwater. That brought the land within the terms of the Contaminated Land Act 1991, under which the approval of the Department of Heritage and Environment is required before any works are carried out on the land.
- The plaintiff Manwelland Pty Ltd is a company in which the shares are held by companies associated with four Mackay businessmen and their families. They use the plaintiff as a medium for investing in various real estate transactions and developments. In 1994 they began to interest themselves in the subject site. They were aware it was contaminated and that there were restrictions on its use, but they saw it as having potential as an industrial subdivision, or as a site for a large shopping centre, or for resale after it was cleaned up. Following negotiations with the owner, the plaintiff acquired an option to buy the land for $810,000, subject to conditions involving Departmental approval for the use of the land or its subdivision.
- After being extended, the date for exercise of the option was 31 March 1995. In the meantime, the plaintiff or its directors set about finding out what would have to be done and what it would cost for the land to be “remediated”, which is a word used in the Act to mean decontaminated or cleaned up. They were referred to the defendant Dames & Moore Pty Ltd, which is a company claiming expertise in the field. In due course, it reported that there were several ways of remediating the land. One, which was the cheapest method expected to cost about $25,000, was to cap and contain it, which involved covering its surface. The other was to remove the contaminated soil to a landfill somewhere else. The defendant reported that this could be done by transferring the offending soil to the Bayersville tip in North Mackay, where dump charges were low. Even if that more expensive method had to be used wholly or in part, the defendant advised that, adopting it or a combination of those methods, a full clean up of the subject land could be achieved at a cost in the order of $300,000.
- On the faith of this advice, the plaintiff on 31 March 1995 resolved to exercise the option and on 19 July 1995 duly completed the contract to purchase the land for $810,000.
- In fact, however, the defendant had been wrong about the prospects of the plaintiff’s being allowed to cap and contain the whole area or to use the Bayersville tip as a dumping ground for contaminated soil. Capping and containing would not solve the groundwater problem. The Bayersville tip was next to a mangrove swamp and was unlined, with no surface water collection control, and no groundwater monitoring or leachate collection system. The Department would not and will not allow it to be used as a place for dumping contaminated soil from the subject land. The defendant had failed to make any or any sufficient inquiries about these matters before it reported to the plaintiff. As a result, it would cost much more than $300,000, and, on one estimate, probably between $500,000 and $963,500, to thoroughly clean up the land. In the meantime, the plaintiff had, as I have said, already exercised the option, bought the land, and paid the purchase price of $810,000 in reliance on the defendant’s advice.
- The action was tried in the circuit court at Mackay by Dutney J sitting without a jury. It is from his findings that the narrative in these reasons has, in somewhat abbreviated form, been taken. His Honour held the defendant liable to the plaintiff on three of the bases pleaded in the action. The defendant had, he held, engaged in misleading or deceptive conduct in contravention of s 52 of the Trade Practices Act 1974. It had also been negligent at common law. In addition, it was in breach of its contract with the plaintiff to use proper skill and care in giving its advice. None of these conclusions has been challenged before us. The appeal is confined to the question of damages, as to which the plaintiff contends that the amount awarded is based on wrong principles and inadequate.
- At the trial, the plaintiff submitted that the appropriate measure of damages recoverable was the difference between the price paid by the plaintiff, which was $810,000, and the market value of land at the date it was acquired, which on the evidence of a valuer called by the plaintiff was $300,000. This, according to the plaintiff, had the consequence that it ought to have recovered a primary amount of at least $510,000. The learned judge, however, adopted a different approach to the issue of damages. Starting with the proposition, based on Haines v Bendall (1991) 172 CLR 60, 63, that the settled principle governing the assessment of compensatory damages in contract or tort is that the injured party should receive a sum that would put him in the position he would have occupied if the contract had been performed or the tort not committed, his Honour held that the plaintiff was bound to bring into account in the damages assessment the proceeds of resale on 16 July 1996 of a part of the land which it had subsequently developed and disposed of, less the expense of bringing it to saleable condition.
- It is necessary to refer in more detail to the events that followed the exercise of the option on 31 March 1995. Unable to carry out the original plan of capping or containing the site or removing contaminated soil to the dump, and then developing the whole area, the plaintiff arranged to have the land subdivided into three lots. Lot 1 with the frontage on Shakespeare Street was cleaned up by removing contaminated material from it to Lot 3. A shopping complex was built on Lot 1 by the plaintiff (“the reconfigured development”), which in July 1996 was sold for some $3.7 million to a trust established by a Mr Clark, who is a member of a local firm of accountants C E Smith & Co. Lot 2, which is the less contaminated part of the balance of the area, remains vacant, but may at some time in the future be capable of being “remediated” and put to use. It and Lot 3 are together reckoned to have a value of $80,000, although Lot 3 is so badly contaminated as to be unlikely to receive Departmental approval for any future use and is of little or no value at all.
- The financial outcome of the plaintiff’s activities of purchasing the land and developing and reselling Lot 1 is recorded in ex 33, which is a document entitled “Profitability Analysis – Actual Development”. The figures in it underwent some adjustment in the course of evidence given at the trial, but in its final form the items it sets out were accepted by his Honour as accurate. They began with a Gross Realisation figure of $3,780,000 representing the proceeds of sale received from the plaintiff’s purchaser, which was the trust established by Smith & Co. After allowing for leasing costs and an amount for a rental guarantee, the Net Realisation sum is shown as $3,600,031. What are described as Project Costs are then accounted for in a sum totalling $3,638,385. When that figure is set against the net amount realised of $3,600,031 (which includes the amount of $810,000 paid to buy the land), it produces a debit or loss to the plaintiff of $38,354. This, however, incorporates an amount of $28,094.57 representing expenses incurred before the option was exercised on 31 March 1995, which is not attributable to the defendant’s conduct. When it is deducted, the overall loss sustained is $10,259.43, for which judgment was given for the plaintiff, together with interest of $5,899.17, totalling in all $16,150.60.
- It was not suggested by the plaintiff on appeal that it made any difference whether the damages were assessed in contract, in negligence, or under the statutory right of action conferred by the Trade Practices Act. It is convenient to focus principally on the latter, which cannot be less than the damages at common law. A series of decisions establishes that, although in some respects sui generis, a legitimate starting point for assessing damages for misleading conduct engaged in contrary to s 52 is afforded by common law damages in tort. See Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1, 6-7, 12-13; Wardley Australia Ltd v Western Australia (1992) 175 CLR 514, 526; Kizbeau Pty Ltd v W C & B Pty Ltd (1995) 184 CLR 281, 290-291; Kenny & Good Pty Limited v MGICA (1992) Limited (1999) 199 CLR 413, 454-455. Assuming that, as here, there has been contravening conduct within the meaning of s 52 of the Act, the primary inquiry is to ascertain what loss has, in terms of s 82, been caused to the plaintiff by that conduct. For that purpose, it is enough that the contravening conduct materially contributed to the loss or damage sustained: Henville v Walker [2001] HCA 52 ¶69 (Gaudron J).
- Section 82(1) of the Act speaks of recovering the amount of the “loss or damage” suffered by that conduct, and in a number of cases an analogy has been seen with the measure of damages recoverable for the tort of deceit. In the context of that tort, Sir Frederick Jordan in McAllister v Richmond Brewing Co (NSW) Pty Ltd (1942) 42 SR (NSW) 187, 192, regarded it as “well established” that a person induced by deceit to buy something was entitled to recover as damages the amount by which the price paid exceeded the true value of the thing bought at the time of its purchase. It is, however, clear that, in stating what he described as the “prima facie” rule, his Honour regarded it as operating to restrict the amount of damages recoverable. As such, it resembles the prima facie rule adopted in ss 51(3) and 52(3) of the Sale of Goods Act 1896 for ascertaining damages for breach of contracts for the sale of goods. A principal virtue of that rule is that it avoids argument about the impact of subsequent fluctuations in market price. The wronged party is, when he finds his contract has been broken by non‑delivery or non-acceptance of the goods, expected to enter the market and either buy comparable goods or sell the goods left on his hands at whatever is their prevailing market price. The operation of the rule is, however, dependent on the existence of an available market, and, as Peter Gibson LJ pointed out in his dissenting judgment in Gardner v Marsh & Parsons [1997] 1 WLR 489, 507, “the same assumption cannot be made in the case of negligence or some other breach of contract or tort affecting the sale or purchase of land, where the right of action may not be known until long after the arising of the causes of action and there is unlikely to be an available market in the Sale of Goods Act sense”.
- In the present case, it was not until December 1995, which was some five or six months after completing the contract of purchase of the land, that the plaintiff finally became aware that it would not be permitted simply to “cap and contain” and develop the whole site or to remove the contaminated material off-site in the manner envisaged in the defendant’s report. Whether at that stage there was in fact an available market for land in its degraded condition does not seem to have been investigated in great depth at the trial. Sales of such land are comparatively rare. The “true” value of the land was assessed at $300,000 by a Mr Deacon, who was called to give valuation evidence on behalf of the plaintiff. He arrived at that figure by reference to comparable sales of uncontaminated land in and around the Mackay CBD, to which he then applied a “significant” discount to cater for buyer resistance to purchasing contaminated land. His valuation report (ex 8), was related to the date of exercise of the option, which he took to be 20 April 1995, but was in fact prepared for the trial of these proceedings. He appears to have made no allowance in his valuation for the fact that, as later events had demonstrated, the land was, as to at least one third of its area, plainly capable of being developed in the manner and with the results achieved by the plaintiff between December 1995 and the completion of the sale for $3.7 million in November 1996. His Honour accepted Mr Deacon’s valuation figure of $300,000 for the whole of the land as it was in March 1995, but appears to have done so because the valuation evidence was uncontradicted.
- In any event, what has in the past sometimes been regarded as the prima facie measure for assessing damages in the case of a thing bought or sold, such as goods or shares for which there is an available market, is plainly not necessarily appropriate for ascertaining the loss or damage sustained by the plaintiff in consequence of its having acted on a misleading statement by a third party about the suitability for commercial use of contaminated land which it was intended to clean up and use for development and resale. There would not be a ready market for land in such a state or condition. That measure of damages is, however, only one method of arriving at the loss in fact sustained in the case of the common law tort of deceit. The “usual rule”, as Gibbs CJ called it in Gould v Vaggelas (1985) 157 CLR 215, 220‑221, is, as his Honour said:
“only a special application of the general principle that in an action of deceit a plaintiff is entitled to recover as damages a sum representing the prejudice or disadvantage he has suffered in consequence of his altering his disposition under the inducement of the fraudulent misrepresentations made by the defendant: Toteff v Antonas (1952) 87 CLR 647, 650. In other words, the general principle is that the plaintiff is to be put, so far as possible, in the position he would have been in if he had not acted on the fraudulent inducement.”
See also Wardley Australia Ltd v Western Australia (1992) 175 CLR 514, 535 (Brennan J). It was this general principle that was applied by Dutney J in arriving at the damages for which he gave judgment in the present case.
- In arriving at the precise amount of the loss or damage in money terms, Dixon J in Potts v Miller (1940) 64 CLR 282, 297, said the rule was that:
“The measure of damages in an action of deceit consists in the loss or expenditure incurred by the plaintiff in consequence of the inducement upon which he relied diminished by any corresponding advantage in money or money’s worth obtained by him on the other side.”
That approach has also been applied in assessing compensation or damages for contravening conduct under the Trade Practices Act. See Kenny & Good Pty Limited v MGICA (1992) Limited (1999) 199 CLR 413, 424, 454-455, in which, following Toteff v Antonas (1952) 87 CLR 647, 650, it was said that the task is to ascertain how much worse off the plaintiff is than if he had not entered into the transaction induced by the representation. Although the relief available under s 82(1) of the Trade Practices Act is not to be confined by analogy either with actions in contract or tort (Marks v GIO Australia Holdings (1998) 196 CLR 494, 503-504, 528-529, 549), the task nevertheless remains one of ascertaining the “loss” suffered by reason of the contravening conduct and calculating the amount needed to compensate for it. See Henville v Walker [2001] HCA 52, at ¶66 (Gaudron J). In describing the operation of s 82(1) in the same case, Hayne J said ([2001] HCA 52, at ¶160):
“First it is necessary to identify the loss sustained by the appellants. The loss which the appellants suffered is a single sum. It is an amount by which their expenditures exceeded their receipts. Several different items must be taken into account in computing the amount expended and the amount received, but the loss is the single sum remaining after receipts are subtracted from expenditures”.
What is required in ascertaining loss for the purpose of s 82(1) is, his Honour went on to add, ([2001] HCA 52, at ¶162), a comparison between the position in which the appellants there found themselves after the project was finished and the position in which they would have been if, instead of relying on what they were told by the respondents, they had not undertaken the project at all.
- In my respectful view, the same method of ascertaining the loss or damage is appropriate in the present case. The plaintiff’s losses resulting from their having acquired the subject land in reliance on the advice of the defendant concerning its “remediability” are to be set against the receipts or gains accruing from that acquisition. It is the acquisition of the land that is the cause of both the ensuing losses and gains, or which materially contributed to them. The plaintiff’s position after the process of subdivision, development and sale of Lot 1 was completed in November 1996 is to be compared with its position as it would have been had the option to buy the land never been exercised as it is shown in ex 33. Using those details, the comparison demonstrates that the plaintiff was, as the learned judge found, worse off by $10,259.43 than it would have been if the defendant had not engaged in the misleading conduct proved against it; or, to express it another way, if it had not acquired the land. It is that sum of $10,259.43, together with the amount of interest allowed, for which judgment was entered. The result is or would be the same whether the amount in question is considered as damages for negligence, or breach of contract or as compensation under s 82(1) for the loss suffered by the defendant’s conduct in contravention of s 52 of the Trade Practices Act.
- The plaintiff challenges this process of reasoning by raising a number of objections to it. First, it is said that the gains, benefits or advantages which flowed to it from carrying out the development and sale of Lot 1 were “independent”, “extrinsic”, “supervening” or “accidental”, and should therefore not be taken into account in reduction of the plaintiff’s damages. The words quoted are taken from the reasons for judgment of Gibbs CJ in Gould v Vaggelas (1985) 157 CLR 215, 220, and are traceable to what was said by Dixon J in Potts v Miller (1940) 64 CLR 282, 298. In both instances the question under consideration was the limits of the damages recoverable at common law. Losses that are not a direct consequence of the inducement are not recoverable. See also Kizbeau Pty Ltd v W G & B Pty Ltd (1995) 184 CLR 281, 291. Those statements say nothing about any comparable limitations on the gains that are to be taken into account in arriving at the amount of the net loss recoverable. Mr Bell QC nevertheless submitted that the proposition can and should be applied in reverse. The plaintiff ought, he submitted, not to be obliged to bring into account benefits that accrued to it through actions of the plaintiff if they were not directly attributable to the defendant’s misleading conduct constituting the inducement giving rise to the claim.
- In my respectful opinion this misconceives the basis on which the damages or compensation are measured or assessed for conduct of this kind. The plaintiff is entitled to recover compensation for its loss, which means it is to receive the amount needed to restore it to the position it would have occupied had it not been induced to enter into the transaction, meaning by that the purchase and acquisition of the subject land. If it had not acquired the land, it would still have the amount of money representing the price paid for it ($810,000), together with amounts of other outlays that were incurred and paid, such as conveyancing costs, stamp duty, interest on borrowed moneys and the like. Equally, however, if it had not acquired the land it would not have received the resale price of $3.7 million paid to it in November 1996 when, as Lot 1, a part of that land was developed and sold to the purchasing trust established by Smith & Co. Of course, the process of subdivision and redevelopment of Lot 1 cost a good deal; but as can be seen from the figures in ex 33, it necessarily included the price of $810,000 that was originally paid for the whole of the land. In the end, however, as ex 33 shows the plaintiff succeeded, out of the resale price of $3.7 million, in obtaining restitution of the price and associated expenses it had paid or incurred as a result of the inducement on which it was led to part with its money. Taken with other expenses incurred in developing and selling the land, which it would not have bought apart from the actionable inducement, it emerged with an overall loss of only $10,249.43, which formed the principal sum for which judgment was given. Those expenses, if reasonably incurred, would have been recoverable even if the course adopted by the plaintiff had been less successful than it was. See McGregor on Damages (16th ed) ¶¶333-335.
- It was nevertheless submitted by the appellant that to approach the matter in this way was contrary to the decision of the Court of Appeal in England in Hussey v Eels [1990] 2 QB 227. There the plaintiffs completed the purchase of a bungalow in reliance on a negligently false representation from the vendor’s solicitors that the building had not suffered subsidence. Having discovered the true facts, the plaintiff purchasers obtained planning permission to demolish the bungalow and erect two new buildings upon the land. They then sold the land with the benefit of that planning permission for a considerable profit over and above the price they had originally paid for it. On appeal, it was held that, in their claim against the vendors for damages for misrepresentation, they were not required to bring into account the amount of the capital profit they had received on resale. According to the headnote, the ratio of the decision is that the plaintiffs owed the defendants no duty to mitigate their damages by securing planning permission and reselling the land, “so that it could not be said that the negligence which caused damage to the plaintiffs had also caused whatever profit they had made on resale”. When, according to Mustill LJ ([1990] 2 QB 227, 240), the plaintiffs “unlocked the development value of the land, they did so solely for their own benefit, and not as part of a continuous transaction of which the purchase of land and bungalow was the inception”. For that reason, they were entitled to recover the full cost or expense that would have, but had not been, incurred in stabilising the now demolished bungalow, and to do so without bringing to account the profit made on resale of the land as a vacant lot with planning permission.
- The decision in Hussey v Eels has recently been applied by the Full Court of Western Australia in Tay v Koh (1998) WA Full Court, Appeal No 132 of 1997. I confess, however, that I have some difficulty in accepting it as sound in law or as being applicable to the present case. The existence of a duty to mitigate may operate to reduce the recoverable loss sustained. It does not follow that the absence of such a duty serves to increase it. The decision in Hussey v Eels has since been followed in England in Gardner v Marsh & Parsons [1997] 1 WLR 489, but with a strong dissent from Peter Gibson LJ, for which I respectfully state my preference. In both English cases, the issue of damages was linked with the question whether the steps taken with respect to the land that produced the profit were carried out in response to the plaintiff’s duty to mitigate. What, if any, relevance the common law duty to mitigate may have in assessing compensation for loss or damage under s 82(1) of the Trade Practices Act is perhaps not yet entirely clear, although it may be relevant in deciding whether contravening conduct has materially contributed to the loss. But its application in Hussey v Eels to sanction an award for damages going beyond the plaintiffs’ loss is opposed to the general principle applied in assessing damages in cases of this kind, and may be attributable at least in part to the fact that in England the courts continue to adhere rigidly to the rule that, even in the case of land, damages are to be measured by the difference between the purchase price and the “true” value of the thing acquired. In that context, it is difficult to disagree with the strictures of Peter Gibson LJ ([1997] 1 WLR 489, 508) on the decision in Daisley v B S Hall & Co (1972) 225 EG 1553. In Australia, the weight of authority now favours the view that the damages are to be determined by ascertaining the net loss sustained as a result of acting on the inducement. One would expect that, in arriving at the “true” or market value, account would in a case like Hussey v Eels be taken of the potential of the property to be dealt with in exactly the way it was in that instance; that is, by demolishing the bungalow and obtaining planning permission to erect two new buildings on it. The potential for redevelopment, at least if foreseeable, is similar to fluctuations in market value, which, as McHugh J has said, “will ordinarily be factored into the assessment of the true value of the property as at the date of valuation”. See Kenny & Good Pty Limited v MGICA (1992) Limited (1999) 199 CLR 413, 436, in a comment with which Gummow J agreed (199 CLR 413, 446). In that way, the two methods of ascertaining the amount of damages ought in theory to produce the same or much the same result.
- Another way of justifying the approach adopted by the trial judge in the present case is therefore to regard the development and resale of the subject land as demonstrating its true value at the time damages fall to be determined. In Gould v Vaggelas (1985) 157 CLR 215, 220, Gibbs CJ, citing Potts v Miller (1940) 64 CLR 282, 289-290, 299, recognised that “Events that happen after the time of purchase may throw a light on the value of the property at that time”. See also Kizbeau Pty Ltd v W G & B Pty Ltd (1995) 184 CLR 281, 291. That was certainly true of the present case in the sense that, at the time Mr Deacon gave his valuation evidence at the trial, the subdivision and development of Lot 1 of the plaintiff’s land had long since taken place and its resale for $3.7 million had been completed. That is shown by the fact that ex 33, or an earlier version of it, appears as part of the valuation report ex 8 about which Mr Deacon gave his evidence. One would therefore expect it to have been “factored in” to the estimate he gave of the true value of the land either at the time it was acquired or when the misleading character of the defendant’s advice became apparent, whichever is the appropriate date for making the assessment. On any view of ex 33, the plaintiff succeeded in recovering in full the price it had paid for land and other expenses incurred, together with the sum of $10,259.43 for which judgment was given in its favour.
- If, however, my reservations about the correctness of the decision in Hussey v Eels [1990] 2 QB 227 are misplaced, the question to be determined here is whether the subdivision of Lot 1 of the subject land and its development and sale is to be regarded as not being “part of a continuous transaction of which the purchase of land … was the inception”. Transaction is a rather indefinite term; but, adopting that test as the criterion for deciding whether the plaintiff’s receipts from Lot 1 are to be taken into account in assessing the loss or damage sustained by the plaintiff, there can, in my opinion, be only one answer to the question posed. The plaintiff’s principal activity was real estate development and, as the trial judge found, it always intended to develop and sell the subject land. In the end, that is precisely what it did with respect to Lot 1. Its ability to fulfil its plans for the whole site were frustrated by the difficulty, if not impossibility, of economically decontaminating the whole 1.2 ha area; but, as to the one third of it contained in Lot 1, it carried out its original intention in full, the only difference being that the contaminated soil was retained on Lot 3 instead of being moved offsite to some other place. In all other respects, the plaintiff’s original purpose was achieved but on a scale reduced by two‑thirds. To the extent that the plaintiff remains out of pocket as a result of the reduced scale of the project it carried out, it is entitled to compensation for that loss but no more. The judgment gives effect to that result.
- The real grievance of the plaintiff and its directors in bringing this action and appeal seems in the end to be that, if they had not been induced by the defendant’s misleading conduct to purchase the land in question, they could successfully have applied their efforts and resources to some more profitable venture or opportunity elsewhere. Instead, what they have done has served only to save the defendant from the financial consequences of its negligence The remedy for that state of affairs is, however, not to distort the measure of damages recoverable in tort, contract or under the statute, but to make use of the relief that the law affords. In Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1, 13, Mason, Wilson, and Dawson JJ in discussing the loss or damage recoverable under s 82(1) of the Trade Practices Act had this to say:
“Because the object of damages in tort is to place the plaintiff in the position in which he would have been but for the commission of the tort, it is necessary to determine what the plaintiff would have done had he not relied on the representation. If that reliance has deprived him of the opportunity of entering into a different contract for the purchase of goods on which he would have made a profit then he may recover that profit on the footing that it is part of the loss which he has suffered in consequence of altering his position under the inducement of the representation. This may well be so if the plaintiff can establish that he could and would have entered into the different contact and that it would have yielded the benefit claimed: cf Esso Petroleum Co Ltd v Mardon [1976] QB 801, at pp 820-821, 828-829; Doyle v Olby (Ironmongers) Ltd [1969] 2 QB at p 167. The lost benefit is referable to opportunities foregone by reason of reliance on the misrepresentation. In this respect the measure of damages in tort begins to resemble the expectation element in the measure of damages in contract save that it is for the plaintiff to establish that he could and would have entered into the different contract.”
See also Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494, 511. On this footing, it might have been possible for the plaintiff to formulate and sustain a claim for the loss of prospective profit on some other enterprise which it could have carried through successfully had not its capital and efforts been devoted to extricating itself from the difficulties in which the defendant had placed it. Claims for what are essentially damages for loss of the opportunity denied to a plaintiff are, in my experience, not altogether common, which may suggest that they are difficult to establish and perhaps do not often succeed; but it is clear from what was said in Gates v City Mutual Life that it is for the plaintiff to prove at the trial that it could and would have entered into a different contract. No such claim was put forward or established in the present case.
- In addition to the matters so far considered, the plaintiff on appeal also submits that if, in arriving at the loss sustained, it was obliged to bring into account the gains it made from the redevelopment and sale of Lot 1, then there were other countervailing liabilities, burdens or disadvantages that ought to have been counted in its favour. One was the plaintiff’s contingent liability to Gas Corporation as the original vendor of the land under an indemnity which the plaintiff gave to it as part of the contract for purchase of the land in March 1995. The second category of burden was the time and effort expended by the plaintiff’s directors in arranging and carrying out the subdivision, redevelopment and sale of Lot 1, for which it is said the plaintiff ought to have been remunerated or compensated. The third category, which was described before us as “holding charges”, included liabilities, such as rates and taxes, which the plaintiff would continue to incur by virtue of its ownership of the balance (Lots 2 and 3) of the subject land. A basic problem confronting the plaintiff in respect of each of these categories of claim is that neither in the court below, nor for the most part on this appeal, are there any evidentiary details of the nature or amounts involved. That is explained in part by the plaintiff’s further complaint, that after the evidence and addresses had been received and the reasons for judgment delivered in November 2000, the trial judge refused an application by the plaintiff for leave to re-open its case in order to call further evidence on these matters. Even so, one would have expected to find, either on that application or on its renewal in this Court, particulars, perhaps in affidavit form, of the precise evidence it was proposed to adduce. There is in the appeal record an affidavit from Mr Penridge dated 18 December 2000, which was provided to his Honour shortly before final judgment was given, in which some of these heads of claims are deposed to in broad outline but without much condescension to detail.
- The problem of proof and assessment is particularly acute in the case of the first category of liability or loss referred to. Clause 42 of the contract by which the plaintiff agreed to buy the land from the vendor Gas Corporation contains in its three sub-clauses extensive undertakings by the plaintiff accepting responsibility for all remediation measures that might be required under the Contaminated Land Act 1991 in relation to the land “or any adjacent land”, and indemnifying the vendor against any claims arising directly or indirectly out of the contamination of that land. Plainly the plaintiff’s liability to Gas Corporation under those provisions is potentially very large. The problem is to assess it in money terms. The only evidence that goes anywhere near the point is the estimate of $500,000 to $963,500 as the cost of completely cleaning up the land, which is not necessarily to be equated with the value of the contingent claims against the plaintiff. It is in the nature of a contingency that it may never materialise. What ought to have been done at the trial was to adduce evidence (if any is available) of the possibility or probability of the contamination giving rise to claims for damages or to liability under the Act on the part of the plaintiff at some time in the future, together with the likely cost in that event of remedying those problems. The undiscounted total cost of completely remediating the land now is not identical with the value of the contingency represented by claims which may be made under the indemnity at some indefinite time in the future. One would expect that the evidence and predictions on those questions would be the subject of contention, and that the process of assessing compensation for that prospective or contingent loss would be one of some difficulty. If it is possible to obtain insurance against such future claims or liabilities, then the loss might be assessed as the cost of the premium payable for such a policy, if it is obtainable, which would presumably be one that would need to endure in perpetuity. If, as sometimes happens with contingent claims of that kind, it proves impossible to value the contingency with any degree of confidence, the plaintiff might be entitled to no more than a conjectural or merely nominal sum by way of compensation for its potential liability under cl 42 of the contract. Similar questions arising in bankruptcy and winding up are apt to present serious difficulties of proof and assessment which are discussed in The Law of Company Liquidation (4th ed), at 544-547.
- The third of the three categories of loss now sought to be raised is that described as “holding charges” comprising principally rates, land taxes and other such liabilities charged on or arising from ownership of the land. For some reason, this category of claim was not actively pursued on appeal. Perhaps that was because, if the balance of the land is saleable, one would expect the plaintiff to put an end to its liabilities for holding charges by selling the remaining land for whatever price it is capable of fetching. If, on the other hand, it is, because of its contaminated condition, practically unsaleable, it must correspondingly have either no or very little value for the purpose of rating or land tax assessment. In either event, it is not easy to see that much or any disadvantage, assessable in money terms, will be incurred by the plaintiff that is capable of being added to the expenses in ex 33 which are to be deducted from the profits and receipts derived from development and sale of Lot 1.
- The second category of claim has been left until last because it presents problems of legal principle as well as proof. Essentially it involves the proposition that the plaintiff is entitled to be compensated for the value of the work and labour done by its directors in extricating the plaintiff from the difficulties in which the defendant’s wrongful act had placed it. In other words, it is submitted that the plaintiff was entitled to be reasonably remunerated for its efforts and enterprise in subdividing, developing and selling Lot 1. One should not, I think, too readily reject the possibility of successfully pursuing a claim of that kind in an appropriate case, of which the present may be an example. In Tate & Lyle Food & Distribution Ltd v Greater London Council [1982] 1 WLR 149, 152, Forbes J said he had “no doubt that the expenditure of managerial time in remedying an actionable wrong done to a trading concern can properly form the subject matter of a head of special damage”. His Lordship added, however, that such a claim “must be extremely difficult to quantify”, and, in the end, he rejected the claim in that case for want of satisfactory proof. For much the same reason, a similar fate befell the claim considered by Giles J in NRMA Ltd v Morgan (1999) 31 ASCR 435, 804. I am not altogether persuaded that the fact that the directors of the plaintiff gave their time and attention to the plaintiff free of charge in the ultimate expectation of receiving profits or dividends from the plaintiff’s activities precludes it from successfully pursuing a quantum meruit or other claim of this kind; although it may suggest that the true basis of the claim is, or would have been, the value of the opportunity lost in consequence of having their efforts and enterprise diverted to what was the essentially unprofitable task of averting the financial problems in which the defendant’s wrongdoing had placed it. In any event, as in the cases before Forbes J and Giles J, there was in the evidence before his Honour at the trial of this action no sufficient basis in evidence to sustain such a claim even if it had been made by the plaintiff. That being so, there was and is no justification in law for allowing some conjectural amount on this account to compensate for the effort and time (which Mr Penridge has since estimated at 3,000 hours) expended in and about the redevelopment and sale of Lot 1.
- This leads on to the final question on appeal, which concerns his Honour’s decision not to permit the plaintiff to re-open its case on these matters. In the reasons which he gave on 20 December 2000 in support of his ruling to that effect, his Honour said that the application was very late, the evidence having concluded in mid-October and the defendant having delivered later in that month written submissions in which the issue of failure to prove damages was squarely raised. His Honour went on:
“I raised the issue of the correct measure of damages very early in the course of the trial before Mr Penridge, the plaintiff’s first witness, finished his evidence in chief. The plaintiff’s counsel were permitted to reserve their position on the issue and if necessary to recall Mr Penridge. They chose not to do so.
The matter was again raised during the evidence of Mr Deacon through whom (at T176) the document which became ex 33 was tendered. Ex 33 as corrected by the evidence at T178-180 was said to show the profitability of the reconfigured development. It was also said to be in response to my earlier suggestion that the reconfigured development might ultimately have to be brought into account (see T177.1). In its own written submission on the trial proper the plaintiff suggested loss of opportunity but gave no indication of wanting to reopen to lead evidence.”
- On appeal, Mr Bell QC candidly acknowledged that the oversight was the fault of plaintiff’s counsel, but that the client should not have to suffer for it. He relied on Urban Transport Authority v Nweiser (1992) 28 NSWLR 471, 479, where Clarke JA applied a statement in an earlier decision which referred to re‑opening “where the defendant’s case has not been gone into and there is ready to be tendered some additional evidence which by accident, mistake or want of foresight has not been tendered before the prosecution case is closed”. The present case was, it was submitted, not one in which counsel had for tactical reasons refrained from calling the subject evidence. The application to re-open was based “on a mistaken apprehension of the law” and was “more appropriately to be considered as one in which the application has resulted from an error by counsel”. See Urban Transport Authority v Nweiser (1992) 28 NSWLR 471, 478.
- In that case, however, the application to re-open was made by the defendant at trial shortly after the defendant’s case had been closed and plaintiff’s counsel had begun his final address. The witness whom the defendant wished to call had been waiting at court to give evidence at the preceding day of the hearing, but had not been called in consequence of a ruling by the trial judge that evidence from a defence witness was inadmissible as going only to the credit of the plaintiff: cf Attorney‑General v Hitchcock (1847) 1 Exch 91; and contrast Natta v Canham (1991) 32 FCR 282. The evidence in Nweiser, which went to establish fraud on the part of the plaintiff in making the claim, was therefore readily available and apparently in relatively short compass so far as its scope or extent were concerned. In terms of meeting it forensically, the plaintiff would probably not have been seriously prejudiced by permitting the defendant to call it at that stage.
- The position was very different in the present case. Counsel for the defendant was in the process of making oral submissions on 13 October 2000, which was the fifth day of the trial, when his Honour said:
“HIS HONOUR: ---- but I just want to ask you about this damages question. I’m still puzzled by the damages. Why don’t you have to bring to account any profit you in fact made?
MR HINSON: It’s obviously in my interest to say that that should be done.
HIS HONOUR: Just that I had the impression that you and Mr Bell agreed at the way damages should be assessed if they’re to be assessed.
MR HINSON: I think that’s right. I don’t think we had any different view about that.
HIS HONOUR: And you’re on your feet so I thought I’d ask you.
MR HINSON: Thank you.
HIS HONOUR: I always thought the basis for any damages, whether it was torts or contract or trade practices was to say what would the position have been but for the unlawful conduct, whether it was the failure to perform the contract or the negligent advice or the misleading and deceptive conduct, and what's the position as a consequence of it, and the difference between those two positions, and it represents the damages, which is why you get expectation loss in contract and you don't in torts, because the positions are slightly different, and I thought that’s what Marks said in effect.
MR HINSON: Your Honour on that ---
HIS HONOUR: And here the evidence is that if the unlawful conduct hadn’t taken place in so far at least as it involves the negligence or the Trade Practices Act, they simply wouldn’t have proceeded with the purchase. So one needs to look at their nett position in consequence of proceeding, as compared to the nett position had they not proceeded and the difference is the damage; but that doesn’t seem to be what you and Mr Bell think the damage should be.
MR HINSON: No. That’s right.
MR BELL: Do you think I should answer these your Honour: It’s probably a bit unfair.
MR HINSON: It’s a hard question for me to respond to because I’d like to give a favourable answer.
HIS HONOUR: Well perhaps I’ll ask Mr Bell and let you off the hook.”
- In the oral address for the plaintiff which then followed, the question raised by his Honour was pursued at some length by Mr Bell in his submissions, which included reference to a passage from a judgment of one of their Honours in Kenny & Good Pty Limited v MGICA (1999) 199 CLR 413, 436, which, it was suggested, confirmed the attitude adopted by counsel on the assessment of damages. The exigencies of the circuit sittings meant that the trial was then adjourned for the parties to make further written submissions on matters in issue. This was done by about the end of October, when the issue of damages was, as I have said, “squarely raised” by the defendant. His Honour’s reasons for judgment were delivered on 23 November 2000. It was not until after those reasons had been delivered that the plaintiff sought leave to re-open its case, which was refused in the further reasons delivered by Dutney J on 20 December 2000. The formal judgment was passed and entered on or as of that date.
- The application in the present case differed from that in Urban Transport Authority v Nweiser in a number of substantial respects. The application was, as the learned judge said, made very late. It was not a case in which there had been no forewarning from the trial judge of his opinion of the law governing the issue of damages. From an early stage of this trial his Honour had been making his views known and he had repeated them on more than one occasion up to and in the course of the oral submissions by counsel taken on circuit. It is true that there was an understanding between counsel that damages would fall to be assessed in the manner contended for by counsel for the plaintiff; but a judge is required by his or her oath of office to apply the law of Queensland as it is, and not as the parties suppose it to be. Although parties to an arbitration may agree that some other rules or regime will be applied in resolving their difference: see Czarnikow v Roth Schmidt & Co [1922] 2 KB 478, 488, and Commercial Arbitration Act 1992, s 22(2), these proceedings were not an arbitration but an action at law in the Supreme Court, in which the agreement or understanding between counsel was and is relevant only to the extent of its being a factor in the proper exercise of his Honour’s discretion to allow the plaintiff’s application to re-open its case.
- The purpose of re-opening the plaintiff’s case was not to admit further evidence to be adduced which, like that in Urban Transport Authority v Nweiser was comparatively limited in extent and readily available to the plaintiff at the time. What was envisaged here was a wholesale restructuring and revision of the plaintiff’s case on damages, which, it may confidently be assumed, would call for amended pleadings and particulars, as well as the discovery or disclosure of large numbers of documents with respect to each of the categories of additional loss advanced on this appeal. In effect what was sought on the application for re‑opening was a new trial on the issue of damages, which is something that is not ordinarily available except on appeal from a judgment that is shown to be wrong in fact or law and not capable of being put right without a retrial of that issue.
- Above all, the fact that the application to re-open was made only after the reasons for judgment had been given is a factor that weighs heavily against its being granted. In Smith v New South Wales Bar Association (1992) 176 CLR 256, 267, Brennan, Dawson, Toohey and Gaudron JJ said that:
“… different considerations may apply depending on whether the case is simply one in which the hearing is completed …, or one in which reasons for judgment have been delivered… In the latter situation the appeal rules relating to fresh evidence may provide a useful guide as to the manner in which the discretion to re-open should be exercised.”
As to that, courts in this state have consistently acted on the principles stated in Ladd v Marshall [1954] 1 WLR 1489, 1491, which, as adapted in Langdale v Danby [1982] 1 WLR 1123 to cases of appeals from summary judgments, were applied in Clarke v Japan Machines (Australia) Pty Ltd [1984] 1 Qd R 404, 408. According to those principles, three conditions must be fulfilled to justify the reception of fresh evidence on appeal or justify a new trial. Stated briefly, they are that the evidence must not have been obtainable by the exercise of reasonable diligence for use at the trial; that the evidence must be such that, if given, it would probably have an important, though not necessarily decisive, influence on the result of the case; and that it must be apparently credible.
- Stating those principles in that form shows that, without more, they are not satisfied in a case like this of an application to re-open after reasons for judgment have been delivered. The evidence of further loss and damage to the plaintiff would, it seems clear, have been obtainable at the trial. It would not have influenced the result, if by that is meant the outcome of the trial as distinct from the amount of the judgment for the plaintiff. It would, if given, presumably have been credible if in some respects controversial, although it would not necessarily have been easy to assemble or adduce. The first step would, however, have been to obtain leave to amend the statement of claim in various respects so as to plead the additional loss sustained including the opportunities lost to the plaintiff in the form required by UCPR Rule 155. Without such amendment the evidence would not have been admissible. An amendment of those dimensions to raise a new case on damages is rarely, if ever, permitted at the stage which this trial had reached when the application to re-open was made. In my respectful view, the learned judge made no error in the exercise of his discretion, but was correct in refusing the application to re-open.
- It follows that the appeal should be dismissed with costs.
- THOMAS JA: There is little I can add to the reasons of McPherson JA which I have had the benefit of reading. My further comments will therefore be brief.
Basis of assessment of damages
- I agree with McPherson JA’s analysis of the authorities. I consider that Dixon J’s statement in Toteff v Antonas,[1] as adopted by Mason Wilson and Dawson JJ in Gates v City Mutual Life Assurance Society Ltd,[2] poses the appropriate questions for the purposes of the present case. The appellant was entitled to damages in a sum representing “the prejudicial disadvantage he has suffered in consequence of his altering his position under the inducement”[3] of the relevant improper advice. It was not suggested that a different result should follow according to whether damages were assessed in contract, negligence or under the Trade Practices Act. In the present matter nothing turns on whether the respondents’ statements are regarded as improper advice or representations. It is necessary to determine “how much worse off the plaintiff is as a result of entering into the transaction which the representation induced him to enter than he would have been had the transaction not taken place”.[4] This is in substance the approach that was taken by the learned trial judge.
- A question of fact was involved as to whether the end sale of Lot 1 should be regarded as a consequence of the appellant exercising its option to purchase the land rather than abstaining from such a purchase. Quite clearly the development and sale of the site was an integral part of the appellant’s planning from well before the exercise of the option. As Mr Penridge said, “Our intention was always to develop and shift it and sell ... that’s what we had always done in the past and that was our intentions for them too [sic].” The alternatives which the appellant had already considered included decontaminating and selling, subdividing and selling off lots for industrial purposes, and constructing a shopping centre before resale. What in fact happened was more circumscribed and less profitable than what had been contemplated, but within the broad range of ideas of commercial development originally contemplated.
- Mr Bell QC for the appellant referred to Tay v Koh[5] in which the question was posed whether the plaintiff’s development was “part of a continuous dealing” flowing from the purchase, or an “independent and disconnected transaction”. In that case the Full Court of Western Australia upheld the trial judge’s finding that the ultimate realisation was an independent and disconnected transaction from the original purchase. Accepting for present purposes that such a distinction is appropriate, it seems to me that the learned trial judge in the present case correctly determined otherwise.
- In Tay v Koh, the subsequent development was a very attenuated process, and the final project was regarded as “due entirely to supervening or extraneous factors, unrelated to the inherent value of the land.”[6] The fact that in the present case the appellant was driven to resourceful variations to attain maximum realisation does not in my view break the connection between purchasing the land and reselling it in due course to maximum advantage. In cases of this kind it is not necessarily inappropriate to take into account subsequent events to demonstrate the reality of the situation, or to show that the true loss through ownership of the property (or business) is less than it might prima facie seem to be.[7]
- The sale of Lot 1 was a consequence of the appellant’s exercising its option to purchase. Its proceeds should be brought into account in determining what damage was in fact suffered by the appellant in consequence of the respondent’s wrongful conduct. To fail to require the appellant to bring into account the end result of the exercise would offend the principle that a plaintiff cannot recover more than he or she has lost.[8]
Liability under indemnity
- The appellant’s complaint on this score is that after reasons for judgment had been delivered, the learned trial judge failed to grant leave to the appellant to call further evidence. The basis of the application was that the appellants’ advisers had erroneously assumed that the primary measure of damages was price paid less true valuation. But even on that assumption it seems to me that it was open to the appellant to prove additional independent loss such as its potential future liability under the indemnity. If the indemnity was regarded as a real burden it was for the appellant to prove its value or call some evidence that would allow some quantification to be made.[9] In fact it was adverted to in evidence, specifically by Mr O’Connor, but no-one seems to have seen fit to ask him about the risk of the appellant being called upon at some time to pay something because of it or whether such a risk was high or low. In the event the learned trial judge regarded the indemnity as too remote a source to justify an assessment, and noted that there was no evidence of any appreciable risk of the appellant being called upon to remediate. In these circumstances a nil or nominal assessment was appropriate, and there was no justification for the matter being re-opened.
Possible claims by directors
- In the course of the trial the appellant presented its accounts in relation to the project including its expenditure incurred therein. They disclose no separate liability to the appellants’ directors. There was no evidence of any arrangement for the company to reimburse its directors for services rendered over and above the call of duty, or of any obligation to do so. The application to re-open the case so that some new claim of this kind might now be formulated is one fraught with risk. The application to re-open, if granted, would open the way, not for the supplementation of a few discreet items that had been overlooked, but for the wholesale revision and restructure of accounts. The learned trial judge was correct in refusing to permit the re-opening of the case.
- I agree with the orders proposed by McPherson JA.
- DOUGLAS J: I have read the reasons of McPherson JA and for those reasons agree that the appeal should be dismissed with costs.
Footnotes
[1] Toteff v Antonas (1952) 87 CLR 647, 650.
[2] Gates v City Mutual Life Assurance Society Ltd (1985-1986) 160 CLR 1, 12.
[3] Toteff at 650.
[4] Gates at 12.
[5] Tay v Koh (WA Full Court); Appeal No 132 of 1997, 28 May 1998.
[6] Ibid per Ipp J at 6.
[7] Kizbeau Pty Ltd v W G & B Pty Ltd (1995) 184 CLR 281, 291, 296-297; Cf Pazese Pty Ltd v Sciacca & Shaw [1999] QCA 455 paras 15, 16, 25, 29; Cf Kenny & Good v MGICA (1992) Ltd (1999) 199 CLR 413 at para 123 per Kirby and Callinan JJ, with which Gummow J agreed at para 93.
[8] Haines v Bendall (1991) 172 CLR 60, 63.
[9] Ray Teese Pty Ltd v Syntex Aust Ltd [1998] 1 Qd R 104.