Cessnock City Council ABN 60 919 148 928 v 123 259 932 Pty Ltd ACN 123 259 932

[2024] HCATrans 8

[2024] HCATrans 008

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S115 of 2023

B e t w e e n -

CESSNOCK CITY COUNCIL ABN 60 919 148 928

Appellant

and

123 259 932 PTY LTD ACN 123 259 932

Respondent

GAGELER CJ
GORDON J
EDELMAN J
STEWARD J
GLEESON J
JAGOT J
BEECH‑JONES J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON TUESDAY, 13 FEBRUARY 2024, AT 9.59 AM

Copyright in the High Court of Australia

MR J.T. GLEESON, SC:   May it please the Court, I appear with MR L.G. MORETTI for the appellant.  (instructed by Holding Redlich)

GAGELER CJ:   Thank you, Mr Gleeson.

MR D.L. WILLIAMS, SC:   May I please the Court, I appear with my learned friend MR B.D. KAPLAN for the respondent.  (instructed by Dentons Australia)

GAGELER CJ:   Thank you, Mr Williams.  Mr Gleeson.

MR GLEESON:   Your Honours will see from our outline that I propose first to address the law, which is paragraphs 2 to 9, before coming to the very arresting facts which bring this matter to the Court.  To provide focus, if the Court could have page 148 of the core appeal book, paragraph 73 of the Court of Appeal, which sums up much reasoning that has gone before.  Paragraph 73, we submit, does not accurately state Australian law for the recovery of damages for loss of contractual benefits measured by “wasted expenditure”.

It is wrong to the extent that it purports to state a principle that applies to, firstly, all contracts, without further inquiry; secondly, all forms of expenditure in reliance upon a contractual promise, without further inquiry into the nature of the expenditure, including whether it is essential or incidental reliance.

GORDON J:   Sorry, without ‑ ‑ ‑

MR GLEESON:   Without further inquiry into the nature of the expenditure including whether it is essential reliance or incidental reliance as I have explained.  And thirdly, the third last line:

whether under or dehors the contract.

It is overly general in that it applies a presumption to forms of recoupment not coming under the contract but coming dehors the contract from separate ventures conducted by the innocent party.  Fourthly, it is wrong because it erects a presumption of law passing a burden on the balance of probabilities to the contract breaker to prove, as a past hypothetical fact, that the expenditure would have been wasted in any event.  Your Honours, that is the focus for the legal submissions, but if I could come to our outline.

GAGELER CJ:   Mr Gleeson, you are addressing Australian law, obviously, but are you saying Australian law is different from English law and United States law to which your opponent draws attention?

MR GLEESON:   It is certainly different to United States law, and the difference I will come to under our proposition, paragraph 3.  In respect to English law, there was a significant difference, as a number of the earlier English authorities, including those discussed in Amann, were overly heavily influenced by the United States approach and, while somewhat imprecise in places, might be read as shifting a legal onus, in places might be read as not fully investigating the more precise questions we identify, albeit since about 2010 at least, in the Yam Seng decision, English law has conformed more closely to Australian law by saying not only is Robinson v Harman the governing principle but the onus rests on the innocent party to prove what we submit in paragraph 2, which is if the contract had been performed the innocent party would have been in a better position in some identifiable and quantifiable respect than its actual position following breach.  So, conformity between Australia and the United Kingdom has increased.

EDELMAN J:   When you talk about the United States law, are you talking about just the more recent decisions in the United States law?  Because Albert v Armstrong Rubber, on one of view of it, is just expressing absolutely conventional expectation loss and then applying a substantive legal onus to it, and that was picked up in Amann Aviation. 

MR GLEESON:   Yes.  Can I address your Honour’s question very shortly, under paragraph 3, because I wish to go to that case in some detail.  So, all we wish to say in respect to paragraph 2 is that it is our submission that, given Robinson v Harman is the governing principle and given the onus of proof, it remains on the innocent party at all times to prove it would be in a better position in some identifiable, and ultimately quantifiable, respect than its actual position following the breach.  We submit that there is a never shifting of a legal onus of proof in the aspects that we are concerned with in this case.

Now, in terms of authority, we would take the Court to Berry v CCL Secure Pty Ltd (2020) 271 CLR 151, which is volume 1, tab 4, page 38, for the discussion in paragraph 28 in the judgment of three Justices. Admittedly, in the context of section 82 of the Trade Practices Act but by reference to footnote 45, picking up Amann, thus stating a more general principle as to where the legal burden rests.  By contrast, paragraph 29, recognising that there may be a shifting of the evidentiary burden in appropriate circumstances.

I will come back to 29, but our submission on 29, when it refers to Amann Aviation – firstly referring to five judgments in footnote (51), and then, in particular, Justice Brennan in Amann – it is in the context of the shifting of an evidentiary onus, not a legal onus.  In particular, your Honours will pick up on page 170 of the Commonwealth Law Report, at about point 5, that if the presumption arises:

it was just that the Commonwealth should bear the ultimate onus of proving at least a prospect that Amann’s returns under the contract would not have been sufficient to recoup that expenditure.

We emphasise “prospect”, not “balance of probabilities”.  We submit that paragraph 29 is useful because it has brought these – misleadingly called – reliance damages into direct comparison with expectation damages measured on the loss of a chance.

EDELMAN J:   It is not entirely clear what the words “at least” are doing, though.  Whether that is at least a requirement of proof of a prospect, and possibly a requirement of proof of more than that, or whether that is discharged by proof of a prospect.

MR GLEESON:   We submit the latter, your Honour.

BEECH‑JONES J:   Mr Gleeson, paragraph 30, it says:

either of the presumptions –

plural:

considered in Amann –

What do you say that is a reference to?  That is not a reference to an evidential and legal, you say it is something else?  If you are coming to it, I do not want to take you off.

MR GLEESON:   Your Honour, our answer is that it is a reference back to the bottom of page 169, where the sentence reads:

One relevant modern application of that principle is reflected in this Court’s decision –

And then the footnote picks up a number of the judgments, the second, we read – we think – as Justice Brennan’s version of it, which is the narrower version, that it is only where the breach has rendered it impossible to carry out the assessment on the ordinary basis that there is any shifting of onus.

GORDON J:   I had understood that it was the rebuttable presumption put at the top of 170 was the first one, is it not, and then the second way is the way in which Justice Brennan puts it, and both of those are said by Berry to be sufficient in this case.

MR GLEESON:   Yes – in our case?

GORDON J:   No ‑ ‑ ‑ 

MR GLEESON:   In Berry?

GORDON J:   For the reason it is unnecessary to invoke either of the presumptions in Amann, being the way put first, the rebuttable; and in the second, the way in which Justice Brennan puts it.

MR GLEESON:   We agree, your Honour.  Before leaving Berry, the distinction between the legal onus never shifting and the evidentiary onus potentially shifting back and forward is found at paragraphs 65 to 66 in your Honour the Chief Justice and Justice Edelman’s joint judgment. Again, stated in a context of the statutory claim, but, we submit, reflective of the same principle in the law of contract.

EDELMAN J:   Do you say that it would have been enough in Armory v Delamirie – to which, I think, paragraph 28 or 29 referred – for the respondent to have demonstrated that there was a prospect that the jewels might not have been worth very much money?

MR GLEESON:   Potentially, yes, once one worked through what was the ordinary measure of damage and then precisely how was the damage meant to be proven on some alternative basis.  Your Honours, can I come, then, to our proposition 3 and the United States.

GAGELER CJ:   Before, perhaps, you come to proposition 3 – just in relation to proposition 2, why is the innocent party not worse off compared with the position as it would have been if the contract had been performed, simply by having wasted expenditure?

MR GLEESON:   Because that has not embarked upon the enquiry, if the contract had been performed, would you have wasted that expenditure in any event?  And that enquiry might lead you to look at the performance of the contract itself.  That is what Fuller and Perdue call “essential reliance”; it is where I do things, in performing or preparing to perform the contract, expecting that I will get recoupment from the other party, usually by payment of the contract price.  So, if I have incurred the expenditure, it may well be wasted, in any event, if I do not get back sufficient receipts under the contract, allowing for all my other expenses.

GAGELER CJ:   So, the plaintiff has to prove not only wasted expenditure but that it would not have been wasted if performance had occurred?

MR GLEESON:   We submit that is the legal onus of the plaintiff, and that legal onus never shifts.  So, in the present case, they say we spent $3.7 million on a hangar.  We submit the legal onus never shifts to prove that, had this contract played out, they would have got back sufficient receipts.

GAGELER CJ:   Why should the evidentiary onus not shift?

MR GLEESON:   The evidentiary onus may shift – may shift – but before I expand on that ‑ ‑ ‑

GAGELER CJ:   I am sorry.

MR GLEESON:   No, your Honour, I said recoupment.  There are two forms of recoupment which have been completely glossed over in the Court of Appeal’s paragraph 73.  The second situation which Fuller and Perdue call “incidental reliance” is where the expected recoupment is not out of the contract with the other party, nor out of, as in McRae, an asset which is promised to exist under the contract.  But it is under the conduct of a separate business which – albeit needs this contract in the background in order to allow it to run – it is ultimately whether that separate business succeeds or fails that will determine whether the expenditure is truly wasted.

EDELMAN J:   But ultimately, we are always talking about consequential losses in this sphere, are we not?  If we are talking about consequential losses, why does it matter if the consequential loss was incurred directly in reliance on the performance of the contract, or indirectly in reliance upon that?

MR GLEESON:   Well, it can matter critically.  Once we are in the field of the shifting of an evidentiary onus – your Honour the Chief Justice put that to me, and I accepted that can occur, and in some cases will occur fairly readily – one asks, what is the presumption about ordinary behaviour, ordinary commercial behaviour, which allows one to assume, absent something different, that the expenditure would have been recouped?

If one is looking at essential reliance with recoupment from the counterparty, the view expressed by Chief Justice Mason, Justice Deane, doubted by Justice Gaudron, Justice Toohey and Justice McHugh, and not really commented on by Justice Brennan, was that ordinary expectations of commerce might set up an assumption that if I am supplying goods or services for a contractual price, I have built into my expected recovery return of my expenditure, either under the first contract or under a subsequent contract.  So, if one is in the field of an evidentiary assumption and commercial expectations, that is the type of reasoning.  Our point is that whether any such assumption can be made requires close attention to the particular contract and the particular expenditure.

If what you are saying is, I am entering a contract with you where you are promising to take steps which are likely to lead to me getting a 30‑year lease under which I will be paying rent every year, where I am going to spend $3.7 million on a hangar and where my recoupment, if any, is not going to come out of the lease, it is going to come out of such businesses as I choose to operate over that 30‑year period, one immediately asks, why would the evidentiary onus necessarily shift and, if it shifts, with what degree of force does it shift?  So that is why, your Honour Justice Edelman, the nature of the expenditure and the intended recoupment can be critical in terms of understanding if an evidentiary onus has shifted.

EDELMAN J:   That assumes, though, that the rationale underlying a reason for a shift in the evidential onus is, as you have put it, an expectation, effectively, that people will recoup their expenditure.  But there may be difficulty in modern commerce with saying there should be any presumption that parties will recoup their expenditure in commercial contracts.  There is another justification for a shift in the evidential presumption, and that is the Armory v Delamirie one, which is that if you, as a contract‑breaker, have made it much harder for the other party to prove their loss, then the evidentiary onus ought to shift to you.

MR GLEESON:   I accept that, your Honour.

EDELMAN J:   And that rationale would not differentiate between the two different types of expenditure, would it?

MR GLEESON:   It would, your Honour.  What it will require is a close attention to the terms of the contract to see how the risks have been allocated under it, and what effect the defendant’s breach truly has had on it, the ability to value the promised thing before or after the breach.

Now, in the present case, immediately before the breach, if you were seeking to value the promise, it is possible, in theory, to value a lease, it is difficult in practicality to value a 30‑year lease wholly dependent on the success of businesses being run dehors the contract.  The point Professor Lücke makes in his article in volume 5 is that in this type of case it is no more difficult after the breach than before the breach to value that lease – it is always difficult but not impossible.

Now, the Armory v Delamirie principle, in other words, your Honour, needs to be applied to the type of contract and to the type of breach and to the type of effect it truly has had.

GLEESON J:   And that point about the type of breach, I think, is significant in terms of dealing with the point that Justice Edelman asked you about, which was whether or not evidence of a prospect would be sufficient.  In the Armory Case, as I understood it, the party in breach deprived the plaintiff of any means of proof of the value of the jewels.  So, how could a proof of a prospect that the jewels were lacking in value be a sufficient response to that breach?

MR GLEESON:   I accept that, your Honour.  One looks to the particular breach.  I think I interrupted your Honour the Chief Justice, who was asking me another question.

GAGELER CJ:   I suppose my question is really at the conceptual level, Mr Gleeson.  Part of the way you seem to be framing your argument would be to treat reliance damages as a kind of proxy for expectation damages.  So, one is always comparing one with the other.

If you just take a really simple scenario of a non‑commercial contract, a procurement contract by, say, a government department – the contract is for the provision of computer equipment and, in reliance on the contract’s future performance, the department installs brackets to hold the computers.  The computers are not then delivered, there is repudiation of the contract, there is wasted half a million dollars on brackets that will never be used.  Why is it not just sufficient to say, well, that is just wasted expenditure in the expectation of the contract being performed?

MR GLEESON:   The answer is, your Honour, that is the approach that is taken in the United States because of a view that one is protecting a reliance interest within contract.  And one of the key questions that Amann had to face was, how would that approach be reconciled with Robinson v Harman?  The decision made across every judgment in Amann is to say, no, you are not protecting that reliance interest in contract.  You may be protected in tort or under the statute, but in contract one must always come back to saying, would you have recovered that expenditure had the contract been performed?

BEECH-JONES J:   Mr Gleeson, in the example given by the Chief Justice, the department would never be recovering profit though; it is not that type of contract which they would ever be expecting to, as it were, recoup.

GAGELER CJ:   Justice Beech-Jones, it might be necessary to speak a little louder.

BEECH-JONES J:   Sorry – in the example by the Chief Justice, that is not an example of a contract of which there would ever be – the department would ever be expecting to get revenue, or may not be, depending on what they are doing.

MR GLEESON:   I accept that is a difference, your Honour.

GAGELER CJ:   Mr Gleeson, would you say, in the example – and I am sorry to be using a hypothetical – but would you say in that example that money spent on the brackets is just not recoverable in contract?

MR GLEESON:   No, but to be recoverable it has to be reconcilable with Robinson v Harman, and that has to require some comparison – allowing for the nature of the contract, allowing for whether it is a profit-seeking contract or not – some comparison with your position had the contract been performed.

GAGELER CJ:   Why is the position just not, if the contract was performed, the expenditure would not have been wasted; the contract is being repudiated, the expenditure is wasted.  Why is that just not the counterfactual analysis?

MR GLEESON:   Well, it may depend on your Honour’s precise example.  And one of my propositions is one needs to look at the nature of the contract and the allocation of risks under the contract.  If ‑ ‑ ‑

GORDON J:   I speak only for myself, but that proposition is at just too high a level of generality.

MR GLEESON:   What I am trying to indicate is, if it is your Honour’s example, that it is a contract to supply equipment and in reliance upon that, brackets are purchased, one would be looking at the contract to see what provision it had made, first of all, for these eventualities.

GORDON J:   What eventualities?

MR GLEESON:   The one that is now complained about – namely, that you have spent money on brackets which you have not recovered.  But one will then immediately, of course, be looking at mitigation as well, which is, can you do anything with the spare brackets?

GAGELER CJ:   Of course.

MR GLEESON:   That will be taken into account, but one still has to say, what position would I have been in had this contract been performed?

GAGELER CJ:   What is the analysis that would be required in my simple example, on your submission?

EDELMAN J:   Would not the answer under the sale of goods legislation simply be that you were given an amount of money to enable you to purchase exactly the same type of computers, or as close as possible to the same type of computers, as you had contracted to purchase?

MR GLEESON:   That was the answer I was going to give, as the normal measure of damages for the failure to deliver goods is what sum of money do you need to recover the replacement goods?  If there is a market, you go out and buy them in the market.  If they cost you more, you recover that as part of your damage.  But if you follow that example further, that may tell you where the cost of the brackets fits into the exercise.  Your Honours, can I deal with the United States.  The starting point ‑ ‑ ‑ 

EDELMAN J:   Just by that response, you mean if it costs more to buy computers of a different size because of the brackets that have been installed then you can recover that additional amount as consequential loss?

MR GLEESON:   Yes, but had the contract been performed, you would have had computers.  So, you can be recompensed for the failure to have the computers you were expected to get, and then the cost of your brackets is a cost you are wearing as part of the business or government you are conducting.  Now, your Honours ‑ ‑ ‑ 

BEECH-JONES J:   So, is the outcome a pure reliance loss or recoupment case does not arise on that example?

MR GLEESON:   Correct, and correct save for McRae.

GORDON J:   I was going to say, you have to deal with page 89 of Amann and Chief Justice Mason’s ‑ ‑ ‑ 

MR GLEESON:    Yes, I am going to come to McRae and Amann, and my answer to your Honour Justice Beech‑Jones was yes, because, as the question was framed to me – was recovery of the expenditure, as reliance, expenditure – that is not what is done.  What is possible – if you could not prove the cost of going into the market to get the replacement computers, if there were no replacement computers available – so, you then just have a bare fact of expenditure – if they be the facts, you are then saying one of two things.

If it is McRae, which is our paragraph 5 – if it is a case where the defendant’s breach has rendered it impossible to assess the damages on the ordinary basis, the law may permit, as a starting point or a prima facie measure, which is the way Chief Justice Dixon described it, reference to something alternative, namely, the cost of the brackets, passing an evidentiary onus over to the defendant to ‑ ‑ ‑ 

EDELMAN J:   Well, even then, it would not really be the cost of the brackets, it would be something like the cost of removing the brackets and installing something that is equivalent to a computer.

MR GLEESON:   It may be that, but that would be an example where, consistent with Robinson v Harman – but if it be the case that the defendant’s breach has made it impossible to measure it on the ordinary basis then the evidentiary approach may allow the plaintiff to put up something less than perfection and cast some sort of evidentiary onus on the defendant.  That is one qualification of the answer. 

GORDON J:   And you accept that the rationale of that is that the expenditure has been incurred in reliance on the promise by the defaulting party, which is the way ‑ ‑ ‑ 

MR GLEESON:   Plus, it is the default in the McRae case; it is the defaulting party’s breach of contract that has rendered it impossible to do the assessment on the ordinary measure of damages consistent with Robinson v Harman.  It is that bit I add, your Honour, which, with respect, Justice Brereton has left out of his analysis of McRae. 

EDELMAN J:   But the word “impossible” may be to elevate it, (a), higher than most of the authorities place it and, (b), higher than, in almost every case, would exist.  There is almost nothing that is impossible of proof in a counterfactual world.

MR GLEESON:   Your Honour, consider McRae and consider what Chief Justice Dixon was saying:  the ordinary measure of damages for the non‑delivery of goods is the value of the goods either go into the market, or otherwise value the goods.  To take up Justice Gleeson’s question, where the particular breach is – you had warranted the tanker existed at a certain site and there was no tanker – it is impossible to carry out the ordinary measure of damages because you cannot value a non-existent thing.  That is why the Chief Justice used the language “impossible”.  What he then said is, I would allow you to set up something else a starting point, which is your expenditure in reliance upon the promise.

Now, that cast an evidentiary onus on the Commission, not a legal onus.  The reason it was evidentiary was it was impossible for the Commission to prove the value of the tanker – there was no tanker – but it was not impossible for the Commission, on different facts, to do other things, such as prove the plaintiff’s business had hopelessly failed and it was going to be unable to complete the salvage.  So, that is why “impossibility”, as used by Chief Justice Dixon and in Justice Brennan’s view, is a correct statement of:  has the breach made it impossible to do it on the ordinary basis?  That is a reason to allow this evidentiary process to start to shift.

EDELMAN J:   And was the joint judgment, I think, in Murphy wrong to say impossible, or difficult or very difficult, to prove?

MR GLEESON:   Well, I accept, your Honour, that there are shades of the ‑ ‑ ‑

GORDON J:   I think there is impossible, there is certainty; very difficult, difficult.

MR GLEESON:   There are shades there, but it is referable to the breach creating a difficulty which was not otherwise inherent in the contract.

BEECH‑JONES J:   Mr Gleeson, does the degree of difficulty go to the strength of the evidentiary shift, as it were?

MR GLEESON:   Yes.  It will be very relevant to not only whether it arises, but what will be needed to, quote, rebut it, end quote.

BEECH‑JONES J:   So, if it is impossible it becomes practically heavy, and it if it is difficult it is not as heavy, as it were.

MR GLEESON:   It will be part of that inquiry.  We have given your Honours the first Restatement of Contracts 1932, section 333:  this was the statement of United States law immediately prior to the article by Fuller and Perdue.  It is the Restatement referred to by Chief Judge Learned Hand in L. Albert & Son.  Section 333 was a limited protection of the reliance interest, limited to:

expenditure, reasonably made in performance of the contract or in necessary preparation therefor –

Subject to limitations, including you cannot recover in excess of the full contract price.  So, returning, your Honour Justice Edelman, as to whether a distinction between essential reliance and other reliance matters, it mattered a great deal in this statement of United States law.  You see the shifting of the burden of proof in paragraph (d), but everything is referable to the contract price as the cap on the expected recoupment.  If your Honours then go to volume 5 to Fuller and Perdue ‑ ‑ ‑

GORDON J:   Was that in an environment where that limitation reflected the commercial arrangements at the time?  Some of the examples that you have given us this morning about the difficulty – and I use that not in the sense we have just been discussing it, but to take the word “difficulty”, the more complex requirements of valuation – for example, 30‑year lease, establishment of businesses – but that is not what that is talking about.

MR GLEESON:   That is not what it is talking about, and my point was, to the extent there was some recognition of what you might call a reliance interest here, it was narrow.  It was directed to the things I do under the contract to prepare to perform the contract in expectation of a price.  I can recover them as my reliance, subject to the price being the ultimate limit of the damages.  My point is that was United States law as re‑stated; tolerably narrow.  That is what Fuller and Perdue wanted to travel well beyond.

EDELMAN J:   Sorry, was there a justification given in any of the commentary for the full contract price being the cap?

MR GLEESON:   Well, perhaps comment d.

GLEESON J:   I am sorry, I have not found comment d.

MR GLEESON:   Comment d, on page 527. 

GLEESON J:   Thank you.

MR GLEESON:   The whole assumption is a tolerably narrow factual context.  I am providing goods or services in exchange for a price, and I am allowed my expenditure, subject to the contract price being the cap.  Now, volume 5.

GORDON J:   Sorry, before we go there, can I just ask you to go to page 527, and the bottom of 526, which is this cap – it is a different point, I think, and it is picking up the point I just raised with you about the difficult of proof of value of profit, et cetera, which is the justification and rationale for, in a sense, the rule itself.  In other words, you are:

entitled to expenditure plus profits –

but your:

inability to prove profits should not deprive him of his right to the proved expenditure, so far as this expenditure was provident and reasonable and is not already compensated for in usable materials on hand.

Am I missing something, Mr Gleeson?  I am sure I am.

MR GLEESON:   All I am seeking to do at the moment is position where United States law was in 1932, and I am indicating that – and we do not say that is Australian law.  To the extent this suggests there is a shifting of the legal onus, if that is what it is saying, we do not say it reflects Australian law.  At most this should be understood as an evidential shifting of the burden.  But it is in this particular context of essential reliance where the expenditure is intended to be recouped out of the contract and, yes, because there may be difficulties in proving the performance of the contract, some sort of burden is shifting to the defendant, subject to the contract cap.

GAGELER CJ:   If you just take the chapeau, leave a, b and c aside, the chapeau and the qualification in d, it looks pretty much like McRae’s Case, does it not?

MR GLEESON:   The chapeau is McRae’s Case.  What is missing is the tighter filter in McRae, which is that the defendant’s breach has rendered it impossible to prove the damages on the usual measure.  If that were added as an integer in the principle, then it is McRae.

GORDON J:   That is what I am taking you to at 526 to 527.  It may not be in the principle, but at least that explains why it is there.  It says:

Frequently it is very difficult, and at times it is impossible, to prove . . . It is in these cases that the rule of the present Section is essential to the plaintiff’s case.

MR GLEESON:   It is close, your Honour, it is not identical.  I have to beg to differ.  It is not identical because McRae is – it is the breach by the defendant rendering it impossible – or let us say very difficult – to prove the damages on the usual measure.  So, what is at the bottom of 526, top of 527, covers that case, but it is a little broader, the way it is expressed.

GORDON J:   Thank you.

MR GLEESON:   So, in volume 5, commencing at page 1318, which is tab 42.  At the foot of 1318, Fuller and Perdue refer to:

the “normal” rule of contract damages (which awards to the promisee the value of the expectancy –

What we would regard as Robinson v Harman, and the whole of this article is directed to saying that, really, overlooks or conceals what ought to be going on here.  At the foot of page 1319 there is a commencement of a discussion of a reliance interest.

GAGELER CJ:   What page of the article is it?

MR GLEESON:   Page 53, foot of the page, the commencement at the proposition “First”, the identification of reliance on the promise, and at page 54, at point 3:

Secondly, the plaintiff has in reliance on the promise . . . changed his position.  For example, the buyer under a contract for the sale of land has incurred expense in the investigation of the seller’s title, or has neglected the opportunity to enter other contracts.  We may award damages to the plaintiff for the purpose of undoing the harm which his reliance on the defendant’s promise has caused him.  Our object is to put him in as good a position as he was before the promise was made.

This is the reliance interest.  Now, the reason, when your Honour the Chief Justice gave me that example, I was attempting to answer that through the Fuller and Perdue argument, one is protecting the reliance, even though we are in contract, and really, that is the beginning and almost the end of the matter.  What Fuller and Perdue were seeking to do was to say that the first edition of the Restatement was too narrow.  One had to go beyond what they called “essential reliance” and capture other forms of reliance for this purpose, which we would regard as a tort purpose – restitutio ad integrum.

GAGELER CJ:   Yes, I suppose what I was putting to you is whether that justification is the only justification for recovery of reliance damages, and whether they might not be equally recoverable if the question is put in terms of performed contract and repudiated contract, rather than contract, no-contract, which is obviously a tortious kind of measure.

MR GLEESON:   I accept that is the field we are in, if we are in any field.  I am simply seeking to ascertain and then clear it away – and I will come back to it – that at the heart of the Fuller and Perdue project was a tort approach, and because it was a tort approach this is our submission.  That opened the frame to a much wider series of reliance expenditures.  It justified the idea of a legal onus shifting, as opposed to an evidentiary one, and it cast on the defendant, taken to its fullest extreme, the burden on the balance of probabilities of proving that which in most cases would be difficult or impossible to prove, e.g., how would you have performed in your other businesses over 30 years?  It is that expansion, as advocated through Fuller and Perdue, which, we say, does not reflect Australian law. 

EDELMAN J:   Well, they also then had to shoehorn expectation interest into reliance interest. 

MR GLEESON:   I am sorry, your Honour? 

EDELMAN J:   They then had to shoehorn the expectation interest into a reliance interest, so it becomes almost the mirror image of what the Court was saying in Amann.  Its expectation interest becomes a proxy for reliance, rather than reliance being the proxy for expectation. 

MR GLEESON:   I agree with your Honour.  The Fuller and Perdue point is all common lawyers have filled themselves.  We are really protecting reliance because it is a higher‑grade interest than expectation, but the cases discuss it as expectation, so we should more be honest and call it reliance.  Then what we do is put a cap on the reliance interest by reference to the expectation interest, and therefore we have not offended principle.  Now, that is what your Honours see, for example, at page 60 of the article, last paragraph, and then, critically, at page 73, last paragraph, they start to introduce the distinction between essential reliance, where they say the suit could be seen a resting on expectation or expectation plus reliance.

GORDON J:   Where are you reading, please? 

MR GLEESON:   Foot of page 73.

GORDON J:   Thank you. 

MR GLEESON:   And then the foot of 74, they discuss a case where the two interests tend to emerge.  And then at 75, they start the discussion whether the expectation interest sets the limit of recovery.  Critically, if I could go to 78 through to 80, at the top of 78, they say there needs to be a distinction between the two kinds of reliance, and then they explain what essential reliance is, and they say: 

if we do not limit recovery by the “contract price” we are permitting the plaintiff to shift to the defendant his own contractual losses –

Now, that first full paragraph on 78 is relatively similar to the 1932 first Restatement.  Then they go to what they call “incidental reliance”.  They refer to a very old case of Nurse v Barns – we can give your Honours a copy if you need it, there is no reasoning in it – where they say, well, you cannot limit the reliance interest by the contract price.  What you then need to do is to create a different limit, and the limit is you cannot recover more in reliance than you would have recovered had you succeeded in your separate businesses.

They acknowledge, candidly, at the top of 79 that limit is going to be of little assistance because it will seldom be possible to judge the fate of the separate venture.  Now, that is our case.  That is our case.  That is why Justice Toohey and Justice Gaudron said you do not shift anything more than an evidentiary onus.  But where Fuller and Perdue got is that where it is incidental reliance, you are directly protecting the reliance interest but – you are imposing a cap, but the cap is by reference to what would have been recovered under the separate businesses.  That is what they call the “subjective” expectation interest – that is point 4.

Then your Honours will see the classic formula in italics – which is picked up in later cases – but it is a conclusion which has wrapped up their approach to both essential reliance and incidental reliance.  We submit that is not Australian law.  So, that is Fuller and Purdue.

Finally on page 89 – perhaps 88 first – they again make the point about the limit they urge for incidental reliance.  Then at 89 they that distinction is not found in the Restatement and they argue the Restatement has to be rewritten.

Next in the chronology, if your Honours could go to the decision of Chief Judge Learned Hand, which is volume 2, tab 20, L. Albert & Son, page 519 of the book.  It was a claim for damages for late delivery.  At the foot of page 188 of the case report itself, in paragraph [12], the damages which were sought were, relevantly:

the cost of the foundation –

which the purchase had laid for the “Refiners”.  So, in order to get ready to accept delivery, which was their basic obligation, they laid out some money on some refiners – that is what they sought to recover.  If your Honours jump forward to page 191 of the report, in the first paragraph, in discussing Fuller’s article, Justice Learned Hand indicates that the case before him is a case of:

“essential reliance,” –

and he says:

It is one instance –

of the formula and then the formula is set out.  So, it is critical to L. Albert & Son that the case was essential reliance, as indeed was Amann, as is not the present case.  In that context, if you return to page 189, paragraph [13‑15], first the normal measure of damages is identified ‑ ‑ ‑

BEECH‑JONES J:   What page is that again, Mr Gleeson?

MR GLEESON:   Page 189 of the report.

BEECH‑JONES J:   Thank you.

MR GLEESON:   The normal measure of damage is identified, which is consistent with Robinson v Harman.  But at the foot of that first column there is the discussion of the possibility of allowing proof on an alternative measure of damages.  We have the statement about the promisor in default should not be made the insurer of the other’s venture:

yet it does not follow that the breach should not throw upon him the duty of showing that the value of the performance would in fact have been less than the promisee’s outlay.  It is often very hard to . . . value . . . performance –

Now, that is the rule or the principle stated by Judge Learned Hand.  It is wholly stated in the context of essential reliance.  There is no discussion as to whether this applies beyond that to a case of incidental reliance like our case.

EDELMAN J:   Well, another way of looking at the discussion is to say that it starts at [13-15] with what is, I think, on any view, a statement of damages for loss following a breach of contract for the sale of goods, in absolutely conventional terms – and still in conventional terms – then goes on to say there is an exception to that, where one party:

has put the peril of the answer upon that party who by his wrong has made the issue relevant to the rights of the other.

In terms that seem to be very familiar in English law in Armory v Delamirie, and in Australian law.  And then, at the end of the judgment, seeks to find another justification for that principle, which is then found in Professor Fuller and Mr Perdue’s article.  In other words, the reasoning is not necessarily dependent upon the adoption of the Fuller and Perdue analysis.

MR GLEESON:   I accept that, your Honour.  We are saying this is not a wholesale adoption of Fuller and Perdue, and, in particular, whether one is extending this presumption into these more incidental, consequential areas of reliance is never addressed by Judge Learned Hand.  The principle that he is identifying is in fact a narrower one than Fuller and Perdue, and it needs to be treated with that degree of caution.  What is not pellucidly clear from the judgment is, is this a presumption of law, as this Court discussed in Masson v Parsons, or is this an evidentiary shifting of the onus?

Now, if it is a presumption of law as per Masson v Parsons – if facts A, B, and C are proved, the Court must conclude D, absent proof to the contrary on the relevant standard.  When Justice Gaudron read this paragraph in Amann, at page 152, she said this is not a presumption of law.  She said nothing that Justice Learned Hand proposed here was anything more than a shifting of the evidentiary onus.

Now, if that be the correct way to read it, then it is closer to the principle that we urge on the Court for Australia.  If this is to be read as a shifting of a legal burden of proof, then we suggest it is not and should not be the law of Australia.

GAGELER CJ:   Mr Gleeson, the Court might, at this stage, take its morning adjournment a little earlier than normal.

MR GLEESON:   May it please the Court.

GAGELER CJ:   We will take a 15-minute adjournment now.

AT 10.53 AM SHORT ADJOURNMENT

UPON RESUMING AT 11.05 AM:

MR GLEESON:   Your Honours, in volume 5, at page 1433, which is tab 45, the second Restatement took up the urgings of Fuller and Perdue and stated a far broader principle than the first Restatement, and once which, we submit, does not reflect Australian law.  Firstly, because what is now described as an “alternative”, which is a right to damages based on the reliance interest, everything that follows has, as its premise, that one is protecting a separate reliance interest – which is the tort interest – as a matter of right.

At paragraph 344 of the secondary statement – which is not in the materials – Fuller and Perdue’s recommendation was expressly taken up by the reporter, recognising expectation, reliance, and restitution interests as all protected by contract.  Secondly, you see from the “including” that what was the outer boundaries of the earlier Restatement is now treated as but an illustration.  Thirdly, the onus cast on the defendant is an onus on the reasonable certainty standard, which is higher than the standard of Australian law.

Comment a makes very clear what is intended by this broader statement of the law, including – in the illustrations, 1, 2, and 3 are essential reliance, but paragraph 4 is our case, where an onus is apparently cast on the defendant – apparently, a legal onus – to prove what would have occurred under the contracts collateral to the contact that has been breached.  The footnote for 4, the illustration over the page is said to be Nurse v Barns and L. Albert & Son, which, of course, did not go that far.

So, your Honours, I think paragraphs 4 and 5 of our outline of submissions we have addressed.  Could I come to Amann Aviation 174 CLR 64, which is paragraph 6. It is volume 1, tab 5, page 79. Using the Commonwealth Law Report reference, at 74, foot of the page, a critical factual premise for Chief Justice Mason’s judgment and a number of the judgments was that Amann’s prospects of recovering the expenditure rested in part on receipts under the first contract, but in important part on whether a valuable renewal could be obtained, and the finding of fact was that there would be a strong prospect of renewal, and one might infer that renewal under a favourable contract, because Amann:

would be fully equipped with the cost of its aircraft written down.

Next, at 80, under the heading “The award of damages” we have the general statement of Robinson v Harman that we agree with.  Immediately over at page 81 the Court is addressing a particular type of contract, not every contract, and it is the contract I have been speaking about this morning where it is essential reliance plus the expectations of recoupment of expenses incurred in discharge of contractual obligations from the counterparty.

GORDON J:   Where do I find that, please?

MR GLEESON:   Top paragraph, page 81.

BEECH-JONES J:   So, you would distinguish that from the example given by the Chief Justice, because the department is not doing that?

MR GLEESON:   Yes.  I accept your Honour Justice Edelman’s point that this may not be the only rationale for an evidentiary shifting of the burden, but, at least in this judgment, an important rationale is an assumption about what happens in the ordinary course of commercial dealings of a particular character.  Of course, that is the type of case it was dealing with and one will not find any discussion in here of whether such assumptions would ordinarily be made in a different case like our case.  You will see repeated twice in the next paragraph, at about halfway down ‑ ‑ ‑

GLEESON J:   Why would you not make those kinds of assumptions in the case of a contract like this?

MR GLEESON:   Like ours?

GLEESON J:   Yes.

MR GLEESON:   Because it is wholly dependent upon what decisions are made in the pursuit of ventures which are extraneous to the contract between these two parties and those decisions are going to depend upon, firstly, the business skill of the respondent in conducting those businesses.  We know that did not go so well.  It is going to depend, secondly, upon whether other people choose to take up lots in the airport, assuming they become available – so, that is wholly dependent upon third‑party decisions.  Thirdly, whether those other people are successful in their businesses and whether that creates any flow‑over benefit to the respondent’s business.

Fourthly, given the respondent’s businesses had effectively failed at the date of the breach, whether or how the respondent could finance the period of time necessary to try and hang on to start making some money from these unknown other businesses – so, they are all the sorts of things which raise imponderables inherent not in the breach but inherent in the very nature of the expenditure and its incidental relationship to the contract in question.

GLEESON J:   I see.  Thank you.

EDELMAN J:   Why should one party’s expectation in a commercial contract have any bearing on whether or not an evidential onus shifts or not?  I mean, almost every party to a commercial contract will expect to make a profit, and every counterparty will be hoping that they make a loss.

MR GLEESON:   Well, your Honour, that is the point by Justice Toohey, Justice Gaudron and Justice McHugh very, very powerfully.  Justice McHugh, albeit in dissent, with respect, nailed this point.  In fact, one of the problems with Amann and getting a ratio is, do your Honours look for the judges who joined in the orders, or do you look for four judges?

GORDON J:   Welcome to our world.

MR GLEESON:   I was enjoying the challenge of posing the question and not having an answer, your Honours.  If one takes the Judges joining the orders, we have Chief Justice Mason, Justice Dawson, Justice Brennan and Justice Gaudron, critically.  If we treat – if you try and get four Judges for a principle, which is what the Court of Appeal did, you drop Justice Gaudron – she is in the reserve Bench – you pick up Justice Deane, even though he dissented in the orders, and you try and meld that together.

Now, your Honour Justice Edelman’s question was, why should this be given any weight or any strong weight in the raising of an evidentiary presumption?  What I was seeking to say was, you have Justices Gaudron, Toohey, McHugh, who follow the sentiment of your Honour’s question.  You have Justice Brennan, who does not rest it on this ground, he rests it on his view of breach causing impossibility on the ordinary measure.  So, you really only have three Judges:  Chief Justice Mason, Justice Dawson, and Justice Deane, who give weight to this proposition. 

Now, what that means is, you are not bound as a matter of ratio to treat this as law, subject to you reopening it.  It is an idea which, if your Honours are to give it any further life, we would submit, has to be looked at along with whatever other inferences are appropriate to draw in the case.  But I do want to emphasise, that is not the only lynchpin, but that is a critical lynchpin of Chief Justice Mason’s judgment, and twice in the next paragraph they repeat the idea that they are focusing on:

damages of expenditure justifiably incurred for the purpose of discharging contractual obligations –

That is halfway down.  Further down:

recovering costs incurred in the course of performing contractual obligations –

So, it is an incredibly carefully‑written judgment in the light of Fuller and Perdue, which we know from the next page, page 82.  And their Honours have chosen, on 82, to extract from Chief Judge Learned Hand the first sentence – this is at point 5 – which is in the context of essential reliance, which was that case and Amann, then to make no comment on the further discussion about the problems of incidental reliance ‑ ‑ ‑ 

GAGELER CJ:   What is the distinction between those two? 

MR GLEESON:   Essential reliance is moneys that I spend in order to perform, or to prepare myself to perform, the obligations I owe under the contract.  So, that is one aspect of it.  But related to that, very, very closely, is that, usually – perhaps always, but at least usually – the expectation is that I will recover my expenditure out of the things that are coming to me from the counterparty, so my recoupment is from, usually, the contractual price under the contract.

Now, that is the context in which Chief Justice Mason identified what he called “ordinary commercial expectations”.  And so, we are – our case is multiple steps removed from that, because there is a permission to build a hangar.  There is no duty to build a hangar, it is completely up to them whether they build a hangar or what sort of hangar they build.  They choose to build a non-demountable Rolls Royce hangar.  Whether they had any expectation of recovering that cost did not depend upon performance of the lease; it depended upon their separate businesses.

So, your Honours will see on 82, it is a careful selection of part of Chief Justice Learned Hand but not any adoption of incidental reliance.  Then there is a reference to the Restatement that I have taken you to, and Chief Justice Mason is at pains, over on page 83, to indicate one reason why that does not reflect Australian law, which is the reasonable certainty standard, but a further reason he points out on page 85 at the top, which is that the ‑ ‑ ‑

STEWARD J:   They point out.

MR GLEESON:   They point out – yes, I am sorry, your Honour – that:

the language of election or the notion that alternative ways are open to a plaintiff –

is not consistent with Robinson v Harman.  So, at that point – your Honour the Chief Justice asked me about English law.  This is where the earlier English authorities are regarded as inconsistent with Australian law, as is the United States approach.  Everything is rationalised under Robinson v Harman.

Professor Treitel, perhaps unkindly, described this as the verbal trick, because what has happened is reliance damages that have come out of a United States approach have been refashioned into Robinson v Harman.  We do not make that criticism.  We accept this as the way Australia has dealt with this difficult creature.  But the result is Robinson v Harman ‑ ‑ ‑

GAGELER CJ:   So, Professor Treitel states the law in England at the time he was writing, pretty much in terms of the first Restatement, leaving aside the price.  So, you have a consistent approach in the United States and United Kingdom, it would seem, and you are saying Australian law is out of step with that?

MR GLEESON:   No.  What I have said is, if your Honour is focusing on the United States approach in 1932 and Professor Treitel’s statement in England, there is, firstly, the limitation in that one is grappling with essential reliance, they are not exploring these problems of collateral reliance.  That is one aspect that is clear of that.  Secondly, whether it is a legal onus shifting or an evidential onus is, with respect, not pellucidly clear in either the United States or the United Kingdom.  Now, if they are to be treated as instances of evidential onus shifting, then we do not have a great deal of difficulty with that as the then‑law.  If it is a rule of law, presumption of law, then we say that was not Australian law.

Then, at 86, point 5, turn to the question of, why do we raise any form of presumption?  There is an extract from Chief Judge Learned Hand on page 87, then the answer seems to be given at the foot of 87.  At this point, their Honours seem to be focusing on the commercial expectations assumption:

The placing of the onus of proof on a defendant . . . amounts to the erection of a presumption that a party would not enter into a contract in which its costs were not recoverable.

Then, your Honours, there is an incredibly important passage at the top of ‑ ‑ ‑

BEECH‑JONES J:   Do you say it is a reference to “costs were not recoverable” under the contract?

MR GLEESON:   Under the contract.  At the top of page 88 ‑ ‑ ‑

EDELMAN J:   And you say that the reference to “costs” there is only a reference to essential reliance costs, not into incidental reliance costs?

MR GLEESON:   They have not addressed incidental reliance cost.  And that is the step Justice Brereton has taken.  He may be right or wrong, but it is not a step that this judgment, with respect, has taken.  Because it did not need to, it did not address it.

EDELMAN J:   But why would it not, on their rationale, it necessarily extend to incidental reliance losses?  Because their rationale is that people do not enter into commercial contracts unless they expect to recover all of their costs.  The expectation of recovery would not just be the costs that they incur for the performance of their obligations, it would include all their incidental costs.

MR GLEESON:   Your Honours, we are not embracing the commercial expectations hypothesis.  We are saying, if it has any work to do, it can be put into the evidentiary mix, but have a look at the sort of contract you are dealing with.  And when their Honours stated it – I am at pains to point out they stated it in a particular context – they did not say every contract has this character – and that is why I come to page 88.  The top of page 88 is absolutely critical, and, with respect, Justice Brereton has ignored it.  They immediately start to say there are some types of contracts where:

it would not be appropriate to apply the presumption . . . for the reason that inherent in the entry into such a contract is the contingency that not even the slightest expenditure will be recovered, let alone the securing of any net profit.

Now, your Honour Justice Gordon asked me why does the contract matter, or to get that submission down into a concrete aspect.  What their Honours here are saying is, you have to look at the particular contract to see whether, given its uncertainties, it would simply be incoherent or unreasonable or unfair or unjust to raise the presumption.

We agree.  That is the sort of inquiry that is needed.  But what is interesting is that what their Honours call “purely aleatory” contracts are broader than that description as it is normally understood.

GORDON J:   Why?

MR GLEESON:   At its narrowest, an aleatory contract is, for example, a wagering contract where parties promise ‑ ‑ ‑

GORDON J:   You cannot – there is a bet.

MR GLEESON:   It is a bet, and one party in fact does not want the event to happen, but pays money if it does happen.  Now, the case they cite – Aldwell v Bundey – is not a purely aleatory contract in traditional concepts.  That is the case – it is in the materials – where there was a boat race being conducted and the promise was, you will be permitted to row and if you win, you will get a price.

Now, in that case, reliance damages were recovered and their Honours say that is a purely aleatory contract.  Indeed, they say at the foot of 88, it should now be understood not as reliance damages but as a Chaplin v Hicks loss of the chance of winning the race.  So, their Honours are saying, in Aldwell v Bundey you should not apply any presumption because, obviously enough, there can be no certainty whether you are going to win the boat race.

STEWARD J:   Mr Gleeson, is the effect of your submission that you would never get reliance damages for breach of a lease where you cannot recoup – you do not recoup your expenditure from the landlord, who only provides you with a possession?  That would mean all – you would never get it, for any commercial lease.

MR GLEESON:   I am hesitating, your Honour, because in practical terms it may lead that far.  But in legal ‑ ‑ ‑

BEECH‑JONES J:   You would allow direct cost, though, like your solicitor and all that sort of stuff?

MR GLEESON:   Yes.  You will be able to get that category of costs incurred, for example in negotiating and entering the lease.  But, to the extent you say, had the lease been honoured I would have conducted business X, Y and Z from the premises, for practical purposes, which is fair and just, you will be require to pursue your ordinary damages either on loss of a chance basis or on a proof on the probabilities basis.  That would be the ordinary practical result.

If you are trying to squeeze them into this, you are going to have difficulty, because you are going to have to say, well, what is the basis upon which I am shifting a legal onus to the lessor or the promisor?  If it is commercial expectations, well, it is not going to get you anywhere, for Justice Edelman’s reasons.  If it is fairness and justice, that is not going to take you terribly far with an evidentiary onus because, first of all, where does all the evidence lie as to what business you would have conducted, would it have been successful, how would you have financed that?  It all rests with the innocent party.

STEWARD J:   I understand.

MR GLEESON:   So, I am not completely ruling it out, but I am accepting the force of your Honour’s question that ‑ ‑ ‑

STEWARD J:   Can I ask you another question.  How do all these principles fit into a situation we have here, where we have a Council owning an airport which invites tenders from people to come and develop parts of the airport and a tender is accepted?  In other words, this is not a purely commercial area.  This is partly governmental, partly commercial.  How do these principles fit into that context?  You might say they just do not fit in at all.

MR GLEESON:   They can be accommodated, but they do require adaption into those circumstances.  So, the way we would see it, your Honours, if this had been approached on a conventional damages basis, what would have happened?  You would have said the promise was to take reasonable steps to register the lease which, on the facts, would probably have led to the plan being registered.  That would have been step 1.  Step 2 is, if the plan was registered, there would have been a 30‑year lease which had burdens for 30 years.

JAGOT J:   And the sewerage system that the Council had paid for, enabling development of the other lots, by definition.

MR GLEESON:   Of the other lots.  Yes, I accept that, your Honour.

JAGOT J:   Yes.

MR GLEESON:   So, you would have had the burdens of the lease, you would have had the benefit of the right to use the land and, yes, the land would have had that surrounding amenity improved.  So, step 3 is, there was no promise by the Council to spend any money on developing the lots other than what was necessary to get the plan registered.

Step 4 is whether your business had any chance of success, which was wholly dependent upon how you, the respondent, grappled with the difficulties you were facing, which were enormous.  Step 5 is, if your case was that if other people took up the lots the overall area might be a happier place to go to, that rested on a whole lot of probabilities.  So, what a plaintiff could do in that circumstance was they could, firstly, seek to prove on the balance of probabilities they would have recovered the $3.7 million.

Alternatively, they could seek to prove on the balance of probabilities that the chance of recovery of some of it was a valuable chance, which could then be assessed on the possibilities and the probabilities under Malec v Hutton.  Where the grave difficulty arises, as per your Honour Justice Steward’s question, is, can you simply set up and say:  I spent the 3.7, over to you to prove that every one of these uncertainties over the 30 years would not have led to recoupment.

It was not submitted this was a pure aleatory contract in the strict meaning of it, because it is not.

GORDON J:   Thank you.

MR GLEESON:   But what it does is share the relevant underlying similarity of feature with that which is identified at page 89 of Amann.  Your Honours, how we submit, then, the case ought to have been concluded is that her Honour – contrary to the attack this afternoon upon us, which is fair enough, but upon her Honour unjustified – did not address the wrong counterfactual.

If you could go, please, to page 68 of the core appeal book, at 211, her Honour was quite precise in identifying that the counterfactual was the plaintiff would have had the 30‑year lease and, secondly, this is lines 4 to 6, the other lots in the subdivision would have been registered.  It was because her Honour was focusing on that correct counterfactual she then made the finding of fact, the evidence, such as it was, showed there was very little demand at the location.  There was little interest beyond the plaintiff’s in developing the airport.

Now, Mr Williams says he overturned that finding at Court of Appeal 134, and he referred to the Council documents.  What you will see in those Council documents is no evidence of anyone wanting to take up one of the other 24 proposed lots.  The highest it got was in the first document, where 12 people expressed interest in renting little pigeonholes in this hangar if it was retrofitted.  So, nothing in those documents showed her Honour erred in that finding.  She is focusing on the correct counterfactual.

Paragraph 212, Mr Williams says, is irrelevant.  It may not be conclusive, but it is hard to think of something more relevant to say you had the opportunity to conduct businesses on the very site and build good will, and you failed.  That is not conclusive, but what that at least does, we would submit, is raise a question where the onus, evidentiary‑wise, would shift back to the plaintiff to answer these questions:  how were you planning to do better in the future than you had done in the past?  Question 1.  Question 2:  how were you planning to survive the lean period in the hope that other people might take up the new 24 other seweraged lots?  How were you planning to do that?  Number three:  what was your business plan, including your finance, to take you through into a stage where you might, at some point, recover profits?

Now, all those were matters that lay in their knowledge and their responsibility, and the evidentiary onus called upon them in this case to answer them, and they never did.  They could not.  So, you add the factors in 212 together with – I emphasise – 213.  Her Honour did look at the correct counterfactual and she made a finding:

The possibility that the plaintiff might have been in a better position to make money . . . had the development . . . proceeded as originally envisaged (with the lots fully occupied by profitable business) is no more than speculative.

That finding is, effectively, accepted by Justice Brereton at paragraph 135 and 140.

BEECH‑JONES J:   Mr Gleeson, could I ask you something when you have a moment.  You say those findings and what Justice Brereton found are good enough to rebut the evidentiary onus?

MR GLEESON:   Yes.

BEECH‑JONES J:   And do you accept the converse, that they are not good enough to rebut the legal onus?

MR GLEESON:   I do not accept that, for this reason:  her Honour, at 221 – which we have never retreated from – depending how your Honour reads it, says:

the defendant has discharged the onus of rebutting it by showing that the cost of the hangar would not have been recouped.

What we read her Honour as saying is if you have to make a single finding on the balance of probabilities as to a past hypothetical event, when you look at this entire sorry history – including what we led, and including what they never they answered – if you have to do it on a single‑point answer, the answer is no recoupment is more likely than any recoupment.

May it please the Court.

GAGELER CJ:   Thank you, Mr Gleeson.  The Court will reserve its decision in this matter and will adjourn until 10.00 am tomorrow.

AT 4.14 PM THE MATTER WAS ADJOURNED