Cripps v G & M Dawson Pty Ltd

[2006] NSWCA 81

New South Wales

Court of Appeal

CITATION:	CRIPPS and Another v G & M DAWSON Pty Ltd and Another; G & M DAWSON Pty Ltd and Another v CRIPPS and Another. [2006] NSWCA 81
HEARING DATE(S):	5 December 2005
JUDGMENT DATE:	13 April 2006
JUDGMENT OF:	Mason P at 1; Santow JA at 2; Brownie AJA at 62
DECISION:	(1) Appeal dismissed with costs. ; (2) Leave granted to file cross-appeal, and cross-appeal allowed. ; (3) The appellants to pay the respondents’ costs before the Tribunal and Appeal Panel. ; (4) Cross-appellant to have costs of cross-appeal.
CATCHWORDS:	BREACH OF CONTRACT – refusal to consent to assignment of lease – remoteness of damage – Hadley v Baxendale – whether remoteness a question of fact or law – s113(2) Administrative Decisions Tribunal Act 1997 - COSTS – “special circumstances” – s88(1) Administrative Decisions Tribunal Act 1997
LEGISLATION CITED:	Administrative Decisions Tribunal Act 1997 (NSW) s88(1); s113(2) Retail Leases Act 1994
CASES CITED:	Alexander v Cambridge Credit Corp Ltd (1987) 9 NSWLR 310 Canson Enterprises Limited v Boughton & Co (1991) 85 DLR (4th) 129 Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64 Edwards v Noble (1971) 125 CLR 249 H Parsons (Livestock) Limited v Uttley of Ingham & Co Limited [1978] QB 791 Hadley v Baxendale (1854) 9 Exch 341; 156 ER 145 Hope v Bathurst City Council (1980) 144 CLR 1 Jennings v Credit Corporation of Australia (2000) 48 NSWLR 709 O’Halloran v R T Thomas & Family Pty Ltd (1998) 45 NSWLR 262 Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 Vetter v Lake Macquarie City Council (2001) 202 CLR 439 Williams v Bill Williams Pty Ltd [1971] 1 NSWLR 547
PARTIES:	CA 40857/04: Michael Lance CRIPPS as executor of the Estate of Kerrie Frances Cripps and Madonna Kaye JONES (Appellants) G & M DAWSON PTY LTD (ACN 053 842 185) (First Respondent) H G & R SECURITIES PTY LIMITED (ACN 004 759 415) (Second Respondent) CA 40537/05: G & M DAWSON PTY LTD (Cross-Appellant) Michael Lance CRIPPS as executor of the Estate of Kerrie Frances Cripps and Madonna Kaye JONES (Cross-Respondents)
FILE NUMBER(S):	CA 40857/04; 40537/05
COUNSEL:	J ANDERSON (Appellants/CrossRespondents) S REUBEN (First Respondent/ Cross-Appellant) --- (Second Respondent)
SOLICITORS:	Gibson Howlin (Appellants/Cross-Respondents) Pitcher Walton & Co (First Respondent/Cross-Appellants) Alan Brown & Company (Second Respondent)

LOWER COURT JURISDICTION:	Administrative Decisions Tribunal Appeal Panel
LOWER COURT FILE NUMBER(S):	ADT49003; 59011
LOWER COURT JUDICIAL OFFICER:	Acting Judge M Chesterman, Deputy President; K Rickards, Judicial Member; B Weule, Non Judicial Member

CA 40857/04 (ADT 049003)
CA 40537/05 (ADT 59011)

MASON P
SANTOW JA
BROWNIE AJA

13 APRIL 2006

Michael Lance CRIPPS as Executor of the Estate of Kerrie Frances Cripps & Anor v G & M DAWSON PTY LTD & 1 Ors

Judgment

1 MASON P: I agree with Santow JA.

2 SANTOW JA:

INTRODUCTION
The appellant lessors Michael Lance Cripps as executor, and Madonna Kaye Jones (referred to collectively as “Cripps”) bring this appeal against their former retail tenant, G & M Dawson Pty Ltd (“Dawson”) the respondent. Cripps challenges as too remote an award of $102,000 in damages to Dawson by the Appeal Panel of the Administrative Decisions Tribunal (reversing the decision of the Administrative Decisions Tribunal) under the Retail Leases Act 1994 (“the Act”).

3 That award was for breach by Cripps of the lease contract, itself now undisputed. Breach occurred when Cripps wrongfully refused to give consent to Dawson’s requested assignment of the lease. The Act conferred a contractual right to assign the lease, subject to qualifications not here relevant. Dawson had made known its request to assign its tenancy in conjunction with the sale of its photographic business. The first attempted sale was frustrated by Cripps’ wrongful refusal to consent to assignment of the lease. When ten months later that business was sold, it yielded $102,000 less than an earlier attempted sale. Between attempted and actual sale there had been a substantial drop in the value of Dawson’s photographic equipment with the advent of digital technology. Its equipment with the old technology was a principal asset of the business.

4 There is an alternative basis for damages which is also disputed. It is based on alleged equitable fraud by Cripps in wrongfully refusing to register Dawson’s lease.

5 Elaborating on these factual circumstances, Dawson sought to assign what was a retail lease used to conduct a photographic studio. The assignment was in conjunction with Dawson’s attempted sale of that business for $130,000 to Mr and Mrs Kilbane (“the Kilbane sale”) as at May 2002. The sale comprised, principally, the equipment (leased from a financier) though also an additional amount for stock and debtors. Cripps as lessor wrongfully refused consent to the assignment of the lease, having earlier wrongfully refused to register the lease. That led to cancellation of the sale and the associated agreement. The tenant some ten months later (7 April 2003) sold the business (to a Mr Song) for only $28,000 and claimed damages for the price difference, being $102,000.

The Tribunal Decision at first instance and the Appeal Panel’s determination

6 The damages awarded by the Administrative Decisions Tribunal in the first instance were purely nominal. This was because the Tribunal concluded that the difference between the two contract prices was attributable to the loss of the opportunity to sell the equipment comprised in the business. That equipment had lost a significant portion of its former value from introduction of a new model using different technology. This introduction occurred after the first sale fell through, though we do not know precisely when. It was said by Cripps not to be within the contemplation of the parties at the time they made the lease contract that a probable result of breach of that contract was loss of the value of the equipment. Any damage so based was therefore too remote.

7 However, the Appeal Panel reversed the decision of the Tribunal and awarded Dawson $102,000 in damages, being the difference between the two sale prices. The Appeal Panel found an error of law founding its jurisdiction. This was in the Tribunal’s interpretation an application of the common law principle applicable to remoteness of damage in contract. It is from that award and jurisdictional holding that the present appeal has been brought. The question at issue essentially turns on whether the damage was properly recoverable under one or other of the two limbs in Hadley v Baxendale (1854) 9 Exch 341; 156 ER 145 as being either:

(a) a loss that may fairly and reasonably be considered as arising naturally, according to the usual course of things, from breach of the contract, or

(b) a loss as may reasonably be supposed to have been in the contemplation of both parties at the time they made the lease contract as a probable result of the breach of it.

8 The Appeal Panel concluded that the appeal should succeed on several bases, summarised below:

(a) The Tribunal erred in distinguishing between the loss of an opportunity to complete a contract of sale of a business and the loss of an opportunity to sell only the equipment of the business; then in treating the latter “ kind or type of loss ” as the material one in applying the criteria of remoteness of damage. These were not to be characterised as giving rise to different types of loss, at least where there was no identifiable goodwill. Both would be within the reasonable contemplation of the parties to a lease, when considering the probable consequences of a breach of a covenant to consent to an assignment by the lessee (Red, 64I-K, 64W-65B).

(b) An approach to damage which requires attention to such factual distinctions involves asking (impermissibly) whether the parties could reasonably have been expected to have contemplated “the precise details of the events giving rise to the loss”: Alexander v Cambridge CreditCorp Ltd (1987) 9 NSWLR 310. It contravenes McHugh JA’s warning in Alexander (supra) against adopting an unduly high “level of classification of the damage which the parties must have contemplated” (Red, 64P-T).

(c) The Appeal Panel took significant account of the principle in Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64 and Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 that what may be claimed is the loss of the opportunity to acquire a commercial benefit (Red, 64U-V).

(d) The Appeal Panel was also concerned about the Tribunal’s use of the phrase “loss of the opportunity to sell the equipment at a particularly good price”. The Tribunal paid insufficient heed to McHugh JA’s statement in Alexander that “the parties need not contemplate the degree of extent of the loss or damage suffered”. It opens up the possibility that if Dawson had sustained a lesser loss, such a loss would not have been held too remote. But the Appeal Panel did not base its decision only on this possible error (Red, 65C-N).

(e) The Appeal Panel concluded:

“Our decision is instead based on our ruling that, in drawing and relying on a distinction between the loss of an opportunity to sell a lessee’s business and the loss of the opportunity to sell the equipment within such a business, the Tribunal misapplied the second limb of [the] Hadley v Baxendale test. It asked, in effect, whether the parties could reasonably be expected to have contemplated ‘the precise details of the events giving rise to the loss’.” (Red, 65O-R).
(f) Having reviewed the evidence, the Appeal Panel was satisfied that:
(i) The sale of Dawson’s business to Kilbane for $130,000 in June 2002 was, for all practical purposes, a “certainty” but for the refusal of Cripps to consent to the assignment of the lease;

(ii) The price of $28,000 stipulated in the contract with Mr Song provided an acceptable estimate of the value of the business as at April 2003; and

(iii) In the absence of contrary evidence, the difference between these two prices, namely $102,000, should be taken to constitute the damage suffered by Dawson on account of the loss of its opportunity to sell the business to Kilbane (Red, 66H-L).

(g) It was appropriate that interest on the damages and costs of the hearing at first instance be determined by the Tribunal as constituted at first instance (Red, 66M-N).

(h) The Appeal Panel set aside Order 1 made by the Tribunal and substituted an order that Cripps pay Dawson the sum of $105,115, representing damages for:

(i) Legal costs and disbursements in relation to the Kilbane sale (also allowed by ADT): $3,115

(ii) Damages suffered on account of the loss of the opportunity to sell to Kilbane: $102,000.


THE ISSUES ON APPEAL

9 The first issue on appeal is whether, as held by the Appeal Panel, Dawson’s loss of $102,000 was not too remote. I shall refer to that issue as “the contractual issue”. If the answer is in the negative, there is then a further question. It is whether that loss could be recovered as equitable compensation or damages for equitable fraud. I shall refer to that issue as “the equitable compensation issue”.

10 A further issue on appeal is whether the Appeal Panel lacked jurisdiction; in particular whether, even if the Tribunal were in error, it was not an error of law as required by s113(2) of the Administrative Decisions Tribunal Act 1997 (NSW) (“ADT Act”). I shall refer to that as “the jurisdictional issue”.

11 The Appeal Panel’s reasoning on the jurisdictional issue, now challenged on appeal, was as follows:

(a) An error relating to the interpretation and mode of application of a broad common law principle is an error of law. The Appeal Panel distinguished Vetter v Lake Macquarie City Council (2001) 202 CLR 439 (Red, 65S-W).

(b) Implicitly, the Tribunal acknowledged that the quantum of damages had it not been too remote should be assessed at $102,000, being the difference between the two contract prices, but made no express finding to this effect (Red, 65W-66C).

(c) Having identified an error of law in the Tribunal’s judgment, the Appeal Panel considered that the appropriate course was to grant leave under s113(2)(b) ADT Act for the appeal to extend to the merits and to make its own assessment of damages under this head (Red, 66D-G).

12 There is a cross-appeal on costs, against the Appeal Panel’s denial of these in favour of the successful first respondent Dawson when he had been wholly successful. I shall refer to that as “the costs issue”.

ELABORATION OF MATERIAL FACTS

13 The contractual and equitable compensation issues need to be placed in their factual context as follows.

14 By contract of sale of land dated 21 September 2000 the appellants (Cripps) purchased from a mortgagee exercising power of sale a retail shopping arcade at Princes Highway, Sutherland. Shop 1 in the arcade (“the shop”) was occupied by the respondent Dawson under a continuing right to possession.

15 Dawson entered into negotiations with the mortgagee in possession with respect to a new lease for the shop. The mortgagee was authorised to enter into the lease as mortgagee in possession under the relevant registered mortgage. This was also permitted under the contract for sale. By an instrument dated 3 November 2000 (“the lease”) Dawson and the mortgagee entered into a lease of the premises for a term of three years commencing 16 June 2000 and terminating on 15 June 2003 together with an option to renew for a further period of three years. Clause 11.4 of the lease imposed an obligation on the lessor to ensure that the lease was registered (Red, 21K-P).

16 A caveat had been lodged by Dawson’s solicitor with respect to the previous lease. At the request of the lessor’s solicitor a withdrawal of caveat was furnished by Dawson to be held in escrow pending confirmation that the lessor had signed the lease and that it would be registered on settlement (Red, 21P-R and 55T-V).

17 The contract of sale of land under clauses 50.3, 50.6(c) and 50.7 imposed obligations on Cripps. I agree with the respondent that the mortgagee’s obligations with respect to the lease were shifted onto Cripps. These obligations included the obligation to register the lease (Red, 33K-Y). Clause 50.6(c) provided for a contractual undertaking given by Cripps to attend to stamping and registration of the shop lease (Red, 25L-P).

18 On 31 May 2002 Dawson entered into an agreement to sell its business to the Kilbanes for a contract price of $130,000 (Red, 21U-V).

19 It is no longer disputed that Cripps was in breach of s39 of the Act, which provisions are reflected in clause 10 of the lease. That breach was in withholding consent to Dawson’s request for the assignment of lease to the Kilbanes, notwithstanding that Dawson had complied with the statutory requirements of the Act (Red, 45E-G).

20 Dawson’s solicitors wrote to the solicitors for Cripps on 19 June 2002 stating “Unless our client’s lease is registered forthwith and we receive an acknowledgment of the same together with the acknowledgement that the option contained in the lease is subsisting and valid as at this time, our client will hold your clients liable for any damages they may incur as a result of the sale failing to proceed. Please give this matter your immediate attention” (affidavit of Philip Walton Exhibit A1 page 30). Similarly, on 24 June the solicitors wrote and stated “We note that you have not responded to our letter of 19 June 2002 and once again put you on notice that our client will hold your client responsible for any damages caused by their obstruction in relation to the consent to the assignment of the lease” (affidavit of Philip Walton Exhibit A1 page 31). I agree with the respondent that Cripps was thereby placed on notice of the consequences of failing to deal with the lessee’s request for assignment of the lease to Kilbane.

21 It is undisputed that Cripps refused consent to an assignment of the lease. This was without sufficient reason. Kilbane rescinded the contract for sale of the business on or about 1 July 2002 relying upon Dawson’s inability to assign the lease (Red, 22D-E).

22 Dawson subsequently entered into an agreement to sell its business to Mr Song for a contract price of $28,000. That agreement was dated 7 April 2003 (Red, 22F).

23 The contracts to sell respectively to Kilbane and Song were on essentially the same terms. They provided for sale as a going concern with an inventory of equipment. That is to say, both contracts provided for stock to be sold at cost plus GST (Blue, 1/10). In the case of the Kilbane contract, $15,000 was to be paid on account of stock on completion and the balance paid on a specified date thereafter (Blue, 1/13). A small amount ($1,500) was paid for debtors. The processing lab comprising the photographic equipment, was to be purchased from its owner, Dawson’s financier, for its payout figure. The figure for equipment was stated at $130,000. The parties to the contract for sale of business did not apportion any figure towards goodwill. The contract, against the heading “Asset and price apportionment”, had “Goodwill: NIL” (Blue, 1/10). However, the respondent takes issue with the appellants’ contention that the agreement provided that the price included no component for goodwill.

24 It is disputed that it was established that the value of the equipment comprised in the business had fallen significantly before the date of sale to Mr Song ten months after the first attempted sale (written submissions 20 May 2005 at paragraph 13, Orange, 16). But it is not disputed that

(a) the only buyer Dawson could obtain for the business on the same terms after ten months was Mr Song, and

(b) the equipment was (then) treated as worth approximately $30,000, being sold (as under the first contract) as part of a going concern.

25 Finally, further submissions in writing confirmed that it had never been put to Mr Dawson in contradiction of the position stated in his affidavit of 4 March 2003 at paragraph 6 that the sale of business contract was in reality a sale of equipment; see paragraphs 1-58 for the relevant cross-examination of Mr Dawson. Indeed the transcript of Mr Dawson’s evidence reveals that the sale of the business was the true substance of the contract, taking into account the attempts to market and sell it over time. Dawson had advertised the business for sale through a broker, the Sydney Business Exchange under a brokerage agreement of 9 August 2000 (Black, 3D-6O). In addition, the business was advertised under “Business for Sale” in the Sydney Morning Herald (Black, 6P-8F). The evidence shows that the business was on the market from August 2000.

26 It is fair to say, as the respondent contended, that Dawson was cross-examined on behalf of Cripps on the basis of and adopting as the underlying assumptions, that the contract for sale of business was a genuine contract for the sale of business and not a contract for the sale of equipment (Black, 42U-43J).

DISPOSITION
Value Decline in the Business over Ten Months?

27 There is one significant material fact that is disputed. It is whether it was established by the appellants that the equipment comprised in the business had fallen significantly in value before the date of the sale to Mr Song in the ten months that followed the abortive sale to the Kilbanes. Given that the Song sale at a greatly reduced price was not shown to be other than arm’s length, it is prima facie evidence that the equipment comprised therein had fallen significantly in value.

28 There is also some evidence on that matter apart from the differential in purchase price when the market was tested.

29 There was a valuation dated 11 March 2003 by Greg Thompson & Co. It valued the business at $27,370, at a time when the sale to Mr Song was to take place approximately three weeks later on 7 April 2003. At Blue, 54 under the heading “Technology” the following appears (Blue, 1/54):

“The current equipment used by this business was acquired in late 2000 following the withdrawal from the Fletcher’s franchise.

The equipment purchased new is based on analog technology for film development.

Since the equipment acquisition in late 2000 technology to this business sector has changed significantly with digital technology becoming the dominant basis. Fuji, the equipment supplier to this business, has ceased production of the analog processor owned by this business.

The differences between technology platforms affect this business in the following manner.

All existing film development services are able to be provided however, in a world of technology change from which follows additional products and services, this business will start to lose business as these new consumer requirements aren’t available.

Based on the earlier discussion of the business model this results in customers going elsewhere to get film developed and hence reduces the likelihood of them returning to this business to purchase from the range of other (higher gross margin) products.

Thus the ability to increase or maintain the current earnings levels is in doubt.”

30 There is a second valuation and report, likewise prepared for Dawson, dated 11 March 2003 from a valuer Mason Gray Strange. Under “General Remarks” appears the following statement:

“The photographic processing industry is extremely depressed at the moment and there will be very limited demand for this equipment. Values have fallen significantly over the last few years and I would expect values to continue to fall for some time to come.”

31 What I would infer from this evidence is that, at least so far as Dawson was concerned, the sale to the Kilbanes was taking place in a known falling market so far as the vendor’s outdated analog photographic equipment was concerned. It can be inferred from the much lower later price that the fall in value was taking place at a rapid rate, reflected in the period of ten months between the two sales.

32 The significance of this arises when one considers the first of the two types of loss recoverable in contract under the principles in Hadley v Baxendale (1854) 156 ER 145 at 151. The first category refers to losses of a type that “may fairly and reasonably be considered as arising naturally, ie, according to the usual course of things from such breach of contract itself”. According to the usual course of things in a falling market, loss is likely to arise naturally from breach constituted by delay. This is insofar as delay prevented sale of the business with its associated equipment.

33 That being so, one does not need to consider the second category for recoverable losses, namely “as may reasonably be supposed to have been in the contemplation of both parties at the time they made the contract as a probable result of the breach of it.”

34 As I see matters, although argument concentrated on the second category of loss, the loss that here resulted would be recoverable under the first limb of Hadley v Baxendale. In those circumstances it could not be said that the damage was too remote.

35 The appellants’ argument on the second limb of Hadley v Baxendale is essentially that if the parties, or, more relevantly, Cripps, had thought about the matter they would not have considered it a “serious possibility” that Dawson would have been prevented by Cripps’ failure to give consent from selling its plant and equipment at a price comparable to the first sale price. Certainly a near 80% discount could never have been considered a serious possibility. I set out the development of that argument in the appellants’ written submissions:

“16. The oft quoted test of whether damage flowing from a breach of contract is too remote to be recoverable was stated by Lord Reid in C Czarnikow Limited v Koufos [[1969] 1 AC 350, 385]:

The crucial question is whether, on the information available to the defendant when the contract was made, he should, or the reasonable man in his position would, have realized that such loss was sufficiently likely to result from the breach of contract to make it proper to hold that the loss flowed naturally from the breach or that loss of that kind should have been within his contemplation.


17. The statement of principle as expounded by Lord Reid was endorsed by the High Court in Wenham v Ella [(1972) 127 CLR 454, 471-472], Burns v M.A.N. Automotive (Aust) Pty Limited [(1986) 161 CLR 653, 658 per Gibbs CJ; 667 per Wilson, Deane & Dawson JJ], and Baltic Shipping Co v Dillon [(1993) 176 CLR 344, 368].

18. The statement of principle was applied by the Federal Court as recently as 2003 in GEC Marconi Systems Pty Limited v BHP Information Technology Pty Ltd [(2003) 128 FCR 1 at para [938]].

19. In Alexander v Cambridge Credit Corporation Ltd [[1987] 9 NSWLR 310], a decision of this Court, McHugh JA said [at 365E-F]:


In later cases … there has been a tendency to play down the distinction between reasonable foreseeability and reasonable contemplation as semantic only. However, I think that the difference is a real one which results in a significant narrowing of liability. The word ‘contemplation’ seems to be used in Koufos in the sense of ‘thoughtful consideration’ or perhaps ‘having in view in the future’. It emphasises that, if the parties had thought about the matter, they would really have considered that the result had at least a ‘serious possibility’ of occurring.

The actual decisions in Hadley v Baxendale and Victoria Laundry (Windsor) Ltd v Newman Industries Limited bear out the proposition that the contemplation test limits the area of potential liability. For it was surely reasonably foreseeable as a serious possibility that the millshaft was required for the operation of the mill and that a launderer and dyer might have special contracts with a lucrative profit margin. Yet the losses of the plaintiffs arising from those circumstances were not recoverable.”


20. In the instant case, whilst it was reasonably foreseeable that the failure by the lessee to consent to the assignment of the lease might result in the decision by the purchaser under contract to purchase the business conducted in the demised premises to rescind that contract, it was neither foreseen nor was it foreseeable that such a failure could result in the lessee’s inability to sell his plant and equipment. Adopting the words of McHugh JA, had the parties (or, more relevantly, Cripps) thought about the matter they would not have considered it a ‘serious possibility that Dawson would have been prevented as a result of Cripps’ failure from selling its plant and equipment otherwise than for a sum approximating less than 22% of the contract price.

21. The instant case is similar in principle to that considered by McHugh JA in Alexander . In that case the relevant loss was attributable to a dramatic deterioration in the economy during the period in which the respondent corporation continued to trade as a result of the appellant auditors’ negligence. In this case the relevant loss was attributable to the dramatic fall in the value of photographic processing equipment which occurred due to the advent of alternative superior technology before Dawson entered into the Song agreement. [Orange, 8-10]

36 The appellants also emphasised in their argument that the essential feature of both sales was that each sale was fundamentally of equipment without goodwill. Hence (it was said) it could never have been in reasonable contemplation of the parties that there would be an inevitable decline in the value of that equipment. In particular it was said that the enormous decline in value through the introduction of superior digital technology would fall outside the reasonable contemplation of at least Cripps, at the time the relevant contract of lease was entered into, namely 3 November 2000. This would hardly be a matter of which the lessor would be informed, remembering that reasonable contemplation is that of both parties, not the lessee, Dawson.

37 The respondent seeks to answer that argument in the same way as was accepted by the Appeal Panel. It cites McHugh JA in Alexander at 365-6 where he warns against adopting an unduly high “level of classification of the damage which the parties must have contemplated”. McHugh JA eschewed a test of what the parties could reasonably have been expected to have contemplated by reference to “the precise details of the events giving rise to the loss”. Rather it was “sufficient that they contemplate the kind or type of loss or damage suffered”.

38 Applying that reasoning here, the respondent contends that, in terms of the second limb, both parties may reasonably be supposed to have had in contemplation as at 3 November 2000 (when the lease was entered into) that loss could result from delay. One does not need to contemplate the precise degree of loss, or its scale, as that is to raise the bar too high; one is then looking at “the precise details of the events giving rise to the loss”. Instead of adopting an unduly high level of classification of the damage as that which the parties must have contemplated, it suffices to concentrate more broadly on the kind or type of loss, being here a delayed sale in a falling market. It is placing the requirement too high for the reasonable contemplation to have to encompass the precise extent of the fall in value, as against the generic risk of equipment being rendered less valuable for sale, as can result from introduction of new technology.

39 I consider that the respondent’s submission on the second limb of Hadley v Baxendale was correctly accepted by the Appeal Panel essentially for those reasons. Moreover, whilst no amount was attributed to goodwill in the sale agreements, it is clear from the terms of the relevant sale documentation that it was in each case the sale of a business. Thus it incorporated not only equipment but included stock, for which a not immaterial amount was to be paid, as well as a smaller amount for debtors. Lack of reference to goodwill in each contract does not mean that the parties, or the purchaser, thought there was no value in goodwill in reality. There can be many explanations for omitting reference to goodwill or any figure for it. These may include, for example, the desire to maximise depreciation for tax purposes. Thus I do not consider that this feature of the transaction alters the conclusion reached.

40 I need only consider equitable compensation as an alternative basis for recovery, were Dawson’s loss of $102,000 too remote for recovery as damage in contract. It is therefore not necessary for me to consider that issue. I need only note that the “but for” test of causation adopted by Spigelman CJ in O’Halloran v R T Thomas & Family Pty Ltd (1998) 45 NSWLR 262 at 279, would here be satisfied. That is to say, had there been no breach and the original sale therefore proceeded, the loss would not have occurred. Spigelman CJ (agreed in by Priestley JA and Meagher JA) adopted the statement of principle of Justice McLachlan in Canson Enterprises Limited v Boughton & Co (1991) 85 DLR (4th) 129 at 163:

“In summary, compensation is an equitable monetary remedy which is available when the equitable remedies of restitution and account are not appropriate. By analogy with restitution, it attempts to restore to the plaintiff what has been lost as a result of the breach, ie the plaintiff’s lost opportunity. The plaintiff’s actual loss as a consequence of the breach is to be assessed with the full benefit of hindsight. Foreseeability is not a concern in assessing compensation, but it is essential that the losses made good are only those which on a common sense view of causation, were caused by the breach.”

The Jurisdictional Issue

41 Pursuant to s113(2) of the Administrative Decisions Tribunal Act 1997 (NSW) an appeal lies from the Tribunal to the Appeal Panel only in respect of a question of law. The appellants’ contention is that whether or not the loss of $102,000 was too remote to be recoverable was not a question exclusively of law.

42 The appellants call in aid Vetter v Lake Macquarie City Council (supra). There the majority approved the dictum of Mason JA in Williams v Bill Williams Pty Ltd [1971] 1 NSWLR 547 at 557 and subsequently (as a member of the High Court) in Hope v Bathurst City Council (1980) 144 CLR 1 at 8. That dictum was to the effect that, if minds may reasonable differ as to whether a given set of facts falls within the statutory expression, then the question is properly characterised as one of fact and not of law. Thus the majority said in Vetter (supra), “… A question exclusively of law arises … if, on the facts found, only one conclusion is open.” Kirby J made observations to similar effect at [78] as did Hayne J at [108].

43 The appellants then contend that whilst the authorities referred to above were concerned with questions of the applicability of statutory provisions to facts as found, a similar result ensues from the classification of the question of whether conduct amounts to negligence, contending that such determination is also a finding of fact; Edwards v Noble (1971) 125 CLR 249 at 299.

44 Here however, the question is not whether conduct amounts to negligence. Rather it is whether damage suffered in the present case was excluded from recovery on the grounds of its remoteness. The appellants contend that the remoteness of loss allegedly suffered following a breach of contract is a question of fact and degree but not a question of law, based on satisfying either the subjective test of whether the likelihood of loss was actually contemplated by the defendant, or the objective test of whether the loss may reasonably be supposed to have been in the contemplation of the defendant as a not unlikely result of the breach.

45 First, as I have said, this is not the kind of error of law dealt with in Vetter, as the Appeal Panel rightly concluded. The issue facing the tribunal in this case is not whether a statutory provision applies to a particular factual situation. Rather it is whether the tribunal was in error in concluding that the damage in question was not capable of recovery under the legal principles governing remoteness of damage in contract.

46 Moreover, underlying that question was the question of the proper construction of the contract. Was it a contract for the sale of equipment simpliciter, or a contract for the sale of business encompassing equipment as a principal asset thereof? It is long-settled law that the issue of construction of a contract is a question of law not fact; see cases cited in “Carter on Contract” loose-leaf edition para 12-010.

47 In concluding that the Tribunal erred in distinguishing between the loss of an opportunity to complete a contract of sale of a business and the loss of an opportunity to sell only the equipment of the business, the Appeal Panel was construing the contract and thus determining a question of law.

48 Nor is it correct to characterise the question of whether damage arising under the contract, properly construed, was too remote for recovery as simply a question of fact and degree. Rather, it is a question of whether or not a particular item of loss or damage, about which there was no relevant factual dispute, was capable of coming within the concept of remoteness. That question is in my judgment a question of law. In H Parsons (Livestock) Limited v Uttley of Ingham & Co Limited [1978] QB 791 at 801 Lord Denning MR stated categorically that, “remoteness of damage is beyond doubt a question of law”.

49 Insofar as it might have been necessary to determine any matter of fact, such as when the technological change from analog to digital occurred in photographic equipment, that does not convert what was otherwise a question of law into a question of fact. Where a question of fact is merely incidental to a question of law or otherwise necessarily involved in determining that question of law, it may be determined notwithstanding that the jurisdiction be to determine only a question of law. Compare on question of law under s101 of the Justices Act 1902 (NSW) Jennings v Credit Corporation of Australia (2000) 48 NSWLR 709 at 713 per Santow J. As I have earlier pointed out, leave was granted under s113(2)(b) ADTAct for the appeal to it to extend to the merits, and to make its own assessment of damages.

50 The reasoning of the Tribunal appealed to the Appeal Panel on the second limb of Hadley v Baxendale clearly involved a question of law. It concerned the level of classification of the damage which the parties must have contemplated, in terms of precise detail as distinct from contemplation of a more generic kind. That is a legal question.

Conclusion

51 I would conclude that the appeal ground based upon the jurisdictional issue must fail.

Costs

52 I turn finally to the costs issue, where there is a cross-appeal against the Appeal Panel’s denial of these in favour of the successful first respondent Dawson, notwithstanding that he had been wholly successful.

53 Section 88(1) of the Administrative Decisions Tribunal Act 1997 provides that “subject to the rules of the Tribunal and any other Act or law, the Tribunal may award costs in relation to proceedings before it, but only if it is satisfied that there are special circumstances warranting an award of costs”.

54 The Tribunal, following the successful appeal to the Appeal Panel on 3 February 2005, concluded against Dawson that the criterion of ”special circumstances” was not satisfied in the circumstances. I set out below the Tribunal’s reasoning on this issue:

“17 If the traditional common law approach of ‘costs follow the event’ applied in the Tribunal, the Applicant, being successful, would have a prima facie entitlement to its costs. But as has been said in numerous cases within the Retail Leases Division, the criterion of ‘special circumstances’ dictates a very different approach.

18 The principles governing the awards of costs were specifically considered by the Appeal Panel in Sotiropoulos v Mattana Coiffure Pty Limited (No 2) (RLD) [2004] NSWADTAP 43 and in Wood & Anor v Bergman (No 2) [2003] NSWADT 175. Clearly, section 88 of the ADT Act lays down a principle that the Tribunal must be satisfied that there are special circumstances warranting an award of costs. Illustrations of what may qualify as ‘special circumstances’ appear in paragraph 2 of the Tribunal’s Practice Note 12, dated 4 March 2003 however, the list given is not exhaustive. In Gizah Pty Ltd v AXA Trustees Ltd (No. 2) [2001] NSWADT 164, at [29], the Tribunal defined ‘special circumstances’ as ‘circumstances that are out of the ordinary, but without having to be extraordinary or exceptional’. A finding of ‘serious unfairness’ is not a prerequisite to determining that there are ‘special circumstances’.

19 Unreasonable conduct that is out of the ordinary and conduct which is grossly unreasonable can attract the exercise of the Tribunal's power under section 88. The Applicant points to the conduct by the First and Second Respondents in failing to consent to the assignment and the consequence that it was unable to be fully compensated for its actual losses as a result of their actions; and asserts that it would be seriously unfair to the Applicant not to be awarded costs where it has been successful in this litigation and in effect forced to pursue this litigation in order to have its legal rights recognised.

20 I have no doubt that the Applicant, through no fault of its own, has been placed in the situation where it has been forced to pursue this litigation. In my view this is extremely regrettable. Nevertheless, the legislature has established a scheme for the resolution of retail tenancy disputes that anticipates that an order for costs will be the exception rather than the rule. I agree with the First and Second Respondents’ assertion that, in order for the Applicant to succeed in this application, I must find that the circumstances surrounding the conduct of the case amount to ‘special circumstances’. I also agree that costs orders are not a sanction to reprove unreasonable conduct that has led to an application for relief.

21 In the circumstances of this matter it is my view that requirements for an order pursuant to section 88 have not been met. The circumstances were not out of the ordinary such as to amount ‘special circumstances’ that could be relevant to the question of costs. Accordingly, the appropriate order is that each party should bear its own costs.”

55 While determination of costs is a discretionary matter and moreover a matter of practice and procedure, as the Tribunal itself recognised, unreasonable conduct that is out of the ordinary and conduct which is grossly unreasonable can attract exercise of the Tribunal’s power under s88 to award costs.

56 Here, the special circumstances relied upon by Dawson, said to be out of the ordinary, are twofold. First, Cripps failed to recognise the existence of Dawson’s lease, refusing to register it without proper cause.

57 Second, taking advantage of that failure, and being fully on notice of Dawson’s need for the lease to be registered and consent to its assignment given so that the sale of his business could proceed, in breach of the Act and of the lease Cripps withheld consent to that request for assignment of the lease. This was notwithstanding that Dawson had complied with the requirements of the Act, including in particular s41 thereof, covering consent to assignment. The result was the lost sale to Kilbane and the consequent damage.

58 Thus the commencement of the proceedings was prompted by the need to ensure that the lessor recognised both the existence of the lease and the obligation to consent to its assignment.

59 There followed five hearing days before the Tribunal at first instance, with further hearing days before the Appeal Panel, strenuously contested.

60 It is not necessary to determine whether in the circumstances the appellant committed equitable fraud. In my view it suffices that the conduct of Cripps and Jones, in relying upon their status as the registered proprietors of the freehold and the doctrine of indefeasibility of title to wrongly deny registration and consequently assignment of the lease, so acted as by their conduct to give rise to special circumstances; that is, circumstances that were clearly out of the ordinary and grossly unreasonable so far as the respondent tenant was concerned. On the one hand, the Tribunal correctly concluded that the respondent, through no fault of its own, has been placed in the situation where it has been forced to pursue this litigation. Yet it still failed to find special circumstances. With respect, I consider that the Tribunal was in error in failing to conclude that special circumstances here applied. For this purpose, it suffices that the circumstances are out of the ordinary. They do not have to be extraordinary or exceptional. While a finding of “serious unfairness” is not prerequisite to determining that there are special circumstances, it is nonetheless a highly relevant consideration.

OVERALL CONCLUSION AND ORDERS

61 The appellant has failed in each of its grounds of appeal and the respondent is successful in its cross-appeal on the costs issue. In those circumstances, I would propose orders as follows:

(1) Appeal dismissed with costs.

(2) Leave granted to file cross-appeal, and cross-appeal allowed.

(3) The appellants to pay the respondents’ costs before the Tribunal and Appeal Panel.

(4) Cross-appellant to have costs of cross-appeal.

62 BROWNIE AJA: I agree with Santow JA.

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